OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to Delta Dental of Kansas, Inc. (Wichita, KS). The outlook assigned to these Credit Rating (ratings) is stable.
The ratings reflect Delta Dental of Kansas’ balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
Delta Dental of Kansas has the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital growth has been the result of consistent favorable net income. Delta Dental of Kansas utilizes external resources to manage its investment portfolio. The investment portfolio is composed mostly of high quality fixed income assets, and cash and short-term investments. However, Delta Dental of Kansas has a slightly elevated exposure to equities, excluding investments in its subsidiary. The organization maintains two large investments, its equity interest in its subsidiary, Surency Life & Health Insurance Company, and its home office building. As a result of a favorable liquidity position, the organization does not maintain any sources of contingent liquidity.
Delta Dental of Kansas continues to report consistent premium growth and profitability. While the self-funded Administrative Service Contract business has reported a slow, steady reduction versus risk business, it still represents approximately 60% of the total revenue base. Revenues are driven primarily by group dental, but premium growth also has come from its individual and federal reinsurance business.
Delta Dental of Kansas is the market leader in Kansas with a dominant market share, as it offers the largest provider network in the state. However, the organization has product and geographic concentration, as its premium concentration is 100% dental product in Kansas. In addition, there is limited growth potential due to Delta Dental Plans Association’s franchise rules restricting business to within Kansas. In an effort to expand its lines of business, it created a wholly owned subsidiary, Surency Life & Health Insurance Company, to market other product lines, such as vision, FSA/HSA, and COBRA.
Delta Dental of Kansas does not have a formalized ERM program; however, it does have an established governance structure, risk culture and risk management controls in place. AM Best will continue to monitor the company’s ERM policies and practices for future improvements, and the maturity of its program.
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