AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating 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 Construccion 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). Stonefort Reinsurance's retrocession programme was discontinued during the last renewal, which exposes the company's balance sheet to higher levels of volatility going forward. However, AM Best expects the company's risk-adjusted capitalisation to remain at the strongest level, supported by low underwriting leverage. The company's significant investment allocation to bonds issued by its intermediate parent company, HOCHTIEF, remains an offsetting factor.

Stonefort Reinsurance has a track record of strong and stable operating performance, largely driven by robust underwriting results, as demonstrated by a five-year (2019-2023) weighted average combined ratio of 79.4%, as calculated by AM Best. Stonefort Reinsurance's prospective performance continues to be subject to volatility, mainly due to the company's exposure to business associated with the cyclical U.S. construction market. The discontinuation of the company's retrocession programme further increases the potential for volatility in Stonefort Reinsurance's results.

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. In 2023, this accounted for approximately 26% of gross written premiums, and mainly emanated from its sister company, Stonefort Insurance S.A. (Stonefort Insurance), which has now been placed in run-off. Management plans to replace part of the business sourced from Stonefort Insurance gradually with third party treaty reinsurance business, which is expected to be kept at limited levels.

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.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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