A.M. Best Co. has assigned an issuer credit rating (ICR) of “bbb” to Global Indemnity plc (Global Indemnity) (Dublin, Ireland) [NASDAQ: GBLI].
A.M. Best also has affirmed the financial strength rating (FSR) of A (Excellent) and ICRs of “a” of Wind River Reinsurance Company, Ltd. (Wind River Re) (Hamilton, Bermuda) and its U.S. subsidiaries. Concurrently, A.M. Best has affirmed the ICR of “bbb” and debt ratings of the intermediate parent holding company, United America Indemnity, Ltd. (UAI) (George Town, Cayman Islands). Global Indemnity is the newly formed ultimate parent holding company of Wind River Re. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)
The ratings reflect the strong capitalization and diversified portfolio of specialty products provided on both an admitted and non-admitted basis by Wind River Re and its U.S. subsidiaries. The ratings also reflect the long-term historical profitability of the U.S. subsidiaries, which began operating under a single pooling agreement as of January 1, 2009, whereby they pool their premiums and liabilities and cede 50% of their combined net retained liabilities to Wind River Re. Wind River Re also continues to build a book of unaffiliated, third-party reinsurance business to complement the affiliated business. At the end of 2009, on a gross basis, the third-party business comprised just over 21% of Wind River Re’s total written premiums, with that proportion expected to increase in 2010.
These positive rating factors are tempered by the combined operating results of the U.S. subsidiaries in recent years, driven by declining premium levels and increased infrastructure investments that have led to an increase in the expense ratio. Global Indemnity’s domestic infrastructure initiatives have included reorganizing geographically to help cultivate more fruitful and productive point-of-sale relationships with its distribution force. A portion of the premium decline is attributable to the planned discontinuation of relationships with agents and brokers that had been producing unsatisfactory results. Additionally, recent reserve releases notwithstanding, management has been very conservative in posting reserves relative to established actuarial estimates. This conservatism has had somewhat of a limiting effect on underwriting results; however, operating results through the first half of 2010 have shown notable improvement.