Q3 2022 Greenlight Capital Re Ltd Earnings Call

Thank you for joining the Greenlight already conference call for the third quarter of 2022 earnings.

The company reminds you that forward looking statements that may be made in this call are intended to be covered by the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Forward looking statements are not statements of historical fact, but rather reflect the company's current expectations estimates and predictions about future results and events are subject to risks uncertainties and assumptions, including those enumerated in the company's Form 10-K for the year ended December 30 <unk>.

<unk> 2021 Form 10-Q for the three months ended March 31, 2022, and other documents filed by the company with the SEC.

If one or more risks or uncertainties materialize or if the companys underlying assumptions prove to be incorrect actual results may vary materially from what the company projects the.

The company undertakes no obligation to update publicly or revise any forward looking statements, whether as a result of new information future events or otherwise as except required by law.

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

I would now like to turn the call over to Green Light <unk>, Chief Executive Officer, Mr. Simon Burton. Please go ahead Sir.

Good morning, and thank you for joining us today to discuss our third quarter results.

And a key performance metric is change in book value per share, which decreased during the third quarter by three 9% any reduction is a disappointment.

Our performance was relatively good in the context of the severe challenges that the overall reinsurance industry faced this quarter.

Hurricane Ian struck late in September and is yet to be fully assessed by the industry. Although it is likely one of the costliest insurance events in history.

Although natural catastrophes occurring during the third quarter included two typhoons impacting Japan and South Korea.

These wind storms added 19 points to our third quarter combined ratio.

In the past years, we have been steadily reducing our exposure to headline natural catastrophes as a negative sentiments on exposure and tail risk outpaced the level of rate increases.

On the other side of the industry balance sheet. The rapid increase in bond yields has for the second successive quarter hit those with fixed income investment strategy is very hard.

Most equity strategies haven't said much better.

Our investment result was excellent in the third quarter.

Relative to the reinsurance industry as a whole our investment strategy is working well and has allowed us the level of capital preservation on available to more traditional reinsurance balance sheets with significant fixed income exposure.

Looking forward, it's difficult to overstate the tailwind we are seeing in our core reinsurance business.

Underwriting conditions at the start of 2022 were very good.

Our opinion they were the best in over a decade.

The industry has since seen an unusual confluence of events through the UK.

In Ukraine, Russia Wall, a series of natural catastrophes, including Hurricane in claim inflation and investment losses from multiple sources.

So from a sentiment perspective, it is clear that reinsurers all determined to achieve better pricing and terms across a range of short tail specialty classes led by property catastrophe to achieve some level of payback following several years of underperformance.

It's a helpful dynamic, although the real driver of effective pricing will be the imbalance in supply and demand.

We're already receiving urgent request for reinsurance support from our customers and it's clear the reinsurance capital is presently evaluable as gas commodity.

In previous market cycles, we have seen inflows of fresh reinsurance capital at times like these lets investors seemed skeptical and fatigue by passing a weak performance and trapped capital, particularly in the catastrophe ILS funds.

This leaves us in a strong competitive position in our short tail specialty on catastrophe costs as the business as we look to the year ahead.

Last month, we announced three promotions and the revised underwriting structure that went with them.

Symbol Griffin was appointed Chief underwriting officer of Greenlight reinsurance Islands Regan tens was appointed Chief underwriting officer of Caymans subsidiary Greenlight reinsurance limit limited.

<unk> is now head of innovations underwriting.

They join R&D glad wind, who is head of UK marketing inactive underwrites, a full green light innovation syndicate to form an underwriting leadership team of four people.

All of these leaders have a deeper understanding of their respective markets and have developed a wealth of close customer relationships.

Each has gained my trust and respect over the last several years.

Turning now to our innovations business. This is the first quarter of the last day that we haven't posted significant investment gains to our carrying values. This isn't a surprise as many of our largest partners had completed capital raises over the past year, which is generally less them in a strong financial position.

Looking ahead, the combination of an improved insurance operating environment for everybody, including Tech enabled startups and the re emergence of a buyer's market and early stage investments. This made our overall innovation thesis even stronger for.

For the year to date is about 12% of our total net written premium is derived from our innovations business and the pipeline of attractive opportunities continues to grow.

You may have seen the announcement that we are hosting an investor day in New York City on Thursday November 17, starting at noon.

We're looking forward to seeing many of you there in person for the first time in a few years. If you would like to attend please contact Karen daily of the equity group.

Iowa, Greenlight re dot Ky, she will be happy to send you the details.

Now I'd like to turn the call over to David.

Thanks, Simon and good morning, everyone. The solid class fund returned three 6% in the third quarter. Our longs contributed 6% of short portfolio detracted, 110th of 1% and macro detracted one 4% during the quarter. The S&P 500 index declined four 9%.

Long positions in Atlas Air and Green brick partners and a short position to manage green bricks housing sector exposure, where our largest positive contributor.

Okay contributions.

And two undisclosed short positions, where the biggest detractors.

Outlets are worldwide was our biggest winner during the quarter Ishares advanced 55%. After the company received a takeover bid from a group of private equity investors at $102 50 per share. We believe the consortium is getting a great deal, but we are a content to exit our two plus year investment for a large gain after the deal was.

Yeah.

Green brick partners shares advanced 9% during the quarter. After the company announced its second quarter earnings of $2 <unk> per share, which beat the consensus estimates by nearly 70%.

During the quarter. The company was also added to the S&P 600 small cap index. We believe the quarterly share price gain was held in check due to the widely publicized slowdown in housing demand as mortgage rates spiked at the fastest rate in decades, Nonetheless, green brick outperformed its peers and as a result, the short position we added.

In August and a basket of homebuilders to hedge housing sector risk was also positive for us during the quarter.

The price of gold declined eight 1% during the quarter as investors preferred to shine and this is the now higher yielding cash alternatives and treasury bonds to the precious metal we remain concerned that the current global inflation problem could metastasized into a full fledged sovereign debt crisis somewhere and believe that continuing to Hong Kong. Despite.

The possibility of further short term weakness is prudent.

Aside from Twitter, which we've exited into the completed deal we didnt add any new material long positions during the quarter and quite frankly, we havent been doing much buying all year.

With the capital we recently received from the Twitter deal closing, we're building our stockpile to dry powder for potential opportunities in the coming quarters.

We're in a bear market and we expect it to continue for some time.

The solid class portfolio returned six 9% in October and has returned 18, 2% year to date net.

Net exposure in the investment portfolio was approximately 13% at the end of the third quarter down from 20% at the end of the second quarter.

While the losses from Hurricane Ian are frustrating in light of an otherwise calm storm season, we did well on a relative basis and our position to capitalize as the reinsurance market improves further we've a great team and I want to take this opportunity to congratulate Regan Carrington very Griffin, who was recently promoted to the roles of Chief underwriting officer.

Officer in Cayman, and Ireland, respectively, now I would like to turn the call over to Neal to discuss the financial results.

Thank you David and good morning.

Loss for the quarter was $18 $5 million for <unk> 56 per share with.

For the nine months ended September 32022, our net loss was $9 $4 million or 28 cents per share.

We reported an underwriting loss of $18 $9 million during the third quarter.

<unk> ratio of 115, 4%.

The underwriting loss included $19 $5 million of losses from Hurricane Dorian and $3 $2 million from typhoons <unk> and <unk>.

The underwriting loss also included $6 $1 million of expense relating to deposit accounted contracts it could.

Strophe losses in deposit accounting expense contributed 23, six percentage points to the combined ratio.

The comparison the equivalent period in 2021 reported an underwriting loss of $12 6 million.

Which included $25 $9 million of catastrophe losses from Hurricane, Idaho European floods, and Hailstorms in South African riots.

Gross premiums written in the third quarter were one $155 1 million.

An increase of 21% from the third quarter of 2021.

This increase this increase was due to growth in specialty general liability multiline and personal property business, including premium generated by the company's innovations partners our.

Our decision to reduce our purchasing our participation in motor contracts, partially offset this increase.

Premiums ceded were $8 8 million in the third quarter of 2022 and immaterial in the third quarter of 2021.

We reported total net investment income of $11 6 million during the third quarter.

We earned $8 $5 million from our investments in the Solas class fund and recognized an additional $3 million of other investment income primarily from interest earned on our restricted cash.

Total general and administrative expenses incurred during the quarter were $7 4 million up from $6 $1 million in the third quarter of 2021.

The increase was due primarily to higher expenses relating to share based compensation and syndicate 3456.

We include other underwriting expenses of $6 $8 million in the third quarter of 2022, due primarily to foreign exchange losses.

Our non underwriting expenses incurred in the third quarter of 2021 were insignificant.

At the end of the third quarter, our fully diluted book value per share was $13 55 a.

A decrease of three 9% from June 30.

Now I will turn the call back to the operator and open it up to questions.

Thank you.

Conducting a question and answer session.

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I wanted to please poll for questions.

Thank you.

There are no questions at this time.

Should you have any follow up questions. Please direct them to Karyn daily at the equity group at IR at Greenlight, Ari Dot Ky and she'll 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.

Thank you.