Investment income drives Greenlight Re profit

The Cayman Islands-based reinsurer Greenlight Capital Re, Ltd. announced improved financial results for the second quarter of 2009 on the basis of its underwriting and investment portfolio performance.

Greenlight Re reported a net income of US$92.2 million for the second quarter of 2009 compared to US$33.5 million for the same period in 2008.

On a fully diluted per share basis, the NASDAQ-listed company posted a second quarter net income of US$2.51 per share, contrasting a net income of US$0.91 per share for the same period in 2008.

The fully diluted book value per share, which takes into account the dilutive effect from share based compensation, increased 17.4 per cent in the second quarter but was at US$16.73 down 4.3 per cent from US$17.49 per share a year earlier.

David Einhorn, Chairman of the Board of Directors of Greenlight Re, commented on the results: “In the second quarter of 2009 our underwriting portfolio continued its profitable growth while our investment portfolio posted a good return in light of our conservative portfolio positioning.”

Greenlight Re’s underwriting portfolio performed better than expected. Updated claim estimates on a catastrophe loss that were booked during the first quarter turned out lower than initially forecasted.

Gross and net premiums written and earned were substantially higher than in comparable periods in 2008. During the first six months of 2009 gross premiums written were US$141.9 million compared to US$96.1 million for the first six months of 2008. At the same time net earned premiums grew to US$95.5 million, an increase of 83 per cent over the same period in 2008.

Len Goldberg, Chief Executive Officer of Greenlight Re, said: “We continued to successfully build our underwriting portfolio and leverage our strategic partnerships while also benefiting from the reversal of the catastrophe loss we booked in the first quarter of 2009.’

“While the insurance market has not hardened as quickly as we had hoped, our team continues to identify and select attractive underwriting opportunities while retaining our existing portfolio.’

The posted quarterly results largely benefited from the performance of Greenlight Re’s investment portfolio. The net investment income of US$88.3 million during the second quarter of 2009 resulted in a net return of 13.9 per cent, bringing net returns for the first six months to 19.1 per cent in the investment portfolio.

As a result Greenlight Re has recovered the losses suffered in its investment portfolio in 2008.

Most of the investment return in the second quarter came from the reinsurer’s loan portfolio, which increased 30% on a gross basis.

‘While our investment portfolio has been conservatively positioned given the potential volatility in the markets, we were able to demonstrate significant outperformance in the second quarter of 2009,’ said Mr. Goldberg.

He added: ‘Our second quarter results underline our strategy to earn strong risk-adjusted returns on both sides of the balance sheet in order to drive long-term growth in book value per share.”