Greenlight Capital Re, Ltd. (GLRE) reported the quarter and it wasn’t pretty.

music selection:  “Invisible Touch” — Genesis

Shares are down sharply since the announcement.  Let’s look at the most important metric first: combined ratio.  Last year this time it looked like GLRE was turning the corner with a CR of 100.6 for the nine months.  For the nine months ended 2015, CR is a pathetic 117.4.  What’s  more the corporate expenses side is unmoved.  The company has not found administrative or scale savings in the span of a year.  There is no putting lipstick on this pig.  David Einhorn needs to get his team to find some underwriting discipline if he wants his (large) personal investment to pay off.

Our most important valuation metric is diluted book value per share.  This is another area where GLRE is suffering.  This time last year the value was 29.16.  This year it has sunk to 23.29, a more than 20% decline.  The only bright spot here is market price has fallen even more and the price to diluted book value is 97%.  If the firm can find underwriting discipline, there would be a lot of upside.

The whole point of betting on GLRE is to get a call option on David Einhorn’s legendary investment prowess.  So how did the investment of float do?  Just as bad.  It’s a trifecta of failure this quarter.  For the nine months ended September 2014, the investment portfolio saw a profit of 49.755 million.  For the current nine months, there is a loss of 236.456 million.  Almost a quarter of a billion dollars sucked into the market abyss.  Management attributes most of this to weakness in commodity, especially oil, pricing.

I’m not giving up on Mr. Einhorn yet but this quarter is deeply disappointing.  TPRE reports early November and I’ll be offering the same review then.

Devour your prey raptors!

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