Greenlight Re Announces Third Quarter 2022 Financial Results

Rhea-AI Summary

Greenlight Capital Re (NASDAQ: GLRE) reported a net loss of $18.5 million or $0.56 per diluted share for Q3 2022, significantly higher than the $13.9 million loss in Q3 2021. The combined ratio rose to 115.4% from 109.3% the previous year. Despite a 20.5% increase in gross premiums written to $155.1 million, net premiums earned fell 10% to $121.9 million. Total investment income was $11.6 million, a substantial increase from $4.1 million in Q3 2021. Fully diluted book value per share decreased 3.9% to $13.55. The company cites natural catastrophes and inflation as factors impacting performance.

Positive

• Gross premiums written increased by 20.5% to $155.1 million in Q3 2022.
• Total investment income rose to $11.6 million, up from $4.1 million in Q3 2021.
• 3.6% return from the Solasglas fund despite negative equity market conditions.

Negative

• Net loss for Q3 2022 was $18.5 million, compared to $13.9 million in Q3 2021.
• Combined ratio worsened to 115.4% from 109.3% year-over-year.
• Net premiums earned decreased by 10% to $121.9 million in Q3 2022.

Net loss for the quarter of $18.5 million
Fully diluted book value per share decreased 3.9% in the quarter to $13.55

GRAND CAYMAN, Cayman Islands, Nov. 02, 2022 (GLOBE NEWSWIRE) -- Greenlight Capital Re, Ltd. (NASDAQ: GLRE) (“Greenlight Re” or the “Company”) today reported its financial results for the three months ended September 30, 2022. The results included:

• A net loss of $18.5 million, or $0.56 per diluted ordinary share, compared to a net loss of $13.9 million, or $0.42 per diluted ordinary share, in the third quarter of 2021;
• A combined ratio of 115.4%, compared to a combined ratio of 109.3% in the third quarter of 2021;
• Total investment income of $11.6 million, compared to total investment income of $4.1 million in the third quarter of 2021; and
• A decrease in fully diluted book value per share of $0.55, or 3.9%, to $13.55.

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

	Three months ended September 30
	2022			2021
	($ in thousands)
Gross premiums written	155,146			128,735
Net premiums earned	121,948			135,524
Underwriting income (loss)	(18,865	)		(12,578	)
Combined ratio	115.4	%		109.3	%

Simon Burton, Chief Executive Officer of Greenlight Re, stated, “The combined impact of natural catastrophes, continued inflation, and rising interest rates has taken a considerable toll on reinsurers’ balance sheets. Our relatively modest book value per share decline of 3.9% in the quarter is a testament to the strength of our investment platform and risk management approach. Looking ahead, we are well-positioned to benefit from a market that continues to move in our favor.”

David Einhorn, Chairman of the Board of Directors, said, “We are pleased with the 3.6% return from the Solasglas fund despite most equity markets posting negative returns during the quarter. The Hurricane Ian loss, while manageable, overshadows the significant progress we have made in our underwriting operations.”

Underwriting and Investment Results

Third quarter of 2022

Gross premiums written in the third quarter of 2022 were $155.1 million, compared to $128.7 million in the third quarter of 2021. This $26.4 million, or 20.5%, increase relates primarily to growth in personal property, general liability, and financial and other specialty business, including premiums underwritten by the Company’s Innovations partners. The Company’s decision to reduce its exposure to personal motor and workers’ compensation risks partially offset this increase.

Net premiums earned were $121.9 million during the third quarter of 2022, a decrease from $135.5 million in the comparable 2021 period.

The Company incurred a net underwriting loss of $18.9 million in the third quarter of 2022. This underwriting loss included $19.5 million of losses estimated from Hurricane Ian and $3.2 million from Typhoons Nanmadol and Hinnamnor. By comparison, the equivalent period in 2021 reported an underwriting loss of $12.6 million, which included $25.9 million of catastrophe losses from Hurricane Ida, the European floods and hailstorms, and South African riots. The underwriting loss for the three months ended September 30, 2022, also included $6.1 million of expense relating to deposit-accounted contracts.

The Company’s total investment income during the third quarter of 2022 was $11.6 million. The Company’s Investment Portfolio, managed by DME Advisors, returned 3.6%, representing income of $8.5 million from the Solasglas fund. The Company reported $3.0 million of other investment income, primarily from interest earned on its restricted cash and cash equivalents.

The Company incurred other non-underwriting expenses of $6.8 million during the third quarter of 2022. These expenses related to foreign exchange losses driven by the weakening of the pound sterling.

Nine months ended September 30, 2022

Gross written premiums were $435.8 million for the nine months ended September 30, 2022, a decrease of $4.4 million, or 1.0%, compared to the comparable 2021 period. The reduction in personal motor premiums drove the year-to-date decrease.

Net premiums earned were $358.1 million for the nine months ended September 30, 2022, a decrease of $45.3 million, or 11.2%, compared to the equivalent 2021 period.

The Company incurred a net underwriting loss for the nine months ended September 30, 2022, of $17.2 million, which equates to a combined ratio of 104.8%. The underwriting loss for the equivalent 2021 period was $10.0 million, representing a combined ratio of 102.4%. The underwriting loss for the nine months ended September 30, 2022, was driven primarily by $25.5 million of natural catastrophe losses and $13.6 million of losses related to the Russian-Ukrainian conflict. By comparison, the underwriting loss for the equivalent 2021 period was driven by losses from Hurricane Ida, the winter storm Uri, the European floods and hailstorms, and South African riots.

Total investment income for the nine months ended September 30, 2022, was $36.5 million, compared to income of $24.8 million earned during the equivalent 2021 period. The investment income for the nine months ended September 30, 2022, included $9.2 million of gains recognized in connection with the Company’s Innovations-related investments. The Company’s investment in the Solasglas fund generated income of $24.5 million for the nine months ended September 30, 2022, compared to a loss of $4.2 during the equivalent 2021 period.

2022 Investor Day

Greenlight Re will host a live investor day in New York City on Thursday, November 17, 2022, beginning at 12:00 pm Eastern Time. Members of the Company’s leadership team, including Chief Executive Officer Simon Burton and the Chairman of the Company’s Board of Directors, David Einhorn, will deliver a series of presentations followed by an open question-and-answer session.

Space for the event is limited, and advance registration is required. Interested parties should contact Greenlight Re’s Investor Relations representative, Karin Daly, at IR@greenlightre.ky.

Greenlight Capital Re, Ltd. Third Quarter 2022 Earnings Call

Greenlight Re will host a live conference call to discuss its financial results on Thursday, November 3, 2022, at 9:00 a.m. Eastern Time. Dial-in details:

	U.S. toll free	1-877-407-9753
	International	1-201-493-6739
The conference call can also be accessed via webcast at:
	https://event.webcasts.com/starthere.jsp?ei=1571152&tp_key=07c4efe7ac

A telephone replay of the call will be available from 11:00 a.m. Eastern time on November 3, 2022, until 9:00 a.m. Eastern time on November 9, 2022. The replay of the call may be accessed by dialing 1-877-660-6853 (U.S. toll-free) or 1-201-612-7415 (international), access code 13732921. An audio file of the call will also be available on the Company’s website, www.greenlightre.com. 

Non-GAAP Financial Measures
In presenting the Company’s results, management has included financial measures that are not calculated under standards or rules that comprise accounting principles generally accepted in the United States (GAAP). Such measures, including basic book value per share, fully diluted book value per share, and net underwriting income (loss), are referred to as non-GAAP measures. These non-GAAP measures may be defined or calculated differently by other companies. Management believes these measures allow for a more thorough understanding of the underlying business. These measures are used to monitor our results and should not be viewed as a substitute for those determined in accordance with GAAP. Reconciliations of such measures to the most comparable GAAP figures are included in the attached financial information in accordance with Regulation G.

Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the U.S. federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the U.S. Federal securities laws. These statements involve risks and uncertainties that could cause actual results to differ materially from those contained in forward-looking statements made on the Company’s behalf. These risks and uncertainties include the impact of general economic conditions and conditions affecting the insurance and reinsurance industry, the adequacy of our reserves, our ability to assess underwriting risk, trends in rates for property and casualty insurance and reinsurance, competition, investment market fluctuations, trends in insured and paid losses, catastrophes, regulatory and legal uncertainties and other factors described in our Forms 10-K and 10-Q filed with the Securities Exchange Commission on March 8, 2022, and May 3, 2022, respectively. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as provided by law.

About Greenlight Capital Re, Ltd.
Greenlight Re (www.greenlightre.com) provides multiline property and casualty insurance and reinsurance through its licensed and regulated reinsurance entities in the Cayman Islands and Ireland, and its Lloyd’s platform, Greenlight Innovation Syndicate 3456. The Company complements its underwriting activities with a non-traditional investment approach designed to achieve higher rates of return over the long term than reinsurance companies that exclusively employ more traditional investment strategies. In 2018, the Company launched its Greenlight Re Innovations unit, which supports technology innovators in the (re)insurance space by providing investment capital, risk capacity, and access to a broad insurance network.

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

GREENLIGHT CAPITAL RE, LTD. CONDENSED CONSOLIDATEDBALANCE SHEETS UNAUDITED
(expressed in thousands of U.S. dollars, except per share and share amounts)
	September 30, 2022				December 31, 2021
Assets
Investments
Investment in related party investment fund	$	195,199			$	183,591
Other investments		65,081				47,384
Total investments		260,280				230,975
Cash and cash equivalents		32,278				76,307
Restricted cash and cash equivalents		648,897				634,794
Reinsurance balances receivable (net of allowance for expected credit losses)		473,564				405,365
Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses)		10,604				11,100
Deferred acquisition costs		78,836				63,026
Unearned premiums ceded		13,659				42
Other assets		6,425				5,885
Total assets	$	1,524,543			$	1,427,494
Liabilities and equity
Liabilities
Loss and loss adjustment expense reserves	$	540,827			$	524,010
Unearned premium reserves		298,173				227,584
Reinsurance balances payable		108,772				91,224
Funds withheld		11,446				3,792
Other liabilities		4,927				7,164
Convertible senior notes payable		93,446				98,057
Total liabilities		1,057,591				951,831
Shareholders' equity
Ordinary share capital (Class A: par value $0.10; authorized, 100,000,000; issued and outstanding, 28,569,346 (2021: 27,589,731): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715 (2021: 6,254,715))	$	3,482			$	3,384
Additional paid-in capital		477,021				481,784
Retained earnings (deficit)		(13,551	)			(9,505	)
Total shareholders' equity		466,952				475,663
Total liabilities and equity	$	1,524,543			$	1,427,494

GREENLIGHT CAPITAL RE, LTD. CONDENSED CONSOLIDATEDRESULTS OF OPERATIONS UNAUDITED
(expressed in thousands of U.S. dollars, except percentages and per share amounts)
	Three months ended September 30								Nine months ended September 30
		2022				2021				2022				2021
Underwriting revenue
Gross premiums written	$	155,146			$	128,735			$	435,812			$	440,249
Gross premiums ceded		(8,801	)			(60	)			(21,973	)			(6	)
Net premiums written		146,345				128,675				413,839				440,243
Change in net unearned premium reserves		(24,397	)			6,849				(55,747	)			(36,844	)
Net premiums earned	$	121,948			$	135,524			$	358,092			$	403,399
Underwriting related expenses
Net loss and loss adjustment expenses incurred
Current year	$	92,443			$	111,052			$	251,231			$	296,333
Prior year		2,116				(652	)			1,558				(1,255	)
Net loss and loss adjustment expenses incurred		94,559				110,400				252,789				295,078
Acquisition costs		36,821				35,048				106,101				106,060
Underwriting expenses		3,285				2,616				10,034				9,310
Deposit accounting and other reinsurance expense (income)		6,148				38				6,373				2,957
Net underwriting income (loss)	$	(18,865	)		$	(12,578	)		$	(17,205	)		$	(10,006	)
Income (loss) from investment in related party investment fund	$	8,521			$	(6,214	)		$	24,474			$	(4,196	)
Net investment income (loss)		3,038				10,303				11,978				28,999
Total investment income (loss)	$	11,559			$	4,089			$	36,452			$	24,803
Net underwriting and investment income (loss)	$	(7,306	)		$	(8,489	)		$	19,247			$	14,797
Corporate expenses	$	4,104			$	3,444			$	12,693			$	12,030
Other (income) expense, net		6,784				342				13,374				1,076
Interest expense		1,091				1,578				3,411				4,684
Income tax expense (benefit)		(816	)			—				(823	)			3,733
Net income (loss)	$	(18,469	)		$	(13,853	)		$	(9,408	)		$	(6,726	)
Earnings (loss) per share (Class A and Class B)
Basic	$	(0.56	)		$	(0.42	)		$	(0.28	)		$	(0.20	)
Diluted	$	(0.56	)		$	(0.42	)		$	(0.28	)		$	(0.20	)
Underwriting ratios
Loss ratio - current year		75.8	%			81.9	%			70.2	%			73.5	%
Loss ratio - prior year		1.7	%			(0.4	)%			0.4	%			(0.4	)%
Loss ratio		77.5	%			81.5	%			70.6	%			73.1	%
Acquisition cost ratio		30.2	%			25.9	%			29.6	%			26.3	%
Composite ratio		107.7	%			107.4	%			100.2	%			99.4	%
Underwriting expense ratio		7.7	%			1.9	%			4.6	%			3.0	%
Combined ratio		115.4	%			109.3	%			104.8	%			102.4	%

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

	Three months ended September 30												Three months ended September 30
	2022												2021
	Property			Casualty			Other			Total			Property			Casualty			Other			Total
Loss ratio	120.1	%		79.6	%		59.4	%		77.5	%		101.9	%		79.8	%		76.8	%		81.5	%
Acquisition cost ratio	19.0			31.6			30.6			30.2			21.6			26.1			27.2			25.9
Composite ratio	139.1	%		111.2	%		90.0	%		107.7	%		123.5	%		105.9	%		104.0	%		107.4	%
Underwriting expense ratio										7.7												1.9
Combined ratio										115.4	%											109.3	%

	Nine months ended September 30												Nine months ended September 30
	2022												2021
	Property			Casualty			Other			Total			Property			Casualty			Other			Total
Loss ratio	76.2	%		71.0	%		67.5	%		70.6	%		77.1	%		76.6	%		62.4	%		73.1	%
Acquisition cost ratio	22.6			28.6			34.8			29.6			21.2			25.9			29.6			26.3
Composite ratio	98.8	%		99.6	%		102.3	%		100.2	%		98.3	%		102.5	%		92.0	%		99.4	%
Underwriting expense ratio										4.6												3.0
Combined ratio										104.8	%											102.4	%

GREENLIGHT CAPITAL RE, LTD.
KEY FINANCIAL MEASURES AND NON-GAAP MEASURES

Management uses certain key financial measures, some of which are not prescribed under U.S. GAAP rules and standards (“non-GAAP financial measures”), to evaluate our financial performance, financial position, and the change in shareholder value. Generally, a non-GAAP financial measure, as defined in SEC Regulation G, is a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented under U.S. GAAP. We believe that these measures, which may be calculated or defined differently by other companies, provide consistent and comparable metrics of our business performance to help shareholders understand performance trends and facilitate a more thorough understanding of the Company’s business. Non-GAAP financial measures should not be viewed as substitutes for those determined under U.S. GAAP.

The key non-GAAP financial measures used in this report are:

• Basic book value per share and fully diluted book value per share; and
• Net underwriting income (loss)

These non-GAAP measures are described below.

Basic Book Value Per Share and Fully Diluted Book Value Per Share

We believe that long-term growth in fully diluted book value per share is the most relevant measure of our financial performance because it provides management and investors a yardstick to monitor the shareholder value generated. Fully diluted book value per share may also help our investors, shareholders, and other interested parties form a basis of comparison with other companies within the property and casualty reinsurance industry. Basic book value per share and fully diluted book value per share should not be viewed as substitutes for the comparable U.S. GAAP measures.

We calculate basic book value per share as (a) ending shareholders' equity, divided by (b) aggregate of Class A and Class B Ordinary shares issued and outstanding, including all unvested service-based restricted shares, and the earned portion of performance-based restricted shares granted after December 31, 2021. We exclude shares potentially issuable in connection with convertible notes if the conversion price exceeds the share price.

Fully diluted book value per share represents basic book value per share combined with any dilutive impact of in-the-money stock options, unvested service-based RSUs, and the earned portion of unvested performance-based RSUs granted. Fully diluted book value per share also includes the dilutive effect, if any, of ordinary shares expected to be issued upon settlement of the convertible notes.

Our primary financial goal is to increase fully diluted book value per share over the long term. We use fully diluted book value per share as a financial measure in our annual incentive compensation.

The following table presents a reconciliation of the non-GAAP financial measures basic and fully diluted book value per share to the most comparable U.S. GAAP measure:

		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
		($ in thousands, except per share and share amounts)
Numerator for basic and fully diluted book value per share:
Total equity (U.S. GAAP) (numerator for basic and fully diluted book value per share)		$	466,952			$	484,293			$	468,407			$	475,663			$	450,514
Denominator for basic and fully diluted book value per share:(1)
Ordinary shares issued and outstanding as presented in the Company’s condensed consolidated balance sheets			34,824,061				34,721,231				34,721,231				33,844,446				33,844,446
Less: Unearned performance-based restricted shares granted after December 31, 2021			(539,161	)			(560,927	)			(581,593	)			—				—
Denominator for basic book value per share			34,284,900				34,160,304				34,139,638				33,844,446				33,844,446
Add: In-the-money stock options, service-based RSUs granted, and earned performance-based RSUs granted			183,790				179,988				176,379				154,134				154,134
Denominator for fully diluted book value per share			34,468,690				34,340,292				34,316,017				33,998,580				33,998,580
Basic book value per share		$	13.62			$	14.18			$	13.72			$	14.05			$	13.31
Increase (decrease) in basic book value per share ($)		$	(0.56	)		$	0.46			$	(0.33	)		$	0.58			$	(0.35	)
Increase (decrease) in basic book value per share (%)			(3.9	)%			3.4	%			(2.3	)%			4.3	%			(2.6	)%
Fully diluted book value per share		$	13.55			$	14.10			$	13.65			$	13.99			$	13.25
Increase (decrease) in fully diluted book value per share ($)		$	(0.55	)		$	0.45			$	(0.34	)		$	0.57			$	(0.35	)
Increase (decrease) in fully diluted book value per share (%)			(3.9	)%			3.3	%			(2.4	)%			4.2	%			(2.6	)%

⁽¹⁾ For periods prior to January 1, 2022, all unvested restricted shares are included in the “basic” and “fully diluted” denominators. Restricted shares with performance-based vesting conditions granted after December 31, 2021, are included in the “basic” and “fully diluted” denominators to the extent that the Company has recognized the corresponding share-based compensation expense. At September 30, 2022, the aggregate number of unearned restricted shares with performance conditions not included in the “basic” and “fully diluted” denominators was 732,310 (June 30, 2022: 754,076, March 31, 2022: 774,742, December 31, 2021: 193,149, September 30, 2021: 193,149).

Net Underwriting Income (Loss)

One way that we evaluate the Company’s underwriting performance is by measuring net underwriting income (loss). We do not use premiums written as a measure of performance. Net underwriting income (loss) is a performance measure used by management to evaluate the fundamentals underlying the Company’s underwriting operations. We believe that the use of net underwriting income (loss) enables investors and other users of the Company’s financial information to analyze our performance in a manner similar to how management analyzes performance. Management also believes that this measure follows industry practice and allows the users of financial information to compare the Company’s performance with that of our industry peer group.

Net underwriting income (loss) is considered a non-GAAP financial measure because it excludes items used to calculate net income before taxes under U.S. GAAP. We calculate net underwriting income (loss) as net premiums earned, plus other income relating to reinsurance and deposit-accounted contracts, less deposit interest expense, less net loss and loss adjustment expenses, acquisition costs, and underwriting expenses. The measure excludes, on a recurring basis: (1) investment income (loss); (2) other income (expense) not related to underwriting, including foreign exchange gains or losses, Lloyd’s interest income or expense and adjustments to the allowance for expected credit losses; (3) corporate general and administrative expenses; and (4) interest expense. We exclude total investment income or loss, foreign exchange gains or losses, Lloyd’s interest income or expense and expected credit losses as we believe these items are influenced by market conditions and other factors not related to underwriting decisions. We exclude corporate and interest expenses because these costs are generally fixed and not incremental to or directly related to our underwriting operations. We believe all of these amounts are largely independent of our underwriting process, and including them could hinder the analysis of trends in our underwriting operations. Net underwriting income (loss) should not be viewed as a substitute for U.S. GAAP net income before income taxes.

The reconciliations of net underwriting income (loss) to income (loss) before income taxes (the most directly comparable U.S. GAAP financial measure) on a consolidated basis are shown below:

	Three months ended September 30								Nine months ended September 30
		2022				2021				2022				2021
	($ in thousands)
Income (loss) before income tax	$	(19,285	)		$	(13,853	)		$	(10,231	)		$	(2,993	)
Add (subtract):
Total investment (income) loss		(11,559	)			(4,089	)			(36,452	)			(24,803	)
Other non-underwriting (income) expense		6,784				342				13,374				1,076
Corporate expenses		4,104				3,444				12,693				12,030
Interest expense		1,091				1,578				3,411				4,684
Net underwriting income (loss)	$	(18,865	)		$	(12,578	)		$	(17,205	)		$	(10,006	)

FAQ

What were Greenlight Re's earnings results for Q3 2022?

Greenlight Re reported a net loss of $18.5 million for Q3 2022, or $0.56 per diluted share.

How did the combined ratio change for Greenlight Re in Q3 2022?

The combined ratio increased to 115.4% in Q3 2022, compared to 109.3% in Q3 2021.

What is the outlook for Greenlight Re following the Q3 2022 results?

The company indicates it is well-positioned to benefit from favorable market conditions despite recent losses.