Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Greenlight Capital Re Ltd (GLRE, Financial) reported a 9.1% increase in gross written premiums, reaching $169 million compared to the second quarter of 2023.
- The company achieved a net income of $8 million, contributing to a 1.5% growth in fully diluted book value per share for the quarter.
- Excluding US convective storm losses, the portfolio performed well and in line with expectations.
- The specialty book saw a significant increase in net premiums written by 76.4%, primarily within the marine and energy classes.
- Greenlight Capital Re Ltd (GLRE) has grown its book value per share for seven consecutive quarters, with a 11.9% increase over the last 12 months.
Negative Points
- The combined ratio for the quarter was 99.8%, impacted by a higher-than-normal level of catastrophe losses, particularly from US convective storms.
- Current period catastrophe losses amounted to $13.3 million, with significant contributions from US storms, German floods, and other events.
- Net investment income decreased significantly to $12.6 million from $42.2 million in Q2 last year.
- The casualty book experienced a decrease in net premiums written by 8.7%, with a composite ratio increase to 104.9% due to reserve strengthening and higher acquisition costs.
- Total G&A expenses increased by $0.5 million, attributed to growth in headcount across various departments and locations.
Q & A Highlights
Q: How are you thinking about the opportunity to grow the insurance portfolio and earn higher premiums in light of a more sensitive macro backdrop? Are there any lines of business you expect to target if competitors are reducing their risk?
A: Greg Richardson, CEO, explained that despite heightened macroeconomic uncertainty, Greenlight Re's portfolio is resilient due to its strategies. The company is cautious about casualty lines but sees growth opportunities in property and specialty classes. The innovations book is a key area of focus, with plans to partner with capital partners to support growth.
Q: How comfortable do you feel with the current capital allocation, and what led to the higher allocation to the investment portfolio?
A: Greg Richardson, CEO, noted that the Solace Glass fund has delivered superior risk-adjusted returns, making the increased allocation from 60% to 70% accretive. The company maintains a balanced approach to capital allocation across its strategies, including innovations and open market reinsurance, to optimize shareholder returns.
Q: Can you provide more context on the decision to increase the allocation to the Solace Glass fund?
A: David Einhorn (Trades, Portfolio), Chairman, highlighted that the decision was influenced by improved liquidity and balance sheet strength. The company has recovered excess collateral, and the tone with rating agencies has improved. The board is open to further increases in the future, contingent on continued performance and capital position improvements.
Q: What is the outlook for the casualty book, given the current market conditions?
A: Greg Richardson, CEO, expressed caution regarding the casualty book due to inflation and nuclear verdict severity issues. However, Greenlight Re's positions are less susceptible to these problems, and the company remains focused on maintaining a balanced portfolio.
Q: How does Greenlight Re plan to manage its innovations business growth relative to its balance sheet?
A: Greg Richardson, CEO, stated that the innovations business is a significant growth area, but the company aims to keep its net position proportional to its balance sheet. Initiatives are underway to find capital partners to support this growth, ensuring it aligns with overall strategic goals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
