Q3 2020 Greenlight Capital Re Ltd Earnings Call

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Thousand 19, and other documents filed by the company with the S E C.

If one or more risk or uncertainties materialize or if the company's underlying assumptions proved to be incorrect actual results may differ materially from what the company projects. The company undertakes no obligation to update publicly or revise any forward looking statements whether as a result of new information, if you procure events or otherwise X.

As required by law.

After the prepared remarks, we will be conducting a question and answer session for those who would like to ask a question. Please press star one to be added to the question queue.

These note this event is being recorded.

I would now like to turn the conference over the Green light reasons C E O. Mr. Simon Burton. Please go ahead Sir.

Good morning, and thank you won't won't hold today.

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What's the market phone calls.

Marvel.

The insurance industry.

And forms a walk in the cold for it was unusual in two days.

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Frequency in small to medium size natural catastrophes, including Hurricanes extreme online storms and Walt Watters.

Clients in Investor interest in their products as the benefits of digital transactions become clearer and lockdown situations.

We continue to see compelling new opportunities for early stage strategic partnerships and expect further growth in this area of that business.

Now I would like to turn the call over to David.

Thanks, Simon and good morning, everyone.

Following the company's announcement of a five for one stock split in August and a potential inclusion in the S&P 500 index. We believe market behavior. Like this is emblematic of the media surrounding a small universe of story and other tech stocks. It is our view that we are now in the early stages of the bubble popping.

As a result, we have shorted, a basket of high flying stocks and recent ipos trading it excessive valuations.

Our long book contains businesses that are uniquely positioned to do well in this environment. So just change healthcare, which owns the largest medical claims clearinghouse and has benefited from a ramp up in health care volumes as people have resumed elective procedures and Atlas Air worldwide Holdings, which owns and operates the world's largest fleet of freighter.

This passenger travel down there is a shortage of airfreight capacity in freighters like Atlas Air I've been able to command a premium to ship commercial goods.

Mmm.

The increase was due primarily to increases in workers compensation business and also in specialty logs, which includes crop and energy contracts as well as health health business generated by our innovations initiatives.

On a year to date basis grew.

Gross premiums written down 15%, primarily as a result of our decision not to a new certain personal motorcar.

Total general and administrative expenses incurred during the quarter or $5.2 million, representing a decrease of $2.6 million or approximately 33% from the prior year period.

Decreased when she primarily to lower stock compensation and other personnel costs as well as the normal occurrence of expenses related to our 2019 strategic review.

We reported total net investment income of $6.9 million during the third quarter of 2020, which includes med investment income of six $4 million, an hour investment and soulless class.

During the third quarter, we would we would purchase approximately 700000 chairs and an average cost of $6.87 per share. According to a discount of 43% off our September 30th fully diluted book value per share.

Turn the call back to the operator and open it up to questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If you were using a speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press Star then too at this time, we will pause momentarily to assemble our roster.

The first question is from Mackellar episode, though from solo capital Management. Please go ahead.

Well. Thank you for taking my questions very quickly. The first one is after the sale of the insurance separation was dropped D. Stealing contain offers for the operation are that is I bet you that he permanently closed.

Second question is the technical on that perhaps I'm mistaken around computers.

But I believe that the hedge fund solid glasses, a mirror image of the Hudson and I believe that the hedge fund raised seven per cent during October verses two plain one person.

That so a classmate.

Perhaps those who are not comparable buddy.

If that's the case I I would appreciate a clarification and finally.

I was curious about the pace of buybacks sure is triggering.

Having said that there's a great deal of competition for our capital we have lots of good ideas for our capital and we're obviously balancing those interest as we go forward.

Yes, let me let me just jump in agriculture.

Let me just jump in and add there that relating to the difference in performance. The when you talk about for example, the relatively low net exposure and so forth Adnan solace glass. The overall level investment is lower on a gross basis compared to capital and it is.

Had a green light hedge funds and.

And the financial model that you expect longer term to provide basically a return the shareholder then.

Meaningfully in excess of of.

Of the market return and I guess, what I'm wondering is like what level of combined ratio and what level of gross exposure you expect the company to use longer term.

Outperformed the market such that.

Like it it meaningfully outperforms the.

I would just add to answer your question a little bit further as we've done in the planning for 2021, if we can get near our internal plan, we would chief what you are suggesting next year.

Meeting.

Meaning you, meaning a return that exceed cost of capital basically.

Hi, good that that's what you were interpreting okay.

Okay, Yes, and I think that the cost of capital and I think that the cost of capital is high right now given the implications of the stock price.

Okay.

And can you just elaborate a little bit David you said that share buybacks are the highest and best use of capital.

And just trying to reconcile that comment with.

With a basically 70% ballpark, 70% risk.

Risk free return to shareholders.

And and how you think about the option to use effectively all of your capital.

Or that use by buying.

By approximately returning that to shareholders.

Yeah, we can't two and look we're not going to do a liquidation that the business. So we need to routine enough capital to not be doing in liquidation in the business. Further we think that there are opportunities in the business that have adequate returns on capital and should be taken advantage of.

Particularly in light of the rapidly improving market conditions.

Relating to the constraints as I alluded to before they are trading constraints related to percentage of volume and such I.

I just looked up while we were glad you're asking the last question approximately 8 million shares traded last quarter. So we were approximately 9% of the trading volume in the in the share repurchase.

You know, we're somewhat limited by percentage of volume constraints. So if people would like to sell more stock more quickly or trade. The stock more quickly, we would probably be able to repurchase shares more quickly.

The next question is from Suliman, So Ronny would try cap investments. Please go ahead.

Hi, Thank you for taking my question David.

David You mentioned about the divergence off for five minutes between solace flat and your hedge fund and the reason is that the amount of capital.

Thats used and I think.

Oh, the position that should peaking at sort of flat, it's not as aggressive as for their hedge fund and if I remember correctly, I think maybe last quarter or the quarter before you said that gradually you win.

He gave to the theme you know physician level as for your hedge fund so any any insight into when we could expect that to happen with any member.

Last year the yard before then capitalization was strong the returns all saw this glass or the funds managed for the insurance company used to ready they love to large tend to think that it does on the hedge fund.

So any any any any timeline as to when the divergence where they produce.

Yeah last quarter I believe I said that we would try to.

Increased the amount not not converged dms completely so I think you Miss stated, what I said or misunderstood, what I said a quarter ago.

We have already made improvement in the level of investment.

As of September Thirtyth cecity, the hedge funds, but is still substantially less and it will remain substantially less until we until the board decides to.

Change that and I'm not sure that that when that well when that will happen further in the future. Among other things, we probably need to build more capital in the company in order for that to occur.

Sure. So in terms of the magnitude of divergence right should we expect so sorry this quarter right. They're gone for the SaaS glass is about two and a half 2% end of hedge fund was north of 7%. So that's quite a significant more than double the divergence is that what we should expect going forward our <unk> equity.

Also change.

It should be somewhat less than that.

The there's one particular condition green brick partners, which has an outsized waiting in the hedge fund and at the solace glass. It is constrained by the investment guidelines that we have and so our best performing thing although it was a very large contributor to solace glass.

Was more underway there than some other things within that within the funds and that contributed to the divergence.

This concludes our question and answer session session should you have any follow up questions. Please direct them to Adam prior of the equity group Inc. at 2128369, 606, and he will be happy to assist you.

We also remind you that a replay of this call and other pertinent information about Greenlight re is available on our website at www Dot Greenlight re dot Com. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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