Greenlight Capital Re Ltd. Q3 FY2024 earnings call

Reinsurance Highlights

• Gross written premiums for Q3 were $168.3 million, net income $35.2 million (up from $13.5 million in Q3 2023).
• Combined ratio 95.9% for Q3, year-to-date combined ratio 97.9% (eighth consecutive underwriting profit).
• Cat losses in Q3 totaled $14.1 million, including $7.5 million from Hurricane Helene. Current year cat losses added 9.3 percentage points to the Q3 combined ratio, while favorable prior year loss development improved it by 3.1 percentage points.
• Focus on 1/1 renewal season, confident in market opportunities; attended industry conferences in Monte Carlo and Baden-Baden.
• Board approved appointments of Tom Curnock as Group Chief Underwriting Officer and Pat O’Brien as Group Chief Operating Officer; AM Best affirmed A- rating and upgraded outlook to positive.

Investment Highlights

• Solasglas fund Q3 return 5.2%; long portfolio 9.9%, macro 1.2%, short -5.1%.
• S&P 500 index advanced 5.9% in Q3; largest positive contributors: Green Brick Partners, gold, Solvay; largest detractors: short basket to hedge homebuilding exposure, equity index hedges, etc.
• Peloton discussed, potential upside if company successful in rightsizing cost structure.
• Solasglas portfolio -0.2% in October, YTD 11.7% through Oct 31; net exposure ~31% at end of Oct.

Financial Highlights

• Net income $35.2 million ($1.01 per diluted share) vs $0.39 per diluted share in Q3 2023.
• Underwriting book generated $6.1 million of profit after underwriting related G&A expenses.
• Gross premiums written in Q3 decreased by $14.7 million y-o-y, but excluding non-renewed contracts up 3.3%; specialty book net premiums written up 19.6% y-o-y.
• Ceded premiums up due to new inward specialty contract and additional excess of loss retrocession coverage.
• Underwriting expense ratio 4.2% in Q3 vs 3% in Q3 2023; repurchased $7.5 million of shares, $17.5 million remaining under share repurchase plan.

Greenlight Re reported gross written premiums of $168.3 million for the third quarter. Net income was $35.2 million, up $21.7 million from Q3 2023. The combined ratio was 95.9% for the quarter, an eighth consecutive quarter of underwriting profit, with year-to-date combined ratio at 97.9%. Cat losses in the third quarter were $14.1 million, including $7.5 million from Hurricane Helene. The specialty book's gross premiums written grew by $21.4 million or 52% compared to Q3 2023. On the investment side, the Solasglas fund reported a 5.2% return. The long portfolio contributed 9.9%, the macro portfolio 1.2%, and the short portfolio detracted 5.1%. The Solasglas portfolio returned negative 0.2% in October and 11.7% year-to-date through October 31st, with net exposure in the investment portfolio approximately 31% at the end of October.

Reinsurance Guidance

• Confident in Greenlight Re being well positioned to take advantage of market opportunities at the 1/1 renewal season.

Investment Guidance

• No specific forward-looking guidance beyond general comments on portfolio performance and market conditions, noting the Solasglas portfolio YTD performance and net exposure levels.

• Catastrophe Risks: Uncertainty over industry losses from hurricanes like Milton (estimates range from $5 billion to $50 billion).
• Investment Risks: Short portfolio detracted 5.1% in Q3; housing-related shorts could be unprofitable and face debt refinancing challenges.
• Renewal Season Risks: Dependence on market conditions at the critical 1/1 renewal season, with no material increase in reinsurance capacity expected.