A.M. Best Assigns A Excellent Rating To Delta Dental Plan of Minnesota.

OLDWICK, N.J.--(BUSINESS WIRE)--Sept. 15, 1999--

A.M. Best Co. today assigned an A (Excellent) rating to Delta Dental Plan of Minnesota, Eagan, Minn.

The rating reflects the company's significant consistent growth, which has been achieved through increased product offerings, growing sales to large national groups and alliances with key medical carriers. A.M. Best also acknowledges the favorable capitalization and consistently strong profitability. Offsetting these strengths are the financial limitations the company faces as a nonprofit organization.

Delta Dental of Minnesota provides dental coverage to approximately 2.5 million people and has a 40% market share in a state in which approximately 54% of the population has dental coverage. Subscriber growth has increased more than 100% since 1995.

The business mix is very well diversified, with no enrollment concentration risk. The company is more diversified today than it was five years ago, when its seven largest accounts comprised 35% if its business. The company's largest group today represents only 6% of its total premium revenue.

The company has formed alliances with the two largest medical benefit providers in Minnesota--Blue Cross & Blue Shield of Minnesota and Allina Health Systems. The alliance with Blue Cross & Blue Shield of Minnesota has been in existence since 1993, and the Allina alliance since 1997. In 1999, the company also formed an alliance with the largest medical carrier in Iowa, Wellmark, known as Blue Cross and Blue Shield of Iowa.

Delta Dental of Minnesota develops and administers all the dental products sold by its affiliated medical companies. It is attractive to medical benefit providers because it provides a complete dental product portfolio and excellent service at lower administrative costs. The smallgroup market has exceeded expectations over the past several years, mainly because of increased sales through its alliances and the introduction of multi-year rate guarantees--usually two years--not offered by the competition. Some major competitors have moved their service centers out of Minnesota, and others are discontinuing or reducing their marketing efforts in the state.

The company's persistency rates historically have been around 98%. A.M. Best believes alliances with other medical providers, enrollment and premiums will continue to increase. Delta Dental of Minnesota's current strategies should position it for further expansion, both in and out of the state, as it continues to expand its customer base in the small and medium-size market, large national employer groups and public program business.

The company's statutory net worth increased over $11 million, or 32% since 1996, from both operation and investment earnings. It maintains adequate capitalization in support of its risk business.

The Department of Commerce regulates the company, which--as a Minnesota insurance corporation--is subject to the investment rules for insurance companies. The company's investment policies are more conservative that those imposed by the department.

Delta Dental of Minnesota has reported positive net gains for the past several years, achieving 2 to 3% net gain returns as a percentage of premium revenue. Both full-risk and administrative-service-only blocks are profitable. Due to significant data-processing enhancements, administration ratios have become very competitive and net gains have been generated consistently. Premium revenue has increased over 95%, or $158 million, since 1994. Overall revenue and enrollment are well ahead of target for 1999. A.M. Best believes that this trend should in the near-term.

Because of the company's not-for-profit status--which makes surplus enhancements reliant upon profitability--and its mono-line product portfolio, A.M. Best expects the company should grow and protect its market dominance in Minnesota and expand its service areas throughits subsidiaries and strategic affiliations. Its growth strategy is closely tied to the organization's restructuring, completed in mid-1997.

A.M. Best also assigned an A (Excellent) rating to Delta Dental Plan of Nebraska, Omaha. The company is an integral part of Delta Dental of Minnesota's business strategy, operates under common management, serves as an additional marketing and distribution arm in Nebraska and capitalizes on the brand identity and recognition of the Delta system.

A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.