Since 2021, the company has admitted that there are “regulatory and judicial” problems in the isapre sector in Chile, which finally caused the dismissal of 50% of its workers in about two years.
In the midst of an environment marked by “higher levels of claims”, the British United Provident Association, better known as Bupa, a global corporation dedicated to the provision of health services – such as insurance, isapres and medical centers – and present in several countries of Latin America – Brazil, Bolivia, Chile and Mexico – notes and Colombia and Ecuador, among others – sustainable losses in the region.
In its 2021 annual report, the company explained that its business in Latin America, along with Europe, showed “strong revenue growth in most business units”. However, it warns that profit was affected by “higher levels of claims at our insurers”.
According to a report on the results of the first half of the current year, specifically in Chile, “we continue to see the effects of regulatory interventions and judicial decisions in the isapre insurance sector that caused essential losses to continue growing our insurance business in Chile. “
Bupa’s business is divided into three regions, the most important being the Asia-Pacific region, which contributes 43% of the company’s total revenue, amounting to approximately €5.5 billion. This is followed by the Europe and Latin America group, which contributes with 31% of sales, which are just over 4 billion euros.
In this division, as of December 2021, Sanitas Seguros contributed 31% of business revenue, followed closely (27%) by Bupa’s business in Chile (around €1,000 million). Businesses in Brazil contribute 5% of revenues (around 200 million euros), while activity in Mexico is just over 1% (around 40 million euros).
During the first half of 2022, the Europe and Latin America division raised more than €2 billion, 20% less than the Asia Pacific division.
Main Latin American Markets
These numbers show that the company’s most relevant market is Chile, where it is focused on the health insurance business (isapre Cruz Blanca) and as a provider of health services through its clinics and medical centers.
In Chile’s first half, revenue improved but continued to be affected by higher claims, however, “we anticipate continued challenges and are working directly with the local regulator and other stakeholders to try to stabilize the situation.”
In addition, businesses in Brazil stand out with Care Plus, a company aimed at a segment of the corporate world that specifically values high-end premium health insurance as a market differentiator. In 2021, “Brazil delivered strong revenue and customer growth, while underlying earnings declined due to lower claims interruptions,” the company commented in its annual report.
Meanwhile, businesses in the Aztec country are focused on home insurance. This market performed well in 2021, with revenue growth driven by the product portfolio and its alliance with BBVA.
“Bupa Mexico’s underlying revenue and earnings increased, driven by the launch of its first outpatient product distributed through BBVA, as well as a distribution agreement with HDI, higher volumes from Vitamedica, a third-party company we acquired in January 2021, and Re – opening the doors for the provision of services ”, explains the company.
Elsewhere in the region, Bupa posted a fundamental loss in 2021 as “the disruption in claims seen in 2020 has not been repeated”.
Shelly’s Achilles heel?
Bupa’s business in Chile comprises Isapre Cruz Blanca, medical centers and clinics operating in the country, as well as an insurance division. This market recorded good revenue growth in 2021 and during the first half, due to the higher turnover. Although it presented fundamental losses “driven by regulatory and judicial interventions in the isapre sector”.
According to its annual report, in Chile, during this period, “there was good revenue growth due to the increased volume of outpatient activity in our healthcare business. The performance of Isapre’s insurance business was impacted by regulatory interventions that affected the entire the segment, including preventing premium adjustments and authorizing significant coverage expansions.To mitigate the impact of these regulatory changes, we restructured our business and reduced our operating costs.
Meanwhile, in the first half of the year just ended, Bupa explained that “the entire sector faces serious financial challenges marked by persistent losses. This is the result of a series of regulatory interventions and judicial decisions that mean challenges and delays in price measures. . ”
The company notes “preventing cascading adjustments to scheduled segment pricing; mandatory funding of sick leave for parents; and pursuing legal challenges to the premium pricing rule. If these risks to isapre’s business materially deteriorate, there is a future risk of deterioration of Bupa Chili,” he warns.
He also added: “We expect the regulatory and political landscape to continue to negatively impact Isapre’s business in 2022 and we will continue to monitor this closely and engage with relevant stakeholders.”
According to the last income statement sent by the Chilean subsidiary to the Financial Market Authority (CMF), revenues grew slightly (6.85%) in the first quarter to 291,285 million pesos (about 330 million dollars). Likewise, despite the downside, losses increased sharply to over 27 billion pesos (about 31 million dollars), from 2.2 billion in the same period of 2021 (2.51 million dollars).
This, according to the company, is the result of an “unprecedented financial crisis” that would put the isapre system at risk, leading the company to decide “to move from the position of Sales Force”, which would imply the dismissal of half of its factory, about 150 workers.
Thus, while in April of last year 1,946 people worked at the company, “currently there should be around 900 workers,” Marco Torres, president of Cruz Blanca’s only union, told Diario Financiero.
The company explained that “Cruz Blanca – as well as the sector as a whole – is experiencing an unprecedented financial crisis that jeopardizes its sustainability, as a result of various regulatory and legal factors beyond the scope of the company’s responsibility”, adding that when deepening in view of the complex scenario that crosses the private health insurance sector, Cruz Blanca confirmed that this crisis “has worsened after the recent regulations that were adopted for the sector, which is why we have a deficit in our operations, which forced us to making painful decisions and this impacts our employees with the sole aim of continuing to protect the service we have committed to our branches and the country.”
In this context and with the operation in Chile contributing with more than US$ 1 billion to the company’s international sales, Carolina Triatt, insurance manager at Fitch Ratings in Chile, noted that the expectation is for a recovery in the sector, but she arrived with the increase in inflation. which made this market one of the hardest hit “because they basically couldn’t adjust their rates to the point where the accident rate was also growing”.