AM Best Affirms Credit Ratings of Stellar Insurance, Ltd.

LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) of Stellar Insurance, Ltd. (Stellar) (Bermuda), an indirect wholly owned subsidiary of the Saudi Arabian Oil Company (SAOC). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Stellar’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

Stellar’s balance sheet strength is underpinned by its risk-adjusted capitalisation that is expected to remain comfortably at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by the company’s low underwriting leverage, earnings retention and comprehensive reinsurance programme. In December 2024, Stellar restructured its investment portfolio, with over 80% of the company’s invested assets converted into a promissory note from SAOC. While this investment strategy is common for captive companies, Stellar’s investments now are significantly more concentrated, albeit with a financially strong affiliated company. Stellar remains reliant on reinsurance to provide high gross underwriting limits. The credit risk associated with reinsurance is mitigated partially by Stellar’s use of a diversified panel of financially strong reinsurers.

Stellar has reported strong operating results over the past five years, mainly driven by robust underwriting profits in the absence of large losses. In 2023, the company experienced a net-net combined ratio of -21.4% (2022: 17.3%), as calculated by AM Best, with the company’s five-year (2019-2023) net-net combined ratio ranging between -21.4% and 35.9% (these metrics are calculated using a combination of IFRS 4- and IFRS 17-reported figures). The company’s return on equity stood at 13.9% in 2023, skewed by its relatively large capital base. AM Best expects the company’s performance in 2024 and prospectively to remain strong, albeit over the longer term subject to potential volatility due to the captive’s exposure to high severity, low frequency losses in its energy programme.

Stellar’s business profile assessment reflects the key role it plays in SAOC’s overall risk management framework. As a single-parent captive, Stellar’s purpose is to provide transfer solutions for risks emanating from SAOC and its affiliates’ operations. Stellar’s portfolio is concentrated by line of business, with the majority of premiums represented by energy onshore and offshore property risks, as well as by geography with approximately 84% of premiums associated with risks located in Saudi Arabia.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated 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 AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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