Best’s News & Research Service - January 20, 2016 11:50 AM (EST)
A.M. Best Affirms Ratings of Delta Dental of Minnesota and Its Affiliate
- January 20, 2016 11:50 AM (EST)
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit ratings of “a” of Delta Dental of Minnesota (DDMN) (Minneapolis, MN) and Delta Dental of Nebraska (DDNE) (Omaha, NE). The outlook for all ratings is stable.
The ratings of Delta Dental of Minnesota (DDMN) and its affiliate, Delta Dental of Nebraska (DDNE), reflect strong levels of risk-adjusted capitalization maintained at each dental plan, favorable trend of revenue growth and DDMN”s leading market position. DDMN and DDNE each maintain solid risk-adjusted capital levels for their insurance and investment risks derived from each company’s ability to generate favorable net earnings over the long term. Furthermore, DDMN’s strong position within the dental insurance market in Minnesota is the result of successful business retention strategies with competitive pricing, its large network of participating providers, innovative product diversity, strong brand recognition and reputation for superior customer service.
Offsetting factors include a decline in earnings projected over the near to the medium term and market dynamics of operating in a highly competitive dental environment. Lower earnings at DDMN is expected to continue through the near to medium term as selling, general and administrative costs are expected to offset its growing revenue base. Also, each respective dental plan operates in a highly competitive dental market, particularly among small employer groups in metropolitan areas, and pricing challenges may suppress profit margins. Furthermore, DDMN and DDNE operate in a single line of business, exposing the companies to concentration risk.
A.M. Best deviated from its “Rating Members of Insurance Groups” criteria report because full rating enhancement was afforded to DDNE despite the lack of ownership between DDMN and DDNE. However, DDMN provides DDNE with operational and distribution support, and common management exists between the two companies. Therefore, A.M. Best expects that the Board of Directors would act to support both entities with 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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