Greenlight Re (GLRE) reported the quarter on Monday.

music selection: “Edge Of Thorns” — Savatage

The most important piece of news in the release is the “combined ratio”.  This is the insurance industry’s measure of how profitable underwriting is.  You want to play golf here and not football; lowest score wins.  Unfortunately, GLRE came in with a CR of of 109.2 for the six month period compared to 99.8 for the same period last year.  There is no putting lipstick on that pig.  Anything over 100 represents an underwriting loss.  GLRE lost 9.2 cents on every dollar of revenue it generated.   Unacceptable.

Investing results were a 1.5% loss for the quarter.  I am not too concerned about this as quarterly investing results are meaningless.  We are in GLRE with an intended holding period of decades.  That is just a hiccup.

The only “bright” spot was revenue.  Quarterly revenue increased to 93 million from 33.7 million for the same quarter last year.  We can’t jump up and down and celebrate however as the company lost money at a 9.2% clip on every dollar of that revenue.  We want the company to gain economy of scale but not by dropping its pants on price and margin.

I’m not giving up on David Einhorn just yet though.  The company has had profitable underwriting in the past and can do so again.  Einhorn is a very smart man.  Smart enough to know he is letting money slip away into the night.  And he has plenty of skin in this game through a large equity position in GLRE.  He also clearly thinks the shares are underpriced as the company has been buying back shares.  To be precise 500,000 shares at 29.32.  The company is authorized to repurchase up to another 1.5 million shares through June 2016.

TPRE reports after close today and I will update you, especially on combined ratio, on Friday.

Devour your prey raptors!

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