h t Heal e t a r op r o C - ubs.com · operations and employee retention if they help ... health &...

2 November 2017

Corporate HealthUBS Wealth Management white paper

For marketing purposes only

2 Corporate Health

Contents

3 Foreword

4 Executive summary

6 Part 1: Corporate Health: An introduction

10 Part 2: Employee health programs:

The evolving business case

16 Part 3: US & Europe: The value-based revolution

20 Part 4: Emerging markets: Why employers will have

to play a bigger role

25 Part 5: EmployeehealthcareinAsiaPacific:

A mixed perspective

30 Part 6: Conclusion

This report has been prepared by UBS AG, UBS Switzerland AG and UBS Financial Services Inc. Please see important disclaimer at the end of the document.

Corporate Health

Globally, companies are grappling with how to make themselves more sustainable in the face of inexorable long-term challenges such as urbanization, global population growth, and the competition for resources. Investors, cus-tomers, and employees are also growing more aware of these issues – partly due to cultural pressure from emerging stakeholders like mil-lennials–andarepressuringfirmstoact,withpotentialbenefitsfortheworldatlargeaswellasthosefirms’bottomlines.Onesustainabilitychallenge that many companies face is support-ing the health of their employees. Sick, tired or emotionally disconnected employees are not only a concern for themselves and those close to them, but are also a concern for their employers. Companies can only optimize their operations and employee retention if they help to optimize the health of their employees too.

At UBS, we are aware of a range of occupa-tionalhealthissuesrelatingtoofficelifeandtheirimpactonsustainableandprofitablegrowth. This is essential in an industry that ser-vices clients 24 hours a day, 365 days a year. These issues range from sedentary lifestyles to continuous digital connectivity. The latter can keep employees glued to devices outside of normalworkinghoursandcanhaveaneffecton their emotional well-being, creativity, and engagementatwork.Althoughouremployees’health is ultimately their responsibility, we at UBS want to create an environment and provide our employees with resources and information that enable them to take care of themselves andtheirfamilieseffectively.

In this white paper on corporate health, which wedefineasthephysical,mental,andemo-tional health of employees, we explore the majorissuesaffectingemployeewelfareglob-ally and what companies can do to improve employee well-being.

ForewordBy Caroline Kuhnert, Head UBS WM UHNW Europe & Emerging Markets, Donna Burns, Head UBS WM HR, and Dana Ritzcovan, Head UBS WMA HR

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Corporate Health4

Corporate health is the physical, mental, and emotionalhealthofacompany’sworkforceandits healthiness as an environment for employ-ees. This paper aims to show that companies with best-in-class health programs may also show strong business results including long-term share price returns. This does not neces-sarilysuggestacauseandeffectfromashareprice perspective, but it does appear to support the thesis that a relationship exists (see part 2). In doing so, we argue that company manage-ment and shareholders are incentivized to sup-port such programs as well as identify and mini-mize corporate health risks. (For full details, see part 2). The paper also outlines challenges that companiesfacewithrespecttoemployees’health as well as emerging solutions.

In the US & Europe, challenges include rises in healthcare costs, which have averaged 6% annually over the past 15 years (see part 3 of thispaper).Thisposesparticulardifficultiesforcompanies in the US where, in conjunction with private insurers, employers tend to be the pri-marysourceofhealthcareplans.OutsideoftheUS,risinghealthcarecostsmayalsobuffetgov-ernment-dominated healthcare systems.

Part 3 shows that in cases where companies provide healthcare plans to employees, devel-oped world companies should consider value-based care as a means of getting better value formoneyamidongoinginflation.

In emerging economies, challenges include governments’growinginabilitytomeetwork-ers’healthcareneedsduetoadearthoffund-ing, a growing burden from non-infectious diseases such as cancer, heart conditions, and diabetes, and in some cases aging populations. Part 4 shows why companies should consider providing healthcare plans for employees and whytheyshouldhelpfillthegapwhenemploy-ees’privatehealthcareplansarelacking.Where

relevant, they should also sponsor technologies like telehealth as a means of reaching employ-ees based in rural areas.

In the Asia Pacificregion(part5),workers’ primary healthcare sponsors range from govern-mentstoprivatefirmsandstate-ownedenter-prises (companies partly or fully owned by gov-ernment entities). Where they have no sponsor, workers must make their own insurance arrangements or pay for healthcare out of their own pockets. As the role of state-owned enter-prisesdeclines,privatelyownedfirmswillhavetoplayagrowingroleinprovidingforworkers’health.

Finally, in all regions, a number of common factors will play an important role in shaping companies’approachtoemployeehealth.Com-paniesshouldidentifyindustry-specifichealthproblems and implement employee health pro-grams supporting optimal long-term responses. As part of this, they should encourage employ-ees to use new technology to track and improve their health, such as monitoring vital signs and physical activity via smartphones. Companies should position employee health programs cor-rectlywithinahealthy,effectiveorganizationalculture. Finally, companies should embrace the vision underlying corporate health – that a firm’shealthisinextricablylinkedtothehealthof its employees. Under this approach, it becomes apparent that employee health is not somuchacostforafirmasapotentialcompet-itive advantage.

Executive summary

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Corporate Health6

At the 2008 World Economic Forum (WEF) Annual Meeting in Davos, the WEF published two landmark reports on employee health and itsimportancetocompanies’reputations,oper-ations,andfinancialperformance,inconjunc-tionwiththeWorldHealthOrganizationandPwC. The papers attracted international atten-tion for a number of reasons.

First,theytranscendednarrowdefinitionsofhealth & safety and occupational health. Instead, they concentrated on how companies could manage chronic and non-infectious dis-eases more broadly.

Second,theycapturedashiftingfocusinemerging markets towards the latter and away from infectious diseases, including conditions more closely associated with higher incomes such as obesity. (For more background on this shift,seepart4.)

Third, they demonstrated how companies could use employee health programs to improve their productivity, bottom lines, operational perfor-mance, and reputations as well as the vital cause of employee welfare. (For more detail, see our article on the evolving business case for such programs in part 2.)

Almost10yearsonfromthesepapers,thisfieldhas witnessed a number of additional develop-ments.

First,healthcarecostinflationhasremainedhigh in the developed world despite the eco-nomicpaininflictedbythefinancialcrisis.Tocontain healthcare costs as well as improving outcomes, employers and other stakeholders are exploring new solutions, such as the emerg-ing value-based revolution described in part 3.

Second, governments in the developing world havebeenincreasinglyunabletomeetworkers’needs for healthcare and other public-type ser-vicesafterthefinancialinstabilityofMay2013

toJanuary2016,leavingemployerstofillthegap – a theme that is explored in greater depth inthispaper’semergingmarketsection.

Third, new technology has enabled employees to collect more data on their own health – such as through smartphones – and reduce health-care costs by making their lifestyles measurably healthier. Given increasing mobile phone and IT penetration in emerging markets, our article on theAsiaPacificregion(part5)showshowthiscanbenefitemployersin‘developing’aswellas‘advanced’economies.

Butforemployers,thefinalandperhapsthemostuniversalshiftisagrowingawarenessofhealth’simportanceatacorporatelevel.Afterthesystemiccorporatedysfunctionofthefinan-cial crisis, more emphasis has been placed not only on employee health but also on organiza-tional health, or the health of an organization as an environment for those employees. This canalsohavecrucialspillovereffectsintothemanagementofemployees’physical,mental,and emotional health overall.

Corporate Health: An introduction

Part 1

By Nick Rice, Claudia Oeken, and Laura Kane

Fig.1:McKinsey’sninedimensionsof organizational health

External orientation

Direction

Accounta- bility

Innovation

Coordination and control

MotivationCapability

Leadership

Environment and vlaues

Source:McKinseyOrganizationalHealthIndex

Corporate Health

Corporate Health – an Introduction

McKinsey, the most prominent consultancy in this area, lists nine dimensions of organizational health: accountability; capability; coordination & control; direction; environment & values; external orientation; innovation; leadership; and motiva-tion.AccordingtoMcKinsey,68%offirmsthatscore strongly across these areas earn above-averageprofitmarginsintermsofearningsbefore interest, tax, depreciation, and amortiza-tionversus,whileonly31%offirmsthatscoreweakly earned above-average margins.1

Equally, in the area of employee health, evi-dence has emerged that a healthy workforce may be in some way correlated with superior share price returns. (For more details, see part 2.)Insuchcases,definitivecauseandeffectisdifficulttoestablish–forinstance,itishard to tell to what extent improved employee healthliftedperformance,orwhetherbetter-performing companies simply tend to have higher-caliber employee health programs. Nev-ertheless, the correlation is worth analyzing further.

Atfirstglance,someindicatorsarehardtospot. Forinstance,“presenteeism,”orworkingwhile sick or disengaged, does not show up as absencebutcanresultinproductivityloss,higher risk of failure, and impaired decision-making capabilities. A 2011 study called Man-aging Presenteeism from the UK Centre of Mental Health2 shows presenteeism costs UK companies nearly twice as much as absentee-ism, or GBP 15 billion versus GBP 8 billion a year. The evidence suggests companies will have to watch less visible health factors closely if they wish to grasp the full implications for employee productivity.

When managing employee health, executives can also learn from organizational best practice. Rather than passively meeting basic standards or relegating healthcare programs to sideshow status, companies should treat employee health asacoreconcernfortheirbusiness,offeringameasurable enhancement to employee welfare as well as operational performance, reputation, and returns. In a recent white paper, UBS WealthManagement’sChiefInvestmentOfficedescribedthisactiveapproachas‘businesswithimpact,’inspiredbytheconceptofimpactinvesting and its aim of generating measurable socialandenvironmentalaswellasfinancialreturns.

1 McKinseyOrganizationalHealthIndex,2017.2 Managing Presenteeism; 2011 The Centre of Mental Health, UK

Fig. 2: Studies show health strains can make companieslessefficientStress costs US employers USD 300bn a year; absenteeism and presenteeism combined cost UK companies GBP 23bn; stress reduction at Swiss companies could unleash CHF 5.7bn in potential

Source: American Institute of Stress, Centre for Mental Health UK (2011), Gesundheits- förderung Schweiz, 2016

USD 300 bn

GBP 23 bn

CHF 5.7 bn

Fig. 3: Company statistics show employee healthprograms’benefits

Source: HBR, 2010

Cost savings of USD 250m from 2002 to 2008Johnson & Johnson

Fig. 4: Success factors of healthy companies

Source: UBS

Ensure consistent messages from the top on importance of employee health.

1Create a culture that supports a healthyenviron-ment.

2Introduce sustain-able and targeted health measures based on employee needs.

3Monitor and hold account-able.

4Reinforce communi-cation and encourage engage-ment at all levels of the organi-zation.

5

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Corporate Health8

Corporate Health – an Introduction

With respect to employee health, there are a few observations to bear in mind:

nAsperthe‘businesswithimpact’approach,strategic best practices not reactive stopgaps are likely to support long-term returns. Tar-geting maximum not minimum standards is key. Employee health programs are important overarching ways of delivering these objec-tives – again, as per the evolving business case for such programs explored in part 2.

n Focus on the broad corporate picture, but alsospecificaspects,whichmayneedgreaterattention.Forinstance,lessdiversefirmsmaywish to start a dedicated diversity & inclusion departmentthatimprovesemployees’pro-fessional relationships and emotional health and also enhances decision-making by open-ing up a greater range of perspectives.

n Create dedicated initiatives for emerging health needs, e.g. responses to a lack of ser-vices in developing world locations or to the rise of new technologies. The latter might include stress and burnout from 24/7 con-nectivity or potential health & safety issues arising from new equipment.

n Foster special external / internal networks to spread info on key health issues. No one company, organization, or manager has all the solutions; an open-architecture approach is best.

n Finally, ensure consistent messages on the importance of employee health. Create a cul-ture that supports a healthy environment; reinforce communications and encourage engagement at all levels of an organization. Introduce sustainable and targeted health measures based on employee needs, and monitor and hold managers accountable for performance on relevant metrics. A rigorous managerial approach to employee health will support the health of the organization as well as its members.

Since ancient times, people have spoken of a ‘healthymindinahealthybody.’Today,compa-niesshouldspeakofa‘healthyemployeeinahealthyfirm.’Corporatehealthisindivisiblefrom the health of employees and their organi-zations as a whole. Companies around the world have a long way to go before they realize thatapproach’sfullfinancialandnon-financialbenefits.

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Corporate Health10

In this section we examine how corporate healthprogramsfindtheirwayintocompanies’reporting, discuss the potential correlation between such programs and share price perfor-manceandwhatinfluencesit,andlastbutnotleast show case studies of how failed or missing healthand/orsafetyprogramsnegativelyinflu-encebusinesses’bottomlinesandreputations.

Given the economic importance of the work-force, studies1 show that the promotion or under-promotion of employee health and well-beinghasafinancialimpactonbusinesses.Overthe last several years a number of research papers have been published about the Zero Accident Vision (ZAV), which is driven by the idea that all accidents are preventable. Some newer research papers take a broader look (Vision Zero [VZ]) and include the well-being of employees alongside occupational health. In the past, well-being of employees was mainly lim-ited to safety concerns during production and otherprocesses.NewerdefinitionsofVZarebased on the assumption that all work-related accidents, harm or illnesses are preventable. In this values-based approach, the vision is that work has no negative impact and maintains or even improves employee health, safety and well-beingandfurtherdevelopsemployees’self-con-fidence,competencesandemployability.2

Turning from the academic world to the corpo-rate world, one important step to achieving such avisionistounderstandtheeffectsofcompa-nies’businessactivitiesontheiremployees’health. Looking at environmental aspects, inves-tors and companies nowadays closely watch the directorindirecteffectsofbusinessactivity(e.g. waterusage,CO

2 emissions, etc.), as these

effectsarerecognizednotonlyasbusinessrisksbut also opportunities for solution providers (e.g. companieswithsalesexposuretoenergyefficiency,waterinfrastructure,etc.).Thereforecorporate responsibility reporting is already advancedinthisfield.Thereportingofemployeehealth and well-being is less advanced. In impor-tant and recognized sustainable reporting stan-dards, employee health and safety is a relevant environmental, social, and governance (ESG) indi-cator within the area of human capital. However, current reporting of these indicators is either vague or mainly focuses on occupational health and safety, including traditional indicators such as work-related injuries, fatality rates, work-related illness, lost time incident rate, and absenteeism, etc. As a result, ESG research and the investment community focus primarily on the traditional indi-cators in their assessment of workforce health.

The Vitality Institute3 runs a Health Metrics Reporting Project with a group of larger multi-national companies and university partners pro-moting employee health metrics. The project promotes employee health metrics as an inte-gral indicator of overall organizational perfor-mance within the broader corporate account-ability framework. They developed a scorecard withtenhigh-levelindicators(seeFig. 6)anda

Employee health programs: The evolving business case

Part 2

By Themis Themistocleous, Alexander Stiehler, and Matthew DeMichiel

1 “Whatisthehardreturnonemployeewellnessprograms?”HarvardBusinessReview.L Berry,A Mirabito,W Baun(December 2010).

“ESGIssueReport:IdentifyingVulnerabilitiestoHealth&SafetyIncidences”,MSCIESGresearch,(November2013).

2 “Theimportanceofcommitment,communication,cultureand learning for the implementation of the Zero Accident Visionin27companiesinEurope,”SafetyScience,July2017 (link);“Visionzero:fromaccidentpreventiontothe promotionofhealth,safetyandwell-beingatwork,”Journal of Policy and Practice in Health and Safety, G. Zwetsloot,S. Leka,P. Kines,7April2017.

3 VitalityGroupisamemberofDiscoveryLtd.,aglobalfinan-cial service organization and pioneer of the Shared-Value Insurance model. Vitality, created by Discovery in 1997, is theworld’slargestscientific,incentive-basedwellnesssolu-tion for individuals and corporates.

Corporate Health

comprehensive list of around 40 questions to assess workforce health and well-being. The ten high-level indicators are intended for C-Suites andboardsandtobeincludedinthecompany’sintegrated report. The more comprehensive scorecard is intended for the sustainability report, with the main audiences being ESG ana-lysts and other stakeholders. A third layer of information is internal for departments involved in these initiatives (see Fig. 5).

Compared to traditional health and security metrics,theVitalityInstitute’sComprehensiveHealth Metrics Scorecard addresses many spe-cificpointsaroundcorporatehealthprogramslike the involvement of senior management (is there a health/wellness committee chaired by a seniorleader?),theannualbudgetofthepro-gram, numbers of employees involved, evalua-tion of impact, incentives for employees to par-ticipate, to name a few examples. Also included in their scorecard are surveys that address points like the mental well-being of the workforce (e.g. depression, resilience, and stress), sleep, physical activity, nutrition and other factors that are nor-mally not covered by traditional approaches.4

This kind of standardized reporting about employee health initiatives is an important step in closing the information gap. Besides more transparency and comparability of corporate programs for investors, ESG analysts and stake-holders, companies can also use external report-ing about their health initiatives as a tool for recruiting activities. Ultimately it might even sup-port their ESG ratings. Also, studies about mil-lennials show that the majority of this age group believes corporate success should be measured inmorethanjustfinancialperformance.5

Is there a link between employee health programs and share price returns?A key aspect in assessing whether companies with employee health and wellness programs will outperform over the long term is the poten-tial link between health and wellness programs andfirmprofitability.

Based on the limited available evidence, we believe corporate health and wellness initiatives mayofferanopportunitytoincludethisESGaspect in investment decisions. The Harvard Busi-ness Review published a study presenting several cases that highlighted the business case for com-panies to invest in wellness programs. To men-tionafewexamples,Johnson&Johnson’sman-agement estimated that they saved USD 250 million in health care costs through wellness pro-grams between 2002–2008, with a return of USD2.71perUSDspent.Othercompaniesexpe-rienced similar results. H-E-B, for instance, claims thatemployeesthatdon’tparticipateintheirworkplace wellness program have USD 1,500 higher healthcare costs than participants. The company estimates that the return on investment of moving 10% of employees from high- and medium risk to low-risk in this respect is 6 to 1.6

Otheracademicpapersthattestedwhether corporate health and wellness contributed posi-tivelytocompanies’financialresultsfoundthataportfolioof“healthy”companiesoutperformedthe market.7, 8 These studies do not necessarily

Levels of reporting

Audience for each level of reporting

ESG analysts, public sector, health focused

non profits

Sustainability Report(selective quantitative

metrics)

C-Suite, Board, Investors

Internal health and well-being reporting (detailed quantitative

metrics), e.g., CDC Worksite Health Scorecard

CMO, HR, Wellness Manager

or team

Integ-rated

Report (mostly

narrative)

Source: Reporting on Health: A Roadmap for Investors, Companies, and Reporting Platforms (January 2016) http://thevitalityinstitute.org/projects/health-metrics-reporting/

Fig. 5: Levels of reporting and audience


4 Reporting on Health: A Roadmap for Investors, Companies, and Reporting Platforms (January 2016). http://thevitalityinstitute.org/projects/health-metrics-reporting/

5 Millennials – the global guardians of capital, UBS Chief Invest-mentOfficeWealthManagementwhitepaper(June2017).

6 “Whatisthehardreturnonemployeewellnessprograms?”HarvardBusinessReview.L Berry,A. Mirabito,W. Baun(December 2010).

7 “Thelinkbetweenworkforcehealthandsafetyandthehealthof the bottom line: tracking market performance of companies thatnurturea“cultureofhealth”,”JournalofOccupationalandEnvironmental Medicine. R Fabius, RD Thayer, CM Yarborough, KW Peterson, F Isaac, RR Loeppke, BS Eisenberg, M Dreger (September 2013). http://thevitalityinstitute.org/projects/health-metrics-reporting/

8 “CorporateHealthandWellnessandtheFinancialBottomLine:EvidencefromSouthAfrica,”JournalofOccupationalandEnvironmentalMedicine.CS Conradie,Evd MerweSmit,DP Malen(February2016) http://thevitalityinstitute.org/projects/health-metrics-reporting/

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Corporate Health12

suggestacauseandeffectfromaperformanceperspective, but it does appear to support the thesisthatarelationshipexists.Oneanalysiswasperformed in South Africa over a time period of three,five,and10years.Inalltestedscenarios(equal-weighted and market-capitalization-weighted portfolio approaches), the basket of firmsoutperformeditsbenchmark,theJSEFTSEAll Share index.9 Studies on the US market showed similar results. A number of studies examined the market performance of companies that won awards for their employee wellness programs or received a high score for their pro-gramsontheso-calledHEROscorecard,whichallows employers to evaluate their health and well-beingeffortsbyusingacomprehensiveinventoryofcurrentbestpractices.Infigure7,we show the performance three baskets of cor-poratehealthportfoliosversustheS&P 500.For Note: CHAA = Corporate Health Achievement Award

Sources: J. Grossmeier et al. Linking workplace health promotion best practices and organizational financial performance. JOEM 2016;58(1):16-29. RZ Goetzel et al. The stock performance of C. Everett Koop Award winners compared with the Standard & Poor’s 500 Index. JOEM 2016;58(1):9-15. R. Fabius et al. Tracking the market performance of companies that integrate a culture of health and safety. JOEM 2016;58(1):3-8.

Fig. 7: Journal of Occupational & Environmental Medicine Three studies of corporate health versus share performance, % return

Koop HERO CHAA S&P 500

350

300

250

200

150

100

50

0

–50

2001 2004 2007 2010 2013

325%

235%

345%

159%


Fig.6:VitalityInstitute’sCoreHealthMetricsScorecard

Governance – leadership and culture

1 Hasyourcompanyconductedaconfidentialsurvey,audit,orotherassessmentwithinthepresentreportingperiodthatmeasuresthe degreetowhichtheworkplacecultureandenvironmentsupporthealthandwell-being?Examples: employees are asked to rate the corporate culture in some way; employees are asked if they feel their manager supports them when they take time to go to the gym at lunch.

2 Are health, well-being, chronic disease prevention, or health promotion topics mentioned in– theannualreport?– Form10-K?– anyotherformatreportedtotheboardofdirectorsatleastonceayear?

3 Isthereapersonresponsibleforemployeehealthandwell-beinginyourcompany?

Management – programs, policies, and practices

4 Does your company have an annual budget or receive dedicated funding for personalized health promotion and disease prevention programs?Examples: a dedicated budget in the department responsible for the implementation of the health and well-being program (e.g., the human resources department); a central health and well-being budget allocated by senior executives on an annual basis

5 Doesyourcompanyhaveaprogramtoaddressmentalwell-being,dealingwithmatterssuchasdepressionandstressmanagement?

6 Doesyourcompanyhaveanoccupationalsafetyandhealth(OSH)policy?

7 Doesyourcompanyprovidemedicalbenefitsforfull-timeworkers,includingrecommendednationalpreventiveservices(e.g.,theAffordableCareActintheUnitedStates)suchastobaccocessation,screenings,andvaccinations?

8 Doesyourcompanymaintainasmoke-freeworkplace?

Evidence of success – health risks and health outcomes

9 Hasyourcompanyconductedaconfidentialsurvey,audit,orotherassessmentwithinthepresentreportingperiodthatmeasuresthehealthstatusofemployees?

10 Whatistheper-employeeaverageabsenteeismduetosickleaveforthereportingperiod(unplannedleaveorsickdays)?

Source: Reporting on Health: A Roadmap for Investors, Companies, and Reporting Platforms (January 2016) http://thevitalityinstitute.org/projects/health-metrics-reporting/

9 ibid

Corporate Health


instance, a portfolio of winners of the C. Everett Koop National Health Award, which recognizes outstanding worksite health promotion and improvement programs, outperformed the S&P 500indexovertheperiod2000–2014.Asimilar result showed a study that examined the performance of listed companies that received highscoresontheHEROscorecard(HealthandWell-beingBestPracticesScorecard).Overasix-year period these companies outperformed the S&P index.10

Conversely, we have come across various occu-pational health case studies that highlight the impact that a poor occupational health record canhaveonacompany’sperformance.

Inourfirstexample,arefineryinCaliforniaexperiencedadevastatingfirein2012causedbyaleakingcrudeunitpipe,thefirecausedwide-spreaddamagetotherefineryaswellasinjuring six employees and becoming a health concern to the surrounding area. When the US Chemical Safety Board (CSB) issued their investi-gativereporttheycitedtherefinery’ssafetyprograms and emergency response procedures asleadingcausesoftheincident.Specifically,the CSB found shortfalls in the safety culture thatledtocontinuedoperationduringthefireas well as reluctance for employees to use ‘WorkStopAuthority’.11

Acost-benefitanalysisperformedbytheRandCorporation found several explicit costs of the incident including USD 10 million for healthcare, USD 5.3 million for repairs, USD 1.4 million for fines,USD900,000forasafetyevaluation,andUSD 60,000 for the emergency response. Fur-ther, the Rand Corporation estimated the loss of production at nearly USD 900 million equat-ingtoalossinprofitofnearlyUSD63million.12

Oursecondcase-studyfocusesonasbestosworkers claims and their impacts on company financials–examplesthatarewellknownwithinthe occupational health & safety community. Currently,theWorldHealthOrganization(WHO)estimatesthat107,000individualsdieannually from asbestos-related diseases and an estimated 125 million people globally are still exposed to asbestos at work.13

MSCI cited several companies in its 2013 health & safety report for their asbestos liabilities, including Ingersoll-Rand – an industrial machin-

ery company – that faced nearly USD 900 mil-lion in liabilities in 2012, or nearly 6% of sales. Enel SpA – an Italian utility – saw criminal con-victions of six of their managers for failing to protect workers in the 1980s. Finally, Armstrong World Industries – a producer of building prod-ucts – faced over 150,000 personal injury cases relating to asbestos that caused the company to fileforbankruptcyin2000.WhenArmstrongemerged from bankruptcy in 2006, a personal injury trust took claim to nearly half the compa-ny’ssharesequatingtoavalueofnearlyUSD 1.5billion.14

These are just a few of the many examples that demonstrate the importance of occupational health & safety on company culture. Lack of attention to these programs can have measur-ableeffectsbothfromanoperationalstand-pointwheninsufficientsafetyculturedamagescompanyinfrastructureorwhenworker’shealthcauses permanent consequences for both the employeesandleadstosignificantliabilitiesforthe company.

As data improves, we expect that case studies on systemic corporate health failings beyond occupational health will receive more attention.

10“Istherealinkbetweenstockmarketpricegrowthandhavingagreatemployeewellnessprogram?Maybe,”JournalofOccu-pational&EnvironmentalMedicine.MPO’Donnell,(January2016).

“Trackingthemarketperformanceofcompaniesthatintegratea culture of health and safety: An assessment of corporate healthachievementawardsapplicants,”JournalofOccupa-tional&EnvironmentalMedicine.R Fabius,R Loeppke,T Hohn,et al. (January 2016). CHAA = corporate health achievement awards.

“TheStockPerformanceofC.EverettKoopAwardWinnersComparedWiththeStandard&Poor’s500Index,”JournalofOccupational&EnvironmentalMedicine.R Goetzel,R Fabiuset al.(December2015).

“Linkingworkplacehealthpromotionbestpracticesandorga-nizationalfinancialperformance:trackingmarketperformanceofcompanieswithhighestscoresontheHEROscorecard,”JournalofOccupational&EnvironmentalMedicine.J Gross-meier,R Fabius,etal.(January2016).

11“FinalInvestigationReport”U.S.ChemicalSafetyandHazardInvestigation Board. (2015)

12“Cost-BenefitAnalysisofProposedCaliforniaOilandGasRefineryRegulations”,RandCorporation,D. Gonzales, T Gulden,AStrong,WilliamHoyle,(2016)

13 Concha-Barrientos M, Nelson D, Driscoll T, Steenland N, Punnett L, Fingerhut M et al. Chapter 21. Selected occupa-tional risk factors. In: Ezzati M, Lopez A, Rodgers A, Murray C, editors.Comparativequantificationofhealthrisks:globalandregional burden of disease attributable to selected major risk factors.Geneva:WorldHealthOrganization;2004:1651–801

14“ESGIssueReport:IdentifyingVulnerabilitiestoHealth&SafetyIncidences”,MSCIESGresearch,(November2013)

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Corporate Health14

In conclusion, human capital is an important – maybe the most important – economic factor contributingtoacompany’ssuccess.Tosustain-ably develop and grow human capital, compa-nies need a healthy workforce. Today, most companies focus their sustainability reporting on traditional occupational safety and health metrics. However, we expect that these report-ing metrics will expand in the future and incor-porate more employee health aspects as human capital is both an input factor and also it deter-minestheoutcomesofacompany’sproductsand services.15Ourcasestudiesindicatethatweak health and safety standards can result in high costs and reputational damage – an importantadditionalargumentoftenover-looked–butsuchprogramsalsoofferthepotential for a stronger corporate culture as they can build employee trust, pride and com-mitment.16 Although employee health programs areonlyonewayofstrengtheningemployers’relationship with employees, we believe it pro-

vides evidence for management to incorporate further health and safety considerations. In summary, based on a broad range of academic research and our own analysis, and even if directcausationmaybedifficulttoidentifyinthecaseofsharepricesspecifically,weseeacorrelation between workforce health & well-ness programs and corporate performance.

15 For more details see the Six Capitals model of the Interna-tional Integrated Reporting Council.

16“Whatisthehardreturnonemployeewellnesspro-grams?”HarvardBusinessReview.LBerry,A. Mirabito,W. Baun(December2010).


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The value-based revolution: get what you pay for

The rising cost of healthcare around the world is leading to new approaches to health manage-ment. How and where healthcare is delivered, paid for, and consumed will change over the coming years, particularly as budget constraints forceashiftfromvolume-basedtovalue-basedreimbursement – payment for the value one gets from healthcare products and services. This shiftwillhavefar-reachingconsequencesforpayers and health providers, but also for patients and their employers. While value-based care(VBC)isnotyetpervasive,itsinfluencewillbe among the key elements to control health-care costs over the coming years amid increased longevity, in our view. For this reason, the ulti-mate payer for healthcare, namely employers and governments, must be aware of the ever-growing trend toward VBC, not only to lower total healthcare costs, but also to improve patient outcomes and employee productivity. In2016theOECDcountriescollectivelyspentUSD6.5trilliononhealthcare(source:OECD).Overthelast15yearsthesecostshaverisen6%annually and their growth shows little sign of slowing: in the US, for example, total healthcare expenses are projected to reach 20% of GDP, and government health expenditure nearly one-third of Federal outlays by 2025 (source: CMS, CBO).TheproblemismostacuteintheUS,butsimilar trends are visible elsewhere in the devel-oped world (see Fig. 8). Moreover, higher per-capita health expenditure does not necessarily lead to better health outcomes.

In the US, partly as a consequence of healthcare costinflation,butalsoduetochangesinemployer health plans, employees have been saddled with a greater share of healthcare costs. In an attempt to moderate costs, US

employers have encouraged employees to enrol inhigh-deductiblehealthplans(HDHPs).Over50% of US covered workers now have an annual deductible of USD 1,000 or more (source: Kaiser Family Foundation) (see Fig. 9). This growing trend has had unintended conse-quences, with increasing evidence that more Americans are delaying medical treatment because of the high cost of care. While avoiding or deferring treatment may reduce costs in the near term, it is likely to be sub-optimal from a medical perspective and could in fact lead to higher future medical costs.

An evolving solution to this growing problem has been the emergence of new payment mod-els to better align the interests of payers and providers. Increasingly payers are linking the price paid for treatment to health outcomes, rather than simply paying for the volume of

US & Europe: The value-based revolution

Part 3

By Mike Ryan, Jerome Brimeyer, and Lachlan Towart

Fig. 8: The rise in developed market healthcare expenses Total healthcare expenditure as a % of GDP, 1995–2014

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1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Source: World Bank, data as of September 2017

United StatesOECD membersSwitzerlandJapan European Union

Corporate Health


services provided, the so-called fee-for-service (FFS) model. By changing the provider payment model, payers hope to reduce waste and dupli-cation, spread clinical and operational best-prac-tice, and ultimately achieve higher quality patient outcomes for a better price. Broadly, this isreferredtoasashiftto“value-basedcare”(VBC).

New technology makes it possible to better measure the outcomes delivered by healthcare providers, although measurement of actual out-comes remains complex. Government incentives such as Meaningful Use regulations have led to wide adoption of Electronic Medical Records (EMR) in the US and elsewhere: 96% of US acute hospitals used EMR systems by 2015, comparedtoonly72%in2011(source:ONCHealthIT Dashboard). EMRs have also been widely adopted across many European coun-tries’healthcaresystems,despitesomeinitial“teething”troubles.Combiningclinicaldatawith analysis of which treatments are provided, when, and the costs assigned to them could eventually support a move to population health management.

In the US, VBC is already changing how health-care providers and product companies are reim-bursed for products and services. Providers, namely hospitals and large regional healthcare systems, are increasingly being asked by payers to accept at-risk reimbursement, where pay-mentisheavilyinfluencedbythequalityandoutcome of patient care. In Europe, healthcare provision traditionally relies more on nation-alised systems, but private provider groups are increasingly willing to take responsibility for patients’healthriskoneitheranindividualorpopulation basis.

The trend will also impact suppliers to the healthcare system. Biopharmaceutical compa-nies, particularly those with high priced drugs, are beginning to enter into value-based con-tracts where they only receive full reimburse-mentfrompayersifadrugmeetspre-specifiedmetrics, such as heart attack prevention or other medical outcomes. Similarly, the reim-bursementofmedicaldevicesisbeinginflu-encedbyVBC,aswellas“bundled”reimburse-ment, whereby payers reimburse providers with a pre-established bundled payment for a given procedure (e.g. hip or knee implant), rather than FFS reimbursement or an explicit payment

for the device. Bundled payments will also be based on patient outcomes, requiring devices to becomeprogressivelymorecosteffectiveiftheyare to remain competitive.

As yet, no country has fully implemented value-based care but some have made partial head-way. A full transition to VBC would require a complete re-think of health provision, and may in practice be unachievable. But already trends are emerging that encourage employers to bet-ter support good health in their workforces.

First,weseeevidenceofa“consumerization”of healthcare. As patients bear a larger share of the cost of their care, they tend to take a greater interest in their health choices. This price-sensitivity is visible, for example, in the rise of retail clinics within drug stores, where patientscanreceivebasichealthadvicesignifi-cantly cheaper than in traditional primary care settings,orpatientsdecliningtofillprescrip-tions as their out-of-pocket costs rise.

Fig. 9: Percentage of covered workers enrolled in a plan with a general annual deductible of USD 1,000 or more for single coverage By firm size, 2009–2017, in %

80

2009 2010 2011 2012 2013 2014 2015 2016 2017

* Estimate is statistically different from estimate for the previous year shown.

Note: These estimates include workers enrolled in HDHP/SOs and other plan types. Average general annual health plan deductibles for PPOs, POS plans, and HDHP/SOs are for in-network services.

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2009–2017

All small firms (3–199 workers)All large firms (200 or more workers)All firms

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Second,theshifttovalue-basedcareplacesmore emphasis on preventative treatment and wellness. Here technology acts as an enabler: for example, remote monitoring of vital signs could allow earlier intervention where a patient’sunderlyingdiseaseisworsening,butbefore they begin to feel worse. Similarly, track-ing data over the whole period between visits gives a doctor more information to work with than the one-day snapshot currently captured onthedaythepatientvisitsthedoctor.Onechallenge is how to manage the vast amount of data collected: patient privacy will be a concern.

Asreimbursementshiftsclosertoamodelinwhichahealthcareproviderisgivenafixedamount of money per person to manage each patient’shealth,thevalueofpreventativemedi-cinegrows.Ofcourse,anemployeewhodoesnot become sick (they may not think of them-selvesasa“patient”)willalsogainfromthehealthbenefits,aswellastheeconomicbenefitof lower total system costs.

While these measures are still some way away from being realized, we believe the direction of travel is clear. Full implementation (even if possi-ble) is likely to require a complete re-think of healthcare provision, and a change in behavior on the part of patients. We expect insurance

policies, and increasingly corporate wellness programs,tousefinancialincentivestoencour-age better health awareness. The hope is that these measures can contain the growth of future healthcare costs. Financially, employers shouldbenefitdirectlywheretheyaretheulti-matepayer.Buttheyshouldalsobenefitthrough having a healthier, more engaged workforce.

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Emerging markets (EM) are home to almost half the global population. But the combined value of their healthcare sectors is just USD 1.3 tril-lion, less than half that of the US1. The big gap in per capita healthcare spending between EM and the rest of the world is largely due to decades of underinvestment by EM govern-ments. This is poised to change, in our view, because EM societies are aging rapidly. The per-centage of people 65 years or older will likely reach 15% in 2030, according to UN forecasts. China’s65-and-abovedemographicwillriseby50% by 2020.

Higher urbanization and income growth are changing consumption patterns and lifestyle. Higher income implies higher demand for goods like healthcare and leisure. As income increases, expenditures on hospital services and medicalproductspickup(seeFig.10).Oneofthe consequences of higher income per capita is theevolutioninfocusfrominfectiousto non-infectious diseases like diabetes and heart disease.

Overall,80%ofEMdeathsarenowattributedto non-infectious diseases, nearly on a par with the 87% in DM (Fig. 11). This number conceals considerable variation – in Brazil, for instance, close to 74% of deaths are attributable to such illnesses, while in Nigeria and Kenya the num-

Emerging markets: Why employers will have to play a bigger role

Part 4

By Jorge Mariscal, Soledad Lopez, and Lucy Qiu

Source: HSBC and national statistics offices, 2012.

Note: This data collates CPI basket information for 50 countries and groups them according to income level in order to establish a “standard” consumer spend for each income level.

Fig. 10: Healthcare expenditures as a percentage of personal income in very low- to high-income countries In %

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Hospital services

Medical products and equipment

Outpatient services

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Very low Low Low middle Upper middle High

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Source: World Health Organization, World Economic Outlook, UBS as of 2012. GDP weighted using 2014 GDP.

Fig. 11: Global fatalities caused by non-infectious diseasesIn %

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Emerging Asia Latin America

Emerging EMEA Developed markets

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Death by diabetes

Cancerrelated

fatalities

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1 WorldHealthOrganization,WorldEconomicOutlook, UBS as of 2014. GDP weighted using 2014 GDP.

Corporate Health


Fig. 12: Out of pocket expenditure as a percentage of total health care expenditure

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Emerging markets Developed markets

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20

10

0

1995 2000 2005 2010 2014

43.1 47.8 45.0 36.3 34.7

13.8 14.3 13.3 12.3 11.8

beriscloseto25%,accordingtoWHOfigures.Nevertheless, because of the higher costs and longer treatment periods that non-infectious diseases require, and despite patchy data on this topic, they have likely been a key factor in fuelling EM healthcare spending growth, in our view. We believe an aging population and the rise of non-infectious diseases will continue to be a burden on healthcare services and on eco-nomic growth unless the public or private sec-tors address the issue.

Despite recent improvements, the share of pub-lic healthcare on total healthcare spending in EM is still relatively low, at 54% (according to latest WHOnumbersfrom2013).Thus,out-of-pocketexpenses (private medical expenses not covered by state healthcare schemes) remain on average 35% of the total (2013) compared to 12% in DM (see Fig. 12).

We believe that as global economic growth recovers, the share of EM out-of-pocket expensesshoulddecline.Comparedwithfiveyears ago, however, many EM governments are already cash strapped and may have a limited budgetto supporthealthcarespending.AsFig. 13shows,Brazil,Egypt,SouthAfricaandChile have among the highest healthcare expen-

ditures as a percentage of GDP in EM, yet alreadyrunsizablefiscaldeficits.Egypthasmoremoderate healthcare expenditures at 5.6% of GDP,closetotheEMaverage,butthelargefis-caldeficitmeanstheprivatesectorwilllikelyhave to shoulder a bigger healthcare spending burden, in our view. China, though similar to the EM average in terms of healthcare spending and



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Fig. 13: Healthcare expenditures and fiscal balances in EM

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CN ChinaIN IndiaID IndonesiaKR KoreaMY MalaysiaPH PhilippinesTH ThailandAsia AsiaBR BrazilCL ChileCO ColombiaMX MexicoPE PeruLatAm Latin AmericaCZ Czech RepublicEG EgyptGR GreeceHU HungaryPL PolandQA QatarRU RussiaSA South AfricaTR TurkeyUAE United Arab EmiratesEMEA EMEAEM Emerging marketsDM Developed Markets

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fiscalhealth,willlikelyexperienceamorerapidincrease in healthcare spending in the coming years due to its aging demographics. To help manage costs, the country is targeting out-of-pocket expenses (as a share of total healthcare spending) of less than 30% by 2018 (vs. 34.3% in 2012).2 It intends to reach this goal by improv-ing medical insurance coverage, raising medical cost subsidies and, at the same time, deregulat-ingdrugprices.Thedecisiontoremovespecificdrug-price caps and expose prices more to mar-ket forces was made in response to supply shortages that have occurred because of overly cheap drugs in some areas3.

Whatcanemployersdo?China is not alone in encouraging private sector-friendly solutions to EM healthcare prob-lems. Throughout EM, private companies – including employers as well as healthcare providers – will have to play a growing role.

A 2013 study4 found that employees place sig-nificantimportanceonhealthandwellnessbenefits.Thisisinparticulartrueforthoseworking in the emerging economies such as Brazil, India, Mexico and China, where state-funded provision is weak. Yet EM employees also see the lowest satisfaction levels given the resources available to them.

The business case for corporates to provide bet-terhealthandwellnessbenefitsseemsclear.Researchers have found a relationship4 between the satisfaction levels of health and wellness resources and desired workplace outcomes such as engagement and commitment. Wellness pro-grams can also help avoid high costs related to illness and reduce employee absences.

Many companies already recognize this and are keen to bridge the gap. A Metlife study5 found that in Russia 91% of employers see employee wellness as an important consideration. For-ward-thinking companies are focusing on pre-ventive care, which can be popular at relatively low cost. Preventive care can also address the top three employee health concerns: sedentary lifestyle, high blood pressure and stress.

Fig. 14: Importance of Health and Wellness Resources1 = Very unimportant, 6 = Very important

Netherlands

Japan

UK

Spain

All

US

South Africa

China

India

Brazil

Mexico

Botswana

0 2 4 6

Source: 2013 study by Sloan Center on Aging & Work at Boston College

Fig. 15: Satisfaction with Health and Wellness1 = Very dissatisfied, 6 = Very satisfied

Brazil

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Botswana

Spain

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Netherlands

Mexico

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2 HanY.China’sMinisterofHealthPubliclyAcknowledgesThat Out-of-PocketMedicalExpendituresAreStillHigh.United DailyNews(LianHeZaoBao);January7,2011.2012data:WorldHealthOrganization,WorldEconomicOutlook,UBS as of 2014.

3 Reuters.“ChinatostopsettingmostmedicinepricesfromJune1,”May2015.

4 The Sloan Center on Aging & Work at Boston College, “Employer-sponsoredHealthandWellnessResources,”Global WorkforceStudy,Sept.2013.

5 MetLife,“GlobalEmployeeBenefitTrendsStudy–Russia,”2014.

Corporate Health


For cost-conscious corporate managers, volun-tarybenefitsthatarepaidinfullorinpartbythe employee can enable them to maintain or expandtheirbenefitsoffering.Forexample,inLatin America, where economic growth has slowed in recent years amid lower commodity prices,abouthalfofthemultinationalsoffervoluntary dental insurance, as well as a quarter of local companies. Nearly 40% of multination-als provide employees with the opportunity to pay for supplemental health insurance, while aboutafifthofsingle-countrycompaniesdoso.These numbers have considerable potential to rise from a low base6.

Technology can also have a transformational effect.InIndia,Africa,andremoteareaswhereit can take a long time see a doctor, the rising popularity of telehealth (e.g., video chats, patient support lines) is valuable to employee and employer alike. Telehealth allows patients to undergo screenings, consult physicians, and receive referrals and follow-up treatment if required. Employers can also use online technol-ogy to educate and facilitate the selection of healthandwellnessbenefits.

Overall,higherincomes,agingpopulationsandthe rise of non-infectious diseases in EM are becoming a heavy burden on healthcare ser-vices. However, many EM government budgets arefinanciallystretched,withlargefiscaldeficitsreducing room to increase their healthcare spending. Many countries are targeting lower out-of-pocketexpensesbyincreasingefficiencyand reducing costs. Hence, there is a growing need for employers and the private sector to interveneandfillthegapbetweenemergingand developed markets with respect to health-care services. Researchers have found a strong correlation between the satisfaction levels of health and wellness resources and desired workplace outcomes such as engagement and commitment4. In EM, the argument for compa-niestohelpmanagetheiremployees’healthisbecoming more compelling, in our view.

6 MetLife,“LatinAmericaEmployeeBenefitsTrendsStudy,”2013

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A wide range of development stagesinAsiaPacificprovides valuable lessons

IntheAsiaPacific(APAC)region,thelevelofwealth, as well as the establishment of institu-tions, is spread quite unevenly – and so is the development of corporate healthcare programs for employees. To complicate matters further, nationswithagingpopulationprofilesoftenborder countries with swelling ranks of young people,eachofthemfacingverydifferentchal-lenges. High GDP countries, which we refer to as APAC Developed Markets (DM) in this report, followingtheMSCIclassificationsystem,include the likes of Japan and Australia; we clas-sify economies such as China, India and Indone-

sia in the APAC Emerging Markets (EM) group, and countries such as Sri Lanka and Bangladesh in the APAC Frontier category.

As Fig. 16 shows, healthcare expenditure rela-tive to GDP is fairly unevenly distributed in the region, and it is generally also lower than the G10 average. The reason is straightforward. Fig. 17showsthatthepublictaxintakeasapercentage of GDP tends to fall with income levels. This means that the government, which tends to be the biggest provider of healthcare, is more constrained when tax revenues are less. This is also a key reason for governments to widen their tax bases; recent examples include tax reform moves in the Philippines and India, and a tax amnesty in Indonesia.

Employee healthcare inAsiaPacific: A mixed perspective

Part 5

By Min Lan Tan and Hartmut Issel

Source: IMF, Government Finance Statistics Yearbook and data files, World Bank, OECD, UBS, 2017

Fig. 17: Tax nets in G10 and APAC DM are considerably wider then in APAC EM and APAC Frontier economiesTax to GDP ratio

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Fig. 16: APAC expenditure is generally lower than the G10 average as a percentage of GDP; APAC EM and APAC Frontier are lower than APAC DMHealth expenditure/GDP

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It is therefore not surprising that when we com-pare the G10 countries with the DM, the EM and the Frontier economies across APAC, the link between tax and the share of public health-care spending as a percentage of total health-care expenses is fairly tight. In general, the lower the income and tax levels, the more indi-viduals will be burdened by out-of-pocket expenses, as Fig. 18 shows. The fact that APAC EMhealthcarecostsinflateataconsiderablyfaster rate further highlights this pressing issue.

Another, if somewhat crude, measure of the healthcare system is life expectancy. While in our all sample countries in Fig. 20 we see life expectancy increase over time, these encourag-ing developments could be explained mostly by rising income levels. In other words, the richer a country is per capita, the longer its citizens can expect to live. Clearly, one link is the ability to provide good healthcare.

How companies, as well as their behaviors, are changing

In general, public insurance schemes are com-moninAPAC.However,thesystems’reputation,wait-timeandqualitymayoftenbesub-par,even in DM APAC countries, in our view. This may explain the ascent of private hospital chains across APAC, although they are not always within reach of everyone, especially among lower income earners, due to their high fees.

Source: WHO, 2017

Fig. 18: Public healthcare provision is much more prevalent in G10 and APAC DM In %

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Public Out of pocket Private insurance Others

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Fig. 19: APAC EM healthcare cost inflation outpaces that of wealthier economies Healthcare CPI

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Fig. 20: Populations in higher income countriestend to live longer due to better healthcareLife expectancy

Hong Kong

Japan

Singapore

Australia

Korea Rep.

New Zealand

China

Malaysia

Thailand

Indonesia

Philippines

India

60 65 70 75 80 85

Sources: United Nations Population Division, World Bank, UBS, 2017

2015 2001

EmployeehealthcareinAsiaPacific:Amixedperspective

Corporate Health


Sowheredocorporationscomein?Unlikeinmany wealthy nations, many APAC governments remain heavily involved in running companies in strategic sectors. These so-called state-owned enterprises,orSOEs,usuallyprovidecompre-hensive health coverage for their employees. ManyoftheseSOEsarelargeenoughtocircum-vent insurance companies. From a cost angle, it ismoreefficienttostrikeagreementsdirectlywith hospitals, as Petronas, a leading govern-ment-ownedentityinMalaysia,does.Othervariants include military hospitals and facilities.

There is also a structural issue at play, namely thatSOEsareseeingtheirshareoftheeconomydiminish, albeit slowly, with newer economy sec-torsfillingthevoid.Butfillingthevoidalsomeans that the private companies need to think aboutstrategiestoprovidehealthcarebenefitsto their workforce. Another idiosyncratic factor in much of Asia is the informal sector, i.e. indi-vidualswhoworkwithoutreceivingspecifichealthcarebenefits.Thisisonereasonwhymany mid- and low-income countries attempt to raisetheformalsector’sshareoftheeconomy.

Thelevelofhealthcarebenefitsvariesfromcom-pany to company, and from country to country. In Australia for example, companies tend not to offerinsurancebutratherpreventativemeasuressuch as health check-ups. However, in many APAC DM countries, companies realize the need topromotehealthcarebenefitstoprospectiveemployees due to the competition for talent. While this is clearly not the only factor candi-dates will consider, companies can no longer affordnottoofferanybenefitsastheywouldstand out in a competitive marketplace.

IntheEM-typeeconomieswhereemployees’bargainingpowerisoftenlower,amoredirectapproach is sometimes applied. A recent exam-pleisIndonesia’suniversalpublichealthcareprogram (BPJS), whereby employers have to con-tribute 4% of their salaries toward healthcare coverage while the employee contributes an additional 1%. In other words, at earlier stages of development at least, companies may have to be nudged into supporting healthcare require-ments, while at more advanced GDP-per-person levels this becomes a habit as companies realize thestrategicbenefitsofprovidinghealthcarefortheir employees. Group coverage, i.e. large-scale contracts that companies negotiate with insur-ers, is increasingly common in the APAC region.

Fig. 21 shows the growth rates of group health-care coverage in countries covering the period 2000 to 2015/16. While relatively wealthy coun-tries that had higher initial healthcare penetra-tion, display little, if any growth, group health-care in other countries is advancing rapidly. Group insurance contracts are a lower-cost alternative to individual employee enrolment; in fact,fromaninsurer’spointofview,theyareconsiderablylessprofitable,suchthatbenefitsultimately accrue with workers. Part of the rea-son is that higher-risk individuals automatically fall under group coverage, whereas on an indi-vidual basis, the insurer might charge a much higher premium.

Finally,theriseof‘insurtech’mayhelpAPACnations increase healthcare coverage.

Insurtech uses internet and mobile communica-tion-basedplatformstotailorinsuranceoffer-ings to individuals. In a recent report called ‘Insurtech–ShiftingAsia,’weshowthatthekeybenefitsfrominsurtecharegreateroperationalefficienciesthroughautomationandstreamlin-ing, improved pricing of risk, better fraud pre-vention, and marketing synergies from targeted marketing, cross selling, and better customer retention. We estimate that total savings over the coming decade in APAC may be as high as USD 300 billion, with a substantial part of that stemming from life/health insurance.

Source: Various regional corporates, 2017

Fig. 21: Corporate sponsored insurance on the rise in countries that hope to catch upGrowth rate of group insurance, in %

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Japan Taiwan HongKong

Philippines China Singapore Thailand

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In sum, taking these technological and other shiftsintoaccount,APACcompaniesappearcapableofplayingasignificantroleinimprov-ing the health of their employees – and in some cases are already doing so. Developing APAC alone is home to four billion individuals, most of whom do not have access to a developed-world standard of healthcare. At the same time, cor-porateAPAC’scloutisgrowing,with197com-panies on the Global Fortune 500 list. If APAC

companies turn more of their resources to improving the health of their employees, and thereby increase their productivity in the work-place, both companies and their employees could stand to reap meaningful long-term rewards.


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When companies tackle employee health, one important factor this paper highlights is the need for a regional approach.

In the US, companies already work with insurers to provide healthcare coverage for their workers, yetfaceobstaclescontrollingcostinflationandlinkingexpendituresandoutcomes.Overthelonger term, as outlined in part 3 of this paper, corporate America should look at value-based care as a way of tying employee healthcare spending increases to improvements in employee health. Encouraging investment in advancements such as electronic medical records will make employee health outcomes easier to measure.

In emerging markets, as outlined in part 4, strainedpublicfinanceswilllimitwhatgovern-mentscandotoimproveworkers’health.Thisisespecially true in the face of emerging challenges such as the growing prevalence of non-infectious diseases and, in cases like China, aging demo-graphics. Employers will increasingly need to pick up the slack – for instance, by working with insurers to provide coverage. In some cases, lob-byingforgreaterflexibilityinareaslikedrugpric-ing may also boost the supply of treatments. Sponsoring new technologies such as telehealth may also permit better service in rural areas.

In Asia Pacific (part 5 of the paper), over the long term, private employers may prove particu-larlycriticalinfillingtwopubliccoveragegaps:in lower-income countries, where taxation tends to be less; and in areas where state-owned enterprises,whichoftenprovidehealthcarecov-erage for employees, are playing a declining role. Firms should prepare for the emergence of new healthcare funding models such as Indone-sia’suniversalhealthcaresystem,towhichemployerspay4%ofworkers’salariesandemployees pay an extra 1%.

However, there are also a number of common measures that corporations would be advised to take globally in order to optimize their employ-ees’health.TheseapplyeveninregionslikeEurope (part 3) where governments remain the dominanthealthcareproviders,despitefinancialupheavals such as the Eurozone crisis.

1) Companies should identify industry-specific health problems and implement employee health programs supporting optimal long-term responses (see part 1). Such problems include not only traditional health and safety concerns but also emerging risks posed by a sedentaryofficelifestyleandburnoutcausedby 24/7 digital communication. Solutions can range from the more traditional, e.g. encour-aging physical exercise, to the more recent, e.g. regular breaks from digital devices for employees.

2) These programs should also encourage employees to use new technology to track and improve their health. Examples include: using smartphones to monitor vital signs and physical activity in real time; establishing internal and/or connecting to external net-works that enable employees to share infor-mation about health needs and solutions; and adopting insurtech that helps employees lower healthcare costs by communicating health improvements to their providers (see part 5 of the paper).

3) We believe companies should position employee health programs correctly within a healthy,effectiveorganizational culture (see part 1). Senior managers should take time to reinforce the importance of employee health with consistent policies, communica-tions, and engagement at every level of the firm.Companiesshouldmonitorandholdmanagers accountable for sub-standard employee health outcomes.

4) When making the case for investment in employee health, companies should also look at the possible correlation between best-in-class programs and financial performance (although it is important to note that there is notnecessarilyadirectcauseandeffectbetween the two), as well as the potential consequencesforfirmsthatfailtomanagehealth risks (see full details in part 2). Com-panies may also use this information to high-lightthebenefitstoshareholders,andshare-holderscanalsouseittohelppersuadefirmsto change.

Conclusion

Part 6

By Nick Rice

Corporate Health

Finally, although the provision of healthcare will always be complex, employees are more likely to adopt solutions if they are presented in a way that makes them easier to understand. Whether ornottheyareinvolvedinthehealthcarefield,all companies are capable of providing their employees with regular, relatable advice on the importance of health and additional options for managing it better. For companies that embrace

this principle and treat it as a competitive advan-tage, the fundamental vision underlying corpo-rate health – that the health of a company is indivisible from the health of its workers – will go from being a challenge to a long-term opportu-nity.

Conclusion

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Corporate Health

UBS Wealth Management white paper

Editor in chief

Nick Rice

Authors (in alphabetic order)

Jerome Brimeyer

Matthew DeMichiel

Hartmut Issel

Laura Kane

Soledad Lopez

Jorge Mariscal

ClaudiaOeken

Lucy Qiu

Nick Rice

Mike Ryan

Alexander Stiehler

Min Lan Tan

Themis Themistocleous

Lachlan Towart

Program management

Réda Mouhid

Publication date

2 November 2017

Desktop Publishing

Werner Kuonen

Cover picture

iStock | loonger

Languages

English

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Corporate Health

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ThispresentationhasbeenpreparedbyUBSAG,itssubsidiaryoraffiliate(“UBS”).

Thispresentationisforyourinformationonlyandisnotintendedasanoffer,orasolicitationofanoffer,tobuyorsellanyproductorotherspecificservice.Althoughallpiecesofinformationand opinions expressed in this presentation were obtained from sources believed to be reliable and in good faith, neither representation nor warranty, express or implied, is made as to its accuracy or completeness.

Thegeneralexplanationsincludedinthispresentationcannotaddressallofyourpersonalinvestmentobjectives,yourfinancialsituationaswellasyourfinancialneeds.Certainproductsandservicesaresubjecttolegalrestrictionsandcannotbeofferedworldwideonanunrestrictedbasis.Allinformationandopinionsaswellasanypricesindicatedaresubjecttochangewithoutnotice.

UBS does not provide legal or tax advice and this presentation does not constitute such advice. UBS strongly recommends all persons considering the products or services described in this presentation obtain appropriate independent legal, tax and other professional advice.

Approved and issued by UBS, this presentation may not be reproduced or copies circulated without prior authority of UBS.

USA:Asafirmprovidingwealthmanagementservicestoclients,UBSFinancialServices,IncisregisteredwiththeU.S.SecuritiesandExchangeCommission(SEC)asaninvestmentadviserandabroker-dealer,offeringbothinvestmentadvisoryandbrokerageservices.Advisoryservicesandbrokerageservicesareseparateanddistinct,differinmaterialwaysandaregovernedbydiffer-entlawsandseparatecontracts.ItisimportantthatyoucarefullyreadtheagreementsanddisclosuresUBSprovidestoyouabouttheproductsorservicesoffered.Formoreinformation,pleasevisit our website at www.ubs.com/workingwithus. ©UBS 2017. All rights reserved. UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA/SIPC. There are two sources of UBS research.Reportsfromthefirstsource,UBSCIOWealthManagementResearch,aredesignedforindividualinvestorsandareproducedbyUBSWealthManagementAmericas(whichincludesUBS Financial Services Inc. and UBS International Inc.) and UBS Wealth Management. The second research source is UBS Investment Research, and its reports are produced by UBS Investment Bank,whoseprimarybusinessfocusisinstitutionalinvestors.Thetwosourcesoperateindependentlyandmaythereforehavedifferentrecommendations.Thevariousresearchcontentprovideddoesnottakeintoaccounttheuniqueinvestmentobjectives,financialsituationorparticularneedsofanyspecificindividualinvestor.Ifyouhaveanyquestions,pleaseconsultyourFinancialAdvisor. UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA/SIPC.

FIM-Business: Please take note that the content of this document is exclusively intended for Financial Intermediaries and shall not be passed on to end-clients and third parties. Furthermore, itshallbekeptinmindthatanyproductinformationprovidedhereinisnotadvancedinconsiderationofaportfolioofaspecificend-clientandshallnotberegardedasinvestmentadvisoryserviceprovidedbyUBS.ItistheFinancialIntermediary’ssoleresponsibilitytodecidewhetheraninvestmentinstrumentisappropriateandsuitablewithrespecttoacertainend-client’sfinan-cialandpersonalsituationandobjectives(includingtheend-client’sknowledge,experienceandcountryofdomicile).France: This document has not been submitted for approval by, and no advertisingorotherofferingmaterialshavebeenfiledwith,theFrenchFinancialMarketsAuthority(“AutoritédesMarchésFinanciers”–AMF)or“AutoritédeContrôlePrudentieletdeRéso-lution”(ACPR).Thisdocumentandanyotherinformationormaterialsrelatingtheretoisforinformationpurposesonlyanddoesnot(intendto)constituteapublicofferingorinvolveaninvest-mentserviceinFrance.Thispublicationisforyourinformationonlyandisnotintendedasanofferorasolicitationofanoffertopurchaseorsellanyspecificproductsandshouldnotbetreatedas giving investment advice. All information and opinions as well as any indicated prices are valid only at the time of the preparation of the information and are subject to change due to marketdevelopmentsanytimeandwithoutpriornotice.Pleasebeawarethattheproductspresentedinthispublicationmaynotfittothepersonalinvestmentobjectives,portfolioandriskprofileofeveryindividualinvestor.Allinformationandopinionsexpressedinthispublicationwereobtainedfromsourcesbelievedtobereliable.Thispublicationistargetedneithertocitizensof the United States of America or of the United Kingdom nor to any persons who have permanent residence in those jurisdictions. With regard to the products presented in this publication solely the sales brochure is legally binding which can be received from UBS upon request. This publication may neither be altered, copied nor reproduced without the prior written consent of UBS. Neither this document nor any other information or materials relating thereto (a) may be distributed or made available to the public in France, (b) may be used in relation to any investment serviceinFrance(c)ormaybeusedtopubliclysolicit,provideadviceorinformationtoorotherwiseprovokerequestsfromthepublicinFranceinrelationtotheoffering.Anyofferingismadeexclusively on a private basis in accordance with French law and is addressed only to, and subscription will only be accepted from eligible investors in accordance with French law. Germany: Thispublicationisforyourinformationonlyandisnotintendedasanofferorasolicitationofanoffertopurchaseorsellanyspecificproductsandshouldnotbetreatedasgivinginvestmentadvice. All information and opinions as well as any indicated prices are valid only at the time of the preparation of the information and are subject to change due to market developments any time and without prior notice. We recommend consulting an investment or tax advisor or lawyer prior to your investment. Please be aware that the products presented in this publication may notfittothepersonalinvestmentobjectives,portfolioandriskprofileofeveryindividualinvestor.Allinformationandopinionsexpressedinthispublicationwereobtainedfromsourcesbelievedto be reliable. However, no representation or warranty, expressed or implied is made to their accuracy. Please note, that UBS Europe SE or other companies of the UBS group (or employees thereof)maypurchaseorsellanyfinancialinstrumentsorderivativeswithacorrespondingunderlyingmentionedinthispublication.Furthermore,theycanactasprincipalrespectivelyagentorrenderconsultingorotherservicestoanissuerortocompaniesaffiliatedwithanissuer.ThispublicationistargetedneithertocitizensoftheUnitedStatesofAmericaoroftheUnitedKingdom nor to any persons who have permanent residence in those jurisdictions. With regard to the products presented in this publication solely the sales brochure is legally binding which canbereceivedfromUBSEuropeSE,P.O.Box102042,60020Frankfurt/Main,uponrequest.Thispublicationmayneitherbealtered,copiednorreproducedwithoutthepriorwrittenconsentof UBS Europe SE. Monaco: ThisdocumentisnotintendedtoconstituteapublicofferingoracomparablesolicitationunderthePrincipalityofMonacolaws,butmightbemadeavailableforinformationpurposestoclientsofUBS(Monaco)SA,aregulatedbankunderthesupervisionofthe“AutoritédeContrôlePrudentieletdeRésolution”(ACPR)forbankingactivitiesandunderthesupervisionof“CommissiondeContrôledesActivitésFinancièresforfinancialactivities”.Italy: This document is distributed in Italy to clients Financial Intermediaries of UBS Europe SE, SuccursaleItalia,withregisteredofficeinMilano,viadelVecchioPolitecnicon.3,anditistheItalianbranchofUBSEuropeSE,withregisteredofficeinBockenheimerLandstraße2-4,D-60306FrankfurtundMain(Germany).UBSEuropeSE,SuccursaleItaliaoperatesunderthesupervisionoftheItalianRegulatorsBankofItalyandCONSOBand,furthermore,underthesupervisionofthe German Regulator BaFin. Luxembourg: This document is distributed by UBS Europe SE, Luxembourg Branch, with place of business at 33A, Avenue J. F. Kennedy, L-1855 Luxembourg, R.C.S. Luxembourg n° B209123. UBS Europe SE, Luxembourg Branch is a branch of UBS Europe SE, a credit institution constituted under German Law in the form of a Societas Europaea, duly authorized by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin), and is subject to the joint supervision of BaFin, the central bank of Germany (Deutsche Bundesbank), as well as of the Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (CSSF), to which this document has not been submit-ted for approval. Singapore: Distributed by UBS AG, Singapore Branch. Spain: ”ThispublicationisdistributedinSpaintoitsclientsbyUBSEuropeSE,SucursalenEspaña,abankingentitydomiciledinSpain(CalleMaríadeMolina4,28006Madrid-www.ubs.es),subjecttosupervisionbyBancodeEspañaandtheBundesanstaltfürFinanzdienstleistungsaufsichtandentitledtoprovideinvestmentservicesunderthesupervisionoftheComisiónNacionaldelMercadodeValores.”

For Cross-Border situations: Bahrain: UBS is a Swiss bank not licensed, supervised or regulated in Bahrain by the Central Bank of Bahrain and does not undertake banking or investment business activities in Bahrain. Therefore, Clients have no protection under local banking and investment services laws and regulations. Brazil: Securities mentioned in this material have not been, and will not be, submitted for approval nor registered with the Securities and Exchange Commission of Brazil (CVM). Documents and information contained herein are not being used in connectionwithanyofferforsubscriptionorsaletothepublicinBraziland/ortoBrazilianresidents.”Canada: All current and future information and documentation provided to you by UBS, including but not limited to, market data, research and product information is provided to you for information and marketing purposes only. The information contained in such material is not, andundernocircumstancestobeconstruedas,aprospectus,anadvertisement,apublicoffering,anoffertosellsecuritiesdescribedtherein,solicitationofanoffertobuysecuritiesdescribedtherein,inCanadaoranyprovinceorterritorythereof.AnyofferorsaleofthesecuritiesdescribedthereininCanadawillbemadeonlyunderanexemptionfromtherequirementstofileaprospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registrationrequirementintherelevantprovinceorterritoryofCanadainwhichsuchofferorsaleismade.Undernocircumstancesistheinformationcontainedthereintobeconstruedasinvestment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained therein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada or, alternatively, pursuant to a dealer registration exemption. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon these materials, the informationcontainedthereinorthemeritsofthesecuritiesdescribedthereinandanyrepresentationtothecontraryisanoffence.Investingincertaininvestmentproductsand/orreceivingfinancialservicesmayhaveadversetaximplicationsdependinguponaclient’spersonalcircumstances.Theeffectofaparticularproductorserviceontheclient’soveralltaxsituationmaybedifficulttoassess.UBSisunabletogiveanyguaranteeorassuranceregardingthepotentialtaximplicationsofanyinvestmentproductorservicemadeavailabletoitsclientsandaccordinglyshallnotassumeanyresponsibilityorliabilityforanyadversetaximplicationswhatsoeverasaconsequenceofanysuchproductorservice.UBSrecommendsthatclientsconsultwithqualifiedtaxadvisorstoassesstheeffectofparticularproductsandservicesontheirpersonaltaxsituation.CertainCanadianFederalIncomeTaxConsiderations:ThissummaryisbasedontheprovisionoftheIncomeTaxAct(Canada)(the“TaxAct”)anditsregulationswhichareinforceorhaveeffectasofthedatehereof.UBSassumesnoliabilitytoupdateorrevisethebelowsummary,andit should not be relied upon by investors to make investment decisions. The below summary of certain Canadian federal income tax considerations is limited to a non-exhaustive set of tax rules

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Corporate Health34

thatcouldresultinataxliabilitytoainvestorthatisresidentofCanadaforpurposesoftheTaxActandthatisinvestinginsecuritiesofa“non-resident”(asdefinedintheTaxAct)issuereveniftheinvestordoesnotearnorreceiveanyamountsfromsuchinvestment.TheTaxActincludesrules(the“OffshoreInvestmentRules”)thatmayrequireanamounttobeincludedintheincomeofaninvestorthatholdsan“offshoreinvestmentfundproperty”.TheOffshoreInvestmentRulesmayapplywhere(i)anoffshoreinvestmentfundpropertyderivesitsvalueprimarilyfrom“portfolioinvestments”incertainassets,and(ii)itmayreasonablybeconcludedthatoneofthemainreasonsfortheinvestmentistoderiveabenefitfromportfolioinvestmentsintheseassetsinsuchamannerthattaxesontheincome,profitsandgainsfromtheassetsaresignificantlylessthanthetaxapplicableundertheTaxActifsuchincome,profitsandgainshadbeenearneddirectlybytheinvestor.IftheOffshoreinvestmentRulesapply,theinvestorwillhaveanincomeinclusioninrespectofeachmonthequaltothe“designatedcost“ofthepropertytotheinvestor that is subject to the rules at the end of the month multiplied by 1/12th of the sum of a prescribed rate of interest plus 2 %. The prescribed rate of interest is linked to the yield on 90-dayGovernmentofCanadaTreasuryBillsandisadjustedquarterly.Theincomeinclusionwillbereducedbytheinvestor’sincomefortheyear(otherthancapitalgains)fromtheoffshoreinvestmentfundpropertydeterminedundertheotherprovisionsoftheTaxAct.Accordingly,iftheOffshoreInvestmentRulesapplytoaninvestor,theinvestormayberequiredtoincludeintaxable income amounts that the investor has not earned or received. These rules are complex and their application depends, to a large extent, on the reasons of an investor for acquiring or holdingtheinvestment.TheforegoingsummaryprovidesageneraldescriptionoftheOffshoreInvestmentRules,andshouldnotbeconstruedasadvicetoanyparticularinvestorregardingtheimplicationsoftheOffshoreInvestmentRulesintheinvestor’sparticularcircumstances.InvestorsareurgedtoconsulttheirowntaxadvisorsregardingtheapplicationandimpactoftheOff-shoreInvestmentRulesintheirparticularcircumstances.Therulesinrespectofnon-residenttrustswillnotapplyinrespectof“exemptforeigntrusts”(asdefinedintheTaxAct),whichwould,subject to detailed provisions, generally include commercial trusts. Where, however, a non-resident trust is an exempt foreign trust because it is a commercial trust, an investor (x) that holds, eitheraloneortogetherwith(i)anypersonsnotdealingatarm’slengthwiththeinvestoror(ii)anypersonswhoacquiredtheirinterestinthetrustinexchangeforconsiderationgiventothetrustbytheinvestor,atleasta10%interest(asdefinedanddeterminedbasedonfairmarketvalue)insuchtrust,or(y)thathascontributed“restrictedproperty”(asdefinedintheTaxAct)tosuchtrust,willberequiredtoincludeinincomeapercentageofthattrust’s“foreignaccrualpropertyincome”(asdefinedintheTaxAct).OtherinvestorsinacommercialtrustmaybesubjecttotheOffshoreInvestmentRulesdiscussedabove.Investorsshouldconsulttheirowntaxadvisorsinthisregard.Ifthetotal“equitypercentage”(asdefinedintheTaxAct)ofaCanadianinves-tor (and related persons) is 10% or more in a particular non-resident corporation, the investor may be subject to the rules in the Tax Act which (i) require the inclusion of a percentage of the foreignaccrualpropertyincomeofthecorporationincomputingtheincomeoftheinvestor,ratherthantheapplicationoftheOffshoreInvestmentRules,and(ii)couldresultinwithholdingtax being due by an investor that is a corporation resident in Canada for purposes of the Tax Act. Investors should consult their own tax advisors in this regard. Czech Republic: UBS Switzerland AG is not a licensed bank in Czech Republic and thus is not allowed to provide regulated banking or investment services in Czech Republic. This material is distributed for marketing purposes. Egypt:SecuritiesorotherinvestmentproductsarenotbeingofferedorsoldbyUBStothepublicinEgyptandtheyhavenotbeenandwillnotberegisteredwiththeEgyptianFinancialSuper-visory Authority (EFSA). Greece:UBSAGanditssubsidiariesandaffiliates(UBS)arepremierglobalfinancialservicesfirmsofferingwealthmanagementservicestoindividual,corporateandinstitutionalinvestors.UBSAGandUBSSwitzerlandAGareestablishedinSwitzerlandandoperateunderSwisslaw.UBSAGoperatesinover50countriesandfromallmajorfinancialcenters.UBSisnotlicensedasabankorfinancialinstitutionunderGreeklegislationanddoesnotprovidebankingandfinancialservicesinGreece.Consequently,UBSprovidessuchservicesfrombranches outside of Greece, only. Indonesia, Malaysia, Thailand:Thiscommunicationandanyofferingmaterialtermsheet,researchreport,otherproductorservicedocumentationoranyotherinformation(the“Material”)sentwiththiscommunicationwasdonesoasaresultofarequestreceivedbyUBSfromyouand/orpersonsentitledtomaketherequestonyourbehalf.Should you have received the Material erroneously, UBS asks that you kindly delete the e-mail and inform UBS immediately. The Material, where provided, was provided for your information only and is not to be further distributed in whole or in part in or into your jurisdiction without the consent of UBS. The Material may not have been reviewed, approved, disapproved or endorsed byanyfinancialorregulatoryauthorityinyourjurisdiction.UBShasnot,byvirtueoftheMaterial,madeavailable,issuedanyinvitationtosubscribeforortopurchaseanyinvestment(includingsecuritiesorproductsorfuturescontracts).TheMaterialisneitheranoffernorasolicitationtoenterintoanytransactionorcontract(includingfuturecontracts)norisitanoffertobuyortosell any securities or products. The relevant investments will be subject to restrictions and obligations on transfer as set forth in the Material, and by receiving the Material you undertake to comply fully with such restrictions and obligations. You should carefully study and ensure that you understand and exercise due care and discretion in considering your investment objective, risk appetite and personal circumstances against the risk of the investment. You are advised to seek independent professional advice in case of doubt. Any and all advice provided on and/or tradesexecutedbyUBSpursuanttotheMaterialwillonlyhavebeenprovideduponyourspecificrequestorexecuteduponyourspecificinstructions,asthecasemaybe,andmaybedeemedas such by UBS and you. Ireland: Theinformation/marketingmaterialenclosed/attachedisprovidedtoyouuponyourspecificunsolicitedrequestandbasedonyourowninitiative.Pleasebeaware that UBS does therefore not render investment advice to clients domiciled/resident in Ireland and that any information/marketing material provided by UBS may not be construed as investment advice. Nigeria: UBS AG and its branches and subsidiaries (UBS) are not licensed, supervised or regulated in Nigeria by the Central Bank of Nigeria (CBN) or the Nigerian Securities andExchangeCommission(SEC)anddonotundertakebankingorinvestmentbusinessactivitiesinNigeria.UBS(Nigeria)RepresentativeOfficeLimitedinLagosislicensedbytheCentralBankofNigeria(CBN)tooperateasarepresentativeofficeofUBS.Poland: UBSisapremierglobalfinancialservicesfirmofferingwealthmanagementservicestoindividual,corporateandinstitu-tionalinvestors.UBSisestablishedinSwitzerlandandoperatesunderSwisslawandinover50countriesandfromallmajorfinancialcentres.UBSSwitzerlandAGisnotlicensedasabankorasaninvestmentfirmunderPolishlegislationandisnotallowedtoprovidebankingandfinancialservicesinPoland.Portugal: UBS Switzerland AG is not licensed to conduct banking and financialactivitiesinPortugalnorisUBS[Legalentityname]supervisedbythePortugueseRegulators(BankofPortugal“BancodePortugal”andPortugueseSecuritiesExchangeCommission“ComissãodoMercadodeValoresMobiliários”).Russia:Thisdocumentanditsdistributionareforinformationpurposesonlyandconstitutesneitherapublicnoraprivateoffering.Recom-mendations refer to investment products exclusively available through and provided by UBS Switzerland AG. UBS employees travelling to Russia are neither authorized to conclude contracts nortonegotiatefinancialtermsthereofwhileinRussia.ContractsonlybecomebindingonUBSonceconfirmedinSwitzerland.Singapore:Thiscommunicationandanyofferingmaterialtermsheet,researchreport,otherproductorservicedocumentationoranyotherinformation(the“Material”)sentwiththiscommunicationwasdonesoasaresultofarequestreceivedbyUBSfrom you and/or persons entitled to make the request on your behalf. Should you have received the Material erroneously, UBS asks that you kindly delete the e-mail and inform UBS immediately. The Material, where provided, was provided for your information only and is not to be further distributed in whole or in part in or into your jurisdiction without the consent of UBS. The Mate-rialmaynothavebeenreviewed,approved,disapprovedorendorsedbyanyfinancialorregulatoryauthorityinyourjurisdiction.UBShasnot,byvirtueoftheMaterial,madeavailable,issuedanyinvitationtosubscribeforortopurchaseanyinvestment(includingsecuritiesorproductsorfuturescontracts).TheMaterialisneitheranoffernorasolicitationtoenterintoanytransactionorcontract(includingfuturecontracts)norisitanoffertobuyortosellanysecuritiesorproducts.Therelevantinvestmentswillbesubjecttorestrictionsandobligationsontransferassetforthin the Material, and by receiving the Material you undertake to comply fully with such restrictions and obligations. You should carefully study and ensure that you understand and exercise due care and discretion in considering your investment objective, risk appetite and personal circumstances against the risk of the investment. You are advised to seek independent professional advice incaseofdoubt.Anyandalladviceprovidedonand/ortradesexecutedbyUBSpursuanttotheMaterialwillonlyhavebeenprovideduponyourspecificrequestorexecuteduponyourspecificinstructions, as the case may be, and may be deemed as such by UBS and you. Turkey:Noinformationinthisdocumentisprovidedforthepurposeofoffering,marketingandsalebyanymeansofanycapitalmarketinstrumentsandservicesintheRepublicofTurkey.Therefore,thisdocumentmaynotbeconsideredasanoffermadeortobemadetoresidentsoftheRepublicof Turkey in the Republic of Turkey. UBS Switzerland AG is not licensed by the Turkish Capital Market Board (the CMB) under the provisions of the Capital Market Law (Law No. 6362). Accord-inglyneitherthisdocumentnoranyotherofferingmaterialrelatedtotheinstruments/servicesmaybeutilizedinconnectionwithprovidinganycapitalmarketservicestopersonswithintheRepublic of Turkey without the prior approval of the CMB. However, according to article 15 (d) (ii) of the Decree No. 32 there is no restriction on the purchase or sale of the instruments by residents of the Republic of Turkey. UAE: UBS is not licensed to provide banking services in the UAE by the Central Bank of the UAE nor is it licensed by the Emirates Securities and Commodi-tiesAuthority.TheUBSAGRepresentativeOfficeinAbuDhabiislicensedbytheCentralBankoftheUAEtooperatearepresentativeoffice.UBSAGDubaiBranchislicensedbytheDFSAinthe DIFC. United Kingdom: This document is issued by UBS Wealth Management, a division of UBS AG which is authorised and regulated by the Financial Market Supervisory Authority in Switzerland. In the United Kingdom, UBS AG is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Where products or services are provided from outside the UK, they may not be covered by the UK regulatory regime or the Financial Services Compensation Scheme. UBS AG, Jersey Branch is authorised and regulated by the Jersey Finan-cial Services Commission for the conduct of banking, funds and investment business. Where services are provided from outside Jersey, they may not be covered by the Jersey regulatory regime. UBS AG, Jersey Branch and UBS AG, London Branch (which is registered as a branch in England and Wales Branch No. BR004507) are both branches of UBS AG a public company limited by shares,incorporatedinSwitzerlandwhoseregisteredofficesareatAeschenvorstadt1,CH-4051BaselandBahnhofstrasse45,CH8001Zurich.UBSAG,JerseyBranch’sprincipalplacebusinessisP.O.Box350,24UnionStreet,StHelier,JerseyJE48UJ.Ukraine:UBSisapremierglobalfinancialservicesfirmofferingwealthmanagementservicestoindividual,corporateandinstitutionalinvestors.UBSisestablishedinSwitzerlandandoperatesunderSwisslawandinover50countriesandfromallmajorfinancialcentres.UBSSwitzerlandAGisnotlicensedasabank/financialinstitutionunderUkrainianlegislationanddoesnotprovidebankingandfinancialservicesinUkraineUruguay:Allsecurities/investmentfunds/products/servicesthatwillbeofferedtoyoubyUBSi)ArenotandwillnotberegisteredwiththeCentralBankofUruguay(BCU)tobepubliclyofferedinUruguayunlessexplicitlystatedotherwise;ii)Areofferedtoyouonaprivatebasispursuanttosection2ofUruguayanlaw18.627;InvestmentfundsthatwillbeofferedtoyoucorrespondtoinvestmentfundsthatarenotinvestmentfundsregulatedbyUruguayanlaw16,774datedSeptember27,1996,asamendedunlessexplicitlystatedotherwise;andUBSrepresentsandagreesthatithasnotofferedorsold,andwillnotofferorsell,anysecurities/investmentfunds/products/servicestothepublicinUruguay,exceptincircumstanceswhichdonotconstituteapublicofferingordistributionunderUruguayanlawsandregulations.UBSisnotsubjecttosupervision of the Uruguayan regulator (BCU). Deposits held with UBS are not protected by the Uruguayan Guarantee Fund of Bank Deposits. The deposits are subject to the applicable law and regulations of the respective UBS Booking Centre. Upon request UBS can provide you with the following regarding investment funds: How to access information which must be made available to investors according to the regulations of the country where the investment fund was established; The investment fund rules and regulations; and Information on the obligations of theinvestmentfund’sdistributor.

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