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AM Best Downgrades Credit Ratings of Stellar National Life Insurance Company; Places Credit Ratings Under Review With Developing Implications

BY Business Wire | CORPORATE | 09/13/24 11:53 AM EDT

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has downgraded the Financial Strength Rating to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Rating to ?bbb-? (Good) from ?bbb? (Good) of Stellar National Life Insurance Company (Stellar) (Phoenix, AZ). Concurrently, AM Best has placed the Credit Ratings (ratings) under review with developing implications.

The ratings reflect Stellar?s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

These rating actions are due to Stellar?s capital and surplus, which declined to $4.0 million at second quarter 2024, from $9.6 million at year-end 2023. The decline in capital and surplus is driven by losses related to launching production, new business strain and startup costs. The company is planning to improve its capital position through strategic discussions as it seeks new capital partners. The ratings will remain under review with developing implications while AM Best monitors the status of capital initiatives and fully reviews the impact.

Stellar has focused on becoming a fully digital issuer of annuities, while partnering with U.S. independent annuity sales channels. Invested assets are managed by Stellar National IM, LLC (Stellar IM), an affiliate of Stellar?s parent company, Stellar National Holdings, LLC (Stellar Holdings). Stellar IM has a strategic investment relationship with Blue Vista Capital Management, LLC, an indirect owner of Stellar Holdings, which has a particular expertise in the commercial mortgage lending space and over $5 billion in assets under management. Partially offsetting factors include the increasing exposure to interest rate risk as Stellar?s annuity book of business grows, as well as the challenges that come with executing its business plan.

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 specializing 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. For more information, visit www.ambest.com.

Copyright ? 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Source: AM Best

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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