Greenlight Re Announces Third Quarter 2022 Financial Results

About this update from Greenlight Reinsurance, Ltd.

Net loss for the quarter of $18.5 million Fully diluted book value per share decreased 3.9% in the quarter to $13.55 GRAND CAYMAN , Cayman Islands , Nov. 02, 2022 (GLOBE NEWSWIRE) -- Greenlight Capital Re, Ltd. (NASDAQ: GLRE) (“Greenlight Re” or the “Company”) today reported its financial results for the three months ended September 30, 2022 . The results included: A net loss of $18.5 million , or $0.56 per diluted ordinary share, compared to a net loss of $13.9 million , or $0.42 per diluted ordinary share, in the third quarter of 2021; A combined ratio of 115.4%, compared to a combined ratio of 109.3% in the third quarter of 2021; Total investment income of $11.6 million , compared to total investment income of $4.1 million in the third quarter of 2021; and A decrease in fully diluted book value per share of $0.55 , or 3.9%, to $13.55 . The following summarizes the Company’s underwriting results for the third quarter of 2022 and 2021: Three months ended September 30 2022 2021 ($ in thousands) Gross premiums written 155,146 128,735 Net premiums earned 121,948 135,524 Underwriting income (loss) (18,865 ) (12,578 ) Combined ratio 115.4 % 109.3 % Simon Burton , Chief Executive Officer of Greenlight Re, stated, “The combined impact of natural catastrophes, continued inflation, and rising interest rates has taken a considerable toll on reinsurers’ balance sheets. Our relatively modest book value per share decline of 3.9% in the quarter is a testament to the strength of our investment platform and risk management approach. Looking ahead, we are well-positioned to benefit from a market that continues to move in our favor.” David Einhorn , Chairman of the Board of Directors, said, “We are pleased with the 3.6% return from the Solasglas fund despite most equity markets posting negative returns during the quarter. The Hurricane Ian loss, while manageable, overshadows the significant progress we have made in our underwriting operations.” Underwriting and Investment Results Third quarter of 2022 Gross premiums written in the third quarter of 2022 were $155.1 million , compared to $128.7 million in the third quarter of 2021. This $26.4 million , or 20.5%, increase relates primarily to growth in personal property, general liability, and financial and other specialty business, including premiums underwritten by the Company’s Innovations partners. The Company’s decision to reduce its exposure to personal motor and workers’ compensation risks partially offset this increase. Net premiums earned were $121.9 million during the third quarter of 2022, a decrease from $135.5 million in the comparable 2021 period. The Company incurred a net underwriting loss of $18.9 million in the third quarter of 2022. This underwriting loss included $19.5 million of losses estimated from Hurricane Ian and $3.2 million from Typhoons Nanmadol and Hinnamnor. By comparison, the equivalent period in 2021 reported an underwriting loss of $12.6 million , which included $25.9 million of catastrophe losses from Hurricane Ida, the European floods and hailstorms, and South African riots. The underwriting loss for the three months ended September 30, 2022 , also included $6.1 million of expense relating to deposit-accounted contracts. The Company’s total investment income during the third quarter of 2022 was $11.6 million . The Company’s Investment Portfolio, managed by DME Advisors , returned 3.6%, representing income of $8.5 million from the Solasglas fund. The Company reported $3.0 million of other investment income, primarily from interest earned on its restricted cash and cash equivalents. The Company incurred other non-underwriting expenses of $6.8 million during the third quarter of 2022. These expenses related to foreign exchange losses driven by the weakening of the pound sterling. Nine months ended September 30, 2022 Gross written premiums were $435.8 million for the nine months ended September 30, 2022 , a decrease of $4.4 million , or 1.0%, compared to the comparable 2021 period. The reduction in personal motor premiums drove the year-to-date decrease. Net premiums earned were $358 .1 million for the nine months ended September 30, 2022 , a decrease of $45.3 million , or 11.2%, compared to the equivalent 2021 period. The Company incurred a net underwriting loss for the nine months ended September 30, 2022 , of $17.2 million , which equates to a combined ratio of 104.8%. The underwriting loss for the equivalent 2021 period was $10.0 million , representing a combined ratio of 102.4%. The underwriting loss for the nine months ended September 30, 2022 , was driven primarily by $25.5 million of natural catastrophe losses and $13.6 million of losses related to the Russian-Ukrainian conflict. By comparison, the underwriting loss for the equivalent 2021 period was driven by losses from Hurricane Ida, the winter storm Uri, the European floods and hailstorms, and South African riots. Total investment income for the nine months ended September 30, 2022 , was $36.5 million , compared to income of $24.8 million earned during the equivalent 2021 period. The investment income for the nine months ended September 30, 2022 , included $9.2 million of gains recognized in connection with the Company’s Innovations-related investments. The Company’s investment in the Solasglas fund generated income of $24.5 million for the nine months ended September 30, 2022 , compared to a loss of $4.2 during the equivalent 2021 period. 2022 Investor Day Greenlight Re will host a live investor day in New York City on Thursday, November 17, 2022 , beginning at 12:00 pm Eastern Time . Members of the Company’s leadership team, including Chief Executive Officer Simon Burton and the Chairman of the Company’s Board of Directors, David Einhorn , will deliver a series of presentations followed by an open question-and-answer session. Space for the event is limited, and advance registration is required. Interested parties should contact Greenlight Re’s Investor Relations representative, Karin Daly , at [email protected] . Greenlight Capital Re, Ltd. Third Quarter 2022 Earnings Call Greenlight Re will host a live conference call to discuss its financial results on Thursday, November 3, 2022 , at 9:00 a.m. Eastern Time . Dial-in details: U.S. toll free 1-877-407-9753 International 1-201-493-6739 The conference call can also be accessed via webcast at: https://event.webcasts.com/starthere.jsp?ei=1571152&tp_key=07c4efe7ac A telephone replay of the call will be available from 11:00 a.m. Eastern time on November 3, 2022 , until 9:00 a.m. Eastern time on November 9, 2022 . The replay of the call may be accessed by dialing 1-877-660-6853 ( U.S. toll-free) or 1-201-612-7415 (international), access code 13732921. An audio file of the call will also be available on the Company’s website, www.greenlightre.com . Non-GAAP Financial Measures In presenting the Company’s results, management has included financial measures that are not calculated under standards or rules that comprise accounting principles generally accepted in the United States (GAAP). Such measures, including basic book value per share, fully diluted book value per share, and net underwriting income (loss), are referred to as non-GAAP measures. These non-GAAP measures may be defined or calculated differently by other companies. Management believes these measures allow for a more thorough understanding of the underlying business. These measures are used to monitor our results and should not be viewed as a substitute for those determined in accordance with GAAP. Reconciliations of such measures to the most comparable GAAP figures are included in the attached financial information in accordance with Regulation G. Forward-Looking Statements This news release contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. Federal securities laws. These statements involve risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements made on the Company’s behalf. These risks and uncertainties include the impact of general economic conditions and conditions affecting the insurance and reinsurance industry, the adequacy of our reserves, our ability to assess underwriting risk, trends in rates for property and casualty insurance and reinsurance, competition, investment market fluctuations, trends in insured and paid losses, catastrophes, regulatory and legal uncertainties and other factors described in our Forms 10-K and 10-Q filed with the Securities Exchange Commission on March 8, 2022 , and May 3, 2022 , respectively. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as provided by law. About Greenlight Capital Re, Ltd. Greenlight Re ( www.greenlightre.com ) provides multiline property and casualty insurance and reinsurance through its licensed and regulated reinsurance entities in the Cayman Islands and Ireland , and its Lloyd’s platform, Greenlight Innovation Syndicate 3456. The Company complements its underwriting activities with a non-traditional investment approach designed to achieve higher rates of return over the long term than reinsurance companies that exclusively employ more traditional investment strategies. In 2018, the Company launched its Greenlight Re Innovations unit, which supports technology innovators in the (re)insurance space by providing investment capital, risk capacity, and access to a broad insurance network. Investor Relations Contact Karin Daly Vice President, The Equity Group Inc. (212) 836-9623 [email protected] GREENLIGHT CAPITAL RE, LTD. CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED (expressed in thousands of U.S. dollars, except per share and share amounts) September 30 , 2022 December 31 , 2021 Assets Investments Investment in related party investment fund $ 195,199 $ 183,591 Other investments 65,081 47,384 Total investments 260,280 230,975 Cash and cash equivalents 32,278 76,307 Restricted cash and cash equivalents 648,897 634,794 Reinsurance balances receivable (net of allowance for expected credit losses) 473,564 405,365 Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses) 10,604 11,100 Deferred acquisition costs 78,836 63,026 Unearned premiums ceded 13,659 42 Other assets 6,425 5,885 Total assets $ 1,524,543 $ 1,427,494 Liabilities and equity Liabilities Loss and loss adjustment expense reserves $ 540,827 $ 524,010 Unearned premium reserves 298,173 227,584 Reinsurance balances payable 108,772 91,224 Funds withheld 11,446 3,792 Other liabilities 4,927 7,164 Convertible senior notes payable 93,446 98,057 Total liabilities 1,057,591 951,831 Shareholders' equity Ordinary share capital (Class A: par value $0.10 ; authorized, 100,000,000; issued andoutstanding, 28,569,346 (2021: 27,589,731): Class B: par value $0.10 ; authorized,25,000,000; issued and outstanding, 6,254,715 (2021: 6,254,715)) $ 3,482 $ 3,384 Additional paid-in capital 477,021 481,784 Retained earnings (deficit) (13,551 ) (9,505 ) Total shareholders' equity 466,952 475,663 Total liabilities and equity $ 1,524,543 $ 1,427,494 GREENLIGHT CAPITAL RE, LTD. CONDENSED CONSOLIDATED RESULTS OF OPERATIONS UNAUDITED (expressed in thousands of U.S. dollars, except percentages and per share amounts) Three months ended September 30 Nine months ended September 30 2022 2021 2022 2021 Underwriting revenue Gross premiums written $ 155,146 $ 128,735 $ 435,812 $ 440,249 Gross premiums ceded (8,801 ) (60 ) (21,973 ) (6 ) Net premiums written 146,345 128,675 413,839 440,243 Change in net unearned premium reserves (24,397 ) 6,849 (55,747 ) (36,844 ) Net premiums earned $ 121,948 $ 135,524 $ 358,092 $ 403,399 Underwriting related expenses Net loss and loss adjustment expenses incurred Current year $ 92,443 $ 111,052 $ 251,231 $ 296,333 Prior year 2,116 (652 ) 1,558 (1,255 ) Net loss and loss adjustment expenses incurred 94,559 110,400 252,789 295,078 Acquisition costs 36,821 35,048 106,101 106,060 Underwriting expenses 3,285 2,616 10,034 9,310 Deposit accounting and other reinsurance expense (income) 6,148 38 6,373 2,957 Net underwriting income (loss) $ (18,865 ) $ (12,578 ) $ (17,205 ) $ (10,006 ) Income (loss) from investment in related party investment fund $ 8,521 $ (6,214 ) $ 24,474 $ (4,196 ) Net investment income (loss) 3,038 10,303 11,978 28,999 Total investment income (loss) $ 11,559 $ 4,089 $ 36,452 $ 24,803 Net underwriting and investment income (loss) $ (7,306 ) $ (8,489 ) $ 19,247 $ 14,797 Corporate expenses $ 4,104 $ 3,444 $ 12,693 $ 12,030 Other (income) expense, net 6,784 342 13,374 1,076 Interest expense 1,091 1,578 3,411 4,684 Income tax expense (benefit) (816 ) — (823 ) 3,733 Net income (loss) $ (18,469 ) $ (13,853 ) $ (9,408 ) $ (6,726 ) Earnings (loss) per share (Class A and Class B) Basic $ (0.56 ) $ (0.42 ) $ (0.28 ) $ (0.20 ) Diluted $ (0.56 ) $ (0.42 ) $ (0.28 ) $ (0.20 ) Underwriting ratios Loss ratio - current year 75.8 % 81.9 % 70.2 % 73.5 % Loss ratio - prior year 1.7 % (0.4 )% 0.4 % (0.4 )% Loss ratio 77.5 % 81.5 % 70.6 % 73.1 % Acquisition cost ratio 30.2 % 25.9 % 29.6 % 26.3 % Composite ratio 107.7 % 107.4 % 100.2 % 99.4 % Underwriting expense ratio 7.7 % 1.9 % 4.6 % 3.0 % Combined ratio 115.4 % 109.3 % 104.8 % 102.4 % The following tables present the Company’s underwriting ratios by line of business: Three months ended September 30 Three months ended September 30 2022 2021 Property Casualty Other Total Property Casualty Other Total Loss ratio 120.1 % 79.6 % 59.4 % 77.5 % 101.9 % 79.8 % 76.8 % 81.5 % Acquisition cost ratio 19.0 31.6 30.6 30.2 21.6 26.1 27.2 25.9 Composite ratio 139.1 % 111.2 % 90.0 % 107.7 % 123.5 % 105.9 % 104.0 % 107.4 % Underwriting expense ratio 7.7 1.9 Combined ratio 115.4 % 109.3 % Nine months ended September 30 Nine months ended September 30 2022 2021 Property Casualty Other Total Property Casualty Other Total Loss ratio 76.2 % 71.0 % 67.5 % 70.6 % 77.1 % 76.6 % 62.4 % 73.1 % Acquisition cost ratio 22.6 28.6 34.8 29.6 21.2 25.9 29.6 26.3 Composite ratio 98.8 % 99.6 % 102.3 % 100.2 % 98.3 % 102.5 % 92.0 % 99.4 % Underwriting expense ratio 4.6 3.0 Combined ratio 104.8 % 102.4 % GREENLIGHT CAPITAL RE, LTD. KEY FINANCIAL MEASURES AND NON-GAAP MEASURES Management uses certain key financial measures, some of which are not prescribed under U.S. GAAP rules and standards (“non-GAAP financial measures”), to evaluate our financial performance, financial position, and the change in shareholder value. Generally, a non-GAAP financial measure, as defined in SEC Regulation G, is a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented under U.S. GAAP. We believe that these measures, which may be calculated or defined differently by other companies, provide consistent and comparable metrics of our business performance to help shareholders understand performance trends and facilitate a more thorough understanding of the Company’s business. Non-GAAP financial measures should not be viewed as substitutes for those determined under U.S. GAAP. The key non-GAAP financial measures used in this report are: Basic book value per share and fully diluted book value per share; and Net underwriting income (loss) These non-GAAP measures are described below. Basic Book Value Per Share and Fully Diluted Book Value Per Share We believe that long-term growth in fully diluted book value per share is the most relevant measure of our financial performance because it provides management and investors a yardstick to monitor the shareholder value generated. Fully diluted book value per share may also help our investors, shareholders, and other interested parties form a basis of comparison with other companies within the property and casualty reinsurance industry. Basic book value per share and fully diluted book value per share should not be viewed as substitutes for the comparable U.S. GAAP measures. We calculate basic book value per share as (a) ending shareholders' equity, divided by (b) aggregate of Class A and Class B Ordinary shares issued and outstanding, including all unvested service-based restricted shares, and the earned portion of performance-based restricted shares granted after December 31, 2021 . We exclude shares potentially issuable in connection with convertible notes if the conversion price exceeds the share price. Fully diluted book value per share represents basic book value per share combined with any dilutive impact of in-the-money stock options, unvested service-based RSUs, and the earned portion of unvested performance-based RSUs granted. Fully diluted book value per share also includes the dilutive effect, if any, of ordinary shares expected to be issued upon settlement of the convertible notes. Our primary financial goal is to increase fully diluted book value per share over the long term. We use fully diluted book value per share as a financial measure in our annual incentive compensation. The following table presents a reconciliation of the non-GAAP financial measures basic and fully diluted book value per share to the most comparable U.S. GAAP measure: September30, 2022 June 30 ,2022 March 31 ,2022 December31, 2021 September30, 2021 ($ in thousands, except per share and share amounts) Numerator for basic and fully diluted book value per share: Total equity ( U.S. GAAP) (numerator for basic and fully diluted book value per share) $ 466,952 $ 484,293 $ 468,407 $ 475,663 $ 450,514 Denominator for basic and fully diluted book value per share: (1) Ordinary shares issued and outstanding as presented in the Company’s condensed consolidated balance sheets 34,824,061 34,721,231 34,721,231 33,844,446 33,844,446 Less: Unearned performance-based restricted shares granted after December 31, 2021 (539,161 ) (560,927 ) (581,593 ) — — Denominator for basic book value per share 34,284,900 34,160,304 34,139,638 33,844,446 33,844,446 Add: In-the-money stock options, service-based RSUs granted, and earned performance-based RSUs granted 183,790 179,988 176,379 154,134 154,134 Denominator for fully diluted book value per share 34,468,690 34,340,292 34,316,017 33,998,580 33,998,580 Basic book value per share $ 13.62 $ 14.18 $ 13.72 $ 14.05 $ 13.31 Increase (decrease) in basic book value per share ($) $ (0.56 ) $ 0.46 $ (0.33 ) $ 0.58 $ (0.35 ) Increase (decrease) in basic book value per share (%) (3.9 )% 3.4 % (2.3 )% 4.3 % (2.6 )% Fully diluted book value per share $ 13.55 $ 14.10 $ 13.65 $ 13.99 $ 13.25 Increase (decrease) in fully diluted book value per share ($) $ (0.55 ) $ 0.45 $ (0.34 ) $ 0.57 $ (0.35 ) Increase (decrease) in fully diluted book value per share (%) (3.9 )% 3.3 % (2.4 )% 4.2 % (2.6 )% (1) For periods prior to January 1, 2022 , all unvested restricted shares are included in the “basic” and “fully diluted” denominators. Restricted shares with performance-based vesting conditions granted after December 31, 2021 , are included in the “basic” and “fully diluted” denominators to the extent that the Company has recognized the corresponding share-based compensation expense. At September 30, 2022 , the aggregate number of unearned restricted shares with performance conditions not included in the “basic” and “fully diluted” denominators was 732,310 ( June 30, 2022 : 754,076, March 31, 2022 : 774,742, December 31, 2021 : 193,149, September 30, 2021 : 193,149). Net Underwriting Income (Loss) One way that we evaluate the Company’s underwriting performance is by measuring net underwriting income (loss). We do not use premiums written as a measure of performance. Net underwriting income (loss) is a performance measure used by management to evaluate the fundamentals underlying the Company’s underwriting operations. We believe that the use of net underwriting income (loss) enables investors and other users of the Company’s financial information to analyze our performance in a manner similar to how management analyzes performance. Management also believes that this measure follows industry practice and allows the users of financial information to compare the Company’s performance with that of our industry peer group. Net underwriting income (loss) is considered a non-GAAP financial measure because it excludes items used to calculate net income before taxes under U.S. GAAP. We calculate net underwriting income (loss) as net premiums earned, plus other income relating to reinsurance and deposit-accounted contracts, less deposit interest expense, less net loss and loss adjustment expenses, acquisition costs, and underwriting expenses. The measure excludes, on a recurring basis: (1) investment income (loss); (2) other income (expense) not related to underwriting, including foreign exchange gains or losses, Lloyd’s interest income or expense and adjustments to the allowance for expected credit losses; (3) corporate general and administrative expenses; and (4) interest expense. We exclude total investment income or loss, foreign exchange gains or losses, Lloyd’s interest income or expense and expected credit losses as we believe these items are influenced by market conditions and other factors not related to underwriting decisions. We exclude corporate and interest expenses because these costs are generally fixed and not incremental to or directly related to our underwriting operations. We believe all of these amounts are largely independent of our underwriting process, and including them could hinder the analysis of trends in our underwriting operations. Net underwriting income (loss) should not be viewed as a substitute for U.S. GAAP net income before income taxes. The reconciliations of net underwriting income (loss) to income (loss) before income taxes (the most directly comparable U.S. GAAP financial measure) on a consolidated basis are shown below: Three months ended September 30 Nine months ended September 30 2022 2021 2022 2021 ($ in thousands) Income (loss) before income tax $ (19,285 ) $ (13,853 ) $ (10,231 ) $ (2,993 ) Add (subtract): Total investment (income) loss (11,559 ) (4,089 ) (36,452 ) (24,803 ) Other non-underwriting (income) expense 6,784 342 13,374 1,076 Corporate expenses 4,104 3,444 12,693 12,030 Interest expense 1,091 1,578 3,411 4,684 Net underwriting income (loss) $ (18,865 ) $ (12,578 ) $ (17,205 ) $ (10,006 ) Source: Greenlight Capital Re

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