AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) for Stonefort Reinsurance SA, a Luxembourg-based subsidiary of HOCHTIEF Aktiengesellschaft.

HOCHTIEF, a major construction firm headquartered in Germany, is majority owned by ACS, Actividades de Construcción y Servicios, SA. The outlook for these credit ratings remains stable.

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Stonefort Reinsurance’s balance sheet strength is underpinned by risk-adjusted capitalization at the strongest level, as determined by Best’s Capital Adequacy Ratio (BCAR). The company’s recent decision to discontinue its retrocession program has introduced greater volatility to the balance sheet.

However, AM Best anticipates that Stonefort Reinsurance’s risk-adjusted capitalization will stay at the highest level, bolstered by low underwriting leverage. An offsetting factor remains the company’s significant investment in bonds issued by its parent company, HOCHTIEF.

Stonefort Reinsurance has maintained a strong and stable operating performance over the years, primarily due to solid underwriting results. From 2019 to 2023, the company achieved a five-year weighted average combined ratio of 79.4%, as calculated by AM Best.

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However, the company’s future performance is expected to experience volatility, driven in part by exposure to the cyclical US construction market. The discontinuation of the retrocession program is likely to increase the potential for fluctuations in Stonefort Reinsurance’s results.

The assessment of Stonefort Reinsurance’s business profile as limited reflects its concentration in casualty risks tied to HOCHTIEF’s North American construction operations. Additionally, Stonefort Reinsurance reinsures open-market business, which made up approximately 26% of gross written premiums in 2023.

This portion primarily originated from its sister company, Stonefort Insurance SA, which is now in run-off. Management intends to replace some of this business with third-party treaty reinsurance, though the volume is expected to remain limited.

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