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Greenlight Re significantly improves underwriting & investment performance

7th November 2019 - Author: Luke Gallin

Investment-oriented reinsurer Greenlight Re has reported net income of $5.1 million for the third-quarter of 2019, as the firm produced underwriting income and an investment gain for the second quarter in a row.

Greenlight ReIt would appear that the previously announced strategic review and ongoing efforts to diversify its portfolio are having a positive impact for Greenlight Re in 2019. After reporting a solid Q2, the hedge fund style reinsurer has announced underwriting income of $2.6 million for the third-quarter versus an underwriting loss of $4 million a year earlier.

At the same time, the reinsurer’s investment income reached $9.9 million in Q3 2019, which is a significant improvement on the $80.9 million investment loss recorded a year earlier.

At 98%, Greenlight Re’s combined ratio strengthened in the quarter from the 103.5% posted in the third-quarter of 2018.

Overall, net income of $5.1 million is a dramatic improvement on the net loss of almost $90 million announced in Q3 2018. Last year, Greenlight Re was hit by the impacts of hurricane Florence in Q3, and while it certainly felt the impacts of Q3 2019 events, ongoing efforts to turnaround the underwriting performance appear to be paying off.

Consistently poor underwriting returns led ratings agency A.M. Best to turn negative on Greenlight Re earlier this year, and as a result of these measures the firm partially de-risked its investment portfolio and also started a strategic review led by its Board of Directors, which is ongoing.

Simon Burton, Chief Executive Officer (CEO) of Greenlight Re, commented on the firm’s performance: “We performed well in the third quarter, achieving a combined ratio of 98.0% and growing book value by 1.2%. While we were not unaffected by the significant loss activity in the quarter, our positive underwriting contribution reflects the ongoing efforts to diversify our portfolio.

“As previously announced, our strategic review of the Company is ongoing as we work diligently to maximize value for our shareholders.”

Chairman of the Board of Directors, David Einhorn, added: “Overall we are pleased with our investment portfolio’s performance as Solasglas posted a positive return of 10.4% for the first nine months of the year. The underwriting portfolio continues to benefit from increased diversification.”

A reduction in auto business, partially offset by additional new business written in several different markets, resulted in gross written premiums declining in the quarter to $110.6 million, while net written premiums increased to $106.6 million.

Greenlight Re states that ceded premiums totalled $4 million versus $15.5 million a year earlier, while net earned premiums increased to $129.2 million, year-on-year.

For the first nine months of the year, Greenlight Re’s underwriting performance remains in negative territory, with a combined ratio of 104.7%. However, underwriting gains in both Q2 and Q3 will have gone some way to offsetting the underwriting loss experienced in the first-quarter of the year, suggesting that the firm could produce full-year underwriting income.

Total net investment income for the nine month period reached $61 million, compared with an investment loss of $266.7 million reported for the same period in 2018.

The hedge fund backed reinsurer business model has come under scrutiny in recent times, with market observers and analysts questioning the performance of players such as Greenlight Re in a challenging investment landscape and competitive underwriting environment.

It’s been said by analysts previously that when compared with traditional reinsurers, the performance of investment-oriented reinsurers is lagging, but the recent and much-improved performance on both sides of the balance sheet for the likes of Greenlight Re might alleviate some of the pressures.

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