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AM Best keeps Delta Dental Plan of Arkansas' A- FSR
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| Copyright: | M2 COMMUNICATIONS | | Source: | EquityBites | | Wordcount: | |
4 November 2009 - AM Best assigned Wednesday an A- (excellent) financial strength rating and an "a-" issuer credit rating on US insurer Delta Dental Plan of Arkansas Inc (DDAR).
The outlook is "stable".
The ratings reflect the demonstrated steady growth that DDAR has experienced in its fully insured membership over the last five years, the agency said.
The growth was accompanied by pricing discipline, which led to steady underwriting margins of 9%-10% in 2006-2007. However, underwriting gains declined during 2008, as DDAR implemented a strategy of margins moderation, AM Best noted.
Additionally, positive operating results have allowed the company to build up and maintain strong capitalisation.
The company's level of risk-based capitalisation exceeded 650% as of year-end 2008 and is considered more than adequate for its ratings, the rater added.
Offsetting factors include the fact that DDAR's subscriber base is heavily concentrated within a single very large self-funded group, which accounts for a large percentage of total subscribers and claims, in the agency's view.
AM Best acknowledges that DDAR has a long-standing relationship with this client.
However, AM Best remains concern that any significant changes in this contract may negatively affect DDAR's cost structure and lead to deteriorated financial results, the analysts elaborated.
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