Announcements

GCR affirms Chartered Accountants (SA) Medical Aid Fund’s rating of AA-(ZA); Outlook Stable.

Johannesburg, 19 June 2014 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Chartered Accountants (SA) Medical Aid Fund of AA-(ZA); with the outlook accorded as Stable.

SUMMARY RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating(s) to Chartered Accountants (SA) Medical Aid Fund’s (“CAMAF”) based on the following key criteria:

CAMAF’s rating benefits from the scheme’s captive membership base and well established market presence. This membership base reflects a favourable risk profile, by way of a comparatively low average age, and well understood claiming patterns. This has allowed for greater accuracy in claims predictability.

The scheme has evidenced a solid healthcare performance throughout the review period, posting successive positive net healthcare results over the past four review years, with a corresponding average net healthcare margin of 2.5%. In addition, CAMAF reflects very strong solvency, representing a rating strength. Solvency management has been facilitated by the scheme’s in-depth knowledge of the underlying membership profile, which has allowed for an enhanced degree of control over risk management practices. The scheme’s capacity to generate successive net surpluses is expected to allow for continued accumulated fund maintenance going forward, underpinning the current rating. Furthermore, the investment portfolio is considered conservative, with a high proportion invested in cash and equivalents, and supported by bonds. In turn, the scheme reflects healthy liquidity.

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. Due to the high degree of predictability in the membership base, financial performance has been closely aligned with budgets, reflective of a good level of strategic implementation. However, the scheme’s membership base reflects concentration risk to certain large individual corporate entities, which see scale inherently exposed to employment activity and broad economic downturns.

An upward rating movement would be considered if the scheme were able to achieve a substantial elevation in its market profile, increasing market share substantially. However, sustained adverse net performance, due to significant claims or investment losses, which could cause the level of capitalisation to decline materially, would have an adverse effect on the rating.

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

NATIONAL SCALE RATINGS HISTORY

Initial rating (June/2002)
Claims paying ability: A+(ZA);
Outlook: Stable

Last rating (July/2013)
Claims paying ability: AA-(ZA);
Outlook: Stable

ANALYTICAL CONTACTS

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

Secondary Analyst
Thato Modungoa
Junior Analyst
(011) 784-1771
Modungoa@globalratings.net

Committee Chairperson
Dirk Greeff
Sector Head: Financial Institution Ratings
(011) 784-1771
Dgreeff@globalratings.net

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Criteria for Rating Medical Schemes (April 2014)
CAMAF rating reports, 2002-2013
Medical Schemes Bulletin, 2003-2013

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. 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.

CAMAF 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 CAMAF with no contestation of the rating.

The information received from CAMAF and other reliable third parties to accord the credit rating(s) included the 2013 audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements for 2014, unaudited year-to-date management accounts to March 2014, reserving methodologies and members’ surplus policies, 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 affirms Chartered Accountants (SA) Medical Aid Fund’s rating of AA-(ZA); Outlook Stable.

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