Announcements Insurance Rating Alerts

GCR affirms Momentum Medical Scheme’s national scale financial strength rating of AA(ZA), and withdraws the rating.

Rating action

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 Subsequently, the rating has been withdrawn as a secondary rating action.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 Rating class Rating scale Rating Outlook/Watch
Momentum Medical Scheme Financial strength National WD WD

Rating rationale

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.

Analytical contacts

Primary analyst Linda Matavire Analyst: Insurance Ratings
Johannesburg, ZA LindaM@GCRratings.com +27 11 784 1771
Committee chair Matthew Pirnie Group Head of Ratings
Johannesburg, ZA MatthewP@GCRratings.com +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

Ratings history

Momentum Medical Scheme
Rating class Review Rating Scale Rating Outlook Date
Claims paying ability Initial National A+(ZA) Stable Outlook March 2005
Financial strength Last National AA(ZA) Stable Outlook September 2020

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.
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