A major credit ratings agency has revised its outlook to negative for Bermudian-based James River Group Holdings Ltd and several of its subsidiaries, and placed the credit ratings of one company under review with negative implications.

AM Best has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit ratings of “a-” (Excellent) of most of the rated operating subsidiaries of JRG Holdings.

In addition, AM Best has revised the outlook to negative from stable and affirmed the long-term ICR of “bbb-” (Good) of JRG Holdings.

Concurrently, the agency has downgraded the FSR to B++ (Good) from A- (Excellent) and the long-term ICR to “bbb+” (Good) from “a-” (Excellent) of Bermudian-based JRG Reinsurance Company Ltd.

AM Best has also placed JRG Re’s credit ratings under review with negative implications.

JRG Holdings is domiciled in Bermuda, while its subsidiaries are based in Bermuda, Richmond, Virginia, and Raleigh, North Carolina.

The ratings of JRG Holdings’ subsidiaries reflect their balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.

AM Best said: “These rating actions follow JRG Holdings’ recent announcements that it has identified a material weakness in its internal control over financial reporting, it will sell JRG Re and it will explore strategic business alternatives for the organisation.

“As part of this process, the board stated that it will consider a wide range of options including, among other things, a potential sale, merger or other strategic action.

“The negative outlook reflects the uncertainty that these announcements will have on the organisation, whilst also reflecting the execution risk associated with some of these initiatives."

The ratings of JRG Re reflect the company’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and marginal ERM. The ratings also benefit from lift that is attributable to operational and past financial support from JRG Holdings.

The rating downgrade of JRG Re reflects AM Best’s view that the company is less integral to JRG Holdings’ strategic, operational and financial objectives.

It said this view is supported by management’s decision to suspend underwriting business in JRG Re earlier this year following operating losses over the past several quarters.

Furthermore, the agency said, JRG Holdings recently announced that it had entered into a definitive agreement to sell JRG Re to Fleming Intermediate Holdings LLC at .75x the book value of JRG Re at closing.

AM Best said JRG Re has been placed under review with negative implications. Pending required regulatory approvals, the transaction is expected to close during the first quarter of 2024.

The FSR of A- (Excellent) and the long-term ICRs of “a-” (Excellent) have been affirmed with the outlooks revised to negative from stable for the following subsidiaries of JRG Holdings: James River Insurance Company, James River Casualty Company, Falls Lake National Insurance Company, Stonewood Insurance Company, Falls Lake Fire and Casualty Company, and Carolina Re Ltd.