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Greenlight Re Announces Second Quarter 2022 Financial Results

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Greenlight Capital Re
Greenlight Capital Re

Net income for the quarter of $14.8 million
Fully diluted book value per share increased 3.3% in the quarter to $14.10

GRAND CAYMAN, Cayman Islands, Aug. 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 June 30, 2022. The results included:

  • Net income of $14.8 million, or $0.37 per diluted ordinary share, compared to net income of $0.6 million, or $0.02 per diluted ordinary share, in the second quarter of 2021;

  • A combined ratio of 91.6%, compared to a combined ratio of 96.5% in the second quarter of 2021;

  • Total investment income of $17.2 million, compared to total investment income of $2.0 million in the second quarter of 2021; and

  • An increase in fully diluted book value per share of $0.45, or 3.3%, to $14.10.

The following summarizes the Company’s underwriting results for the second quarter of 2022 and 2021:

 

Three months ended June 30

 

2022

 

 

2021

 

 

($ in thousands)

Gross premiums written

134,780

 

 

141,579

 

Net premiums earned

110,219

 

 

132,479

 

Underwriting income (loss)

9,342

 

 

4,562

 

Combined ratio

91.6

%

 

96.5

%

Simon Burton, Chief Executive Officer of Greenlight Re, stated, “We reported a strong quarter, with underwriting and investments each contributing to the overall 3.3% growth in book value per share. Our underwriting combined ratio of 91.6% is a solid result, and we are confident that our repositioned underwriting business will benefit from market conditions that continue to improve.”

David Einhorn, Chairman of the Board of Directors, said, “We had a successful quarter in both underwriting and investing despite the significant headwinds facing the industry. We generated a positive investment result in the first half of the year despite the worst start for equity markets in over 50 years.”

Underwriting and Investment Results

Second quarter of 2022

Gross premiums written in the second quarter of 2022 were $134.8 million, compared to $141.6 million in the second quarter of 2021. This $6.8 million, or 4.8%, decrease relates primarily to the Company’s decision to reduce its exposure to personal motor and workers’ compensation risks. Partially offsetting this reduction was growth in personal property, general liability, and financial and other specialty business, including premium generated by the Company’s Innovations partners.

Net premiums earned were $110.2 million during the second quarter of 2022, a decrease from $132.5 million in the comparable 2021 period.

The Company recognized net underwriting income of $9.3 million in the second quarter of 2022. During the comparable 2021 period, the Company recognized net underwriting income of $4.6 million. The shift in business mix to higher-margin lines of business drove the improvement.

The Company’s total investment income during the second quarter of 2022 was $17.2 million. The Company’s Investment Portfolio, managed by DME Advisors, returned 4.9%, representing income of $11.9 million from the Solasglas fund. The Company reported $5.3 million of other investment income, primarily from its Innovations investments.

The Company incurred other non-underwriting expenses of $6.0 million during the second quarter of 2022. These expenses related to (i) foreign exchange losses driven by the weakening of the pound sterling and (ii) investment losses incurred by Lloyd’s syndicates in which the Company participates.

Six months ended June 30, 2022

Gross written premiums were $280.7 million for the six months ended June 30, 2022, a decrease of $30.8 million, or 9.9%, compared to the comparable 2021 period. The reasons for the year-to-date reduction were consistent with those for the second quarter discussed above.

Net premiums earned were $236.1 million for the six months ended June 30, 2022, a decrease of $31.7 million, or 11.8%, compared to the equivalent 2021 period.

The Company recognized net underwriting income for the six months ended June 30, 2022, of $1.7 million, which equates to a combined ratio of 99.3%. The underwriting gain for the equivalent 2021 period was $2.6 million, representing a combined ratio of 99.0%. The 2022 underwriting results incorporated $13.6 million of losses related to the Russian-Ukrainian conflict and $2.8 million of losses associated with Tennessee wildfires, while the underwriting results in the equivalent 2021 period included losses from winter storm Uri and deposit-accounted contracts.

Total investment income for the six months ended June 30, 2022, was $24.9 million, compared to income of $20.7 million incurred during the equivalent 2021 period. The investment income for the six months ended June 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 $16.0 million for the six months ended June 30, 2022, compared to income of $2.0 during the equivalent 2021 period.

Greenlight Capital Re, Ltd. Second Quarter 2022 Earnings Call

Greenlight Re will host a live conference call to discuss its financial results on Wednesday, August 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=1555313&tp_key=e6fb5254db

A telephone replay of the call will be available from 11:00 a.m. Eastern time on August 3, 2022, until 9:00 a.m. Eastern time on August 8, 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 13730626. 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, risk capacity, and access to a broad insurance network.

Contact:
Investor Relations:
Karin Daly
The Equity Group Inc.
(212) 836-9623
IR@greenlightre.ky


GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED

(expressed in thousands of U.S. dollars, except per share and share amounts)

 

 

 

 

 

June 30, 2022

 

December 31, 2021

Assets

 

 

 

Investments

 

 

 

Investment in related party investment fund

$

189,256

 

$

183,591

 

Other investments

 

65,809

 

 

47,384

 

Total investments

 

255,065

 

 

230,975

 

Cash and cash equivalents

 

28,000

 

 

76,307

 

Restricted cash and cash equivalents

 

669,603

 

 

634,794

 

Reinsurance balances receivable (net of allowance for expected credit losses)

 

446,285

 

 

405,365

 

Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses)

 

9,426

 

 

11,100

 

Deferred acquisition costs

 

70,343

 

 

63,026

 

Unearned premiums ceded

 

9,294

 

 

42

 

Other assets

 

5,107

 

 

5,885

 

Total assets

$

1,493,123

 

$

1,427,494

 

Liabilities and equity

 

 

 

Liabilities

 

 

 

Loss and loss adjustment expense reserves

$

526,445

 

$

524,010

 

Unearned premium reserves

 

268,254

 

 

227,584

 

Reinsurance balances payable

 

95,374

 

 

91,224

 

Funds withheld

 

12,522

 

 

3,792

 

Other liabilities

 

5,323

 

 

7,164

 

Convertible senior notes payable

 

100,912

 

 

98,057

 

Total liabilities

 

1,008,830

 

 

951,831

 

Shareholders' equity

 

 

 

Ordinary share capital (Class A: par value $0.10; authorized, 100,000,000; issued and outstanding, 28,466,516 (2021: 27,589,731): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715 (2021: 6,254,715))

$

3,472

 

$

3,384

 

Additional paid-in capital

 

475,903

 

 

481,784

 

Retained earnings (deficit)

 

4,918

 

 

(9,505

)

Total shareholders' equity

 

484,293

 

 

475,663

 

Total liabilities and equity

$

1,493,123

 

$

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 June 30

 

Six months ended June 30

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Underwriting revenue

 

 

 

 

 

 

 

Gross premiums written

$

134,780

 

 

$

141,579

 

 

$

280,666

 

 

$

311,514

 

Gross premiums ceded

 

(7,163

)

 

 

(1

)

 

 

(13,172

)

 

 

54

 

Net premiums written

 

127,617

 

 

 

141,578

 

 

 

267,494

 

 

 

311,568

 

Change in net unearned premium reserves

 

(17,398

)

 

 

(9,099

)

 

 

(31,350

)

 

 

(43,693

)

Net premiums earned

$

110,219

 

 

$

132,479

 

 

$

236,144

 

 

$

267,875

 

Underwriting related expenses

 

 

 

 

 

 

 

Net loss and loss adjustment expenses incurred

 

 

 

 

 

 

 

Current year

$

63,706

 

 

$

87,420

 

 

$

158,788

 

 

$

185,281

 

Prior year

 

(2,883

)

 

 

(463

)

 

 

(558

)

 

 

(603

)

Net loss and loss adjustment expenses incurred

 

60,823

 

 

 

86,957

 

 

 

158,230

 

 

 

184,678

 

Acquisition costs

 

36,335

 

 

 

37,631

 

 

 

69,280

 

 

 

71,012

 

Underwriting expenses

 

3,528

 

 

 

3,357

 

 

 

6,749

 

 

 

6,694

 

Deposit accounting and other reinsurance expense (income)

 

191

 

 

 

(28

)

 

 

225

 

 

 

2,919

 

Net underwriting income (loss)

$

9,342

 

 

$

4,562

 

 

$

1,660

 

 

$

2,572

 

 

 

 

 

 

 

 

 

Income (loss) from investment in related party investment fund

$

11,876

 

 

$

(2,006

)

 

$

15,953

 

 

$

2,018

 

Net investment income (loss)

 

5,280

 

 

 

4,046

 

 

 

8,940

 

 

 

18,696

 

Total investment income (loss)

$

17,156

 

 

$

2,040

 

 

$

24,893

 

 

$

20,714

 

Net underwriting and investment income (loss)

$

26,498

 

 

$

6,602

 

 

$

26,553

 

 

$

23,286

 

 

 

 

 

 

 

 

 

Corporate expenses

$

4,578

 

 

$

4,382

 

 

$

8,589

 

 

$

8,586

 

Other (income) expense, net

 

5,957

 

 

 

31

 

 

 

6,590

 

 

 

734

 

Interest expense

 

1,166

 

 

 

1,562

 

 

 

2,320

 

 

 

3,106

 

Income tax expense (benefit)

 

9

 

 

 

(1

)

 

 

(7

)

 

 

3,733

 

Net income (loss)

$

14,788

 

 

$

628

 

 

$

9,061

 

 

$

7,127

 

 

 

 

 

 

 

 

 

Earnings (loss) per share

 

 

 

 

 

 

 

Basic

$

0.44

 

 

$

0.02

 

 

$

0.27

 

 

$

0.21

 

Diluted

$

0.37

 

 

$

0.02

 

 

$

0.23

 

 

$

0.21

 

 

 

 

 

 

 

 

 

Underwriting ratios

 

 

 

 

 

 

 

Loss ratio - current year

 

57.8

%

 

 

66.0

%

 

 

67.2

%

 

 

69.2

%

Loss ratio - prior year

 

(2.6

)%

 

 

(0.4

)%

 

 

(0.2

)%

 

 

(0.3

)%

Loss ratio

 

55.2

%

 

 

65.6

%

 

 

67.0

%

 

 

68.9

%

Acquisition cost ratio

 

33.0

%

 

 

28.4

%

 

 

29.3

%

 

 

26.5

%

Composite ratio

 

88.2

%

 

 

94.0

%

 

 

96.3

%

 

 

95.4

%

Underwriting expense ratio

 

3.4

%

 

 

2.5

%

 

 

3.0

%

 

 

3.6

%

Combined ratio

 

91.6

%

 

 

96.5

%

 

 

99.3

%

 

 

99.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following tables present the Company’s underwriting ratios by line of business:

 

 

 

 

 

Three months ended June 30

 

Three months ended June 30

 

2022

 

 

2021

 

 

Property

 

Casualty

 

Other

 

Total

 

Property

 

Casualty

 

Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss ratio

47.6

%

 

64.6

%

 

37.4

%

 

55.2

%

 

49.2

%

 

76.2

%

 

44.8

%

 

65.6

%

Acquisition cost ratio

25.0

 

 

28.2

 

 

46.6

 

 

33.0

 

 

22.2

 

 

26.6

 

 

36.2

 

 

28.4

 

Composite ratio

72.6

%

 

92.8

%

 

84.0

%

 

88.2

%

 

71.4

%

 

102.8

%

 

81.0

%

 

94.0

%

Underwriting expense ratio

 

 

 

 

 

 

3.4

 

 

 

 

 

 

 

 

2.5

 

Combined ratio

 

 

 

 

 

 

91.6

%

 

 

 

 

 

 

 

96.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Six months ended June 30

 

Six months ended June 30

 

2022

 

 

2021

 

 

Property

 

Casualty

 

Other

 

Total

 

Property

 

Casualty

 

Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss ratio

58.2

%

 

66.5

%

 

72.0

%

 

67.0

%

 

64.5

%

 

74.9

%

 

55.2

%

 

68.9

%

Acquisition cost ratio

23.9

 

 

27.1

 

 

37.2

 

 

29.3

 

 

21.0

 

 

25.8

 

 

30.8

 

 

26.5

 

Composite ratio

82.1

%

 

93.6

%

 

109.2

%

 

96.3

%

 

85.5

%

 

100.7

%

 

86.0

%

 

95.4

%

Underwriting expense ratio

 

 

 

 

 

 

3.0

 

 

 

 

 

 

 

 

3.6

 

Combined ratio

 

 

 

 

 

 

99.3

%

 

 

 

 

 

 

 

99.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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:

 

June 30, 2022

 

March 31, 2022

 

December 31, 2021

 

September 30, 2021

 

June 30, 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)

$

484,293

 

 

$

468,407

 

 

$

475,663

 

 

$

450,514

 

 

$

466,826

 

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

 

34,721,231

 

 

 

34,721,231

 

 

 

33,844,446

 

 

 

33,844,446

 

 

 

34,171,068

 

Less: Unearned performance-based restricted shares granted after December 31, 2021

 

(560,927

)

 

 

(581,593

)

 

 

 

 

 

 

 

 

 

Denominator for basic book value per share

 

34,160,304

 

 

 

34,139,638

 

 

 

33,844,446

 

 

 

33,844,446

 

 

 

34,171,068

 

Add: In-the-money stock options, service-based RSUs granted, and earned performance-based RSUs granted

 

179,988

 

 

 

176,379

 

 

 

154,134

 

 

 

154,134

 

 

 

154,134

 

Denominator for fully diluted book value per share

 

34,340,292

 

 

 

34,316,017

 

 

 

33,998,580

 

 

 

33,998,580

 

 

 

34,325,202

 

Basic book value per share

$

14.18

 

 

$

13.72

 

 

$

14.05

 

 

$

13.31

 

 

$

13.66

 

Increase (decrease) in basic book value per share ($)

$

0.46

 

 

$

(0.33

)

 

$

0.58

 

 

$

(0.35

)

 

$

0.11

 

Increase (decrease) in basic book value per share (%)

 

3.4

%

 

 

(2.3

)%

 

 

4.3

%

 

 

(2.6

)%

 

 

0.8

%

 

 

 

 

 

 

 

 

 

 

Fully diluted book value per share

$

14.10

 

 

$

13.65

 

 

$

13.99

 

 

$

13.25

 

 

$

13.60

 

Increase (decrease) in fully diluted book value per share ($)

$

0.45

 

 

$

(0.34

)

 

$

0.57

 

 

$

(0.35

)

 

$

0.11

 

Increase (decrease) in fully diluted book value per share (%)

 

3.3

%

 

(2.4

)%

 

 

4.2

%

 

 

(2.6

)%

 

 

0.8

%

(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 June 30, 2022, the aggregate number of unearned restricted shares with performance conditions not included in the “basic” and “fully diluted” denominators was 754,076 (March 31, 2022: 774,742, December 31, 2021: 193,149, September 30, 2021: 193,149, June 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 June 30

 

Six months ended June 30

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

($ in thousands)

Income (loss) before income tax

$

14,797

 

 

$

627

 

 

$

9,054

 

 

$

10,860

 

Add (subtract):

 

 

 

 

 

 

 

Total investment (income) loss

 

(17,156

)

 

 

(2,040

)

 

 

(24,893

)

 

 

(20,714

)

Other non-underwriting (income) expense

 

5,957

 

 

 

31

 

 

 

6,590

 

 

 

734

 

Corporate expenses

 

4,578

 

 

 

4,382

 

 

 

8,589

 

 

 

8,586

 

Interest expense

 

1,166

 

 

 

1,562

 

 

 

2,320

 

 

 

3,106

 

Net underwriting income (loss)

$

9,342

 

 

$

4,562

 

 

$

1,660

 

 

$

2,572