AM Besthas affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a+" of Sooner Insurance Company (Sooner) (Colchester, VT). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Sooner's balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The balance sheet strength is underpinned by risk-adjusted capitalization at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR), generally favorable loss reserve development and low underwriting leverage. Although Sooner has a significant loan to its ultimate parent, ConocoPhillips [NYSE: COP], 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.
Sooner's operating performance has been consistently strong over the past 10 years, driven by solid underwriting profits, with most return metrics outperforming the industry composite and modest investment returns. The company's loss experience has remained favorable for over a decade. This is due in part to strong risk management programs at ConocoPhillips, whose management views Sooner as a core element in its overall corporate risk management program.
The company's business profile assessment reflects its position as the captive insurer for its ultimate parent. Sooner's underwriting risks consist largely of providing property damage and excess liability coverage to ConocoPhillips and its subsidiaries, including joint ventures, worldwide.
With regard to its ERM, ConocoPhillips' corporate insurance and health, safety and environmental groups have a culture of risk awareness and a framework to identify and manage various types of risks, such as periodic reviews of their potential loss exposures through a specialist in industrial risks, a process AM Best views as appropriate for its risk profile. The ratings also reflect the implicit support of ConocoPhillips and the critical role the captive plays in its ERM program.
AM 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.
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