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  Rating of Australian Unity Notes Reviewed and Affirmed at 'BBB+' 


Melbourne, Monday, 3 November 2014 – Australia Ratings has reviewed and affirmed its credit rating of ‘BBB+’ on the Australian Unity Notes (AUNs; ASX code: AYUHA), issued by AUL. This rating is the highest long-term rating in the intermediate category of creditworthiness on the rating scale of Australia Ratings (see the rating scale below).The AUNs are unsecured debt obligations of the issuer, Australian Unity Limited (AUL).

Australia Ratings also confirmed its product complexity indicator of ‘GREEN’ on the AUNs indicating that Australia Ratings considers the AUNs to be a debt investment with simple and straight forward terms and conditions.

“The ‘BBB+’ rating on the AUNs primarily reflects the assessed credit quality of both their issuer, Australian Unity Limited and the wider Australian Unity Group” said Australia Ratings’ credit analyst, Chris Cudsi. Mr Cudsi added, “In 2014, Australian Unity was able to maintain the level of profitability achieved in 2013, as we had anticipated”.

AU’s earnings were stable in 2014, as a sizeable earnings boost in Australian Unity's retirement living business offset significantly higher claims costs in AU's health insurer. Net profit after tax (NPAT) for 2014 was A$29.6 million, compared with A$29.4 million for the previous corresponding period.

The Australian Unity Group is a diversified mutual specialising in the provision of healthcare (mainly, health insurance), financial services and retirement living.

The credit rating reflects the following key strengths of AUL’s business:

  • Robust and competitive healthcare arm that generates over 53% of adjusted EBITD.
  • Prudent and moderately conservative risk appetite with regard to gearing levels and maintenance of buffers above regulatory capital requirements.
  • Increasing diversification benefits of continued expansion into Retirement Living, Financial Services and Big Sky Building Society businesses.

The credit rating also reflects the following key risks to AUL’s business:

  • All three of the Australian Unity Group’s major businesses (Healthcare, Financial Services ‑ including Big Sky Building Society – and Retirement Living) operate in areas subject to significant regulatory scrutiny and/or political pressure to minimise price increases.
  • Exposure to project and construction risks inherent in property development within the Retirement Living business.
  • Restricted financial flexibility, given Australian Unity Limited’s mutual status precludes future equity raising.

The ‘GREEN’ Product Complexity Indicator of bonds is confirmed. A GREEN designation indicates the terms and conditions of the AUNs are simple and straightforward with a very low level of complexity on Australia Ratings’ five point Product Complexity Indicator scale.


For more information contact:

Chris Cudsi, Director, 0403 751 040, chris.cudsi@australiaratings.com



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