GCR affirms Momentum Medical Scheme’s national scale financial strength rating of AA(ZA), and withdraws the rating.
Johannesburg, 21 June 2021 – GCR Ratings (“GCR”) has affirmed Momentum Medical Scheme’s (“Momentum”) national scale financial strength rating of AA(ZA). Subsequently, the rating has been withdrawn as a secondary rating action. Accordingly, GCR will no longer provide rating coverage on the scheme.
Rated Entity / Issue
Momentum Medical Scheme
Before the withdrawal, the rating reflected a strong business profile and strengthened financial profile, supported by a favourable claims experience translating to a solid capital buffer and strong liquidity.
Momentum maintained an intermediate market position reflected by a market share of 7%, despite a membership contraction caused by COVID-19 related travel restrictions that constrained movement of international students. Membership diversification is viewed positively given the dominance of individual members which leads to high levels of member granularity.
Earnings strengthened in FY20 supported by contained claims as a result of a reduction in elective surgeries and hospitalised medical cases during the COVID-19 lockdown. As such, the claims ratio registered at 72% (FY19: 84%; FY18: 87%) translating to a net healthcare surplus of R666m (FY19: R53m). However normalisation of claims is expected in FY21/FY22 following the resumption of treatments delayed during 2020, and the funding of ongoing COVID-19 benefits, with earnings expected to moderate towards historical levels.
Total funds increased by 54% to R2.2bn supported by sound surplus accumulation, whilst the statutory solvency level increased to 39.6% (FY19: 25.9%; FY18: 23.9%). Statutory solvency is however expected to moderate when claims patterns normalise, although is likely to be maintained above minimum regulatory levels.
Liquidity is viewed to be moderately strong with the cash and stressed financial assets coverage of gross claims registering at a higher 6.5 months at FY20 (FY19: 4.5 months), with operational cash coverage of 1.1x (FY19: 1.0x). Liquidity metrics are expected to remain within a similar level supported by conservative asset allocation.
Analyst: Insurance Ratings
+27 11 784 1771
Group Head of Ratings
+27 11 784 1771
Related criteria and research
Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Insurance Companies, May 2019
GCR Ratings Scales, Symbols & Definitions, May 2019
GCR Country Risk Scores, June 2021
GCR South African Medical Schemes Sector Risk Scores, April 2021
Momentum Medical Scheme
Claims paying ability
Salient Points of Accorded Rating
GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the rating is based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such rating is an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
The credit rating has been disclosed to the rated entity. The rating was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating. The rated entity participated in the rating process via virtual management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The information received from the rated entity and other reliable third parties to accord the credit rating included:
The audited financial results to 31 December 2020.
Other relevant documents.
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.
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