A.M. Best Affirms Ratings of Sooner Insurance Company

OLDWICK, N.J--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Sooner Insurance Company (Burlington, VT). The outlook for both ratings is stable.

The ratings are based on Sooner’s excellent capitalization, history of profitable operating results 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 is Sooner’s exposure to large losses due to the high limits offered on its policies and the resulting significant dependence on reinsurance protection.

The captive has a history of strong underwriting results and operating returns. Sooner’s loss experience has remained favorable, due in part to ConocoPhillips’ strong loss control programs. ConocoPhillips’ corporate insurance conducts periodic reviews of its potential loss exposures through an external specialist in industrial risks. Based on this analysis, a single occurrence could result in a large loss that approaches Sooner’s treaty limits.

Nonetheless, Sooner has the capital to fund claims in the event of a reinsurance recovery problem, and it does participate in the U.S. federal program for terrorism coverage, the Terrorism Risk Insurance Program Reauthorization Act of 2007. Although the majority of Sooner’s capital is loaned to its parent, there is limited counterparty risk due to the affiliation. Additionally, ConocoPhillips has a strong balance sheet, a history of favorable earnings and is required to fund annually the loan from Sooner.

A.M. Best remains the leading rating agency of captive insurers rating a wide variety of more than 200 captives in the United States and throughout the world.

For current Best’s Credit Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; and “A.M. Best’s Rating Methodology for Captive Insurance Companies.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Nick Dranchak, 908-439-2200, ext. 5629
Financial Analyst
nick.dranchak@ambest.com
or
Steven Chirico, CPA, 908-439-2200, ext. 5087
Assistant Vice President
steven.chirico@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Source: A.M. Best Co.