While Greenlight Re’s capital footprint entails 100% common equity with no use of debt, A.M. Best is somewhat concerned with the asset risk represented by its equity-based investment portfolio. Mitigating this concern is the absence of financial leverage, the partially hedged nature of the investment portfolio and the experience of the investment managers. The risk of the investment portfolio was stressed in 2008 when Greenlight Re lost 17.8% in its investment portfolio, followed by a return of 32.1% in 2009. More then 80% of the company’s invested assets are in highly liquid investments and generally no position can be greater than 20% of invested assets. A.M. Best’s interactive rating process 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.The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition , which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; and “A.M. Best’s perspective on Operating Leverage.” Methodologies can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co. has upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) and issuer credit rating (ICR) to “a” from “a-” of Greenlight Reinsurance, Ltd. (Greenlight Re) (Cayman Islands). A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of “a-” of Greenlight Re’s sister company, Greenlight Reinsurance Ireland, Ltd. (Ireland). Concurrently, A.M. Best has upgraded the ICR to “bbb” from “bbb-” of Greenlight Re’s holding company, Greenlight Capital Re, Ltd. (Greenlight Capital Re) [NASDAQ: GLRE]. The ICR for Greenlight Capital Re is strictly based on the holding company’s methodology, since the company does not carry debt. The outlook for all ratings is stable. The ratings for Greenlight Re are based on its excellent risk-adjusted capitalization, experienced management team and the disciplined implementation of its business plan. The ratings also recognize the company’s exceptional enterprise risk management as it aggressively manages risks on both sides of the balance sheet. These strengths are partially offset by the challenges Greenlight Re encounters with writing profitable business in a softening market and the leverage resulting from an investment portfolio that is primarily composed of publicly-traded equity securities. Greenlight Re operates as a broker market reinsurer writing a combination of property/casualty and specialty reinsurance business. The company has been successful building its underwriting team infrastructure and adding new business using its partnership oriented approach to underwriting. This underwriting approach allows Greenlight Re to focus on a small number of large relationships, which enables pricing and structuring on a deal by deal basis. The company’s underwriting and investment assumptions are combined to develop a risk profile on both sides of the balance sheet, while catastrophe aggregate downside limits are in place and capped at the board level. To date, Greenlight Re’s underwriting results are favorable, and its large surplus base supports the current and expected growth in premium volumes.