AMSTERDAM--(BUSINESS WIRE)--AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Stonefort Insurance S.A. (Stonefort Insurance) (Luxembourg). The outlook assigned to these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn these ratings as the company has requested to no longer participate in AM Best’s interactive rating process, following the company board’s recent decision to place Stonefort Insurance into run-off.
The ratings reflect Stonefort Insurance’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The ratings also consider, in the form of rating lift, AM Best’s expectation that the Stonefort group will provide financial support to the company during the run-off period, if needed. In addition, Stonefort’s run-off business is protected by reinsurance from sister company, Stonefort Reinsurance S.A.
Stonefort Insurance’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the company’s risk-adjusted capitalisation to be maintained at the strongest level throughout the entire run-off period. The company benefits from a liquid investment portfolio and has a history of prudent reserving.
Stonefort Insurance’s marginal operating performance assessment is underpinned by an average return-on-equity ratio of -11.7% and an average combined ratio of 122% for the five-year period from 2018 to 2022, as calculated by AM Best. In 2022, the company reported a net loss of EUR 12.8 million (2021: EUR 0.5 million profit). Modest prospective operating losses are also expected in the run-off period.
Stonefort Insurance’s limited business profile assessment is mainly supported by the company’s run-off status. The company has in place a well-defined run-off strategy with clear risk appetite targets and objectives. At year-end 2022, the company’s book of business was diversified by geography and product, with a product offering characterised by medium to high-risk products, including fire, commercial property, surety and other risks.
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