Greenlight Re(US:GLRE)2019-05-07 18:58Financial Data and Key Metrics Changes - The company recorded net income of $5.9 million for Q1 2019, a significant improvement compared to a net loss of $142.8 million in Q1 2018 [22] - Fully diluted net income per share was $0.16 for Q1 2019, compared to a net loss per share of $3.85 for the same period in 2018 [22] - Gross premium written decreased by approximately 7% to $162.6 million in Q1 2019, primarily due to a medical stop-loss contract not renewed and the commutation of a mortgage reinsurance contract [23] - The composite ratio for Q1 2019 was 115.2%, up from 96% in the comparable period in 2018, mainly due to adverse developments in the auto business [25] - The fully diluted adjusted book value per share as of March 31, 2019, was $13.16, reflecting a 0.5% increase for the quarter but a 28.3% decrease from $18.35 per share reported in March 31, 2018 [28] Business Line Data and Key Metrics Changes - The auto class experienced unanticipated losses due to adverse rulings affecting claims in Florida, overshadowing otherwise successful performance in other business lines [6][8] - The company has ceded over $150 million of auto premium to align ongoing net exposure with its risk appetite [7] - Workers' compensation class is showing flat or slightly lower rates, but with a downward trend in claim frequency, leading to compelling risk-adjusted returns [12] Market Data and Key Metrics Changes - The public health market conditions are improving, with a 20% rate increase observed in recent Japanese windstorm renewals [10] - In the U.S., conditions in the private passenger auto class are generally good, with stabilized claim frequency and manageable claim severity [11] Company Strategy and Development Direction - The company is focused on diversifying its portfolio and improving underwriting returns, particularly in the London Market Specialty classes where capacity withdrawal has created upward pricing pressure [9] - The company aims to balance its portfolio between quota share and excessive loss divisions, enhancing integrity and diversity [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that no other underwriting periods will be impacted by the recent adverse developments in the auto class [7] - The core portfolio is performing well, and management sees positive earnings potential moving forward despite potential bumps in the road [36] - Management is optimistic about the overall improving environment and tailwinds for diversifying revenue sources [12] Other Important Information - The Board approved a renewal of the company's share repurchase plan, allowing for the repurchase of 2.5 million shares, which expires on June 30, 2020 [29] - There were no share repurchases during Q1 2019 [29] Q&A Session Summary Question: How long until the combined ratio is below 100? - Management indicated that while the recent reserve charge is a bump in the road, they are optimistic about the core portfolio's performance and potential for improvement [33][36] Question: Explanation of adverse rulings affecting closed cases? - Management preferred not to delve into specifics but indicated that the unusual nature of the claims and the shifting legal landscape in Florida contributed to the unexpected developments [38][63] Question: Approach to catastrophe exposure and insurance portfolio? - Management stated that while catastrophe exposure is compelling from a margin standpoint, it is not a major driver of risk and return, and they are mindful of overall risk in the portfolio [47][51] Question: Outlook for Tesla? - Management expressed a negative view on Tesla, citing overvaluation and deteriorating business performance, expecting to benefit from their short position [53][56] Question: Will share buybacks only occur if stock price is below book value? - Management emphasized flexibility in decision-making regarding share buybacks, considering multiple factors including share price and capital deployment opportunities [41][42] Question: Plans for increasing analyst coverage? - Management acknowledged ongoing relationships with analysts and expressed hope for increased coverage in the future [43]