AM Best has downgraded the financial strength rating of JRG Reinsurance (JRG Re) to B++ (Good) from A- (Excellent) and the long-term issuer credit rating to “bbb+” (Good) from “a-” (Excellent), while placing JRG Re’s credit ratings under review with negative implications.
AM Best also revised the outlooks of most of the rated operating subsidiaries of JRG Re’s parent company, James River Group Holdings Ltd., (JRG Holdings) to negative from stable and affirmed its financial strength rating of “A-” (Excellent) and the long-term issuer credit ratings “a-” (Excellent). The ratings agency also revised JRG Holdings’ outlook to negative from stable while affirming its long-term ICR of “bbb-” (Good).
The ratings of JRG Holdings’ subsidiaries reflect their balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management (ERM).
These rating actions follow JRG Holdings’ recent announcements that 1) it has identified a material weakness in its internal control over financial reporting, 2) it will sell JRG Re and 3) it will explore strategic business alternatives for the organization, AM Best said.
Update: James River to Exit Reinsurance, Agreeing to Sell JRG Re to Fleming for $277M
As part of this process, the rating agency continued, the JRG board stated that it will consider a wide range of options including, among other things, a potential sale, merger or other strategic action. AM Best said its negative outlook reflects the uncertainty that these announcements will have on the organization, while also reflecting the execution risk associated with some of these initiatives.
The rating downgrade of JRG Re reflects AM Best’s view that the company is less integral to JRG Holdings’ strategic, operational and financial objectives. This view is supported by management’s decision to suspend underwriting business in JRG Re earlier this year, following operating losses over the past several quarters. JRG Holdings announced in November 2023 that it had entered into a definitive agreement to sell JRG Re to Fleming Intermediate Holdings LLC at .75 times the book value of JRG Re at closing.
Pending required regulatory approvals, the transaction with Fleming is expected to close during the first quarter of 2024.
The FSR of “A-” (Excellent) and the Long-Term ICRs of “a-” (Excellent) have been affirmed with the outlooks revised to negative from stable for the following subsidiaries of JRG Holdings:
- James River Insurance Co.
- James River Casualty Co.
- Falls Lake National Insurance Co.
- Stonewood Insurance Co.
- Falls Lake Fire and Casualty Co.
- Carolina Re Ltd.
AM Best said the ratings of JRG Holdings’ subsidiaries reflect their balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management (ERM).
The ratings of JRG Re reflect the company’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and marginal ERM. “The ratings also benefit from lift that is attributable to operational and past financial support from JRG Holdings,” AM Best said.
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