AUSTRALIAN UNITY BONDS RATING REVIEWED AND AFFIRMED AT 'BBB+'

Melbourne, Wednesday, 27 November 2024 – Australia Ratings has reviewed and affirmed its credit rating of ‘BBB+’ on the Australian Unity Bonds (Bonds; ASX codes: AYUHC, AYUHD, AYUHE), 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 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.

“Australian Unity had a financially difficult FY2024, as the group expended over $40 million on integration, business transformation and restructuring initiatives across its diversified portfolio of businesses” said Australia Ratings’ credit analyst, Chris Cudsi. Mr Cudsi added, “Together with the announced divestment of Australian Unity Bank, these initiatives should bolster the group’s performance in coming years”.

AUL’s reported a net loss after tax of $31.3 million in FY2024, compared with a net profit of $6.5 million in the previous year, due to the business transformation initiatives as well as a substantial increase in funding costs. During FY2024, AUL acquired the myHomecare Group and friendly society IOOF Ltd and its approximately $1.1 billion investment bond business. The Australian Unity Group is a diversified organisation specialising in the provision of healthcare (mainly, health insurance), financial services and home health and residential aged care.

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

• Increased diversification benefits of continued expansion into Home Health, Residential Aged Care and Wealth and Capital Markets businesses
• Robust and competitive private health insurance business that generates 30% of adjusted EBITDA
• Prudent risk appetite with regard to maintenance of buffers above regulatory capital requirements

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

• Many of Australian Unity’s major businesses operate in areas subject to significant regulatory scrutiny and political pressure to minimise price increases.
• Significant increases in debt in recent years, partly tempered by corresponding substantial increases in the asset base.
• 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, 0403 751 040, chris.cudsi@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.

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