Greenlight Reinsurance, Ltd. · NASDAQ:GLRE
Greenlight Reinsurance — Greenlight Capital Re — Investor Day (November 2024)
44 slides from Greenlight Reinsurance's investor day presentation, Nov 19, 2024
Slide 1: 2024 Investor Day Presentation
Greenlight Capital Re, Ltd. 2024 Investor Day Presentation Tuesday, November 19, 2024 1
Slide 2: Agenda
Agenda 01 W ELCOM E & INTRO 02 STRATEGIC OVERVIEW 03 FINANCIAL OVERVIEW 04 INVESTM ENTS UPDATE
Slide 3: Cautionary Note Regarding Forward-Looking Statements and Non-GAAP Measures
CAUTIONARY NOTE REGARDING FORW ARD-LOOKING STATEM EN TS AND NON -GAAP M EASURES This Investor Presentation (this “Presentation”) is intended solely for the informational purposes of the persons to whom it is presented in connection with the 2024 Investor Day of Greenlight Capital Re, Ltd. (the “Comp
Slide 4: Investment Portfolio Disclosure
INVESTM ENT PORTFOLIO DISCLOSURE All information provided for Solasglas Investments, LP is for informational purposes only and should not be deemed as investment advice or a recommendation to purchase or sell any specific security. Performance returns reflect the total returns, net of fees and expen
Slide 5: Welcome & Introduction
David Einhorn Chairman Welcome & Introduction 5
Slide 6: Last 2 years of progress
Last 2 years of progress • Combined Ratio under 100% every quarter • Book Value per Share has shown consistent, stable growth • Should improve over time • Shares still trade at a discount to BVPS Quarterly Combined ratio Fully Diluted Book Value Per Share 120% $20 18.72 17.39 17.65 99.8% 98.0% 99.8%
Slide 7: A hard market…
A hard market… 7
Slide 8: Why Greenlight Re…
W hy Greenlight Re… Multi-pillar strategy Strong and improving ROE Disciplined capital allocation Share price inexpensive relative to our book value Strong team and platforms poised for growth in favorable market conditions 8
Slide 9: Strategic Overview
Greg Richardson Chief Executive Officer Strategic Overview 9
Slide 10: Overview
Overview Strategic priorities going forward Smooth CEO transition • ROE/BVPS growth, capital • On board and resident full-time in Grand Cayman as of January 1, 2024 allocation, capital management Faramarz Romer, CFO • Met with key brokers, major clients, and Innovations partners • Developed strong r
Slide 11: Greenlight Re Strategic Pillars
Greenlight Re Strategic Pillars Greenlight Re’s strategy is sound Open M arket Solasglas Investments Innovations Innovations Underwriting (SILP) Underwriting Investments Primarily follow business with line Value-oriented investment Investment positions usually give Primary objective is to access det
Slide 12: Strong and improving risk-adjusted returns
Strong and improving risk-adjusted returns Strong 5-year trend… …Despite low risk profile • Positive Combined Ratio trend – achieved 8 • Highly diversified underwriting portfolio consecutive quarters of underwriting profit • Prudent cat aggregates with strong cycle management through 3Q24 • Growing
Slide 13: Strategic position at January 1, 2024
Strategic position at January 1, 2024 Average 2023 - 2024 Run Rate2 Greenlight Re Portfolio at January 1, 2024 Open Market UW SILP 2020-23 Innovations Investments ROC1 (Return on risk capital) Hurdle Rate Innovations UW (in force) Innovations Investments Innovation UW (Incl. runoff business) Size of
Slide 14: Strategic direction
Strategic direction Greenlight Re Portfolio Strategy Strategic Direction SILP SILP • Highest ROC contributor over recent years Open Market UW • Increase allocation within risk tolerances Open Market Underwriting • Increasingly Profitable, entering third-year of hard reinsurance market • Expand under
Slide 15: Underwriting culture is a key strength
Underwriting All business functions are critical to Underwriting Excellence culture is a Underwriting process key strength MARKET Clients & Brokers Centralized underwriting authority • Consistency of process, Account pricing and risk selection Pricing & Servicing, Claims & Risk Appetite Selection Mo
Slide 16: Lean, flexible operating platforms provide global market access
Lean, flexible operating platforms provide global market access Greenlight Capital Re, Ltd. NASDAQ: “GLRE” Cayman Islands Ireland UK TOTAL Greenlight Reinsurance, Ltd. Greenlight Reinsurance Ireland, DAC Syndicate 3456 (Lloyd’s) Greenlight Re Corporate Member Ltd Viridis Re SPC Ltd. Greenlight Re Ir
Slide 17: Open Market Underwriting – highly diversified with strong outlook
Open M arket Underwriting – highly diversified with strong outlook Diversified by Line of Business Business Outlook PROPERTY 21% STRONGLY POSITIVE Property Cat 9% Other Property 12% • Hard market pricing continues Macro Environment • Supported by active hurricane season • Constrained by Cat risk app
Slide 18: Innovations – a key Greenlight Re differentiator
Innovations – a key Greenlight Re differentiator Unique/comprehensive platform Outstanding investment track record Investment Reinsurance • Seed or early-stage insurance and MGA start-ups • AM Best rating: A- 2018 40 Active Portfolio • Industry expertise 1st Investment • $250K-$2M checks Companies •
Slide 19: Innovations Underwriting – engine of profitable growth
Innovations Underwriting – engine of profitable growth Strong global MGA growth outpacing P&C Market… …even more so in the US since 2019 Global MGA Market DWP • MGAs account for ~10% of US P&C market • 80% MGA growth from 2019 to 2022 MGA DWP MGA Premium Growth P&C Market Premium Growth Source: Insu
Slide 20: Innovations Underwriting – engine of profitable growth
Innovations Underwriting – engine of profitable growth Current1 Innovations clients in rapid growth phase… …with attractive margin trend Innovations Gross Earned Premium ($mm) Innovations Underwriting Margin3 100 15% 80 10% 60 5% 40 20 0% 0 2 -5% 2022 2023 2024 2022 2023 2024 2 Note: 1. Current port
Slide 21: We are developing third-party capital partners
W e are developing third-party capital partners Raising equity capital to finance growth is unattractive when GLRE stock trades below book value However, we can access third-party capital “at book” to leverage our capabilities and generate fee or “spread” income • We currently spend approximately $1
Slide 22: Financial Highlights
Faramarz Romer Chief Financial Officer Financial Highlights 22
Slide 23: Growing business with strong and improving profitability
Growing business with strong and improving profitability Underwriting performance improving… Expanding underwriting book 110 Combined Ratio % $700 105 350 $650 $650 * 100 Net Written Premiums (Millions) 300 95 $594 $600 250 90 $565 2019 2020 2021 2022 2023 2024YTD # of deals 200 $550 $530 150 20% …
Slide 24: Return On Average Equity in context - risk vs return
Return On Average Equity (ROAE) in context - risk vs return Consistent ROAE growth with less volatility than peers ROAE vs Peers* 5-Year^ Return vs Volatility 20% ACGL 15% Return (Average ROE) Return (Average ROE) EG Peer Avg MKL HG RNR 10% GLRE Unlike peers, AXS GLRE has low exposure to interest an
Slide 25: Multi-pillar strategy driving EPS
M ulti-pillar strategy enhances Multi-pillar strategy driving EPS returns via $1.40 $1.32 diversification $1.20 $1.00 $1.01 $0.91 $0.80 $0.78 Diluted EPS • Underwriting and Solasglas $0.60 investment portfolio are the $0.50 key drivers of our EPS $0.40 $0.39 $0.20 $0.23 • There is low correlation $0
Slide 26: ROE Drivers
ROE Drivers RETURN ON AVERAGE EQUITY SILP Return Combined Ratio • Multi-Pillar strategy generates ROE on 90% 93% 96% 99% 102% both sides of our balance sheet -5% 10% 7% 4% 1% -2% • Underwriting results (combined ratio) 0% 13% 10% 7% 4% 1% and SILP investment returns are key 5% 16% 14% 11% 8% 5% driv
Slide 27: Strong balance sheet
Strong balance sheet >75% of reserves are short tailed 34.1% Shareholders equity (up 32% since ’22) $300 26.2% $700 $200 $650 15.3% Millions $600 Millions $100 8.2% $550 3.0% 1.4% 1.6% 1.6% 3.5% 4.2% 0.7% $500 $0 $450 $400 Treaty Year 12/31/22 12/31/23 9/30/2024 Declining debt leverage* Collateral R
Slide 28: BVPS growth in-line with peers
BVPS growth in-line with peers • Fully diluted BVPS growth has performed in-line with the • We have grown fully diluted book value per share every year peer average since 2019 • 11.5% CAGR over the last 3 years Peer Growth in BVPS: 2022 – 2024* BVPS Growth $20 16.8% 18% Peer Average 34% $19 16% Ful
Slide 29: Share Price vs Book Value
Share Price vs Book Value • While we have grown diluted book value, GLRE share price has grown even more rapidly, outperforming the S&P 500 • Discount to book value is narrowing and GLRE is now trading closer to book value GLRE Price to Book Value since 2021 Annual Return $20.00 0.85 Jan ‘22 to Sep
Slide 30: Capital Management and Allocation
CAPITAL 1. Underwriting Growth • 3. Share Repurchases Board authorized repurchase plan up • 6.5% annual growth in net M ANAGEM ENT to $25M premiums over last 5 years • Repurchased 547K shares in 2024 for • Expanded Lloyd's platform (Syndicate $7.5 million (~1% of shareholders' AND • 3456, Greenlight
Slide 31: Solasglas Investments Update
David Einhorn Solasglas Investments Update 31
Slide 32: Investment approach
Investment approach Greenlight Capital, an affiliate of DME Advisors, was DME Advisors analyzes available financial data, business strategies, and prospects to founded in 1996 identify undervalued and overvalued securities Greenlight Re has implemented Goal is to maximize total this value-oriented i
Slide 33: Investment portfolio
Investment portfolio Solasglas Investments, LP is the fund that holds all DME Advisors is the general partner and owns investment assets managed approximately 22% of Solasglas by DME Advisors Largest longs as of Q3 ‘24: Investment Portfolio is 70% of Brighthouse Financial, CONSOL Greenlight Re’s Adj
Slide 34: Our 20-year track record
Our 20-year track record Investment Returns Net of Fees(1) Annualized Returns 250% 200.7% (5.6% ann.) GLRE/SILP Return σ=10.7% 12.2% Bloomberg U.S. Aggregate Bond Index 1-year 200% 150% 19.0% 92.7% 3-year (3.3% ann.) 100% σ=4.2% 10.6% 5-year 50% 5.6% 0% Since inception Aug-04 Aug-05 Aug-06 Aug-07 Au
Slide 35: And our 5-year track record
And our 5-year track record Investment Returns Net of Fees(1) 65.5% Annualized Returns 70% GLRE/SILP Return (10.6% ann.) Bloomberg U.S. Aggregate Bond Index σ=10.8% 60% 12.2% 50% 1-year 40% 19.0% 30% 3-year 20% 1.7% (0.3% ann.) 10.6% 10% σ=6.3% 5-year 0% -10% 5.6% Since inception -20% Sep-19 Mar-20
Slide 36: DME Advisor's current view
DM E Advisor’s Economy is strong Don’t expect recession in the coming year current view Recent signs of slowdown Election outcome has unleashed animal spirits Less regulation Lower taxes and more spending Onshoring Inflation is still a concern despite recent slowdown Strong labor (wildcard will be i
Slide 37: Solasglas portfolio positioning
Solasglas portfolio On the long side: On the short side: positioning • Largest longs are: Brighthouse • COVID profiteers Financial, CONSOL Energy, Green Brick Partners, HP and Solvay • Credit sensitive to commercial real estate or consumer credit • Some newer positions: Alight, CNH Industrial, Pelot
Slide 38: Solasglas portfolio positioning: macro
Solasglas portfolio Macro overlay to protect from exogenous shocks and enhance returns positioning: 2024 year-to-date attribution of returns macro Gross Attribution 13.8% -3.5% 4.1% Longs Shorts Macro Gold has been a significant contributor this year Inflation swaps Credit spreads for tail risk 38
Slide 39: Solasglas portfolio correlation
Solasglas portfolio correlation 12-month rolling correlation between SILP and S&P 500 0.6 0.5 0.4 0.3 0.2 0.1 0 Jan-21 May-21 Sep-21 Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 Jan-24 May-24 Sep-24 Note: 12-month rolling correlation of daily returns from 1/1/2020 – 9/30/2024 between SILP and the total
Slide 40: In conclusion…
Refreshed leadership In conclusion… Successful pivot of underwriting strategy Innovations is a differentiator Strong balance sheet Proactive capital allocation and focus on ROE and growth in BVPS Positive momentum 40
Slide 41: Question & Answer Session
Question & Answer Session DAVID EINHORN PATRICK O’BRIEN Chairman of the Board Group Chief Operating Officer Chief Executive Officer – Ireland GREG RICHARDSON BRIAN O'REILLY Chief Executive Officer Head of Innovations FARAM ARZ ROM ER RICHARD STROM M ER Chief Financial Officer Chief Actuary TOM CURNO
Slide 42: Appendix – Non-GAAP Reconciliation
Appendix – Non-GAAP Reconciliation 42
Slide 43: Fully diluted book value per share
Fully diluted book value per share The key non-GAAP financial measure used in this Presentation is fully diluted book value per share. Our primary financial goal is to increase fully diluted book value per share over the long term. We use fully diluted book value as a financial measure in our incent
Slide 44: Fully diluted book value per share (quarterly)
Fully diluted book value per share (quarterly) The following tables presents a reconciliation of the fully diluted book value per share to basic book value per share (the most directly comparable U.S. GAAP financial measure): Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q4 2024 Q3 2024 Numerator