CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK - APRIL 03, 2019 12:22 PM (EDT)
AM Best has removed the under review with developing implications and affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bb” of Oregon Dental Service (ODS). The outlook assigned to the FSR is stable while the outlook assigned to the Long-Term ICR is positive. Concurrently, AM Best has removed from under review with developing implications and upgraded the FSR to B (Fair) from B- (Fair) and the Long-Term ICR to “bb” from “bb-” of Moda Health Plan, Inc. (Moda Health). The outlook assigned to these Credit Ratings (ratings) is stable. Both companies are domiciled in Portland, OR.
The ratings for ODS reflect its balance sheet strength, which AM Best categorizes as weak, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The revised outlook for ODS reflects the improvement in absolute capital at year-end 2018 and in its estimated Best’s Capital Adequacy Ratio (BCAR). In addition to the balance sheet strengthening for ODS, these rating actions reflect a 49.5% sale of ownership of its subsidiary Moda, Inc. (which was renamed Moda Partners, Inc.) to Delta Dental of California (DDC), effective Feb. 28, 2019. Like ODS, DDC is part of the Delta Dental Plan Association, one of the largest dental benefits providers in the United States; DDC’s affiliation with Dentegra Group, Inc. provides dental benefits to more than 36 million individuals in 15 states. The strategic partnership with DDC has reduced the financial leverage at the ODS organization and eliminated some borrowings. Furthermore, the transaction alleviates some of the pressure on ODS to provide capital support to Moda Health as AM Best expects that DDC will provide its share of financial support if needed.
The ratings for Moda Health reflect its balance sheet strength, which AM Best categorizes as weak, as well as its marginal operating performance, limited business profile, appropriate ERM and support of its owners.
The rating upgrades at Moda Health reflect the improvement in absolute capital at year-end 2018 and in its estimated BCAR. As a result of the transaction with DDC, there will be an improvement in the quality of the balance sheet in 2019. However, AM Best notes that Moda Health has issued both internal and external surplus notes, which comprise more than 50% of the company’s capital & surplus at year-end 2018.
The marginal operating performance assessment at Moda Health reflects poor historical underwriting results, as well as a large statutory net loss in excess of $200 million. This loss was reported as “Risk Corridor Reclassification” on Moda Health’s year-end 2018 statement filing stemming from the individual market losses from its participation in the Affordable Care Act and the federal government’s nonpayment of the risk corridor receivables. The risk corridor receivables had previously been non-admitted beginning in 2015 and were considered in prior rating actions. The year-end 2018 reclassification has no effect on absolute or risk-adjusted capital measures.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global rating agency and information provider with a unique focus on the insurance industry.