AM Best affirms Third Point Re outlook

AM Best has affirmed the financial strength Rating of A- (Excellent) and the long-term issuer credit ratings (Long-Term ICR) of “a-” of Third Point Reinsurance Company (Bermuda) and Third Point Reinsurance (USA).

AM Best also has affirmed the Long-Term ICRs of “bbb-” of Third Point Re (USA) Holdings and its ultimate holding company, Third Point Reinsurance. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect TP Re’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Third Point Re’s very strong level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), coupled with strong financial flexibility, as well financial leverage and coverage metrics, which are appropriate for the current rating level collectively contribute to an overall balance sheet assessment of very strong by AM Best.

The rating agency said that while Third Point Re has been unable to demonstrate underwriting profitability to date, the company reported healthy net income for year-end 2017, driven by exceptional returns on its investment portfolio - leading to an overall operating performance assessment of adequate. AM Best continues to have an ongoing dialogue with Third Point Re’s senior management and closely monitors the company’s underwriting performance.

Because of its alternative investment strategy, Third Point Re could be exposed to a convergence of events that could test its capital strength. The underwriting and significant investment risks could have a duplicative adverse effect on their risk-adjusted capital levels. The assets of TPRCL and TPRUSA are managed by Third Point, a New York-based SEC-registered investment manager. TPRCL’s and TPRUSA’s assets are in separate portfolios managed by Third Point, which are not combined with assets of other investors at Third Point.

AM Best believes that the company is well-positioned at the current rating level; however, sustained, material deterioration in operating performance or risk-adjusted capitalisation could lead to negative rating pressure in the near to medium term.

AM Best said that it views Third Point Re’s business profile as neutral and that although the company is not a market leader, its current management team is able to leverage established relationships and exhibit continued growth since inception, despite challenging market conditions. Through its multiple subsidiaries, the company provides customised reinsurance products on a worldwide basis.