Greenlight Capital Re (NASDAQ:GLRE) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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View the webcast at https://event.webcasts.com/starthere.jsp?ei=1731027&tp_key=691022d3df
Summary
Greenlight Capital Re reported a net profit of $3.2 million for Q3 2026, bringing year-to-date net income to $9.4 million. Fully diluted book value per share increased 0.8% to $20.78.
The company achieved a combined ratio of 90.5%, driven by strong underwriting performance and a benign catastrophe quarter, despite experiencing investment losses.
Open Market gross written premium contracted by 10.4%, while the Innovations book grew by 46% in the quarter, reflecting strong organic growth and stable pricing.
A $25 million provision linked to the Middle East conflict was reduced by $6 million due to more information becoming available. No new large losses were reported this quarter.
The Solus Glass portfolio experienced a 3.3% decline in Q3, with specific losses from macro positions and certain long positions, although some gains were realized from shorts and other investments.
Greenlight Capital Re announced a strategic partnership with Hippo Holdings aimed at co-investing in early-stage MGA investments and utilizing Hippo’s carrier as Greenlight Re’s preferred U.S. fronting carrier.
Management is focused on 1/1 renewals and expects attractive rates and terms for the Open Market reinsurance business despite a softening market.
The company continued share repurchase activities, buying back over 5% of its outstanding shares in 2026, with $24.8 million remaining under the approved plan.
Full Transcript
OPERATOR (Moderator)
Greetings. Thank you for joining the Greenlight Capital Re Third Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the prepared comments. You may press star one at any time to be placed in the question queue. It is now my pleasure to turn the call over to David Sickman, Greenlight Re’s General Counsel. Thank you. You may begin.
David Sickman (General Counsel)
Thank you and good morning. I would like to remind you that this conference call is being recorded and will be available for replay following the conclusion of the event. An audio replay will also be available under the Investors section of the company’s website at www.greenlightre.com. Joining us on the call today will be our CEO, Greg Richardson, Chairman of the Board, David Einhorn, and our Chief Financial Officer, Faramarz Romer. On behalf of the company, I’d like to remind you that forward-looking statements may be made during this call and are intended to be covered by the safe harbor provisions of the federal securities laws. These forward-looking statements reflect the company’s current expectations, estimates and predictions about future results and are subject to risks and uncertainties.
As a result, actual results may differ materially from those expressed or implied. For more information on the risks and other factors that may impact future performance, investors should review the periodic reports that are filed by the company with the SEC from time to time. Additionally, management may refer to certain non-GAAP financial measures. The reconciliations to these measures can be found in the company’s filings with the SEC. The company undertakes no obligation to publicly update or revise any forward-looking statements. With that, it is now my pleasure to turn the call over to Greg.
Greg Richardson (Chief Executive Officer)
Thank you, David. Good morning everyone, and thank you for joining us. The third quarter of 2026 was mixed, with a strong underwriting result offset by investment losses. Overall, we reported a net profit of $3.2 million, which brings our year-to-date net income to $9.4 million. Fully diluted book value per share increased 0.8% in the quarter to $20.78 per share. We reported a combined ratio of 90.5% in the quarter, translating to $14.6 million of underwriting income.
This result was driven by a combination of the strong underlying profitability of the book, assisted by a benign cat quarter. Our Open Market book delivered an 87.9% combined ratio, while our Innovations book delivered a 98.2% combined ratio. Shifting to our top line, our Open Market gross written premium contracted 10.4% in the quarter compared to prior year, as we respond to the softening market conditions and exercise prudent cycle management. In contrast, our Innovations book grew by 46% in the quarter, reflecting stable pricing and strong organic growth of the companies we support in this segment during 2026. We have also expanded our use of outward reinsurance and third-party capital, with overall gross written premium for the quarter down just 1.4% while net written premium was down 12.3%.
During our August earnings call, we noted a $25 million provision linked to the Middle East conflict. This provision reduced by $6 million in the third quarter as more information became available on specific individual losses. While the Middle East conflict is still ongoing, it is noteworthy that we have not reported any new large losses this quarter. Our investment in the Solus Glass portfolio was down 3.3% in the quarter. David will provide more color on this in his remarks.
The Solus Glass loss was offset by $10.5 million of other investment income. Included in other investment income was $4.1 million of realized gains on the partial sale of two Innovations investments. As our Innovations book matures, we are seeing opportunities to monetize gains on some of our investments. We will recycle this capital into new investment opportunities. I would like to highlight a strategic partnership we announced last week with Hippo Holdings. Under the partnership, Hippo will have the opportunity to co-invest alongside our Innovations unit in early stage MGA investments. Furthermore, Hippo’s carrier Spinnaker Insurance Company will serve as Greenlight Re’s preferred U.S. admitted fronting carrier for qualifying co-invested programs. This partnership builds on existing relationships between Hippo and Greenlight Re, and we believe it will help accelerate disciplined, profitable growth of our Innovation segment.
We are now focused on 1/1 renewals while the market is continuing to soften. We generally believe that rates and terms remain attractive for our Open Market reinsurance business, and we expect to see profitable new opportunities through next year. As noted above, Innovations growth continues to be strong with stable rates. Now I’d like to turn the call over to David.
David Einhorn (Chairman of the Board)
Thanks, Greg, and good morning everyone. The Solus Glass fund returned negative 3.3% in the third quarter. The long portfolio detracted 7.6%, the short portfolio contributed 7.3% and macro detracted 2.8% during the quarter. The S&P 500 index advanced 2.3%. While the market advanced, our long and short portfolios behaved as if they were in a bear market. Many of our longs and shorts declined between 10% and 25%. The longs reversed gains and the shorts reversed losses from earlier in the year without a company-specific catalyst.
The largest positive contributors were shorts of AI-adjacent companies and homebuilder stocks, and our long position in DHT Holdings, which benefited from much higher tanker charter rates. The largest detractors were our macro position in short-term U.S. interest rates and our long positions in Green Brick Partners and Brighthouse Financial. The largest detractor in the quarter was our macro SOFR futures position, which reflects our view that short-term interest rates will decline or at least not increase as much as the market expects.
The position has been costly year to date and we’ve reduced it to manage risk. Our remaining exposure extends through next summer, and we continue to believe that the market is pricing in more Federal Reserve rate increases than are likely to occur. Green Brick Partners shares declined 17% and gave back most of their second quarter appreciation. Brighthouse Financial shares fell 21% amid increasing concern that regulators would block or delay its pending acquisition by Aquarian Capital.
We added a few small long positions to the portfolio during the quarter. Century Aluminum is the largest domestic producer of primary aluminum. The company is benefiting from tariffs in a tight global market and has an attractive growth opportunity to bring new smelter capacity online with government subsidies. We presented this idea last month at the Robin Hood Investors Conference in New York. The full presentation is available on our homepage at www.greenlightcapital.com.
We also added positions in ADI Global Distribution, a leading distributor of low-voltage electrical products that recently spun out of Resideo, and Canal Plus, a London-listed global pay TV and content production company. Our net exposure ended the third quarter at 32% compared to 33% at the end of the second quarter. Solus Glass returned 2.3% in October, bringing the 2026 year-to-date return to flat. Net exposure in the investment portfolio was approximately 28% at the end of October.
Greenlight Re continues to perform well in a softening reinsurance environment. The team has been disciplined and has made prudent decisions over the last year. While the market continues to trade our stock at a significant discount to book value, we continue our share repurchase plan and bought back over 5% of our outstanding shares in 2026. Joe Platt has been a director of Greenlight Re since 2004. At our board meeting last week, he announced he will retire from the board at the end of the year. Joe has been a great friend and a guiding light for the company through good times and bad. His role as lead director and his wise advice have been invaluable to me and the company. I wish Joe the best and we will miss him. Now I’d like to turn the call over to Faramarz to discuss the financial results in more detail.
Faramarz Romer (Chief Financial Officer)
Thank you, David. Good morning everyone. During the third quarter of 2026, Greenlight Re reported net income of $3.2 million, or $0.10 per diluted share, bringing our year-to-date earnings to $9.4 million, or $0.28 per diluted share. The underwriting income of $14.6 million for the quarter resulted in a combined ratio of 90.5%, which benefited from no new cat or large losses during the quarter. While the Middle East conflict has continued, we received verifiable information relating to specific events that were reserved in the first and second quarters. As Greg mentioned, we reduced our case reserves by $6 million on certain events, while we have maintained our IBNR reserves given the uncertainty in the region.
Prior year adverse reserve development was 1.6 points during the third quarter compared to 0.5 points in the same period last year. Most of the reserve strengthening related to a handful of contracts within the Innovation segment. Now let’s look at this quarter’s results at the segment level. The Open Market segment reported pre-tax income of $19.5 million, composed of underwriting income of $15.2 million and investment income of $4.3 million. For the third quarter, the Open Market segment net written premiums decreased by 19% to $114.2 million, while net earned premiums decreased by 13%. The decrease in net earned premiums was driven by lowered premium estimates on specialty and property proportional contracts, as well as decreased exposure on the non-renewed casualty book.
The Open Market combined ratio for the third quarter was 87.9% compared to 84.5% for the third quarter last year. Loss ratio for Open Market decreased by 1.9 points, driven by favorable prior-year reserve development of 0.6 points compared to adverse development of 0.6 points in the third quarter of last year. The favorable movement in the cat and large loss ratio from the release of reserves relating to the Middle East conflict was partially offset by a higher attritional loss ratio, mainly related to the specialty business.
Compared to the same period last year, the acquisition cost ratio for the Open Market segment increased by 4.1 points, mainly due to variable commission true-ups recorded in the quarter. Expense ratio increased by 1.1 points to 4.9% as a function of lower earned premiums and higher expenses related to personnel costs. Moving to the Innovation segment, the Innovation segment reported pre-tax income of $5.8 million, composed of underwriting income of $0.5 million and investment income of $6 million, partially offset by other expenses of $0.6 million. During the quarter, Innovations gross written premiums increased by $13.6 million, or 46%, compared to Q3 last year to $43 million, mainly driven by new business and exposure growth from existing treaties in multiline and financial lines.
Net earned premiums in the third quarter increased by $7.1 million, or 34%, to $28.1 million, as all lines within the Innovation segment grew compared to the same period last year. The combined ratio for Innovations was 98.2% during the third quarter compared to 96.8% for the same period last year. The loss ratio in the third quarter increased by 13.5 points, primarily due to 7.6 points of adverse prior-year reserve development, while during the same period last year the segment reported a favorable reserve development of 3.1 points.
The third quarter acquisition cost ratio for Innovations improved by 10.1 points compared to the same period last year due to variable commission adjustments. In our 10-Q filed yesterday, we noted that the Innovations underwriting expenses now include our share of Syndicate 3456 expenses, which were previously presented under acquisition costs. We have reclassified the comparatives to conform prior period figures to the new presentation, as we believe it better reflects the nature of these expenses. As we previously indicated, we expect the expense ratio for Innovations to decrease as the segment gains scale.
We are starting to see evidence of this, as the expense ratio improved by 2 points as the premium growth exceeded expense growth. We continue to invest in this segment to deliver profitable growth. Our new partnership with Hippo and the Lloyd’s approval to transition Syndicate 3456 to a full syndicate are some of the initiatives that we expect will advance us towards this objective. During the third quarter, we repurchased 505,000 shares for $8 million. Subsequently, in October, we repurchased an additional 220,000 shares for $3.3 million. Since the beginning of the year, we have repurchased 5.4% of our outstanding shares for $30.5 million. We have $24.8 million remaining under the current board-approved repurchase plan, which will allow us to continue repurchasing shares opportunistically. At the end of the third quarter, our fully diluted book value per share was $20.78, an increase of 1.7% for the first nine months.
That concludes our prepared remarks. The operator will now open the line for your questions.
OPERATOR (Moderator)
Thank you. At this time, we will conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, at this time, that’s star one to ask a question.
One moment while we poll for the first question. The first question comes from Dan D. Young. Please proceed with your question.
Dan D. Young (Analyst)
Hi. Could you give more explanation of the tax considerations that make you want to keep David Einhorn’s ownership of the company, I guess, where it is, or lower it slightly when doing the share buybacks? Please,
Greg Richardson (Chief Executive Officer)
David, do you want to take that or do you want Faramarz to speak on that?
Faramarz Romer (Chief Financial Officer)
Yeah, look, we’ve entered into a number of—this is, I think, the third one now—where we have a share repurchase agreement with David. I’ll let David talk about the details of it. But essentially, as the company is buying back shares, it reduces the number of outstanding shares for the company and increases the portion that David is owning if he keeps holding on to the shares. So in order to ensure that David doesn’t exceed the thresholds required, we have entered into an agreement where we repurchase 33% of the shares that we repurchase on the open market.
We will repurchase them from David. So as we enter into our open market repurchase agreements, we then enter into a similar agreement with David, and I think we just recently filed a new one with our 8-K yesterday, where you’ll see that that’s continuing up to March of 2027.
Dan D. Young (Analyst)
Okay, thank you. It’s not something where David wants to reduce his ownership at all. It’s just for tax convictions and the threshold of his ownership
Faramarz Romer (Chief Financial Officer)
Right, to maintain his overall ownership percentage. That’s right. The alternative would be not to be able to buy back stock.
Dan D. Young (Analyst)
Okay, great. I’m glad you’re doing it. So thank you.
OPERATOR (Moderator)
Thank you. At this time, ladies and gentlemen, we would like to thank you for your participation. This does conclude today’s teleconference. Please disconnect your lines at this time and have a great day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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