Greenlight Reinsurance, Ltd. · NASDAQ:GLRE
Greenlight Reinsurance — Greenlight Capital Re — Investor Day (November 2018)
31 slides from Greenlight Reinsurance's investor day presentation, Nov 15, 2018
Slide 1: Greenlight Capital Re 6th Biennial Investor Day
Greenlight Capital Re 6th Biennial Investor Day November 14, 2018
Slide 2: Safe Harbor & At a Glance
Safe Harbor & At a Glance 2 This presentation contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these Basic Company Information forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. Federa
Slide 3: Agenda
Agenda 3 Simon Burton – CEO The Greenlight Re Strategy & Industry Dynamics Tim Courtis – CFO Brief Financial Overview David Einhorn – Chairman Investments Q & A Lunch & Refreshments www.greenlightre.com
Slide 4: Operational Overview
Operational Overview Simon Burton Chief Executive Officer
Slide 5: Greenlight Re Overview
Greenlight Re Overview 5 Risk management products and services to the insurance, reinsurance and other risk marketplaces A.M. Best A- Rated Based in Cayman Islands and Ireland (40 employees) Diversified Reinsurance Platform Value-Oriented Investment Program www.greenlightre.com
Slide 6: Our Lines of Business
Our Lines of Business 6 Other Property Our underwriting risks are grouped into three main 16% lines of business: 18% 1. Casualty: Includes motor liability, workers’ compensation, multi-line, general liability and professional liability 2. Property: Includes catastrophe, motor physical damage, person
Slide 7: Increasingly Diversified Premium Base
Increasingly Diversified Premium Base 7 Motor General Liability (Property) Motor Financial 4.8% 10.8% (Property) 7.0% 10.6% Marine 1.0% Personal Property Workers 7.2% Compensation 6.9% Accident & Personal Motor Health Property (Casualty) 2013 10.1% 47.4% 27.2% 2017 Professional Liability 6.5% Commer
Slide 8: Industry Dynamics & Strategy
Industry Dynamics & Strategy 1 Current Industry Themes 2 Current State of the Industry and Emerging Disruption 3 Greenlight Re’s Strategy in this Evolving Market 4 Greenlight Re’s Innovation Platform
Slide 9: An Evolving Industry: Market Structure
An Evolving Industry 9 1 Current Industry Themes Market Structure Soft Market Conditions Cycle Management Consolidation Decreases abating? Ability to scale Declining reinsurance volumes Inflation risk Post-event pricing Commoditization www.greenlightre.com
Slide 10: An Evolving Industry: Technology
An Evolving Industry 10 1 Current Industry Themes Technology Disintermediation Efficiency: apps, systems, data All entities between primary customer and end risk holder are Analytics: new data sources under pressure Safety: physical technologies to Particular emphasis on prevent and mitigate loss di
Slide 11: Market Participants: Narrowed Upside Opportunity
Market Participants: Narrowed Upside Opportunity 11 2 Current State of the Industry and Emerging Disruption Rated Re Lloyd’s Rely on operational reach, market heft, broker leverage 2017: attempted to drive front-end efficiency and risk-picking expertise to generate alpha opportunities 2018: focused
Slide 12: The Opportunity
The Opportunity 12 2 Current State of the Industry and Emerging Disruption • Transformed customer experience • Better fraud detection; streamlined claims • Create products that consumers want to buy, not products that they have to buy • Emerging market penetration via mobile technology • New types o
Slide 13: Greenlight Re's Strategy
Greenlight Re’s Strategy 13 3 Greenlight Re’s Strategy in this Evolving Market Technology & Operationally Light Nimble Underwriting Core Partnerships Innovation • Two offices in Cayman • Combination of low- • Insulate against open • Announced 3 and Ireland provide cost beta and focused market challe
Slide 14: Setting the Stage for Future Growth Potential
Setting the Stage for Future Growth Potential 14 4 Greenlight Re’s Innovation Platform The Rise of • Strategic investor, not passive Innovators • Our involvement improves chance of success • Leverages a key strength: we welcome disruptive technology • Primary objectives: • Generate “sticky” reinsura
Slide 15: Innovations: Investment Criteria
Innovations: Investment Criteria 15 4 Greenlight Re’s Innovation Platform Innovation Opportunity Funnel Stages • Preference for early stage investments All 2000+ • Position ourselves as key or sole insurtech 0 startups 200+ Intro strategic investor 1 contact stage 30-50 • Early stage commitment: $0.
Slide 16: Innovations: Investments
Innovations: Investments 16 4 Greenlight Re’s Innovation Platform Sana Benefits Galileo Platforms Click2Sure Employer stop loss digital third Point of sale online Blockchain platform party administrator (TPA) and connecting insurance managing general underwriter insurance platform participants (MGU)
Slide 17: Financial Overview
Financial Overview Tim Courtis Chief Financial Officer
Slide 18: Profitable Underwriting
Profitable Underwriting 18 Apart from catastrophe losses in 2017, Greenlight Re’s composite ratio has remained relatively stable over past six years Accident Year Ultimate Composite Ratios Includes catastrophe losses of $43 million (6.9% of net premiums earned) 114.9% 116.1% 99.9% 100.0% 101.6% 95.7
Slide 19: Risk Accumulation
Risk Accumulation 19 Net Probable Maximum Loss (“PML”)(1) for Aggregate Loss Exposure to Natural Peril Losses 17.4% 12.9% 13.9% 12.3% $144 $112 $115 $80 Jan. 2016 Jan. 2017 Jan. 2018 Jul. 2018 Net PML Exposure (Aggregate Loss $ millions) % of Shareholders’ Equity www.greenlightre.com (1) PML is our
Slide 20: Balance Sheet Restructuring
Balance Sheet Restructuring 20 • New fund structure as of September 1, 2018 simplifies the investment presentation on the balance sheet = Solasglas Investments, LP • Greenlight Re will report a net asset value based on its limited partnership interest in Solasglas, in lieu of reporting gross values
Slide 21: Share Price vs. Book Value
Share Price vs. Book Value 21 Greenlight Re is trading at a discount to book value $40 32.65 $35 33.71 $30 26.81 30.76 23.67 23.08 23.59 22.17 23.38 $25 22.22 20.79 27.91 $20 13.39 22.01 15.29 21.61 22.80 18.95 21.39 18.71 20.10 $15 16.57 14.27 12.99 $10 12.40 11.63 10.21 $5 Fully Diluted Adjusted B
Slide 22: Investments
Investments David Einhorn Chairman
Slide 23: Investment Approach
Investment Approach 23 • Value-focused, long/short investment program • Goal is to maximize total risk-adjusted return • Average gross exposure of 95% long and 61% short since formation of GLRE • Portfolio is 92% long and 60% short as of October 31, 2018 • Annualized net return of 4.4% since formati
Slide 24: Historical Investment Performance
Historical Investment Performance 24 Investment Returns Net of Fees 40% 32.1% 30% 24.4% 19.6% 20% 14.2% 11.0% 8.7% 10% 7.1% 7.2% 5.2% 5.9% 2.1% 1.5% 0% -10% -20% (17.6%) (20.2%) (21.4%) -30% (1) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (1) Through October 31, 2018.
Slide 25: 2018
2018 25 • Investment portfolio is -21.4% YTD through October 31 • Longs have detracted 5.9%, shorts have detracted 13.2%, and macro/other have detracted 2.2% • October return was +1.2% vs. the S&P 500’s decline of -6.8% • No substantial winners so far in 2018 • Focus on risk management and exposure
Slide 26: Risk Management
Risk Management 26 • Replaced short equity exposure in bubble basket names with put spreads in late January • Portfolio reduction Reduction in exposure from peak gross exposure on January 23 through JV termination Jan 23, 2018 Aug 31, 2018 Long 105.8% 72.4% Short -76.1% -57.6% Net 29.7% 14.8% Gross
Slide 27: Historical Cyclicality of Value vs. Growth
Historical Cyclicality of Value vs. Growth 27 Relative Performance of 12-Month Rolling Returns for the Russell 1000 Pure Value Index vs. Russell 1000 Pure Growth Index(1) Value underperforming 50% growth by 54% since January 1, 2017 30% 10% (+1σ ) (10%) (-1σ ) (30%) (50%) 2004 2005 2006 2007 2008 20
Slide 28: Conclusions
Conclusions 28 • Underwriting portfolio is further diversified and performing well in 2018 • Lower cost base with focus on increased operational efficiency • Greenlight Re Innovations offers an exciting growth opportunity • Compelling value-oriented investment portfolio • GLRE trades at substantial
Slide 29: Appendix
GREENLIGHT RE Appendix
Slide 30: Non-GAAP Measures
Non-GAAP Measures 30 Fully Diluted Adjusted Book Value Per Share We believe that long-term growth in fully diluted September December 31, December 31, December 31, December 31, adjusted book value per share is the most relevant 30, 2018 2017 2016 2015 2014 measure of our financial performance becaus
Slide 31: Investment Portfolio Disclosure
Investment Portfolio Disclosure 31 All information provided 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 are estimated pending the year-end audit. Past performance is not indicative