OLDWICK, NJ–(BUSINESS WIRE)–AM Best upgraded Delta Dental of Iowa’s financial strength rating from A (Excellent) to A- (Excellent) and issuer’s long-term credit rating to “a” (Excellent) from “a-” (Excellent) (DDIA) (Johnston, IA). The outlook for these Credit Ratings (ratings) is stable.
The ratings reflect DDIA’s balance sheet strength, which AM Best rates as the strongest, as well as its adequate operating performance, neutral business profile and appropriate management of business risks.
Driving the ratings improvement is DDIA’s diverse business profile. DDIA generates its premiums/income from multiple payers that include employer groups, including administrative services only, as well as individuals and Medicaid, which helps offset the organization’s focus on dental products in Iowa. Additionally, DDIA retains a significant share of the dental market in Iowa, bolstered by brand recognition as a member of the Delta Dental Plans Association.
DDIA maintains the highest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The risk of DDIA’s investment portfolio is moderately high, but the organization’s significant level of capitalization is considered sufficient to absorb the impact of adverse investment market conditions. The organization has demonstrated its ability to steadily increase its capital and its surpluses, thanks to consistently favorable net profits. Although underwriting metrics were positive, there was a modest level of volatility, which
partially offset by stable net investment income. Additionally, underwriting income increased significantly in 2020 and 2021, in part due to a declining claims trend resulting from the COVID-19 pandemic. However, AM Best expects subscription revenue to moderate in the short to medium term as usage patterns return to normal levels.
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