A.M. Best Downgrades Credit Ratings of Greenlight Reinsurance, Ltd. and Its Affiliate
November 03 2016 - 4:33PM
Business Wire
A.M. Best has downgraded the Financial Strength Rating to
A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit
Ratings (Long-Term ICR) to “a-” from “a” of Greenlight
Reinsurance, Ltd. (Greenlight Re) (Cayman Islands) and its
affiliate, Greenlight Reinsurance Ireland, Designated Activity
Company (Ireland). Additionally, A.M. Best has downgraded the
Long-Term ICR to “bbb-” from “bbb” of Greenlight Re’s holding
company, Greenlight Capital Re, Ltd. (Cayman Islands)
[NASDAQ:GLRE]. The outlook of these Credit Ratings (ratings) has
been revised to stable from negative.
The rating actions reflect Greenlight Re’s less favorable
underwriting results in recent years, including results through
June 30, 2016, which have fallen short of A.M. Best’s long-term
expectations. While the company has taken actions to remediate the
problematic contracts, it is showing an underwriting loss that
underperforms most peers on its five-year trend through 2015. While
A.M. Best acknowledges that the underwriting process and controls
have since been strengthened, the current market environment will
continue to present challenges and will ultimately test the
sufficiency of the current underwriting rigor and enterprise risk
management. Investment losses in 2015 did not help the company’s
overall earnings profile, however, A.M. Best anticipated a certain
level of volatility with regard to the investment portfolio.
At the current rating level, A.M. Best can be slightly more
accepting of variability in operating results, though, A.M. Best is
looking for operating results, that over the long term, generate
solid profit from both underwriting and investment activities.
Greenlight Re faces increasing challenges in writing profitable
business in a market with excess capacity and further competition
from new reinsurance companies with a similar alternative
investment strategy.
While Greenlight Re’s capital footprint entails 100% common
equity with no use of debt, A.M. Best recognizes the asset risk
represented by its equity-based investment portfolio. Mitigating
this concern is the inherent partially hedged nature of the
investment portfolio, and the experience and strong, long-term
track record of the investment manager. More than 80% of the
invested assets are in highly liquid investments, and generally no
position can be greater than 20% of invested assets. A.M. Best’s
rating approach involves assessing Greenlight Re’s risk
correlations across the enterprise by subjecting its capitalization
to concurrent adverse stress test events. The company’s robust
risk-adjusted capitalization withstands substantial amounts of
strain when subjected to these various stress scenarios.
This press release relates to Credit Ratings that have been
published on A.M. 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 A.M.
Best’s Recent Rating Activity web page. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20161103006798/en/
A.M. BestGreg Reisner, +1 908 439 2200, ext.
5224Directorgreg.reisner@ambest.comorChristopher
Sharkey, +1 908 439 2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorRobert DeRose, + 1
908 439 2200, ext. 5453Senior
Directorrobert.derose@ambest.comorJim Peavy, +1 908
439 2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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