GLRE - Earnings call transcript Q4 2017 | Greenlight Capital Re, Ltd.

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Operator

Thank you for joining us for the Greenlight Re Conference Call for the Fourth Quarter 2017 Earnings.

Joining us today on the call are David Einhorn, Chairman; Simon Burton, Chief Executive Officer; Tim Courtis, Chief Financial Officer; Brendan Barry, Vice President, Underwriting Officer; and Mike Belfatti, Chief Operating Officer. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. this being note, Please Instructions] even recorded. is [Operator Private forward-looking are to XXXX. made company of covered reminds this that that you the provisions Harbor intended The on Act statements call the Safe Litigation Securities Reform by of be are

prove statements events publicly a historical result but XX-K and or forward-looking the company assumptions, to uncertainties uncertainties the projects. sir. statements are or rather SEC. conference actual predictions about over including of be as The estimates XXXX, incorrect, or and by go differ XX, or If filed with statements and Simon would no whether in information, Please February the Form turn new current subject if otherwise. assumptions dated like expectations, results and not to ahead, obligation revise the I company those the now Burton. future or are reflect undertakes risks Forward-looking documents company's fact, any one company's update to results company's events materialize future more materially company underlying enumerated and of risks, other may from the to what the to

Simon Burton

joining for call. morning, thank and Good you our

This classes medical include review joined contracts four the of range components describing adjustments give disappointing losses. has loss QX a and casualty. I'll to IR, our months Our resulted thorough stop of that catastrophe diluted largest clearer adjusted and and the results; on by X%. to reflecting reserve last natural overall results Mike other legacy book a reserves. reserve a and in over To It indemnity, late year of in for of adjustments reduction professional picture loss the were the of start two the XXXX. value by us reserves development measured in fully you is of led worth

impact reported million net previously quarter natural from of of half net was in produced $XX.X was these scale was prior catastrophe $XX.X XXXX, tested million made $X.X which industry and our year adjustments of these unchanged earthquakes end. fourth Hurricane development income approximately of the $XXX year estimate severely nature Mexican largely than reserve loss industry produced and of in and combined were at million by billion third a quarter wildfires losses from The events unusual $XX.X For net estimates the losses. million, more We California the the QX. that

our pleased events. industry was expectations resilience the this of to of with to share loss business within cash be Our I and continue

approximately of that Our natural quarters is outsized exposure interesting is modestly for to hazards which reflects exposure flat sized a has take but is block not view position. sufficiently priced from us to reasonably prior an CAT our

an many us of quarter space. appear fortunate Timing entry during stagnation losses price the with repositioning business in have and marine January reversed portfolio notably X, work specialty was several to as from CAT capacity continued classes classes new Our at pressure. casualty the by or some into energy allowing class, and driven mixed entrant in overall more up, trending specific new areas Rate XX% than mortgage selective around a be vary significantly and by as approach. down renewals circumstances to some is our slightly more, recent fairly deal down changes with macro were

in were short exposed perils natural expect, not exposed tailed isolated. excess improved board you classes of classes across flatter As renewal. specialty in the Other XX% catastrophe rates increases would were approximately but to

pricing saw rate by it X not predicted at changes As dislocation not surprised by some. as the supply January we was capital a seemed comment, could muted that general the the clear we of were that support

hope price relied It for has of time risk. been delusional and has industry increases I it. our long some to behavior the underpriced too on For post-loss offset end that's

transaction session first peers, auto linked is large relationships retro to expanded focused many business been we transforming on second for pipeline deal need in management joined than portfolio step in of our a base on which future, is long-term CAT where Greenlight distribute our classes asset This our premium an and at a classes. on the completed building I appetite our this of the expertise and the to for in our Unlike good where capabilities. portfolio work capital also risk increase during the underwriting strategy for represents we July, product fit effort have for of markets. we Re explains other our client QX. have use innovation seek to relationships insurance CD non-standard Finally, we our Since diversifying hard

this, As expertise processes in streamline positive each business. for deploy to the part our teams the will which and January efficiently of area renewal we results underwriting

we our construction technology initiatives and in into linked traditional As head be on will by focus portfolio XXXX, management asset complemented insurance innovation. and

will on weeks coming to We the have more months. this say and in

over to progress discuss to our the call investment our strategy. the and results turn overall in to like David I'd Now

David Einhorn

and good investment The X.X% morning, longs detracted fourth our X.X% our in and portfolio Simon Thanks X.X%. declined Greenlight contributed shorts everyone. quarter; Re the

and Our versions largest XX% included our the it's approved Mylan long in detractors Copaxone. Energy, biggest for FDA winners shorts our Caterpillar of after and Resources. generic advanced traditions CONSOL in Mylan Continental and

Mylan earnings pipeline the company more management guidance of to achieve received With and earnings. under becoming XXXX the the value key future approval has company's the evident. estimated trades are Xx and recently others, ability

second biggest natural business of high gas cost have which the structures CONSOL companies and was it's resource from positions, management spin-off Our winner quality it's favorable strong completed coal both business, Energy teams.

remaining reduced XXXX The enhanced gas trades at coverage. CNX play, EBITDA Resources, in result analyst and pure this natural Xx XXXX less both under name, than Xx and assets CONSOL the complexity call expect original having We spin opportunities, the companies less than company's Energy. growth more and traded will EBITDA

as raw will company in losers; for XX% exceeded believe Caterpillar the temporary this position headwinds We quarter the the be company in from As margins during rose segment. as short our faces expectations construction this materials.

this and XX%. equity annuities which a put book in mostly markets should climbed new the makes both return in only position XX%, rising prices This rates much re-rate If right interest rates would the as Continental from Financial a next ways, correct, was the position sensitivity it and position half capital Brighthouse insurance potential the the the plan favorable overall MetLife share declined Brighthouse valuation. markets years. Resources a We market for spun summer. spin the forecast. a traded short no prolonged reflected and our normalized sooner portfolio as sensitive the proves management's downside it of three than rose than return Our business earnings. to market more Brighthouse from in last and in while to Xx life short capital X.X% equity portfolio to which in interest index. environment bear loan established out half Investment opinion, of at up time In up our the January from both in rate because doubled shifted oil low advanced the about our S&PXXX only and January, portfolio works grind value straight included

which similar While prior March we've our of never XXXX a the came underperformed to like worst environment. S&P compared this, in was underperformance

The growth the Greenlight fundamentally long, gross the while are short. We us. shorts exposure to hurt by gross that challenged managing XXX% currently maintaining XX% about reinvestment exposure portfolio is prudently

this has coming benefit cuts reversion February, our soon. longs profits business maybe While gross remained of portfolio. a to year are render a loan we hallmark including our our and of with and years to Higher uncertain are interest beginning finally their value with valuation stocks the environment had profits tax Corporate stocks incredibly our should they are difficult think against which rates haven't is future accelerating companies less an The stocks wide. alternative and investors offer valuable. in between shorts many spread story outperformance

less Cayman. endeavors and underwriting to have to many every read a strategic in to internal that a on our team operations; very ability Though to company. operating second Mike flow will Simon, to decade than managed to guide public X their growth the [ph] business. I'm in take in constructive rest time It's the of as of results, the accomplish have changes and months the they see Turning area satisfying of to started

While XXXX I'm year a the excited disappointing company's prospects. was overall, about

financial the to discuss I'd call like the to turn Now over results. to Tim

Tim Courtis

I'll where compared The the unearned net XXXX. loss the of Greenlight $XX.X million, our written results, net net reported share primarily quarter. compared in and share Gross income written due fourth return the quarter quarter briefly quarter to over decrease X.X% financial prior diluted per year through per during premium Thanks, XXXX. a to the The XXXX, premiums $XX.X of net for fourth $X.XX reduction in Re premiums fourth contract is million David. fourth fourth quarter loss during of quarter the starting Florida with homeowner's million were the was income of to $XXX a of which go for was the on commutation fully in $X.XX of the the period.

As a Simon quarter from of net ratio. the reported of net non-standard the indicated, of catastrophe of for the was XXXX XXX.X%, ceded to automobile portion composite premium our business. fourth there-in estimated increased retro-see included fourth $X.X quarter The the as gross quarter we our during ratio were losses quarter investment of XXXX, the during net CAT a We loss added investment of X.X reinstatement on million continue to the points X.X% fourth loss premiums million wildfires. $XX.X of our composite fourth portfolio. California Fourth reflecting losses, quarter

compared million, Greenlight net Re written XXXX net a of $X.XX. to the in results, The premiums Gross $XX.X year full $XXX.X XX% approximately the of was XXXX. income per to an over million for net year, of $XX increase XXXX. reported million loss share for loss Moving were

our due premiums during new contracts and non-standard compensation to in lesser on XXXX workers to extent business As prior the increased numbers, primarily have our automobile year. premiums the reported a written quarterly increased to

composite development XXX.X% and X.X adding a our year net XXXX, X adding net points. with For prior points loss was catastrophe ratio further losses

to the Underwriting Our of $X.X totaled for million than were million primarily than quantitative a and prior combined accruals in $XX.X underwriting of the XXXX $XX.X in X.X%, result is for The due in XXX.X%. the which year expenses higher the ratio as underwriting year year year. the million the $XX.X for profitability. general a million reduction lower expenses expense year administrative for was prior approximately of reduced resulting bonuses ratio

gain $XX.X XX, consulting and compares the account. share X.X% year was XXXX prior primarily to relating and December of during Our net a $XX.XX million professional as on reported fees. million from December expenses of decrease for X% per net a book non-reoccurring to reported $X.X of higher XXXX. value adjusted at is million, $XX.XX, Fully per investment investment $XX.X XX, million approximately our We $X.X of corporate of income reflecting to XXXX due expenses diluted share

investment foreign can In consider referred in PFIC for the passive enacted as continue the our appreciate, law have rules and company company and and new their tax relating to often brightline U.S. you the our time rules to impact the rules we well analyzing as the we we to As the provide facts qualifying provisions new spent circumstances considerable both particular, as test way PFIC on The test, conduct companies. the insurance business. a

interpreters to this diligently that guidance of While work due options is in respect meet a the and at we further course progresses. as goal regulatory wait the still provide range test we our looking brightline issued, to are hurdle. to We'll details for be our is with

up to like the to the to it operator open I'd turn questions. call and Now back

Operator

Glasspiegel from [Operator comes the with question first Bob Instructions] Janney. And

Bob Glasspiegel

thought does on it one that had of some of about or transaction, strengths. competitive I've always were thought you suggest about the that Couple business overweighted you retaining as the By your of business? little concerns bit profitability that the in segment auto less you questions

Simon Burton

classes. looking so liked class, we're overweight our relationships, we've of Yes, great keep room this rebalancing of also the creation got and relatively anything, some in you enter to sure. client new to more we were than a the We should portfolio for consider business,

Bob Glasspiegel

ratio process I commission an ratio the step loss to of and the math working do is play not in the ratio or it impact was My Is expense in the there came have down. to go it expense through calculate through ceding an looks accruals? expense quarter. like incentive right, it they each dynamics some

Tim Courtis

the results, because less and value has The net well but for of drive the obviously a premium bit. accruals as dollar that more the ratio with less on bonus and those this year-to-date given down fixed obviously more premium reduced is added is speaking earned somewhat is the value actual dollar quantitative to

Bob Glasspiegel

the But the ceding there impact quarter in is from ratio to expense no the transaction?

Tim Courtis

The for the ratio quarter No. expense was X.X%.

Bob Glasspiegel

you review; reserve internal the internal did outside based or review it actuaries use or outside was review? -- On it was an on

Mike Belfatti

based We on review. set reserves internal

external announces of did levels as multiple However, we well.

to second bring well, table is of the sort eyes wanted I both. of so we the enhancements in the of set things addition that to One did as maximum all internally of to use

Bob Glasspiegel

quick question. one David,

-- like down To date, the you the February it the perform bit. portfolio little in the mentioned how portfolio lagged You sounded a of did market? draft

David Einhorn

we has performed but discussed. not say net would I has January expect either. In the portfolio It relatively month, one materially it's underperformed it that month long as would outperformed exposure. the February underperformed given throughout of I not dramatically in has the as

Bob Glasspiegel

to that said the looking scenarios options, materially couple you you you're On at are it operate just comply? of there or how would it test change side dances is where a

Simon Burton

every on here are working reinsurance on any range primarily us I is, employee we're One of real now. brightline the things their with to test beyond doubt can we is reinsurance imposed the business. do days say There spending address a a company thing bonafide would that

circumstances beyond the but in certainly, to steps we it be seems any question all anyway. if the steps important. appetite facts and brightline our interested not It's fit So of this fit these early the that take but within the otherwise underwriting almost we'd too of is indicate and will test majority will

Operator

question next Meredith the comes of UBS. And from Brian

Brian Meredith

want pick here a again, the more review? in First, kind with saw more the ground it detail little conservative to additions in up dive you respect reserve trend to of that here. Was Was I the happened much just range? loss into some to What happening? it acceleration

Mike Belfatti

over seeing reserve few last new experience obviously, I number sort two, at to level. is looking And when insurance eyes months think my of of more in directly set it's of something macro with claim the deals, classes one. in business mostly to complex what here, portfolios was large looking a the bring at reinsurance and global I reacting I that trends, the number experience class so bare the at individual we're managing and

years, trends we So did account. always claim single reporting, in bottoming of that that reprojections an every and analysis industry process, in I'd frequency over abatement longer one closely thing in the term process; point. that even and severity occurred we to at turning. trends, XX isn't what as point course certainly of has levels industry very looked at Clearly, of we're showed frankly seeing of generally more are and There interesting the reserve signs do

following most data clearly, at understanding coming the the our it through leads be things of claim us there some is that So of of in where and reporting a but can -- just is where going macro level.

Brian Meredith

business. about the -- bit entering of and other you portfolio on. energy Simon, renewals little they you played marine one talked color couple how out? of on of kind just of of your kind a classes [ph] Some them repositioning and about talk Can going month maybe

Simon Burton

some in last bit our a of bit the revisited did market timing challenging. We an Brian. and as created Sure, more backdrop in it fortunate appetite. is rebounced room The created uptick the have with CATs still some a it their of rate so year, importantly, but peers

a I those and last being bit for lot as for the would us. [indiscernible] few of these specialty describe years, So somewhat classes played that where stagnant well

where this all syndicated entry follower said primarily is was pretty market in acting was smaller in active change London new green considered, like having markets raising light given with selected, we but considerably us business, our classes. we're energy a modest And strategy definitive we've before; the dollar classes So terms marine that few there the for terms been business objective a classes shares it where our in the example a and for ground as interested we're so and relatively are that specific really conditions are space profile were itself. yes, their so as where in much aviation other we less deliberately classes today. as those interested and was that business an Onto in, never

standing of relationship quite classes our account So we are parties, continuation long of from the like on we were the selective past. and had whom our I've several

Brian Meredith

I'm strategically tolerance maybe point? about these sense you're this just of does doing at in -- now think treaties; terms make to and of [ph] at indicative curious, [ph] of business having the some some it Lloyds acting given

Simon Burton

it It's in the consider list discussed we of been one that Brian, the is of may long future. only directions strategic

Operator

[Operator from [indiscernible]. the Instructions] comes And question next

Unidentified Analyst

[ph] after book between or of going the the stock last even that EBITDA loss, Greenlight you second buyback stock. the out but forward? spread can quarter took given born this know third -- of company January -- value, is the or existence you're and advantage year low to something versus that Thank of share think I buyback you. the some contemplating that quarter that price know the Re didn't price to I wasn't

David Einhorn

the value we of The use the buybacks purpose value the have has certainly period the used per book of prospectively we share, that include AM maintain operations, of other that the compete authorization value to and and capital. to book company of in rating past a when It is could which that to to sure of goal future. do tool is we any be use run -- factors long opportunity have considerations time over and long other maximize an one the add share to for enough to overall are in Best make buyback in we that insurance have against per time. the may our come capital period the to and balanced to The

depends deep there something may discount do the and discount, this have the share trade So if done dependent, the while we fact circumstances from is -- that it's towards and a upon how book it into is we in is future, before value. -- also

do those time. things what to and then from all to at time look So we decide we

Unidentified Analyst

pass something happy is discount for it's to or that you're on? XX% duly And you

David Einhorn

think you purposes a pass question to I which factors different company's of a to capital from not time for see are happy the don't it's question I time. the looking other do needs at or on, think all varies for it's static;

And do is we versus you think not uses of at book as related so becomes no becomes look value would to the do, as we something the choices more stock a deeper capital. the where about capital, there the buyback for obviously discount, attractive magic particular different price the the that different

Operator

And a comes from [ph], the Dunstan Fitzgerald question private next investor.

Unidentified Analyst

and with thinking get we the and loss business this take about is to zone? dealt going of business? the conference simply the I'm results, our do to are basic back what steps call about strengthen past ratio can improving the Most we better what in

David Einhorn

a I in think tuned. who to went on through sort a stay you've heard new the the the that year answer sense from Last call today is management of management we has and talking been efforts different risk than underwriting to of pricing to reposition kinds the portfolio, reposition taken we've able to before. the ways through do significant to actually philosophy, in change,

state we're have will results improved that they I think the the results they've business optimistic we've think already that and don't doing, form particularly think we're of results. leaders team, opportunity early days results today through those I'm of implement the begun reflect and seeing the senior an flow present now as to absolutely the which that very plan underwriting I decisions underwriting I management in in hired and first overtime the

Operator

to at in on The will would Adam assist Prior else any have there you. And follow-up present be question, should XXX-XXX-XXXX, you like Equity happy please and he Group nothing them have time, to direct -- as is I the to

you call at of information much a today's that attending replay We pertinent so may now website and on call. also about our Thank other available you Re for remind disconnect. is And www.greenlightre.ky. Greenlight this you

Greenlight Capital Re (GLRE) 21 Feb 182017 Q4 Earnings call transcript