OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Sooner Insurance Company (Sooner) (Burlington, VT). The outlook of these Credit Ratings (ratings) remains stable.
The rating affirmations reflect Sooner’s excellent risk-adjusted capitalization, history of consistent strong operating profitability driven by favorable underwriting results, conservative reserve levels and the position it holds as the captive insurer for its ultimate parent, ConocoPhillips [NYSE: COP]. The ratings also consider the level of commitment on the part of ConocoPhillips, whose management incorporates Sooner as a core element in its overall risk management program.
Partially offsetting these positive rating factors are Sooner’s significant reinsurance credit risk stemming from the large limits offered on its policies and the possible change in the captive’s net retentions that could happen year over year, as well as the limited diversification of business written, which is expected with a single-parent captive.
Sooner provides property damage, business interruption and general liability insurance to ConocoPhillips and its subsidiaries worldwide.
Sooner has a history of generally positive underwriting results and strong operating return measures. Over a 10-year period, the company’s loss experience has remained favorable due, in part, to ConocoPhillips’ strong risk management programs.
ConocoPhillips’ corporate insurance and health, safety and environmental groups conduct periodic reviews of their potential loss exposures through a specialist in industrial risks. Sooner may have high net retentions based upon the capacity of the overall insurance market from year to year. Nonetheless, Sooner has the capital to retain these risks, if net retentions were to increase. Although the majority of Sooner’s capital is loaned to ConocoPhillips, it is considered to have relatively low risk due to this affiliation, as well as the parent’s strong balance sheet and history of positive earnings.
Positive rating actions are unlikely at present. Downward rating pressure could be the result of material losses outside of management’s expectations, a significant and sustained decline in Sooner’s risk-adjusted capitalization, operating performance results that do not meet A.M. Best’s expectations, or a material shift in its risk profile that could potentially undermine the stability of its ratings. In addition, deterioration in ConocoPhillips’ credit profile could impact Sooner’s ratings.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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