Press Release - MAY 23, 2018
A.M. Best Affirms Credit Ratings of Dentegra Seguros Dentales, S.A.
FOR IMMEDIATE RELEASE
MEXICO CITY - MAY 23, 2018
The rating affirmations are in tandem with those of DSD’s affiliates within the Delta Dental of California Group (see press release dated May 23, 2018), and reflect the group’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The rating affirmations also reflect DSD’s risk-adjusted capitalization 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 ultimate parent, Delta Dental of California (DDC), a leading dental insurer in the United States, 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 increased market penetration 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 as a result of successfully implementing its growth strategy, achieved its break-even point within five years. The company underwrites dental insurance, and in 2017, 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 levels, as measured by BCAR. The Mexican 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 2017, profitability remained solid, as reflected by a 16.1% 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 enterprise risk management practices. The group has historically demonstrated its support to DSD in terms of capital injections in order to fund growth opportunities.
A.M. Best expects DSD to maintain adequate capitalization levels supported by good underwriting practices and reinvestment of profits into the subsidiary. Factors that could result in positive rating actions include profitable membership growth and continued improvement in risk-adjusted capitalization. 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 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.
Key insurance criteria reports utilized:
The following applied criteria supplemented the analysis of the ultimate rating unit:
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.
This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.
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