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AM Best Revises Issuer Credit Rating Outlook to Positive for Delta Dental of California and Its Affiliates
[June 30, 2021]

AM Best Revises Issuer Credit Rating Outlook to Positive for Delta Dental of California and Its Affiliates


AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of "a" (Excellent) of Delta Dental of California (DDC) (San Francisco, CA (News - Alert)) and its affiliates, Delta Dental Insurance Company (Wilmington, DE), Delta Dental of Pennsylvania (DDP) (Mechanicsburg, PA) and Delta Dental of New York, Inc. (New York, NY). The outlook of the FSR is stable. These companies are collectively known as Delta Dental of California Group.

The ratings reflect Delta Dental of California Group's balance sheet strength assessment, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The positive Long-Term ICR outlook reflects the improvement in the group's balance fundamentals achieved through consistent capital growth and moderation of investment risks. AM Best expects that the balance sheet metrics will be maintained or improved in the near to medium term. Delta Dental of California Group has the strongest level of risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR). The organization reported a double-digit compound annual capital growth over a five-year period (2016-2019), primarily driven by earnings and unrealized gains. The group has maintained favorable overall liquidity and has access to additional sources of operating liquidity. Further contributing to the outlook revision is the decline in materiality of surplus notes to capitalize affiliate companies, as these entities have accumulated additional unrestricted capital and surplus over the recent years. In addition, an investment in Moda Partners, Inc. (Moda) made in 2018 by DDC, generated a large (unrealized) investment gain in 2020 as Moda's wholly owned subsidiary, Moda Health Plan, Inc, received Affordable Care Act risk corridor payments following the Supreme Court decision that reduced the risk that DDC would have to provide additional capital support.

Delta Dental of California Group has reported continued strong operating results. Though profitability fell in 2020, it remains strong and the group continues to outperform a set of chosen dental peers on return on equity, return on revenue, and combined ratio metrics over a five-year period. While premiums and profitability declined on a year-over-year basis, this was an intentional strategy by the group no to profit unduly from the COVID-19 pandemic. Absent refunds or payments made to customers and providers, premiums and profits would have been favorable compared with 2019. Premium growth is likely to resume in 2021, as the group added two million members in 2020, despite the decline in premiums in the period.



Dentegra Group, Inc. (Dentegra) is a non-profit Delaware holding company formed by DDC and DDP to oversee and coordinate the strategic activities of the entities and their affiliates. Dentegra is one of the largest dental plan administrators in the United States and offers dental plans that are provided on a fully insured and an employer self-funded basis. DDC is the largest member company of the Delta Dental Plans Association. Collectively, the companies of the Delta Dental of California Group provide coverage to approximately 36 million people. The companies are active participants in numerous state exchanges for small groups and individuals, as stand-alone dental policies or through medical partnerships. Additionally, dental coverage is provided to Medicaid recipients in a number of states, and Medicare Advantage dental benefits are offered through numerous partnerships with medical carriers. The group continues to expand through membership growth in numerous segments. DDC provides the group's affiliates with efficient technological capabilities to support growing operations in multiple lines of business.

The group's ERM program is supported by a well-established governance structure, with culture and risk management controls. In addition, it utilizes the three lines of defense strategy. The top risk scenarios are stress tested to ascertain if the capital position exceeds minimum levels, and whether solvency was maintained to meet management's business plan. The organization continues to invest in cyber security infrastructure and maintains cyber liability insurance coverage. AM Best will continue to monitor the organization's ERM practices as the group's operations evolve and new risks emerge.


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 Guide to 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 credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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