Oldwick, New Jersey – October 23, 2020 – AM Best has assigned a Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of “a-” to Coefficient Insurance Company (headquartered in South San Francisco, CA) (Coefficient). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Coefficient’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. Coefficient is a newly formed company that is wholly owned by Verily Life Sciences LLC (Verily). Verily is majority owned and consolidated by Alphabet, Inc. (Alphabet). Swiss Re Corporate Solutions Ltd (Swiss Re) has entered into a definitive agreement to take a minority interest in Coefficient, subject to regulatory approval and the satisfaction of certain customary closing conditions. The ratings also consider the company’s strategic importance to and the support it receives from Verily and Alphabet, and is anticipated to receive from its expected minority shareholder, Swiss Re.
The primary product focus of the organization will be in the stop-loss insurance market, where Coefficient expects to leverage the innovative capabilities of Verily and grow its Precision Risk stop-loss product in the self-funded health insurance market segment. Precision Risk assigns members of a group into one of 22 deductibles with a wide range in attachment points. The partnership with Swiss Re will bring established capabilities to Coefficient, and AM Best expects this relationship to foster strength in distribution and bring innovative solutions to the broad national market. The team assembled to manage Coefficient is deeply experienced with prior leadership roles and strong knowledge of the health care and health insurance landscape. They also have brought in experienced service support to administer and aid in executing upon their plan to grow and expand group stop-loss business for companies with self-funded health insurance employer plans.
As Coefficient increases sales volume, AM Best expects Coefficient’s risk-adjusted capital levels to decline with premium expansion, and Verily is expected to explicitly support this growth as needed with capital to maintain Coefficient’s assessed risk-adjusted capital level of strong.
As a startup company, Coefficient is expected to face challenges from market pressure and barriers may prevent expansion. In addition to the economic challenges and social constraints during the pandemic, insurers may be faced with regulatory pressure, difficulty achieving market acceptance and changing demographics, affecting market behaviors. AM Best will monitor Coefficient’s ability to adapt and respond to any of these changes and their ability to respond without operational or financial disruption.
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