Best’s News & Research Service - September 08, 2023 01:45 PM (EDT)
AM Best Removes From Under Review With Negative Implications, and Downgrades Issuer Credit Rating of Dentegra Seguros Dentales,
- September 08, 2023 01:45 PM (EDT)
Mexico City //BestWire// - AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of B++ (Good), as well as downgraded the Long-Term Issuer Credit Rating to “bbb” (Good) from “bbb+” (Good) and the Mexico National Scale Rating to “aa.MX” (Superior) from “aa+.MX” (Superior) of Dentegra Seguros Dentales, S.A. (DSD) (Mexico). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect DSD’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
DSD’s ratings were downgraded and placed under review with negative implications in February 2023, following the announcement that Auna S.A.A. (Auna), a Peruvian health-focused company, had acquired 100% ownership of DSD. DSD is no longer affiliated with Delta Dental companies (Dentegra Group); consequently, it no longer benefits from the operational leverage through common systems, procedures and ERM practices, which translates into rating support from being a member of the group. The previous under review with negative implications status reflected the minimal information that AM Best had at the time regarding DSD’s new shareholders.
The current stable outlooks reflect AM Best’s expectations that the change in ownership will bring commercial opportunities to DSD, while allowing it to continue working under its established practices and guidelines, which have historically rendered positive bottom-line results and through the reinvestment of earnings strengthened its capital base.
The ratings of DSD are limited by the recent change in ownership, as there is still a certain degree of implementation risks that AM Best will monitor as the strategy of Auna unfolds. Auna (Peru, 1989) offers oncology treatments and other healthcare plans in Mexico, Peru and Colombia. The acquisition of DSD is part of Auna’s expansion strategy, adding dental and vision insurance to its products in Mexico.
DSD initiated operations in Mexico in 2007 and successfully implemented its growth strategy to achieve its break-even point within five years. The company continues to be ranked as a market leader, holding over 60% 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. These positive factors are offset by the company’s concentration in two products, dental and vision insurance and the niche nature of these markets.
DSD’s risk-adjusted capitalization stands at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company is susceptible to underwriting risk as it retains 100% of its premiums, followed by investment risks. DSD follows a conservative investment strategy, in line with local guidelines, which provides a steady flow of revenues.
Operating performance is considered adequate, given DSD’s track record of positive bottom-line results over the years. The company has demonstrated strong underwriting practices, and these have resulted in positive technical performance, further strengthen by investment income.
AM Best considers the company’s ERM assessment as appropriate for its risk appetite and as being strongly supported by its ERM infrastructure and practices, as well as the expertise from its management team.
Positive rating actions could take place if DSD is able to grow its capital base through the reinvestment of earnings, while maintaining its risk-adjusted capitalization at the strongest level. Negative rating actions could take place should the change in DSD’s ownership cause volatility in the company’s capital base or modify its underwriting tenets prompting a deterioration in operating performance.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Nov. 13, 2020), 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 June 15, 2023)
• Available Capital & Holding Company Analysis (Oct. 13, 2017)
• Evaluating Country Risk (Version May 4, 2023)
• Understanding Global BCAR (Version July 6, 2023)
• Scoring and Assessing Innovation (Version Feb. 27, 2023)
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, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best’s Credit Ratings.
• Previous Rating Date: Feb. 10, 2023
• Initial Rating Date: Dec. 10, 2015
• Date Range of Financial Data Used: Dec. 31, 2017-June 30, 2023
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