Greenlight Capital Re Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 5, 2025

Key Takeaways

  • Negative Sentiment: Modest net income of $0.3 million in Q2 2025 versus $8 million in Q2 2024, signaling a notable earnings slowdown.
  • Positive Sentiment: Underwriting continued to be a strength with a 95% combined ratio and $8.1 million of underwriting income, aided by a benign catastrophe environment.
  • Negative Sentiment: The Solace Glass fund portfolio fell 4% in the quarter and is down 1.2% year-to-date, offsetting other investment gains.
  • Negative Sentiment: The Innovation segment’s combined ratio rose to 107% due to $2.5 million of unfavorable reserve development, prompting corrective actions.
  • Positive Sentiment: Management repurchased $5 million of shares and grew fully diluted book value per share to $18.97, up 7.5% since year-end.
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Earnings Conference Call
Greenlight Capital Re Q2 2025
00:00 / 00:00

There are 5 speakers on the call.

Operator

Thank you for joining the Greenlight Capital Re Limited Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the prepared remarks. It's now my pleasure to turn the call over to David Sigman, Greenlight Re's General Counsel. You may begin.

Speaker 1

Thank you, Kevin, and good morning. I would like to remind you that this conference call is being recorded and will be available for replay following the conclusion of the event. An audio replay will also be available under the Investors section of the company's website at www.greenlightre.com. Joining us on the call today will be our Chief Executive Officer, Greg Richardson Chairman of the Board, David Einhorn and Chief Financial Officer, Farmers Roemer. On behalf of the company, I'd like to remind you that forward looking statements may be made during this call and are intended to be covered by the safe harbor provisions of the federal securities laws.

Speaker 1

These forward looking statements reflect the company's current expectations, estimates and predictions about future results and are subject to risks and uncertainties. As a result, actual results may differ materially from those expressed or implied. For more information on the risks and other factors that may impact future performance, investors should review the periodic reports that are filed by the company with the SEC from time to time. Additionally, management may refer to certain non GAAP financial measures. The reconciliations to these measures can be found in the company's filings with the SEC, including the company's Form 10 ks.

Speaker 1

The company undertakes no obligation to publicly update or revise any forward looking statements. With that, it is now my pleasure to turn the call over to Greg.

Speaker 2

Thank you, David. Good morning, everyone, and thank you for joining us. We reported net income of $300,000 in Q2 twenty twenty five, which brings our year to date net income to $30,000,000 Fully diluted book value per share increased 0.5% in the quarter and 5.7% for the first half of the year. We reported a combined ratio of 95% for the quarter, translating to $8,100,000 of underwriting income. Our investment in Solar Glass portfolio was down 4% in the quarter, reversing a portion of the Q1 outperformance.

Speaker 2

David will provide more color on this in his remarks. Q2 was a benign quarter from a cat activity perspective. We have updated the definition of cat event loss to be individual catastrophe loss to us of 5,000,000 or more net of reinsurance recoveries. We also started reporting known large loss events defined as losses between 1,000,000 and $5,000,000. The net financial impact of prior year adverse loss development was $2,600,000 or 1.6 combined ratio points.

Speaker 2

Farr Marz will elaborate on loss development for each segment momentarily. Our underwriting results in the second quarter was largely unaffected by our previous reserving actions on related to the California wildfires and Russia Ukraine aviation losses. On the latter, we had strengthened our reserves in Q4 of last year, and the long awaited outcome of a UK trial in the second quarter validated our early decisive action on this. As mentioned on our previous quarter call, we have started to non renew a significant portion of our open market casualty book. The impact of these non renewals started to flow through our top line in Q2, which was offset by growth in other areas, including FAL and the specialty book.

Speaker 2

We don't have a large renewal book for 07/01, but we are seeing overall market conditions remaining similar to one one and four one with flat to mild single digit decreases in risk adjusted rate change. As we head into the peak of cat season, we feel good about our exposures and are well positioned to weather any storms. During the second quarter, we repurchased $5,000,000 worth of our stock at an average cost of $13.99 per share. We continue to monitor our capital position in light of our various capital metrics, and we'll carefully evaluate opportunities for further share repurchases as part of our overall capital management. Finally, this quarter, we have prepared an investor presentation summarizing our results and strategy, which is available in the Investor Relations section of our corporate website.

Speaker 2

We hope it provides additional context as we continue our efforts to communicate more broadly with shareholders. Now I'd like to turn the call over to David.

Speaker 3

Thanks, Greg, and good morning, everyone. The Solace class fund returned negative 4% in the second quarter. The long portfolio and macro contributed 1.23.5% respectively, while the short portfolio detracted 8.9%. During the quarter, the S and P 500 index advanced 10.9%. Our biggest problem during the quarter were the lack of winners in our long portfolio and a strongly rising market.

Speaker 3

The largest positive contributors were long investments in gold and Kinderall Holdings, equity index hedges, and macro positions tied to a weaker US dollar and lower short term interest rates. The largest detractors included a short position in a profitless technology company and a health care equipment business. BOL was the largest positive contributor as its price appreciated about 6% over the quarter. Cinderel Holdings shares advanced 34% during the quarter. In May, the company announced strong quarterly results marked by a return to positive net revenue growth and a significant increase in new customer signings.

Speaker 3

Also, the company raised its guidance for fiscal year twenty twenty six. In macro, our SOFR futures position benefited as the market priced in additional interest rate cuts from the Federal Reserve. Also, our long euro and yen positions were positive contributors as the dollar weakened further. The largest detractors included several short positions primarily in profitless tech and similarly speculative companies, which all rallied significantly. We found ourselves on the wrong side of a couple of short squeezes, which we had to risk manage, which means taking a partial loss.

Speaker 3

In the long portfolio, Bright House Financial declined 7% as the market speculated that a possible takeover may happen at a smaller premium than originally expected or possibly not at all. Throughout the quarter, there was a lot of economic activity designed to get ahead of the tariff implementation. As tariffs have now mostly come into effect on August 1, we believe that there will be a reversal of some of that front running and expect it to show in the data over the next several months. While the losses were mostly on the shorts, our underperformance came mostly on the longs. As we contemplate the reason why, we believe that the economy is doing worse than generally understood as many of the companies, actually on both sides of our book, are reporting weak results.

Speaker 3

The main difference is that the investors have more commitment to look through the weakness on our short names than on our long names. Our net exposure ended the quarter at about 2%, down from 20% at the end of the first quarter. Solace Glass returned negative 4% in July, bringing the twenty twenty five year to date return to negative 1.2%. Net exposure for the investment portfolio was approximately 7% at the July. We continue to make progress on our underwriting portfolio and expect that the repositioning away from open market casualty into other better risk adjusted lines will contribute to our results over the intermediate term.

Speaker 3

Last week, we held our Annual Shareholders Meeting and I'm pleased to announce that all the proposals passed by over 90%. I want to thank all of our shareholders for their vote of confidence. And now I'd like to turn the call over to FarMars to discuss the financial results.

Speaker 4

Thank you, David, and good morning, everyone. During the 2025, Greenlight, we reported a net income of $300,000 or $01 per diluted share compared to a net income of $8,000,000 or $0.23 per diluted share during the 2024. The consolidated underwriting income was $8,100,000 resulting in a combined ratio of 95%, which was 4.9 points better than second quarter last year, primarily due to no cat losses in the quarter. Our investments in the Solace Plus Fund lost $18,300,000 during the second quarter, while other investments earned $10,500,000 income, the majority of which related to interest on restricted cash and cash equivalents collateralizing our obligations to cedents. Now let's look at the second quarter results by segment.

Speaker 4

For the quarter, the Open Market segment grew net written premiums by 8% to $142,100,000 The increase was driven primarily from growth in the FAL business. Meanwhile, the casualty premiums decreased during the quarter as a result of nonrenewing the casualty book. The open market combined ratio for the second quarter improved by 2.1 points to 92% compared to 94.1% for the same period in 2024. The current year loss ratio increased by 1.8 points, primarily related to the casualty book and a transactional liability program. The higher loss ratio was offset by lower acquisition cost ratio, which improved by 3.1 points on lower commissions.

Speaker 4

The segment reported a net favorable loss development of 900,000 or 0.7 combined ratio points, resulting from $9,700,000 release of our specialty reserves, partially offset by reserve strengthening of casualty and multiline programs and a transaction liability program. The Open Market segment reported a pretax income of $16,800,000 composed of underwriting income of $11,200,000 and investment income of $5,600,000 The Innovation segment grew net written premiums by 2.3% to $22,700,000 during Q2. The increase was mainly driven by Syndicate three thousand four fifty six and some specialty programs, partially offset by decrease in casualty premiums. Our whole account quota share retro program, which incepted in Q4 twenty twenty four, also contributed to lower net earned premiums compared to the same quarter of last year. The combined ratio for Innovation segment was 107 during the second quarter compared to 90.9% in Q2 last year.

Speaker 4

Unfavorable prior year reserve development contributed 11.8 points to the Innovation segment combined ratio compared to favorable development of 6.5 points in Q2 twenty twenty four. The 2,500,000 of adverse reserve development related to two specific programs that reported greater number of claims than expected. We are already working with our partners to implement corrective actions on these programs. The combined ratio benefited from lower attritional loss ratio and lower acquisition cost ratio, which improved by 0.8 points and 5.1 points, respectively. The expense ratio for the Innovation segment this quarter was 7.6% compared to 3.9% during the same quarter last year due to a combination of growth in personnel and increase in direct costs attributable to the segment and lower earned premiums.

Speaker 4

Outside of the two segments, the runoff homeowners' property contracts suffered adverse development of $1,500,000 during the second quarter. Foreign exchange gains in the quarter were 6,300,000.0 primarily driven by our British pound sterling denominated balances as the pound strengthened against the U. S. Dollar. We ended the 2025 with our fully diluted book value per share growing to $18.97 an increase of 7.5% since the 2024.

Speaker 4

This included the impact of the $5,000,000 of shares repurchased in the second quarter. That concludes our prepared comments. The operator will now open the line for questions.

Operator

Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. Answer Once again, at this time, ladies and gentlemen, we'll be conducting a question and answer session. Session. If you'd like to be placed into question queue, please press star one on your telephone keypad.

Operator

A confirmation tone will indicate your line is in the question queue. You may press 2 if you'd like to move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. We reached the end of our question and answer session.

Operator

Should you have any follow-up questions, please direct your call to Karen Daley of Liberty Group Inc. At irgreenlightre. Ky. We'll be happy to assist you. This now concludes Greenlight Re's second quarter twenty twenty five earnings conference call.

Operator

Thank you. You may now disconnect.

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