David Einhorn, the Chairman of investment-oriented reinsurer Greenlight Re, said during the company’s recent earnings call that its strategic review is ongoing after initial actions failed to have the desired impact.
In the summer of 2019, ratings agency A.M. Best turned negative on Greenlight Re over concerns around its consistently poor underwriting performance.
The reinsurer posted a net loss of more than $350 million for 2018 on the back of a $45 million net loss in the prior year, driven by losses on both the underwriting and investment side of its balance sheet.
In Q1 2019, Greenlight Re’s underwriting result remained in negative territory but was more than offset by its investment gain, resulting in a quarterly profit of almost $6 million. However, the company’s underwriting challenges didn’t go unnoticed and consequently, A.M. Best revised its outlook for Greenlight Re and its subsidiaries.
The revision from A.M. Best led to the commencement of a strategic review and initially, it appeared as though the hedge fund-backed reinsurer was heading in the desired direction as the firm produced underwriting income in both the second and third quarter of the year.
However, Greenlight Re’s Q4 and full year 2019 results show that despite some improvements within its underwriting operation during the year, challenges remain. Overall, Greenlight Re reported a net underwriting loss of $33.5 million for 2019 and a loss of $15.8 million for the fourth-quarter of the year.
In light of the action taken by A.M. Best and the previously announced strategic review, management was questioned during the call on the company’s poor underwriting performance over a long period of time.
“The company is doing the best it can within the strategic review process. I can’t comment on any specifics. The process is ongoing and the company is going to do the best that it can to get the best outcome possible for the shareholders,” said Einhorn.
Adding, “I think it’s fair to say that the strategic review has taken longer than we would have expected it to. And, I think you can take from that, that whatever our first course of action choice was did not pan out. And, so, now we are thinking about other courses of action. And when we eventually come up with something that we think is the best available choice we will make it and we will announce it and go forward on that basis.”
The company’s Chief Executive Officer (CEO), Simon Burton, also commented on the strategic review and said that so far, the company has “not selected any particular course of action nor have we formalized the timetable to complete our review.”
