A.M. Best Upgrades Delta Dental of Iowa.

OLDWICK, N.J. -- A.M. Best Co. has upgraded the financial strength rating to A- (Excellent) from B++ (Very Good) of Delta Dental of Iowa (DDIA) (Ankeny, IA). The rating outlook is stable.

This rating action reflects DDIA's favorable operating performance, strong capital position and leading market position within Iowa. Partially offsetting these factors are DDIA's limited health care product portfolio and its reliance on other Delta Dental member companies and outside vendors for key support functions.

DDIA has reported favorable earnings over the past few years, primarily driven by the risk market, which is more than one quarter of its book of business. DDIA continues to improve its profitability by consistent growth in its overall membership, along with a declining dental expense ratio. Capital has more than doubled over the last five years due to operating results. A.M. Best does expect the growth in earnings and capital to stabilize as the company prices closer to trend. A.M. Best believes the support of a strong network gives DDIA a substantial competitive advantage in accessing dental providers and ultimately controlling dental costs, which allows DDIA to maintain a leading market share in its service area.

DDIA's operational infrastructure utilizes strategic partnerships which, to date, have successfully controlled costs. However, the company is exposed to the potential of future contract negotiations, which could have a significant impact on operational costs. A.M. Best believes that DDIA's limited health care product portfolio may create the opportunity for increased competition from a multi-line carrier and may put pressure on future growth in large group and administrative services contract products.

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