OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating (FSR) to C (Weak) from C- (Weak) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “ccc” (Weak) from “ccc-” (Weak) of Friday Health Plans of Colorado, Inc. (Friday Health Plans of Colorado ) (Alamosa, CO). The outlook for the FSR has been revised to stable from positive while the outlook for the Long-Term ICR is positive.
These Credit Ratings (ratings) reflect Friday Health Plans of Colorado’s balance sheet strength, which AM Best assesses as very weak, as well as its marginal operating performance, limited business profile and weak enterprise risk management.
The upgrade and the positive outlook of the Long-Term ICR reflect AM Best’s expectation of continued improvement in the company’s balance sheet strength assessment. While risk-adjusted capitalization was very weak for 2020, as measured by Best Capital Adequacy Ratio (BCAR), absolute capital and surplus levels increased to $15.9 million, up from $3.2 million in 2019. The improvement is primarily driven by capital support provided by Friday Health Plan of Colorado’s parent, Friday Health Plans, Inc. (Friday Health Plans), which completed a $50 million capital fundraising in 2020, and deployed $11 million in surplus notes and $7.5 million in equity to Friday Health Plans of Colorado. Furthermore, in 2020, Friday Health Plans of Colorado entered into a 50% quota share reinsurance agreement with AXA, providing capital relief. In March 2021, Friday Health Plans completed a second round of capital raising securing approximately $160 million in funding, which will be deployed to Friday Health Plans of Colorado and to new services areas in support of regulatory capital requirements and business growth.
Operating results continue to be depressed as Friday Health Plans of Colorado continues to expand. In 2020, underwriting results were negative, reflecting unfavorable experience from New Mexico Health Connection, a business that Friday Health Plans of Colorado assumed in 2020. AM Best expects operating results to continue to fluctuate as the company continues to grow its operations and implement changes. From a business profile perspective, Friday Health Plans of Colorado is mainly concentrated in the individual exchange business in certain areas in Colorado and in New Mexico, which limits its reach. However, the company is evaluating expansion into other state markets. Friday Health Plans of Colorado continues to refine its controls and risk management processes further to ensure that it has feasible capabilities for its business expansion.
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