Einhorn Feels Sting From Florida Bet as Irma Pressures ReinsurerBy
Greenlight Re is down on the week, still near 2007 IPO price
Hedge fund manager has also been burned on some investments
Hedge fund manager David Einhorn has endured a number of losing bets at his insurance venture. Now, the weather is becoming a threat for his Greenlight Capital Re Ltd.
The company’s stock has slumped about 9 percent since Aug. 31 as Hurricane Irma moved closer to Florida.
The storm adds to challenges for Simon Burton, who was named this year as the insurer’s third chief executive officer since 2011. Einhorn, who is chairman and oversees the Cayman Islands-based company’s portfolio, has struggled with uneven investment results in recent periods. And the company has been burned by higher-than-expected claims costs on a variety of insurance lines, from commercial vehicles in 2012 to property policies in Florida last year.
Greenlight also entered a reinsurance deal in December to take on risks from United Insurance Holdings Corp., the CEO of the St. Petersburg, Florida-based company said in a conference call in February. United is among the largest residential insurers in the state after many industry giants scaled back coastal risks after storms more than a decade ago.
While insurance underwriting results improved during the second quarter of this year at Einhorn’s firm, investing losses wiped out profit in the period. The hedge fund manager has been stung by a number of his short positions, such as a bet against electric carmaker Tesla Inc., which has surged more than 60 percent this year, and Athenahealth Inc., which climbed about 23 percent.
Einhorn is among U.S. hedge fund managers that set up offshore reinsurance vehicles to gain tax advantages and a stable source of capital for investing. With so many people on Wall Street pursuing similar strategies, however, it has been hard for the companies to find attractive insurance opportunities. Greenlight Re shares changed hands for $20.15 at 12:56 p.m. in New York, up 15 cents from Thursday’s close. That compares with the $19 price from the 2007 initial public offering.
Einhorn’s main hedge fund fell 1.5 percent in August, extending its drop to 1.8 percent for the year.
— With assistance by Simone Foxman, and Jennifer Surane