A.M. Best Assigns Oregon Dental Service An A- -Excellent- Rating.

OLDWICK, N.J.--(BUSINESS WIRE)--March 23, 1999--A.M. Best today assigned an A- (Excellent) rating to Oregon Dental Service, Portland.

The rating reflects the company's strong presence in the Oregon dental insurance market, making it the largest provider in the state; favorable profitability; and good capitalization.

Offsetting these strengths are the company's high concentration of investment in equities securities; risk in the rapid expansion of ODS Health Plan, Inc., its for-profit affiliate and provider of medical insurance; limited penetration in the small-group market, despite the company's ample market share in the large-group market; and the challenges it faces as a mono-line company. ODS is the Delta Dental plan in Oregon. It was one of the founding members of the Delta Dental Plan Association and is a recognized leader of dental insurance in Oregon.

The company serves more than 530,000 members, making it the largest provider of dental benefits in the state. Its market share in Oregon has been increasing, and the company now has approximately 30% market share in a state where only 60% of the population has dental insurance coverage.

This market presence, along with its connection to the Delta Dental Plans Association, provides substantial competitive advantages in providing access to dental providers. This partnership gives the company the ability to develop and maintain professional and long-standing relationship with dental provider networks, which ultimately benefits the company and its members. ODS has reported operating gains over the past five years and has increased capital and surplus more than 285% since 1993.

The company maintains a high level of investments--over 44% of total assets--in equities. This leaves the company susceptible to capital fluctuations from the cyclical nature of the equity market. A.M. Best anticipates that the company will address this and bring the level of equity investments to a more reasonable level, in accordance with industry practice.

A.M. Best also affirmed the B+ (Very Good) rating of ODS Health Plan, which also is located in Portland. ODS Health Plan, has been providing medical insurance in Oregon since 1989. It was late entering the managed-care arena and a market predominately controlled by one company, whose market penetration is well over 50% and where 65% of the entire population in Oregon has some kind of medical insurance. ODS Health has experience extremely rapid growth in premiums; premiums have grown over 256% since 1993.

ODS Health has not consistently produced positive underwriting results; favorable earnings have been primarily generated from investment income. Should it require additional capital in the future, A.M. Best would expect that ODS, as an affiliate, would be looked to as a source of funding.

ODS is better known as a large-group provider. Approximately 47% of the company's members are retention contracts (300 plus groups). Small-group, or non-retention contracts (standard insured contracts), account for nearly 17% of their total membership. Close to 90% of the businesses in Oregon have under 100 employees.

The company will be challenged, since it operates as a mono-line company. Although the company offers various funding methods, its product portfolio is confined primarily to the dental-related products, all of which face strong competition from regional and national companies offering a more diversified product line.

ODS and ODS Health Plan are marketed together in Oregon as ODS Health Plans.

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.