Discovery Health Medical Scheme maintains AA+(ZA) rating
Global Credit Ratings (GCR) has re-rated Discovery Health Medical Scheme (DHMS) at AA+(ZA), according a Stable outlook.
Marc Chadwick, Sector Head: Insurance Ratings at GCR is pictured below. He notes that the organisation’s rating is due to its market presence and strong market position. In this regard, DHMS reflects an estimated 54.4% share of principal membership in the open market medical scheme industry.
“The scheme has strong brand recognition. Also there is the members’ voluntary participation in the Vitality wellness programme. Both of these support membership retention and contribute towards improving members’ risk profiles,” says Chadwick.
Its low-risk member profile pool further boosts the Discovery Health Medical Scheme’s rating profile. The average principal member age, as well as the average beneficiary age, remained stable at 44 years and 34 years respectively.
Chadwick adds that DHMS’ solvency metrics and solid reserve accumulation, have strengthened steadily, particularly over the last three years, with the statutory solvency margin being recorded at 26% in financial year-end (FYE) 2015.
Over the past three years, DHMS has reported strong operating performances, resulting in a cumulative net surplus of R4.1 billion. Consistent below industry average claims ratio and cost efficiency have further sustained the business. The operating results should remain sound over the medium term.
Discovery Health Medical Scheme Liquidity
A conservative investment strategy continues to support liquidity, with cash and equivalents accounting for 64% of the investment portfolio at FYE 2015. The better solvency margin has helped to facilitate investment optimisation of the investment portfolio.
The industry rating remains capped at AA+(za) due the prevailing characteristics of the South African medical schemes. Due to this, an upward adjustment of DHMS’ rating is unlikely over the short to medium term. However, downward rating pressure may arise from a severe weakening in key operating and solvency metrics or from a marked loss of membership with the 24-month rating period.