RATING OF AUSTRALIAN UNITY BONDS REVIEWED AND AFFIRMED AT ‘BBB+’

Melbourne, Wednesday 30 November 2022

Australia Ratings has reviewed and affirmed its credit rating of ‘BBB+’ on the Australian Unity Bonds (Bonds; ASX code: AYUHC and AYUHD), 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 (more details about the rating scale at www.australiaratings.com). The Bonds are unsecured debt obligations of the issuer, AUL.

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

“In 2022, Australian Unity had a mixed result across its diversified portfolio of businesses” said Australia Ratings’ credit analyst, Chris Cudsi. Mr Cudsi added, “The Health business and Independent and Assisted Living business increased earnings, while the remaining operating segments were adversely affected by volatile and underperforming asset markets”.

AU’s net profit after tax (NPAT) increased by almost 39% in 2022 compared with the previous year, though this was significantly driven by one-off revaluation and business combination gains. Without these, profit would have been significantly lower due to heavy unrealised losses of the benefit fund assets.

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

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

• Robust and competitive independent and assisted living arm that generates around 42% of adjusted EBITDA.
• Prudent risk appetite with regard to maintenance of buffers above regulatory capital requirements.
• Increasing diversification benefits of continued expansion into Wealth and Capital Markets and Australian Unity Bank.

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

• All of Australian Unity’s major businesses operate in areas subject to significant regulatory scrutiny and/or political pressure to minimise price increases.
• Significant increases in debt in recent years, partly tempered by an improving debt maturity profile.
• Exposure to project and construction risks inherent in property development.

The GREEN Product Complexity Indicator of the Bonds is confirmed. 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
chris.cudsi@australiaratings.com
0403 751 040

Further information is available from www.australiaratings.com.

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About Australia Ratings
Australia Ratings is Australia’s local credit rating agency with over 60 years of experience in assessing and rating credit risk. Australia Ratings was formed in 2010 following regulatory reforms to the operation of credit rating agencies in Australia. Australia Ratings Pty Limited holds Australia Financial Services License No. 346138.

Opinions of Australia Ratings are determined by its analytical team in accordance with its rating methodology. The Board of Australia Ratings, whose members include Jarrod Brown, Chris Dalton, and Mike Dontschuk, oversee the application of Australia Ratings rating methodology and the integrity of the rating process.

Click here to find out more about Australia Ratings’ Credit Rating and Product Complexity Indicator (PCI) Scale.