A.M. Best Revises Outlook to Stable for Ratings of Oregon Dental Services and ODS Health Plan

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating (FSR) of B++ (Good) and issuer credit rating (ICR) of “bbb” of Oregon Dental Service (ODS). A.M. Best also has revised the outlook to stable from negative and affirmed the FSR of B+ (Good) and ICR of “bbb-” of ODS Health Plan, Inc. (ODSHP), a subsidiary of ODS.

“Understanding BCAR for Life and Health Insurers”

Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and ICR of “bbb” of Dentists Benefits Insurance Company (DBIC), the property/casualty subsidiary of ODSHP, and Northwest Dentists Insurance Company (NORDIC) (Bothell, WA), the property/casualty subsidiary of ODS. The outlook for these ratings is stable. All companies are domiciled in Portland, OR, unless otherwise specified.

The revised outlook reflects the significant improvement in ODS and ODSHP’s operating results and the stabilization of their risked-based capital levels. ODS and ODSHP’s operating results turned positive in 2010, after incurring losses in 2009. ODSHP incurred significant losses in 2009 as well as a high level of business growth, which were funded in part by internal and external capital sources. Due to ODSHP’s improved operating results and consistent premium base, its risked-based capital level has stabilized.

The rating affirmations of ODS reflects its strong market share, business diversification and improved operating results. ODS is the Delta Dental plan in Oregon, with approximately 50% of the dental insurance market in the state, which is far ahead of its competitors. ODS has successfully geographically expanded its membership base, as well as leverage its administrative capabilities to diversify its revenue stream through multiple lines of business.

The affirmation of the ratings for ODSHP recognizes its return to profitability, stabilization of its capital level and the continued support of ODS. In 2010, operating results at ODSHP turned positive after incurring significant losses in 2009. Capital and surplus at ODSHP has stabilized due to improved operating results. A.M. Best expects ODS to continue to provide capital support to ODSHP, if necessary.

The affirmation of DBIC’s ratings acknowledges its supportive capitalization driven by low underwriting leverage, favorable long-term operating performance and its leadership position providing professional liability coverage to Oregon dentists. Partially offsetting these positive rating factors are DBIC’s geographic and product line concentration, in addition to the recent increases in claim frequency and severity that have led to deteriorating underwriting results over the last three years.

The affirmation of NORDIC’s ratings reflects its solid capitalization, adequate liquidity and its dominant market position in providing dental liability insurance coverage to dentists in Washington.

Partially offsetting these positive rating factors is NORDIC’s less favorable underwriting performance primarily attributable to increased claim severity, the negative impact on surplus growth from its deteriorating operating performance and the significant geographical and product line concentration risks. A.M. Best expects efforts undertaken by both DBIC and NORDIC to stabilize their underwriting performance to avert further negative rating pressure.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Rating Health Insurance Companies”; “Rating Members of Insurance Groups”; “Understanding BCAR for Life and Health Insurers”; “Understanding BCAR for Property/Casualty Insurers”; and “Risk Management and the Rating Process for Insurance Companies.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.