A.M. Best Affirms Credit Ratings of Delta Dental of Minnesota and Its Affiliate

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” of Delta Dental of Minnesota (DDMN) (Minneapolis, MN) and its affiliate, Delta Dental of Nebraska (DDNE) (Omaha, NE). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect strong levels of risk-adjusted capitalization maintained at each dental plan, a favorable trend of revenue growth and DDMN’s leading market position. DDMN and DDNE each manage solid risk-adjusted capital levels for their insurance and investment risks derived from each company’s ability to generate favorable net earnings. On a consolidated basis, revenue has trended favorably, driven by strong membership retention and rate increases. Furthermore, DDMN’s strong brand position within Minnesota’s dental insurance market reflects its successful business retention strategies, large network of participating providers, competitive pricing and reputation for excellent customer service.

Offsetting rating factors include a recent decline in operating earnings as a result of high utilization in most of their markets. Earnings are projected to continue a negative trend in the near to medium term as selling, general and administrative costs are expected to weigh heavily against their growing revenue base. Each respective dental plan also operates in a highly competitive dental market, particularly among small employer groups in metropolitan areas, and pricing discipline may suppress profit margins. Furthermore, DDMN and DDNE continue to operate in a single line of business, exposing the companies to geographic concentration risk.

A.M. Best deviated from its “Rating Members of Insurance Groups” criteria report because full rating enhancement was afforded to DDNE despite the lack of ownership between DDMN and DDNE. However, DDMN provides DDNE with operational and distribution support, and common management exists between the two companies. As such, A.M. Best expects that DDMN’s board of directors would act to support both entities with the group.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. 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.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best

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Wayne Kaminiski, +1 908-439-2200, ext. 5061

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