AM Best Upgrades Issuer Credit Rating of Dentegra Seguros Dentales, SA

MEXICO–(BUSINESS WIRE)–AM Best upgraded the issuer’s long-term credit rating (long-term ICR) from “a” (Excellent) to “a+” (Excellent) and confirmed the financial strength rating (FSR) of A ( Excellent) and the Mexican National Scale (NSR) rating of “aaa.MX” (Exceptional) from Dentegra Seguros Dentales, SA (DSD) (Mexico). The outlook for the long-term ICR has been revised from positive to stable, while the outlook for the FSR and NSR is stable.

These credit rating (rating) actions are consistent with those of DSD’s subsidiaries within the Dentegra Group, Inc., and reflect the strength of the group’s balance sheet, which AM Best assesses as very strong, as well as its strong performance operational, its neutral business profile and appropriate management of business risks.

The ratings acknowledge DSD’s affiliation with its parent company, Delta Dental of California (DDC), which is part of the Delta Dental Association of Companies of Dentegra Group, Inc., one of the leading US dental insurers, which provides synergies and operational efficiencies at its Mexican subsidiary. DSD rating confirmations reflect the organization’s highest level of risk-adjusted capital on a consolidated basis, a strong operational performance rating, and continued market penetration through numerous US state-level exchanges and dental coverage for beneficiaries of Medicaid, among other factors, as evidenced by its FSR of A (Excellent) and long-term ICR of “a+” (Excellent).

The rating also reflects DSD’s highest risk-adjusted capitalization as measured by Best’s capital adequacy ratio (BCAR), a conservative investment strategy and strong underwriting practices. DSD’s positive rating factors are offset by the company’s relatively small size within the Mexican insurance industry and its focus on two products, dental insurance and vision insurance.

DSD started operations in Mexico in 2007 and successfully implemented its growth strategy to break even in five years. The company continued to be ranked as the market leader in 2021, holding over 65% of the dental insurance market. DSD operates through a network of independent agents, local brokers and other insurance companies to complement its medical expense plans. The company maintains business relationships with over 4,000 dentists across Mexico.

DSD is sensitive to underwriting risk as it retains 100% of its premiums. However, the company demonstrated strong underwriting practices, which translated into positive underwriting performance and positive bottom line results. Thanks to effective risk selection, DSD reported lower than expected claims in 2021 despite an increase in the number of people returning to the dentist, as the majority of the population had been vaccinated and quarantine measures began to be lifted. Administration costs increased in 2021 due to a non-recurring expense, which is part of the adjustments DSD has made to its cost structure, which should result in cost savings and efficiencies, to maintain premium adequacy levels as they continue to grow. The company’s investment policies are conservative and in line with local and group guidelines and ensure a steady stream of income to support its positive operating results. Additionally, the company benefits from its integration into Dentegra Group, Inc., gaining operational leverage through common ERM systems, procedures and practices.

AM Best expects DSD to maintain adequate capitalization levels, supported by good underwriting practices and reinvestment of earnings.

If negative rating actions are taken on Dentegra Group, Inc.’s major operating subsidiaries, due to a downward trend in risk-adjusted capitalization, DSD’s ratings are likely to move in parallel. Negative rating actions could also take place if the group experiences deteriorating operating results driven by sustained negative premium growth or sustained lower profitability, and DSD’s ratings would reflect these actions.

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