Q1 2025 Greenlight Capital Re Ltd Earnings Call

Speaker Change: Thank you for joining the Green light capital re limited first quarter 2025 earnings conference call. At this time all participants are on a listen only mode. A question and answer session will follow the prepared comments you may press.

Speaker Change: Time to replaced in the question queue. It is now my pleasure to turn the call over to David Sigman.

Speaker Change: Three might Reese General counsel. Thank you. Please go ahead. Thank you 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 and audio replay will also be available nanim.

Greg Richardson: Website at Www Dot Greenlight re dot 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 Farmar's Roamer.

Greg Richardson: Sign 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 subjects.

Speaker Change: 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.

Speaker Change: 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 recently filed Form 10-K for the year.

Speaker Change: 431st 2024, 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.

Greg Richardson: Thank you David Good morning, everyone and thank you for joining us.

Greg Richardson: We reported net income of 29.6 million in Q1, 2025, which equates to an increase in fully diluted book value per share of 5.1% in the quarter.

Greg Richardson: Our net income was driven by strong investment performance with the Solasclass portfolio, returning 7.2% in the quarter tremendous outperformance during a volatile market downturn.

Greg Richardson: We recorded an underwriting loss, however of 7.8 million in the quarter, which equates to a combined ratio of 104.6%.

Greg Richardson: Our underwriting result in the first quarter was dominated by our provision for the California wildfires in January we booked a net wildfire loss of 23.6 million, which equates to 14 combined ratio points.

Greg Richardson: Our provision is based on an industry ultimate loss estimate of $50 billion and is consistent with the 15 to 30 million dollar range, we disclosed on our fourth quarter 2024 earnings call.

Greg Richardson: Our industry loss estimate is at the higher end of the industry range in part because tariffs could drive higher reconstruction costs.

Greg Richardson: Overall, we don't anticipate tariffs will cause a significant impact on our underwriting profitability in the near term on the one hand inflationary pressures tend to increase loss costs on the other hand, an economic slowdown for example.

Greg Richardson: Use exposure.

Greg Richardson: In longer term, if tariffs trigger a major economic downturn, we believe our investment portfolio is well positioned David Einhorn will touch on this later.

Speaker Change: The other material underwriting topic in the quarter is a change in our approach to open market casualty business, we access casualty MGA business through both our open market channel and our innovations channel.

Speaker Change: We have decided that going forward, we will access casualty M. G. M. G. A business primarily through our innovations channel, where we have better access to underlying data a clear line of sight to the underlying economics of the business and therefore more control.

Speaker Change: In a short term this will lead to some contraction of our casualty book as we non renew some open market casualty business.

Speaker Change: In time, however, we expect to replace some of this volume with innovations business. It is also worth noting that we indirectly write casualty business through our fell participations.

Speaker Change: As part of our review of Cashly business, we strengthened our historical casualty reserves by $22 million in the quarter, mainly relating to underwriting years 2014 to 2019.

Speaker Change: During our quarterly Reserve review, we also released $11 million of specialty and $8 million of property reserves in the quarter.

Speaker Change: Therefore, our first quarter prior year development impact across all lines was 3.5 million or 2.1 combined ratio points.

Speaker Change: Well underwriting performance in the quarter was disappointing excluding the 14 points related to California wildfires, our first quarter combined ratio was strong and consistent with expectations.

Speaker Change: In March we highlighted a change to our financial statement disclosures, where we broke out our innovation segment for the first time.

Speaker Change: The performance our innovations book in the first quarter was in line with expectations and we reported a combined ratio of 94.3% in that segment.

Speaker Change: On our Q4 2024 call I provided an update on our one one renewal season and the market environment at that time, well April one renewals are considerably less material than January one overall.

Speaker Change: And similar to one one.

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

David: Thanks, Greg and good morning, everyone. The solace glass fund returns, 7.2% in the first quarter, our short and macro portfolios contributed 5.0, and 4.6%, respectively, and our long portfolio Detr.

David: During the quarter. The S. N P 500 index declined 4.3% the largest positive contributors were long investments in gold Brighthouse financial and Lanxis. The largest detractors were long investments in core natural resources.

David: And a short position in a direct to consumer healthcare company gold was the largest positive contributor as it appreciated 19% over the quarter Bright house financial shares advanced 21% during the quarter. This followed news that the company.

Speaker Change: Myself and is hired Goldman Sachs and Wells Fargo as advisors, there appears to be significant interest from large asset managers, who are particularly interested in managing bright houses large general account, while there is a risk the current market turbulence could derail a deal we expect.

David: Selling itself at a healthy premium.

David: Lanxa shares advanced 18% during the quarter core natural resources shares fell 28% over the quarter. It is the company that we was created with the merger a console energy and arch resources Engany in 25, the combine company suffered.

David: Can reduce production due to a fire in one of its minds. However, it has a conservati.

David: And entertainment shares declined 18% over the quarter as gaming stock broadly fell on fears of slower consumer spending also investors have become more pessimistic on the viability of pens online sports bedding business E. S. P.

David: In the United States, we're concerned that a significant economic slowdown is underway led by reduced consumer spending we've pivoted from conservative to bearish positioning in headed several new short positions in consumer discretionary companies. We also believe that the slowdown.

David: Lower interest rates more than the market expects and established a long sofar position consistent with this view.

David: After the Liberation day trade announcements, we also added to our position in long duration inflation swaps and established tail protection for potential further depreciation of the dollar against the euro and the gross and net exposures.

David: The 2025 year date return to 10.6% net exposure in the investment portfolio was approximately 22% at the end of April on the underwriting side large loss from the California, wildfires clouded otherwise positive underlying trends in our.

David: Greg and Tom Kernock, Our group C. U O continue to overhaul our portfolio mix, which should advance screenlight Ree's dual engine strategy now I'd like to turn the call over to farmers to discuss financial results in more details.

Farmers: Thank you David and good morning, everyone. During the first quarter of 2025, Greenlight re reported anet income of $29.6 million or 86 cents per daled share compared to a net income of $27 million or 78 cents.

Farmers: Luted share during the first quarter of 2024, the Unwriting loss of 7.8 million translated into a combined ratio of 104.6%. The first quarter cat losses added 14 percentage points to our combined ratio while the reserve.

Farmers: Contributed 2.1 percentage points to the combined ratio our investments in the Solas Fund contributed 32.2 million of income other investment income added additional 8.3 million of income for the quarter.

Farmers: 30 of which related to interest on restricted cash and cash equivalents collateralizing our obligations to the sedents.

Farmers: I will now break down the underwriting results by our two segments for the quarter. The open market segment grew the net grew networks by 16.6%. The increase was driven partly from growth in the F.

Farmers: General liability contracts, which were bound during 2024, the segment suffered a pretax loss of $3.2 million, mainly due to California, walfires driving an underwriting loss of 8.9 million, partly offset by investment.

Farmers: Seven the open market combined ratio for the first quarter was 106% compared to 96.2% for the same period in 2024, the only weather related cat activity impacting us this quarter wa.

Farmers: Which added 18 combined ratio points to the segment by comparison the cat activity. During the same period last year was much lower at 9.4 combined ratio points at current you're attritional loss ratio improved by 1.3 percentage points.

Farmers: In prior year Reserve development, primarily relating to the casualty book added 2.9 points to the segment combined ratio turning to our innovation segment. During the first quarter, we reported a pretax income of zero point million dollars.

Farmers: Providing income contributing 1.1 million the innovation segment combined ratio improved to 94.3% compared to 99.3% for the same period last year.

Farmers: 4 million were lower by 8.7% mainly related to the syndicate 3456, and termination of underperforming programs. There were no catalosses within the innovation segment innovation loss ratio improved.

Farmers: Six points, primarily driven by favorable reserve development and syndicate 3456 underlying programs the expense ratio for the innovation segment. This quarter was 8.2% compared to 4.3% during the same quarter last year.

Farmers: Due to a combination of growth in personnel an increase in indirect costs attributed to the segment and lower earned premiums we expect expense ratio to normalize over time as innovations book of business grows.

Farmers: We ended the first quarter of 2025 with our fully diluted book value per share growing to $18.87, an increase of 8.5% from the first quarter of 2024.

Farmers: That concludes our prepared remarks, operator, please open the line for questions.

Speaker Change: Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation total will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment.

Farmers: Sunset before pressing the star keys, one moment, please while we pull for questions.

Farmers: Thank you is there are no questions at this time.

Farmers: Should you have any follow up questions you may direct them to Karen daily of the equity Group, Inc. At IR at Greenlight re dot K Y and she'll be happy to assist you. This now concludes today's conference call for Greenlight Ree's first quarter 2025. Thank you.

Farmers: Connect.