Best’s News & Research Service - July 09, 2013 04:12 PM (EDT)
A.M. Best Upgrades Issuer Credit Rating of Dental Care Plus, Inc.
OLDWICK, N.J. //BestWire// - A.M. Best Co. has upgraded the issuer credit rating (ICR) to “bb+” from “bb” and affirmed the financial strength rating of B (Fair) of Dental Care Plus, Inc. (DCP) (Cincinnati, OH). The outlook for both ratings is positive.
The ICR upgrade reflects DCP’s positive operating performance and improved capitalization. DCP reported favorable underwriting net income in 2012, reflecting the company’s highest historical operating performance. Risk-adjusted capital scores improved noticeably in 2012 as a result of favorable earnings and moderate premium revenue increases over the last two years. Furthermore, DCP’s capitalization also improved in 2012, due to the significant amount of accreted earnings and a capital contribution of $300,000.
Offsetting these positive rating factors is the highly competitive business environment in which DCP operates, where both local and national multiline insurers vie for the profitable dental business. DCP’s business is concentrated in Ohio. However, the company has made strides to improve the quality of its membership mix and to increase market penetration in the surrounding states of Indiana and Kentucky, where it holds operating licenses. Efforts to diversify product designs and to strengthen its information and technology infrastructure are also well on the way. DCP is hedging its exposure to small group membership depletion by developing individual dental products and entering into relationships with other like-minded provider systems. DCP also has lent its expertise to various organizations instrumental in the formation of policies for health exchanges, which forms the basis for the new health care reform business environment.
Key rating drivers that could lead to positive rating actions for DCP include continued favorable trends in revenues and earnings, capital growth and improvement in the loss ratio. Key factors that could lead to negative rating actions include loss of membership, unfavorable operating performance or weakened risk-adjusted capital.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.