S&P Assns 'BBB-' Rtg to Penn Dntl Srvc and Rel Units.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 21, 1999

Standard & Poor's today assigned its triple-'B'-minus counterparty credit and financial strength ratings to Pennsylvania Dental Service Corporation (d/b/a Delta Dental of Pennsylvania), a dental benefits company based in Mechanicsburg, PA and a member of the Delta Dental Plans Association.

These ratings were also assigned to Pennsylvania Dental Service Corp.'s affiliates, Delta Dental of New York, Delta Dental of Delaware Inc., Delta Dental of West Virginia, and Delta Dental of District of Columbia. The outlook is stable.

Major Ratings Factors:

-- Delta Dental of Pennsylvania (DDP) has a market share estimated at 17% of the dental insurance market in Pennsylvania, which is considered good. Its market share has shown steady growth in the past fifteen years.

-- Together with its affiliates in New York, Delaware, West Virginia, and the District of Columbia, DDP is diversified geographically. DDP also holds the Delta Dental license and markets its products in Maryland. Its dental insurance market share in the adjacent states varies from approximately 3% to 11%. As a member of the Delta Dental Plans Association, the group also benefits from the Association's nationwide networks and interplan agreements governing national programs.

-- DDP has a single cost-plus customer which represents approximately 18% of total 1998 revenue.

-- DDP's Standard & Poor's capital adequacy ratio of 102% is considered to be good, but is only slightly above marginal levels. Financial flexibility is enhanced by a strong relationship with Delta Dental Plan of California (DDPCA), the largest member of the Delta Dental Plans Association (Financial strength rating single-'A'-plus).

-- DDPCA has also provided explicit financial support for DDP. Strengthening the business position of DDP and its affiliates is considered to be strategically important to DDPCA.

-- Earnings are considered relatively weak for the rating, with a Standard and Poor's earnings adequacy ratio of 0.8, which is considered marginal. Relatively low earnings levels are partly offset by low administrative expenses and insurance risks which are less volatile than medical insurance.

-- Investments are considered conservative.

-- Liquidity is considered good, with a liquidity ratio of 114% in the Standard & Poor's model.

-- The ratings on DDP's affiliates, Delta Dental of New York, Delta Dental of Delaware Inc., Delta Dental of West Virginia, and Delta Dental of District of Columbia, are based on a guarantee by DDP.

Pennsylvania Dental Service Corp., Delta Dental of New York, Delta Dental of Delaware Inc., Delta Dental of West Virginia, and Delta Dental of District of Columbia are Security Circle insurers, which means that they voluntarily underwent Standard & Poor's most comprehensive analysis and were assigned ratings in one of the top four categories for financial security.

OUTLOOK: STABLE

Although competition from for-profit dental insurance and managed dental care carriers is expected to increase in the states in which DDP and its affiliates operate, the company's competitive advantages will allow it to strongly grow its position and market share in 2000 and 2001. Earnings are expected to gradually improve but be relatively weak for the next two years. Consolidated earnings for 1999 are expected to be approximately $0.5 million. Standard & Poor's expects consolidated earnings in 2000 to be in the range of $0.5 million to $1.0 million. The Standard and Poor's capital adequacy ratio for the consolidated group is expected to remain in the range considered good (100%-124%).

--CreditWire