Greenlight Reinsurance Ltd. has been seeking to improve underwriting results after months of losses. But it apparently hasn’t moved fast enough for A.M. Best, which slapped it with credit ratings downgrades.

A.M. Best said it downgraded the financial strength rating to A- (Excellent) from A (Excellent) and the long-term issuer credit ratings to “a-” from “a” for Greenlight Re, and its affiliate, Greenlight Reinsurance Ireland. Also, the ratings agency downgraded the long-term issuer credit ratings to “bbb-” from “bbb” for Greenlight Re’s holding company, Greenlight Capital Re. Ltd.

As well, A.M. Best revised the credit ratings’ outlooks to stable from negative.

A.M. Best blamed Greenlight Re’s “less favorable underwriting results in recent years, including results through June 30, 2016, which have fallen short of [its] long-term expectations.”

“While the company has taken actions to remediate the problematic contracts, it is showing an underwriting loss that underperforms most peers on its five-year trend through 2015,” A.M. Best said.

The ratings agency acknowledged that Greenlight Re has taken steps to strength its underwriting process and controls, but added that “the current market environment will continue to present challenges and will ultimately test the sufficiency of the current underwriting rigor and enterprise risk management.”

Greenlight Re’s 2015 investment losses were another black mark for the hedge fund reinsurer, A.M. Best said.

While, A.M. Best said it can be a bit more flexible about variable operating results at Greenlight Re’s current rating level, it expressed concern about its place in the larger reinsurance market.

“Greenlight Re faces increasing challenges in writing profitable business in a market with excess capacity and further competition from new reinsurance companies with a similar alternative investment strategy,” A.M. Best said.

Greenlight Re’s capital footprint involves 100 percent common equity with no use of debt. But A.M. Best said there is an asset risk due to its equity- based investment portfolio. It acknowledged that Greenlight Re’s investment manager (hedge fund manager David Einhorn) offers an “experienced and strong, long-term track record” that mitigates some concern.

As Bloomberg reported in September, Greenlight Re has posted losses in five of the last six quarters, due to slumps in Einhorn’s investments and struggles to find profitable insurance contracts. The reinsurer inked a deal in Europe and Asia in September to have its Irish subsidiary partner with Kattan Associates Ltd. to seek new business.

Source: A.M. Best