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Bankmed reported a very large net surplus of R668m in FY20 as low non-essential benefit utilisation caused atypically low claims frequency, in line with industry experience. We nevertheless expect earnings to progressively normalise over the medium term as the claims impact of COVID-19 subsides. In this regard, the net healthcare margin ranged between -1% and -3.5% between FY16 and FY19, and the net margin measured between 1% and 3%, with both metrics showing high stability.
The Stable Outlook reflects expectations that Bankmed’s earnings will normalise to historical ranges post COVID-19 and the scheme will continue to successfully balance affordability and targeted solvency margins, as has been demonstrated in the past. The rating could be upgraded if strategic initiatives to grow the membership base are successfully implemented and this leads to an improvement in the overall membership profile.