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

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AM Best has 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 Mxico, Compa±­a de Seguros, S.A. de C.V. (BUPA Mexico) (Mexico). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect BUPA Mexicos role as a subsidiary of Bupa Insurance Company (BIC), which on a consolidated basis has a balance sheet strength that AM Best categorizes as strongest, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.

The ratings of BUPA Mexico also reflect its importance and integration as the Mexico subsidiary of BIC, which provides BIC with access to Latin Americas largest insurance market, and the operational and capital support from the ultimate parent organization, The British United Provident Association Limited (BUPA), a global health care company. The ratings also consider the parents creditworthiness and the access to BUPAs well-established network and other resources, which enhance BICs competitive advantage. AM Best anticipates that the operational support and financial flexibility afforded by BUPA will continue. AM Best will continue to monitor BICs strategic fit within the parent organization.

The ratings also take into account BUPA Mexicos favorable financial flexibility, provided by its ultimate parent and leveraged by the groups risk-adjusted capitalization at the strongest level, as measured by Bests Capital Adequacy Ratio (BCAR). BUPA Mexicos solid reinsurance program placed with BIC and experienced management team also support the ratings. Offsetting these positive rating factors is the subsidiarys marginal operating performance, which exhibits volatility and 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 its Latin America-based affiliates, and adheres to BICs underwriting, risk management and investment policies. BUPA Mexicos successful expansion into Mexicos insurance market leverages the groups global brand, reinsurance capacity and capital support provided from BIC.

BIC continues to provide capital support to BUPA Mexico, which along with the groups consolidated risk-adjusted capitalization fosters underwriting growth and provides financial flexibility. Given the subsidiarys 10% retention of premium, the main component of required capital is derived from reinsurance recoverables. AM Best does not view this as a major concern, considering that 100% of BUPA Mexicos reinsurance program is placed with BIC, which provides an adequate level of security through a quota share contract under which the subsidiary cedes 90% of its premiums to BIC, further complemented by an excess of loss agreement that protects BUPA Mexicos risk retention.

BUPA Mexicos business volume has outpaced the market for the past five years, presenting a compound average growth rate of 26%. However, an offsetting rating factor is the small size of the subsidiary, reflected in the small market share within the major medical expenses for individual segment, which results in volatile operating performance, making it more dependent on capital support from its parent. As of June 2020, BUPA Mexico presented a positive bottom-line result of MXN 72.6 million, which was mainly a result of a decrease in claims, as well as a transition to an internal service team, which includes areas of customer service and a core business system. The company foresees this as significantly reducing operating expenses in the medium 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 decline in risk-adjusted capitalization, a downgrade in country risk tier in its core business markets or if strategic alignment or operational support with the ultimate parent, BUPA, were to decline materially, the ratings of BUPA Mexico will mirror those actions.

This press release relates to Credit Ratings that have been published on AM Bests 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 AM Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Olga Rubo, FRM

Financial Analyst

+52 55 1102 2720, ext. 134

olga.rubo@ambest.com

Alfonso Novelo

Senior Director, Analytics

+52 55 1102 2720, ext. 107

alfonso.novelo@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Jim Peavy

Director, Communications

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

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