AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a+” (Excellent) from “a” (Excellent) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Mexico National Scale Rating (NSR) of “aaa.MX” (Exceptional) of Dentegra Seguros Dentales, S.A. (DSD) (Mexico). The outlook of the Long-Term ICR have been revised to stable from positive, while the outlook of the FSR and NSR is stable.
These Credit Rating (rating) actions are in tandem with those of DSD’s affiliates within the Dentegra Group, Inc., and reflect the group’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The ratings recognize DSD’s affiliation to its parent, Delta Dental of California (DDC), part of Dentegra Group, Inc.’s association of Delta Dental companies, a leading U.S. dental insurer, which provides synergies and operating efficiencies to its Mexico subsidiary. DSD’s rating affirmations reflect the organization’s strongest level of risk-adjusted capital on a consolidated basis, strong operating performance assessment, and continued market penetration through numerous U.S. state-level exchanges and dental coverage to Medicaid recipients among other factors, as demonstrated by its FSR of A (Excellent) and Long-Term ICR of “a+” (Excellent).
The rating also reflect DSD’s risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), conservative investment strategy and strong underwriting practices. Offsetting DSD’s positive rating factors are the company’s relatively small size within Mexico’s insurance industry and its concentration in two products, dental and vision insurance.
DSD initiated operations in Mexico in 2007 and successfully implemented its growth strategy to achieve its break-even point within five years. The company continued to be ranked as the market leader during 2021, holding over 65% of the dental insurance market. DSD operates through a network of independent agents, local brokers and other insurance companies as a complement to its medical expense plans. The company holds commercial relationships with more than 4,000 dentists throughout Mexico.
DSD is susceptible to underwriting risk as it retains 100% of its premiums. However, the company has demonstrated strong underwriting practices, and these have resulted in positive technical performance and positive bottom-line results. Through effective risk selection, DSD reported lower-than-expected claims during 2021 despite the increase of people going back to dentist appointments, given that the majority of the population had been vaccinated and quarantine measures have started to lift. Administration costs increased in 2021 due to a non-recurring expense, which is part of the adjustments DSD has been making to its cost structure, which are expected to translate into savings and efficiencies in expenses, in order to maintain premium sufficiency levels as they continue to grow. The company’s investment policies are conservative and in line with local and group guidelines and provide a steady flow of revenues to back its positive operating results. Moreover, the company benefits from being integrated into Dentegra Group, Inc., gaining operational leverage through common systems, procedures and ERM practices.
AM Best expects DSD to maintain adequate capitalization levels, supported by good underwriting practices and reinvestment of profits.
If negative rating actions are taken on the main operating subsidiaries of Dentegra Group, Inc., because of a trend of declining risk-adjusted capitalization, DSD’s ratings likely would move in tandem. Negative rating actions also could take place if the group experiences a deterioration in operating results driven by sustained negative premium growth or sustained lower profitability, and DSD’s ratings would reflect those actions.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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