Best’s News & Research Service - June 30, 2020 01:58 PM (EDT)
AM Best Affirms Credit Ratings of Dentegra Seguros Dentales, S.A.
- June 30, 2020 01:58 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, Inc. (see press release dated June 30, 2020), 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 Mexico 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 U.S. 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 2019, 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 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. In 2019, profitability continued to strengthen, as reflected by an 18.3% return on equity. DSD achieved premium sufficiency in 2019 through successful adjustments in management and acquisition expenses, coupled with a portfolio de-risking that improved the company’s loss ratio. 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 Dentegra Group, Inc., gaining operational leverage through common systems, procedures and ERM practices.
As of April 2020, Dentegra has been able to achieve its projected growth, despite the challenges posted by the COVID-19 pandemic, while maintaining stable levels of premium sufficiency.
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 a trend of declining risk-adjusted capitalization, decreasing membership and a deterioration in operating results.
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 June 11, 2020)
The following applied criteria supplemented the analysis of the ultimate rating unit:
- Understanding BCAR for U.S. and Canadian Life/Health Insurers (May 28, 2020)
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 Guide to Best’s Credit Ratings.
- Previous Rating Date: May 22, 2019
- Date Range of Financial Data Used: Dec. 31, 2014-April 30, 2020
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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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.