AM Best has upgraded the Financial Strength Rating to B++ (Good) from B+ (Good) and the Long-Term Issuer Credit Rating to “bbb” (Good) from “bbb-” (Good) of Golden Tree Reinsurance Limited (Golden Tree) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.
Golden Tree is a subsidiary of Iris Financial Services Limited (IFS) and is owned ultimately by Springbrook Capital Ltd., a privately held holding company with diversified operations in insurance and financial services.
The ratings reflect Golden Tree’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The ratings upgrade was driven by Golden Tree’s balance sheet strength being at the strongest level, underpinned by a steady growth in its capital base while maintaining the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR).
Golden Tree was established in 2015 as a segregated portfolio company. In 2019, the company was licensed as a Class 3A insurer under Bermuda laws to provide reinsurance capacity for commercial credit and credit life risks as part of the group’s retrocession cover, with geographic exposure mainly to Colombia’s insurance market.
The ratings also reflect Golden Tree’s sound operating performance, improving business profile, and its affiliation to IFS, which provides synergies and operating efficiencies, as well as an appropriate ERM framework. Offsetting these positive rating factors are Golden Tree’s concentration in one business line and the strong competitive environment in its target geographic market of Colombia.
Golden Tree’s balance sheet strength level of strongest is underpinned by a capital base that was enhanced in 2021, in conjunction with its strongest level of risk-adjusted capitalization. Additionally, the company’s capital base has strengthened over time as a result of its sound underwriting practices. In 2022, the company sustained profitability mainly through underwriting, enabling it to generate a return-on-equity ratio of 26%. AM Best expects Golden Tree to maintain its important role in the group’s strategy. This comes amid healthy growth prospects for the company and consistent profitability generated by new business from group´s newly launched proprietary managing general agent (MGA), which has also contributed to improve Golden Tree’s geographic footprint in the United States. Investment income, driven by a diversified strategy, has continued to support Golden Tree’s results further; however, the company is not dependent on this revenue to achieve positive bottom-line results.
Factors that could lead to a rating upgrade for Golden Tree include increased business diversification and consistent operating performance while maintaining capital adequacy that supports the current ratings. Factors that could lead to negative rating action include a material loss of capital, either from a substantial decline in profitability, due to new business volatility or execution risk, or an aggressive dividend policy, which reduces risk-adjusted capitalization to a level that no longer supports Golden Tree’s ratings.
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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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