Strategic Report 01 Strategy 02 03 04 Number of hospital beds Number of polyclinics 3,320 2018 3,320 16 2018 16 2017 3,014 2017 16 +306 y-o-y 2016 2,557 +0 y-o-y 2016 13 Represents number of existing inpatient beds, including referral hospitals andRepresents number of existing polyclinics in Tbilisi and in other regions. community clinics. Number of pharmacies Number of insured 2018 270 20182 c.230,000 270 2017 255 c.230,000 2017 155,000 20161 243 2016 211,000 +15 y-o-y +75,000 y-o-y Represents number of existing pharmacies in Tbilisi and in other regions.Represents number of policyholders comprising both corporate and retail customers excluding insured travellers. Efficiency KPIs The combined effect of consolidated purchasing power for healthcare services and pharmacy and distribution businesses, the cost optimisation measures, diversified revenue sources and stabilised medical insurance business are the major contributors to the Group’s positive operating leverage of 4.1% in 2018, y-o-y. Despite the new openings, such as the launch of two flagship hospitals in Tbilisi and new medical services, some of which are in the roll-out phase, the adjusted operating leverage of the healthcare services business was also positive at 1.0%.3 Going forward, our focus will remain to drive efficiency across the Group, mainly in our healthcare services business, through various cost- optimisation activities. Other measures, such as various investments in IT aimed at optimisation of workflow processes and implementation of a centralised cost administration, represent the cost control measures we continue to deploy across the board. Healthcare services operating leverage (%) Referral hospital bed occupancy rate (%) -8.1 2018-8.1 56.2 2018 56.2 2017-10.5 2017 61.6 +2.4 ppts y-o-y 2016 17.5 -5.4 ppts y-o-y 2016 63.0 Calculated as the difference between percentage increase in gross profit andCalculated by driving the number of total referral inpatient nights by the number percentage and percentage increase in total operating costs. of referral bed days (number of referral days multiplied by number of referral beds) available during the year. Pharmacy and distribution operating leverage (%) Combined ratio (%) 7.8 2018 7.8 94.0 2018 94.0 2017n/a4 2017 102.5 2016n/a4 -8.5 ppts y-o-y 2016 104.7 Calculated as the difference between percentage increase in gross profit andCombined ratio is the sum of loss ratio and expense ratio. Loss ratio as defined above. percentage increase in total operating costs. Expense ratio is defined as operating expenses excluding interest expense divided by net insurance revenue. 1Including pharmadepot pharmacies. 2As at February 2019. 3Excluding other operating income. 4We entered the pharma business in May 2016 and expanded in January 2017, thus we do not show comparisons with prior periods. 39