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
July 30, 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 August 5, 2020, Greenlight Capital Re, Ltd. (the "Registrant") issued a press release announcing its financial results for the second quarter and six months ended June 30, 2020. A copy of the press release is attached hereto 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 July 30, 2020, the Registrant accelerated the vesting (the "Acceleration") of part of an award of restricted Class A ordinary shares (the “Award”) that was previously granted to Simon Burton, a member of the Registrant’s Board of Directors and the Chief Executive Officer, that was subject to performance-based vesting criteria not based on the market price for the Class A ordinary shares. In connection with the Acceleration, the Award was amended and restated (the “Amended Award”). Pursuant to the Amended Award, and as a result of the Acceleration, 72,545 Class A ordinary shares vested on July 30, 2020. The remainder of the Amended Award is still subject to performance-based vesting criteria not based on the market price for the Class A ordinary shares.
The foregoing summary of the Amended Award does not purport to be complete and is qualified in its entirety by reference to the Amended Award, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1Earnings press release, "GREENLIGHT RE ANNOUNCES SECOND QUARTER 2020 FINANCIAL RESULTS", dated August 5, 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/ Tim Courtis |
| Name: | Tim Courtis |
| Title: | Chief Financial Officer |
| Date: | August 5, 2020 |
Document
GREENLIGHT CAPITAL RE, LTD.
AMENDED AND RESTATED
2004 STOCK INCENTIVE PLAN
AMENDED AND RESTATED RESTRICTED STOCK AWARD AGREEMENT
This Amended and Restated Restricted Stock Award Agreement (the “Agreement”) is made, effective as of the 30th day of July 2020 (the “Effective Date”), between Greenlight Capital Re, Ltd., a Cayman Islands exempted company (the “Company”) and Simon Burton (the “Grantee”).
RECITALS:
WHEREAS, the Company has adopted the Greenlight Capital Re, Ltd. Amended and Restated 2004 Stock Incentive Plan (as it may be amended from time to time, the “Plan”) pursuant to which awards of restricted Class A ordinary shares of the Company (the “Shares”) may be granted;
WHEREAS, the Grantee entered into an employment agreement with the Company and Greenlight Reinsurance, Ltd., dated June 1, 2017 (the “Employment Agreement”) pursuant to which he is eligible to receive an annual grant of restricted Shares following the end of each calendar year of Employment (as defined in the Employment Agreement); and
WHEREAS, the Grantee and the Company previously entered into that certain Restricted Stock Award Agreement (the “Prior Award Agreement”), effective as of March 16, 2020 (the “Grant Date”), whereby the Company granted an award of restricted Shares (the “Restricted Stock Award”) consisting of, in the aggregate, 145,089 Shares in the capital of the Company, to the Grantee in recognition of the Grantee’s services to the Company, subject to the terms and conditions set forth in the Prior Award Agreement;
WHEREAS, the Committee and the Board have determined that it is in the best interest of the Company and its shareholders to accelerate part of the Restricted Stock Award, as of the Effective Date, consisting of 72,545 Shares; and
WHEREAS, the Grantee and the Company desire to amend and restate the Prior Award Agreement in its entirety to reflect the acceleration of part of the Restricted Stock Award, subject to the terms of the Plan and this Agreement.
NOW, THEREFORE, in consideration for the services rendered by the Grantee to the Company and the mutual covenants hereinafter set forth, the parties hereto agree as follows:
1.Grant of Restricted Stock Award. Pursuant to Section 7(b) of the Plan, the Company issued to the Grantee on the Grant Date a Restricted Stock Award consisting of, in the aggregate, 145,089 Shares in the capital of the Company (hereinafter called the “Restricted Shares”) having the rights and subject to the restrictions set out in the Articles of Association of the Company, this Agreement and the Plan. Effective as of the Effective Date, 72,545 Restricted
Shares shall fully vest. The remaining 72,544 Restricted Shares (the “Performance Restricted Shares”) shall vest in accordance with Section 4 hereof.
2.Incorporation by Reference. The provisions of the Plan are hereby incorporated herein by reference. Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan and any capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan. The Committee shall have the authority to interpret and construe the Plan and this Agreement and to make any and all determinations thereunder, and its decision shall be binding and conclusive upon the Grantee and his legal representative in respect of any questions arising under the Plan or this Agreement.
3.Restrictions. Except as otherwise provided in the Plan or this Agreement, the Restricted Shares may not, any time prior to becoming vested, be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Grantee and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall result in such Shares being mandatorily repurchased for par value and cancelled by the Company. In such case, all of the Grantee’s rights to such Shares shall immediately terminate.
4.Earned Performance Restricted Shares; Vesting; Termination of Employment.
(a)Earned Performance Restricted Shares. Subject to Sections 4(c) and 4(d), the number of Performance Restricted Shares earned, if any (the “Earned Performance Restricted Shares”) shall be based upon the cumulative all-in Combined Ratio (as defined below) for the period between January 1, 2019 and December 31, 2024 (the “Performance Period”), as modified by the Adjusted Measurement (as defined below), to the extent applicable, and is determined as follows:
| Combined Ratio | Number of Earned Performance Restricted Shares |
|---|---|
| 97% or Less | 72,544 |
| Above 97% and less than 102% | Determined based on linear interpolation between the points |
| 102% and Higher | 0 |
The “Combined Ratio” is a ratio whereby: (i) the numerator is the cumulative sum over the Performance Period of (1) losses incurred, (2) acquisition costs, (3) all general and administrative expenses and (4) any reinsurance income/expense reported as Other Income/Expense in the Company’s audited financial statements to be reported in the Company’s Annual Report on Form 10-K (the “Financial Statements”) and (ii) the denominator is the cumulative sum of the earned premiums during the Performance Period.
The Combined Ratio will be determined by the Committee after the end of the Performance Period, but prior to March 15, 2025 (the “Vesting Date”), based on calculations performed by the Company based on the Financial Statements (such actual date of determination, the “Determination Date”).
(b)Vesting. Subject to Sections 4(c) and 4(d), the restrictions described in Section 3 above will lapse on the Vesting Date with respect to any Earned Performance Restricted Shares. Any Performance Restricted Shares that do not become Earned Performance Restricted Shares will be automatically repurchased for par value and cancelled by the Company on the Determination Date and all of the Grantee’s rights to such Shares shall immediately terminate.
(c)Termination without Cause or due to death, Disability or Good Reason. In the event of (i) the termination of the Grantee’s Employment by the Company without Cause (as defined in the Employment Agreement) (including the Company’s election to not renew the then current term of the Employment Agreement on equivalent terms upon the expiration of such term), (ii) the termination of Grantee’s Employment by the Grantee for Good Reason (as defined in the Employment Agreement), (iii) upon the Grantee’s death or Disability (as defined in the Employment Agreement), or (iv) the Grantee satisfies the Retirement Conditions (as defined in the Employment) throughout the Performance Period, in each case, prior to the Vesting Date, the Performance Restricted Shares will remain outstanding and eligible to be earned and vested in accordance with Sections 4(a) and 4(b) herein; provided, that, the number of Earned Performance Restricted Shares, if any, will be determined based only upon the number of full calendar years of Employment during the Performance Period and the Combined Ratio will be adjusted for any loss development related to any business written during or prior to the Employment Period (as defined in the Employment Period) until the expiration of the Performance Period (the “Adjusted Measurement”).
(d)All other Terminations. Except as otherwise set forth in Section 4(c) above, if the Grantee’s Employment terminates for any reason on or prior to the Vesting Date, the Performance Restricted Shares (whether or not Earned Performance Restricted Shares) will be automatically repurchased for par value and cancelled by the Company and all of the Grantee’s rights to such Shares shall immediately terminate.
5.Tax Withholding. The Company shall have the right to deduct from any compensation paid to the Grantee pursuant to the Plan the amount of taxes required by law to be withheld therefrom, or to require the Grantee to pay the Company in cash such amount required to be withheld. The Grantee may satisfy any foreign, federal, state or local tax withholding obligation relating to the acquisition of Shares under this Restricted Stock Award by any of the following means (in addition to the Company’s right to withhold or to direct the withholding from any compensation paid to the Grantee by the Company or by an Affiliate) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold vested Restricted Shares otherwise deliverable to the Grantee hereunder; provided, however, that no Restricted Shares are withheld with a value exceeding the minimum amount of tax required to be withheld by applicable law, except to the extent that to do so will not result in adverse accounting consequences; or (iii) transferring to the Company or to an Affiliate for repurchase for the aggregate sum of US$1.00, owned and unencumbered Shares with a Fair Market Value equal to the amount of the applicable tax liability in exchange for the Company’s or Affiliate’s commitment to remit such amounts to the taxing authority.
6.Rights as Shareholders; Dividends. The Grantee shall be the record owner of the Restricted Shares unless and until such Shares are repurchased pursuant to Section 4 hereof or sold or otherwise disposed of, and as record owner shall be entitled to all rights of a shareholder of the Company, including, without limitation, voting rights, if any, with respect to the Restricted Shares and the right to receive dividends, if any, while the Restricted Shares are held in custody.
7.Certificates. Reasonably promptly following the Grant Date, the Company shall cause to be issued to the Grantee a certificate in respect of the Restricted Shares which shall bear the following (or a similar) legend in addition to any other legends that may be required under federal or state securities laws:
“THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) CONTAINED IN THE GREENLIGHT CAPITAL RE, LTD. AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN AND THE RESTRICTED STOCK AWARD AGREEMENT DATED AS OF MARCH 16, 2020 ENTERED INTO BETWEEN THE REGISTERED OWNER AND GREENLIGHT CAPITAL RE, LTD. A COPY OF THE PLAN AND THE AWARD AGREEMENT ARE ON FILE AT THE OFFICES OF GREENLIGHT CAPITAL RE, LTD.”
The Committee shall require that the certificate evidencing such Shares be delivered upon issuance to the Company or such other depository as may be designated by the Committee as a depository for safekeeping until the Shares are repurchased or until the restrictions set forth herein and in the Plan lapse. At the expiration of the restrictions, the Company shall deliver to the Grantee (or his legal representative, beneficiary or heir, if applicable) share certificates for the Shares deposited with it free from legend except as otherwise provided by the Plan or as otherwise required by applicable law.
8.Compliance with Laws and Regulations. The issuance and transfer of the Restricted Shares shall be subject to compliance by the Company and the Grantee with all applicable requirements of securities laws and with all applicable requirements of any stock exchange on which the Company’s Shares may be listed at the time of such issuance or transfer.
9.Stop-Transfer Instructions. The Grantee agrees that, to ensure compliance with the restrictions imposed by this Agreement, the Company may issue appropriate “stop-transfer” instructions to its transfer agent, if any, and if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
10.Refusal to Transfer. The Company will not be required to (i) register any transfer of Shares on its register of members if such Shares have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) treat as owner of such Shares, or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.
11.No Right to Continuous Service. Nothing in this Agreement shall be deemed by implication or otherwise to impose any limitation on any right of the Company or any of its Affiliates to terminate the Grantee’s Continuous Service at any time.
12.Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first class mail, return receipt requested, telecopier, courier service or personal delivery:
If to the Company:
Greenlight Capital Re, Ltd.
65 Market Street, Suite 1207
Jasmine Court, Camana Bay
P.O. Box 31110
Grand Cayman, KY1-1205
Cayman Islands
Facsimile: (345) 745-4576
If to the Grantee, at the Grantee’s last known address on file with the Company.
All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied.
13.Bound by Plan. By signing this Agreement, the Grantee acknowledges that he has received a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all of the terms and provisions of the Plan.
14.Beneficiary. The Grantee may file with the Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Grantee, the executor or administrator of the Grantee’s estate shall be deemed to be the Grantee’s beneficiary.
15.Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and on the Grantee and the beneficiaries, executors and administrators, heirs and successors of the Grantee.
16.Amendment of Restricted Stock Award. Subject to Section 17 of this Agreement, the Board at any time and from time to time may amend the terms of this Restricted Stock Award; provided, however, that the Grantee’s rights under this Restricted Stock Award shall not be impaired by any such amendment unless (i) the Company requests the Grantee’s consent and (ii) the Grantee consents in writing.
17.Adjustment Upon Changes in Capitalization. Restricted Stock Awards may be adjusted as provided in the Plan including, without limitation, Section 11 of the Plan. The
Grantee, by his execution and entry into this Agreement, irrevocably and unconditionally consents and agrees to any such adjustments as may be made at any time hereafter.
18.Governing Law. The validity, construction, interpretation and effect of this Agreement shall exclusively be governed by, and determined in accordance with, the laws of the Cayman Islands.
19.Severability. Every provision of this Agreement is intended to be severable and any illegal or invalid term shall not affect the validity or legality of the remaining terms.
20.Headings. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation of construction, and shall not constitute a part of this Agreement.
21.Limitation of Rights. Nothing in this Agreement or the Plan shall be construed to give the Grantee any right to future Awards under the Plan or otherwise.
22.Entire Agreement and Effectiveness. This Agreement embodies the complete agreement and understanding among the parties hereto with respect to the grant of Restricted Shares to the Grantee in 2019 as contemplated in the Employment Agreement and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way, including, without limitation, the Employment Agreement and the Prior Award Agreement.
23.Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the 30th day of July, 2020.
GREENLIGHT CAPITAL RE, LTD.
/s/ Tim Courtis
By: Tim Courtis
Title: CFO
/s/ Simon Burton
Simon Burton
Signature Page to Amended and Restated Restricted Stock Award Agreement
Document
GREENLIGHT RE ANNOUNCES
SECOND QUARTER 2020 FINANCIAL RESULTS
Net loss of $0.1 million
Fully diluted book value per share increased to $11.81 at quarter end
GRAND CAYMAN, Cayman Islands - August 5, 2020 - Greenlight Capital Re, Ltd. (NASDAQ: GLRE) (“Greenlight Re” or the “Company”) today reported a net loss of $0.1 million, or $0.00 per share, in the second quarter of 2020, compared to net income of $15.3 million, or $0.42 per share, in the second quarter of 2019. Fully diluted book value per share increased $0.18, or 1.5%, to $11.81 in the second quarter of 2020, reflecting share repurchases executed during the quarter. Fully diluted book value per share was $13.58 at the end of the second quarter of 2019.
Simon Burton, Chief Executive Officer of Greenlight Re, stated, “We have been pleased with our stability and performance in light of the impact of the COVID-19 pandemic on the reinsurance industry and the global economy. Additionally, our repurchases of common stock enabled us to deliver solid growth in book value per share during the quarter. Looking ahead to the rest of 2020 and into 2021, we are well positioned to take advantage of broad pricing increases that we are seeing across multiple lines of business.”
David Einhorn, Chairman of the Board of Directors, stated, “We reported a small investment gain during the second 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
Second Quarter 2020
Gross written premiums in the second quarter of 2020 were $116.7 million, compared to $152.3 million in the second quarter of 2019. This decrease was largely due to the Company’s decision not to renew certain auto business, partially offset by additional new business written in several specialty lines.
Net written premiums decreased 9.8% to $116.6 million in the second quarter of 2020, compared to $129.2 million reported in the second quarter of 2019. The Company recognized ceded premiums of $0.1 million during the second quarter of 2020, compared to $23.1 million in the second quarter of 2019. This decrease in ceded premiums was due primarily to the non-renewal of retrocessional coverage on auto business.
Net premiums earned were $108.4 million during the second quarter of 2020, a decrease from $120.4 million in the comparable 2019 period.
The Company incurred a net underwriting loss of $1.3 million in the second quarter of 2020, compared to a net underwriting gain of $1.5 million in the second quarter of 2019. The net financial impact of the COVID-19 pandemic during the second quarter of 2020 was a $6.0 million loss.
COVID-19 losses contributed 5.5 percentage points to the combined ratio resulting in a combined ratio for the second quarter of 2020 of 101.2%. Excluding COVID-19 losses, the underlying book of business reported a combined ratio of 95.7% for the quarter. The combined ratio for the second quarter of 2019 was 98.8%.
Greenlight Re’s total investment income during the second quarter of 2020 was $5.5 million. The Company’s Investment Portfolio, which is managed by DME Advisors, earned 0.3%, representing $1.6 million of investment income from the Solasglas fund. Other investment income of $3.9 million included net unrealized gains of $3.3 million relating to our portfolio of innovation investments.
Six Months Ended June 30, 2020
Gross written premiums were $226.5 million for the first half of 2020, a decrease of 28.1% from $314.9 million reported in the comparable 2019 period.
Net premiums earned were $219.4 million, for the first half of 2020, a decrease of 10.7% from $245.8 million reported in the comparable 2019 period.
The combined ratio for the first half of 2020 was 100.0% compared to 108.3% for the first half of 2019.
The Company incurred an investment loss of $29.7 million for the first half of 2020. The Company’s Investment Portfolio incurred a loss of 7.8%, representing a loss of $40.5 million from the Company’s investment in the Solasglas fund.
Other items
On July 22, 2020 AM Best affirmed the Financial Strength Rating of A- (Excellent) of Greenlight Reinsurance, Ltd. and Greenlight Reinsurance Ireland, Designated Activity Company.
The Company repurchased 1.16 million shares during the second quarter of 2020 at an average price of $6.69 per share.
Conference Call
Greenlight Re will hold a live conference call to discuss its financial results for the second quarter ended June 30, 2020 on Thursday, August 6, 2020 at 9:00 a.m. Eastern time. The conference call title is Greenlight Capital Re, Ltd. Second Quarter 2020 Earnings Call.
To participate in the Greenlight Capital Re, Ltd. Second 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: http://dpregister.com/10144936
The conference call can also be accessed via webcast at:
https://services.choruscall.com/links/glre200806.html
A telephone replay of the call will be available from 11:00 a.m. Eastern time on August 6, 2020 until 9:00 a.m. Eastern time on August 13, 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 10144936. 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
June 30, 2020 and December 31, 2019
(expressed in thousands of U.S. dollars, except per share and share amounts)
| June 30, 2020 | December 31, 2019 | |||
|---|---|---|---|---|
| (unaudited) | (audited) | |||
| Assets | ||||
| Investments | ||||
| Investment in related party investment fund | $ | 177,658 | $ | 240,056 |
| Other investments | 22,045 | 16,384 | ||
| Total investments | 199,703 | 256,440 | ||
| Cash and cash equivalents | 7,318 | 25,813 | ||
| Restricted cash and cash equivalents | 731,292 | 742,093 | ||
| Reinsurance balances receivable (net of allowance for expected credit losses of $89) | 251,163 | 230,384 | ||
| Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses of $47) | 20,225 | 27,531 | ||
| Deferred acquisition costs | 49,227 | 49,665 | ||
| Unearned premiums ceded | 165 | 901 | ||
| Notes receivable (net of allowance for expected credit losses of $1,000) | 18,842 | 20,202 | ||
| Other assets | 1,521 | 2,164 | ||
| Total assets | $ | 1,279,456 | $ | 1,355,193 |
| Liabilities and equity | ||||
| Liabilities | ||||
| Loss and loss adjustment expense reserves | $ | 467,655 | $ | 470,588 |
| Unearned premium reserves | 185,378 | 179,460 | ||
| Reinsurance balances payable | 94,217 | 122,665 | ||
| Funds withheld | 4,644 | 4,958 | ||
| Other liabilities | 3,021 | 6,825 | ||
| Convertible senior notes payable | 94,637 | 93,514 | ||
| Total liabilities | 849,552 | 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, 30,017,870 (2019: 30,739,395): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715 (2019: 6,254,715)) | 3,627 | 3,699 | ||
| Additional paid-in capital | 497,559 | 503,547 | ||
| Retained earnings (deficit) | (71,282) | (30,063) | ||
| Total shareholders' equity | 429,904 | 477,183 | ||
| Total liabilities and equity | $ | 1,279,456 | $ | 1,355,193 |
GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended June 30, 2020 and 2019
(expressed in thousands of U.S. dollars, except per share and share amounts)
| Three months ended June 30 | Six months ended June 30 | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Revenues | ||||||||
| Gross premiums written | $ | 116,689 | $ | 152,340 | $ | 226,476 | $ | 314,900 |
| Gross premiums ceded | (132) | (23,141) | (810) | (44,542) | ||||
| Net premiums written | 116,557 | 129,199 | 225,666 | 270,358 | ||||
| Change in net unearned premium reserves | (8,143) | (8,758) | (6,231) | (24,555) | ||||
| Net premiums earned | 108,414 | 120,441 | 219,435 | 245,803 | ||||
| Income (loss) from investment in related party investment fund [net of related party expenses of $616 and $1,278, (three and six months ended June 30, 2019: $3,131 and $8,563, respectively)] | 1,609 | 14,405 | (40,517) | 45,161 | ||||
| Net investment income | 3,934 | 4,386 | 10,771 | 5,953 | ||||
| Other income (expense), net | 788 | 1,117 | 1,001 | 2,186 | ||||
| Total revenues | 114,745 | 140,349 | 190,690 | 299,103 | ||||
| Expenses | ||||||||
| Net loss and loss adjustment expenses incurred | 89,194 | 78,476 | 164,891 | 201,341 | ||||
| Acquisition costs | 17,903 | 37,172 | 49,642 | 58,698 | ||||
| General and administrative expenses | 6,149 | 7,919 | 12,943 | 14,759 | ||||
| Interest expense | 1,562 | 1,562 | 3,123 | 3,106 | ||||
| Total expenses | 114,808 | 125,129 | 230,599 | 277,904 | ||||
| Income (loss) before income tax | (63) | 15,220 | (39,909) | 21,199 | ||||
| Income tax (expense) benefit | 0 | 94 | (424) | 21 | ||||
| Net income (loss) | $ | (63) | $ | 15,314 | $ | (40,333) | $ | 21,220 |
| Earnings (loss) per share | ||||||||
| Basic | $ | 0.00 | $ | 0.42 | $ | (1.12) | $ | 0.59 |
| Diluted | $ | 0.00 | $ | 0.42 | $ | (1.12) | $ | 0.58 |
| Weighted average number of ordinary shares used in the determination of earnings and loss per share | ||||||||
| Basic | 35,776,736 | 36,100,665 | 35,958,965 | 36,037,177 | ||||
| Diluted | 35,776,736 | 36,829,963 | 35,958,965 | 36,592,318 |
The following table provides the ratios categorized as Property, Casualty and Other:
| Six months ended June 30 | Six months ended June 30 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||||||||||
| Property | Casualty | Other | Total | Property | Casualty | Other | Total | |||||||||
| Loss ratio | 68.1 | % | 71.6 | % | 87.4 | % | 75.1 | % | 67.1 | % | 89.1 | % | 67.1 | % | 81.9 | % |
| Acquisition cost ratio | 20.2 | 28.0 | 10.9 | 22.6 | 18.2 | 22.1 | 36.0 | 23.9 | ||||||||
| Composite ratio | 88.3 | % | 99.6 | % | 98.3 | % | 97.7 | % | 85.3 | % | 111.2 | % | 103.1 | % | 105.8 | % |
| Underwriting expense ratio | 2.3 | 2.5 | ||||||||||||||
| Combined ratio | 100.0 | % | 108.3 | % |
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 be useful to our investors, shareholders and other interested parties to form 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 is considered a non-GAAP financial measure and 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, the 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.
| June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 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 book value per share) | $ | 436,899 | $ | 477,183 | $ | 506,543 | $ | 500,738 | ||||||
| Add: Proceeds from in-the-money stock options issued and outstanding | — | — | — | — | — | |||||||||
| Numerator for fully diluted book value per share | $ | 436,899 | $ | 477,183 | $ | 506,543 | $ | 500,738 | ||||||
| Denominator for basic and fully diluted book value per share: (1) | ||||||||||||||
| Ordinary shares issued and outstanding (denominator for basic book value per share) | 36,272,585 | 37,434,244 | 36,994,110 | 36,994,110 | 36,793,162 | |||||||||
| Add: In-the-money stock options and RSUs issued and outstanding | 116,722 | 116,722 | 63,582 | 63,582 | 87,747 | |||||||||
| Denominator for fully diluted book value per share | 36,389,307 | 37,550,966 | 37,057,692 | 37,057,692 | 36,880,909 | |||||||||
| Basic book value per share | $ | 11.67 | $ | 12.90 | $ | 13.69 | $ | 13.61 | ||||||
| Increase (decrease) in basic book value per share ($) | $ | (1.23) | $ | (0.79) | $ | 0.08 | $ | 0.42 | ||||||
| Increase (decrease) in basic book value per share (%) | 1.5 | % | (9.5) | % | (5.8) | % | 0.6 | % | 3.2 | % | ||||
| Fully diluted book value per share | $ | 11.63 | $ | 12.88 | $ | 13.67 | $ | 13.58 | ||||||
| Increase (decrease) in fully diluted book value per share ($) | $ | (1.25) | $ | (0.79) | $ | 0.09 | $ | 0.42 | ||||||
| Increase (decrease) in fully diluted book value per share (%) | 1.5 | % | (9.7) | % | (5.9) | % | 0.7 | % | 3.2 | % |
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 June 30, 2020, the number of unvested restricted shares with performance conditions was 501,989 (as of March 31, 2020: 501,989, December, 31, 2019: 356,900, September 30, 2019: 356,900, June 30, 2019: 120,605).
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 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 related 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 June 30 | Six months ended June 30 | ||||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||
| ( in thousands) | |||||||
| Income (loss) before income tax | $ | 15,220 | $ | (39,909) | $ | 21,199 | |
| Add (subtract): | |||||||
| Investment related (income) loss | (5,543) | (18,791) | 29,746 | (51,114) | |||
| Other non-underwriting (income) expense | (143) | (126) | 251 | (195) | |||
| Corporate expenses | 2,881 | 3,657 | 6,739 | 6,691 | |||
| Interest expense | 1,562 | 1,562 | 3,123 | 3,106 | |||
| Net underwriting income (loss) | $ | 1,522 | $ | (50) | $ | (20,313) |
All values are in US Dollars.