AM Best Affirms Credit Ratings of Greenlight Capital Re, Ltd. and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "a-" of Greenlight Reinsurance, Ltd. (Cayman Islands) and Greenlight Reinsurance Ireland, Designated Activity Company (Ireland). Additionally, AM Best has affirmed the Long-Term ICR of "bbb-" of Greenlight Capital Re, Ltd. (Cayman Islands) (GLRE) GLRE, the ultimate holding company. The outlook of these Credit Ratings (ratings) is negative.

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).

The negative outlooks reflect AM Best's expectation that the group will be challenged to improve its underwriting performance in the short term given its historical results; however, the group's operating performance should continue to benefit from the recent reunderwriting and investment actions taken to improve overall performance and limit volatility. There have been very recent indications of broad-based reinsurance rate hardening and partial investment recovery following the investment losses recorded in the first quarter of 2020.

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, coupled with adverse underwriting results. Despite the significant losses, GLRE's risk-adjusted capital position has remained at the strongest level. Benefiting the group's risk-adjusted capitalization is management's actions to limit investment volatility through de-risking the investment portfolio, including increasing the amount of cash and fixed income securities held and meaningfully decreasing the group's investment operating leverage. Although the company's surplus has been impacted by COVID-19-related investment losses, AM Best expects the company to maintain risk-adjusted capital levels in line with its current ratings.

Over the past five years, GLRE has produced weak investment returns and marginal underwriting performance, which has led to a five-year average combined ratio of 108.6%, inclusive of corporate expenses, and has contributed to a five-year average return on equity of -19.2%. Following the hiring of a new CEO in 2017, the group has focused on diversifying its client base and product offering in an effort to limit concentrations and improve underwriting performance.

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 somewhat concentrated by cedant, geographically and by line of business; however, the company has taken steps to diversify its platform mainly through growing its non-U.S. business, and underwriting more non-proportional business.

Additionally, GLRE's ERM is deemed appropriate for the company's business complexity and overall risk profile.

Negative rating actions could occur if turmoil in the capital markets negatively impacts GLRE's balance-sheet assessment and investment performance. Underwriting performance that remains relatively adverse compared with most peers also could create negative rating pressure. Rating actions that stabilize the ratings may occur if GLRE bolsters its shareholders' funds through a sustained level of internal capital generation, driven by improved underwriting and investment performance, which would indicate an improving business profile.

The rating affirmations follow an accepted appeal from the rated company in which new material information was provided that stabilized AM Best's opinion of the company's business profile and forward-looking operating performance volatility.

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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