Community Medical Aid Scheme (“COMMED”) has been accorded a domestic ZAR currency claims paying ability rating of BBB- (triple B minus). The rating has also been placed on rating watch.
COMMED has exhibited a continued escalation in claims experience over the review period, attributable to the persistent loss of persal members (which generally have more favourable claiming profiles). This has been exacerbated by the take-on of the older and consequently high claiming ex-Humanity members as from F08. Thus, the large net deficits reported have significantly eroded reserve levels over the last four years and for the 3Q F10. Accordingly, statutory solvency has declined from 63% to a level below the stipulated minimum requirement. While note is taken of management’s corrective actions as per the business plan, a real improvement in solvency is expected to only be realised in the medium term. The significant outflow of members in F09 and for the YTD September F10 was also noted, as well as the high average age of members. The scheme’s liquidity levels remain under significant strain. As such, COMMED continues to dispose of investments in order to bolster cash holdings and support investment income inflows. While it is noted that the scheme’s delivery cost ratio remains above industry norms, cognisance is, however, taken of current management’s concerted efforts to reduce this.
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.