Greenlight Capital Re, Ltd. (GLRE) Earnings

Management highlights

• Net income for Q1 2026 was $35.8 million, resulting in a 4.7% increase in fully diluted book value per share. • Net income was driven by strong investment performance, with the Solace class portfolio returning 6.8% in the quarter, and an underwriting profit of $6.2 million, equating to a combined ratio of 96.0%. • Underwriting results in the first quarter included a $5 million provision linked to the Middle East conflict. • The company non-renewed its direct Japanese cat business due to significant rate decreases. • Open market reinsurance written premium was expected to be lower than the prior year because of the soft reinsurance market, while the innovation segment premium was expected to continue increasing due to organic growth of the existing client portfolio, strong new business opportunities, more favorable rate trends, and the ability to monitor and influence terms and conditions. • The company had returned $15 million of capital to shareholders via share repurchases year-to-date, and a new $40 million share repurchase authorization was approved by the board, effective May 15, 2026, and expiring at the end of May 2027. • Investment portfolio details: The Solace class portfolio returned 6.8%, with various investments like gold contributing positively (gold price advanced 8% during the quarter, with profits taken and exposure adjusted), Acadia Healthcare shares advanced 65% after the company made changes, DHT Holdings shares advanced 53% due to high day rates allowing potential dividend increase. Detractors included long SOFR futures positions due to market doubt on Fed rate cuts after the war, Kendrell shares declined 58% as the company had difficulty winning new business, and Graphic packaging shares declined 33% due to missing earnings expectations and management changes. • The innovation segment saw gross written premiums increase 73% during the quarter, driven by new business and exposure growth in casualty, financial, and specialty lines, along with renewal of the innovations whole account retrocession program increasing the seeded share.

Guidance

• Open market reinsurance written premium was expected to be lower than the prior year due to the soft reinsurance market. • The innovation segment premium was expected to continue increasing owing to organic growth of the existing client portfolio, strong flow of new business opportunities, more favorable rate trends, and the ability to influence terms and conditions. • A new share repurchase authorization of $40 million was approved, effective May 15, 2026, and expiring at the end of May 2027.

Segment performance

Open Market Segment: Pre-tax income was $11.9 million, consisting of $6.8 million in underwriting income and $5.1 million in investment income. Net written premiums for the open market segment decreased by 22.7% to $151.3 million, and net earned premiums decreased by 13.8%. The open market combined ratio improved by 11.2 points to 94.8% compared to the same period in 2025 due to favorable loss development and lower CAT losses. CAT losses in the first quarter this year related to the Middle East conflict were $5 million, whereas in Q1 last year related to California wildfires were $27 million. Favorable reserve development in the first quarter was 2.2 percentage points compared to adverse development of 3.3% in the first quarter of the previous year. However, the improvement in the combined ratio was partially offset by a higher acquisition cost ratio due to higher commissions on FAL programs and a higher expense ratio from performance-based long-term incentive compensation. Innovation Segment: The innovation segment had an underwriting loss of $0.6 million and $1.1 million in investment income. Gross written premiums for the innovation segment increased by $20.1 million, or 73%, to $47.6 million, mainly driven by new business and exposure growth from existing treaties in casualty, financial, and specialty lines, along with growth in Syndicate 3456. Net earned premiums for the innovation segment increased by $6.2 million, or 32%, to $25.2 million. The combined ratio for the innovation segment was 102.3% in the first quarter, which included 1.4 points related to adverse prior development compared to three points of favorable development in the first quarter of the previous year. The attritional loss ratio was 4.4 points higher, mainly due to a financial lines program with higher current year loss ratio based on past loss experience. The expense ratio for the innovation segment remained unchanged at 8.2% despite the increase in earned premiums.

Risks & headwinds

• The Middle East conflict was a fluid situation with significant uncertainty, leading to a $5 million provision in Q1. • The soft reinsurance market posed a risk to open market reinsurance written premium. • Uncertainties existed regarding the performance of investments, such as potential losses from certain investment positions. • Risks were associated with the innovation segment's growth, including potential adverse development in loss ratios.

Analyst Q&A

• Q: None at this time,

  A: As there are no questions at this time, should you have any follow-up questions, please direct them to Jeremy Hellman at the Equity Group, Inc. at ir at greenlightree.ky, and the call is concluded.