Greenlight Captial RE, LTD. Class A 2026 Q2 Earnings Call

You may begin. Thank you, Kevin, 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 Chief Executive Officer, Greg Richardson, Chairman of the Board, David Einhorn, and 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 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, including the company's Form 10-K for the year ended December 31st, 2025. 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.

Thank you, David. Good morning, everyone, and thank you for joining us. Q2 2026 was challenging for Greenlight Re. We reported a net loss of $29.6 million for the quarter, driven by investment income losses from the Solasglas portfolio and a modest underwriting loss. It is worth noting that the second quarter investment loss has essentially reversed in July. Our underwriting result in the second quarter includes a $20 million provision linked to losses related to the Middle East conflict, plus a $6.5 million provision linked to an oil refinery explosion in Qatar, which was not war-related. Our specialty book is a core part of our overall portfolio and has been profitable historically. The specialty book is susceptible to severity events such as the Middle East war. Reserving for this ongoing conflict has been challenging with limited available information.

We have posted a reserve in relation to events up to June 30th, 2026, which we believe is prudent, although there is a high degree of uncertainty. We are not aware of any major Q3 losses as we continue to closely monitor the situation. Furthermore, our exposure to potential loss from the war going forward is decreasing as our cedents are actively reducing their exposures in the region, and we have non-renewed several accounts. On a more positive note, our innovations segment recorded a solid underwriting result in the quarter, generating $2.6 million of underwriting profit and a combined ratio of 89.7%. We have been excited for some time about the potential of our innovation segment, and it is gratifying to see this reflected in the underwriting results. The softening market trends across most lines that we saw in Q1 continued in Q2.

While our gross written premium was up 2% in the quarter due to innovations growth, our net written premium was down 11% as we reduced net exposure in response to softening conditions. Finally, I would like to highlight that in July, we received approval in principle from the Council of Lloyd's to transition our Syndicate-in-a-Box, Greenlight Innovation Syndicate 3456, to a full syndicate effective January 1st, 2027. Syndicate 3456 has been a successful part of the growth in our innovations business over the last four years. The transition to a full syndicate for 2027 will enable further growth of this segment at Lloyd's and further diversification into two new channels: an MGA channel focused on more traditional business and a treaty reinsurance channel.

Lloyd's is a key part of our overall strategy, The transition to a full syndicate status cements our strong position in the Lloyd's market. Now I'd like to turn the call over to Bill.

Thanks, Greg, and good morning, everyone. The Solasglas fund returned negative 5.4% in the second quarter. The long portfolio contributed 12%, The short portfolio detracted 12.3%, Macro detracted 5.4%. During the quarter, the S&P 500 Index advanced 15.2%. The largest positive contributors were long investments in Centene, Green Brick Partners, and Penn Entertainment. The largest detractors include a short basket of AI adjacent stocks and our macro positions in SOFR futures and gold.

Following an earnings beat, Centene shares rose 96% during the quarter. Industry data released during the period also suggested that healthcare utilization has likely peaked, supporting the view that the industry is entering a durable profit upcycle. Green Brick Partners shares appreciated 24% during the quarter as the mood around home building stocks improved. Penn Entertainment shares appreciated 42% as its regional casino portfolio returned to modest growth, driven by strong performance from newer properties. Promotional activity also moderated, and acquisition bids for two peer companies pointed to a higher valuation for Penn. The largest detractor was a short basket of AI-adjacent companies that appreciated significantly as investors continued to chase anything AI-related. Our second-largest detractor was our long SOFR futures position. As inflation expectations picked up following the outbreak of the conflict in the Middle East, the market priced in multiple rate hikes by year-end.

A portion of these losses was offset by gains in our inflation swaps position. Gold was the third-largest detractor as its price declined 14% over the quarter. Earlier in the year, we took profits on most of our call options, reducing our overall exposure and mitigating part of the impact from gold's steep decline following its peak in the first quarter. Net exposure ended the quarter at around 33%, compared to about 41% at the end of the first quarter. Solasglas returned 4.9% in July, bringing the 2026 year-to-date return to 6.1%. Net exposure in the investment portfolio was approximately 39% at the end of July. I'd like to turn the call over to Faramarz to discuss the financial results in more detail.

Thank you, David. Good morning, everyone. During the second quarter of 2026, Greenlight Re reported a net loss of $29.6 million, or $0.89 per diluted share. The underwriting loss was marginal at $0.2 million, resulting in a combined ratio of 100.1%, which included 17.1 percentage points of cat and large losses during the quarter. By comparison, the cat and large loss ratio was 4% for the second quarter last year. The majority of the cat and large losses for the second quarter of this year related to our specialty book. As the Middle East war continued, we booked an additional $20 million of loss reserves in the second quarter on top of the $5 million reserved in the first quarter. The total $25 million reserves include one known full-limit loss accounting for $7.6 million.

Other specific event losses made up $9.9 million of the reserves, and the remaining $7.5 million has been reserved as our best estimate of incurred but not reported losses from the conflict. There is still a high degree of uncertainty surrounding the insured loss estimates due to limited access to affected areas and restrictions imposed in certain territories. We incurred a $6.5 million loss from a fire at a QatarEnergy gas facility. We do not believe this was caused by a hostile act or attack connected to the Middle East war. Excluding the cat and large losses, we had a solid underwriting quarter. We dissect the loss ratio further, the attritional loss ratio during the second quarter improved by 4.3 percentage points to 51.7% versus 56% for the same period last year.

The prior year reserve development was 0.4% during the second quarter of 2026, compared to 1.9% in the same period last year, improving the combined ratio by 1.4 percentage points. Most of the improvement came from the release of reserves related to the 2025 California wildfires. The 2026 second-quarter combined ratio also benefited from 1.8 points of lower acquisition cost ratio and 0.4 points of lower expense ratio compared to the same period last year. Our net investment loss for the quarter was $23.8 million, compared to $7.8 million in the second quarter last year. The majority of the investment loss was related to our investment in Solasglas, which posted a 5.4% loss in the quarter. The investment loss was partially offset by other investment and interest income on our collateral and funds withheld balances, which contributed $4.1 million.