Greenlight Capital Re Q3 2025 Earnings Call - Strong Underwriting Offsets Investment Setbacks

Kevin, Conference Operator: Thank you for joining the Greenlight Capital Re Limited Third Quarter twenty twenty five Earnings Conference Call. At this time, participants are in a listen only mode. A question and answer session will follow the prepared comments. It’s now my pleasure to turn the call over to David Sigman, Greenlight Re’s General Counsel. You may begin.

David Sigman, General Counsel, Greenlight Capital Re: 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, Farmers Roemer. 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 regarding 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. 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 ks for the year ended 12/31/2024.

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, Chief Executive Officer, Greenlight Capital Re: Thank you, David. Good morning, everyone, and thank you for joining us. Q3 twenty twenty five was a mixed quarter with an exceptional underwriting result offset by investment losses. Overall, we reported a net loss of $4,400,000 in Q3 twenty twenty five, which brings our year to date net income to $25,600,000 Fully diluted book value per share decreased 0.4% in the quarter to $18.9 and increased 5.3% for the first nine months of the year. We reported our best quarterly combined ratio of 86.6%, translating to a record $22,300,000 of underwriting income.

This result was driven by a combination of the strong underlying profitability of the book assisted by a benign cat quarter. We would be remiss not to comment on Hurricane Melissa. There are strong historical ties between The Cayman Islands and Jamaica, and our hearts are with all those who have been affected by this incredibly powerful storm. As a reinsurance professional that has closely monitored hurricanes for nearly thirty years, I was impressed by and grateful for the forecasters and their models in predicting both the erratic track and extreme intensity of Melissa. While property is fixed in place, people can get out of the way of the path of the storm with this information.

The forecasters certainly saved many lives as a result. From a financial perspective, Melissa is a fourth quarter event. It is early days, but we do not expect a significant loss to Greenlight Re given the positioning in the cat space and the fact that it missed the Southeastern United States. We have been confident that our underwriting portfolio is positioned to deliver a strong underwriting return. So it is encouraging to see that reflected in our results in Q3.

Our open market book delivered an 84.5% combined ratio, while our innovations book delivered a 96.7% combined ratio. Both segments showed meaningful premium growth. Growth in open market was driven by our funds at Lloyd’s book, modest property and financial lines growth, offset by declines in casualty based on underwriting actions discussed last quarter. For our Innovation segment, a good portion of our accounts incept in the second half of the year, and we can see evidence of previously anticipated organic top line growth beginning to emerge. Unfortunately, our investment performance for the quarter was a loss of $17,400,000 There are two main components of this.

Our investment in the SolasGlass portfolio was down 3.2% in the quarter. David will provide more color on this in his remarks. In addition, we suffered a net unrealized loss of $11,300,000 on our Innovations investment portfolio. The net unrealized loss on our Innovations portfolio was primarily driven by a $16,400,000 write down of our highest valued investment. Our Innovations investments are generally illiquid and we revalue them as soon as we believe the valuation may be impaired or when a new funding round closes.

This particular situation is idiosyncratic in that the lead investor was able to secure a new round of equity financing at a substantial discount due to a debt refinancing that fell through at the last minute. We still believe the company’s prospects are bright and the financing removes an overhang from the investment. While this write down in Q3 is disappointing, I would highlight that we hold our innovations investments for the long term and we are focused on realized gains and the associated underwriting and fee income opportunities generated from these investments rather than mark to market gains and losses. Further, this position was outsized from a carried value perspective due to prior upward adjustments based on previous financing rounds. Currently, we have no single investment valued at more than $10,000,000 and only three investments valued at over $5,000,000 So the risk of a similar write down on a single investment going forward is mitigated absent an industry wide event.

We are now focused on oneone renewals. While the market is clearly softening, we believe rates and terms will remain attractive for our open market reinsurance business. Consequently, we expect to renew most of our non cashed business and perhaps grow somewhat. As noted previously, our innovations book is less susceptible to the supply demand pressures of the reinsurance market. We anticipate continued strong organic growth from our existing Innovations clients and attractive new business opportunities.

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

David Einhorn, Chairman of the Board, Greenlight Capital Re: Thanks, Greg, and good morning, everyone. The Solace Glass Fund returned negative 3.2% in the third quarter. Long portfolio and macro contributed 1.73.3%, respectively, and the short portfolio detracted 8.1%. During the quarter, the S and P 500 Index advanced 8.1%. The largest positive contributors were long investments in gold, Green Brick Partners, and Core Natural Resources.

The largest detractors included a short position in a profitless financial services company, a short basket of homebuilder stocks, and our long position in Kindrel Holdings. Gold was the largest positive contributor as its price rose 17% over the quarter. Green Brick Partners shares also advanced 17% during the quarter as the market’s expectation for lower rates lifted homebuilder stocks. While the company continues to execute well on its regionally focused strategy, we remain cautious on the broader housing market and have maintained a nearly fully hedged position by shorting a basket of national homebuilders. This hedge basket offset most of Green Brick’s positive contribution during the quarter.

Core Natural Resources shares advanced 20% during the quarter, recouping some of its decline from the first half of the year. The company announced significantly improved quarterly results, including an increase in free cash flow, Core used the majority of this cash flow to repurchase shares under the $1,000,000,000 share buyback program it announced earlier in the year after successfully completing its merger with Arch Resources. In addition to the homebuilder hedge basket, the largest detractors for the quarter included a short position in a profitless financial services company that transitioned from a near term bankruptcy candidate to a meme stock and our long port position in Kindrel Holdings. Kindrel shares declined 28% during the quarter, giving back some gains after the company posted a less exciting quarterly update than its previously recent couple of quarterly results. Earlier in the year, we established a new large position in a stub created by Binglong Fluor Corporation in short NuScale Power.

More recently, we established a new medium sized position in Pacific Gas and Electric. Fluor is a global engineering and construction company. In the spring, Fluor experienced a slowdown in capital spending from its customers due to tariff uncertainty, which we expect to reverse and for the business to return to growth in 2026. Away from its core business, Fluor holds approximately a 40% stake in NuScale Power, a small modular nuclear reactor company. Fluor’s stake is worth nearly $5,000,000,000 pretax, which represents over 60% of its market cap.

Fluor has announced plans to divest its holding and use a significant portion of the proceeds towards share buybacks. Pacific Gas and Electric is a California based regulated utility that transmits and distributes electricity and natural gas. While the company was not exposed to January’s catastrophic LA wildfires, its earnings multiple collapsed to below 10 times on concerns that the California Wildfire Fund, an important defense against wildfire related damage claims that it shares with Edison International will be depleted. We invested with a view that the legislature is likely to put in place funding support and make further wildfire risk reform a priority. We have since seen progress in these initiatives and expect PG and E to re rate closer to the nearly 18 times average peer multiple.

In our view, that outside of the boom surrounding a handful of AI and AI adjacent companies, most of the rest of the economy is floundering. In the midst of this excitement, we are simply not comfortable underwriting along investments within the AI ecosystem and have decided for the most part not to participate. Unfortunately, it has been difficult to make money on the long investments outside of this small cohort of stocks. Our net exposure ended the quarter at about 25%, up from about 2% at the end of the second quarter. Solace Glass returned 1.6% in October, bringing the year to date return to 1.2%.

Net exposure in the investment portfolio was approximately 20% at the October. Now I’d like to turn the call over to Farmars to discuss the financial results in more detail.

Farmers Roemer, Chief Financial Officer, Greenlight Capital Re: Thank you, David. Good morning, everyone. During the 2025, Greenlight Re reported a net loss of $4,400,000 or negative $0.13 per diluted share compared to a net income of $35,200,000 or $1.01 per diluted share during the 2024. The total underwriting income was $22,300,000 resulting in a combined ratio of 86.6%, which was 9.3 points better than the same period last year. This included eight points of improvement due to lack of cat losses in the quarter and six points of improvement related to underlying current year attritional loss ratio.

We had 50 basis points of reserve development during the quarter compared to 3.7 points of reserve releases in the third quarter of last year. Our net investment loss was $17,400,000 compared to $30,300,000 of investment income in the 2024. As Greg mentioned, most of the investment losses related to SolasGlass and Innovations, However, these losses were partially offset by other investment and interest income of $8,900,000 I will now break down the third quarter results by segment, starting with the Open Market segment. The Open Market segment reported a pretax income of $27,900,000 composed of underwriting income of $22,200,000 and investment income of $5,600,000 For the quarter, the open market segment grew net written premiums by 9.5% to 140,400,000 while net earned premiums grew by 14.1%. The increase was driven primarily from growth in the Funds at Lloyd’s business and the Financial Property and Specialty lines from a combination of new programs and growth in underlying premium volume on renewing programs.

These were offset by the casualty premiums decreasing during the quarter as a result of our decision earlier this year to non renew most of the open market casualty book. The open market combined ratio for the third quarter improved by 10 points to 84.5% compared to 94.5 for the same period in 2024. The lower loss ratio and a lower acquisitions ratio contributed to the improved combined ratio. The current year loss ratio improved by 11.8 points, driven by 8.3 improvement in attritional losses and 3.5 improvement in event losses. The segment reported a small prior year adverse loss development of $900,000 or 60 basis points compared to favorable reserve releases of 5,300,000.0 or 4.2 loss ratio points in the same quarter last year.

The acquisition cost ratio and the expense ratio improved 2.50.3% respectively on the back of higher earned premiums. Overall, the open market segment had a strong performance for the quarter. Now let’s turn to the innovation segment. The innovation segment grew net written premiums by 57.5% to $22,300,000 during the quarter. The increase was mainly driven by Syndicate three thousand four fifty six and Financial Lines, partially offset by the increase in ceded premiums under the Innovations Whole Account Retro program compared to the third quarter of last year.

Net earned premiums decreased by $800,000 mainly driven by the increase in retroceded premiums compared to the same quarter last year. The combined ratio for Innovation segment was 96.7% during the third quarter compared to 93.6 in Q3 last year. The composite ratio improved by one point to 87.1%. Favorable prior year reserve development contributed 3.1 points to the combined ratio compared to unfavorable development of 0.4% in the 2024. Compared to the same quarter last year, the expense ratio for the Innovation segment was 9.6% compared to 5.5% due to a combination of growth in personnel and an increase in non payroll related costs for this segment.

We are investing in this business in preparation for higher future premiums, leading to the higher expense ratio. We expect this to normalize as we scale this segment. While the Innovation segment is an underwriting income of $700,000 investment impairment that Greg mentioned led to an overall net loss of $11,300,000 for the segment. Now I would like to make a couple of quick points on capital and debt management. During the first nine months of twenty twenty five, we have repurchased 512,000 shares for $7,000,000 which has been accretive to our book value per share.

At the end of the 2025, our fully diluted book value per share was $18.9 an increase of 5.3% year to date. During the quarter, we refinanced our term loan, replacing it with a five year $50,000,000 revolving line of credit. As of the end of the third quarter, we reduced our debt leverage ratio down to 5.3% from 9.5% at the beginning of the year. Subsequently, in October, we repaid an additional 15,000,000 and currently have $20,000,000 of debt outstanding. We have also entered into a letter of credit facility with Citibank exclusively for our funds at Lloyd’s business.

In October, we issued an LLC for GBP 45,000,000 to Lloyd’s and Lloyd’s simultaneously released 60,700,000 of cash, which we had previously provided for Funds at Lloyd’s. The new revolving line of credit and the new Funds at Lloyd’s letter of credit facility provides us added flexibility to optimize our cash management while further strengthening our balance sheet and improving our return on equity. That concludes our prepared remarks. The operator will now open the line for your questions.

Kevin, Conference Operator: Thank you. We’re now conducting a question and answer session. Session. Our first question is coming from Ben Olesh from WA Capital. Your line is now live.

Greg Richardson, Chief Executive Officer, Greenlight Capital Re: Yes. Hello. Thank you for taking my question. This is a question to David. Could you please provide an update on the macro part of the Solar Glass Fund?

What is your view and your position regarding to U. S. Dollar, gold and short term interest? Thank you.

David Einhorn, Chairman of the Board, Greenlight Capital Re: Sure. Thanks for the question. We’ve maintained a core position in gold that now goes back pretty much to the near the inception of the company, certainly since the IPO of the company. The gold is structured in two different components. One is physical gold, which we consider to just sort of be the core position that we occasionally trade around.

Additionally, we buy binary digital digital options that, you know, call options on rapid appreciation in gold. Those actually proved to be successful in the third quarter and also in our October result. We from an interest rate perspective, our position is that we are long SOFR futures out into 2026, which is essentially a view that the Fed will reduce interest rates more than the market currently expects. And finally, we maintain inflation swaps, which are a view that reported inflation over the next two, five, and ten years will be larger than the amount that the market has priced in.

Kevin, Conference Operator: Thank you. Our next question today is coming from Daniel DeJong, a Private Investor. Your line is now live.

Daniel DeJong, Private Investor: Hi, thanks for taking the question. This is more of a long term question for David. I believe a few years ago, you evaluated the future of the company and one of the options considered given the discount to book value was closing the company. With all the work put into the company since and seven years in a row of positive investment performance, at least year to date, Do you see a long term future for the company? Also investors like Howard Marks and Warren Buffett work well past regular retirement age.

Could you see yourself doing that?

David Einhorn, Chairman of the Board, Greenlight Capital Re: Yeah. Look, I think that the company and and we expressed this at last year’s investor presentation. I actually think that the company has made enough structural improvement that we should be earning a return on equity that is greater than our cost of equity. And I believe that that the shares should actually justifiably trade at at or above book value as a result. It’s been frustrating to us and everybody around that the shares continue to trade at a discount.

But I don’t believe that the solution is to liquidate the company. Were we to liquidate the company, there also would be substantial expenses that I could not quantify for you because we haven’t done the exercise. But it would be unlikely that we would recognize, like, the full book value in a liquidation were we to go through with with that. Regarding my longevity, I’m presently 56 years old, and I expect to be doing this for a substantial additional amount of time. Sure.

Kevin, Conference Operator: Thank you. We reached the end of our question and answer session. And 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.