Johannesburg, 1 July 2015 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Chartered Accountants SA Medical Aid Fund (CAMAF) of AA-(ZA); with the outlook accorded as Stable.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit rating to Chartered Accountants SA Medical Aid Fund (“CAMAF”) based on the following key criteria:
CAMAF’s rating benefits from its captive membership base. The scheme’s underlying consistency and high retention in membership is viewed positively by GCR, as it supports a favourable member age profile, and underpins a high degree of claims predictability.
CAMAF’s financial profile is supported by its very strong solvency. The statutory funding ratio and other key credit protection measures have been reported at robust levels over the review period. The scheme remains committed to maintaining key solvency metrics at healthy levels, which supports GCR’s favourable view of the scheme’s rating strength over the rating horizon.
Earnings capacity represents a rating strength, underpinned by the sound operating track record exhibited. Net healthcare surpluses have been posted in four of the last five years, with a high degree of budget attainment. This has been supported by a reasonably well contained claims ratio and relative stability in the scheme’s delivery cost ratio. Coupled with stable investment earnings, this has seen a cumulative R155m added to accumulated funds between FY10 and FY14.
Asset quality is viewed to be high, as the scheme continues to maintain a reasonably balanced investment portfolio. A high proportion of invested assets is held in cash, supported by well diversified managed investments (which include a high weighting of liquid instruments). Against this backdrop, key liquidity metrics are viewed as sound, and are expected to be sustained going forward.
A challenge remains the concentration of the membership base to large employer groups, with the adverse impact thereof evidenced by large scale retrenchments undertaken by its single biggest corporate client in FY14. Further, future growth prospects remain subject to staffing requirements at contracted corporate entities and subsequently the broader domestic economic sentiment.
Upward rating movement would be considered if the scheme were able to achieve a substantial elevation in its market profile, increasing market share materially while enhancing overall diversification. Negative rating action may arise on the back of a sustained adverse net performance, due to significant claims or investment losses, which could cause the level of solvency to decline materially.
|NATIONAL SCALE RATINGS HISTORY|
|Initial rating (June 2002)|
|Claims paying ability: A+(ZA)|
|Last rating (July 2014)|
|Claims paying ability: AA-(ZA)|
|Primary Analyst||Secondary Analyst|
|Marc Chadwick||Vinay Nagar|
|Sector Head: Insurance Ratings||Junior Analyst|
|(011) 784-1771||(011) 784-1771|
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating South African Medical Schemes, updated April 2015
CAMAF rating reports, 2002-2014
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. 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.
GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR’S INSURANCE GLOSSARY
|Accumulated funds||An amount representing the accumulation of historical and current net surpluses and deficits, held for the benefit of members and their dependants|
|Assets||A resource with economic value that a company owns or controls with the expectation that it will provide future benefit.|
|Balance Sheet||Also known as a Statement of Financial Position. A statement of a company’s assets and liabilities provided for the benefit of shareholders and regulators. It gives a snapshot at a specific point in time of the assets the company holds and how they have been financed.|
|Benefits||Financial reimbursement and other services provided covered by medical schemes under the terms of a medical scheme plan.|
|Bond||A long term debt instrument issued by either: a company, institution or the government to raise funds.|
|Claim||A request for payment of a loss, which may come under the terms of a medical scheme plan.|
|Commission||A certain percentage of premiums produced that is received or paid out as compensation by a medical scheme to agents and brokers.|
|Coverage||The scope of the protection provided under a contract of a medical scheme plan.|
|Interest||Money paid for the use of money.|
|Liquidity||The ability of a medical scheme to convert its assets into cash to pay claims if necessary.|
|Loss||The happening of the event for which a medical scheme pays.|
|Market Value||The price for which something would sell, especially the value of certain types of assets, such as stocks and bonds. It is based on what they would sell for under current market conditions.|
|Members’ surplus||Accumulated funds plus revaluation reserves.|
|Portfolio||The total securities owned by a medical scheme.|
|Provision||A technical reserve of a medical scheme established to provide for the future liability for claims which have occurred but which have not yet been settled.|
|Risk||(1) Uncertainty as to the outcome of an event when two or more possibilities exist. (2) A person or thing covered by a medical scheme.|
|Securities||Evidences of a debt or of ownership, as stocks, bonds, and checks.|
|Solvency||Reserves (accumulated funds or members’ surplus) expressed as a percentage of contributions (gross or net).|
|Statutory||Required by or having to do with law or statute.|
|Term||The period of time for which a policy or bond is issued.|
|Valuation||Estimation of the value of an item, usually by appraisal.|
For a more detailed glossary of terms utilised, please click here
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.
Chartered Accountants (SA) Medical Aid fund (CAMAF) participated in the rating process, via teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The credit rating has been disclosed to Chartered Accountants (SA) Medical Aid Fund (CAMAF) with no contestation of the rating.
The information received from Chartered Accountants (SA) Medical Aid Fund (CAMAF) and other reliable third parties to accord the credit rating(s) included the 2014 audited annual financial statements (plus four years of comparative numbers), full year detailed budgeted financial statements for 2015, unaudited year-to-date management accounts to April 2015, and other related documents.
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.