Greenlight Capital Re, Ltd 10-Q for FY2023 Q2

Greenlight Capital Re, Ltd. (GLRE)

10-Q 2023-08-02 For: 2023-06-30

Added on April 06, 2026

About this 10-Q

Greenlight Capital Re, Ltd filed this 10-Q on August 2, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $189.69M; up 56.2% from $121.42M a year earlier
Net income: $49.86M; up 237.2% from net income of $14.79M a year earlier
Diluted EPS: $1.32; up 256.8% from $0.37 a year earlier

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Cayman Islands			N/A
(State or other jurisdiction of incorporation or organization)			(I.R.S. 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)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares	GLRE	Nasdaq Global Select Market


Ordinary Shares, $0.10 par value			35,272,013
(Class)			Outstanding at July 28, 2023


		Page
PART I — FINANCIAL INFORMATION
	Note on Forward-Looking Statements	3
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (unaudited)	4
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)	7
	Notes to the Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	45
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47
SIGNATURES		48


			●			Our results of operations fluctuate from period to period and may not be indicative of our long-term prospects.
			●			The impact of general economic, capital and credit market conditions, including banking sector instability, financial market illiquidity and fluctuations in interest rates, equity securities’ prices and/or foreign currency exchange rates.
			●			A downgrade or withdrawal of our A.M. Best ratings would materially and adversely affect our ability to implement our business strategy.
			●			Any suspension or revocation of any of our licenses would materially and adversely affect our business, financial condition and results of operations.
			●			Our investment performance depends in part on the performance of Solasglas Investments, LP (“SILP”) and may suffer as a result of adverse financial market developments or other factors that impact SILP’s liquidity, which could materially and adversely affect our investment results, financial condition and results of operations.
			●			The carry values of our investments made under our Greenlight Re Innovations pillar, which focuses on developing a range of risk products via strategic partnerships and other methods to access fee income, a stream of underwriting business, and investment upside potential (“Innovations”), may differ significantly from those that would be used if we carried these investments at fair value.
			●			Our level of debt may have an adverse impact on our liquidity, restrict our current and future operations, particularly our ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.
			●			Greenlight Capital Re, Greenlight Reinsurance Ltd. (“Greenlight Re”), and/or Greenlight Reinsurance Ireland, Designated Activity Company (“GRIL”) may be subject to United States federal income taxation.
			●			The other matters set forth in the section entitled “Part I, Item 1A. Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on March 8, 2023.


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			For the transition period from to


	June 30, 2023		December 31, 2022
Assets
Investments
Investment in related party investment fund	$	216,845	$	178,197
Other investments	68,670		70,279
Total investments	285,515		248,476
Cash and cash equivalents	55,597		38,238
Restricted cash and cash equivalents	627,734		668,310
Reinsurance balances receivable (net of allowance for expected credit losses of 2023: $856 and 2022: $356)	616,727		505,555
Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses of 2023: $62 and 2022: $62)	21,555		13,239
Deferred acquisition costs	83,017		82,391
Unearned premiums ceded	19,227		18,153
Other assets	6,293		6,019
Total assets	$	1,715,665	$	1,580,381
Liabilities and equity
Liabilities
Loss and loss adjustment expense reserves	$	621,101	$	555,468
Unearned premium reserves	338,054		307,820
Reinsurance balances payable	109,534		105,135
Funds withheld	15,605		21,907
Other liabilities	7,125		6,397
Convertible senior notes payable	63,125		80,534
Total liabilities	1,154,544		1,077,261
Commitments and Contingencies (Note 11)
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, 29,017,298 (2022: 28,569,346): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715 (2022: 6,254,715))	3,527		3,482
Additional paid-in capital	480,648		478,439
Retained earnings	76,946		21,199
Total shareholders' equity	561,121		503,120
Total liabilities and equity	$	1,715,665	$	1,580,381


	Three months ended June 30				Six months ended June 30
	2023		2022		2023		2022
Revenues
Gross premiums written	$	154,943	$	134,780	$	341,398	$	280,666
Gross premiums ceded	(9,739)		(7,163)		(20,951)		(13,172)
Net premiums written	145,204		127,617		320,447		267,494
Change in net unearned premium reserves	(5,261)		(17,398)		(37,855)		(31,350)
Net premiums earned	139,943		110,219		282,592		236,144
Income (loss) from investment in related party investment fund (net of related party expenses - Note 3)	32,782		11,876		29,644		15,953
Net investment income (loss)	9,369		5,280		17,747		8,940
Other income (expense), net	7,595		(5,957)		14,692		(6,590)
Total revenues	189,689		121,418		344,675		254,447
Expenses
Net loss and loss adjustment expenses incurred	90,504		60,823		187,229		158,230
Acquisition costs	38,293		36,335		79,769		69,280
General and administrative expenses	10,025		8,106		19,961		15,338
Deposit interest expense	235		191		367		225
Interest expense	744		1,166		1,520		2,320
Total expenses	139,801		106,621		288,846		245,393
Income (loss) before income tax	49,888		14,797		55,829		9,054
Income tax (expense) benefit	(28)		(9)		(82)		7
Net income (loss)	$	49,860	$	14,788	$	55,747	$	9,061
Earnings (loss) per share (Class A and Class B) (Note 2)
Basic	$	1.46	$	0.44	$	1.64	$	0.27
Diluted	$	1.32	$	0.37	$	1.49	$	0.23
Weighted average number of ordinary shares used in the determination of earnings and loss per share (Note 2)
Basic	34,070,818		33,871,359		34,065,066		33,861,151
Diluted	38,267,137		40,111,152		38,322,921		39,993,066


	June 30, 2023		December 31, 2022
	($ in thousands)
Cash and cash equivalents	$	55,597	$	38,238
Restricted cash and cash equivalents	627,734		668,310
Total cash, cash equivalents and restricted cash presented in the condensed consolidated statements of unaudited cash flows	$	683,331	$	706,548


	Cost		Unrealized gains		Unrealized losses		Accrued interest		Fair value / carrying value
	($ in thousands)
Private investments and unlisted equities	$	25,202	$	42,967	$	(2,265)	$	—	$	65,904

Debt and convertible debt securities	2,676		—		—		90		2,766

Total other investments	$	27,878	$	42,967	$	(2,265)	$	90	$	68,670


•			Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
•			Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.
•			Level 3: Unobservable inputs supported by little or no market activity and significant to the fair value of the assets and liabilities. The term “unobservable inputs” includes certain pricing models, discounted cash flow methodologies, and similar techniques.


	Less than 6 months		6 to 12 months		Over 1 year		Total
	($ in thousands)
Fair values measured on a nonrecurring basis	$	10,315	$	25,053	$	18,694	$	54,062


Consolidated	2023		2022
	($ in thousands)
Gross balance at January 1	$	555,468	$	524,010
Less: Losses recoverable	(13,239)		(11,100)
Net balance at January 1	542,229		512,910
Incurred losses related to:
Current year	173,428		158,788
Prior years	13,801		(558)
Total incurred	187,229		158,230
Paid losses related to:
Current year	(22,428)		(27,896)
Prior years	(114,056)		(116,200)
Total paid	(136,484)		(144,096)
Foreign currency revaluation	6,572		(10,025)
Net balance at June 30	599,546		517,019
Add: Losses recoverable	21,555		9,426
Gross balance at June 30	$	621,101	$	526,445


	Performance Restricted Shares			Service Restricted Shares
	Number of non-vested restricted shares	Weighted average grant date fair value		Number of non-vested restricted shares	Weighted average grant date fair value
Balance at December 31, 2021	193,149	$	10.10	753,407	$	8.68
Granted	601,213	6.82		248,659	6.82
Vested	—	—		(169,213)	10.31
Forfeited	—	—		(8,476)	7.67
Balance at June 30, 2022	794,362	$	7.62	824,377	$	7.80

Balance at December 31, 2022	794,362	$	7.62	832,896	$	7.76
Granted	357,766	9.85		177,563	9.84
Vested	—	—		(256,243)	6.75
Forfeited	(109,105)	9.37		(55,967)	8.43
Balance at June 30, 2023	1,043,023	$	8.20	698,249	$	8.60


	Three months ended June 30				Six months ended June 30
	2023		2022		2023		2022
	($ in thousands)
Investment income
Dividend income (net of withholding taxes)	$	724	$	303	$	1,351	$	623
Interest income	2,076		286		3,892		335
Total Investment income	2,800		589		5,243		958

Expenses
Management fee	(1,163)		(894)		(2,231)		(1,785)
Interest	(1,579)		(479)		(3,007)		(735)
Dividends	(793)		(200)		(1,212)		(582)
Professional fees and other	(607)		(230)		(889)		(494)
Total expenses	(4,142)		(1,803)		(7,339)		(3,596)
Net investment income (loss)	(1,342)		(1,214)		(2,096)		(2,638)

Realized and change in unrealized gains (losses)
Net realized gain (loss)	(845)		26,827		(2,605)		50,975
Net change in unrealized appreciation (depreciation)	54,825		(6,699)		53,792		(23,491)
Net gain (loss) on investment transactions	53,980		20,128		51,187		27,484

Net income (loss)	$	52,638	$	18,914	$	49,091	$	24,846

GLRE Limited Partners’ share of net income (loss) (1)	$	32,782	$	11,876	$	29,644	$	15,953


	Three months ended June 30				Six months ended June 30
	2023		2022		2023		2022
	($ in thousands)
Management fees	$	1,163	$	894	$	2,231	$	1,785
Performance allocation	3,294		$	1,319	3,294		1,772
Total	$	4,457	$	2,213	$	5,525	$	3,557


	Six months ended June 30
	2023		2022
	($ in thousands)
Carrying value (1)	$	65,904	$	59,809
Upward carrying value changes (2)	$	506	$	11,184
Downward carrying value changes and impairment (3)	$	(250)	$	(1,698)


	Three months ended June 30								Six months ended June 30
	2023				2022				2023 (1)				2022
	($ in thousands)								($ in thousands)
Property
Commercial	$	14,440	9.3	%	$	5,360	4.0	%	$	29,131	8.5	%	$	9,346	3.3	%
Motor (2)	352		0.2		(884)		(0.6)		584		0.2		562		0.2
Personal	16,368		10.6		18,653		13.8		32,005		9.4		31,756		11.3
Total Property	31,160		20.1		23,129		17.2		61,720		18.1		41,664		14.8

Casualty
General Liability	27,517		17.8		16,720		12.4		48,076		14.1		26,725		9.5
Motor Liability (2)	2,707		1.7		(1,613)		(1.2)		8,306		2.4		3,496		1.3
Professional Liability	2,625		1.7		113		0.1		6,272		1.8		254		0.1
Workers' Compensation	3,899		2.5		8,368		6.2		7,058		2.1		18,288		6.5
Multi-line	51,724		33.4		52,216		38.7		105,884		31.0		105,310		37.5
Total Casualty	88,472		57.1		75,804		56.2		175,596		51.4		154,073		54.9

Other
Accident & Health	2,013		1.3		2,604		1.9		4,489		1.3		4,498		1.6
Financial	8,850		5.7		15,380		11.4		31,347		9.2		36,416		13.0
Marine	7,854		5.1		5,351		4.0		19,994		5.9		13,750		4.9
Other Specialty	16,594		10.7		12,512		9.3		48,252		14.1		30,265		10.8
Total Other	35,311		22.8		35,847		26.6		104,082		30.5		84,929		30.3
	$	154,943	100.0	%	$	134,780	100.0	%	$	341,398	100.0	%	$	280,666	100.0	%


	Performance Restricted Stock Units			Service Restricted Stock Units
	Number of non-vested RSUs	Weighted average grant date fair value		Number of non-vested RSUs	Weighted average grant date fair value
Balance at December 31, 2021	—	$	—	154,134	$	8.59
Granted	105,008	6.82		54,207	6.82
Vested	—	—		(35,389)	10.84
Forfeited	—	—		—	—
Balance at June 30, 2022	105,008	6.82		172,952	7.58

Balance at December 31, 2022	105,008	$	6.82	172,952	$	7.58
Granted	71,121	9.85		42,811	9.85
Vested	—	—		(77,695)	6.74
Forfeited	—	—		(1,788)	7.82
Balance at June 30, 2023	176,129	$	8.04	136,280	$	8.76


	June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
	($ 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)	$	561,121		$	510,041		$	503,120		$	466,952		$	484,293




Denominator for basic and fully diluted book value per share: (1)
Ordinary shares issued and outstanding as presented in the Company’s consolidated balance sheets	35,272,013			35,262,678			34,824,061			34,824,061			34,721,231
Less: Unearned performance-based restricted shares granted after December 31, 2021	(820,156)			(851,828)			(516,489)			(539,161)			(560,927)
Denominator for basic book value per share	34,451,857			34,410,850			34,307,572			34,284,900			34,160,304
Add: In-the-money stock options, service-based RSUs granted, and earned performance-based RSUs granted	164,116			157,431			187,750			183,790			179,988
Denominator for fully diluted book value per share	34,615,973			34,568,281			34,495,322			34,468,690			34,340,292
Basic book value per share	$	16.29		$	14.82		$	14.66		$	13.62		$	14.18
Increase (decrease) in basic book value per share ($)	$	1.47		$	0.16		$	1.04		$	(0.56)		$	0.46
Increase (decrease) in basic book value per share (%)	9.9		%	1.1		%	7.6		%	(3.9)		%	3.4		%

Fully diluted book value per share	$	16.21		$	14.75		$	14.59		$	13.55		$	14.10
Increase (decrease) in fully diluted book value per share ($)	$	1.46		$	0.16		$	1.04		$	(0.55)		$	0.45
Increase (decrease) in fully diluted book value per share (%)	9.9		%	1.1		%	7.7		%	(3.9)		%	3.3		%


Change in Acquisition Cost Ratios
Three months ended June 30, 2023
	Increase / (decrease) in acquisition cost ratio points	Explanation
Property	(5.9)%	The decrease was due primarily to the higher proportion of excess of loss contracts which have a lower ceding commission rate than quota share reinsurance treaties. Based on net premiums earned for Property, excess of loss contracts accounted for 16% compared to 9% for the same quarter in 2022.
Casualty	2.3	The marginal increase was due primarily to changes in our business mix, particularly with the growth in General Liability and Multi-Line (including FAL) classes, which both have a higher ceding commission rate than other classes within Casualty.
Other	(21.5)	The decrease was driven primarily by the favorable loss reserve releases on two mortgage programs in 2022 within our Financial class, which resulted in higher performance-based commission costs. There was no comparable favorable loss development for the mortgage business during the current quarter.


Change in Acquisition Cost Ratios
Six months ended June 30, 2023
	Increase / (decrease) in acquisition cost ratio points	Explanation
Property	(4.8)%	Same trends as noted for the second quarter. Based on premium earned for Property, excess of loss contracts accounted for 14% compared to 6% for the same period in 2022.
Casualty	3.4	Same trends as noted for the second quarter.
Other	(9.1)	Same trends as noted for the second quarter.


	June 30, 2023						December 31, 2022
	Case Reserves		IBNR		Total		Case Reserves		IBNR		Total
	($ in thousands)
Property	$	25,565	$	49,476	$	75,041	$	20,354	$	41,361	$	61,715
Casualty	144,303		258,541		402,844		146,702		227,979		374,681
Other	21,090		122,126		143,216		17,700		101,372		119,072
Total	$	190,958	$	430,143	$	621,101	$	184,756	$	370,712	$	555,468


	July 1, 2023
	Net 1-in-250 Year Return Period
Peril	Single Event Loss		Aggregate Loss
	($ in thousands)
North Atlantic Hurricane	$	80,342	$	87,719
Southeast Hurricane	66,060		67,584
Gulf of Mexico Hurricane	52,287		57,682
Northeast Hurricane	52,968		52,968
North America Earthquake	69,819		74,519
California Earthquake	63,401		67,233
Other N.A. Earthquake	23,810		27,565
Japan Earthquake	36,880		51,754
Japan Windstorm	32,770		35,076
Europe Windstorm	31,941		36,236


Payment due:	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	($ in thousands)

Loss and loss adjustment expense reserves (1)	$	308,066	$	184,467	$	70,184	$	58,383	$	621,101


•						equity price risk;
•						commodity price risk;
•						foreign currency risk;
•						interest rate risk;
•						credit risk; and
•						political risk.


	10% increase in commodity prices		10% decrease in commodity prices
Commodity	Change in fair value		Change in fair value
	($ in millions)
Gold	$	5.5	$	(5.5)
Silver	0.5		(0.5)
Uranium	0.4		(0.4)
Crude oil	0.3		(0.3)
Total	$	6.7	$	(6.7)


Currency	Net Exposure		10% increase in currency rate		10% decrease in currency rate
	($ in thousands)
GBP	£	8,028	$	1,020	$	(1,020)
Euro	€	(13,643)	(1,489)		1,489
Total foreign exchange loss (gain)			$	(469)	$	469


10.1			Credit Agreement, dated as of June 16, 2023, among the Company, as borrower, the subsidiaries of the Company party thereto, as subsidiary guarantors, the lenders party thereto, and CIBC Bank USA, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on June 22, 2023).
31.1			Certification of the Chief Executive Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31.2			Certification of the Chief Financial Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32.1			Certification of the Chief Executive Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (*)
32.2			Certification of the Chief Financial Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (*)
101			The following materials from the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2023 formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Changes in Shareholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements.
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


			GREENLIGHT CAPITAL RE, LTD.
			(Registrant)
			By:			/s/ SIMON BURTON
						Simon Burton Director and Chief Executive Officer (principal executive officer)
						August 2, 2023

			By:			/s/ FARAMARZ ROMER
						Faramarz Romer Chief Financial Officer (principal financial and accounting officer)
						August 2, 2023


1.			I have reviewed this quarterly report report on Form 10-Q of Greenlight Capital Re, Ltd.;


2.			Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;


3.			Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.			The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


Dated:	August 2, 2023	/s/ SIMON BURTON
		Simon Burton Chief Executive Officer (principal executive officer)