Global Credit Ratings (GCR) has affirmed the national scale claims paying ability rating assigned to Profmed of AA-(ZA), with the rating outlook accorded as Stable.
Marc Chadwick, Head of Insurance Ratings at GCR, says Profmed’s rating strength of is positively impacted by the scheme’s established market presence and consistency in the targeted membership base. Underpinned by persistently high member retention, the underlying risk pool has remained fairly stable, allowing for a degree of claims predictability, aiding in health risk management. Furthermore, the continued on take of younger members serves to offer cross subsidisation opportunities against a comparatively elevated age profile of the beneficiary pool.
Profmed’s solvency is viewed to be very strong, supported by a persistently high statutory solvency margin that has tracked comfortably above industry peers over the review period. Going forward, solvency is expected to remain at very strong levels (>50%), providing significant rating support over the medium term.
“Profmed’s earnings capacity is viewed to be well controlled, and supportive of medium term reserving targets. The scheme has reported a strong cumulative net surplus of R286 million over the review period. Driven by a 3% spike in the claims ratio, the net healthcare margin was comparatively subdued in Financial Year (FY) 2015, with the scheme expecting the margin to remain in slightly negative territory in FY2016,” adds Chadwick.
The scheme’s overall earning’s capacity is sound with very strong reserves, coupled with good levels of investment income, providing a degree of loss absorption capacity. Key liquidity metrics measured at adequate levels, with net cash covering average claims by two months in FY2015. Liquidity receives supplementary support from the sizeable bond portfolio.
“An upward rating movement would be considered if the scheme were able to achieve a material elevation in its market profile, increasing market share substantially. Sustained adverse net performances, due to significant claims or investment losses, which could cause the level of reserves to decline materially, would have an adverse effect on the rating,” concludes Chadwick.