Greenlight Re(US:GLRE)2019-08-06 18:57Financial Data and Key Metrics Changes - Greenlight Re reported net income of $15.3 million for Q2 2019, compared to a net loss of $37.4 million in Q2 2018, with fully diluted net income per share at $0.42 versus a net loss of $1.01 in the prior year [20] - For the first six months of 2019, net income was $21.2 million compared to a net loss of $180.1 million in the same period of 2018, with fully diluted net income per share at $0.58 compared to a net loss of $4.87 [21] - Total net investment income for Q2 2019 was $18.8 million, including $14.4 million from the Solasglas investment, reflecting a net gain of 2.7% [26] Business Line Data and Key Metrics Changes - Gross written premiums for Q2 2019 increased by approximately 7% year-over-year, marking the first quarterly increase since late 2017 [5] - Net earned premiums for the first six months of 2019 decreased by 10.5% to $245.8 million, coinciding with an increase in unearned premiums due to new business written [22] - The composite ratio for Q2 2019 was 96.1%, with a small favorable loss development of $5.2 million, while the combined ratio for the year-to-date was 108.3% [23][24] Market Data and Key Metrics Changes - The property catastrophe class experienced rate improvements due to two years of outsized industry losses, which are expected to continue through the year-end renewal season [6] - Pricing improvements were also noted in the London Market Specialty business, particularly in marine, energy, satellites, and aviation classes due to capacity withdrawal and higher loss experiences [10] Company Strategy and Development Direction - The company is undergoing a strategic review led by Credit Suisse to improve its business position and structure, addressing pressures from rating agencies [12][33] - The company plans to buy back $1.5 billion of stock by the end of 2021, representing around 35% of current shares outstanding, as it believes Brighthouse remains undervalued [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the need for improvement in underwriting business profiles to address the negative outlook from A.M. Best, emphasizing a commitment to strategic review and positive relationships with rating agencies [37] - The company is focused on stabilizing its situation and improving its investment strategy, with a commitment to managing risks effectively [55] Other Important Information - The company has partially derisked its investment portfolio, moving a majority of assets to cash and short-term treasuries while the strategic review is ongoing [16] - The Solasglas fund returned 2.7% in Q2 2019, with a year-to-date return of 9.6% [17] Q&A Session Summary Question: Why continue operations given the stock is 40% below book value? - Management stated that the strategic review aims to find the best direction for the company, highlighting attractive assets and the need to address the stock's discount to book value [31][33] Question: Is liquidation of the company being considered? - Management clarified that liquidation is not the first option and they are exploring better solutions [48][53] Question: What is the outlook for earnings from the insurance side? - Management does not provide forward guidance but anticipates that insurance operations should be additive to book value over the medium to long term [62] Question: How can the company demonstrate greater confidence in the future? - Management suggested examining underwriting year performance as a metric to assess current portfolio activities, which may differ from financial year performance [65] Question: Are officials prohibited from trading shares during the review? - Management confirmed that officials are generally restricted from trading shares during this evaluation period [66]