Global Credit Ratings reaffirms Discovery Health Medical Scheme at AA-rating

Discovery Holding Limited
Press Release

International credit rating agency Global Credit Ratings ("GCR") has

reaffirmed Discovery Health Medical Scheme's ("DHMS") domestic claims paying
ability rating of AA- (double A minus). This is defined as having a high
certainty of timely payment and is the highest rating attainable in the
South African Medical Scheme sector. GCR has maintained the scheme on rating
watch, as a result of the debate surrounding the capitalisation plan and
reinsurance arrangements. According to Marc Joffe, a healthcare analyst at
GCR, the rating watch accorded is partially reflective of the uncertainty in
the regulatory environment pertaining to the medical scheme sector as a
whole. Joffe points out that, in view of this uncertainty, more than 30% of
all medical scheme ratings accorded by GCR are currently on rating watch.
Since inception, DHMS has delivered substantial growth in its membership
base and is the largest medical scheme in the country. DHMS is administered
by Discovery Health (Pty) Ltd, which in turn is a 100% owned subsidiary of
Discovery Holdings, which is listed in the short-term insurance sector.
According to Joffe, the guarantee agreement with FirstRand coupled with the
extensive reinsurance arrangements in place provides considerable support to
the rating. Joffe stated that despite the statutorily determined solvency
ratio remaining below that required by the Act, the ratio ignores the effect
of risk mitigating factors such as members savings accounts, the guarantee
agreement and the reinsurance arrangements, which if included, would result
in a more accurate indication of DHMS's financial position."
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GCR Contacts:
Name: Marc Joffe
Tel: 011 784 1771
e-mail: joffe@globalratings.net