Greenlight Capital Re (GLRE) Q3 2026 Earnings Call: Combined Ratio Reaches 90.5%

Key Takeaways

• Greenlight Capital Re (NASDAQ: GLRE) reported Q3 2026 net income of $3.2 million, or $0.10 per diluted share. Year-to-date net income reached $9.4 million, or $0.28 per diluted share.
• Underwriting income was $14.6 million, with a 90.5% combined ratio. The result reflected underlying profitability, no new catastrophe or large losses, and a $6 million reduction in reserves tied to specific Middle East events.
• Open Markets remained the stronger underwriting contributor, producing a combined ratio of 87.9% and underwriting income of $15.2 million. Net written premiums fell 19% to $114.2 million as the company responded to softer market conditions.
• Innovations gross written premiums increased 46% year over year to $43 million, while net earned premiums rose 34% to $28.1 million. Its combined ratio increased to 98.2%, including 7.6 points of adverse prior-year reserve development.
• The Solasglas portfolio returned negative 3.3% during the quarter, partly offset by $10.5 million of other investment income. Solasglas subsequently returned 2.3% in October, bringing its 2026 year-to-date return to flat.
• GLRE repurchased 5.4% of its outstanding shares for $30.5 million from the start of 2026 through October. The company had $24.8 million remaining under its authorized repurchase plan.

Key Financial Data

Business and Operating Performance

Open Markets

Open Markets generated pre-tax income of $19.5 million, comprising $15.2 million of underwriting income and $4.3 million of investment income. The segment’s combined ratio was 87.9%, compared with 84.5% a year earlier.

Net written premiums declined 19% to $114.2 million, while net earned premiums fell 13%. Management attributed the decline to lower premium estimates for specialty and property proportional contracts and reduced exposure from non-renewed casualty business. Open Market gross written premiums declined 10.4% as GLRE exercised cycle discipline amid softer pricing conditions.

The loss ratio improved by 1.9 percentage points, helped by favorable prior-year reserve development and reserve releases related to the Middle East conflict. This was partly offset by a higher attritional loss ratio in specialty business. The acquisition cost ratio rose 4.1 points due mainly to variable commission true-ups, while the expense ratio increased 1.1 points to 4.9%.

Innovations

Innovations reported pre-tax income of $5.8 million, including $0.5 million of underwriting income and $6 million of investment income, partly offset by $0.6 million of other expenses.

Gross written premiums rose 46% to $43 million, driven by new business and higher exposure from existing multiline and financial-lines treaties. Net earned premiums increased 34% to $28.1 million as all business lines expanded.

The combined ratio rose to 98.2% from 96.8%. The loss ratio increased 13.5 points, primarily because of 7.6 points of adverse prior-year reserve development. The acquisition cost ratio improved by 10.1 points due to variable commission adjustments, while the expense ratio improved by 2 points as premium growth exceeded expense growth.

GLRE also announced a strategic partnership with Hippo Holdings. Hippo may co-invest with the Innovations unit in early-stage managing general agent investments, while Spinnaker Insurance Company will serve as GLRE’s preferred U.S. admitted fronting carrier for qualifying co-invested programs. Lloyd’s has also approved the transition of Syndicate 3456 to a full syndicate.

Investment Portfolio and Capital Management

The Solasglas portfolio declined 3.3% in Q3. The largest detractor was the macro position in SOFR futures, which reflected the view that short-term U.S. interest rates would fall or rise less than markets expected. GLRE reduced the position to manage risk, with remaining exposure extending through next summer.

Green Brick Partners and Brighthouse Financial were also major detractors. Positive contributors included short positions in AI-adjacent companies and homebuilders, along with the long position in DHT Holdings. New long positions included Century Aluminum, ADI Global Distribution, and Canal+.

Net portfolio exposure was 32% at quarter-end, down from 33% at the end of Q2, and approximately 28% at the end of October.

GLRE repurchased 505,000 shares for $8 million during Q3 and another 220,000 shares for $3.3 million in October. Management said repurchases would continue opportunistically under the existing authorization.

Management Outlook

Management said reinsurance market conditions continue to soften but believes rates and terms remain attractive for the Open Market business. The company expects profitable new opportunities through 2027, while maintaining underwriting discipline during the January 1 renewal cycle.

For Innovations, management expects continued growth under stable pricing. The company also expects the segment’s expense ratio to decline as it gains scale, supported by initiatives including the Hippo partnership and the transition of Syndicate 3456 to a full Lloyd’s syndicate.

Risks and Watch Items

• The ongoing Middle East conflict remains uncertain. GLRE reduced case reserves by $6 million for specific events but maintained incurred-but-not-reported reserves.
• Prior-year adverse reserve development was 1.6 points in Q3, concentrated mainly in several Innovations contracts.
• Softer reinsurance market conditions are pressuring premium volumes, particularly in Open Markets.
• Solasglas investment volatility offset much of the quarter’s underwriting profit. The SOFR futures position has been costly year to date, although exposure was reduced.
• Concerns that regulators could block or delay Aquarian Capital’s pending acquisition of Brighthouse Financial contributed to a 21% decline in Brighthouse shares during the quarter.

Analyst Q&A Highlights

The sole analyst question addressed the company’s share repurchase arrangement with David Einhorn. Management explained that open-market buybacks would otherwise increase Einhorn’s ownership percentage as the outstanding share count declines.

To maintain his overall ownership percentage below applicable thresholds, GLRE has an agreement to repurchase shares from Einhorn equal to 33% of the shares repurchased in the open market. Management said the arrangement is intended to preserve the company’s ability to continue buying back stock and has been extended through March 2027.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Greetings. Thank you for joining the Greenlight Capital Re Third Quarter 2026 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to David Sigmon, Greenlight Re's General Counsel. Thank you. You may begin.

David Sigmon

Thank you, and good morning. I'd 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

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 Solasglas portfolio was down 3.3% in the quarter. David will provide more color on this in his remarks. The Solasglas 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

Thanks, Greg, and good morning, everyone. The Solasglas fund returned negative 3.3% in the third quarter. The loan 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 reverse 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+, 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. Solasglas 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 have 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

Thank you, David. Good morning, everyone. During the third quarter of 2026, Greenlight Re reported a 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 favorable 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 Markets segment reported a 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 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 compared to same period last year, 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 a pretax 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 third quarter 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-K 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 9 months of the year. That concludes our prepared remarks. The operator will now open the line for your questions.

Operator

[Operator Instructions] The first question comes from Dan DeYoung.

Question-and-Answer Session

Daniel DeYoung

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 during the share buybacks, please?

Greg Richardson

David, do you want to take that? Or do you want Faramarz to speak on that?

David Sigmon

Yes. 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 of the company and increases the portion that David is owning as 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 repurchased 33% of the shares that we repurchased on the open market, we will repurchase them from David. So as we enter into our open market repurchase agreements, we then and 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.

Daniel DeYoung

It's not something where David wants to reduce his ownership at all. It's just for tax considerations and the threshold of his ownership.

David Sigmon

Correct. To maintain this overall ownership percentage. Yes. That's right. The alternative would be not to be able to buy back stock.

Operator

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.