Announcements

GCR accords an initial rating of AA-(ZA) to Profmed; Outlook Stable.

Johannesburg, 6 August 2014 — Global Credit Ratings has today assigned an initial national scale claims paying ability rating to Profmed of AA-(ZA); with the outlook accorded as Stable.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to Profmed based on the following key criteria:

Profmed’s rating benefits from the scheme’s captive base and well established market presence. The captive membership base reflects a favourable risk profile, by way of well understood and fairly consistent claiming patterns. This has allowed for greater accuracy in claims predictability, which has translated into suitable pricing and benefits structures.

Profmed continues to evidence a solid financial performance, posting R88m in cumulative net healthcare surpluses since 2010. This has facilitated the scheme’s very strong net surplus trend, returning an average net margin of 7% over the past 4 years.

Profmed reflects very strong solvency, which has followed a consistent upward trajectory throughout the review period, representing a rating strength. The statutory funding ratio advanced to a review period high 54% in F13.

Liquidity levels are viewed to be adequate, with net cash coverage registering at 2.4 months in F13. Liquidity receives supplementary support from the sizeable bond portfolio.

Expressed as a percentage of gross premiums, delivery costs have remained stable over the last four years, albeit remaining above the closed medical scheme industry average on a per member basis. The scheme remains well diversified in terms of intermediaries and employee groups.

An upward rating movement may emanate from a substantial elevation in the scheme’s membership base and market share, coupled with the maintenance of existing strong performance and credit protection metrics. Conversely, negative rating pressure may stem from sustained negative net healthcare margins or net margins, having a material negative impact on solvency and liquidity metrics.

For a detailed glossary of terms utilised in this announcement please click here

NATIONAL SCALE RATINGS HISTORY INTERNATIONAL SCALE RATINGS HISTORY
Initial/last rating (August 2014) Initial/last rating (May/2014)
Claims paying ability: AA-(ZA) Claims paying ability: BBB
Outlook: Stable Outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst
Marc Chadwick
Sector Head: Insurance
(011) 784-1771
Chadwick@globalratings.net

Committee Chairperson
Eyal Shevel
Sector Head: Corporate & Public Sector Debt Ratings
(011) 784-1771
Shevel@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating South African Medical Schemes (April 2014)
Medical Schemes Bulletin 2001-2013.

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.NET.

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.

Profmed participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The credit rating/s has been disclosed to Profmed with no contestation of the rating.

The information received from Profmed and other reliable third parties to accord the credit rating(s) included the latest available audited annual financial statements to December 2013 (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements to December 2014, year to date management accounts to April 2014, and other documentation related to the rating exercise.

The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.

GCR accords an initial rating of AA-(ZA) to Profmed; Outlook Stable.

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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