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Date

Tuesday, August 5, 2025 at 9:00 a.m. ET

Call participants

  • Chairman of the Board and Director — David Michael Einhorn
  • Chief Executive Officer — Greg Richardson
  • Chief Financial Officer — Faramarz Romer

Takeaways

  • Net income -- $0.3 million, marking a sharp decline from $8 million in the prior-year quarter.
  • Fully diluted book value per share -- Increased 0.5% in the quarter to $18.97, up 7.5% since Q2 2024.
  • Combined ratio -- 95.0%, 4.9 points better than the same quarter last year, primarily due to no catastrophe losses.
  • Underwriting income -- $8.1 million for the period, with Open Market segment contributing $11.2 million and Innovations segment acting as a drag.
  • Solasglas fund return -- Negative 4% in the quarter; investment loss of $18.3 million partially offset by $10.5 million of other investment income.
  • Open Market segment net written premiums -- Up 8% to $142.1 million, driven by FAL business growth while casualty premiums declined due to nonrenewals.
  • Open Market segment combined ratio -- Improved to 92%, 2.1 points lower, driven by decreased acquisition costs and partially offset by increased loss ratio in casualty and transactional liability programs.
  • Innovations segment net written premiums -- Grew 2.3% to $22.7 million, attributed mainly to Syndicate 3456 and select specialty programs.
  • Innovations segment combined ratio -- Deteriorated to 107%, a 16.1-point increase due to $2.5 million of adverse reserve development from two underperforming programs.
  • Share repurchases -- $5 million in common stock repurchased at an average price of $13.99 per share during the quarter.
  • Foreign exchange gains -- $6.3 million, mainly due to a strengthening British pound versus the U.S. dollar.
  • Net exposure in investment portfolio -- Ended at approximately 2% in Q2, down from 20% in Q1; stood at about 7% at July-end.
  • Largest positive and negative investment drivers -- Gold and Kyndryl Holdings (NYSE:KD) were main contributors; short positions in profitless tech companies and health care detracted sharply.
  • Annual shareholders meeting results -- "All the proposals passed by over 90%."
  • Nonrenewals and top-line impact -- Casualty book nonrenewals visibly reduced related premium but were offset by growth in FAL and specialty lines.
  • Catastrophe activity -- Q2 was a benign quarter, resulting in no cat event losses reported in the period.
  • Updated definitions -- Company now quantifies catastrophe losses as individual events over $5 million, and "known large loss events" as $1 million-5 million.
  • Segment-specific reserve developments -- $9.7 million specialty reserve release in Open Market, offset in part by casualty and multiline reserve strengthening; $2.5 million adverse reserve development in Innovations driven by two programs with higher claims.
  • Expense ratio in Innovations -- Rose to 7.6% from 3.9% attributed to personnel growth, direct costs, and lower earned premium.

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Risks

  • Innovations segment combined ratio increased to 107% due to $2.5 million adverse reserve development, with explicit concern about "greater number of claims than expected" in two programs.
  • Solasglas investment loss of $18.3 million was driven mainly by short positions in speculative and profitless technology companies that experienced sharp rallies, as management noted being "on the wrong side of a couple of short squeezes, which we had to risk manage."
  • Significant decline in net income to $0.3 million from $8 million in the prior-year quarter.
  • Expense ratio in Innovations segment nearly doubled, reaching 7.6%, resulting from personnel growth, higher direct costs, and lower earned premiums, impacting segment profitability.

Summary

Greenlight Capital Re (GLRE 0.34%) reported nominal net income and modest book value growth, with underwriting gains primarily from benign catastrophe activity and disciplined reserving largely in the Open Market segment. Investment results outweighed much of these positives, as Solasglas posted sharp quarterly and July declines, heavily influenced by short-position underperformance and limited long-position winners, narrowing exposure substantially versus prior periods. Innovations segment results were notably impacted by reserve development related to claim severity in two targeted programs, elevating the segment's combined ratio. Management highlighted decisive nonrenewal actions in the casualty book, intentional capital return through share buybacks, and increased investor outreach initiatives as strategic focal points for intermediate-term repositioning.

  • Management clarified that Q2 underwriting results were not materially impacted by legacy reserving on California wildfires or Russia-Ukraine aviation exposures due to pre-emptive reserve strengthening validated by recent legal outcomes.
  • Flat to slightly decreasing risk-adjusted rate changes in the reinsurance market persisted, as management reported "overall market conditions remaining similar to 1/1 and 4/1."
  • Shareholder proposals at the recent annual meeting received approval rates exceeding 90%, as confirmed by management.
  • Foreign exchange gains contributed materially to quarterly financial results due to favorable U.K. currency movement, separate from underwriting or investment activity.

Industry glossary

  • Combined ratio: The sum of loss and expense ratios as a percentage of earned premium, indicating overall underwriting profitability (ratios below 100% are generally considered profitable).
  • FAL: Funds at Lloyd's; capital provided to support underwriting at Lloyd's of London, often disclosed separately in reinsurance reporting.
  • Solasglas: The proprietary investment fund managed for Greenlight Capital Re, detailed in quarterly reporting for segment performance.
  • Quota share retro program: A reinsurance arrangement where the company cedes a specified percentage of all risks in a portfolio (across all lines) to a reinsurer, including premiums and losses, retroactively.
  • Net exposure: The measure of the investment portfolio's overall directional risk after accounting for long and short positions, expressed as a percentage of capital or assets under management.

Full Conference Call Transcript

Greg Richardson: Thank you, David. Good morning, everyone, and thank you for joining us. We reported net income of $0.3 million in Q2 2025, which brings our year-to-date net income to $30 million. Fully diluted book value per share increased 0.5% in the quarter and 5.7% for the first half of the year. We reported a combined ratio of 95.0% for the quarter, translating to $8.1 million of underwriting income. Our investment in Solasglas portfolio was down 4% in the quarter, reversing a portion of the Q1 outperformance. David will provide more color on this in his remarks. Q2 was a benign quarter from a cat activity perspective.

We have updated the definition of cat event loss to be individual catastrophe loss to us of $5 million or more net of reinsurance recoveries. We also started reporting known large loss events defined as losses between $1 million and $5 million. The net financial impact of prior year adverse loss development was $2.6 million or 1.6 combined ratio points. Faramarz will elaborate on the loss development for each segment momentarily. Our underwriting result in the second quarter was largely unaffected by our previous reserving actions related to the California wildfires and the Russia-Ukraine aviation losses.

On the latter, we had strengthened our reserves in Q4 of last year and the long- awaited outcome of a U.K. trial in the second quarter validated our early decisive action on this. As mentioned on our previous quarter call, we have started to non-renew a significant portion of our open market casualty book. The impact of these nonrenewals started to flow through our top line in Q2, which was offset by growth in other areas, including FAL and the specialty book. We don't have a large renewal book for 7/1, but we are seeing overall market conditions remaining similar to 1/1 and 4/1 with flat to mild single-digit decreases in risk-adjusted rate change.

As we head into the peak of cat season, we feel good about our exposures and are well positioned to weather any storms. During the second quarter, we repurchased $5 million worth of our stock at an average cost of $13.99 per share. We continue to monitor our capital position in light of our various capital metrics, and we will carefully evaluate opportunities for further share repurchases as part of our overall capital management. Finally, this quarter, we have prepared an investor presentation summarizing our results and strategy, which is available in the Investor Relations section of our corporate website. We hope it provides additional context as we continue our efforts to communicate more broadly with shareholders.

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

David Michael Einhorn: Thanks, Greg, and good morning, everyone. The Solasglas fund returned negative 4% in the second quarter. The long portfolio and macro contributed 1.2% and 3.5%, respectively, while the short portfolio detracted 8.9%. During the quarter, the S&P 500 Index advanced 10.9%. Our biggest problem during the quarter were the lack of winners in our long portfolio and a strongly rising market. The largest positive contributors were long investments in gold and Kyndryl Holdings, equity index hedges and macro positions tied to a weaker U.S. dollar and lower short-term interest rates. The largest detractors included a short position in a profitless technology company and health care equipment business.

Gold was the largest positive contributor as its price appreciated about 6% over the quarter. Kyndryl Holdings shares advanced 34% during the quarter. In May, the company announced strong quarterly results, marked by a return to positive net revenue growth and a significant increase in new customer signings. Also, the company raised its guidance for fiscal year 2026. In macro, our SOFR futures position benefited as the market priced in additional interest rate cuts from the Federal Reserve. Also, our long euro and yen positions were positive contributors as the dollar weakened further. The largest detractors included several short positions, primarily in profitless tech and similarly speculative companies, which all rallied significantly.

We found ourselves on the wrong side of a couple of short squeezes, which we had to risk manage, which means taking a partial loss. In the long portfolio, Brighthouse Financial declined 7% as the market speculated that a possible takeover may happen at a smaller premium than originally expected or possibly not at all. Throughout the quarter, there was a lot of economic activity designed to get ahead of the tariff implementation. As tariffs have now mostly come into effect on August 1, we believe that there will be a reversal of some of that front running and expect it to show in the data over the next several months.

While the losses were mostly on the shorts, our underperformance came mostly on the longs. As we contemplate the reason why we believe that the economy is doing worse than generally understood as many of the companies actually on both sides of our book are reporting weak results. The main difference is that the investors had more commitment to look through the weakness on our short names than on our long names. Our net exposure ended the quarter at about 2%, down from 20% at the end of the first quarter. Solasglas returned negative 4% in July, bringing the 2025 year-to-date return to negative 1.2%. Net exposure for the investment portfolio was approximately 7% at the end of July.

We continue to make progress on our underwriting portfolio and expect that the repositioning away from open market casualty into other better risk-adjusted lines will contribute to our results over the intermediate term. Last week, we held our Annual Shareholders Meeting, and I'm pleased to announce that all the proposals passed by over 90%. I want to thank all of our shareholders for their vote of confidence. And now I'd like to turn the call over to Faramarz to discuss the financial results.

Faramarz Romer: Thank you, David, and good morning, everyone. During the second quarter of 2025, Greenlight Re reported a net income of $0.3 million or $0.01 per diluted share compared to a net income of $8 million or $0.23 per diluted share during the second quarter of 2024. The consolidated underwriting income was $8.1 million, resulting in a combined ratio of 95%, which was 4.9 points better than second quarter last year, primarily due to no cat losses in the quarter. Our investments in the Solasglas fund lost $18.3 million during the second quarter, while other investments earned $10.5 million income, the majority of which related to interest on restricted cash and cash equivalents collateralizing our obligations to cedents.

Now let's look at the second quarter results by segment. For the quarter, the Open Market segment grew net written premiums by 8% to $142.1 million. The increase was driven primarily from growth in the FAL business. Meanwhile, the casualty premiums decreased during the quarter as a result of nonrenewing the casualty book. The Open Market combined ratio for the second quarter improved by 2.1 points to 92% compared to 94.1% for the same period in 2024. The current year loss ratio increased by 1.8 points, primarily related to the casualty book and a transactional liability program. The higher loss ratio was offset by lower acquisition cost ratio, which improved by 3.1 points on lower commissions.

The segment reported a net favorable loss development of $0.9 million or 0.7 combined ratio points, resulting from $9.7 million release of our specialty reserves, partially offset by reserve strengthening of casualty and multiline programs and a transaction liability program. The Open Market segment reported a pretax income of $16.8 million, composed of underwriting income of $11.2 million and investment income of $5.6 million. The Innovations segment grew net written premiums by 2.3% to $22.7 million during Q2. The increase was mainly driven by Syndicate 3456 and some specialty programs, partially offset by decrease in casualty premiums.

Our whole account quota share retro program, which incepted in Q4 2024, also contributed to lower net earned premiums compared to the same quarter of last year. The combined ratio for Innovations segment was 107% during the second quarter compared to 90.9% in Q2 last year. Unfavorable prior year reserve development contributed 11.8 points to the Innovations segment combined ratio compared to favorable development of 6.5 points in Q2 2024. The $2.5 million of adverse reserve development related to two specific programs that reported greater number of claims than expected. We are already working with our partners to implement corrective actions on these programs.

The combined ratio benefited from lower attritional loss ratio and lower acquisition cost ratio, which improved by 0.8 points and 5.1 points, respectively. The expense ratio for the Innovations segment this quarter was 7.6% compared to 3.9% during the same quarter last year due to a combination of growth in personnel and increase in direct costs attributable to the segment and lower earned premiums. Outside of the two segments, the runoff homeowners property contracts suffered adverse development of $1.5 million during the second quarter. Foreign exchange gains in the quarter were $6.3 million, primarily driven by a British pound sterling-denominated balances as the pound strengthened against the U.S. dollar.

We ended the second quarter of 2025 with our fully diluted book value per share growing to $18.70 -- sorry, $18.97, an increase of 7.5% since the second quarter of 2024. This included the impact of the $5 million of shares repurchased in the second quarter. That concludes our prepared comments. The operator will now open the line for questions.

Operator: Thank you. [Operator Instructions] We reached the end of our question-and-answer session. Should you have any follow-up questions, please direct them to Karin Daly of the Equity Group Inc. at [email protected], and we'll be happy to assist you. This now concludes Greenlight Re's Second Quarter 2025 Earnings Conference Call. Thank you. You may now disconnect.