OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of Greenlight Reinsurance, Ltd. (Cayman Islands) and Greenlight Reinsurance Ireland, Designated Activity Company (Ireland). Additionally, AM Best has revised the outlook to stable from negative and affirmed the Long-Term ICR of “bbb-” (Good) of Greenlight Capital Re, Ltd. (Cayman Islands) (GLRE) [NASDAQ: GLRE], the ultimate holding company.
The Credit Ratings (ratings) reflect GLRE’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The stable outlooks reflect AM Best’s expectation that the group’s operating performance will continue to benefit from the recent reunderwriting and investment actions taken to stabilize results. Additionally, the expectation is for sustained improvement in operating performance metrics, given the adjustments the company has made to its strategy including significant investments in its innovation arm.
GLRE’s balance sheet strength assessment of very strong is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Consolidated surplus has decreased materially over the past five years, primarily due to the outsized losses generated by its investment portfolio in 2018, coupled with marginal underwriting results. Despite the significant losses, GLRE’s risk-adjusted capital position has remained at the strongest level, and AM Best expects the company to maintain risk-adjusted capital levels in line with its current ratings.
AM Best views GLRE’s operating performance as marginal, given its historically marginal and volatile investment returns and marginal underwriting performance. AM Best anticipates that changes made to GLRE’s alternative investment portfolio following a significant mark-to-market loss event in 2018 will help partially mitigate GLRE’s shareholders’ equity volatility during future adverse capital market events. Additionally, the group’s 2020 combined ratio, inclusive of corporate expenses, improved to 104.0%—the lowest result over the past five years—and compared favorably with the composite.
AM Best views GLRE’s business profile as neutral. The company was incorporated in the Cayman Islands in 2004 and is one of the longest-tenured total return reinsurers. Through its two operating subsidiaries, GLRE provides property/casualty reinsurance on a global scale. Historically, GLRE was concentrated somewhat by cedant, geographically and by line of business; however, the company has taken steps to diversify its platform, including through significant investments in its innovation-related operations.
Additionally, GLRE’s ERM is deemed appropriate for the company’s business complexity and overall risk profile.
Negative rating action could occur if GLRE's investment performance is subject to significant downside volatility or if GLRE’s risk-adjusted capitalization declines materially. Negative rating action could occur if planned improvements in underwriting performance fail to materialize.
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