Global Credit Ratings (“GCR”), an international rating agency, has reaffirmed Momentum Health’s domestic ZAR currency claims paying ability rating at A+ (single A plus), while the rating has been maintained on rating watch. The rating denotes a high claims paying ability, with good protection factors.
The rating took cognisance of the fact that Momentum Health has significantly increased membership over the past two years. This has in turn had positive implications on the scheme’s age profile, as well as diversification. Furthermore, the scheme’s integral brand link to the greater Momentum Group (a leading financial services group in South Africa) was a supporting factor to the rating. However, it was noted that the rapid growth of the scheme’s membership base, together with the net deficit posted in F07, has continued to place pressure on solvency levels, with the scheme’s statutory funding ratio amounting to 20% in F07 (F06: 27%). Sheri Few, senior analyst at GCR, stated that cognisance was, however, taken of the corrective measures implemented by management to increase the scheme’s reserves to meet statutory requirements, which is expected to be reached by F11.
Although Momentum Health’s liquidity levels exhibited an improvement in F07, these remain comparatively low relative to the industry average. Nonetheless, the scheme’s sizable investment portfolio, of which a large portion other investments (R301m) are readily realisable, was noted. The scheme has displayed a higher delivery cost to GPI ratio than that of the industry average over the past two years (18.5% versus estimated industry average of 16% in F07), although this is expected to reduce going forward as scale economies are achieved.
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