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GCR affirms Momentum Health's rating of AA-(ZA)

01 July 2014 Marc Chadwick, GCR

Global Credit Ratings (GCR) has affirmed the national scale claims paying ability rating assigned to Momentum Health of AA-(ZA); with the outlook revised from "Stable" to "Positive".

This is according to Marc Chadwick, Head of Insurance Ratings at GCR, who says Momentum Health is well-established in the domestic open medical scheme industry, covering in excess of 212,000 beneficiaries as at year-end 2013.
The scheme is administered by Momentum Medical Scheme Administrators (MMSA), which in turn is 100% owned by MMI Holdings Ltd, being the holding company of Momentum Group Ltd.

“The revision of the rating outlook from "Stable" to "Positive" is reflective of the robust growth trajectory displayed by Momentum Health in recent years (amidst a largely stagnant open medical scheme industry), which has seen the scheme’s market position strengthen notably in a very competitive environment (5% market share as at 3Q 2013),” explains Chadwick.

He says this is supported by an effective benefit design, a high degree of cover flexibility (aided by the utilisation of innovative auxiliary offerings) and the successful leveraging of the Multiply rewards programme. “In conjunction, these components foster strong member retention and allow for an on-going rejuvenation of the risk pool.”

Chadwick says note is also taken of the strong operating performance exhibited of late, with the scheme posting a net healthcare surplus over the past 4 consecutive years. “This is attributable to a consistent below industry average claims ratio and relatively stable delivery cost base. In anticipation of a continued adherence to current risk management practices, this comparatively favourable trajectory is likely to persist going forward. Moreover, the sustained generation of healthy net surpluses continues to underpin a strong degree of reserve accumulation.”

According to Chadwick, this has resulted in a persistent improvement in key solvency metrics over the review period, with the statutory funding ratio trending slightly ahead of the open medical scheme industry average in F13.

“Further, the scheme continues to adopt a conservative investment strategy, with invested assets at FYE13 held exclusively in cash or low risk money market instruments. This underpins a robust level of liquidity and relative stability in investment earnings,” explains Chadwick.

In view of the above, Chadwick says an upward adjustment of the rating is premised on the maintenance of key operating performance metrics at sound levels, in conjunction with the preservation of a strong level of liquidity and the attainment of projected solvency targets.

“Conversely, downward rating pressure could arise from a sustained deterioration in key operating metrics, a reversal and continued suppression of the statutory funding ratio below the required regulatory minimum and/or a material weakening in the scheme's liquidity position,” concludes Chadwick.

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