AM Best Affirms Credit Ratings of Stonefort Reinsurance S.A.

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of "a-" (Excellent) of Stonefort Reinsurance S.A. (Stonefort Reinsurance) (formerly known as Builders Reinsurance S.A.) (Luxembourg), a subsidiary of HOCHTIEF Aktiengesellschaft (HOCHTIEF), a large Germany-based construction company that is majority owned by ACS, Actividades de Construcción y Servicios, S.A. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Stonefort Reinsurance's balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

Stonefort Reinsurance's balance sheet strength is supported by risk-adjusted capitalisation at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). AM Best expects Stonefort Reinsurance's risk-adjusted capitalisation to remain at the strongest level supported by low underwriting leverage. The main offsetting factor in the balance sheet strength assessment is the significant investment allocation to bonds issued by its intermediate parent company, HOCHTIEF.

Stonefort Reinsurance has a track record of strong and stable operating performances, largely driven by robust underwriting results, as demonstrated by a five-year (2018-2022) weighted average combined ratio of 77.4%, as calculated by AM Best. Stonefort Reinsurance's prospective performance is subject to volatility, mainly due to the company's exposure to business associated with the cyclical U.S. construction market.

Stonefort Reinsurance's business profile assessment of limited reflects its geographically concentrated portfolio of casualty risks, which emanates from HOCHTIEF's construction operations in North America. Additionally, the company reinsures open-market business (approximately 28% of gross written premiums in 2022), including business emanating from its sister company, Stonefort Insurance S.A. (Stonefort Insurance). However, the weight of third-party business is expected to decrease going forward following the group's decision to put Stonefort Insurance in run off.

Stonefort Reinsurance's volume of business remained stable in 2022. Management expects moderate growth in 2023, followed by a drop in 2024, due to the expected reduction in third-party business.

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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