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TMCNet:  A.M. Best Affirms Ratings of Third Point Reinsurance Company Ltd. and Assigns Rating to Third Point Reinsurance Ltd.

[January 31, 2014]

A.M. Best Affirms Ratings of Third Point Reinsurance Company Ltd. and Assigns Rating to Third Point Reinsurance Ltd.

OLDWICK, N.J. --(Business Wire)--

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating (ICR) of "a-" of Third Point Reinsurance Company Ltd. (TPRCL). The outlook for both ratings is stable. Concurrently, A.M. Best has assigned an ICR of "bbb-" to TPRCL's holding company, Third Point Reinsurance Ltd. (TP Re) [NYSE:TPRE]. The outlook assigned to this rating is stable. The ICR of TP Re is strictly based on the holding company's methodology since it does not carry any debt. Both companies are domiciled in Hamilton, Bermuda.

The ratings of TPRCL are based on its excellent risk-adjusted capitalization, continued successful implementation of its business plan, which includes adherence to financial projections, measured growth, acceptance in the marketplace (as witnessed by the initial public offering of the holding company) and the above-average performance of its investment portfolio. The ratings also consider TPRCL's seasoned management team and the dynamic and evolving enterprise risk management that is in place.

Partially offsetting these positive rating factors are the start-up nature of TPRCL, the greater investment risk associated with its alternative investment strategy and the increasing competition and capacity in the reinsurance marketplace.

TPRCL could be expoed to a convergence of events that could test its capital strength. The underwriting risk along with significant investment risk could have a duplicative adverse effect on its risk-adjusted capital. However, TPRCL's low underwriting leverage, experienced underwriting team and its investment manager's 19-year successful investment track record help to alleviate A.M. Best's concerns. The assets of TPRCL are managed by Third Point LLC, a New York-based SEC (News - Alert)-registered investment manager with over $12.1 billion of assets under management. TPRCL's assets are in a separate portfolio managed by Third Point LLC, which are not combined with assets of other investors at Third Point LLC.


In addition, A.M. Best anticipates that TPRCL's management will be challenged by competition from established reinsurers as well as other start-up entities. The addition of more capital to an already overcapitalized reinsurance marketplace could pressure underwriting margins.

Key rating triggers that could result in positive rating actions would be TPRCL meeting and/or exceeding its business plan over the long term, maintenance of robust risk capital levels and positive operating performance through market cycles.

Key rating triggers that could result in negative rating actions would be TPRCL not executing its business plan over the long term, significant adverse reserve development, outsized investment losses and/or a departure of key management.

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. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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