A.M. Best Upgrades Ratings of Delta Dental Plan of Michigan, Inc. and Its Affiliates
A.M. Best Co. has upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) and issuer credit ratings (ICR) to “a” from “a-” of Delta Dental Plan of Michigan, Inc. (DDMI) (Okemos, MI) and its affiliates, Delta Dental Plan of Ohio, Inc. (DDOH) (Westerville, OH) and Delta Dental Plan of Indiana, Inc. (DDIN) (Indianapolis, IN). The outlook for the above ratings has been revised to stable from positive.
Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of DDMI’s stand-alone rated affiliate, Renaissance Life & Health Insurance Company of America (RLHICA) (Indianapolis, IN). The outlook for both ratings is stable.
The rating upgrades for DDMI and its affiliates reflect the significant market share in their respective states, continued growth in earnings and excellent level of risk-adjusted capitalization. These companies provide coverage to over four million members in the tri-state area. Over the past three years, DDMI has reported significantly improved financial results due to lower utilization levels, disciplined pricing and increased operational efficiency. Additionally, DDMI’s level of risk-adjusted capitalization continues to improve and is considered strong for its ratings. DDMI and several other Delta Dental plans established Renaissance Holding Company, which offers non-branded dental coverage through its subsidiary, RLHICA, which provides earnings diversification.
Partially offsetting these positive rating factors is A.M. Best’s concern with DDMI's ability to maintain its current enrollment level, which may be challenged should the economic weakness continue longer term.
Furthermore, asset allocation continues to be somewhat aggressive for a health company. Approximately 43% of invested assets are represented by common stock and more than 24% in real estate; however, a significant portion of the reported common stock is comprised of bond mutual funds—mitigating some of the risk—and the real estate investment is property-owned and occupied by DDMI.
The affirmation of the ratings for RLHICA acknowledge its important role in the development of new products and their distribution within Renaissance Health Service Corporation, its continued favorable earnings and strong level of capitalization as well as the support it receives from the Delta Dental plan owners of which DDMI is the majority owner. Offsetting rating factors include limited growth, potential increases in utilization and anticipated lower earnings.
A.M. Best believes DDMI, DDOH and DDIN are well-positioned for their current rating levels. Factors that could lead to negative rating actions include sizeable membership losses, a significant decline in the organization’s operating performance or a substantial deterioration in its level of risk-adjusted capitalization.
RLHICA is well-positioned for its current rating level. Factors that could lead to negative rating actions include significant deterioration in its operating performance, a decline in its risk-adjusted capital or any decrease in parental support.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Company, Inc.
Jeffrey Lane, 908-439-2200, ext. 5567
Managing Senior Financial Analyst
Sally Rosen, 908-439-2200, ext. 5280
Assistant Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations