A.M. Best Affirms Ratings of Sooner Insurance Company

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

The ratings reflect Sooner’s excellent capitalization, history of consistent operating profitability driven by favorable underwriting results, conservative reserve levels 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 are Sooner’s significant reinsurance credit risk stemming from the large limits offered on its policies and the possible change in the captive’s net retentions that could happen year over year, as well as the limited diversification of business written, which is expected with a single parent captive.

Sooner provides property damage, business interruption and general liability insurance to ConocoPhillips and its subsidiaries worldwide.

Sooner has a history of generally positive underwriting results and strong operating return measures. Over a 10-year period, the company’s loss experience has remained favorable due, in part, to ConocoPhillips’ strong risk management programs.

ConocoPhillips’ corporate insurance and health, safety and environmental groups conduct periodic reviews of their potential loss exposures through a specialist in industrial risks. Sooner may have high net retentions based upon the capacity of the overall insurance market from year to year. Nonetheless, Sooner does have the capital to retain these risks, if net retentions were to increase. Although the majority of Sooner’s capital is loaned to ConocoPhillips, 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.

A.M. Best is unlikely to upgrade Sooner’s ratings over the long term due to its limited market profile. Key rating drivers that could lead to rating downgrades are a significant loss of surplus, consistent adverse reserve development or a significant change in the company’s risk profile. In addition, deterioration in the credit profile of ConocoPhillips could impact Sooner’s ratings.

A.M. 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.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Alternative Risk Transfer (ART)
• Catastrophe Analysis in A.M. Best Ratings
• Evaluating Non-Insurance Ultimate Parents
• Risk Management and the Rating Process for Insurance Companies
• Understanding BCAR for Property/Casualty Insurers

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.

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

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A.M. BestAlexander Sarfo, 908-439-2200, ext. 5779Senior Financial [e-mail] Chirico, CPA, 908-439-2200, ext. 5087Assistant Vice [e-mail] Sharkey, 908-439-2200, ext. 5159Manager, Public [e-mail] Peavy, 908-439-2200, ext. 5644Assistant Vice President, Public [e-mail]