AM Best Affirms Credit Ratings of Third Point Reinsurance Ltd. and Its Subsidiaries; Revises Outlooks to Negative

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has revised the outlooks to negative from stable and
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 Ltd. (Bermuda) and Third Point Reinsurance (USA)
Ltd. (Bermuda). AM Best also has revised the outlooks to negative from
stable and affirmed the Long-Term ICRs of “bbb-” of Third Point
Re (USA) Holdings, Inc. (TP USA) (Wilmington, DE) and its
ultimate holding company, Third Point Reinsurance Ltd. (TPRE) (Bermuda).
Concurrently, AM Best has revised the outlook to negative from stable
and affirmed the Long-Term Issue Credit Rating of “bbb-” on the $115
million 7% fixed senior unsecured notes due 2025 of TP USA.

The ratings reflect TPRE’s balance sheet strength, which AM Best
categorizes as very strong, as well as its marginal operating
performance, neutral business profile and appropriate enterprise risk
management.

The negative outlooks reflect AM Best’s concern over the company’s
business profile given its prolonged inability to generate an
underwriting profit, which has resulted in an average combined ratio of
105.6% for the five years from 2014 to 2018. Furthermore, recent changes
in senior management will need to prove beneficial to TPRE’s market
profile over the medium to long term. The company will need to enhance
its business profile gradually and achieve a core portfolio of business
that can deliver a sustainable level of technical profitability going
forward.

TPRE’s risk-adjusted capitalization, as measured by Best’s Capital
Adequacy Ratio (BCAR), was categorized as strongest as of year-end 2018.
Although surplus has trended down over the past five years (2018-2014),
AM Best expects the company to continue to run its operations while
maintaining the strongest BCAR level. An offsetting factor in AM Best’s
balance sheet strength assessment is TPRE’s high-risk investment
appetite, which exposes its capital to potential short-term volatility.
However, AM Best believes that the company’s investment adviser, Third
Point LLC, has begun to take appropriate actions to mitigate this risk
and stabilize investment earnings going forward.

TPRE has achieved a level of marginal operating results on average over
recent years. The company has not reported an underwriting profit since
inception, and its investment results have been volatile and below AM
Best’s expectations over the cycle. AM Best will continue to monitor the
company’s underwriting performance closely in future years.

TPRE has a diversified reinsurance portfolio that historically focused
on quota shares of lines of business with lower volatility. The company
recently hired senior underwriters with extensive experience and began
expanding into higher margin lines of business, including property
catastrophe and specialty reinsurance. TPRE has established strong
relationships with reinsurance brokers and progressively grown its
business footprint despite challenging market conditions. Additionally,
AM Best considers risk management capabilities to be appropriate for
TPRE’s risk profile.

This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

Contacts

Darian Ryan
Senior Financial Analyst
+1 908
439 2200, ext. 5449
darian.ryan@ambest.com

Steven
Chirico, CPA
Director
+1 908 439 2200, ext. 5087
steven.chirico@ambest.com

Christopher
Sharkey
Manager, Public Relations
+1 908 439
2200, ext. 5159
christopher.sharkey@ambest.com

Jim
Peavy
Director, Public Relations
+1 908 439
2200, ext. 5644
james.peavy@ambest.com