AM Best moves Greenlight Re outlook to 'negative' over underwriting profitability concerns

Rating agency AM Best has revised the outlook of Cayman Islands-based reinsurer Greenlight Capital Re to negative from stable, expressing concern over its "negative underwriting performance".

AM Best said that it is concerned about the company’s business profile, owing to its track record of negative underwriting performance, which has led to a five-year average company reported combined ratio of 105.3 percent (2014-2018) and has contributed to a five-year average return on equity of -13.3 percent (2014-2018).

"GLRE’s consolidated surplus has decreased materially in recent years, to $480 million as of year-end 2018 from $1.2 billion at year-end 2014, primarily due to the outsized losses generated by its investment adviser," the agency said. "However, management has taken appropriate actions to de-risk the balance sheet significantly, thereby reducing the potential for volatility in the investment portfolio going forward."

It stated that the reinsurer will need to improve its underwriting profitability, stabilise its earnings and gradually replenish its capital position through internal capital generation.

"Failure to do so may result in further negative rating actions," it added.

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