The rating affirmations are in tandem with those of DSD’s affiliates within the
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,
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
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
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.
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