AM Besthas revised the outlooks to negative from stable while affirming the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (ICR) of “a-” of Greenlight Reinsurance, Ltd. (Cayman Islands) and Greenlight Reinsurance Ireland, Designated Activity Company (DAC).
Additionally, AM Best has revised the outlook to negative from stable and affirmed the Long-Term ICR of “bbb-” ofGreenlight Capital Re, Ltd.(GLRE), the Cayman Islands-headquartered holding company.
The negative outlooks reflect AM Best’s concern over the company’s business profile, owing to its track record of negative underwriting performance, which has led to a five-year average company reported combined ratio of 105.3 percent (2014-2018) and has contributed to a five-year average return on equity of -13.3 percent (2014-2018). Going forward, AM Best expects GLRE to improve its underwriting profitability. Failure to do so may result in further negative rating actions.
The ratings reflect GLRE’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
GLRE’s consolidated surplus has decreased materially in recent years, to US$480 million as of year-end 2018 from US$1.2 billion at year-end 2014, primarily due to the outsized losses generated by its investment adviser.
However, management has taken appropriate actions to de-risk the balance sheet significantly, thereby reducing the potential for volatility in the investment portfolio going forward, said the ratings agency. In the medium to long term, AM Best said it expects the company to stabilize its earnings and gradually replenish its capital position through internal capital generation.
The rating affirmations and revised outlooks follow an accepted appeal from the rated company in which new material information was provided that enhanced AM Best’s opinion of the company’s risk-adjusted capitalization and forward-looking operating performance volatility.
Source: AM Best
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