Johannesburg, 30 May 2014 — Global Credit Ratings (“GCR”) has today affirmed the national scale claims paying ability rating assigned to Momentum Health of AA-(ZA); with the outlook revised from “Stable” to “Positive”.
SUMMARY RATING RATIONALE
Global Credit Ratings has accorded the above credit rating(s) on Momentum Health based on the following key criteria:
Momentum Health is well-established in the domestic open medical scheme industry, covering in excess of 212,000 beneficiaries as at year-end 2013. The scheme is administered by Momentum Medical Scheme Administrators (“MMSA”), which in turn is 100% owned by MMI Holdings Ltd, being the holding company of Momentum Group Ltd.
The revision of the rating outlook from “Stable” to “Positive” is reflective of the robust growth trajectory displayed by Momentum Health in recent years (amidst a largely stagnant open medical scheme industry), which has seen the scheme’s market position strengthen notably in a very competitive environment (5% market share as at 3Q 2013). This is supported by an effective benefit design, a high degree of cover flexibility (aided by the utilisation of innovative auxiliary offerings) and the successful leveraging of the Multiply rewards programme. In conjunction, these components foster strong member retention and allow for an on-going rejuvenation of the risk pool.
Note is also taken of the strong operating performance exhibited of late, with the scheme posting a net healthcare surplus over the past 4 consecutive years. This is attributable to a consistent below industry average claims ratio and relatively stable delivery cost base. In anticipation of a continued adherence to current risk management practices, this comparatively favourable trajectory is likely to persist going forward. Moreover, the sustained generation of healthy net surpluses continues to underpin a strong degree of reserve accumulation. This has resulted in a persistent improvement in key solvency metrics over the review period, with the statutory funding ratio trending slightly ahead of the open medical scheme industry average in F13. Further, the scheme continues to adopt a conservative investment strategy, with invested assets at FYE13 held exclusively in cash or low risk money market instruments. This underpins a robust level of liquidity and relative stability in investment earnings.
In view of the above, an upward adjustment of the rating is premised on the maintenance of key operating performance metrics at sound levels, in conjunction with
the preservation of a strong level of liquidity and the attainment of projected solvency targets. Conversely, downward rating pressure could arise from a sustained deterioration in key operating metrics, a reversal and continued suppression of the statutory funding ratio below the required regulatory minimum and/or a material weakening in the scheme’s liquidity position.
For a detailed glossary of terms utilised in this announcement please click here.
NATIONAL SCALE RATINGS HISTORY
Initial rating (Mar/2005)
Claims paying ability: A+(ZA)
Last rating (May/2013)
Claims paying ability: AA-(ZA)
Senior Credit Analyst
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Sector Head: Insurance
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Criteria for Rating South African Medical Schemes (April 2014).
Momentum Health rating reports 2005-2013.
RATING LIMITATIONS AND DISCLAIMERS
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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.
Momentum Health 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 Momentum Health with no contestation of the rating.
The information received from Momentum Health and other reliable third parties to accord the credit rating included the audited annual financial statements for 2013
(plus four years of comparative numbers), latest internal and/or external report to management, full year F14 detailed budgeted financial statements, most recent year to-date management accounts to 28 February 2014. In addition, information specific to the rated entity and/or industry was also received.
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 Momentum Health’s rating of AA-(ZA); with the outlook revised from “Stable” to”Positive”