Greenlight Reinsurance, Ltd.

Greetings, and welcome to the Greenlight Capital Reef first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 under telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0. It's now my pleasure to turn the call over to David Sigmund, Greenlight Re's General Counsel. David, please go ahead.

Thank you, 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.greenlightree.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, Farmars 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, including the company's Form 10-K that year ended December 31, 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. We reported net income of $35.8 million in Q1, 2026, driving an increase in fully diluted book value per share of 4.7%. Our net income was driven by a combination of strong investment performance, with the Solace class portfolio returning 6.8% in the quarter, an excellent result in a challenging market, and an underwriting profit of $6.2 million, which equates to a combined ratio of 96.0%. Our underwriting results in the first quarter includes a $5 million provision linked to the Middle East conflict. This added 3.2 points to our combined ratio. As we referenced on our earnings call in early March, the Middle East conflict remains a fluid situation. While a ceasefire is currently in place and we hope the conflict will end soon, significant uncertainty remains. In Q1, we received an immaterial amount of formal loss notifications. However, given the high degree of uncertainty, we felt it was prudent to establish a $5 million general provision for potential losses. On our Q4 2025 call, I provided an update on our 1-1-26 renewal season and the market environment at the time. While April 1 is not a major renewal date for us, market trends are unchanged with softening across most lines. April 1 is the primary renewal date for Japanese business. Due to significant rate decreases this year, we decided to non-renew our direct Japanese cat business. Given the relatively small amount of premium, the limited margin potential no longer made sense for the portfolio. We remain disciplined. We expect open market reinsurance written premium this year to be lower than in the prior year given the soft reinsurance market. On the other hand, we expect our innovation segment premium to continue to increase given the organic growth of our existing client portfolio, a strong flow of new business opportunities, more favorable rate trends, and our ability to monitor and influence terms and conditions. As a management team, we are focused on delivering consistent profitability over the long term. While our shares have been trading at a discount to our growing book value, we have all along maintained that strong underwriting and investment results will ultimately be reflected in our share price. We have started to see this recently following the release of our full year 2025 results. Meanwhile, we have returned $15 million of capital to our shareholders year-to-date via share repurchases under our board-approved share repurchase plan. As I have noted previously, we're optimistic about the opportunities ahead and GreenLight Re's positioning. Now I'd like to turn the call over to David.

Thanks, Greg, and good morning, everyone. The solid class fund returned 6.8% in the first quarter. The long portfolio contributed 1%, the short portfolio contributed 5.7%, and macro contributed 1.2%. During the quarter, the S&P 500 index declined 4.4%. The largest positive contributors were long investments in gold, Acadia Healthcare, and DHT Holdings. The largest detractors included our macro position in short-term interest rates and our long investments in Kindle Holdings and graphic packaging. Gold was the largest positive contributor as its price advanced 8% during the quarter. Gold spiked through the end of February amid de-dollarization concerns, leading to gains in both our physical and call option positions. We took some profits, which lowered our total exposure and allowed us to preserve most of our gains in gold as it declined in March. Acadia Healthcare shares advanced 65% during the quarter. We established a small position in late 2024 when the shares came under pressure following a New York Times investigation into patient treatment. The decline continued as the company's aggressive expansion strategy weighed on results. In late January, shares recovered when the company removed the incumbent CEO and announced the return of its well-regarded former CEO. Should the company be successful in improving occupancy to its target levels, we believe annual earnings per share can double. DHT Holdings shares advanced 53% during the quarter. The company owns and charters very large crude carriers, which were in short supply even prior to the war. With day rates increasing to five times the long-term average level, these elevated rates we expect will allow the company to pay dividend that is nearly quadruple this year. The largest detractor for the quarter was our long SOFR futures positions. After the war began and oil prices spiked, the market started to doubt the Fed's ability to cut rates, resulting in losses for the quarter. We maintain the position as we view the oil price shock as ultimately a headwind to growth, creating a viable pathway for the incoming chairman of the Federal Reserve to lower rates. Kendrell shares declined 58% during the quarter. We owned Kendrell for more than four years through a successful turnaround following a spinoff from IBM. Recently, it became more difficult for the company to win new business, and the shares went on a trip back near our entry price. Fortunately, along the way, we took some profits at higher prices. We exited our remaining position during the quarter. Graphic packaging shares declined 33% during the quarter. The company missed earnings expectations and lowered guidance as costs for its new paper mill came in well over budget. Also, the company replaced its experienced CEO with a new one who recently oversaw a major disappointment at his prior company and has yet to outline a clear strategy. While the shares have suffered, we believe they are extremely cheap relative to reasonable mid-cycle operating results. We initiated a medium-sized position in Versant Media Group following its recent spinoff from Comcast. Shares declined after the spinoff as Comcast shareholders sold stock they received, and the index removals triggered additional selling. The result is in Bursant trading at under four times adjusted EBITDA and an implied cash flow yield that we believe will allow the company to return almost all its entire market cap to shareholders within four years. Prior to the war, we cautiously positioned with relatively low gross and net exposure. While most market participants are optimistic that the conflict will be resolved soon and with minimal repercussions, we continue to prioritize capital preservation and maintain some dry powder. Our net exposure at the end of the quarter was about 41% compared to about 40% at the end of 2025. Solace Glass returned four-tenths of 1% in April, bringing the year-to-date 2026 return to 7.2%. Net exposure in the investment portfolio was approximately 30% at the end of April. We continue to be pleased with the performance of the company's underwriting portfolio and investments. We remain disciplined in our capital allocation and are being deliberate on where we can generate the best returns on our invested capital, given the many levers we have at our disposal, including share buybacks. Now I'd like to turn the call over to Farmars to discuss the financial results in more detail.

Thank you, David. Good morning, everyone. During the first quarter of 2026, Greenlight re-reported net income of $35.8 million, or $1.05 per diluted share. Total underwriting income was 6.2 million, resulting in a combined ratio of 96%, which was 8.6 points better than the same period last year. The 2026 first quarter combined ratio benefited from 10.5 points of improvement due to lower CAT and event losses, contributing 5.8 combined ratio points compared to the same period last year. which included 18.1 combined ratio points related to the California wildfires. Favorable loss development contributed 4.1 points of improvement in the combined ratio and was offset by four points of higher acquisition cost ratio and 1.2 points of higher expense ratio. Our net investment income for the quarter was $40.4 million compared to $40.5 million in the first quarter of 2025. 33.7 million of the investment income related to our investment in Solus Glass, which posted a strong 6.8% return in the quarter, the remainder related to interest income on our collateral and funds withheld balances. I will now break down the first quarter results by segment, starting with the open market segment. The open market segment reported a pre-tax income of 11.9 million, composed of underwriting income of $6.8 million and investment income of $5.1 million. For the quarter, the open market segment net written premiums decreased by 22.7% to $151.3 million, while net earned premiums decreased by 13.8%. A decrease in net earned premium was expected as it related to the casualty book, which we had decided to non-renew early in 2025. The remainder of the decrease was mostly related to downward premium adjustments on quota share specialty property and multi-line contracts. The open market combined ratio for the first quarter improved by 11.2 points to 94.8% compared to the same period in 2025 due to favorable loss development and lower CAT losses. First quarter favorable reserve development was 2.2% percentage points compared to adverse development of 3.3% in first quarter last year. CAT losses were 5 million related to the Middle East conflict in the first quarter this year versus 27 million relating to the California wildfires in Q1 last year. The improvement in combined ratio was partially offset by higher acquisition cost ratio due to higher commissions reported on the FAL programs and higher expense ratio attributed to performance-based long-term incentive compensation. Overall, the open market segment had a strong performance during the quarter. Now let's turn to the innovation segment. The innovation segment produced an underwriting loss of $0.6 million and an investment income of $1.1 million. During the quarter, the innovation's gross written premiums 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, combined with growth in Syndicate 3456, which is presented under multi-line. We renewed our innovations whole account retrocession program on January 1st, 2026, increasing the seeded share from 28.5% to 33%. Therefore, the seeded premiums in the first quarter increased due to the combination of growth in underlying business and a higher portion seeded. The net earned premiums for innovation segment increased by 6.2 million, or 32%, to 25.2 million. The combined ratio for the innovation segment was 102.3% during the first quarter, which included 1.4 points related to adverse prior development compared to three points of favorable development in the first quarter last year. The attritional loss ratio was 4.4 points higher, mainly related to a financial lines program where the past loss experience warranted a higher current year loss ratio. The expense ratio for this innovation segment was unchanged at 8.2% in spite of the increase in earned premiums. We continue to invest in talent and technology in readiness for future growth of this segment. During the first quarter, we repurchased 298,701 shares for $5 million at an average price of $16.7 per share. Subsequently, during the month of April, we repurchased an additional $9.5 million of shares, bringing our year-to-date repurchases to $14.5 million. On April 28, the Board approved a new share repurchase authorization of $40 million effective May 15, 2026 and expiring at the end of May 2027. At the end of the first quarter, a fully diluted book value per share was $21.40, an increase of 4.7% for the quarter. My primary metric continues to be growth in fully diluted book value per share, and we are pleased with the first quarter 2026 results. That concludes our prepared remarks. The operator will now open the line for your questions.

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions.

Thank you.

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 I'll be happy to assist you. This does conclude Greenlight Re's first quarter 2026 earnings conference call. Thank you. You may now disconnect.