Greenlight Re reports fourth-quarter loss

Greenlight Re reported a net loss of $30.3 million for the fourth quarter of 2019, impacted by a $14.2 million catastrophe loss related to typhoons Hagibis and Faxai.

This compares to a net loss of $80.8 million for the same period in 2018.

Tropical cyclones Faxai and Hagibis, which hit Japan in September and October 2019, were largely responsible for a net underwriting loss of $15.8 million, compared to a net underwriting loss of $18.0 million reported in the fourth quarter of 2018.

Gross written premiums of $98.5 million were down from $135.1 million during the same period in 2018, while net premiums decreased 6.2% to $98.4 million, as the Cayman-based reinsurer did not renew retrocessional coverage of certain auto business.

The hedge fund-backed reinsurer faced unexpected losses in its private automobile business in 2019 due to adverse rulings that affected a significant number of claims in Florida, which had previously been considered closed.

Greenlight Re ceded a significant portion of its exposure from failed Windhaven Insurance to the retro market before non-renewing its reinsurance of the Florida non-standard auto insurer last year.

Simon Burton, chief executive officer of Greenlight Re, said when comparing the company’s portfolio at the end of 2019 to the beginning of last year, “we are pleased with the progress we’ve made”.

“Excluding the adverse loss development on our private passenger auto business recognised in the first half of 2019, our portfolio performed acceptably during 2019, despite $17 million of natural catastrophe losses that we incurred during the year,” Burton said. “We are optimistic about our positioning in 2020, which will enable us to take advantage of improving market conditions.”

The reinsurer’s net investment loss of $8.8 million during the fourth quarter includes a loss of $5.7 million on the Solasglas fund and a $6 million valuation allowance provision made on notes receivable.

Greenlight Re chairman David Einhorn said, “We gave up some ground during the fourth quarter, given the unabated outperformance of growth vs. value stocks.” But investment returns from the Solasglas fund, managed by Einhorn’s DME Advisors, were positive for the year, reporting a 9.3% return and an overall net investment gain of $46.1 million.

Ratings agency A.M. Best & Co. last year criticised the reinsurer’s underwriting performance, prompting Greenlight Re to announce a strategic review in May.

This review is still ongoing and the reinsurer is in talks with interested counterparties. Einhorn admitted in an earnings call on Tuesday that the strategic review has taken longer than anticipated.

“I think you can take from that, that whatever our first course of action choice was did not pan out, so now we’re 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,” he said.

Greenlight Re’s stock traded at around $7.30 at midday on Tuesday, well below its 52-week high of $12.60.

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