Q4 2025 Greenlight Capital Re Ltd Earnings Call

Speaker #1: A question-and-answer session will follow the prepared comments. You may press star 1 at any time to be placed in the question queue. It is now my pleasure to turn the call over to David Sigman, GREENLIGHT RE's general counsel.

Operator: A question-and-answer session will follow the prepared comments. You may press star one at any time to be placed in the question queue. It is now my pleasure to turn the call over to David Sigmon, Greenlight Re's General Counsel. You may begin.

Speaker #1: You may begin.

Speaker #2: Thank you, Kevin, 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.

David Sigmon: Thank you, Kevin, 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. An audio replay will also be available under the Investors section of the company's website at www.greenlightre.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, 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.

Speaker #2: An audio replay will also be available under the investor's section of the company's website at www.greenlightre.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, Farmers Romer.

Speaker #2: 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 #2: 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.

Speaker #2: 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.

David Sigmon: 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. 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 Form 10-K for the year ended 31 December 2025. 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.

Speaker #2: 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 Form 10-K for the year ended December 31st, 2025.

Speaker #2: 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.

Speaker #3: Thank you, David. Good morning, everyone, and thank you for joining us. I am pleased to report strong results for both Q4 2025 and full year 2025.

Greg Richardson: Thank you, David. Good morning, everyone. Thank you for joining us. I am pleased to report strong results for both Q4 2025 and full year 2025. We have been indicating for some time the confidence we have in our strategy and our positioning. It is gratifying to see this reflected in our results. In particular, we are making significant progress in generating underwriting profits. Q4 2025 is the 10th quarter out of the last 12 quarters in which we have delivered an underwriting profit. I'm excited about Greenlight Re's potential as we enter 2026. Q4 2025 was an excellent quarter for Greenlight Re, with strong performance in both the underwriting and investment components of our strategy.

Speaker #3: We have been indicating for some time the confidence we have in our strategy and our positioning. It is gratifying to see this reflected in our results.

Speaker #3: In particular, we are making significant progress in generating underwriting profits. Q4 2025 is the 10th quarter out of the last 12 quarters in which we have delivered an underwriting profit.

Speaker #3: I'm excited about GREENLIGHT RE's potential as we enter 2026. The fourth quarter of 2025 was an excellent quarter for GREENLIGHT RE, with strong performance in both the underwriting and investment components of our strategy.

Speaker #3: We reported a net underwriting or a combined ratio of 92.1% and a strong investment return from Solace Glass of 36 million or a 7.9% gain, driving net income for the quarter of $49.3 million.

Greg Richardson: We reported a net underwriting profit of $13 million, or a combined ratio of 92.1%, and a strong investment return from Solasglas of $36 million or a 7.9% gain, driving net income for the quarter of $49.3 million. Our underwriting profit was driven by strong performance on our open market book, which delivered a 90.7 combined ratio. This was driven by strong core profitability, assisted by relatively benign cat and large loss activity, partially offset by some prior year reserve development. On the large loss side, we booked $2 million of losses in Q4 related to Hurricane Melissa, which made landfall in Jamaica in late October, and $2.7 million related to an oil refinery fire loss. With regard to prior year development, we strengthened reserves on our open market book by $5.5 million, driven primarily by casualty programs that are in runoff.

Speaker #3: Our underwriting profit was driven by strong performance on our open market book, which delivered a 90.7% combined ratio. This was driven by strong core profitability assisted by relatively benign CAT and large loss activity, partially offset by some prior year reserve development.

Speaker #3: On the large loss side, we booked $2 million of losses in the fourth quarter related to Hurricane Melissa, which made landfall in Jamaica in late October.

Speaker #3: And $2.7 million related to an oil refinery fire loss. With regard to prior year development, we strengthened reserves on our open market book by $5.5 million driven primarily by casualty programs that are in runoff.

Speaker #3: Our innovations book recorded a modest underwriting loss for the quarter of 0.4 million dollars or a combined ratio of 101.7%. This was primarily driven by a large loss of $2.1 million on a surety account.

Greg Richardson: Our innovations book recorded a modest underwriting loss for the quarter of $0.4 million, or a combined ratio of 101.7%. This was primarily driven by a large loss of $2.1 million on a surety account. For the full year 2025, we demonstrated solid underwriting performance, with profitable underwriting each quarter except the Q1, which was hit by the California wildfires. Overall, we delivered record underwriting income for 2025 with an underwriting profit of $35.7 million, or a combined ratio of 94.6%. Net income for the year was $74.8 million, which drove a 13.8% increase in fully diluted book value per share to $20.43. Turning to the 1/1 renewal season. It is a key renewal season for Greenlight Re, with approximately 60% of our business incepting on 1 January. We are very pleased with how this key renewal period progressed.

Speaker #3: For the full year 2025, we demonstrated solid underwriting performance. With profitable underwriting each quarter, except the first quarter, which was hit by the California wildfires.

Speaker #3: Overall, we delivered record underwriting income for 2025 with an underwriting profit of $35.7 million or a combined ratio of 94.6%. Net income for the year was $74.8 million which drove a 13.8% increase in fully diluted book value per share to $20.43.

Speaker #3: Turning to the 1-1 renewal season, it is a key renewal season for GREENLIGHT RE with approximately 60% of our business incepting on January 1st.

Speaker #3: We are very pleased with how this key renewal period progressed. While market conditions showed softening across most lines, we believe pricing in general remains adequate and we executed broadly in line with our business plan.

Greg Richardson: While market conditions showed softening across most lines, we believe pricing in general remains adequate, and we executed broadly in line with our business plan. I'll provide an overview of our 1/1 book in key areas. Generally, our Funds at Lloyd's book incepts at 1/1. We have written a significant Facultative book for several years, and we are optimistic for the prospects of Lloyd's in 2026, despite the softening market. Lloyd's is committed to maintaining underwriting discipline, and we support this focus. There has been an influx of capital seeking to target the Lloyd's market after several years of strong profitability. As we have been active in this market for several years, we have strong relationships, and we are able to maintain and grow our relationships with key partners, despite the increased capital entering the market.

Speaker #3: I'll provide an overview of our 1-1 book in key areas. Generally, our funds at Lloyd's book inceps at 1-1. We have written a significant FAL book for several years and we are optimistic for the prospects of Lloyd's in 2026 despite the softening market.

Speaker #3: Lloyd's is committed to maintaining underwriting discipline and we support this focus. There has been an influx of capital seeking to target the Lloyd's market after several years of strong profitability.

Speaker #3: As we have been active in this market for several years, we have strong relationships and we are able to maintain and grow our relationships with key partners, despite the increased capital entering the market.

Speaker #3: This year, we grew our FAL book by approximately 21% due to attractive opportunities that were available to us. A material portion of our specialty book also renews at 1-1.

Greg Richardson: This year, we grew our Facultative book by approximately 21% due to attractive opportunities that were available to us. A material portion of our specialty book also renews at 1/1. In general, the specialty market saw some significant softening. We estimate rates were down 11%, although terms and conditions generally held firm. With many of our competitors looking to grow their specialty books, the market was very competitive on signings. Our standing in the market and our timely upgrade to an A.M. Best rating helped protect our specialty book, which grew by 6%. The third element of our book with a strong 1/1 focus is property. We saw some significant weakening in the property line, and estimate rates are down 12%. Our property book was broadly flat year-over-year, indicating exposure is up given the rate decreases.

Speaker #3: In general, the specialty market saw some significant softening. We estimate rates were down 11%, although terms and conditions generally held firm. With many of our competitors looking to grow their specialty books, the market was very competitive on signings.

Speaker #3: Our standing in the market and our timely upgrade to an AM best rating helped protect our specialty book, which grew by 6%. The third element of our book with a strong 1-1 focus is property.

Speaker #3: We saw some significant weakening in the property line, an estimate rates are down 12%. Our property book was broadly flat year over year indicating exposure is up given the rate decreases.

Speaker #3: Our North Atlantic Hurricane exposure on a 1 and 250 occurrence basis increased by 7% to 139 million reflecting this increased exposure. Our innovations portfolio renewals are not heavily weighted towards 1-1.

Greg Richardson: Our North Atlantic hurricane exposure on a 1 in 250 occurrence basis increased by 7% to $139 million, reflecting this increased exposure. Our innovations portfolio renewals are not heavily weighted towards 1 January. Rather, they are more evenly spread throughout the year. For the business that did renew at 1 January, we saw strong growth with premium up 83%. Our innovations business is less susceptible to market trends. This can be seen in the risk-adjusted rate change at 1 January, which was relatively flat. Importantly, we renewed our Outwards Innovations whole account quota share treaty at 1 January with an increased session from 28% to 33% and materially improved terms. In addition, we accepted third-party capital into Syndicate 3456 for the first time. This provides a strong external validation of our syndicate performance to date.

Speaker #3: Rather, they are more evenly spread throughout the year. For the business that did renew at 1-1, we saw strong growth with premium up 83%.

Speaker #3: Our innovations business is less susceptible to market trends. This can be seen in the risk-adjusted rate change relatively flat. Importantly, we renewed our outwards innovations whole account quota share treaty at 1-1 with an increased session from 28% to 33% and materially improved terms.

Speaker #3: In addition, we accepted third-party capital into syndicate 3456 for the first time. This provides a strong external validation of our syndicate performance to date.

Speaker #3: In recent days, we have seen an increase in tensions in the Middle East. With the US and Israel launching attacks on Iran and Iran retaliating by bombing several other neighboring countries.

Greg Richardson: In recent days, we have seen an increase in tensions in the Middle East, with the US and Israel launching attacks on Iran, and Iran retaliating by bombing several other neighboring countries. Our thoughts are with the people in this region. It is difficult to comment on this fluid situation other than to say we hope that the war ends soon, thereby minimizing physical damage and loss of life. At this stage, while there have been media reports of isolated insured losses, we have not been notified of any large losses. In general, our policies contain a war exclusion. However, we do have some exposure to the conflict from specific marine war, aviation war, and war on land covers that we offer as part of our specialty book. We continue to closely monitor developments in the region.

Speaker #3: Our thoughts are with the people in this region. It is difficult to comment on this fluid situation other than to say we hope that the war ends soon.

Speaker #3: Thereby minimizing physical damage and loss of life. At this stage, while there have been media reports of isolated insured losses, we have not been—excuse me—we have not been notified of any large losses.

Speaker #3: In general, our policies contain a war exclusion. However, we do have some exposure to the conflict from specific marine war, aviation war, and war on land covers that we offer as part of our specialty book.

Speaker #3: We continue to closely monitor developments in the region. As we look ahead towards 2026, we are optimistic about the opportunities ahead and GREENLIGHT RE's positioning.

Greg Richardson: As we look ahead towards 2026, we are optimistic about the opportunities ahead and Greenlight Re's positioning. Now I'd like to turn the call over to David.

Speaker #3: Now I'd like to turn the call over to David.

Speaker #4: Thanks, Greg, and good morning, everyone. The Solace Glass Fund returned 7.9% in the fourth quarter. The long portfolio contributed 1.4%. The short portfolio contributed 4.6%, and macro contributed 3.1%.

David Einhorn: Thanks, Greg. Good morning, everyone. The Solasglas Fund returned 7.9% in Q4. The long portfolio contributed 1.4%, the short portfolio contributed 4.6%, and macro contributed 3.1%. During the quarter, the S&P 500 index advanced 2.7%. The largest positive contributors were long investments in gold, Brighthouse Financial, and Victoria's Secret. The largest detractors included long positions in Green Brick Partners, Penn Entertainment, and a macro position in inflation swaps. Gold was the largest positive contributor as its price advanced 12% over the quarter. It was an exceptional year for gold as it appreciated 64% and was our largest positive contributor in every quarter of 2025. Brighthouse Financial shares advanced 22% during the quarter. After years of frustration with this investment, the company announced in November that it would be sold to a private equity firm for $70 a share.

Speaker #4: During the quarter, the S&P 500 index advanced 2.7%. The largest positive contributors were long investments in gold, White House financial, and Victoria's Secret. The largest detractors included long positions in Greenbrick Partners, Penn Entertainment, and a macro position in inflation swaps.

Speaker #4: Gold was the largest positive contributor as its price advanced 12% over the quarter. It was an exceptional year for gold as it appreciated 64% and was our largest positive contributor in every quarter of 2025.

Speaker #4: White House financial shares advanced 22% during the quarter. After years of frustration with this investment, the company announced in November that it would be sold to a private equity firm for $70 a share.

Speaker #4: While this valuation represents just two-thirds of book value, it provides us with a reasonable and welcome path to exit. Victoria's Secret shares doubled during the quarter.

David Einhorn: While this valuation represents just two-thirds of book value, it provides us with a reasonable and welcome path to exit. Victoria's Secret shares doubled during the quarter. In the past, the company built its brand around a highly aspirational image supported by supermodel-led campaigns. However, in recent years, management moved away from this approach to make the brand more inclusive. New management has since taken over and begun reversing those changes, including reinstating the company's annual fashion show. During the quarter, the company posted strong results, delivering the largest revenue beat since its 2021 spin-off, and significantly raising annual profit guidance. Green Brick Partners shares declined 15% during the quarter. After several years of strength, cyclical headwinds are now weighing on the housing sector as declining demand and home prices have created a more challenging environment for builders.

Speaker #4: In the past, the company built its brand around a highly aspirational image, supported by supermodel-led campaigns. However, in recent years, management moved away from this approach to make the brand more inclusive.

Speaker #4: New management has since taken over and begun reversing those changes, including reinstating the company's annual fashion show. During the quarter, the company posted strong results delivering the largest revenue beat, since its 2021 spin-off, and significantly raising annual profit guidance.

Speaker #4: the quarter. After several years of strength, cyclical headwinds are now weighing on the housing sector as declining demand in home prices have created a more challenging environment for builders.

Speaker #4: As we remain negative on the state of the broad housing market, we've continued to fully hedge our exposure in most of the Greenbrick loss was offset by gains from our short basket of home builders.

David Einhorn: As we remain negative on the state of the broad housing market, we've continued to fully hedge our exposure, and most of the Green Brick loss was offset by gains from our short basket of homebuilders. Penn Entertainment shares fell 23% during the quarter. The company faced competitive pressure and weaker results in its regional casino business, while the market continued to question Penn's ability to reach break even in its digital sports betting and digital casino businesses. Encouragingly, Penn recently announced Q4 results highlighted the profitability in December within its digital segment, including improved guidance for regional casino growth and free cash flow in fiscal 2026.

Speaker #4: Penn Entertainment shares fell 23% during the quarter. The company faced competitive pressure and weaker results in its regional casino business, while the market continued to question Penn's ability to reach break-even in its digital sports betting and digital casino businesses.

Speaker #4: Encouragingly, Penn recently announced fourth-quarter results highlighted the profitability in December within its digital segment and included free cash flow in fiscal 2026. Inflation swaps were a detractor as inflation expectations declined modestly during the quarter.

David Einhorn: Inflation swaps were a detractor as inflation expectations declined modestly during the quarter. We initiated several small long positions, including Antero Resources, a natural gas exploration and production company, Deckers Outdoor, a footwear and apparel company, Henry Schein, a medical product distributor, and Spectrum Brands Holdings, a consumer products company focused on pet care, home, and personal care. The Solasglas Fund returned 7.5% in 2025, compared to a 17.9% return for the S&P 500. Solasglas returned 3.4% in January and 6.3% in February, bringing the 2026 year-to-date return to 9.8%. We continue to be concerned about the equity market valuations in the US and believe that in the long term, this is not a great time to have a lot of equity exposure. Net exposure in the investment portfolio was approximately 29% at the end of February, down from about 40% at year-end.

Speaker #4: We initiated several small long positions including Intero Resources, a natural gas exploration and production company, Decker's Outdoor, a football—excuse me—a footwear and apparel company, Henry Schein, a medical product distributor, and Spectrum Brand Holdings a consumer products company focused on pet care, home, and personal care.

Speaker #4: The Solace Glass Fund returned 7.5% in 2025 compared to a 17.9% return for the S&P 500. Solace Glass returned 3.4% in January and 6.3% in February, bringing the 2026 year-to-date return to 9.8%.

Speaker #4: We continue to be concerned about the equity market valuations in the US and believe that in the long term, this is not a great time to have a lot of equity exposure.

Speaker #4: Net exposure in the investment portfolio was approximately 29% at the end of February, down from about 40% at year-end. Greg Thom and the team have done a fantastic job with the underwriting portfolio.

David Einhorn: Greg Tom and the team have done a fantastic job with the underwriting portfolio while continuing our disciplined approach to risk-taking. I believe this is a key factor that led to our upgrade from AM Best from A- to A in November. While Greenlight Re is performing well and earning its cost of capital, I believe our share price does not reflect this. We believe that the company has the financial flexibility and capital strength, as exemplified by the rating upgrade, to be more aggressive on share repurchases to capture the discount being offered in the market. Now I'd like to turn the call over to Faramarz to discuss the financial results in more detail.

Speaker #4: While continuing our disciplined approach to risk-taking, I believe this is a key factor that led to our upgrade from AM Best from A minus to A in November.

Speaker #4: While GREENLIGHT RE is performing well, and earning its cost of capital, I believe our share price does not reflect this. We believe that the company has the financial flexibility and capital strength as exemplified by the rating upgrade to be more aggressive on share repurchases to capture the discount being offered in the market.

Speaker #4: Now I'd like to turn the call over to Farmers to discuss the financial results in more detail.

Speaker #5: Thank you, David, and good morning, everyone. During the fourth quarter of 2025, GREENLIGHT RE reported net income of $49.3 million or $1.44 per delimited share.

Faramarz Romer: Thank you, David. Good morning, everyone. During the Q4 of 2025, Greenlight Re reported net income of $49.3 million, or $1.44 per diluted share. Total underwriting income was $13 million, resulting in a combined ratio of 92.1%, which was 20 points better than the same period last year, which included 10 combined ratio points related to the Russia/Ukraine reserve strengthening. The 2025 Q4 combined ratio also benefited from 8 points of improvement due to lower CAT and event losses and 2.3 points of improvement related to underlying current year attritional loss ratio. The improvement in combined ratio was partially offset by 1.8 points of higher expense ratio, mainly relating to variable performance-based compensation. Our net investment income for the quarter was $44.8 million, compared to $2.6 million in the Q4 of 2024.

Speaker #5: Total underwriting income was $13 million, resulting in a combined ratio of 92.1%, which was 20 points better than the same period last year, which included 10 combined ratio points related to the Russia-Ukraine reserve strengthening.

Speaker #5: The 2025 fourth quarter combined ratio also benefited from 8 points of improvement due to lower CAT and event losses, and 2.3 points of improvement related to underlying current-year attritional loss ratio.

Speaker #5: The improvement in combined ratio was partially offset by 1.8 points of higher expense ratio mainly relating to variable performance-based compensation. Our net investment income for the quarter was $44.8 million, compared to $2.6 million in the fourth quarter of 2024.

Speaker #5: 36.2 million of the investment income related to our investment in Solace Glass, which posted a strong 7.9% return in the quarter. The remainder related to interest income on our collateral and funds withheld balances.

Faramarz Romer: $36.2 million of the investment income related to our investment in Solasglas, which posted a strong 7.9% return in the quarter. The remainder related to interest income on our collateral and funds withheld balances. In December, we appointed an insurance-focused, well-established third-party investment manager to manage a portion of our collateral assets that were previously invested in money market funds and other short-term deposits. We have allocated around $100 million to be managed in a fixed maturity portfolio under board-approved investment guidelines. As of the year-end, half of this had been deployed in the fixed maturity portfolio, and the remainder is being deployed in Q1 2026. You will see that we have added new disclosures in our 10-K relating to the fixed maturity portfolio. This new initiative is expected to yield higher returns on our collateral assets while preserving a short duration and high credit quality.

Speaker #5: In December, we appointed an insurance-focused well-established third-party investment manager to manage a portion of our collateral assets that were previously invested in money market funds and other short-term deposits.

Speaker #5: We have allocated around $100 million to be managed in a fixed maturity portfolio under board-approved investment guidelines. As of the year-end, half of this had been deployed in the fixed maturity portfolio, and the remainder is being deployed in the first quarter of 2026.

Speaker #5: We will see that we have added new disclosures in our 10-K relating to the fixed maturity portfolio. This new initiative is expected to yield higher returns on our collateral assets, while preserving a short duration and high credit quality.

Speaker #5: I will now break down the fourth quarter results by segment, starting with the open market segment. The open market segment reported a pre-tax income of $28.2 million.

Faramarz Romer: I will now break down the Q4 results by segment, starting with the Open Market segment. The Open Market segment reported a pre-tax income of $28.2 million, composed of underwriting income of $13.2 million and investment income of $15 million. For the quarter, the Open Market segment grew net written premiums by 9% to $123.6 million, while net earned premiums grew by 11%. The increase in net earned premiums was spread across all lines of business, with the exception of the casualty book, majority of which we had decided to non-renew early in 2025. The Open Market combined ratio for the Q4 improved by 20.4 points to 90.7% compared to the same period in 2024. A lower attritional loss ratio, an improved prior year reserve development, and lower CAT and event losses contributed to the improved combined ratio.

Speaker #5: Composed of underwriting income of $13.2 million, and investment income of $15 million. For the quarter, the open market segment grew net written premiums by 9% to $123.6 million, while net earned premiums grew by 11%.

Speaker #5: The increase in net earned premiums was spread across all lines of business, with the exception of the casualty book. The majority of which we had decided to non-renew early in 2025.

Speaker #5: The open market combined ratio for the fourth quarter improved by 20.4 points, to 90.7%, compared to the same period in 2024. A lower attritional loss ratio and improved prior year reserve development, and lower CAT and event losses contributed to the improved combined ratio.

Speaker #5: Overall, the open market segment had a strong performance during the quarter. Turning to the innovation segment, we continue to see growth opportunities within the segment.

Faramarz Romer: Overall, the open market segment had a strong performance during Q4. Turning to the Innovation Segment, we continue to see growth opportunities within this segment. The Innovation Segment grew gross written premiums by $16.5 million, or 80%, to $37.1 million during Q4, mainly driven by the casualty line and by Syndicate 3456, which is presented under multi-line. The net earned premiums increased by $5.2 million or 27% to $24.2 million. The combined ratio for the Innovation Segment was 101.7% during Q4, which included 8.7 points related to a large loss event on a surety contract.

Speaker #5: The innovation segment grew gross written premiums by 16.5 million dollars or 80% to $37.1 million during the quarter. Mainly driven by the casualty line and by syndicate 3456, which has presented under multi-line.

Speaker #5: The net earned premiums increased by 5.2 million or 27% to $24.2 million. The combined ratio for the innovation segment was 101.7% during the fourth quarter, which included 8.7 points related to a large loss event on a shorty contract.

Speaker #5: The composite ratio improved by 6 points to 92.2%, driven by improvement in the attritional loss ratio and release of reserves due to favorable loss development.

Faramarz Romer: The composite ratio improved by 6 points to 92.2%, driven by improvement in the attritional loss ratio and release of reserves due to favorable loss development. Compared to the same quarter last year, the expense ratio for the innovation segment was 9.5% versus 3.3%, due to a combination of growth in personnel, higher incentive-based compensation, and an increase in non-payroll costs related to the segment. We are investing in this business in preparation for growth in this segment, and we expect the expense ratio to normalize as the segment, including Syndicate 3456, gains scale over the next 18 to 24 months. During the quarter, the innovation segment produced an underwriting loss of $0.4 million and an overall net loss of $0.9 million.

Speaker #5: Compared to the same quarter last year, the expense ratio for the innovation segment was 9.5% versus 3.3%, due to a combination of growth in personnel, higher incentive-based compensation, and an increase in non-payroll costs related to the segment.

Speaker #5: We are investing in this business in preparation for growth in this segment, and we expect the expense ratio to normalize as the segment, including syndicate 3456, gains scale over the next 18 to 24 months.

Speaker #5: During the quarter, the innovation segment produced an underwriting loss of 0.4 million and an overall net loss of 0.9 million. For the full year 2025, we reported $74.8 million of net income or $2.17 of diluted earnings per share.

Faramarz Romer: For the full year 2025, we reported $74.8 million of net income, or $2.17 of diluted earnings per share, driven by $35.7 million of underwriting income and $35.7 million of investment income from Solasglas. Our full-year combined ratio was 94.6%, while Solasglas returned 7.5%. Both sides of our balance sheet contributed to a strong full-year performance. The Open Market segment generated $69.7 million of net income in 2025, of which $37.6 million related to underwriting with a combined ratio of 93.4%, which improved by 5.6 points over 2024. The majority of the improvement came from a lower attritional loss ratio, while an improvement in prior year reserve development also contributed to a lower loss ratio. The Innovation segment reported a combined ratio of 100.2% for the year, resulting in a modest underwriting loss of $0.2 million.

Speaker #5: Driven by 35.7 million of underwriting income and 35.7 million of investment income from Solace Glass. Our full year combined ratio was 94.6%, while Solace Glass returned 7.5%.

Speaker #5: So both sides of our balance sheet contributed to a strong full year performance. The open market segment generated $69.7 million of net income in 2025.

Speaker #5: Of which $37.6 million related to underwriting, with a combined ratio of 93.4%. Which improved by 5.6 points over 2024. The majority of the improvement came from a lower attritional loss ratio while an improvement in prior year reserve development also contributed to a lower loss ratio.

Speaker #5: The innovation segment reported a combined ratio of 100.2% for the underwriting loss of 0.2 million. The gross written premiums for this segment increased by 28% to $121.6 million representing 16% of our total premiums.

Faramarz Romer: The gross written premiums for this segment increased by 28% to $121.6 million, representing 16% of our total premiums. While the loss ratio and acquisition cost ratio were consistent with the prior year, the expense ratio rose by 4.5 points for the reasons I mentioned earlier. Let's turn to capital and debt management. During the quarter, we repurchased 201,000 shares for $2.8 million, bringing our full-year share repurchases to $9.8 million at an average price of $13.76 per share. We have $20.2 million remaining under the authorized share repurchase plan, and we plan to continue repurchasing shares given the discount to book value. During the quarter, we repaid $30 million of our debt and currently have $5 million of debt outstanding. During the year, we reduced our debt leverage ratio from 9.5% to 0.7%.

Speaker #5: While the loss ratio and acquisition cost ratio were consistent with the prior year, the expense ratio rose by 4.5 points, for the reasons I mentioned earlier.

Speaker #5: Now let's turn to capital and debt management. During the quarter, we repurchased $201,000 shares for $2.8 million bringing our full year share repurchases to $9.8 million at an average price of $13.76 per share.

Speaker #5: We have 20.2 million dollars remaining under the authorized share repurchase plan, and we plan to continue repurchasing value. During the quarter, we repaid $30 million of our debt and currently have $5 million of debt outstanding.

Speaker #5: During the year, we reduced our debt leverage ratio from 9.5% to 0.7%. At the end of the fourth quarter, our fully diluted book value per share was $20.43, an increase of 13.8% for the year.

Faramarz Romer: At the end of Q4, our fully diluted book value per share was $20.43, an increase of 13.8% for the year. Over the last 3 years, we have grown our fully diluted book value per share by 42.6%, or 12.5% annually. To recap our performance during 2025 year, our premiums grew to the highest level in our history. We had a record year of underwriting income. AM Best upgraded our rating to A, and we significantly delevered our balance sheet. We feel the company is in a strong position going into 2026, and we believe we are well-positioned to deliver another outstanding year of performance for our shareholders. That concludes our prepared remarks. The operator will now open the line for your questions.

Speaker #5: Over the last three years, we have grown our fully diluted book value per share by 42.6% or 12.5% annually. To recap our performance during 2025 year, our premiums grew to the highest level in our history.

Speaker #5: We had a record year of underwriting income. AM Best upgraded our rating to A, and we significantly delevered our balance sheet. We feel the company is in a strong position going into 2026, and we believe we are well positioned to deliver another outstanding year of performance for our shareholders.

Speaker #5: That concludes our prepared remarks. The operator will now open the line for your questions.

Speaker #1: Thank you. And now the 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: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing *1. One moment please while we pull for questions. Our first question today is coming from Eric Haignere with BTIG. Your line is now live.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we pull for questions.

Speaker #1: Our first question today is coming from Eric Hagen from BTIG. Your line is now live.

Speaker #3: Hey, thanks. Good morning. Good to hear from you guys. you know, lots of attention right now on private credit. Some of the blue chip asset managers taking in redemptions.

Eric Haignere: Hey, thanks. Good morning. Good to hear from you guys. Lots of attention right now on private credit. Some of the blue-chip asset managers taking in redemptions. It's hard to handicap some of the credit risk out there for certain areas of the debt market, especially. I think 2 questions related to that. 1, is there a strong connection that you see between the capital flow in the reinsurance market and private credit? Maybe just the competitive landscape for other reinsurers which may be attached to larger asset managers? Number 2, how does this narrative around private credit play into your thesis that this is a riskier time for the equity market right now? How do you think it maybe drives the broader capital allocation policy over the near term? Thank you, guys.

Speaker #3: You know, it's hard to handicap some of the credit risk out there for certain. Areas of the debt market is especially. I mean, I think two questions related to that.

Speaker #3: One, is there a strong connection that you see between the capital flow, you know, in the reinsurance market and private credit? Maybe just the competitive landscape for other reinsurers, which may be attached to larger asset managers?

Speaker #3: And then number two, I mean, how does this narrative around private credit play into your thesis that this is a riskier time for the equity market right now?

Speaker #3: How do you think it maybe drives the broader capital allocation policy over the near term? Thank you, guys.

Speaker #1: David, do you want to take that and then maybe farmers could comment?

Greg Richardson: David, do you want to take that, and then maybe Faramarz could comment.

Speaker #4: All right. Look, Tom, in terms of the asset side of our business, we don't have any private credit. We are, public market investors, and almost everything in the portfolio is public, and able to mark to market on a quoted price.

David Einhorn: All right. Look, in terms of the asset side of our business, we don't have any private credit. We are public market investors. Almost everything in the portfolio is public and able to mark to market on a quoted price. I think the broader concern that you're suggesting relating to private credit is fundamentally peripheral to our investment strategy. I don't expect it to have much impact one way or another on what we're doing.

Speaker #4: I, I think the broader concern that you're suggesting relating to private credit is, you know, fundamentally peripheral. To our investment strategy and I don't expect it to have much impact one way or another.

Speaker #4: On, on what we're doing.

Speaker #1: Farmers, do you want to comment?

Speaker #5: Yeah. I think David covered it. You know, from an asset side, what we're seeing on, on the reinsurance side, is generally the private credit is more prevalent on the asset-intensive reinsurers that are playing in the life annuity side.

Greg Richardson: Faramarz Romer, you want to come in?

Faramarz Romer: Yeah. I think David covered it from an asset side. What we're seeing on the reinsurance side is generally the private credit is more prevalent on the asset intensive reinsurers that are playing in the life annuity side. We don't have any life annuity business. All of our book is property casualty, and as David said, we have no direct exposure to private credit.

Speaker #5: we don't have any life annuity business. All of our, one of our book is property casualty and has, as David said, we have no direct exposure to private credit.

Speaker #1: Thank you, guys. That's really helpful. Another one, I mean, the move to retire some of your debt, was that an opportunistic move to maybe just manage your leverage over the near term, or can you envision eventually returning to the debt market at certain valuations and how you think about that?

Eric Haignere: Thank you, guys. That's really helpful. Another one. The move to retire some of your debt, was that an opportunistic move to maybe just manage your leverage over the near term, or can you envision eventually returning to the debt market at certain valuations, and how you think about that?

Speaker #5: Yeah. Thanks, Eric. it's a good question. So, you know, back in 2018, we had entered a, we had issued our convertible notes, and then when they came up for maturity, we converted those from convertible notes into a term loan.

Faramarz Romer: Yeah. Thanks, Eric. Good question. Back in 2018, we had issued our convertible notes, and then when they came up for maturity, we converted those from convertible notes into a term loan, and then earlier last year, we converted the term loan into a revolving credit facility for $50 million. We feel that we have a pretty good ability now to, with the cash that's being generated from the business, our investment portfolio is well-positioned. Given the interest rates where they were, we felt that it was better to pay down the remaining debt. We still have the ability on the revolver for if we ever needed to lever back up. At this point, the best use of that cash was to pay down the debt and still have the ability in the future to increase our leverage if we needed to.

Speaker #5: And then earlier last year, we converted the term loan into a revolving credit facility for $50 million. So we feel that we have a pretty good, ability now to, with the cash that's being generated from the business, our, our investment portfolio is well positioned and given the interest rates where they were, we felt that it was better to pay down the remaining debt.

Speaker #5: We still have the ability on the revolver for, you know, if we ever needed to lever back up. But at this point, the best use of that cash was to pay down the, the debt.

Speaker #5: And, and, and still have the ability in the future to, increase our, our leverage if we needed to.

Speaker #1: Yep. Really helpful. Thank you, guys, so much.

Eric Haignere: Yep. Really helpful. Thank you guys so much.

Speaker #5: Thanks, Eric.

Faramarz Romer: Thanks, Eric.

Speaker #1: Thank you. As a reminder, that star one to be placed in the question queue. Our next question is coming from Kevin English, a private investor.

Operator: Thank you. As a reminder, that is star one to be placed into question queue. Our next question is coming from Kevin English, a private investor. Your line is now live.

Speaker #1: Your line is now live.

Speaker #6: Yeah. Hi, guys. Thanks for, taking the call and, and congrats again on a strong quarter. I guess, yeah, just to start as well, wanted to commend management for, you know, being in the open market and backing up conviction with purchases.

Kevin English: Yeah. Hi, guys. Thanks for taking the call. Congrats again on a strong quarter. I guess, yeah, just to start as well, wanted to commend management for being in the open market and backing up conviction with purchases. I think that shows a lot of faith in what you all are building. My question is really just around the investment ratio, which remains at 70%. I know we're up from the 50%, that was a reflection of the 2018 volatility. It does seem like the risk management of the investment portfolio has been revised since then. I think on an unlevered ROI basis, it is the most profitable business line. Understand not wanting to take excess exposure, particularly at an inopportune time. This month is probably not the right to be bringing it up, though, coming off a really nice set of months here.

Speaker #6: I think that shows a lot building. My, my question is really just around, the investment ratio. which, you know, remains at 70%. I know we're up from the 50%.

Speaker #6: That was a reflection of the 2008, '18 volatility. you know, but it does seem like the risk management of the investment portfolio has been revised since then.

Speaker #6: I think on an unlevered ROI basis, it is, you know, the most profitable business line. So, so understand not wanting to, you know, take excess exposure, you know, particularly at an inopportune time.

Speaker #6: This month is probably not the right to be bringing it up. So coming off a really nice, set of months here. but just want to hear if there's any update there, particularly given the ability, you know, as David said, to flex the net exposure to kind of dictate kind of market exposure, you know, in that way.

Kevin English: Just want to hear if there's any update there, particularly given the ability, as David said, to flex the net exposure to kind of dictate kind of market exposure in that way. Yeah, appreciate any context there, maybe update on timing as how you're thinking about it.

Speaker #6: So yeah, appreciate any context there, maybe update on timing as how you're thinking about it.

Speaker #1: David, do you want to, start on that one?

Greg Richardson: David, do you want to start on that one?

Speaker #4: No, why don't, why don't you start? I'll, I'll add in.

Faramarz Romer: No, why don't you start? I'll add in.

Speaker #1: Yeah. Listen, the, the performance of Solace Glass has been terrific. we have a multi-pillar strategy. One of the great things about, about our investment strategy, it's very scalable.

Greg Richardson: Yeah. Listen, the performance of Solasglas has been terrific. We have a multi-pillar strategy. One of the great things about our investment strategy, it's very scalable. We can increase it, we can decrease it. We don't do it willy-nilly. It's board governed. In addition to the sort of 10-ish% return we've been averaging over the past several years on that book, one of the nice things is that we don't get 100% capital charge for it. From our standpoint, in terms of use of the scarce resources, which we refer to as our AM Best capital capacity, it is actually a levered return. It is a very attractive return to us. It is volatile from quarter to quarter, so we have to mitigate that. It is something we look at, and if reinsurance markets should soften, that's an avenue we have to enhance our ROE.

Speaker #1: We can, we can increase it. We can decrease it. we don't do it willy-nilly. We, it's board governed. but in addition to the sort of 10-ish percent return we've been averaging over the past several years, on that, that book, one of the nice things is that we don't get 100% capital charged for it.

Speaker #1: So from our scarce resources, which we refer to as our AMBEST it is actually a levered return. So it is a very attractive return to us.

Speaker #1: it is volatile from quarter to quarter. So we have to mitigate that. But it is something we look at. And if reinsurance markets should soften, that's an, avenue we have to, enhance our, our, ROE.

Greg Richardson: Does that help?

Speaker #1: Does that, help?

Speaker #3: Yeah. No, no. Appreciate it. Thanks, thanks so much.

Speaker #3: Yeah. No, no. Appreciate it. Thanks, thanks so much.

Kevin English: Yeah. No, I appreciate it. Thanks so much.

Speaker #1: Thank you. We reached the end of our question and answer session. And ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day.

Operator: Thank you. We've reached the end of our question and answer session. Ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.