Announcements

Transmed maintained at BBB, rating watch

The domestic ZAR currency claims paying ability rating accorded to Transmed Medical Fund (“Transmed”) has been affirmed at BBB (triple B), with the rating maintained on rating watch. The rating is to be monitored on a quarterly basis.

Transmed has experienced material financial strain over the review period, largely owing to the high claiming profile of the SATS risk pool (which is ringfenced within the scheme), coupled with their insufficient subsidy structure. In this regard, Transmed has recorded substantial net deficits since F05, cumulatively amounting to R764m as at FYE10. Note is also taken of the consecutive operating and net deficits registered by the TWMP risk pool over the review period. Owing to this, the scheme has experienced material reserve erosion, with accumulated funds reducing from R866m at FYE05, to R182m at FYE10. This, in turn, has resulted in a continuous decline in the scheme’s statutory solvency margin. At FYE10, as anticipated, statutory solvency measured well below the Council for Medical Schemes’ (“CMS”) minimum requirement of 25%, equating to a review period low of 14%.

The scheme subsequently submitted a business plan for meeting solvency requirements to the CMS in March 2011. The plan outlines the corrective measures to be put in place over the next three years, which are projected to restore the scheme’s statutory solvency margin to the regulatory minimum. Notably, the business plan does not cater for a scenario in which the SATS risk pool will remain as a part of the scheme after FYE11. Current efforts pertaining to the above matter are aimed at finalising the future funding of the SATS risk pool by October 2011. It should, however, be noted that while the 2011 SATS funding has been calculated to cover SATS members’ healthcare expenditure for the year, any overstatement of actual results to budget poses corrective measures to rectify this going forward, a risk to TWMP’s reserves (as they are not mutually exclusive), which threatens the viability of the scheme as a going concern.

The recent accreditation of open schemes introduces a further element of uncertainty into the future performance of this risk pool. This notwithstanding, positive factors include the largely stable TWMP membership levels over the review period, as well as the scheme’s very conservative investment stance.

Marc Chadwick.
https://globalratings.net/uploads/files/April_2011.pdf

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