AM Best Affirms Credit Ratings of Sooner Insurance Company
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Insights
The affirmation of Sooner Insurance Company's Financial Strength Rating and Long-Term Issuer Credit Rating at 'A' and 'a+' respectively by AM Best is indicative of the insurer's robust financial health and stability. This is critical information for investors and stakeholders, as these ratings are often used as benchmarks for assessing the risk associated with insurance companies. The stable outlook suggests that Sooner is expected to maintain this level of financial security in the foreseeable future.
From a financial analysis perspective, Sooner's strong balance sheet is bolstered by superior risk-adjusted capitalization, a key metric for evaluating an insurer's ability to uphold its policyholder obligations. The BCAR (Best's Capital Adequacy Ratio) at the strongest level is a testament to this. Additionally, the favorable loss reserve development and low underwriting leverage contribute to financial resilience, signaling a lower risk of unexpected financial strain from claims.
The strategic loan arrangement with ConocoPhillips, its parent company, is noteworthy. This inter-company loan is considered low risk due to the strong financial position of ConocoPhillips and enhances Sooner's capital position. This symbiotic relationship underscores the importance of intra-group financial support mechanisms and their impact on an insurer's creditworthiness.
The role of Sooner Insurance Company as a primary captive insurer for ConocoPhillips is central to the latter's enterprise risk management (ERM) strategy. Captive insurance is a form of self-insurance where the insurer is owned by the insured. In this case, Sooner's role in ConocoPhillips's ERM showcases how large corporations integrate risk management into their business models to efficiently handle potential large losses.
Sooner's focus on property damage and excess liability coverage for ConocoPhillips indicates a tailored approach to risk mitigation, which is essential for companies with extensive global operations. The continuous identification and management of various risks, including industrial risks, through specialized processes, reflect a mature ERM framework that is crucial for maintaining operational stability and mitigating financial volatility.
AM Best's recognition of Sooner's strong operating performance, with return metrics outperforming the industry composite, provides valuable insights into the company's comparative market position. Outperforming the industry composite is a strong indicator of operational efficiency and profitability, which could influence investor perception and the company's attractiveness in the insurance market.
The mention of Sooner's sustained track record of favorable loss experience, largely attributed to ConocoPhillips's strong risk management programs, is a testament to the effectiveness of proactive risk management. It highlights the potential for long-term sustainability and profitability, which can be a key differentiator in the competitive insurance landscape.
The ratings reflect Sooner’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 (ERM).
Sooner’s balance sheet strength is underpinned by its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), its generally favorable loss reserve development and low underwriting leverage. Sooner’s most significant asset is a loan back to its ultimate parent, ConocoPhillips [NYSE: COP]. The arrangement provides Sooner with capital and has a relatively low risk due to the parent/subsidiary affiliation, as well as ConocoPhillips’s strong balance sheet and history of positive earnings.
Sooner has a sustained track record of strong operating performance, driven by solid underwriting profits, with most return metrics outperforming the industry composite. The company’s loss experience has been largely favorable for more than a decade due in large part to ConocoPhillips’s strong risk management programs. As a core component in ConocoPhillips’s ERM program, the captive arrangement affords the corporation flexibility to efficiently and productively manage potential large losses.
Sooner’s neutral business profile assessment reflects its position as the primary captive insurer for its ultimate parent. Sooner’s underwriting risks mainly provides property damage and excess liability coverage to ConocoPhillips and its global subsidiaries and joint ventures.
Sooner’s ERM demonstrates a culture of risk awareness and a framework to identify and manage various types of risks continually, including periodic reviews of its potential loss exposures through a specialist within industrial risks, a process AM Best views as very appropriate for the company’s risk profile. The ratings also reflect the implicit and explicit support of ConocoPhillips and the strategic role the captive plays in its parent’s ERM program.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in
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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Kourtnie Beckwith
Senior Financial Analyst
+1 908 882 1649
kourtnie.beckwith@ambest.com
Daniel Teclaw
Director
+1 908 882 2390
dan.teclaw@ambest.com
Christopher Sharkey
Associate Director, Public Relations
+1 908 882 2310
christopher.sharkey@ambest.com
Al Slavin
Senior Public Relations Specialist
+1 908 882 2318
al.slavin@ambest.com
Source: AM Best
FAQ
What are the Financial Strength and Long-Term Issuer Credit Ratings of Sooner Insurance Company?
What factors contribute to Sooner's balance sheet strength?
What is Sooner Insurance Company's most significant asset?
What type of coverage does Sooner provide to ConocoPhillips and its subsidiaries?
How does Sooner's ERM program manage risks?
