Q2 2024 Greenlight Capital Re Ltd Earnings Call

Speaker Change: Thank you for joining the Greenlight Capital Re Ltd. 2nd Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation.

Operator: Earnings Conference Call. At this time, I'll participate in some of this in only mode.

Operator: At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator: A question and answer session will follow the formal presentation.

Operator: You may press star one at any time's replacement of the question Q.

David Sigmon: It's now my pleasure to turn the call over to David Sigmon, Greenlight Re's General Counsel. You may begin.

Speaker Change: You may press star 1 at any time to be placed into the question queue.

Speaker Change: It's now my pleasure to turn the call over to David Sigmon, Greenlight Regional Council. You may begin.

David Sigmon: Thank you and good morning. I'd 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 investor section of the company's website at www.greenlightre.com.

David Sigmon: Thank you and good morning.

Speaker Change: 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 Investor section of the company's website at www.greenlightre.com.

David Sigmon: Joining us on the call today will be our Chief Executive Officer, Greg Richardson, Chairman of the Board, David Einhorn, and Chief Financial Officer, Faramarz Romer. 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. 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.

Operator: Joining us on the call today will be our Chief Executive Officer, Greg Richardson, Chairman of the Board, David Einhorn, and Chief Financial Officer, Faramarz Romer. 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. These forward-looking statements reflect the company's current expectations, estimates, and predictions about future results and are subject to risks and uncertainties.

Speaker Change: Joining us on the call today will be our Chief Executive Officer, Greg Richardson, Chairman of the Board, David Einhorn, and Chief Financial Officer, Faramarz Romer.

Speaker Change: 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 Change: These forward-looking statements reflect the company's current expectations, estimates, and predictions about future results and are subject to risks and uncertainties.

David Sigmon: Additionally, management may refer to certain non-GAAP financial measures.

David Sigmon: The reconciliation to these measures can be found in the company's filings with the SEC, including the company's recently filed Form 10-Q for the quarter ended June 30, 2024. The company undertakes no obligation to publicly update or revise any forward-looking statements.

Greg Richardson: With that, it is now my pleasure to turn the call over to Greg.

Greg Richardson: Thanks, David.

Greg Richardson: Good morning, everyone, and thank you for joining us today. Green lightry reported gross written premiums of 169 million, up 9.1% compared to the second quarter of 2023. We delivered net income of 8 million, which equates to 1.5% growth in fully diluted book value per share during the quarter, or 6% on an annualized basis. We reported a combined ratio of 99.8% for the quarter. Our underwriting result was impacted by a higher than normal level of current period catastrophe losses, primarily related to the US convective storm season, which added 8.4% to our second quarter combined ratio. US convective storm losses in the second quarter are estimated at over 30 billion dollars, roughly twice the 10-year average.

Speaker Change: Greenlight Re reported gross written premiums of $169 million, up 9.1% compared to the second quarter of 2023.

Greg Richardson: up 9.1% compared to the second quarter of 2023. Our underwriting result was impacted by a higher than normal level of current period catastrophe losses. Our exposure to these events almost exclusively relates to a homeowner's insurance program, which we non-renewed effective January 1st, 2024. While we have some residual exposure to U.S. severe convective storms, the peak U.S. convective storm season of March to June is behind us, and our ongoing exposure is declining rapidly as the 2023 treaty runs off, excluding U.S. convective storm losses Our portfolio performed well in the quarter and in line with expectations, but we are more cautious and casual.

Speaker Change: We delivered net income of $8 million.

Speaker Change: We reported a combined ratio of 99.8% for the quarter.

Speaker Change: primarily related to the U.S. convective storm season, which added 8.4% to our second quarter combined ratio.

Speaker Change: U.S. convective storm losses in the second quarter are estimated at over $30 billion, roughly twice the 10-year average.

Greg Richardson: Our exposure to these events almost exclusively relates to a homeowner's insurance program, which we non-renewed effective January 1, 2024. While we have some residual exposure to US severe convective storms, the peak US convective storm season of March to June is behind us and our ongoing exposure is declining rapidly as the 2023 treaty runs off. Excluding US convective storm losses, our portfolio performed well in the quarter and in line with expectation. We remain positive about the positioning of our portfolio and market conditions in general. At July 1, the renewal season was in line with expectations; re-insurers remained disciplined, and pricing continues to be attractive.

Speaker Change: Our exposure to these events almost exclusively relates to a homeowner's insurance program, which we non-renewed effective January 1st, 2024.

Speaker Change: While we have some residual exposure to U.S. severe convective storms, the peak U.S. convective storm season of March to June is behind us and our ongoing exposure is declining rapidly as the 2023 treaty runs off.

Speaker Change: We remain positive about the positioning of our portfolio and market conditions in general.

Speaker Change: At July 1, the renewal season was in line with expectations, re-insurers remained disciplined, and pricing continues to be attractive.

Greg Richardson: We continue to see attractive opportunities for growth, particularly in the property and specialty classes, but are more cautious in casualty, particularly if there are large original limits involved.

Greg Richardson: I recently returned to the Cayman Islands after spending a couple of weeks in Ireland and the UK, where I had the opportunity to spend extended time with our staff, our brokers, and our clients. Greenlight Re's positioning with our brokers and clients is strong, and we look forward to future growth with them. Greenlight Re is in good shape; we have a strong team, and I am excited about our prospects.

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

David Einhorn: Thanks, Greg, and good morning everyone. The Salas Class 1 returned 1.2% in the second quarter. Our short portfolio added 1.6%, and macro added 0.9%; the long portfolio detracted 1%. During the quarter, the S&P 500 Index advanced 4.3%. The largest positive contributors were long investments in Salve, HP, and Kindle Holdings. The largest detractors were long positions in Brighthouse Financial and Greenbrick Partners in a single-name short. Salve advanced 30% during the quarter. Despite concerns around falling soda ash prices, the company exceeded earnings expectations in the first quarter and maintained its full-year outlook. HP shares gained 16% as PC hardware sales turned marginally positive after 7 quarters of decline, and the company guided to a return of growth for this segment.

David Einhorn: During the quarter, the S&P 500 Index advanced 4.3%. The largest detractors were long positions in Bright House Financial and Greenbrick Partners and a single name short. Salve advanced 30% during the quarter. Despite concerns around falling soda ash prices, the company exceeded earnings expectations in the first quarter and maintained its full year outlook. The third largest detractor was a single name short position that, despite an unexciting earnings update, saw a stock rally on the heels of a company event where it unveiled new AI-related initiatives. When we first started Greenlight RE, we had a vision, but no idea what it would actually eventually become.

Speaker Change: The largest positive contributors were loan investments in Salve, HP, and Kindral Holdings. The largest detractors were loan positions in Bright House Financial and Greenbrick Partners, and a single name short.

David Einhorn: The market might have also begun to show excitement around the prospect of an even larger AI-related PC growth cycle. Kindle Holdings shares advanced 21%, after another positive earnings update, which saw results exceed expectations on all key metrics. Importantly, the company finally guided towards constant currency revenue growth, beginning in its fourth fiscal quarter this year. Gains in the macro portfolio were primarily driven by gold, which appreciated 4% over the quarter. Brighthouse Financial shares fell 16% after announcing for the second quarter in a row a surprising one-off earnings disappointment. This time, it disclosed that it incurred the reinsurance arbitration expense of several $100 million.

Speaker Change: Gains in the macro portfolio were primarily driven by gold, which appreciated 4% over the quarter.

David Einhorn: Greenbrick partner shares fell 5% over the period and made the company announce both record-breaking first quarter earnings and home-builder growth margins. The third-largest detractor was a single-ing short position, which, despite an unexciting earnings update, saw stock rally on the heels of a company event where it unveiled new AI-related initiatives. Our net exposure remained neutral during the quarter. Led by a surge in Greenbrick Partners, the Sawless Glass portfolio returned 4.6% in July and has returned 11.3% year-to-date through July 31. Net exposure in the investment portfolio was approximately 31% at the end of July.

Speaker Change: Greenberg partner shares fell 5% over the period. In May, the company announced both record-breaking first quarter earnings and homebuilder gross margins.

Speaker Change: Our net exposure remained neutral during the quarter. Led by a surge in Greenberg partners, the Solace Glass portfolio returned 4.6% in July and has returned 11.3% year-to-date through July 31st.

David Einhorn: This month is the 20th anniversary of Greenlight Re. I just returned from a board meeting in Dublin where I had the chance to meet our European staff and celebrate this milestone. When we first started Greenlight Re, we had a vision, but no idea what it would actually eventually become. Despite some tough periods, I'm incredibly proud of the team and what we built from the ground up. The company is the strongest it has ever been, and I look forward to the next 20 years. During our board meeting, the board made the decision to increase the allocation to the Salas Glass Fund from 60% to 70% of adjusted book value.

Speaker Change: During our board meeting, the board made the decision to increase the allocation to the Solace Glass Fund from 60% to 70% of adjusted book value. This change was made effective August 1st.

David Einhorn: This change was made effective August 1st.

Faramarz Romer: Now I'd like to turn the call to Faramarz, who will discuss the financial results in more detail.

Faramarz Romer: Thank you, David, and good morning, everyone. During the second quarter of 2024, we generated net income of $8 million or 23 cents per diluted share compared to $49.9 million or $1.32 per diluted share in Q2 2023. The underwriting book generated a small profit of $0.3 million after underwriting-related GNA expenses. Current period catastrophe losses accounted for $13.3 million, the majority of which related to the U.S. severe convective storms, as Greg mentioned. While approximately $5.9 million related to the German floods, the Taiwan earthquake, and then offshore platform fire. During the second quarter, net written premiums increased by $8.9 million or 6.2% to $154.1 million compared to the same quarter in 2023.

Speaker Change: Thank you, David, and good morning, everyone.

Speaker Change: During the second quarter of 2024, we generated net income of $8 million, or $0.23 per diluted share compared to $49.9 million.

Faramarz Romer: or $1.32 per diluted share in Q2 2023, while approximately $5.9 million was related to the German floods, the Taiwan earthquake, and an offshore platform fire. During the second quarter, our net written premiums increased by $8.9 million, or 6.2%, to $154.1 million compared to the same quarter in 2022. Moving to a casualty book, net premiums decreased by $7.4 million, or 8.7%, during the second quarter, primarily related to the Lloyds Syndicate business.

Speaker Change: The underwriting book generated a small profit of $0.3 million after underwriting-related G&A expenses.

Speaker Change: Current period catastrophe losses accounted for 13.3 million dollars, the majority of which related to the US severe convective storms as Greg mentioned.

Greg Richardson: while approximately $5.9 million related to the German floods, the Taiwan earthquake, and an offshore platform fire.

Greg Richardson: During the second quarter, our net written premiums increased by $8.9 million, or 6.2%, to $154.1 million compared to the same quarter in 2023.

Faramarz Romer: The growth related to the specialty book, while the property and casualty books partially offset the increases. The net premiums burned for $158.4 million and increased of $18.5 million or 13.2% compared to Q2 last year. Turning to our specialty book, our net premiums were at an increase of $25.9 million, or 76.4%, during the second quarter, mainly within the marine and energy classes. The composite ratio for the specialty business decreased to 72.2% in the second quarter compared to 76.7% during Q2 last year. The decreased primarily related to favorable loss development within a mortgage and marine and energy classes, partially offset by the offshore platform fire during the quarter.

Greg Richardson: Turning to our specialty book

Speaker Change: Our net premiums were at an increase by $25.9 million, or 76.4% during the second quarter, mainly within the marine and energy classes.

Speaker Change: The composite ratio for the specialty the second quarter compared to 76.7% during Q2 last year.

Speaker Change: The decrease primarily related to favorable loss development within a mortgage and marine and energy classes

Faramarz Romer: Moving to our casualty book, net premiums were at an increase of $7.4 million, or 8.7%, during the second quarter, primarily related to the Lloyd's naked business. The composite ratio for the casualty business was 104.9% in the second quarter compared to 91.4% in Q2 last year. last year. The increase was partially related to higher loss ratio, driven by reserves strengthening on certain legacy casualty contracts, and partially due to higher acquisition costs on the Lloyd's and Nicod Business.

Faramarz Romer: Within a property book, net premiums written decreased by $9.6 million, or 36.2%, during the second quarter, driven primarily by the non-renewed homeowners contract that Greg mentioned earlier. The composite ratio for the property business was 127.5% for the second quarter compared to 122.2% during Q2 last year. The composite ratios during both periods were impacted by the U.S. convective strong losses on the previously mentioned homeowners' contract. Total GNA expenses increased by $0.5 million during the second quarter to $10.5 million compared to $10 million in the second quarter of 2023. The increase primarily related to growth and headcount as we added leaf staff across various departments and locations.

Faramarz Romer: Within our property book, net premiums written decreased by $9.6 million or 36.2% during the second quarter, driven primarily by the non-renewed homeowners contract that Greg mentioned earlier. The composite ratios during both periods were impacted by the U.S. convective storm losses on the previously mentioned homeowners contract. The increase primarily related to growth in headcount as we added new staff across various departments and locations, and on funds deposited at launch. You can register for the event by contacting Karen Daly, our Investor Relations Representative.

Greg Richardson: Within our property book, net premiums written decreased by $9.6 million or 36.2% during the second quarter driven primarily by the non-renewed homeowners contract that Greg mentioned earlier.

Greg Richardson: Total G&A expenses increased by $0.5 million during the second quarter to $10.5 million compared to $10 million in the second quarter of 2023.

Greg Richardson: The increase primarily related to growth in headcount as we added new staff across various departments and locations.

Faramarz Romer: We reported total net investment income of $12.6 million during the second quarter, compared to $42.2 million in Q2 last year. Our investment in the Soros Class Fund reported a gain of $4.3 million or 1.2%, while our innovations in investment reported a small gain this quarter. We earned $8.1 million of interest income on our restricted cash and cash equivalents and on our funds deposited at Lloyds. We have generated $40.7 million of cash from operations during the first half of this year. During the second quarter, we prepaid $10 million of our term loans, bringing down our debt ratio to the lowest level since 2018.

Greg Richardson: We reported total net investment income of $12.6 million during the second quarter compared to $42.2 million in Q2 last year.

Greg Richardson: We earned $8.1 million of interest income on our restricted cash and cash equivalents.

Greg Richardson: and on our funds deposited at Lloyds.

Greg Richardson: During the second quarter, we prepaid $10,000 of our term loans, bringing down our debt ratio to the lowest level since 2018.

Faramarz Romer: We have grown our book value per share for seven consecutive quarters. Over the last 12 months, our fully-dalued book value per share has grown 11.9% as a result of strong underwriting and investment results. As of June 30, 2024, our fully-diluted book value per share was $17.65.

Greg Richardson: We have grown our book value per share for seven consecutive quarters.

Greg Richardson: Over the last 12 months, our fully diluted book value per share has grown 11.9% as a result of strong underwriting and investment results.

Greg Richardson: As of June 30, 2024, our fully diluted book value per share was $17.65.

Faramarz Romer: Before we move to the Q&A session, I want to mention that yesterday we announced that we will be hosting our 2024 Investor Day on November 19th in New York City. We can register for the event by contacting Karen Daly, our investor relations representative. We look forward to seeing you there, and now I will turn the call back to the operator to open it up for questions.

Greg Richardson: Before we move to the Q&A session, I want to mention that yesterday we announced that we will be hosting our 2024 Investor Day on November 19th in New York City.

Speaker Change: You can register for the event by contacting Karen Daly, our Investor Relations Representative.

Speaker Change: We look forward to seeing you there and now I will turn the call back to the operator to open it up for questions.

Operator: Thank you.

Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad.

Operator: Will now be conducting your question and answer session. If you'd like to be placed in the question Q, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question Q. You may press star 2 if you'd like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up a handset before pressing Star 1. Once again, if you'd like to be placed into question Q, please press star 1 at this time. One moment please, while we pull for questions.

Speaker Change: Operator?

Speaker Change: You may press star 2 if you would like to remove your question from the queue.

Eric Hagen: Our first question today is coming from Eric Hagen from BTIG.

Operator: Your line is now live.

Speaker Change: Our first question today is coming from Eric Hagen from BTIG. Your line is now live.

Eric Hagen: Hey, thanks.

Eric Hagen: Good morning. Hope you guys are well. A couple of questions here. I mean, first is how are you thinking about the opportunity to grow the insurance portfolio, earn higher premiums and let it, you know, just listen to narratives surrounding a more sensitive macro backdrop. Would you like there's any lines of business that you expect you can maybe mean into and target if competitors are reducing their risk?

Eric Hagen: Hey, thanks. Good morning. Hope you guys are well.

Eric Hagen: How are you thinking about the opportunity to grow the insurance portfolio, earn higher premiums in light of this new narrative surrounding a more sensitive macro backdrop? Do you feel like there's any lines of business that you expect you can lean into and target if competitors are reducing their risk?

Greg Richardson: Sure, this is Greg. Thanks.

Greg Richardson: That's a great question, Eric. I'll kind of break it into two things. You talk about the macro backdrop. Obviously, let's start with that. Obviously, we're in a period of heightened macroeconomic uncertainty. The fraughty market, which is showing some pullback uncertainty about interest rates, interest rates, global political challenges, and elections coming up. So obviously that's something that affects all financial services, including insurance and reinsurance companies. I would point out that I think the nature of our portfolio, both on the investment side and on the liability side. It makes us more resilient than many other reinsurance companies by nature of the strategies that we employ.

Speaker Change: Thank you.

David Einhorn: I'll kind of break it into two things. You talked about the macro backdrop. I would point out that I think the nature of our portfolio, both on the investment side and on the liability side, makes us more resilient than many other reinsurance companies by nature of the strategies that we employ. So on the investment side, we hedge a lot of macroeconomic risk, and on the liability side, we're not that exposed to longer-tail financial lines, inflation risk, or while we write some mortgage reinsurance, it's a rather modest portion So no one can escape that exposure, of course, but we feel well-positioned.

Speaker Change: This is Greg. Thanks, that's a great question, Eric.

Speaker Change: I would say heightened macroeconomic uncertainty, a frothy

Speaker Change: I would point out that I think the nature of our portfolio, both on the investment side and on the liability side, makes us more resilient than

Speaker Change: Many other reinsurance companies, by nature of the strategies that we employ, so on the investment side, we hedge a lot of macroeconomic risk, and on the liability side, we're not that exposed to

Greg Richardson: So, on the investment side, we hedge a lot of macroeconomic risk. And on the liability side, we're not that exposed to long retail financial lines inflation risk. Or while we write some mortgage reinsurance, it's a rather modest portion of our portfolio. So no one can escape that exposure, of course. But we feel well positioned. And I would perhaps point out to our experience in 2022 when there was inflation-driven interest rate shock. And I think green light probably outperform almost every insurance or insurance company in the world on that measure. So macroeconomic risk, obviously, is a factor.

Speaker Change: Longer Tail Financial Lines, Inflation Risk, or while we write some mortgage reinsurance, it's a rather modest portion of our portfolio.

Speaker Change: You know, no one can escape that exposure, of course, but we feel well-positioned and I would perhaps point out to point out to you our experience in 2022 when There was an inflation driven interest rate shock

David Einhorn: And I would perhaps point out to you our experience in 2022 when there was an inflation-driven interest rate shock, and I think Greenlight probably outperformed almost every insurance or reinsurance company in the world on that measure, and Brian O'Reilly. And the challenge is, it is innovation. It's forward-looking. It takes courage, and it takes conviction.

Greg Richardson: And then within the reinsurance world and the insurance world, we worried about the cycle that's going on. We remain in a strong position overall. We think where there's it's probably peaked in most lines. But in property cashews, I pointed property and specialties. I pointed out we find the rates still to be quite attractive and opportunities for growth. Casually, some more complicated story. And so we're a little bit more cautious on that, but we think our casually positions are less susceptible to the inflation and nuclear verdict severity problems that many, many companies are struggling with.

Speaker Change: Casualty is a more complicated story and so we're a little bit more cautious on that but we think our casualty positions are less susceptible to the inflation and and

Speaker Change: Nuclear verdict severity problems that many many companies are struggling with. You highlighted the insurance play and that's our one of our

Greg Richardson: You highlighted the insurance play, and that's one of our aspects of our business that we're most proud of. Obviously, you know, we're noted for having superb investment acumen, and that, and that's our hallmark of green light, in many respects. But coming up close second to that, we share a similar pride in our innovations book. What we have built there in the leadership of Brian O'Reilly is nothing short of extraordinary. and the challenges, it is innovations, it's forward-looking, it takes courage and it takes conviction, and there's some learnings along the way that we've had, but we're really excited about the well-diversified portfolio that we have.

Speaker Change: were noted for having superb investment acumen, and that's the hallmark of Greenlight Re in many respects.

Speaker Change: But coming up close second to that, we share a similar pride in our innovations book. What we have built there under the leadership of Brian O'Reilly is nothing short of extraordinary.

Speaker Change: forward-looking. It takes courage and it takes conviction.

David Einhorn: And there are some learnings along the way that we've had, but we're really excited about the well-diversified portfolio that we have. It's a portfolio that is very niche-oriented. In some cases, linked to new distribution mechanisms of the new economy and growth driven by the new economy, we avoid certain kinds of wholesale commodity reinsurance capacity lines which are subject to either large event risk or systematic pricing risk. So again, like macroeconomic risk, nobody can avoid the cycles in reinsurance or insurance.

Greg Richardson: It's a portfolio that is very niche-oriented. In some cases, linked to new distribution mechanisms of the new economy and growth driven by the new economy, we avoid sort of wholesale commodity re-insurance capacity lines, which are subject to either large event risk or systematic pricing risk. Again, like macroeconomic risk, nobody can avoid the cycles in re-insurance or insurance. We think the innovations book is probably more resilient with respect to those forces. If we do nothing to grow or build our innovations business beyond the positions we have, there will be potential for significant growth just within the existing portfolio.

Speaker Change: or systematic pricing risk. So, well, again, like macroeconomic risk, nobody can avoid the cycles in reinsurance or insurance. We think the innovations book is probably more resilient with respect to those forces.

David Einhorn: We think the innovations book is probably more resilient with respect to those forces. Potential for significant growth just within the existing portfolio at the same time There are is a terrific pipeline of new opportunities our issue with with Innovations is not the attractiveness of the business. It's the the growth Relative to our balance sheet so key to that is is finding Capital partners to partner with us or with us in that area and we've launched initiatives to do just that and highly confident Given the level of interest we've heard to date that we're going to be able to execute on that plan, So, you know, you started out by talking about insurance, that is a big opportunity, but we want to keep our net position in proportion with our balance sheet and with the other strategies that we have that include Solace Glass, that include open market reinsurance, that includes innovations, and also will include over time capital management in a small measure as well, all of which is geared towards optimizing and driving ROE, which I would argue is the, My highest mission and highest goal is to improve shareholder

Speaker Change: to grow or build our innovations business beyond the positions we have, there will be

Greg Richardson: At the same time, there is a terrific pipeline of new opportunities. Our issue with innovations is not the attractiveness of the business; it's the growth relative to our balance sheet. Key to that is finding capital partners to partner with us in that area. We've launched initiatives to do just that, and highly confident given the level of interest we've heard to date that we're going to be able to execute on that plan as well. You start out by talking about insurance; that is a big opportunity, but we want to keep our net position in proportion with our balance sheet and with the other strategies that we have that includes sales class, that include open market re-insurance, that includes innovations, and also will include overtime capital management in a small measure as well.

Speaker Change: Our issue with innovations is not the attractiveness of the business, it's the growth relative to our balance sheet.

Speaker Change: and with the other strategies that we have that include Solaris Glass, that include open market reinsurance.

Speaker Change: that includes innovations and also will include, over time, capital management in a small measure as well, all of which is geared towards optimizing and driving ROE, which I would argue is the

Greg Richardson: All of which is geared towards optimizing and driving ROE, which I would argue is my highest mission and highest goal is to improve shareholder returns over time.

Eric Hagen: That was a really helpful response. I appreciate you guys. We picked up a little bit on the re-insurance portfolio and the investment portfolio. How comfortable do you guys feel with the current capital allocation? Any perspectives on the higher allocation to the investment portfolio? Just in light of how well reserved you guys are, how well you feel if you are prepared to do it right now. What do you feel like you can crack it in areas where you feel like you can go ahead and crack even more capital to the investment portfolio?

Unidentified Speaker: How comfortable do you guys feel with the current capital allocation? Any perspectives on what led to the higher allocation to the investment portfolio, just in light of how well-reserved you guys are, how well you feel you are? Where you feel like you could direct even more capital to the investment portfolio?

Greg Richardson: Thank you, guys.

Speaker Change: where you feel like you can direct even more capital to the investment portfolio. Thank you, guys.

Greg Richardson: Yeah, I'll take a crack at that, but I'm sure David or farmers might want to chime in on that. When you look at our investment portfolio over 20 years, it's delivered superior risk-adjusted returns, true alpha in the financial sense. But when you look at it in the context of a re-insurance company and the risk capital that we allocate, it's even better. Our Solar Glass investment returns on risk capital as we allocate and think about that scarce resource that we have: the risk-bearing capacity. The returns over the past several years on the Solar Glass have been superior, probably the best returning aspect of our business, so it is accreted to us to increase that allocation.

Unidentified Speaker: Yeah, I'll take a crack at that. But I'm sure David or Faramarz might want to chime in on that.

Unidentified Speaker: But when you look at it in the context of a reinsurance company and the risk capital that we allocate to that, it's even better; investment returns on risk capital as we allocate and think about the that scarce resource that we have is the risk-bearing capacity. The returns over the past several years on the SOS bus have been superior, probably the best-paying aspect of our business. So it is attractive to us.

Speaker Change: when we

Speaker Change: our Solus glass

Greg Richardson: If you start increasing it wildly large, then it starts consuming disproportionate amounts of capital, and those returns on risk capital begin to diminish. But it is absolutely accreted to make this increase from 60 to 70 percent, and we have the excess capacity to do that, so that is, from an economic standpoint, a very smart move to make. The open market reinsurance also continues to be generating very attractive on a pricey basis risk adjusted returns. Now that is obviously the actual return is going to vary with events. We had to pop in the first quarter from the rich in Baltimore.

Unidentified Speaker: If you start increasing it wildly, then it starts consuming disproportionate amounts of capital, and those returns on risk capital begin to diminish, but it is absolutely accretive to make this increase from 60 to 70 percent, on a pricing basis, risk-adjusted returns. Now, obviously, the actual returns are going to vary with events. You know, we had a pop in the first quarter from the bridge in Baltimore.

Speaker Change: If you start increasing it wildly large, then it starts consuming disproportionate amounts of capital and those returns on risk capital begin to diminish. But it is absolutely accretive to make this increase from 60 to 70%

Speaker Change: On a pricing basis, risk-adjusted returns. Now, that's obviously the actual returns are going to vary with events. You know, we had a pop in the first quarter from the bridge in Baltimore. We had some unfortunate severe convective storm losses.

David Einhorn: We had some unfortunate severe convective storm losses from that legacy contract that is in runoff, but the ongoing portfolio we believe continues to generate very attractive returns on capital, and so we see opportunity to grow there. In the future, all good things come to pass, and at some point, prices will not be as attractive, and then we will have to pair back and adjust our portfolio accordingly. What I like about green life is the optionality that we have. The innovation is going to be a growing foundation of steady properties that we have enormous influence and control over.

Unidentified Speaker: We had some unfortunate, severe convective storm losses from that legacy contract that's in runoff, but the ongoing portfolio, we believe, continues to generate very attractive returns on capital. And so we see opportunity to grow there. In the future, you know.

Speaker Change: And so we see opportunity to grow there. In the future, you know...

Unidentified Speaker: Innovations is going to be a growing foundation of steady properties that we have enormous influence and control over. We think attractive margins. The open market reinsurance business is obviously more cyclical and opportunistic.

Speaker Change: Innovations is going to be a growing foundation of steady properties that we have enormous influence and control over. We think attractive margins.

Greg Richardson: We think attractive margins. Open market reinsurance is obviously more cyclical and opportunistic, but we have the option to dial that up and dial it down, and then the investment, we have a terrific amount of optionality that we can go long, we can do it short, we can be net, we can provide, we think, attractive returns in all kinds of market conditions.

Speaker Change: Open market reinsurance is obviously

Unidentified Speaker: But we have the option to dial that up and dial it down. And then, for the investment, we have a terrific amount of optionality there. We can go long, we can go short, we can be neutral. We can provide, we think, attractive returns in all kinds of market conditions.

David Einhorn: I want to leave it at that, and farmers and David, if you wanted to, either add or correct anything I've just said. There's nothing to correct, but I might just add a little bit, just in terms of a little bit of a longer term perspective toward the allocation to the solid class. As probably everybody on the call knows, the company a few years ago went through a period of very significant stress. We had a large capital loss around 2018, and this triggered a great deal of concern from everybody involved, including the board, including the management, including the rating agencies. The stock obviously performed extremely poorly and deservedly so.

Unidentified Speaker: There's nothing to correct, but I might just add a little bit, just in terms of a little bit of a longer-term perspective on the allocation to the SOLACE class. Including the board, including the management, including the rating agencies, the stock obviously performed extremely poorly and deservedly so. This led to a change in the allocation to the managed account, which was in a different form at that time but subsequently has been renamed and reconstructed as Silas Glass. And we had a significant cut to the allocation that we had here, such that the liquidity position of the company is dramatically better than it was even just a couple of years ago.

Speaker Change: either add or correct anything I've just said.

Speaker Change: As probably everybody on the call knows, the company a few years ago went through a period of very significant stress.

Speaker Change: We had a large capital loss around 2018, and this triggered a great deal of concern from everybody involved.

David Einhorn: This led to a change in the allocation to the managed account, which was in a different form at that time, but subsequently has been renamed and reconstructed as Solid Class, and we had a significant cut to the allocation.

Speaker Change: This led to a change in the allocation to the managed account.

Speaker Change: which was in a different form at that time but you know subsequently has been renamed and reconstructed as solid glass and we had a significant cut to the to the allocation that we had.

David Einhorn: We had. Since then, I think the period of stress has dissipated. You know, the stress that came from the various actions also impacted the liquidity of the business because, on the reinsurance side, counter parties were demanding more collateral, and the company did not have excess liquidity. We had always had adequate liquidity, but we really didn't have excess liquidity. And so liquidity was a factor in figuring out how much we could reasonably allocate to the investment side. Now, over time, as the underwriting results have improved, as the investment results have improved, as the balance sheet has improved, and Faramarz has done a great job on this.

Speaker Change: Since then, I think the period of stress has dissipated. The stress that came from the...

Speaker Change: And so liquidity was a factor in figuring out how much we could reasonably allocate to the investment side.

David Einhorn: We've begun substantially recovering some of the excess collateral that was being posted to counterparties, such that the liquidity position of the company is dramatically better than it was even just a couple of years ago. Similarly, I don't want to speak for the rating agencies, but from my perspective, the tone of those conversations has improved materially, and the company is in a better position in all directions. Now, we have brought on Greg as a new CEO, and he's been in the process over the last few months, beginning to think about his framework for how he thinks that the company under his leadership should be allocating capital.

Speaker Change: Similarly, I don't want to speak for the rating agencies, but from my perspective, the tone of those conversations has improved materially, and the company is in a better position in all directions.

Speaker Change: Now we have brought on Greg as a new CEO and he's been in the process of

Greg Richardson: over the last few months, beginning to think about, you know, his framework for how he thinks that the company, under his leadership, should be allocating capital, and I think he hinted at that a bit.

David Einhorn: And I think he hinted at that a bit. The board has been responsive to all of these changes. I'm pleased that we were able to announce this morning that, as of August 1st, we have allocated an additional 10% of the adjusted equity to the Salis Glass portfolio. And I believe that as things continue to improve, as liquidity improves, the capital position improves, and the performance continues to be sustained at attractive levels, I believe that the board and the management and the rating agencies, ultimately over time, will become sympathetic towards additional increases to the Salis Glass allocation.

Greg Richardson: The board has been responsive to all of these changes.

Speaker Change: that we were able to announce this morning that as of August 1st, we had allocated an additional 10% of the adjusted equity.

Speaker Change: to the solace glass.

Speaker Change: I believe that as things continue to improve, as liquidity improves, the capital position improves and the performance continues to be sustained at attractive levels, I believe that the board and the management and the rating agencies ultimately, over time, will become sympathetic.

David Einhorn: But it's not going to happen in a big step function. It's going to be maybe more baby steps like we went from 50 to 60, and now we've gone from 60 to 70. And if we continue progressing, there should be room for further increases in the future.

Speaker Change: towards additional increases to the solace class allocation. But it's not going to happen in a big step function. It's going to be maybe more baby steps, like we went from 50 to 60, and now we've gone from 60 to 70.

Speaker Change: And, you know, if we continue progressing, there should be room for further increases in the future.

Eric Hagen: We appreciate you guys looking forward to the investment. Thank you so much. Thank you.

Unidentified Speaker: We appreciate you guys and are looking forward to the rest of it. Thank you so much.

Speaker Change: We appreciate you guys and looking forward to the investor day. Thank you so much.

Operator: We reached out to our question-and-answer session. If you have any further follow-up questions, please direct them to Karen Daley of the Equity Group Inc. at IR at GreenLightReed.ky. And she'll be happy to assist you.

Speaker Change: Thank you. We've reached the end of our question and answer session. Should you have any further follow-up questions, please direct them to Karen Daly of the Equity Group, Inc. at ir at greenlightre.ky and she'll be happy to assist you.

Operator: This now concludes GreenLightReed's second quarter of 2024 earnings conference call. Thank you.

Operator: This now concludes Greenlight Re's second quarter 2024 earnings conference call. Thank you. You may now disconnect.

Speaker Change: This now concludes Greenlight Re's second quarter 2024 earnings conference call. Thank you. You may now disconnect.

Operator: You may now just