Global Indemnity plc
) got its issuer credit rating (ICR) of "bbb", affirmed by the
rating agency A.M. Best. The rating agency also testified the
financial strength rating (FSR) of "A" and the ICR of "a" for Wind
River Reinsurance Company, Ltd., a subsidiary of Global Indemnity.
The securities which are lying in shelf registration have also been
rated. The senior unsecured debt has been rated "bbb", subordinated
unsecured debt has been rated "bbb" while the preferred stock got a
rating of "bb+".
The rating affirmation of Wind River Re takes into consideration
the unit's robust capital position and its financial flexibility.
The company's efforts to consistently improve underwriting results
and manage catastrophe losses have raised the company's esteem in
the eyes of the rating agency. The company derives capital strength
from its limited premium base, conservative balance sheet and the
financial support it gets from being part of Global Indemnity.
The U.S. subsidiaries of Wind River Re, which work closely on an
intercompany reinsurance pooling agreement basis, have also given a
superior operating performance. The unit has taken measures to
enhance its operational by cancelling unprofitable reinsurance
contracts signed in 2011 and focusing on the underwriting of
conventional treaty reinsurance, primarily catastrophe-oriented
But the rating agency critically views the company's exposure to
catastrophe losses, elevated underwriting expenses and exposure to
equity in its investment portfolio. The rating agency notes that
though the company's underwriting expenses are well controlled,
expense ratio - measured as a proportion of premium earned - stays
at an elevated level given a low denominator (i.e. low premium).
Also, the company is witnessing growing equity leverage due to the
rising value of equity in recent months.
The rating agency overrules any positive rating action in the near
term given its volatile underwriting results. However, a negative
rating action is not ruled out in case of deterioration in the
unit's capital position or the company's operations and reserve
All the ratings are of investment grade and carry a stable outlook.
Financial strength and credit ratings, which intend to measure a
company's ability to meet policyholder obligations, are important
factors influencing public confidence and creditworthiness of a
company, and hence its competitiveness. An investment grade debt
rating with a stable outlook reflects optimism on the company.
While Global Indemnity carries a Zacks Rank #4 (Sell),
better-ranked players include
Allied World Assurance Company Holdings, AG
AmTrust Financial Services, Inc.
Aspen Insurance Holdings Ltd.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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