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FOR IMMEDIATE RELEASE
OLDWICK - MAY 20, 2014 04:19 PM (EDT)
A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit ratings (ICR) of "a-" of JRG Reinsurance Company, Ltd. (JRG Re) and its U.S.-based insurance affiliates. The ultimate parent for these companies is Franklin Holdings (Bermuda) Ltd. (Franklin). Franklin and JRG Re are both domiciled in Hamilton, Bermuda, and the U.S. subsidiaries are based in Richmond, VA and Raleigh, NC. (See below for a detailed listing of the companies.)
The revised outlook reflects JRG Re's solid risk-adjusted capital, improved underwriting results under the relatively new management team assembled at JRG Re and its exit from the short-tailed, poor-performing crop insurance line of business. JRG Re has increased policyholder surplus by 23% to $371 million in 2013 from $301 million in 2010. The companies lowered their consolidated combined ratios to 91 in 2013 from 105 and 104 in 2012 and 2011, respectively. Improved underwriting results in 2013 reflect the impact of corrective underwriting actions taken by JRG Re in 2012 and 2013, most notably in pricing increases and the termination of a number of unprofitable agency relationships, in addition to the exit from the crop business at the end of 2012.
The ratings reflect JRG Re's strong consolidated capitalization, experienced management team and solid business profile. This includes potential earnings from the company's efforts to write third-party working layer reinsurance business from U.S.-based specialty insurers and supplementing the business that is derived from significant quota share reinsurance agreements with its onshore affiliates. These positive rating factors are partially offset by the challenges presented by a competitive casualty reinsurance market and the recent weakness in underwriting results due to workers' compensation and the assumed crop reinsurance losses.
JRG Re targets small to medium-sized specialty companies and maintains a diversified reinsurance portfolio weighted toward short- to intermediate-tail casualty business. The balance of its written premium has historically been derived from the net retained property/casualty exposures of its onshore affiliates. Effective January 1, 2013, all of its U.S. affiliates participate in an intercompany pooling agreement, retaining 30% of net business with 70% ceded to JRG Re.
Positive rating actions could occur if JRG Re's risk-adjusted capital remains strong and its underwriting profitability is improved and sustained over the medium term. Conversely, negative rating actions could occur if the company's operating and/or underwriting results reflect a return to weaker performance; and consequently, risk-adjusted capitalization falls below A.M. Best's expectations.
The U.S. affiliates' ratings are directly correlated to the ratings of JRG Re and receive full rating enhancement due to the explicit and implicit support provided by JRG Re.
The FSR of A- (Excellent) and the ICRs of "a-" have been affirmed for the following affiliates of JRG Reinsurance Company, Ltd.:
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.