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Melbourne, Wednesday, 11 November 2015

Australia Ratings has assigned a credit rating of ‘BBB+’ to the Australian Unity Series B Bonds - Tranche 1 (Bonds), issued by Australian Unity Limited (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 Bonds are unsecured debt obligations of the issuer, AUL.

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

“The ‘BBB+’ rating on the Bonds 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 2015, Australian Unity grew earnings substantially, with almost all business lines reporting stronger earnings”. AU’s net profit after tax (NPAT) increased by almost 17% in 2015 compared with the previous year.

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 almost 57% of adjusted EBITDA; 
  • Prudent and conservative risk appetite with regard to gearing levels and maintenance of buffers above regulatory capital requirements; and 
  • 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; and 
  • Restricted financial flexibility, given Australian Unity Limited’s mutual status precludes future equity raising.

The ‘GREEN’ Product Complexity Indicator of the Bonds has been assigned. A GREEN designation indicates the terms and conditions of the Bonds 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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