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
May 4, 2021
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 May 5, 2021, Greenlight Capital Re, Ltd. (the "Registrant") issued a press release announcing its financial results for the first quarter March 31, 2021. 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 5.07 Submission of Matters to a Vote of Security Holders
The Registrant held its 2021 Annual General Meeting of Shareholders on May 4, 2021. 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 2021 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 March 12, 2021 (the "Proxy Statement").
(1) The following seven persons were nominees for Directors of the Registrant by shareholders to serve for the term expiring at the Annual General Meeting of Shareholders in 2022.
| 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 | 28,909,603 | 9,223,275 | 4,563 | 22,410,838 | 8,626,686 | — | — | — |
| Simon Burton | 32,379,712 | 1,902,256 | 3,855,473 | 22,410,838 | 8,626,686 | — | — | — |
| David Einhorn | 33,618,355 | 1,027,082 | 3,492,004 | 22,410,838 | 8,626,686 | — | — | — |
| Leonard Goldberg | 35,711,191 | 2,408,840 | 17,410 | 22,410,838 | 8,626,686 | — | — | — |
| Ian Isaacs | 21,920,167 | 16,113,839 | 103,435 | 22,410,838 | 8,626,686 | — | — | — |
| Bryan Murphy | 26,407,090 | 11,724,189 | 6,162 | 22,410,838 | 8,626,686 | — | — | — |
| Joseph Platt | 13,006,304 | 25,126,575 | 4,563 | 22,410,838 | 8,626,686 | — | — | — |
Each of Alan Brooks, Simon Burton, David Einhorn, Leonard Goldberg, Ian Isaacs and Bryan Murphy received the affirmative vote of the majority of the Class A and Class B ordinary shares present in person or by proxy at the 2021 Annual General Meeting of Shareholders and were re-elected as directors of the Registrant. Joseph Platt also received the affirmative vote of the majority of the Class A and Class B ordinary shares present in person or by proxy in connection with the director elections contained in each Proposal 1 and Proposal 2 of the Proxy Statement. However, after adjusting the voting power as described above, while Mr. Platt was re-elected to the board of directors of Greenlight Reinsurance, Ltd. in connection with Proposal 2 (as noted below), he did not receive an affirmative majority of the adjusted votes in connection with Proposal 1 and, as a result, was not re-elected as a director of the Registrant.
(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 2022.
| 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 | 32,395,445 | 5,737,434 | 4,563 | 22,410,838 | 8,626,686 | — | — | — |
| Simon Burton | 32,838,488 | 1,442,317 | 3,855,473 | 22,410,838 | 8,626,686 | — | — | — |
| David Einhorn | 34,085,663 | 559,585 | 3,492,193 | 22,410,838 | 8,626,686 | — | — | — |
| Leonard Goldberg | 36,183,992 | 1,936,039 | 17,410 | 22,410,838 | 8,626,686 | — | — | — |
| Ian Isaacs | 30,306,974 | 7,727,032 | 103,435 | 22,410,838 | 8,626,686 | — | — | — |
| Bryan Murphy | 36,446,902 | 1,685,976 | 4,563 | 22,410,838 | 8,626,686 | — | — | — |
| Joseph Platt | 29,683,462 | 8,449,416 | 4,563 | 22,410,838 | 8,626,686 | — | — | — |
(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 2022.
| 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 | 37,493,931 | 626,100 | 17,410 | 22,410,838 | 8,626,686 | — | — | — |
| Lesley Caslin | 37,495,385 | 624,646 | 17,410 | 22,410,838 | 8,626,686 | — | — | — |
| Bryan Murphy | 36,494,742 | 1,625,289 | 17,410 | 22,410,838 | 8,626,686 | — | — | — |
| Patrick O'Brien | 37,494,251 | 625,780 | 17,410 | 22,410,838 | 8,626,686 | — | — | — |
| Daniel Roitman | 37,488,435 | 631,596 | 17,410 | 22,410,838 | 8,626,686 | — | — | — |
(4) 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, 2021.
| Class A | Class B | |
|---|---|---|
| For | 75,606,462 | 8,626,686 |
| Against | 181,809 | — |
| Abstain | 52,716 | — |
| Broker non-votes | — | — |
(5) 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, 2021.
| Class A | Class B | |
|---|---|---|
| For | 60,312,882 | 8,626,686 |
| Against | 181,809 | — |
| Abstain | 53,589 | — |
| Broker non-votes | — | — |
(6) 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, 2021.
| Class A | Class B | |
|---|---|---|
| For | 60,281,222 | 8,626,686 |
| Against | 179,924 | — |
| Abstain | 87,133 | — |
| Broker non-votes | — | — |
(7) The shareholders cast the following non-binding vote on 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 | 11,192,390 | 8,626,686 |
| Against | 26,289,479 | — |
| Abstain | 655,573 | — |
| Broker non-votes | 22,410,838 | — |
The “say-on-pay” proposal received the affirmative vote of the majority of the Class A and Class B ordinary shares present in person or by proxy. However, after adjusting the voting power as described above, the “say-on-pay” proposal did not receive an affirmative majority of the adjusted votes.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1Earnings press release, "GREENLIGHT RE ANNOUNCES FIRST QUARTER 2021 FINANCIAL RESULTS", dated May 5, 2021, 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: | May 5, 2021 |
Document
GREENLIGHT RE ANNOUNCES
FIRST QUARTER 2021 FINANCIAL RESULTS
Net income for the quarter of $6.5 million
Fully diluted book value per share increased 0.5% in the quarter to $13.49
GRAND CAYMAN, Cayman Islands - May 5, 2021 - Greenlight Capital Re, Ltd. (NASDAQ: GLRE) (“Greenlight Re” or the “Company”) today reported its 2021 first quarter financial results. The results included:
•Net income of $6.5 million, or $0.19 per share, compared to a net loss of $40.3 million, or $1.11 per share, in the first quarter of 2020.
•Combined ratio of 101.5%, compared to a combined ratio of 98.9% in the first quarter of 2020.
•Total investment income of $18.7 million, compared to a net loss of $35.3 million in the first quarter of 2020.
•An increase in fully diluted book value per share of $0.07, or 0.5%, to $13.49.
Simon Burton, Chief Executive Officer of Greenlight Re, stated, “We were pleased to report an increase in book value per share during the quarter, despite the unusually costly winter storms that occurred in February. Gross written premium of $170 million represents an increase of 55% against the first quarter of 2020 as we grew our underwriting business to address a broadly improving market.”
David Einhorn, Chairman of the Board of Directors, stated, “We reported a 1.5% investment gain in the Solasglas fund during the first quarter, driven primarily by gains on our long portfolio. After a difficult January, we believe the investment environment has turned favorably to our strategy and positioning.”
Underwriting results
Gross written premiums in the first quarter of 2021 were $169.9 million, compared to $109.8 million in the first quarter of 2020. This increase, which reflects rate improvements and other market opportunities, related primarily to new multi-line contracts covering Lloyd’s syndicates.
Net written premiums increased 55.8% to $170.0 million in the first quarter of 2021, compared to $109.1 million reported in the first quarter of 2020.
Net premiums earned were $135.4 million during the first quarter of 2021, an increase from $111.0 million in the comparable 2020 period.
The Company incurred a net underwriting loss of $2.0 million in the first quarter of 2021, which included losses of $4.6 million from winter storm Uri. In the first quarter of 2020, the Company recognized net underwriting income of $1.3 million, which incorporated a net financial loss of $3.9 million from adverse prior year development. The combined ratio for the first quarter of 2021 was 101.5%, compared to 98.9% for the first quarter of 2020.
Investment results
The Company’s total investment income during the first quarter of 2021 was $18.7 million. The Company’s Investment Portfolio, which is managed by DME Advisors, earned 1.5%, representing $4.0 million of investment income from the Solasglas fund. The Company also reported $14.7 million of other investment income, primarily from its strategic investments.
Share repurchase plan
The Company’s share repurchase plan expires June 30, 2021. The Board of Directors has approved a new share repurchase plan, effective from July 1, 2021 until June 30, 2022, authorizing the Company to purchase up to $25 million of Class A ordinary shares.
Conference Call
Greenlight Re will hold a live conference call to discuss its financial results on Thursday, May 6, 2021 at 9:00 a.m. Eastern time. The conference call title is Greenlight Capital Re, Ltd. First Quarter 2021 Earnings Call.
To participate in the Greenlight Capital Re, Ltd. First Quarter 2021 Earnings Call, please dial in to the conference call at:
U.S. toll free 1-844-274-4096
International 1-412-317-5608
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/10154500/e67980e728
The conference call can also be accessed via webcast at:
https://services.choruscall.com/mediaframe/webcast.html?webcastid=cY28YSYY
A telephone replay of the call will be available from 11:00 a.m. Eastern time on May 6, 2021 until 9:00 a.m. Eastern time on May 13, 2021. 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 10154500. 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 which include adjusted combined ratio, 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 filed with the Securities Exchange Commission on March 10, 2021. 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 multi-line property and casualty reinsurance though its licensed and regulated reinsurance entities in the Cayman Islands and Ireland. 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:
Adam Prior
The Equity Group Inc.
(212) 836-9606
IR@greenlightre.ky
GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2021 and December 31, 2020
(expressed in thousands of U.S. dollars, except per share and share amounts)
| March 31, 2021 | December 31, 2020 | |||
|---|---|---|---|---|
| Assets | ||||
| Investments | ||||
| Investment in related party investment fund | $ | 199,882 | $ | 166,735 |
| Other investments | 26,152 | 29,418 | ||
| Total investments | 226,034 | 196,153 | ||
| Cash and cash equivalents | 33,537 | 8,935 | ||
| Restricted cash and cash equivalents | 697,689 | 745,371 | ||
| Reinsurance balances receivable (net of allowance for expected credit losses) | 386,858 | 330,232 | ||
| Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses) | 15,009 | 16,851 | ||
| Deferred acquisition costs | 58,591 | 51,014 | ||
| Notes receivable | — | 6,101 | ||
| Other assets | 4,394 | 2,993 | ||
| Total assets | $ | 1,422,112 | $ | 1,357,650 |
| Liabilities and equity | ||||
| Liabilities | ||||
| Loss and loss adjustment expense reserves | $ | 512,843 | $ | 494,179 |
| Unearned premium reserves | 235,725 | 201,089 | ||
| Reinsurance balances payable | 94,059 | 92,247 | ||
| Funds withheld | 3,622 | 4,475 | ||
| Other liabilities | 8,406 | 5,009 | ||
| Convertible senior notes payable | 95,338 | 95,794 | ||
| Total liabilities | 949,993 | 892,793 | ||
| Shareholders' equity | ||||
| Ordinary share capital (Class A: par value $0.10; authorized, 100,000,000; issued and outstanding, 28,595,813 (2020: 28,260,075): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715 (2020: 6,254,715)) | $ | 3,485 | $ | 3,452 |
| Additional paid-in capital | 489,218 | 488,488 | ||
| Retained earnings (deficit) | (20,584) | (27,083) | ||
| Total shareholders' equity | 472,119 | 464,857 | ||
| Total liabilities and equity | $ | 1,422,112 | $ | 1,357,650 |
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 March 31 | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Underwriting revenue | ||||||
| Gross premiums written | $ | 169,935 | $ | 109,787 | ||
| Gross premiums ceded | 55 | (678) | ||||
| Net premiums written | 169,990 | 109,109 | ||||
| Change in net unearned premium reserves | (34,594) | 1,912 | ||||
| Net premiums earned | $ | 135,396 | $ | 111,021 | ||
| Underwriting related expenses | ||||||
| Net loss and loss adjustment expenses incurred | ||||||
| Current year | $ | 97,861 | $ | 71,525 | ||
| Prior year | (140) | 4,172 | ||||
| Net loss and loss adjustment expenses incurred | 97,721 | 75,697 | ||||
| Acquisition costs | 33,381 | 31,739 | ||||
| Underwriting expenses | 3,337 | 2,936 | ||||
| Deposit accounting expense (income) | 2,947 | (607) | ||||
| Underwriting income (loss) | $ | (1,990) | $ | 1,256 | ||
| Income (loss) from investment in related party investment fund | $ | 4,024 | $ | (42,126) | ||
| Net investment income (loss) | 14,650 | 6,837 | ||||
| Total investment income (loss) | $ | 18,674 | $ | (35,289) | ||
| Net underwriting and investment income (loss) | $ | 16,684 | $ | (34,033) | ||
| Corporate expenses | $ | 4,204 | $ | 3,858 | ||
| Other (income) expense, net | 703 | 394 | ||||
| Interest expense | 1,544 | 1,561 | ||||
| Income tax expense (benefit) | 3,734 | 424 | ||||
| Net income (loss) | $ | 6,499 | $ | (40,270) | ||
| Earnings (loss) per share | ||||||
| Basic | $ | 0.19 | $ | (1.11) | ||
| Diluted | $ | 0.19 | $ | (1.11) | ||
| Underwriting ratios | ||||||
| Loss ratio - current year | 72.3 | % | 64.4 | % | ||
| Loss ratio - prior year | (0.1) | % | 3.8 | % | ||
| Loss ratio | 72.2 | % | 68.2 | % | ||
| Acquisition cost ratio | 24.7 | % | 28.6 | % | ||
| Composite ratio | 96.9 | % | 96.8 | % | ||
| Underwriting expense ratio | 4.6 | % | 2.1 | % | ||
| Combined ratio | 101.5 | % | 98.9 | % |
The following tables present the Company’s underwriting ratios by line of business:
| Three months ended March 31 | Three months ended March 31 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||||||||||||
| Property | Casualty | Other | Total | Property | Casualty | Other | Total | |||||||||
| Loss ratio | 80.4 | % | 73.7 | % | 65.0 | % | 72.2 | % | 64.0 | % | 72.7 | % | 60.7 | % | 68.2 | % |
| Acquisition cost ratio | 19.8 | % | 25.0 | % | 25.7 | % | 24.7 | % | 19.5 | % | 27.1 | % | 36.2 | % | 28.6 | % |
| Composite ratio | 100.2 | % | 98.7 | % | 90.7 | % | 96.9 | % | 83.5 | % | 99.8 | % | 96.9 | % | 96.8 | % |
| Underwriting expense ratio | 4.6 | % | 2.1 | % | ||||||||||||
| Combined ratio | 101.5 | % | 98.9 | % |
GREENLIGHT CAPITAL RE, LTD.
NON-GAAP MEASURES AND RECONCILIATION
Adjusted combined ratio
“Combined ratio” is a commonly used measure in the property and casualty insurance industry and is calculated using U.S. GAAP components. We use the combined ratio, as well as an adjusted combined ratio that excludes the impacts of certain items, to evaluate our underwriting performance. We believe this adjusted non-GAAP measure provides management and financial statement users with a better understanding of the factors influencing our underwriting results.
In calculating the adjusted combined ratio, we exclude underwriting losses attributable to (i) prior accident-year reserve development, (ii) catastrophe losses, and (iii) certain significant, infrequent loss events.
Prior accident-year reserve development, which can be favorable or unfavorable, represents changes in our estimates of losses and loss adjustment expenses associated with loss events that occurred in prior years. We believe a discussion of current accident-year performance, which excludes prior accident-year reserve development, is helpful since it provides more insight into current underwriting performance.
By their nature, catastrophe losses and other significant, infrequent loss events are not representative of the type of loss activity that we would expect to occur in every period.
We believe an adjusted combined ratio that excludes the effects of these items aids in understanding the underlying trends and variability in our underwriting results that these items may obscure.
The following table reconciles the combined ratio to the adjusted combined ratio:
| Three months ended March 31 | |||||
|---|---|---|---|---|---|
| 2021 | 2020 | ||||
| Combined ratio | 101.5 | % | 98.9 | % | |
| Impact on combined ratio of selected items: | |||||
| Prior-year development | (0.2) | % | 3.5 | % | |
| Catastrophes | 3.4 | % | — | % | |
| Other adjustments 1 | 2.2 | % | — | % | |
| Adjusted combined ratio | 96.1 | % | 95.4 | % |
1 In the periods presented, “Other adjustments” represents interest income and expense on deposit-accounted contracts due to changes in the associated estimated ultimate cash flows.
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 to measure 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 those 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 (expense) relating to reinsurance and deposit-accounted contracts, 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 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 are shown below:
| Three months ended March 31 | |||
|---|---|---|---|
| 2021 | 2020 | ||
| ( in thousands) | |||
| Income (loss) before income tax | $ | (39,846) | |
| Add (subtract): | |||
| Total investment (income) loss | (18,674) | 35,289 | |
| Other non-underwriting (income) expense | 703 | 394 | |
| Corporate expenses | 4,204 | 3,858 | |
| Interest expense | 1,544 | 1,561 | |
| Net underwriting income (loss) | $ | 1,256 |
All values are in US Dollars.