8-K
GREENLIGHT CAPITAL RE, LTD. (GLRE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
October 29, 2020
Date of report (Date of earliest event reported)
GREENLIGHT CAPITAL RE, LTD.
(Exact name of registrant as specified in charter)
| Cayman Islands | 001-33493 | N/A |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission file number) | (IRS employer identification no.) |
| 65 Market Street | ||
| Suite 1207, Jasmine Court | ||
| P.O. Box 31110 | ||
| Camana Bay | ||
| Grand Cayman | ||
| Cayman Islands | KY1-1205 | |
| (Address of principal executive offices) | (Zip code) |
(345) 943-4573
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Class A Ordinary Shares | GLRE | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On November 4, 2020, Greenlight Capital Re, Ltd. (the "Registrant") issued a press release announcing its financial results for the third quarter and nine months ended September 30, 2020. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and incorporated herein by reference.
In accordance with general instruction B.2 to Form 8-K, the information set forth in this Item 2.02 (including Exhibit 99.1) shall be deemed “furnished” and not “filed” with the Securities and Exchange Commission for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On October 30, 2020, the Registrant’s Compensation Committee approved an increase in the base salary of Neil Greenspan, the Registrant's chief financial officer, from $350,000 to $500,000 per year. This salary increase is effective as of September 10, 2020.
Item 5.07 Submission of Matters to a Vote of Security Holders
The Registrant held its 2020 Annual General Meeting of Shareholders on October 29, 2020. Pursuant to the Registrant’s Third Amended and Restated Articles of Association (the "Articles of Association"), each Class A ordinary share is entitled to one vote per share and each Class B ordinary share is entitled to ten votes per share; provided, however, that the total voting power of the issued and outstanding Class B ordinary shares shall not exceed 9.5% of the total voting power of all issued and outstanding ordinary shares. Since, on the record date of the 2020 Annual Meeting of Shareholders, the total voting power of the issued and outstanding Class B ordinary shares exceeded 9.5% of the total voting power, the voting power of the Class B ordinary shares was reduced with the excess being allocated to the Class A ordinary shares in accordance with Article 53 of the Articles of Association. In addition, the Articles of Association provide that no holder of Class A ordinary shares shall be permitted to acquire an amount of shares which would cause any person to own 9.9% or more of the total voting power of the issued and outstanding ordinary shares. Therefore, the excess voting power from the Class B ordinary shares allocated to the Class A ordinary shares and the Class A ordinary shares allocated to other Class A ordinary shares were restricted to 9.9% for each holder of Class A ordinary shares with the excess, if any, being allocated to the other holders of Class A ordinary shares in accordance with Article 54 of the Articles of Association.
The following tables summarize the final voting results after adjustment of the voting power. For more information on the following proposals, see the Registrant's Proxy Statement dated September 9, 2020.
(1) The following seven persons were elected Directors of the Registrant by shareholders to serve for the term expiring at the Annual General Meeting of Shareholders in 2021.
| Director | Class A For | Class A Against | Class A Abstain | Class A broker non-votes | Class B For | Class B Against | Class B Abstain | Class B broker non-votes |
|---|---|---|---|---|---|---|---|---|
| Alan Brooks | 23,139,684 | 9,419,262 | 19,421 | 27,715,455 | 8,733,861 | — | — | — |
| Simon Burton | 28,348,308 | 4,210,638 | 19,421 | 27,715,455 | 8,733,861 | — | — | — |
| David Einhorn | 28,287,686 | 4,272,676 | 18,006 | 27,715,455 | 8,733,861 | — | — | — |
| Leonard Goldberg | 28,350,754 | 4,184,003 | 43,611 | 27,715,455 | 8,733,861 | — | — | — |
| Ian Isaacs | 22,676,160 | 9,786,529 | 115,679 | 27,715,455 | 8,733,861 | — | — | — |
| Bryan Murphy | 28,187,543 | 4,371,403 | 19,421 | 27,715,455 | 8,733,861 | — | — | — |
| Joseph Platt | 16,804,701 | 15,753,462 | 20,206 | 27,715,455 | 8,733,861 | — | — | — |
(2) The following seven persons were elected Directors of Greenlight Reinsurance, Ltd. by shareholders to serve for the term expiring at the Annual General Meeting of Shareholders in 2021.
| Director | Class A For | Class A Against | Class A Abstain | Class A broker non-votes | Class B For | Class B Against | Class B Abstain | Class B broker non-votes |
|---|---|---|---|---|---|---|---|---|
| Alan Brooks | 28,439,224 | 4,119,723 | 19,421 | 27,715,455 | 8,733,861 | — | — | — |
| Simon Burton | 28,590,559 | 3,968,954 | 18,855 | 27,715,455 | 8,733,861 | — | — | — |
| David Einhorn | 28,546,390 | 4,013,972 | 18,006 | 27,715,455 | 8,733,861 | — | — | — |
| Leonard Goldberg | 28,605,665 | 3,953,281 | 19,421 | 27,715,455 | 8,733,861 | — | — | — |
| Ian Isaacs | 27,974,247 | 4,488,442 | 115,679 | 27,715,455 | 8,733,861 | — | — | — |
| Bryan Murphy | 28,384,482 | 4,174,465 | 19,421 | 27,715,455 | 8,733,861 | — | — | — |
| Joseph Platt | 28,199,627 | 4,359,320 | 19,421 | 27,715,455 | 8,733,861 | — | — | — |
(3) The following five persons were elected Directors of Greenlight Reinsurance Ireland, Designated Activity Company by shareholders to serve for the term expiring at the Annual General Meeting of Shareholders in 2021.
| Director | Class A For | Class A Against | Class A Abstain | Class A broker non-votes | Class B For | Class B Against | Class B Abstain | Class B broker non-votes |
|---|---|---|---|---|---|---|---|---|
| Michael Brady | 28,560,685 | 3,920,279 | 97,405 | 27,715,455 | 8,733,861 | — | — | — |
| Lesley Caslin | 28,585,468 | 3,895,524 | 97,376 | 27,715,455 | 8,733,861 | — | — | — |
| Bryan Murphy | 28,545,569 | 3,935,422 | 97,376 | 27,715,455 | 8,733,861 | — | — | — |
| Patrick O'Brien | 28,634,987 | 3,923,959 | 19,421 | 27,715,455 | 8,733,861 | — | — | — |
| Daniel Roitman | 28,430,954 | 4,127,992 | 19,421 | 27,715,455 | 8,733,861 | — | — | — |
(4) The shareholders approved the Registrant's amended and restated stock incentive plan (the "Plan") to increase the number of Class A ordinary shares available under the Plan from 5.0 million Class A ordinary shares to 8.0 million Class A ordinary shares.
| Class A | Class B | |
|---|---|---|
| For | 23,476,069 | 8,733,861 |
| Against | 14,546,873 | — |
| Abstain | 3,564 | — |
| Broker non-votes | — | — |
(5) The shareholders ratified the appointment of BDO USA, LLP to serve as the independent auditors of the Registrant for the fiscal year ending December 31, 2020.
| Class A | Class B | |
|---|---|---|
| For | 59,836,510 | 8,733,861 |
| Against | 386,269 | — |
| Abstain | 71,044 | — |
| Broker non-votes | — | — |
(6) The shareholders ratified the appointment of BDO Cayman Ltd. to serve as the independent auditors of Greenlight Reinsurance, Ltd. for the fiscal year ending December 31, 2020.
| Class A | Class B | |
|---|---|---|
| For | 59,876,893 | 8,733,861 |
| Against | 394,117 | — |
| Abstain | 22,813 | — |
| Broker non-votes | — | — |
(7) The shareholders ratified the appointment of Mazars, to serve as the independent auditors of Greenlight Reinsurance Ireland, Designated Activity Company for the fiscal year ending December 31, 2020.
| Class A | Class B | |
|---|---|---|
| For | 59,992,617 | 8,733,861 |
| Against | 276,074 | — |
| Abstain | 25,132 | — |
| Broker non-votes | — | — |
(8) The shareholders approved the compensation of the Registrant's executive officers pursuant to the compensation disclosure rules of the Securities and Exchange Commission, or "say-on-pay" votes.
| Class A | Class B | |
|---|---|---|
| For | 18,043,991 | 8,733,861 |
| Against | 13,872,216 | — |
| Abstain | 662,161 | — |
| Broker non-votes | 27,715,455 | — |
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1Earnings press release, "GREENLIGHT RE ANNOUNCES THIRD QUARTER 2020 FINANCIAL RESULTS", dated November 4, 2020, issued by the Registrant.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GREENLIGHT CAPITAL RE, LTD. | |
|---|---|
| (Registrant) | |
| By: | /s/ Neil Greenspan |
| Name: | Neil Greenspan |
| Title: | Chief Financial Officer |
| Date: | November 4, 2020 |
Document
GREENLIGHT RE ANNOUNCES
THIRD QUARTER 2020 FINANCIAL RESULTS
Net income of $2.2 million
Fully diluted book value per share increased to $12.03 at quarter end
GRAND CAYMAN, Cayman Islands - November 4, 2020 - Greenlight Capital Re, Ltd. (NASDAQ: GLRE) (“Greenlight Re” or the “Company”) today reported net income of $2.2 million, or $0.06 per share, in the third quarter of 2020, compared to net income of $5.1 million, or $0.14 per share, in the third quarter of 2019. Fully diluted book value per share increased $0.22, or 1.9%, to $12.03 in the third quarter of 2020. Fully diluted book value per share was $13.67 at the end of the third quarter of 2019.
Simon Burton, Chief Executive Officer of Greenlight Re, stated, “This was yet another challenging quarter for the reinsurance industry with elevated levels of natural catastrophes and continued accumulation of pandemic-related exposure. Against this backdrop our overall combined ratio of 100.4% is a result driven by discipline in both risk and expense management. Excluding the 7.0 percentage point impact of catastrophes, the underlying combined ratio reflects an underwriting business that is poised to generate significant value as market conditions improve.”
David Einhorn, Chairman of the Board of Directors, stated, “We reported a 1.4% investment gain in the Solasglas fund during the third quarter, and believe our investment portfolio is well positioned for the current market uncertainty. We are cognizant that the financial markets remain volatile and as such we continue to be conservatively positioned.”
Underwriting and investment results
Third Quarter 2020
Gross written premiums in the third quarter of 2020 were $135.6 million, compared to $110.6 million in the third quarter of 2019. This increase was due primarily to increases in workers’ compensation and specialty business, as well as health premiums associated with the Company’s strategic partnerships and innovations initiatives.
Net written premiums increased 25.9% to $134.1 million in the third quarter of 2020, compared to $106.6 million reported in the third quarter of 2019. The Company recognized ceded premiums of $1.5 million during the third quarter of 2020, compared to $4.0 million in the third quarter of 2019.
Net premiums earned were $115.5 million during the third quarter of 2020, a decrease from $129.2 million in the comparable 2019 period.
The Company incurred a net underwriting loss of $0.4 million in the third quarter of 2020, compared to a net underwriting gain of $2.6 million in the third quarter of 2019. Natural catastrophes during the third quarter of 2020 generated $8.1 million of losses, primarily from Hurricane Laura, the Midwest derecho storm and the North American wildfires.
The natural catastrophe losses contributed 7.0 percentage points to the combined ratio resulting in a combined ratio for the third quarter of 2020 of 100.4%. The combined ratio for the third quarter of 2019 was 98.0%.
The Company’s total investment income during the third quarter of 2020 was $6.9 million. The Company’s Investment Portfolio, which is managed by DME Advisors, earned 1.4%, representing $6.4 million of investment income from the Solasglas fund.
Nine Months Ended September 30, 2020
Gross written premiums were $362.1 million for the first nine months of 2020, a decrease of 14.9% from $425.5 million reported in the comparable 2019 period.
Net premiums earned were $335.0 million, for the first nine months of 2020, a decrease of 10.7% from $375.0 million reported in the comparable 2019 period.
The combined ratio for the first nine months of 2020 was 100.1% compared to 104.7% for the comparable 2019 period.
The Company incurred an investment loss of $22.8 million for the first nine months of 2020. The Company’s Investment Portfolio incurred a loss of 6.5%, representing a loss of $34.1 million from the Company’s investment in the Solasglas fund.
Other items
The Company repurchased 0.7 million shares during the third quarter of 2020 at an average price of $6.87 per share. As of September 30, 2020, 3.1 million shares remained available for repurchase under the existing plan.
Conference Call
Greenlight Re will hold a live conference call to discuss its financial results for the quarter ended September 30, 2020 on Thursday, November 5, 2020 at 9:00 a.m. Eastern time. The conference call title is Greenlight Capital Re, Ltd. Third Quarter 2020 Earnings Call.
To participate in the Greenlight Capital Re, Ltd. Third Quarter 2020 Earnings Call, please dial in to the conference call at:
U.S. toll free 1-888-336-7152
International 1-412-902-4178
Telephone participants may avoid any delays by pre-registering for the call using the following link to receive a special dial-in number and PIN.
Conference Call registration link: https://dpregister.com/sreg/10148005/d92c76b217
The conference call can also be accessed via webcast at:
https://services.choruscall.com/links/glre201105.html
A telephone replay of the call will be available from 11:00 a.m. Eastern time on November 5, 2020 until 9:00 a.m. Eastern time on November 12, 2020. The replay of the call may be accessed by dialing 1-877-344-7529 (U.S. toll free) or 1-412-317-0088 (international), access code 10148005. 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 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 complete 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 behalf of the Company. 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 Form 10-K and Amendment No. 1 to Form 10-K filed with the Securities Exchange Commission on April 29, 2020. 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.
Established in 2004, Greenlight Re (www.greenlightre.com) is a NASDAQ listed company with specialist property and casualty reinsurance companies based in the Cayman Islands and Ireland. Greenlight Re provides risk management products and services to the insurance, reinsurance and other risk marketplaces. The Company focuses on delivering risk solutions to clients and brokers by whom Greenlight Re's expertise, analytics and customer service offerings are demanded. With an emphasis on deriving superior returns from both sides of the balance sheet, Greenlight Re manages its assets according to a value-oriented equity-focused strategy that supports the goal of long-term growth in book value per share.
Contact:
Investor Relations:
Adam Prior
The Equity Group Inc.
(212) 836-9606
IR@greenlightre.ky
GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 2020 and December 31, 2019
(expressed in thousands of U.S. dollars, except per share and share amounts)
| September 30, 2020 | December 31, 2019 | |||
|---|---|---|---|---|
| Assets | ||||
| Investments | ||||
| Investment in related party investment fund | $ | 184,956 | $ | 240,056 |
| Other investments | 22,241 | 16,384 | ||
| Total investments | 207,197 | 256,440 | ||
| Cash and cash equivalents | 8,159 | 25,813 | ||
| Restricted cash and cash equivalents | 723,107 | 742,093 | ||
| Reinsurance balances receivable (net of allowance for expected credit losses of $89) | 264,227 | 230,384 | ||
| Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses of $47) | 19,949 | 27,531 | ||
| Deferred acquisition costs | 51,696 | 49,665 | ||
| Unearned premiums ceded | — | 901 | ||
| Notes receivable (net of allowance for expected credit losses of $1,000) | 18,461 | 20,202 | ||
| Other assets | 3,264 | 2,164 | ||
| Total assets | $ | 1,296,060 | $ | 1,355,193 |
| Liabilities and equity | ||||
| Liabilities | ||||
| Loss and loss adjustment expense reserves | $ | 481,770 | $ | 470,588 |
| Unearned premium reserves | 203,855 | 179,460 | ||
| Reinsurance balances payable | 80,364 | 122,665 | ||
| Funds withheld | 5,232 | 4,958 | ||
| Other liabilities | 3,756 | 6,825 | ||
| Convertible senior notes payable | 94,216 | 93,514 | ||
| Total liabilities | 869,193 | 878,010 | ||
| Shareholders' equity | ||||
| Preferred share capital (par value $0.10; authorized, 50,000,000; none issued) | — | — | ||
| Ordinary share capital (Class A: par value $0.10; authorized, 100,000,000; issued and outstanding, 29,113,702 (2019: 30,739,395): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715 (2019: 6,254,715)) | 3,537 | 3,699 | ||
| Additional paid-in capital | 492,429 | 503,547 | ||
| Retained earnings (deficit) | (69,099) | (30,063) | ||
| Total shareholders' equity | 426,867 | 477,183 | ||
| Total liabilities and equity | $ | 1,296,060 | $ | 1,355,193 |
GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three and nine months ended September 30, 2020 and 2019
(expressed in thousands of U.S. dollars, except per share and share amounts)
| Three months ended September 30 | Nine months ended September 30 | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Revenues | ||||||||
| Gross premiums written | $ | 135,596 | $ | 110,607 | $ | 362,072 | $ | 425,507 |
| Gross premiums ceded | (1,464) | (4,035) | (2,274) | (48,577) | ||||
| Net premiums written | 134,132 | 106,572 | 359,798 | 376,930 | ||||
| Change in net unearned premium reserves | (18,613) | 22,582 | (24,844) | (1,973) | ||||
| Net premiums earned | 115,519 | 129,154 | 334,954 | 374,957 | ||||
| Income (loss) from investment in related party investment fund [net of related party expenses of $703 and $1,981, (three and nine months ended September 30, 2019: $1,325 and $9,888, respectively)] | 6,431 | 6,609 | (34,086) | 51,770 | ||||
| Net investment income | 466 | 3,312 | 11,237 | 9,265 | ||||
| Other income (expense), net | 1,569 | (887) | 2,570 | 1,299 | ||||
| Total revenues | 123,985 | 138,188 | 314,675 | 437,291 | ||||
| Expenses | ||||||||
| Net loss and loss adjustment expenses incurred | 88,053 | 92,962 | 252,944 | 294,303 | ||||
| Acquisition costs | 27,018 | 30,962 | 76,660 | 89,660 | ||||
| General and administrative expenses | 5,152 | 7,725 | 18,095 | 22,484 | ||||
| Interest expense | 1,579 | 1,578 | 4,702 | 4,684 | ||||
| Total expenses | 121,802 | 133,227 | 352,401 | 411,131 | ||||
| Income (loss) before income tax | 2,183 | 4,961 | (37,726) | 26,160 | ||||
| Income tax (expense) benefit | — | 179 | (424) | 200 | ||||
| Net income (loss) | $ | 2,183 | $ | 5,140 | $ | (38,150) | $ | 26,360 |
| Earnings (loss) per share | ||||||||
| Basic | $ | 0.06 | $ | 0.14 | $ | (1.07) | $ | 0.72 |
| Diluted | $ | 0.06 | $ | 0.14 | $ | (1.07) | $ | 0.72 |
| Weighted average number of ordinary shares used in the determination of earnings and loss per share | ||||||||
| Basic | 35,677,554 | 36,841,623 | 35,569,292 | 36,646,515 | ||||
| Diluted | 35,779,703 | 36,921,490 | 35,569,292 | 36,720,550 |
The following tables present the Company’s underwriting ratios by line of business:
| Three months ended September 30 | Three months ended September 30 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||||||||||
| Property | Casualty | Other | Total | Property | Casualty | Other | Total | |||||||||
| Loss ratio | 92.9 | % | 70.8 | % | 83.3 | % | 76.2 | % | 63.6 | % | 74.7 | % | 69.6 | % | 72.0 | % |
| Acquisition cost ratio | 20.7 | % | 26.3 | % | 15.0 | % | 23.4 | % | 19.2 | % | 23.4 | % | 31.2 | % | 24.0 | % |
| Composite ratio | 113.6 | % | 97.1 | % | 98.3 | % | 99.6 | % | 82.8 | % | 98.1 | % | 100.8 | % | 96.0 | % |
| Underwriting expense ratio | 0.8 | % | 2.0 | % | ||||||||||||
| Combined ratio | 100.4 | % | 98.0 | % | ||||||||||||
| Nine months ended September 30 | Nine months ended September 30 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | 2019 | |||||||||||||||
| Property | Casualty | Other | Total | Property | Casualty | Other | Total | |||||||||
| Loss ratio | 76.9 | % | 71.3 | % | 86.3 | % | 75.5 | % | 65.8 | % | 84.2 | % | 67.9 | % | 78.5 | % |
| Acquisition cost ratio | 20.4 | 27.4 | 12.1 | 22.9 | 18.6 | 22.6 | 34.4 | 23.9 | ||||||||
| Composite ratio | 97.3 | % | 98.7 | % | 98.4 | % | 98.4 | % | 84.4 | % | 106.8 | % | 102.3 | % | 102.4 | % |
| Underwriting expense ratio | 1.7 | 2.3 | ||||||||||||||
| Combined ratio | 100.1 | % | 104.7 | % |
GREENLIGHT CAPITAL RE, LTD.
NON-GAAP MEASURES AND RECONCILIATION
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 by which to monitor the shareholder value generated. In addition, fully diluted book value per share may assist our investors, shareholders and other interested parties in forming a basis of comparison with other companies within the property and casualty reinsurance industry.
Basic book value per share is calculated on the basis of ending shareholders' equity and aggregate of Class A and Class B Ordinary shares issued and outstanding, as well as all unvested restricted shares. Fully diluted book value per share represents basic book value per share combined with any dilutive impact of in-the-money stock options and RSUs issued and outstanding as of any period end. In addition, fully diluted book value per share includes the dilutive effect, if any, of ordinary shares to be issued upon conversion of the convertible notes. 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.
Our primary financial goal is to increase fully diluted book value per share over the long term.
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.
| September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( 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) | $ | 429,904 | $ | 436,899 | $ | 477,183 | $ | 506,543 | ||||||
| Denominator for basic and fully diluted book value per share: (1) | ||||||||||||||
| Ordinary shares issued and outstanding (denominator for basic book value per share) | 35,368,417 | 36,272,585 | 37,434,244 | 36,994,110 | 36,994,110 | |||||||||
| Add: In-the-money stock options and RSUs issued and outstanding | 116,722 | 116,722 | 116,722 | 63,582 | 63,582 | |||||||||
| Denominator for fully diluted book value per share | 35,485,139 | 36,389,307 | 37,550,966 | 37,057,692 | 37,057,692 | |||||||||
| Basic book value per share | $ | 11.85 | $ | 11.67 | $ | 12.90 | $ | 13.69 | ||||||
| Increase (decrease) in basic book value per share ($) | $ | 0.18 | $ | (1.23) | $ | (0.79) | $ | 0.08 | ||||||
| Increase (decrease) in basic book value per share (%) | 1.9 | % | 1.5 | % | (9.5) | % | (5.8) | % | 0.6 | % | ||||
| Fully diluted book value per share | $ | 11.81 | $ | 11.63 | $ | 12.88 | $ | 13.67 | ||||||
| Increase (decrease) in fully diluted book value per share ($) | $ | 0.18 | $ | (1.25) | $ | (0.79) | $ | 0.09 | ||||||
| Increase (decrease) in fully diluted book value per share (%) | 1.9 | % | 1.5 | % | (9.7) | % | (5.9) | % | 0.7 | % |
All values are in US Dollars.
(1) All unvested restricted shares, including those with performance conditions, are included in the “basic” and “fully diluted” denominators. As of September 30, 2020, the number of unvested restricted shares with performance conditions was 429,444 (as of June 30, 2020: 501,989, March 31, 2020: 501,989, December, 31, 2019: 356,900, September 30, 2019: 356,900).
Net Underwriting Income (Loss)
One way that we evaluate the Company’s underwriting performance is through the measurement of 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 as it measures 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 its those of our industry peer group.
Net underwriting income (loss) is considered a non-GAAP financial measure because it excludes items used in the calculation of net income before taxes under U.S. GAAP. Net underwriting income (loss) is calculated as net premiums earned, plus other income (expense) relating to reinsurance and deposit-accounted contracts, less net loss and loss adjustment expenses, less acquisition costs, and less 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 and adjustments to the allowance for expected credit losses; (3) corporate general and administrative expenses; (4) interest expense and (5) income taxes. We exclude total investment income or loss and foreign exchange gains or losses as we believe these items are influenced by market conditions and other factors not related to underwriting decisions. We exclude corporate expenses because these expenses 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.
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 is shown below:
| Three months ended September 30 | Nine months ended September 30 | ||||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||
| ( in thousands) | |||||||
| Income (loss) before income tax | $ | 4,961 | $ | (37,726) | $ | 26,160 | |
| Add (subtract): | |||||||
| Total investment (income) loss | (6,897) | (9,921) | 22,849 | (61,035) | |||
| Other non-underwriting (income) expense | (257) | 1,254 | (6) | 1,059 | |||
| Corporate expenses | 2,972 | 4,727 | 9,711 | 11,418 | |||
| Interest expense | 1,579 | 1,578 | 4,702 | 4,684 | |||
| Net underwriting income (loss) | $ | 2,599 | $ | (470) | $ | (17,714) |
All values are in US Dollars.