How does a medical scheme recover after falling below the statutory solvency requirement?
For Medihelp, the answer did not begin with its balance sheet. It began with claims.
The scheme’s 2025 annual results, released on 25 June 2026, show a financial turnaround that has been building over the past three years. Its solvency ratio recovered from 20.99% at the end of 2024 to 27.01%, moving back above the statutory minimum of 25%.
Over the same period, its relevant healthcare expenditure ratio – one of the industry’s key measures of claims performance – improved from 100.8% in 2023 to 94% in 2024 and to 91.2% in 2025.
Its surplus before other comprehensive income followed a similar path, moving from a deficit of R286.6 million in 2023 to a surplus of R30.7m in 2024 before rising to R282.3m last year.
A disposal of a long-held Allan Gray investment accelerated that recovery by strengthening the reserves used to calculate Medihelp’s statutory solvency ratio. But the financial statements show the turnaround was already under way before that transaction took place.
The hole
The story starts in 2021.
At the end of that year, Medihelp took an unusual decision. While most medical schemes were preparing contribution increases as the country emerged from the Covid-19 pandemic, Medihelp froze contributions and implemented an average contribution reduction of 0.45% for 2022.
The scheme said the move effectively returned about R800m to members, helping to ease financial pressure when many households were still recovering from the economic effects of the pandemic.
The decision came at a cost.
As healthcare utilisation returned to more normal levels, claims increased while contribution income remained under pressure.
The impact became visible in the 2023 financial year.
The relevant healthcare expenditure ratio climbed to 100.8%, meaning the scheme spent slightly more on members’ healthcare than it collected in contribution income. At the same time, Medihelp reported a deficit before other comprehensive income of R286.6m, while its solvency ratio fell to 23.84%, below the 25% minimum required by Regulation 29 of the Medical Schemes Act (MSA).
The deteriorating reserves prompted Medihelp to submit a three-year financial recovery plan to the Council for Medical Schemes. The regulator approved the plan before the scheme announced its 2024 products.
Central to the recovery strategy were above-inflation contribution increases to rebuild reserves. After increasing contributions by 7.5% in 2023, Medihelp implemented a weighted average increase of 15.96% in 2024 – the highest among South Africa’s five largest open medical schemes at the time. The scheme also intensified its focus on claims management and operational efficiency.
Although the 2024 solvency ratio declined further to 20.99%, the underlying business had already begun changing direction.
Claims costs eased. The relevant healthcare expenditure ratio improved sharply from 100.8% to 94%. Instead of losing R286.6m, the scheme generated a surplus before other comprehensive income of R30.7m.
The repair
Medihelp attributes the turnaround to a series of strategic decisions taken over several years.
“The restoration of our solvency is a significant milestone for Medihelp and an important indicator of the scheme’s strength,” says chief executive and principal officer Varsha Vala.
“It reflects deliberate strategic decisions, disciplined execution, and the commitment of our teams to ensuring that Medihelp remains a trusted healthcare partner for current and future generations of members.”
By the end of 2025, those operational improvements had translated into a stronger balance sheet.
If solvency measures a medical scheme’s financial reserves, the relevant healthcare expenditure ratio provides an indication of its operating performance by showing how much of every rand collected in contributions is spent funding members’ healthcare. Medihelp reduced that ratio from 100.8% in 2023 to 94% in 2024 and to 91.2% in 2025.
According to the annual report, the scheme continued to strengthen its managed care, disease management, and healthcare risk management programmes while focusing on reducing avoidable hospital admissions and improving care co-ordination.
That improvement is reflected in its surplus before other comprehensive income. After recording a R286.6m deficit in 2023, Medihelp returned to a R30.7m surplus in 2024. One year later, that surplus had increased almost nine-fold to R282.3m.
The accelerator
The recovery in Medihelp’s operating performance still leaves one question.
If the business had returned to profit and claims costs had come under control, what lifted the solvency ratio from 20.99% to 27.01% in a single year?
Part of the answer lies in a long-held Allan Gray-linked insurance policy that the scheme disposed of in 2025.
The disposal generated a realised investment gain of R79.5m, which formed part of investment income and contributed to the year’s surplus.
Its biggest impact, however, was on the balance sheet.
Over several years, the Allan Gray investment had accumulated substantial unrealised gains. Selling the investment converted those gains into realised gains. Under Regulation 29 of the MSA, unrealised gains are excluded when statutory solvency is calculated, while realised gains form part of accumulated funds.
Henrie Nieuwoudt, Medihelp’s head of finance, says the disposal resulted in approximately R201.2m in previously unrealised gains becoming realised for solvency purposes. Those gains did not form part of the 2025 surplus because they related to prior years. Instead, they increased the accumulated funds used to calculate the scheme’s statutory solvency ratio.
Together with the R79.5m realised investment gain recognised in the current year’s results, the disposal unlocked total realised gains of approximately R280.8m.
The transaction therefore affected the financial statements in two ways.
It added R79.5m to the scheme’s reported surplus for 2025.
It also allowed approximately R201.2m in gains accumulated over previous years to strengthen the reserves used in the statutory solvency calculation.
Back above the line
Returning above the statutory solvency requirement marks an important milestone for the scheme.
Regulation 29 of the MSA requires medical schemes to maintain accumulated funds equal to at least 25% of annual gross contributions. Falling below that level does not mean a scheme cannot pay claims, but it does reduce the financial buffer available to absorb future shocks and usually requires closer regulatory oversight.
For Vala, restoring that buffer is about more than meeting a regulatory requirement.
“Our responsibility extends beyond maintaining strong reserves. It includes ensuring that healthcare remains accessible, affordable, and sustainable for the people who place their trust in us. The recovery of our solvency ratio shows that these objectives can be achieved together.”
Although the Allan Gray disposal materially strengthened the statutory solvency calculation, the financial statements suggest the recovery was already under way before that transaction.
Like every open medical scheme, Medihelp continues to operate in an environment of rising healthcare costs, medical inflation, and growing pressure on household affordability. Maintaining a healthy claims ratio while keeping contributions competitive will remain central to its long-term sustainability.
Membership trends will also remain closely watched. The scheme has made attracting younger members a strategic priority because younger, healthier members strengthen the risk pool and support future reserve growth.
The 2025 results suggest the recovery plan has achieved its immediate objective.
The balance sheet has recovered. The challenge now is to ensure the business continues to perform as strongly as the numbers suggest it can.
