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.

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