Greenlight Re returns to profit on investment gains

Greenlight Capital Re reported fourth-quarter net income of $42 million compared to a $30.3 million loss in the same period a year earlier.

During the period, the company incurred a net underwriting loss of $1.1 million, which consisted mainly of COVID-19 losses. The reinsurer’s investment income totaled $48.4 million.

Simon Burton, Chief Executive Officer of Greenlight Re, said, “We had a strong overall quarter and grew book value per share by 11.6%. This growth was led by $38.5 million of gains generated by our investment in Solasglas, and we recognised a further $9.9 million of other investment income, driven primarily by our strategic and innovations partnerships.”

He said, “The underwriting combined ratio of 101% includes a small loss from COVID and caps a year during which our underwriting business showed tremendous resilience to the pressures of the pandemic and numerous natural catastrophes.”

David Einhorn, chairman of the board of directors, said, “We reported an 8.4% investment gain in the Solasglas fund during the fourth quarter, driven primarily by strong performance in our long positions.”

- Advertisement -

Einhorn, who manages the Solasglas fund, said he expects a global economy to recover as the pandemic subsides and noted that the fund is positioned for higher inflation, a strong housing market and rising interest rates.

The company’s investment income for 2020 was $25.5 million with $4.4 million coming from the Solasglas fund.

For the full year 2020, the company reported an underwriting loss of $1.6 million, which equated to a combined ration 100.4%, compared with an underwriting loss of $33.5 million and a combined ratio of 106.9% in 2019.

Net written premiums in 2020 were 0.5% higher than in the previous year at $477.5 million, but net premiums earned of $455.4 million were 5.8% lower.

In an earnings call, Burton said, aside from COVID-19 claims, 2020 was the fifth-costliest year of natural and manmade catastrophes in the history of the insurance industry.

“This was driven not by large hurricanes and earthquakes, but by a high frequency of wind storms and secondary perils, such as wildfires and convective storms. The recent frequency and severity of these events have tested the credibility of exposure modeling that the industry relies on for pricing,” he said. “It seems to us that the industry is not properly paid for certain types of catastrophe tail scenarios.”

While 2020 was therefore a challenging year for the reinsurance industry, he said, Greenlight Re’s performance was “in my view, very good” with underwriting “just slightly worse than breakeven”.

Greenlight Re transformed its underwriting business during the past three year away from high concentration of risk in individual counterparties to higher margin business.

“This shift positions us well to benefit from the rapidly improving market conditions that were evidence of the recent January 1 renewals.”

Burton said the company will provide more details on its 2021 portfolio next quarter.

“But I’m confident that we saw a significant step forward in January in both the composition of the underwriting portfolio and the overall margin potential,” he added.

- Advertisement -

Support local journalism. Subscribe to the all-access pass for the Cayman Compass.

Subscribe now