Britain's biggest private medical group Bupa was hit hard last year by a weak economy and government cutbacks with profits falling by more than 70% to £118m.

Bupa had 20,000 fewer UK customers than in 2009 as companies slashed health benefits available to senior employees, and individual membership headed south. The company said there were signs a tough financial environment was hitting the middle classes and that managers could no longer take health perks for granted.

Its figures were knocked by a £250m charge after it made writedowns linked to the value of Bupa Health and Wellbeing, which provides carers to people in their own homes. An increasing number of potential customers have found they are no longer able to afford at-home services at a time when savings rates are at rock bottom.

The firm wrote down the value of one of its few remaining hospitals, the Cromwell in London, after selling its hospital arm in 2007 for £1.4bn. It also slashed the value of a US business because of uncertainty over health reforms introduced by president Barack Obama.

Elsewhere, spending cuts affected its British care homes division because local authorities froze payments to private providers for looking after patients they could not find places for.

Chief executive Ray King said: "About 70% of the residents in our UK homes are funded by local councils or the NHS. Average spending per occupant in England rose only 0.5% last year, and all predictions for 2011 are flat at best, but we've still got rising staff costs. The squeeze remains severe."

King raised the spectre of a care home crisis if private providers cut their services to maintain profitability, warning that "if this funding pressure is not relieved in a reasonable period of time, there's going to be a significant bleeding of beds from care homes.

"We estimate over the next decade, over 80,000 beds will come out of the sector, when it needs to grow by about 20,000 to keep up with demand. That will leave a shortfall of 100,000."

King said profits would have been lower still if not for cost-cutting and efficiencies that the group has introduced since the start of the financial crisis. Around 500 jobs have been lost at its UK private insurance arm.

There was better news from its international business with soaring demand in the Middle East and Australia. Group revenue jumped 9% to £7.6bn, while worldwide customer numbers rose from 10.8m to 11.2m. Before writedowns, underlying profits rose 10% to £465m.

Bupa and other international private healthcare groups expect to be beneficiaries of government moves to open up the NHS to the private sector, but fatter profits could take several years to come through.

The centrepiece of health secretary Andrew Lansley's plan to reform the NHS is to transfer power to GP-led consortiums that will commission hospital and community care. GPs will manage the £70bn budget overseen by primary care trusts and will make choices on where money goes. But many GP groups are expected to outsource budget management to private medical companies such as Bupa and rivals such as Humana of the US.

King said: "We are well positioned to achieve continuing growth as world economic conditions improve, due to our geographic breadth, excellent market positions and strong balance sheet."

Employing nearly 52,000, most of Bupa's business is generated from the UK, US, Australia and Spain, but the company has also made inroads in China, Latin America, Saudi Arabia and India.

Bupa was established in 1947 when 17 British provident associations joined together to provide healthcare for the general public.