GLRE: Greenlight Capital Re Delivers Strong Q1 2024 Results, Driven by Underwriting Profitability and Investment Gains

Published on September 24, 2024 | Ticker: GLRE

Greenlight Capital Re, Ltd. (NASDAQ:GLRE), a global specialty property and casualty reinsurer, reported impressive financial results for the first quarter of 2024, showcasing the strength of its underwriting and investment strategies.

For the full year 2023, the company reported annual net income of $86.8 million, annual revenue of $624.3 million, annual operating cash flow of $7.5 million, and annual free cash flow of $53.5 million. These robust financial metrics demonstrate Greenlight Capital Re's ability to consistently deliver value for its shareholders.

In the first quarter of 2024, the company continued its strong performance, generating net income of $27.0 million, or $0.78 per diluted share, compared to $5.9 million, or $0.17 per diluted share, in the same period of 2023. This significant increase in profitability was driven by both improved underwriting results and a strong investment performance.

Underwriting Highlights

Greenlight Capital Re's underwriting operations delivered a combined ratio of 98.0% in the first quarter of 2024, a 1.8 percentage point improvement from the same period in 2023. This underwriting profitability was achieved despite the company's exposure to the tragic collapse of the Francis Scott Key Bridge in Baltimore, which resulted in a $10.1 million loss, net of recoveries and reinstatement premiums, or 6.3 percentage points of the combined ratio.

The company's underwriting portfolio favors shorter-tail specialty classes, such as marine, which allowed it to absorb the significant Baltimore bridge loss while still delivering a small underwriting profit. Moreover, Greenlight Capital Re expects the marine market rates to harden as a result of this industry-defining event.

During the first quarter, the company's gross premiums written increased by 16.5% to $217.3 million, driven by growth in its casualty and specialty books. The casualty book saw a 14.1% increase in net premiums written, primarily related to multiline contracts, including the company's Lloyd's syndicate business. The specialty book, particularly the marine and other specialty classes, experienced an 18.7% increase in net premiums written.

Conversely, the property book saw a 19% decrease in net premiums written, primarily due to the non-renewal of a homeowners quota share contract. Excluding this contract, the property book actually grew by 22%, as the company believes property catastrophe pricing continues to be attractive.

Investment Performance

Greenlight Capital Re's investment in the Solasglas fund, managed by DME Advisors, reported a gain of 5.2% in the first quarter of 2024, compared to a loss of 1.1% in the same period of 2023. This strong investment performance, coupled with the company's net investment-related income of $8.1 million, contributed significantly to the overall profitability in the quarter.

The Solasglas fund's performance was driven by gains in its long portfolio, particularly in positions such as Green Brick Partners and Tenet Healthcare, as well as a successful macro position related to interest rates. The fund's short portfolio and other income and expenses also contributed positively to the overall return.

Liquidity

As of March 31, 2024, Greenlight Capital Re's fully diluted book value per share stood at $17.39, an increase of 3.9% from the end of 2023. The company's strong capital position, with a debt-to-equity ratio of 0.12, provides it with the financial flexibility to pursue growth opportunities and navigate market challenges.

Outlook

The reinsurance market environment remains competitive, with some pressure on pricing, particularly in property catastrophe and specialty classes. However, Greenlight Capital Re has been able to grow its casualty and specialty books while maintaining underwriting discipline.

At the April 1, 2024 renewal season, the company observed a similar trend, with premium growth year-over-year and a broadly flat to modestly down rating environment. The company's small Japanese property catastrophe book saw very modest rate decreases, which the company attributes to the significant strengthening of the U.S. dollar against the Japanese yen over the past few years.

The company's focus on shorter-tail specialty classes, such as marine, has positioned it well to navigate the current market conditions. The Baltimore bridge collapse, which is expected to be one of the largest marine industry losses on record, has the potential to drive further rate hardening in the marine reinsurance market, which could benefit Greenlight Capital Re.

Conclusion

Greenlight Capital Re's strong first quarter 2024 results demonstrate the effectiveness of its differentiated underwriting and investment strategies. The company's ability to deliver underwriting profitability, even in the face of significant catastrophe losses, and its robust investment performance, highlight its resilience and adaptability in the dynamic reinsurance market.

Looking ahead, the company's focus on specialty classes, its disciplined approach to underwriting, and its prudent capital management position it well to continue generating value for its shareholders. Investors should closely monitor Greenlight Capital Re's progress as it navigates the evolving reinsurance landscape and capitalizes on emerging opportunities.

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