A+/Stable Rating Provides Reassurance

Media Release
28 April 2009

A+/Stable Rating Provides Reassurance For Southern Cross Members

Health Insurer Southern Cross Medical Care Society has had its A+/Stable/-- insurer financial strength rating confirmed for the seventh consecutive year by rating agency Standard and Poor’s.

Southern Cross Healthcare Group Chief Executive Officer, Dr Ian McPherson, said today that the renewed rating was a great endorsement for the not-for-profit Society’s financial position, given the current global financial climate.

In its credit rating report, Standard & Poor’s said the A+/Stable rating reflected Southern Cross’ leading market position in the New Zealand private health insurance industry and its strong strategic management.

The rating agency observed that Southern Cross had grown membership despite tougher economic conditions, and as a not-for-profit was strategically focused on delivering value to its members through affordable pricing and a viable product range.

Standard & Poor’s observed that medical inflation and New Zealand’s ageing population would remain key issues for health insurers, but “Southern Cross’ scale and influence should see it well placed against its peers”.

Dr McPherson confirmed the Society had seen an increase in claims costs in the current financial year. “Claim reimbursements to members reached a high 93.6 cents for every $1 of premium income received in the six months to 31 December 2008, which represents tremendous value for members.

“Ultimately we do need to ensure the right balance between premiums coming in and claims going out so that members can rely on us in the long term. However, the Society’s financial reserves and good investment returns mean we can weather a storm."

The Society’s reserves were $329 million as at 31 December 2008.

Dr McPherson said Standard & Poor’s had recognised Southern Cross’ efforts to contain operating expenses and the fact that its expense ratio was lower than industry peers.

“Our ability to contain operating cost has a direct influence on the affordability of premiums, so we recognise the need to focus on achieving efficiencies while maintaining service standards for our members."

ENDS

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