Another one bites the dust
A couple of weeks ago FAnews Online reported that the Financial Services Board had successfully approached the High Court to place Progressive Investment Trust and some of its connected entities under the control of curators. This kind of activity is becoming more frequent in the financial services industry. So it was no surprise that the Council for Medical Schemes (CMS) got in on the act.
On 20 May 2008 the CMS was successful in petitioning the Johannesburg High Court to place the business of Renaissance Medical Scheme under the control of a curator. According to a CMS press release the registrar, Patrick Masobe, instituted proceedings against the scheme after Renaissance provided an actuarial report form Deloitte showing the company was R36m in the red. It seems the registrar had struggled for some time to get accurate financials from the medical scheme. Renaissance had, at April 2008, still not completed its 2007 financial reports.
Solvency ratio on the decline
In addition to being late with its financial reports the schemes solvency ratio had declined significantly in recent months. Medical schemes are required to maintain a 25% solvency ratio at all times. This ratio expresses the percentage of likely annual claims to scheme reserves and indicates whether the scheme is in a good position to meet its financial liabilities over a given period. Regular FAnews Online readers might remember that the country’s largest medical scheme, Discovery Health, was also under fire for not maintaining a 25% ratio during the course of 2007. Of course the situation was totally different – with the massive scheme sitting just below the required 25% mark and communicating with the registrar as to how the situation would be remedied.
Personal Finance reported on the weekend that there had been a last ditch effort to prevent the Renaissance Medical Scheme from being placed under curatorship. The deal reportedly involved Netcare reversing a portion of the company’s 2007 claims expenditures with Renaissance Health’s administrator Prosperity Health picking up the tab. The deal could not be finalised in time and Masobe took the matter to the Johannesburg High Court on 8 May. The case was held over to 20 May on which date the curators were appointed.
21 Day assessment
The curator now has three weeks to conduct an assessment of the business and make a recommendation on the most appropriate course of action to follow. Mzi Nkonki of Nkonki, an accounting and audit firm has been appointed by the court. “We hope that the curator will be able to manage the scheme back to solvency,” said Masobe. “We have full confidence that member interests will be protected as optimally as possible under Mr Nkonki’s management.”
He further urged brokers to “act with restraint and not to take undue advantage of the situation, but to ensure that all advice given to members of Renaissance is best advice based on a proper assessment of the situation and their individual circumstances.” We feel sorry for any medical aid brokers who now have to advise clients on appropriate action when such little information is at hand. It looks like they’ll have no choice but to sit tight and wait for the curators report in around three weeks time.
Editor’s thoughts:
It seems private healthcare in South Africa is under fire from all sides. Hospital groups are under pressure to reduce costs while medical aid schemes are struggling to provide prescribed minimum benefits in a tightly regulated environment. What future do small medical aid schemes have in South Africa? Add your comments below or send them to [email protected]
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