Greenlight Re(US:GLRE)2021-11-06 21:29Financial Data and Key Metrics Changes - The company reported a net loss of $13.9 million or $0.42 per share for the third quarter, with a reduction in fully diluted book value per share to $13.25, a 2.6% decrease from June 30 [23][24]. - The underwriting loss for the quarter was $12.6 million, resulting in a combined ratio of 109.3%, which included $26 million of catastrophe losses contributing 19.1 percentage points to the combined ratio [24][7]. - Gross premiums written were $128.7 million, down 5% from the third quarter of 2020, primarily due to reduced participation in motor contracts [25]. Business Line Data and Key Metrics Changes - The company observed a reduction in motor liability premiums due to increased accident frequency and claims severity, with plans to further reduce auto exposure in 2022 [8]. - In the financial class, written premiums increased due to a rebound in demand for reps and warranty insurance from M&A activity [9]. - The innovations unit reported an investment gain of $9.6 million, a 31% increase from the prior quarter, representing approximately 6% of total written premium year-to-date [11]. Market Data and Key Metrics Changes - The reinsurance industry faced challenges from high incidences of large losses related to catastrophic events, impacting overall market conditions [7]. - The company expressed skepticism about the market's response to another loss-making year in the property catastrophe class, indicating that rate increases were disappointing due to new capital replenishing supply [10]. Company Strategy and Development Direction - The company aims to enhance underwriting products and quality of return through proprietary strategic partnerships, particularly in the innovations unit [11]. - Management indicated a moderate approach to catastrophe exposure, suggesting that while current exposure is reasonable, they do not expect to take an outsized position in the catastrophe business [39][40]. - The company is focused on repositioning its portfolio away from auto insurance while maintaining a balanced approach to catastrophe risks [40][71]. Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of economic inflation on the auto segment, noting proactive measures taken to reduce exposure [62]. - The company remains optimistic about the underlying reinsurance trends despite recent underwriting losses, emphasizing improvements in business quality [19][72]. - Management is closely monitoring the potential implications of global minimum tax regulations but does not view it as a significant concern at this time [66][67]. Other Important Information - The company completed its annual review with A.M. Best, resulting in the reaffirmation of its A rating and an uplift in outlook to stable [12]. - Total general and administrative expenses increased by 18% year-over-year, driven by the growth of the innovations unit and higher professional fees [26]. Q&A Session Summary Question: Clarification on the $9.6 million innovation gain - Management clarified that the gain was not realized but marked up based on a new valuation from a capital raise [30]. Question: Future growth expectations for innovations - Management indicated that innovations represent 6% of written premiums and expect significant growth potential, though specific guidance was withheld [36]. Question: Portfolio repositioning details - Management confirmed a focus on reducing auto exposure while maintaining a reasonable level of catastrophe risk [40][71]. Question: Breakdown of catastrophe losses - The largest loss was attributed to Hurricane Ida at approximately $18 million, with additional losses from European floods and South African riots [64]. Question: Discussion on winding down the insurance operation - Management emphasized that the core operational objective remains reinsurance, and while alternatives were considered, the current strategy is deemed the best for shareholders [73][74].