Best’s News & Research Service - May 22, 2019 04:33 PM (EDT)
AM Best Affirms Credit Ratings of Dentegra Seguros Dentales, S.A.
- May 22, 2019 04:33 PM (EDT)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating of A (Excellent), the Long-Term Issuer Credit Rating of “a” and the Mexico National Scale Rating of “aaa.MX” of Dentegra Seguros Dentales, S.A. (DSD) (Mexico). The outlook of these Credit Ratings (ratings) is stable.
The rating affirmations are in tandem with those of DSD’s affiliates within the Dentegra group of companies (see press release dated May 22, 2019), and reflect the group’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The rating affirmations 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. In addition, the ratings recognize DSD’s affiliation to its parent, Delta Dental of California (DDC), part of the Dentegra Group, Inc. association of Delta Dental companies, a leading U.S. dental insurer, which provides synergies and operating efficiencies to its Mexican subsidiary. DDC’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 state exchanges and dental coverage to Medicaid recipients among other factors, as demonstrated by its FSR of A (Excellent) and Long-Term ICR of “a”.
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. The stable outlook for DSD’s ratings reflects the same outlook on DDC’s ratings.
DSD initiated operations in Mexico in 2007 and successfully implemented its growth strategy to achieve its break-even point within five years. The company underwrites dental insurance, and in 2018, continued to be ranked as the market leader in this line of business. DSD operates through a network of independent agents, local brokers and other insurance companies as a complement to their medical expense plans. The company holds commercial relationships with more than 3,800 dentists in more than 257 cities in Mexico.
DSD’s risk-adjusted capitalization is at strongest level, as measured by BCAR. The Mexico subsidiary 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. In 2018, profitability remained solid, as reflected by an 8.2% return on equity. 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 the group, 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. A positive rating action could occur if the group experiences improvement in balance sheet metrics. Factors that could lead to negative rating actions include decreasing membership and a deterioration in operating results that leads to a significant weakening of risk-adjusted capital.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of AM 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.
Key insurance criteria reports utilized:
- AM Best’s Ratings On a National Scale (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Oct. 13, 2017)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version May 14, 2018)
The following applied criteria supplemented the analysis of the ultimate rating unit:
- Evaluating U.S. Surplus Notes (Oct. 13, 2017)
- Understanding BCAR for U.S. and Canadian Life/Health Insurers (May 9, 2019)
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Understanding Best’s Credit Ratings.
- Previous Rating Date: May 23, 2018
- Date Range of Financial Data Used: Dec. 31, 2013 - Dec. 31, 2018
This press release relates to rating(s) that have been published on AM Best’s website. For additional 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.
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