AM Best Withdraws Public Credit Ratings of BUPA México, Compañía de Seguros, S.A. de C.V.

NOVEMBER 08, 2024 02:00 PM (EST)

AM Best Withdraws Public Credit Ratings of BUPA México, Compañía de Seguros, S.A. de C.V.

CONTACTS:

FOR IMMEDIATE RELEASE

MEXICO CITY - NOVEMBER 08, 2024 02:00 PM (EST)
AM Best has upgraded the Financial Strength Rating to B- (Fair) from C++ (Marginal), the Long-Term Issuer Credit Rating to "bb-" (Fair) from "b+" (Marginal), and the Mexico National Scale Rating to "a-.MX" (Excellent) from "bbb.MX" (Good) of BUPA México, Compañía de Seguros, S.A. de C.V. (Bupa Mexico) (Mexico). The outlook of these Credit Ratings (ratings) is positive. Concurrently, AM Best has withdrawn these public ratings of Bupa Mexico per the company's request.

The ratings reflect Bupa Mexico's balance sheet strength, which AM Best assesses as weak, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The rating upgrades and positive outlooks reflect sustained improvement in the company's balance sheet strength, underpinned by risk-adjusted capitalization supportive of the adequate level, as measured by Best´s Capital Adequacy Ratio (BCAR), following the previous change in its reinsurance program, and fully retained quality business.

Bupa Mexico is a subsidiary of The British United Provident Association Limited and is tied to the Bupa group's commercial strategy of expanding into Mexico's insurance market by leveraging its brand. Bupa Mexico's focus is on the individual and group major medical coverage segment, while the individual lines segment represents its biggest share of business, at approximately 90%. The company's target market has been small clients with high net worth; however, it has diversified by opening coverage to other sectors, with a higher volume of lower premium business.

The company's historically favorable financial flexibility was achieved through the capital and reinsurance support historically provided by its ultimate parent. Beginning in third-quarter 2021, changes in the Mexico-based subsidiary's reinsurance program significantly raised its underwriting risk, pressuring its BCAR. Nonetheless, the company's flagship business, which previously was ceded for the most part, historically has demonstrated operating performance in line with industry benchmarks, enhancing the company's balance sheet strength assessment.

Bupa Mexico's business volume has outpaced the market for the past five years, resulting in a compound annual growth rate of 12%. However, an offsetting rating factor is the small size of the subsidiary, reflected in a market share of over 3% (as of December 2023) in an industry led by bigger participants. As of September 2024, Bupa Mexico posted a positive bottom-line result of MXN 155.4 million, which was mainly a result of contained claims, as well as its internal service team, which includes synergies between areas of customer service and a core business system. The company also has continued to reduce operating expenses; however, a challenging and concentrated operating environment raises uncertainty and could affect new business strategy.

Positive rating actions could occur as a result of sustained improvement in Bupa Mexico's balance sheet strength underpinned by risk-adjusted capitalization above the adequate level. Negative rating actions could occur if the strategic importance of the company to Bupa group decreases, which could diminish AM Best's opinion of parental support toward the Mexico-based subsidiary. Negative rating actions could also take place if balance sheet strength deteriorates to levels no longer supportive of the ratings.

The methodology used in determining these ratings is Best's Credit Rating Methodology (Version Aug. 29, 2024), which provides a comprehensive explanation of AM Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

· Available Capital and Insurance Holding Company Analysis (Version Aug. 15, 2024)

· Best's National Scale Ratings (May 16, 2024)

· Evaluating Country Risk (June 6, 2024)

· Scoring and Assessing Innovation (Feb. 27, 2023)

· Understanding Global BCAR (Version Aug. 1, 2024)

View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best's Credit Ratings.

· Previous Rating Date: Oct. 12, 2023

· Initial Rating Date: Feb. 18, 2016

· Date Range of Financial Data Used: Dec. 31, 2018-Sept. 30, 2024

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) that have been published on AM Best's website. For additional rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page.

If the ratings referred in this press release do not indicate a specific country suffix, it is understood that they are granted globally and not on a national scale.

AM Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. AM Best does not audit the company's financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.

AM Best's credit ratings are independent and objective opinions, not statements of fact. AM Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. AM Best's credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

AM Best receives compensation for interactive rating services provided to organizations that it rates. AM Best may also receive compensation from rated entities for non-rating related services or products offered by AM Best. AM Best does not offer consulting or advisory services. AM Best keeps certain activities of its business units separate from each other to preserve the independence and objectivity of their respective activities. As a result, certain business units of AM Best may have information that is not available to other AM Best business units. AM Best has established policies and procedures to maintain the confidentiality of certain confidential (non-public) information received in connection with each analytical process. For more information regarding AM Best's rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the AM Best Code of Conduct. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.