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Greenlight Reinsurance & Units' Rating Retained by A.M. Best

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Shares of Greenlight Reinsurance, Ltd. (GLRE - Free Report) gained about 3.2% in the last three trading  sessions after A.M. Best reiterated credit ratings of the company and its affiliate Greenlight Reinsurance Ireland. The rating giant retained Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Greenlight Reinsurance andGreenlight Reinsurance Ireland.

The rating agency has also retained The Long-Term ICR of “bbb-” of Greenlight Capital Re, Ltd. (Cayman Islands).The outlook of these ratings remain stable. The rating affirmations of Greenlight Re came on the back of its solid risk-adjusted capitalization, adept management, strong enterprise risk management and proper execution of business strategy.

The ratings affirmations of Greenlight Reinsurance Ireland were backed not only by the above-mentioned attributes but also by the support it gets from Greenlight Re and its ultimate parent, Greenlight Capital Re, Ltd.

Nonetheless, these positives are weighed on by the risks associated with the company’s alternative investment strategy and the challenges encountered by Greenlight Re in writing profitable business under the current market conditions. Moreover, the portfolio of the company that primarily comprises publicly traded securities could pose various risks that could affect the rating affirmations. However, Greenlight Re’s investment portfolio, which is actively managed and has performed well over the long run, lowers such concerns.

The company’s risk-adjusted capitalization can withstand a lot of strain when exposed to various catastrophe and investment stress scenarios. The credit rating agency has also assumed losses from Hurricanes Harvey, Irma and Maria to remain within the company’s risk-tolerance level.

According to the rating giant, factors that could upgrade the ratings include improvements in the company’s underwriting results, continued decline in catastrophe losses and positive investment performance.

Notably, ratings are subject to downgrade if there is adverse reserve development along with negative investment results and poor underwriting performance, which could also lead to a substantial deterioration of surplus.

Rating affirmations or upgrades have always played a significant role in retaining investors’ confidence as well as exhibiting a stock’s credit worthiness. On the contrary, rating downgrades reflect companies’ deteriorating finances, thereby escalating the cost of further debt issuances. We believe that these ratings will not only help Greenlight Reinsurance to retain investors’ faith but also enable it to write more business going forward.

Zacks Rank and Share Price Movement

Greenlight Reinsurance carries a Zacks Rank #4 (Sell). Shares of the company haveunderperformed the industry over a year. While the stock has gained 7.9%, the industry has rallied 26.2%. We expect the company’s growth initiatives and solid capital position to drive its shares up in the near term.

 

Stocks to Consider

Some better-ranked stocks from the insurance industry are Atlas Financial Holdings, Inc. , Markel Corporation (MKL - Free Report) and Mercury General Corporation (MCY - Free Report) .

Atlas Financial Holdings, which sports a Zacks Rank #1 (Strong Buy), engages in underwriting commercial automobile insurance policies in the United States. The company delivered positive earnings surprises in two of the last four quarters with an average beat of 57.94%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Markel, which carries a Zacks Rank #2 (Buy), markets and underwrites specialty insurance products in the United States and internationally. The company delivered positive earnings surprises in two of the last four quarters with an average beat of 21.06%

Mercury General, which carries a Zacks Rank #2, engages in writing personal automobile insurance in the United States. The company came up with positive earnings surprises in three of the last four quarters with an average beat of 1.06%.

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