Johannesburg, 29 May 2013 — Global Credit Ratings has today affirmed the national scale claims paying ability rating assigned to Fedhealth Medical Scheme of AA-(ZA); with the outlook accorded as Positive.
Global Credit Ratings has accorded the above credit rating(s) on Fedhealth Medical Scheme based on the following key criteria:
Fedhealth Medical Scheme (“Fedhealth”) is an established player in the South African open medical scheme arena, providing cover to over 148,000 beneficiaries as at December 2012. The scheme is administered by Medscheme Holdings (Pty) Ltd.
Underpinned by sustained, sound operating results (with consecutive net healthcare surpluses registered over the past three years) and stable investment income, Fedhealth’s members surplus has grown to total a robust R1.1bn at FYE12. Support in this regard is derived from relatively well contained delivery costs and an average claims ratio below the industry. On the back of this, key solvency metrics have trended persistently upwards over the corresponding period, to close at robust levels for the period under review. This positive operating trend is anticipated to be sustained over the short to medium term. Further, the scheme’s investment portfolio remains well balanced, supportive of a healthy level of cash holdings and robust liquidity metrics.
Sustaining key solvency and liquidity metrics at current levels, whilst upholding current underwriting principles could lead to an upward adjustment of the rating. Conversely, downward rating pressure could emanate from a significant weakening in the scheme’s financial position, arising from a sustained loss of members and/or a significant deterioration in key credit protection metrics below forecast levels. Further, the government’s longer term objective of introducing an NHI framework in South Africa, to which the associated effect on the medical schemes industry remains uncertain, could also exert downward rating pressure.
NATIONAL SCALE RATINGS HISTORY
Initial rating (Nov/2001)
Claims paying ability: BB(ZA)
Outlook: Rating watch
Last rating (May/2012)
Claims paying ability: AA-(ZA)
Outlook: Positive outlook
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
GCR’s Criteria for Rating South African Medical Schemes
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.
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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.
Fedhealth Medical Scheme participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to Fedhealth Medical Scheme with no contestation of the rating.
The information received from Fedhealth Medical Scheme and other reliable third parties to accord the credit rating included the latest audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year-to-date management accounts, reserving methodologies and capital management policies.Inaddition,information specific to the rated entity and/or industry was also received.
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