AM Best Affirms Credit Ratings of Dentegra Seguros Dentales, S.A.

AM Best has affirmed the Financial Strength Rating of A
(Excellent), the Long-Term Issuer Credit Rating of “a” and the Mexico
National Scale Rating of “aaa.MX” of Dentegra Seguros Dentales,
S.A. (DSD) (Mexico). The outlook of these Credit Ratings (ratings)
is stable.

The rating affirmations are in tandem with those of DSD’s affiliates
within the Dentegra group of companies (see press
release dated May 22, 2019), and reflect the group’s balance sheet
strength, which AM Best categorizes as very strong, as well as its
strong operating performance, neutral business profile and appropriate
enterprise risk management (ERM).

The rating affirmations also reflect DSD’s risk-adjusted capitalization
being at the strongest level, as measured by Best’s Capital Adequacy
Ratio (BCAR), conservative investment strategy and strong underwriting
practices. In addition, the ratings recognize DSD’s affiliation to its
parent, Delta Dental of California (DDC), part of the Dentegra Group,
Inc. association of Delta Dental companies, a leading U.S. dental
insurer, which provides synergies and operating efficiencies to its
Mexican subsidiary. DDC’s rating affirmations reflect the organization’s
strongest level of risk-adjusted capital on a consolidated basis, strong
operating performance assessment, and continued market penetration
through numerous state exchanges and dental coverage to Medicaid
recipients among other factors, as demonstrated by its FSR of A
(Excellent) and Long-Term ICR of “a”.

Offsetting DSD’s positive rating factors are the company’s relatively
small size within Mexico’s insurance industry and its concentration in
two products: dental and vision insurance. The stable outlook for DSD’s
ratings reflects the same outlook on DDC’s ratings.

DSD initiated operations in Mexico in 2007 and successfully implemented
its growth strategy to achieve its break-even point within five years.
The company underwrites dental insurance, and in 2018, continued to be
ranked as the market leader in this line of business. DSD operates
through a network of independent agents, local brokers and other
insurance companies as a complement to their medical expense plans. The
company holds commercial relationships with more than 3,800 dentists in
more than 257 cities in Mexico.

DSD’s risk-adjusted capitalization is at strongest level, as measured by
BCAR. The Mexico subsidiary is susceptible to underwriting risk as it
retains 100% of its premiums. However, the company has demonstrated
strong underwriting practices, and these have resulted in positive
technical performance and positive bottom-line results. In 2018,
profitability remained solid, as reflected by an 8.2% return on equity.
The company’s investment policies are conservative and in line with
local and group guidelines and provide a steady flow of revenues to back
its positive operating results. Moreover, the company benefits from
being integrated into the group, gaining operational leverage through
common systems, procedures and ERM practices.

AM Best expects DSD to maintain adequate capitalization levels supported
by good underwriting practices and reinvestment of profits. A positive
rating action could occur if the group experiences improvement in
balance sheet metrics. Factors that could lead to negative rating
actions include decreasing membership and a deterioration in operating
results that leads to a significant weakening of risk-adjusted capital.

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 Understanding
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 rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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