Market Overview

A.M. Best Revises Outlooks to Stable for BUPA México Compañía de Seguros, S.A. de C.V.

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A.M. Best has revised the outlooks to stable from positive and
affirmed the Financial Strength Rating of B++ (Good), the Long-Term
Issuer Credit Rating (Long-Term ICR) of "bbb+" and the Mexico National
Scale Rating of "aa+.MX" of BUPA México Compañía de Seguros, S.A. de
C.V. (BUPA Mexico) (Mexico).

The Credit Ratings (ratings) reflect BUPA Mexico's balance sheet
strength, which A.M. Best categorizes as strongest, as well as its
marginal operating performance, limited business profile and appropriate
enterprise risk management.

The revision of the outlooks to stable reflects continued volatility in
the operating performance from BUPA Mexico's parent company, Bupa
Insurance Company (BIC), resulting from its evolving business model.
Operating performance has fluctuated over the years, and underwriting
losses were reported in 2017 and through mid-2018.

The rating affirmations of BUPA Mexico reflect the importance and
integration of the local subsidiary to BIC, which provides its group
with access to one of Latin America's largest insurance markets, and the
operational and capital support from the ultimate parent organization,
The British United Provident Association Limited (BUPA), a global health
and care company. The ratings also consider the parent's
creditworthiness and the access to BUPA's well-established network and
other resources, which enhance BIC's competitive advantage. A.M. Best
anticipates that the operational support and financial flexibility
afforded by BUPA will continue. A.M. Best will continue to monitor BIC's
strategic fit within the parent organization.

The ratings also reflect BUPA Mexico's favorable financial flexibility
leveraged by a strong risk-adjusted capital position supported by a
solid reinsurance program, as well as its experienced management team.
Offsetting these positive rating factors is the subsidiary's volatile
and weak operating performance mainly derived from its 10% retention of
premium, which makes the company dependent on capital injections from
its group parent to support growth and maintain adequate capital under
regulatory requirements.

The subsidiary offers the same array of products as BIC, and adheres to
its underwriting, risk management and investment policies. BUPA Mexico's
successful expansion into Mexico's insurance market leverages the
group's global brand, reinsurance capacity and capital support provided
from BIC.

Given the large capital support tendered by BIC, BUPA Mexico maintains
strong risk-adjusted capitalization, as measured by Best's Capital
Adequacy Ratio (BCAR), which fosters underwriting growth and provides
financial flexibility. Given the subsidiary's 10% retention of premium,
the main component of required capital is derived from reinsurance
recoverables. A.M. Best does not view this as a major concern,
considering that 100% of BUPA Mexico's reinsurance program is placed
with BIC, which provides an adequate level of security.

BUPA Mexico's growth has outpaced the market for the past five years. A
robust reinsurance program held with BIC involves a quota share contract
under which the subsidiary cedes 90% of its premiums to BIC. This is
complemented by an excess of loss agreement that further protects BUPA
Mexico's risk retention.

An offsetting rating factor is the small size of the subsidiary,
reflected in the small market share within the major medical expenses
for individuals segment, which results in volatile operating
performance. In addition, BUPA Mexico has historically registered
negative bottom line results, mainly as a result of elevated loss and
administrative expense ratios given its low premium retention, making it
more dependent on capital support from its parent. The company foresees
costs stabilizing in the medium and long term.

If positive rating actions are taken on BIC, the ratings of BUPA Mexico
will move in tandem. Likewise, if there are negative rating actions
taken on its immediate parent as a result of a material decline in
risk-adjusted capitalization, downgrade in country risk tier in its core
business markets or if strategic alignment or operational support with
the ultimate parent, BUPA, changes materially, the ratings of BUPA
Mexico will mirror those actions. Additionally, if A.M. Best's view of
the Mexican subsidiary's importance to the group deteriorates or if
capital support narrows from historical levels, the ratings will likely
be affected negatively.

The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
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:

  • Best's Credit Rating Methodology (Version Oct. 13, 2017)
  • Evaluating Country Risk (Version Oct. 13, 2017)
  • Understanding Universal BCAR (Version May 14, 2018)
  • Understanding BCAR for U.S. and Canadian Life/Health Insurers (Version
    May 10, 2018)
  • A.M. Best's Ratings On a National Scale (Version Oct. 13, 2017)

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, please refer to Understanding
Best's Credit Ratings
.

  • Previous Rating Date: Aug. 9, 2017 (FSR and Long-Term ICR); Oct. 13,
    2017 (NSR)
  • Date of Financial Data Used: Dec. 31, 2017

This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all 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 A.M. Best's
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
Guide
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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