OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) and the issuer credit ratings (ICR) to “a” from “a-” of Delta Dental of California (DDC) (San Francisco, CA) and its affiliate, Delta Dental Insurance Company (DDIC) (Wilmington, DE). The outlook for each of these ratings was revised to stable from positive.
Concurrently, A.M. Best upgraded the FSR to A (Excellent) from B++ (Good) and the ICRs to “a” from “bbb” of Delta Dental of Pennsylvania (DDP) (Mechanicsburg, PA) and its affiliate, Delta Dental of New York (DDNY) (New York, NY). The outlook for each of these ratings remains stable.
DDC, DDP and DDIC, together with their affiliate companies and DDNY, form one of the country’s largest dental benefit systems, which is ultimately controlled by Dentegra Group, Inc. (Dentegra). Dentegra is a non-profit Delaware holding company formed by DDC and DDP to oversee and coordinate the strategic activities of both entities and their affiliates.
The rating actions for DDC, DDP, DDIC and DDNY reflect improved capitalization, an economic shift to a higher level of earnings and the execution of business expansion strategies. DDC is the largest member company of the Delta Dental Plans Association, a trade organization for Delta Dental member companies operating in all 50 states, the District of Columbia and Puerto Rico.
Collectively, the companies have reported growth trends in premium, capital and assets, as well as continued profitability over the past five years with each category attaining historical high levels in 2015. Improvement in capital was supported by a trend of stronger earnings over the past few years. These results have been achieved by the organization streamlining operations and making investments to modernize its information and technology infrastructure, which has improved efficiency, generated cost savings and raised market penetration in both insured and uninsured businesses. DDC has maintained strong earnings over the past several years, which have been accretive to capital and surplus and resulted in improved risk-adjusted capitalization.
Partially offsetting these strengths are the challenges in expanding to new geographies and the highly competitive business environment. Geographic expansion exposes the companies to the challenges from a lack of uniformity in statutory regulatory requirements, which require different product and rate filings. Furthermore, the companies are expanding distribution through new partnerships. However, geographic expansion allows the companies to offer a national platform with products such as its individual co-branded, preventive care dental health maintenance organization (HMO) design.
Complicating the strategy to improve their position is the strong competition from seasoned participants in the various markets. The organization competes with numerous companies that offer underwriting or claims payment/administration services. The competition ranges from the largest offering national, full line commercial insurance to the small local, single office, third party administrators providing claims payment services. Increased competition continues primarily in the mid-size to large group markets.
In addition to improved earnings and risk-adjusted capitalization at both DDP and DDNY, the rating actions also reflect the application of the criteria, “Rating Members of Insurance Groups” as full rating enhancement was afforded to DDP and DDNY from DDC.
A.M. Best deviated from its “Rating Members of Insurance Groups” criteria report because full rating enhancement was afforded to DDP and DDNY, despite DDC not having direct ownership of DDP or DDNY. However, DDC, DDP and DDNY share common systems, common management and a common mission. As such, A.M. Best expects that the boards of directors would act to support both entities within the group.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.
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