GREENLIGHT CAPITAL RE, LTD. [GLRE] Filings

10-Q 1 glre-20230930.htm 10-Q glre-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________

FORM 10-Q

__________________________

(Mark One)


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

			For the quarterly period ended September 30, 2023


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

			For the transition period from to

Commission file number 001-33493

____________________________________________________________________________________

GREENLIGHT CAPITAL RE, LTD.

(Exact name of registrant as specified in its charter)

____________________________________________________________________________________


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)

(205) 291-3440

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Ordinary Shares, $0.10 par value			35,337,407
(Class)			Outstanding at October 27, 2023

GREENLIGHT CAPITAL RE, LTD.

TABLE OF CONTENTS


		Page
PART I — FINANCIAL INFORMATION
	Note on Forward-Looking Statements	3
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 (unaudited)	4
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 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	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	44
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
SIGNATURES		46

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PART I — FINANCIAL INFORMATION

NOTE OF FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Greenlight Capital Re, Ltd. (“Greenlight Capital Re,” “Company,” “us,” “we,” or “our”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended , and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical facts included in this report, including statements regarding estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements”. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the United States (“U.S.”) federal securities laws. These forward-looking statements generally are identified by the words “believe,” “project,” “predict,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are not historical facts, and are based on current expectations, estimates and projections, and various assumptions, many of which, are inherently uncertain and beyond management’s control. Accordingly, actual results may differ materially from the forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:


			●			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 (“2022 Form 10-K”).

We undertake no obligation to publicly update or revise any forward-looking statements, whether due to new information, future events, or otherwise. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only to the dates they were made.

We intend to communicate certain events that we believe may have a material adverse impact on our operations or financial position, including property and casualty catastrophic events and material losses in our investment portfolio, in a timely manner through a public announcement. Other than as required by the Exchange Act, we do not intend to make public announcements regarding reinsurance or investment events that we do not believe, based on management’s estimates and current information, will have a material adverse impact on our operations or financial position.

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Item 1. FINANCIAL STATEMENTS

GREENLIGHT CAPITAL RE, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

September 30, 2023 and December 31, 2022

(expressed in thousands of U.S. dollars, except per share and share amounts)


	September 30, 2023		December 31, 2022
Assets
Investments
Investment in related party investment fund	$	228,991	$	178,197
Other investments	67,648		70,279
Total investments	296,639		248,476
Cash and cash equivalents	41,302		38,238
Restricted cash and cash equivalents	622,624		668,310
Reinsurance balances receivable (net of allowance for expected credit losses of 2023: $801 and 2022: $356)	640,391		505,555
Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses of 2023: $117 and 2022: $62)	28,191		13,239
Deferred acquisition costs	85,102		82,391
Unearned premiums ceded	18,700		18,153
Other assets	6,680		6,019
Total assets	$	1,739,629	$	1,580,381
Liabilities and equity
Liabilities
Loss and loss adjustment expense reserves	$	658,234	$	555,468
Unearned premium reserves	340,582		307,820
Reinsurance balances payable	69,882		105,135
Funds withheld	13,406		21,907
Other liabilities	6,781		6,397
Debt	74,879		80,534
Total liabilities	1,163,764		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 (par value $0.10; authorized, 125,000,000; issued and outstanding, 35,337,407 (2022: Class A: par value $0.10; authorized, 100,000,000; issued and outstanding, 28,569,346: Class B: 2022: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715)	3,534		3,482
Additional paid-in capital	481,908		478,439
Retained earnings	90,423		21,199
Total shareholders' equity	575,865		503,120
Total liabilities and equity	$	1,739,629	$	1,580,381

The accompanying Notes to the Condensed Consolidated Financial Statements are an

integral part of the Condensed Consolidated Financial Statements.

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GREENLIGHT CAPITAL RE, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

For the three and nine months ended September 30, 2023 and 2022

(expressed in thousands of U.S. dollars, except per share and share amounts)


	Three months ended September 30				Nine months ended September 30
	2023		2022		2023		2022
Revenues
Gross premiums written	$	183,074	$	155,146	$	524,472	$	435,812
Gross premiums ceded	(14,789)		(8,801)		(35,740)		(21,973)
Net premiums written	168,285		146,345		488,732		413,839
Change in net unearned premium reserves	(5,175)		(24,397)		(43,030)		(55,747)
Net premiums earned	163,110		121,948		445,702		358,092
Income (loss) from investment in related party investment fund (net of related party expenses - Note 3)	(1,853)		8,521		27,791		24,474
Net investment income (loss)	6,958		3,038		24,705		11,978
Other income (expense), net	(1,293)		(6,784)		13,399		(13,374)
Total revenues	166,922		126,723		511,597		381,170
Expenses
Net loss and loss adjustment expenses incurred	96,843		94,559		284,072		252,789
Acquisition costs	46,933		36,821		126,702		106,101
General and administrative expenses	7,905		7,389		27,866		22,727
Deposit interest expense	278		6,148		645		6,373
Interest expense	1,457		1,091		2,977		3,411
Total expenses	153,416		146,008		442,262		391,401
Income (loss) before income tax	13,506		(19,285)		69,335		(10,231)
Income tax (expense) benefit	(29)		816		(111)		823
Net income (loss)	$	13,477	$	(18,469)	$	69,224	$	(9,408)
Earnings (loss) per share (Note 2)
Basic	$	0.40	$	(0.56)	$	2.03	$	(0.28)
Diluted	$	0.39	$	(0.56)	$	1.99	$	(0.28)
Weighted average number of ordinary shares used in the determination of earnings and loss per share (Note 2)
Basic	34,070,818		33,127,384		34,067,012		33,119,814
Diluted	34,801,864		33,127,384		34,703,973		33,119,814

The accompanying Notes to the Condensed Consolidated Financial Statements are an

integral part of the Condensed Consolidated Financial Statements.

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GREENLIGHT CAPITAL RE, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

For the three and nine months ended September 30, 2023 and 2022

(expressed in thousands of U.S. dollars)


	Three months ended September 30				Nine months ended September 30
	2023		2022		2023		2022
Ordinary share capital
Balance - beginning of period	$	3,527	$	3,472	$	3,482	$	3,384
Issue of ordinary shares, net of forfeitures (Note 8)	7		11		52		99
Repurchase of ordinary shares (Note 8)	—		(1)		—		(1)
Balance - end of period	3,534		3,482		3,534		3,482
Additional paid-in capital
Balance - beginning of period	480,648		475,903		478,439		481,784
Cumulative effect of adoption of accounting guidance for convertible debt at January 1, 2022	—		—		—		(7,896)
Repurchase of ordinary shares (Note 8)	—		(34)		—		(34)
Share-based compensation expense	1,260		1,152		3,469		3,167
Balance - end of period	481,908		477,021		481,908		477,021
Retained earnings (deficit)
Balance - beginning of period	76,946		4,918		21,199		(9,505)
Cumulative effect of adoption of accounting guidance for convertible debt at January 1, 2022	—		—		—		5,362
Net income (loss)	13,477		(18,469)		69,224		(9,408)
Balance - end of period	90,423		(13,551)		90,423		(13,551)
Total shareholders' equity	$	575,865	$	466,952	$	575,865	$	466,952

The accompanying Notes to the Condensed Consolidated Financial Statements are an

integral part of the Condensed Consolidated Financial Statements.

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GREENLIGHT CAPITAL RE, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the nine months ended September 30, 2023 and 2022

(expressed in thousands of U.S. dollars)


	Nine months ended September 30
	2023		2022
Cash flows from operating activities
Net income (loss)	$	69,224	$	(9,408)
Adjustments to reconcile net income or loss to net cash provided by (used in) operating activities:
Loss (income) from investments in related party investment fund	(27,791)		(24,474)
Net realized gain on repurchase of convertible senior notes payable	(265)		(149)
Net change in unrealized gains and losses on investments and derivatives	1,359		(9,237)
Net realized (gains) losses on investments	800		—
Foreign exchange (gains) losses	(7,635)		10,364
Current expected credit losses recognized on reinsurance assets	500		—
Share-based compensation expense	3,521		3,266
Accretion of debt offering costs and change in interest accruals	(98)		(612)

Net change in:
Accrued interest receivable	(123)		—
Reinsurance balances receivable	(135,796)		(97,651)
Loss and loss adjustment expenses recoverable	(15,007)		496
Deferred acquisition costs	(6,127)		(15,810)
Unearned premiums ceded	(547)		(13,617)
Other assets, excluding depreciation	(546)		(540)
Loss and loss adjustment expense reserves	103,678		36,394
Unearned premium reserves	43,593		70,589
Reinsurance balances payable	(35,253)		17,548
Funds withheld	(8,501)		7,654
Other liabilities	384		(2,237)
Net cash provided by (used in) operating activities	(14,630)		(27,424)
Cash flows from investing activities
Proceeds from redemptions from related party investment fund	73,997		77,993
Contributions to related party investment fund	(97,000)		(65,127)
Purchases of investments	(5,545)		(8,627)
Proceeds from maturity of term deposit	6,000		—

Net cash provided by (used in) investing activities	(22,548)		4,239
Cash flows from financing activities
Proceeds from term loans, net of expenses	74,053		—
Repayment of convertible senior notes payable	(62,147)		—
Repurchases of convertible senior notes payable	(17,198)		(6,384)

Repurchase of Class A ordinary shares	—		(35)
Net cash provided by (used in) financing activities	(5,292)		(6,419)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(152)		(322)
Net increase (decrease) in cash, cash equivalents and restricted cash	(42,622)		(29,926)
Cash, cash equivalents and restricted cash at beginning of the period	706,548		711,101
Cash, cash equivalents and restricted cash at end of the period	$	663,926	$	681,175
Supplementary information
Interest paid in cash	$	3,336	$	4,023
Income tax paid in cash	$	56	$	—

The accompanying Notes to the Condensed Consolidated Financial Statements are an

integral part of the Condensed Consolidated Financial Statements.

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GREENLIGHT CAPITAL RE, LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

September 30, 2023

1. ORGANIZATION AND BASIS OF PRESENTATION

Greenlight Capital Re, Ltd. (“GLRE” and, together with its wholly-owned subsidiaries, the “Company”) was incorporated as an exempted company under the Companies Law of the Cayman Islands on July 13, 2004. The Company’s wholly-owned subsidiaries are described below:

•Greenlight Reinsurance, Ltd. (“Greenlight Re”), domiciled in the Cayman Islands, is a Class D insurer license issued in accordance with the terms of The Insurance Act, 2010 (as amended) and underlying regulations thereto (the “Act”) and is subject to regulation by the Cayman Islands Monetary Authority. Greenlight Re commenced underwriting in April 2006.

•Greenlight Reinsurance Ireland, Designated Activity Company (“GRIL”), domiciled in Ireland since 2010, is authorized as a non-life reinsurance undertaking in accordance with the provisions of the European Union (Insurance and Reinsurance) Regulations 2015. GRIL provides multi-line property and casualty reinsurance capacity to the European broker market and provides GLRE with an additional platform to serve clients located in Europe and North America.

• Greenlight Re Marketing (UK) Limited, domiciled in the United Kingdom (“U.K.”) since 2020, is a U.K. company formed to expand GLRE’s presence in the Lloyd’s of London market (“Lloyd’s”).

•Greenlight Re Corporate Member Ltd., domiciled in the U.K. since 2014, is a corporate member that became a wholly-owned subsidiary of GLRE in 2023 and provides underwriting capacity for various Lloyd’s syndicates, including Syndicate 3456.

•Verdant Holding Company, Ltd., domiciled in the United States since 2008, is an investment holding company.

Additionally, through Greenlight Innovation Syndicate 3456 (“Syndicate 3456”), Greenlight Re provides a (re)insurance platform to its growing portfolio of insurtech partnerships. Domiciled in the U.K. since 2022, Syndicate 3456 is authorized to underwrite under the Lloyd’s syndicate-in-a-box model.

The ordinary shares of GLRE are listed on Nasdaq Global Select Market under the symbol “GLRE.”

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the U.S. Securities and Exchange Commission’s (“SEC”) instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s 2022 Form 10-K, as filed with the SEC on March 8, 2023. These unaudited condensed consolidated financial statements include GLRE and its wholly-owned subsidiaries and all significant intercompany transactions and balances have been eliminated on consolidation.

In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position and results of operations as at the end of and for the periods presented. The results of operations for any interim period are not necessarily indicative of the results for a full year.

2. SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to the Company’s significant accounting policies as described in its 2022 Form 10-K.

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Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. The significant estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, loss and loss adjustment expense reserves, premiums written, earned, and receivable, variability underlying risk transfer assessments, allowances for credit losses, share-based compensation, valuation allowances associated with deferred tax assets and investment impairments.

Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents

The Company maintains cash and cash equivalent balances to collateralize regulatory trusts and letters of credit issued to cedents (see Note 11). The following table reconciles the cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets to the total presented in the unaudited condensed consolidated statements of cash flows:


	September 30, 2023		December 31, 2022
	($ in thousands)
Cash and cash equivalents	$	41,302	$	38,238
Restricted cash and cash equivalents	622,624		668,310
Total cash, cash equivalents and restricted cash presented in the condensed consolidated statements of unaudited cash flows	$	663,926	$	706,548

Funds Held by Cedents

The caption “Reinsurance balances receivable” in the Company’s unaudited condensed consolidated balance sheets includes financial assets held by cedents. At September 30, 2023, funds held by cedents were $422.4 million (December 31, 2022: $337.4 million). Such amounts include premiums withheld by Lloyd’s syndicates and funds contributed by the Company to Lloyd's as security for members’ underwriting activities. The Lloyd’s syndicates invest a portion of the premiums withheld in investment funds and fixed-maturity securities. The Company records its share of income (or expense) from these assets, in its unaudited condensed consolidated statements of operations under the caption “Other income (expense)” as reported by the syndicates on a quarterly lag basis due to the timing of the availability of these quarterly financial reports.

Deposit Assets and Liabilities

At September 30, 2023, deposit assets and liabilities were $3.0 million and $5.2 million, respectively (December 31, 2022: $3.1 million and $10.7 million, respectively). For the three and nine months ended September 30, 2023 and 2022, the interest income (expense) on deposit-accounted contracts were as follows:


	Three months ended September 30				Nine months ended September 30
	2023		2022		2023		2022
	($ in thousands)				($ in thousands)
Deposit interest income	$	—	$	—	$	—	$	—
Deposit interest expense	$	(278)	$	(6,148)	$	(645)	$	(6,373)
Deposit interest income (expense), net	$	(278)	$	(6,148)	$	(645)	$	(6,373)

Foreign Exchange

For the three and nine months ended September 30, 2023, $(2.0) million and $7.6 million (three and nine months ended September 30, 2022: $(5.0) million and $(10.4) million), respectively, of foreign exchange gains (losses) were included in the Company’s net income in the unaudited condensed consolidated statements of operations under the caption of “Other income (expense), net”.

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Earnings (Loss) Per Share

The following table reconciles net income (loss) and weighted average shares used in computing basic and diluted net income (loss) per share for the three and nine months ended September 30, 2023 and 2022 (expressed in thousands of U.S. dollars, except per share and share amounts):


	Three months ended September 30				Nine months ended September 30
	2023		2022		2023		2022
Numerator for earnings per share
Net income (loss) - basic	$	13,477	$	(18,469)	$	69,224	$	(9,408)


Net income (loss) - diluted	$	13,477	$	(18,469)	$	69,224	$	(9,408)

Denominator for earnings per share
Weighted average shares outstanding - basic	34,070,818		33,127,384		34,067,012		33,119,814
Effect of dilutive employee and director share-based awards	731,046		—		636,961		—

Weighted average shares outstanding - diluted	34,801,864		33,127,384		34,703,973		33,119,814
Anti-dilutive stock options outstanding	652,140		690,337		652,140		690,337
Participating securities excluded from calculation of loss per share	—		848,841		—		848,841
Shares potentially issuable in connection with convertible notes excluded from calculation of diluted loss per share	—		5,686,747		—		5,773,889

Earnings (loss) per share:
Basic	$	0.40	$	(0.56)	$	2.03	$	(0.28)
Diluted	$	0.39	$	(0.56)	$	1.99	$	(0.28)

3. INVESTMENT IN RELATED PARTY INVESTMENT FUND

The Company has entered into the Second Amended and Restated Exempted Limited Partnership Agreement (the “SILP LPA”) of Solasglas Investments, LP (“SILP”), with DME Advisors II, LLC (“DME II”), as General Partner, Greenlight Re, and GRIL, (together, the “GLRE Limited Partners”). SILP has entered into a SILP investment advisory agreement (“IAA”) with DME Advisors. LP (“DME Advisors”), pursuant to which DME Advisors is the investment manager for SILP. DME II and DME Advisors are related to the Company, and each is an affiliate of David Einhorn, Chairman of the Company’s Board of Directors (the “Chairman”).

At September 30, 2023, the SILP LPA included the following proviso: “The Investment Portfolio of each Partner will not exceed the product of (a) such Partner’s surplus (Greenlight Re Surplus or GRIL Surplus, as the case may be) multiplied by (b) the Investment Cap (60%), and the General Partner will designate any portion of a Partner’s Investment Portfolio as Designated Securities to effectuate such limit.”

The Company has concluded that SILP qualifies as a variable interest entity (“VIE”) under U.S. GAAP. In assessing its interest in SILP, the Company noted the following:

•DME II serves as SILP’s general partner and has the power to appoint the investment manager. The Company does not have the power to appoint, change or replace the investment manager or the general partner except “for cause.” Neither of the GLRE Limited Partners can participate in the investment decisions of SILP as long as SILP adheres to the investment guidelines provided within the SILP LPA. For these reasons, the GLRE Limited Partners are not considered to have substantive participating rights or kick-out rights.

•DME II holds an interest in excess of 10% of SILP’s net assets, which the Company considers to represent an obligation to absorb losses and a right to receive benefits of SILP that are significant to SILP.

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Consequently, the Company has concluded that DME II’s interests, not the Company’s, meet both the “power” and “benefits” criteria associated with VIE accounting guidance. Therefore DME II is SILP’s primary beneficiary. The Company presents its investment in SILP in its unaudited condensed consolidated balance sheets in the caption “Investment in related party investment fund.”

The Company’s maximum exposure to loss relating to SILP is limited to the net asset value of the GLRE Limited Partners’ investment in SILP. At September 30, 2023, the net asset value of the GLRE Limited Partners’ investment in SILP was $229.0 million (December 31, 2022: $178.2 million), representing 70.3% (December 31, 2022: 69.3%) of SILP’s total net assets. DME II held the remaining 29.7% (December 31, 2022: 30.7%) of SILP’s total net assets. The investment in SILP is recorded at the GLRE Limited Partners’ share of the net asset value of SILP as reported by SILP’s third-party administrator. The GLRE Limited Partners can redeem their assets from SILP for operational purposes by providing 3 business days’ notice to DME II. At September 30, 2023, the majority of SILP’s long investments were composed of cash and publicly traded equity securities, which could be readily liquidated to meet the GLRE Limited Partners’ redemption requests.

The Company’s share of the change in the net asset value of SILP for the three and nine months ended September 30, 2023 was $(1.9) million and $27.8 million, respectively (three and nine months ended September 30, 2022: $8.5 million and $24.5 million, respectively), and shown in the caption “Income (loss) from investment in related party investment fund” in the Company’s unaudited condensed consolidated statements of operations.

The summarized financial statements of SILP are presented below.

Summarized Statement of Assets and Liabilities of Solasglas Investments, LP


	September 30, 2023		December 31, 2022
	($ in thousands)
Assets
Investments, at fair value	$	423,807	$	304,806
Derivative contracts, at fair value	25,128		17,547
Due from brokers	59,298		109,169
Cash and cash equivalents	—		—
Interest and dividends receivable	130		527
Total assets	508,363		432,049

Liabilities and partners’ capital
Liabilities
Investments sold short, at fair value	(154,504)		(159,382)
Derivative contracts, at fair value	(5,232)		(12,443)
Capital withdrawals payable	(170)		(75)
Due to brokers	(21,347)		(2,050)
Interest and dividends payable	(1,008)		(760)
Other liabilities	(429)		(159)
Total liabilities	(182,690)		(174,869)

Net Assets	$	325,673	$	257,180

GLRE Limited Partners’ share of Net Assets	$	228,991	$	178,197

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Summarized Statement of Operations of Solasglas Investments, LP


	Three months ended September 30				Nine months ended September 30
	2023		2022		2023		2022
	($ in thousands)
Investment income
Dividend income (net of withholding taxes)	$	273	$	305	$	1,624	$	928
Interest income	2,523		693		6,415		1,028
Total Investment income	2,796		998		8,039		1,956

Expenses
Management fee	(1,238)		(901)		(3,469)		(2,686)
Interest	(2,380)		(464)		(5,387)		(1,199)
Dividends	(659)		(356)		(1,871)		(938)
Professional fees and other	(507)		(262)		(1,396)		(756)
Total expenses	(4,784)		(1,983)		(12,123)		(5,579)
Net investment income (loss)	(1,988)		(985)		(4,084)		(3,623)

Realized and change in unrealized gains (losses)
Net realized gain (loss)	460		7,221		(2,145)		58,196
Net change in unrealized appreciation (depreciation)	(1,191)		6,464		52,601		(17,027)
Net gain (loss) on investment transactions	(731)		13,685		50,456		41,169

Net income (loss)	$	(2,719)	$	12,700	$	46,372	$	37,546

GLRE Limited Partners’ share of net income (loss) (1)	$	(1,853)	$	8,521	$	27,791	$	24,474

(1) Net income (loss) is net of management fees and performance allocation presented below:


	Three months ended September 30				Nine months ended September 30
	2023		2022		2023		2022
	($ in thousands)
Management fees	$	1,238	$	901	$	3,469	$	2,686
Performance allocation	(206)		$	947	3,088		2,719
Total	$	1,032	$	1,848	$	6,557	$	5,405

See Note 10 for further details on related party management fees and performance allocation.

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4. FINANCIAL INSTRUMENTS

Private investments and unlisted equity securities without readily determinable fair values

At September 30, 2023, the Company included the following private investments and unlisted securities without readily determinable fair values in the caption “Other investments”:


	Cost		Unrealized gains		Unrealized losses		Accrued interest		Fair value / carrying value
	($ in thousands)
Private investments and unlisted equities	$	26,702	$	42,942	$	(4,795)	$	—	$	64,849

Debt and convertible debt securities	2,676		—		—		123		2,799

Total other investments	$	29,378	$	42,942	$	(4,795)	$	123	$	67,648

At December 31, 2022, the Company included the following private investments and unlisted securities without readily determinable fair values in the caption “Other investments”:


	Cost		Unrealized gains		Unrealized losses		Fair value / carrying value
	($ in thousands)
Private investments and unlisted equities	$	22,787	$	42,461	$	(2,815)	$	62,433

Debt and convertible debt securities	1,846		—		—		1,846
Certificates of deposit	6,000		—		—		6,000
Total other investments	$	30,633	$	42,461	$	(2,815)	$	70,279

The following table presents the carrying values of the private investments and unlisted equity securities carried under the measurement alternative at September 30, 2023 and 2022, and the related adjustments recorded during the periods then ended.


	Nine months ended September 30
	2023		2022
	($ in thousands)
Carrying value (1)	$	64,849	$	61,081
Upward carrying value changes (2)	$	506	$	11,260
Downward carrying value changes and impairment (3)	$	(2,780)	$	(1,676)

(1) The period-end carrying values reflect cumulative purchases and sales in addition to upward and downward carrying value changes.

(2) The cumulative upward carrying value changes from inception to September 30, 2023, totaled $43.4 million.

(3) The cumulative downward carrying value changes and impairments from inception to September 30, 2023, totaled $5.9 million.

During three and nine months ended September 30, 2023, the Company realized a loss of $nil and $0.8 million, respectively, (three and nine months ended September 30, 2022: $nil), and a corresponding reversal of unrealized loss relating to an investment which was previously fully impaired at December 31, 2022, resulting in no impact to the Company’s net income (loss) for the nine months ended September 30, 2023.

Fair Value Hierarchy

The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. Assets and liabilities measured at fair value are categorized based on the extent to which the inputs are observable in the market. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

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•			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.

Assets measured at fair value on a nonrecurring basis

At September 30, 2023 and December 31, 2022, the Company held $53.7 million and $53.6 million, respectively, of private investments and unlisted equities measured at fair value on a nonrecurring basis. The Company classifies these assets as Level 3 within the fair value hierarchy. The following table summarizes the periods between the most recent fair value measurement dates and September 30, 2023, for the private and unlisted equities measured at fair value on a nonrecurring basis:


	Less than 6 months		6 to 12 months		Over 1 year		Total
	($ in thousands)
Fair values measured on a nonrecurring basis	$	18,552	$	602	$	34,567	$	53,721

At September 30, 2023 and December 31, 2022, the Company held $11.1 million and $8.9 million, respectively, of private investments and unlisted equities measured at cost.

Assets measured at fair value on a recurring basis

Derivative financial instruments

The Company uses interest rate swaps in connection with its risk management activities to hedge 50% of the interest rate risk relating to the outstanding Term Loans (see Note 7). The interest rate swaps are carried at fair value and are determined using a market approach valuation technique based on significant observable market inputs from third-party pricing vendors. Accordingly, the interest rates swaps are classified as Level 2 within the fair value hierarchy. These derivative instruments are not designated as accounting hedges under U.S. GAAP.

For the three and nine months ended September 30, 2023, the Company recognized unrealized gain for the above derivatives of $0.1 million, which are included in other assets in the Condensed Consolidated Balance Sheets, in interest expense in the Condensed Consolidated Statements of Operations, and in net change in unrealized gains and losses on investments and derivatives in the Condensed Consolidated Statements of Cash Flows.

Investment in Related Party Investment Fund

The Company’s investment in the related party investment fund is measured at fair value using the net asset value practical expedient.Therefore, this investment is not classified within the fair value hierarchy. (See Note 3 for further details on the related party investment fund.)

Financial Instruments Disclosed, But Not Carried, at Fair Value

The carrying value of debt and convertible debt securities within “Other Investments” (see “Private investments and unlisted equity securities without readily determinable fair values” above) and certificates of deposit with original maturities of one year or less approximates their fair values. The Company classifies these assets as Level 2 within the fair value hierarchy.

The Term Loans (see Note 7) represent financial instruments that the Company carries at amortized cost. At September 30, 2023, the carrying values of the Term Loans approximate their fair values.

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5. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

At September 30, 2023 and December 31, 2022, loss and loss adjustment expense reserves were composed of the following:


	September 30, 2023		December 31, 2022
	($ in thousands)
Case reserves	$	190,121	$	184,756
IBNR	468,113		370,712
Total	$	658,234	$	555,468

A summary of changes in outstanding loss and loss adjustment expense reserves for all lines of business consolidated for the nine months ended September 30, 2023 and 2022 is as follows:


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	273,570		251,231
Prior years	10,502		1,558
Total incurred	284,072		252,789
Paid losses related to:
Current year	(41,026)		(54,866)
Prior years	(154,374)		(160,094)
Total paid	(195,400)		(214,960)
Foreign currency revaluation	(858)		(20,516)
Net balance at September 30	630,043		530,223
Add: Losses recoverable	28,191		10,604
Gross balance at September 30	$	658,234	$	540,827

Estimates for Significant Catastrophe Events

At September 30, 2023, the Company’s net reserves for losses and loss expenses include estimated amounts for several catastrophe and weather-related events (“CAT loss”). The magnitude and volume of losses arising from these events is inherently uncertain and, consequently, actual losses for these events may ultimately differ, potentially materially, from current estimates.

During the nine months ended September 30, 2023, the Company recognized CAT loss, net of reinsurance, of $29.5 million for current year CAT loss events, driven by the Turkey earthquake, Cyclone Gabrielle in New Zealand, the U.S. severe storms, Mexican state-owned oil platform fire, and satellite losses. For the nine months ended September 30, 2022, the Company recognized CAT loss of $39.1 million driven by $13.6 million from the Russian-Ukrainian conflict and $19.5 million from hurricane Ian.

Prior Year Reserve Development

For the nine months ended September 30, 2023, the estimate of net losses incurred relating to prior accident years increased by $10.5 million, primarily due to the following:

•$31.3 million adverse loss development primarily due to reserve strengthening on legacy motor (predominantly 2021 underwriting year), homeowners (primarily deterioration relating to Winter Storm Elliott in December 2022), and workers’ compensation (2021 and prior underwriting years) contracts, coupled with a final claim settlement on a professional liability contract (2008 underwriting year).

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•The adverse loss development was partially offset by $20.8 million favorable loss development from various prior years’ property catastrophe events and better than expected loss emergence for marine and energy (predominantly 2020 and 2022 underwriting years), group medical (2022 and prior underwriting years) and cyber contracts (predominantly 2021 underwriting year).

For the nine months ended September 30, 2022, the estimate of net losses incurred relating to prior accident years increased by $1.6 million, primarily due to the following:

• $16.3 million reserve strengthening on motor and health business (2021-2021 underwriting years); a multi-line quota share program (2015, 2016-2019 underwriting years); marine and energy contracts (2020 underwriting year); and a cyber contract (2020 underwriting year).

•Offsetting the above adverse loss development, the Company had favorable loss experience driven mostly by mortgage business (2018 underwriting year), excess of loss workers’ compensation contract (2020 underwriting year) as well as favorable CAT loss development relating to small catastrophe events (mainly 2020 and 2021 underwriting years) and COVID-19 (2020 underwriting year) based on updated claims reporting received from cedents.

6. RETROCESSION

For the three and nine months ended September 30, 2023, the Company’s earned ceded premiums were $15.3 million and $35.2 million, respectively (three and nine months ended September 30, 2022: $4.4 million and $8.4 million, respectively). For the three and nine months ended September 30, 2023, loss and loss adjustment expenses recovered and changes in losses recoverable were $9.1 million and $24.8 million, respectively (three and nine months ended September 30, 2022: $2.5 million and $2.5 million, respectively).

Retrocession contracts do not relieve the Company from its obligations to its cedents. Failure of retrocessionaires to honor their obligations could result in losses to the Company. At September 30, 2023, the Company’s loss reserves recoverable consisted of (i) $20.2 million (December 31, 2022: $9.5 million) recoverable from unrated retrocessionaires, of which $14.7 million (December 31, 2022: $9.2 million) were secured by cash, letters of credit and collateral held in trust accounts for the benefit of the Company and (ii) $8.1 million (December 31, 2022: $3.8 million) recoverable from retrocessionaires rated A- or above by A.M. Best.

The Company regularly evaluates its net credit exposure to assess the ability of the retrocessionaires to honor their respective obligations. At September 30, 2023, the Company’s allowance for expected credit losses was $0.1 million (December 31, 2022: $0.1 million).

7. DEBT

The following table summarizes the Company’s debt.


	September 30, 2023		December 31, 2022
	($ in thousands)
Term loans	$	75,000	$	—
Senior convertible notes	—		79,610
Total principal amount	$	75,000	$	79,610
Accrued interest payable	700		1,331
Less: deferred finance costs	(821)		(407)
Total debt	$	74,879	$	80,534

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Term Loans

On June 16, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with a group of banks (the “Banks”), for which CIBC Bank USA is acting as administrative agent (the “Administrative Agent”). The Credit Agreement provides, subject to certain customary conditions, for a delayed draw term loan facility (the “Facility”), in an aggregate amount of $75.0 million. Outstanding loans (“Term Loans”) under the Facility will (i) amortize in equal quarterly installments in an aggregate annual amount equal to 5.0% of the outstanding loans and (ii) accrue interest at a rate equal to an adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 3.5% per annum. The Company posted $10.0 million of collateral as security for the Facility. The Facility matures on August 1, 2026.

During the three and nine months ended September 30, 2023, the Company borrowed $75.0 million from the Facility, of which $63.4 million was used to repay all of the outstanding Convertible Senior Notes (see below), with the remaining proceeds for general corporate purposes. On August 31, 2023, the Company hedged 50% of the floating interest rate on the Term Loans (see Note 4). The interest rate on the outstanding Terms Loans was 8.9% at September 30, 2023.

The Company was in compliance with all covenants relating to the Facility at September 30, 2023.

Senior Convertible Notes

On August 7, 2018, the Company issued $100.0 million of senior unsecured convertible notes (the “Convertible Notes”), with a maturity date of August 1, 2023. The Convertible Notes bear interest at 4.0%, payable semiannually on February 1 and August 1 of each year beginning February 1, 2019. The conversion price was $17.19 per ordinary share of the Company.

As noted above, the Company fully repaid the remaining outstanding Convertible Notes on August 1, 2023, from the proceeds of the new Term Loans.

During the three and nine months ended September 30, 2023 the Company repurchased and canceled $nil and $17.2 million of the Convertible Notes, respectively, resulting in realized gains of $nil and $0.3 million, respectively, which is included in “Other income (expense), net”, in the unaudited condensed consolidated statements of operations. As noted above, the Company fully repaid the remaining outstanding Convertible Notes on August 1, 2023, from the proceeds of the new Term Loans.

Financing Costs

The Company incurred $0.9 million of issuance costs relating to the Credit Agreement, which are deferred and amortized through the maturity of the Facility. The remaining unamortized deferred finance costs are reported separately in the above table.

For the three and nine months ended September 30, 2023, the Company recognized interest expense of $1.6 million and $3.1 million, respectively (three and nine months ended September 30, 2022: $1.1 million and $3.4 million, respectively) for the above total debt, which included the interest coupon, the amortization of issuance costs and the change in fair value of the interest rate swap (see Note 4).

8. SHARE CAPITAL

The following table is a summary of the Company’s ordinary shares issued and outstanding:


	Nine months ended September 30			Nine months ended September 30
	2023			2022
	Ordinary	Class A	Class B	Class A	Class B
Balance – beginning of period	—	28,569,346	6,254,715	27,589,731	6,254,715
Issue of shares, net of forfeitures	65,394	447,952	—	984,548	—
Repurchase of shares	—	—	—	(4,933)	—
Re-designate Class B to Class A shares	—	6,254,715	(6,254,715)	—	—
Reclassify Class A to Ordinary shares	35,272,013	(35,272,013)	—	—	—
Balance – end of period	35,337,407	—	—	28,569,346	6,254,715

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On May 2, 2023, the Board of Directors re-approved the share repurchase plan effective from July 1, 2023 until June 30, 2024, authorizing the Company to repurchase up to $25.0 million of Ordinary shares or securities convertible into Ordinary shares in the open market, through privately negotiated transactions or Rule 10b5-1 stock trading plans. Any shares repurchased are canceled immediately upon repurchase.

On July 25, 2023, at the Company’s Annual General Meeting the shareholders approved the re-designation of Class B ordinary shares as Class A ordinary shares, and then reclassified Class A ordinary shares as “Ordinary shares,” resulting in the elimination of the dual-class share structure.

9. SHARE-BASED COMPENSATION

Employee and Director Restricted Shares

The following table summarizes the activity for unvested outstanding restricted share awards during the nine months ended September 30, 2023 and 2022:


	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		356,422	7.02
Vested	—	—		(197,002)	10.06
Forfeited	—	—		(8,476)	7.67
Balance at September 30, 2022	794,362	$	7.62	904,351	$	7.73

Balance at December 31, 2022	794,362	$	7.62	832,896	$	7.76
Granted	357,766	9.85		242,957	10.22
Vested	—	—		(364,006)	6.96
Forfeited	(109,105)	9.37		(55,967)	8.43
Balance at September 30, 2023	1,043,023	$	8.20	655,880	$	9.05

On July 25, 2023, at the Company’s Annual General Meeting the shareholders approved the Greenlight Capital Re, Ltd. 2023 Omnibus Incentive Plan, or the 2023 Incentive Plan. The 2023 Incentive Plan replaces the Greenlight Capital Re, Ltd. Amended and Restated 2004 Stock Incentive Plan, or the 2004 Stock Incentive Plan, and its subsequent amendments. As a result, the 2004 Stock Incentive Plan share reserve was transferred to the 2023 Incentive Plan and any forfeitures under the 2004 Stock Incentive Plan will become available for grant under the 2023 Incentive Plan. Further, the shareholders approved to increase the maximum number of ordinary shares for which awards may be granted by 2 million ordinary shares. At September 30, 2023, 3,296,771 (December 31, 2022: 2,011,426) Ordinary shares remained available for future issuance under the Company’s 2023 Incentive Plan. The Compensation Committee of the Board of Directors administers the stock incentive plan.

For the nine months ended September 30, 2023, the Company granted 535,329 (nine months ended September 30, 2022: 849,872) restricted shares to employees pursuant to the Company’s stock incentive plan. The restricted shares granted to employees in 2023 and 2022 include (i) restricted shares with both performance and service-based vesting conditions (“Performance RSs”) and (ii) restricted shares with only service-based vesting conditions (“Service RSs”). The Service RSs vest evenly each year on January 1, subject to the grantee’s continued service with the Company. If performance goals are achieved, the Performance RSs will cliff vest at the end of a three-year performance period within a range of 25% and 100% of the awarded Performance RSs, with a target of 50%. During the vesting period, the holder of the Service RSs and Performance RSs retains voting rights but is entitled to any dividends declared by the Company only upon vesting.

For the nine months ended September 30, 2023, the Company granted 65,394 (nine months ended September 30, 2022: 107,763) restricted Ordinary shares to non-employees directors as part of their remuneration for services to the Company. These restricted shares contain similar restrictions to those issued to employees. They will vest on the earlier of (i) the first anniversary of the date of the share issuance and (ii) the Company’s next annual general meeting, subject to the grantee’s

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continued service with the Company. During the vesting period, non-employee directors holding these restricted shares retain voting rights and are entitled to any dividends declared by the Company only upon vesting.

For the nine months ended September 30, 2023, the total fair value of restricted shares vested was $2.5 million (nine months ended September 30, 2022: $2.0 million).

Employee Restricted Stock Units

The following table summarizes the activity for unvested outstanding restricted stock units (“RSUs”) during the nine months ended September 30, 2023 and 2022:


	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 September 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 September 30, 2023	176,129	$	8.04	136,280	$	8.76

For the nine months ended September 30, 2023, the Company granted 113,932 (nine months ended September 30, 2022: 159,215) RSUs to employees pursuant to the Company’s stock incentive plan. The RSUs include (i) RSUs with both performance and service-based vesting conditions (“Performance RSUs”) and (ii) RSUs with only service-based vesting conditions (“Service RSUs”). The Service RSUs vest evenly each year on January 1, subject to the grantee’s continued service with the Company. If performance goals are achieved, the Performance RSUs will cliff vest at the end of a three-year performance period within a range of 25% and 100% of the awarded Performance RSUs, with a target of 50%. Prior to 2022, the RSUs issued to employees cliff vested three years after the date of issuance, subject to the grantee’s continued service with the Company.

For the nine months ended September 30, 2023, the Company issued 77,695 ordinary shares for the vested RSUs.

Stock Compensation Expense

For the nine months ended September 30, 2023 and 2022, the combined stock compensation expense (net of forfeitures) which was included in the caption “General and administrative expenses” in the Company’s unaudited condensed consolidated statements of operations was $3.5 million and $3.3 million, respectively.

10. RELATED PARTY TRANSACTIONS

Investment Advisory Agreement

Each of DME, DME II, and DME Advisors is an affiliate of the Chairman and, therefore, is a related party to the Company.

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The Company has entered into the SILP LPA (as described in Note 3 of the unaudited condensed consolidated financial statements). DME II receives a performance allocation equal to (with capitalized terms having the meaning provided under the SILP LPA) (a) 10% of the portion of the Positive Performance Change for each limited partner’s capital account that is less than or equal to the positive balance in such limited partner’s Carryforward Account, plus (b) 20% of the portion of the Positive Performance Change for each limited partner’s capital account that exceeds the positive balance in such limited partner’s Carryforward Account. The Carryforward Account for Greenlight Re and GRIL includes the amount of investment losses to be recouped, including any loss generated on the assets invested in SILP, subject to adjustments for redemptions. The loss carry-forward provision in the SILP LPA allows DME II to earn a reduced performance allocation of 10% of profits in years subsequent to any year in which SILP has incurred a loss until all losses are recouped, and an additional amount equal to 150% of the loss is earned.

In accordance with the SILP LPA, DME Advisors constructs a levered investment portfolio as agreed by the Company (the “Investment Portfolio”, as defined in the SILP LPA). On September 1, 2018, SILP entered into the IAA with DME Advisors, which entitles DME Advisors to a monthly management fee equal to 0.125% (1.5% on an annual basis) of each limited partner’s Investment Portfolio. The IAA has an initial term ending on August 31, 2023, subject to an automatic extension for successive three-year terms.

For a detailed breakdown of management fees and performance compensation for the three and nine months ended September 30, 2023 and 2022 (see Note 3).

Pursuant to the SILP LPA and the IAA, the Company has agreed to indemnify DME, DME II, and DME Advisors for any expense, loss, liability, or damage arising out of any claim asserted or threatened in connection with DME Advisors serving as the Company’s or SILP’s investment advisor. The Company will reimburse DME, DME II, and DME Advisors for reasonable costs and expenses of investigating and defending such claims, provided such claims were not caused due to gross negligence, breach of contract, or misrepresentation by DME, DME II, or DME Advisors. The Company incurred no indemnification amounts during the periods presented.

Green Brick Partners, Inc.

David Einhorn also serves as the Chairman of the Board of Directors of Green Brick Partners, Inc. (“GRBK”), a publicly-traded company. At September 30, 2023, SILP, along with certain affiliates of DME Advisors, collectively owned 29.1% of the issued and outstanding common shares of GRBK. Under applicable securities laws, DME Advisors may sometimes be limited in its ability to trade GRBK shares held in SILP. At September 30, 2023, SILP held 2.7 million shares of GRBK.

Service Agreement

The Company has entered into a service agreement with DME Advisors, pursuant to which DME Advisors provides certain investor relations services to the Company for compensation of five thousand dollars per month (plus expenses). The agreement automatically renews annually until terminated by either the Company or DME Advisors for any reason with 30 days prior written notice to the other party.

Collateral Assets Investment Management Agreement

Effective January 1, 2019, the Company (and its subsidiaries) entered into a collateral assets investment management agreement (the “CMA”) with DME Advisors, pursuant to which DME Advisors manages certain assets of the Company that are not subject to the SILP LPA and are held by the Company to provide collateral required by the cedents in the form of trust accounts and letters of credit. In accordance with the CMA, DME Advisors receives no fees and is required to comply with the collateral investment guidelines. The CMA can be terminated by any of the parties upon 30 days’ prior written notice to the other parties.

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11. COMMITMENTS AND CONTINGENCIES

Letters of Credit and Trusts

At September 30, 2023, the Company had the following committed letter of credit facility:

Maximum Facility Limit

Termination Date

Notice period required for termination

($ in thousands)

Citibank Europe plc

275,000

August 20, 2024

120 days before the termination date

In addition, the Company has a $14.0 million uncommitted letter of credit facility with Citibank Europe plc.

At September 30, 2023, an aggregate amount of $268.2 million (December 31, 2022: $203.9 million) in letters of credit was issued under both the committed and uncommitted credit facilities. At September 30, 2023, the Company had pledged total cash and cash equivalents with a fair value in the aggregate of $269.0 million (December 31, 2022: $204.7 million) as collateral against the letters of credit issued and included in the caption “Restricted cash and cash equivalents” in the Company’s unaudited condensed consolidated balance sheets. The Company was in compliance with all the covenants of these facilities at September 30, 2023.

The Company has also established regulatory trust arrangements for certain cedents. At September 30, 2023, collateral of $342.0 million (December 31, 2022: $463.7 million) was provided to cedents in the form of regulatory trust accounts and included in the caption “Restricted cash and cash equivalents” in the Company’s unaudited condensed consolidated balance sheets.

Litigation

From time to time, in the ordinary course of business, the Company may be involved in formal and informal dispute resolution procedures, which may include arbitration or litigation. The outcomes of these procedures determine the rights and obligations under the Company’s reinsurance contracts and other contractual agreements. In some disputes, the Company may seek to enforce its rights under an agreement or collect funds owed. In other matters, the Company may resist attempts by others to collect funds or enforce alleged rights. While the Company cannot predict the outcome of legal disputes with certainty, the Company does not believe that any existing dispute, when finally resolved, will have a material adverse effect on the Company’s business, financial condition, or operating results.

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12. SEGMENT REPORTING

The Company has one operating segment, Property & Casualty (Re)insurance.

The following tables provide a breakdown of the Company’s gross premiums written by line and class of business, and by geographic area of risks insured for the periods indicated:

Gross Premiums Written by Line of Business


	Three months ended September 30								Nine months ended September 30
	2023				2022				2023				2022
	($ in thousands)								($ in thousands)
Property
Commercial	$	16,105	8.8	%	$	2,146	1.4	%	$	45,236	8.6	%	$	8,648	2.0	%
Motor	122		0.1		206		0.1		706		0.1		768		0.2
Personal	16,713		9.1		17,669		11.4		48,718		9.3		49,425		11.3
Total Property	32,940		18.0		20,021		12.9		94,660		18.0		58,841		13.5

Casualty
General Liability	31,325		17.1		13,798		8.9		79,401		15.1		40,523		9.3
Motor Liability	2,917		1.6		565		0.4		11,223		2.1		4,061		0.9
Professional Liability	3,206		1.8		242		0.2		9,478		1.8		496		0.1
Workers' Compensation	4,484		2.4		7,216		4.6		11,542		2.2		25,504		5.9
Multi-line	67,032		36.6		69,419		44.7		172,916		33.0		177,647		40.8
Total Casualty	108,964		59.5		91,240		58.8		284,560		54.2		248,231		57.0

Other
Accident & Health	1,695		0.9		5,879		3.8		6,184		1.2		10,377		2.4
Financial	17,059		9.3		20,065		12.9		48,406		9.2		56,481		12.9
Marine	3,973		2.2		4,675		3.0		23,967		4.6		18,425		4.2
Other Specialty	18,443		10.1		13,266		8.6		66,695		12.8		43,457		10.0
Total Other	41,170		22.5		43,885		28.3		145,252		27.8		128,740		29.5
	$	183,074	100.0	%	$	155,146	100.0	%	$	524,472	100.0	%	$	435,812	100.0	%

Gross Premiums Written by Geographic Area of Risks Insured


	Three months ended September 30								Nine months ended September 30
	2023				2022				2023				2022
	($ in thousands)								($ in thousands)
U.S. and Caribbean	$	77,274	42.2	%	$	72,105	46.5	%	$	206,714	39.4	%	$	224,324	51.5	%
Worldwide (1)	88,037		48.1		79,512		51.3		269,430		51.4		196,197		45.0
Europe (2)	1,868		1.0		(1,797)		(1.2)		8,936		1.7		2,962		0.7
Asia	15,895		8.7		5,326		3.4		39,392		7.5		12,329		2.8
	$	183,074	100.0	%	$	155,146	100.0	%	$	524,472	100.0	%	$	435,812	100.0	%

(1) “Worldwide” is composed of contracts that reinsure risks in more than one geographic area and may include risks in the U.S.

(2) The negative balance represents the reversal of premiums due to premium adjustments, termination of contracts, or premium returned upon novation or commutation of contracts.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References to “we,” “us,” “our,” “our company,” or “the Company” refer to Greenlight Capital Re, Ltd. (“GLRE”) and its wholly-owned subsidiaries unless the context dictates otherwise. See Item 1, Note 1 of the unaudited condensed consolidated financial statements for list of our wholly-owned subsidiaries. References to our “ordinary shares” refer collectively to our Ordinary, Class A Ordinary, and Class B Ordinary shares.

The following discussion should be read in conjunction with the audited consolidated financial statements and accompanying notes, which appear in our 2022 Form 10-K.

The following is a discussion and analysis of our results of operations for the three and nine months ended September 30, 2023 and 2022 and financial condition at September 30, 2023 and December 31, 2022.

OVERVIEW

Business Overview

We are a global specialty property and casualty (re)insurer headquartered in the Cayman Islands, with an underwriting and investment strategy that we believe differentiates us from most of our competitors. Our goal is to build long-term shareholder value by providing risk management solutions to the insurance, reinsurance, and other risk marketplaces. We focus on delivering risk solutions to clients and brokers who value our expertise, analytics, and customer service offerings.

We aim to complement our 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. Our investment portfolio is managed according to a value-oriented philosophy, in which our investment advisor takes long positions in perceived undervalued securities and short positions in perceived overvalued securities.

Through Greenlight Re Innovations (“Innovations”), we support technology innovators in the (re)insurance market by providing investment capital, risk capacity, and access to a broad insurance network.

Because we seek to capitalize on favorable market conditions and opportunities, period-to-period comparisons of our underwriting results may not be meaningful. Also, our historical investment results are not necessarily indicative of future performance. Due to the nature of our reinsurance and investment strategies, our operating results will likely fluctuate from period to period.

The Company’s reinsurance subsidiaries hold an A.M. Best Financial Strength Rating of A- (Excellent) with a stable outlook, which was re-affirmed by A.M. Best on September 29, 2023.

Outlook and Trends

We operate in a business where we expect volatility in our underwriting result. In 2023, we have witnessed one of the costliest on record for U.S. severe storms, which contributed to our CAT losses during the first half of the year. In the third quarter we incurred additional CAT losses from a Mexican state-owned oil platform fire and two satellite loss events. Accordingly, our CAT incurred losses were $13.1 million and $29.5 million, net of reinsurance, for the three and nine months ended September 30, 2023, respectively.

While the global inflationary pressures have abated from their recent highs, we believe inflation continues to be a significant concern within the (re)insurance industry, as it can add uncertainty to the cost of claims, particularly for classes of business with long payout tails. As a result, it creates pricing challenges for new business and valuation challenges in claims reserves. We continue to manage these concerns and risks in multiple ways:

•Our underwriting strategy focuses on relatively short-tailed business, which is inherently less exposed to inflation than long-tailed lines. We estimate the payout duration of our existing reserves at less than three years.

•We incorporate inflation assumptions in all our pricing and reassess these assumptions frequently.

•We are minimizing our exposure to classes that are experiencing severe supply-chain-driven inflation.

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The rising interest rate environment has had a mixed impact on our financial results. Our term loan is partially exposed to fluctuations in the SOFR interest rate. While in 2022 we experienced losses driven by fixed-income securities held by the Lloyd’s syndicates in which we participate, we have seen a reversal of this in 2023 as maturing fixed-income securities are reinvested at higher yields. In addition, the higher interest rates have improved the yield on our restricted cash and cash equivalents. To the extent interest rates continue to increase, we expect to see these trends continue. The SILP portfolio is positioned to also benefit from an inflationary environment.

The combination of the recent significant loss events, continued social inflation, and rising interest rates led to a significant reduction in the amount of reinsurance capital available for deployment, which in turn led to attractive market conditions for 2023. We expect these conditions to continue into the 2024 January renewals. We are also encouraged by the growth of our innovations portfolio and continue to find innovative ways to foster our insurtech partnerships as part of our long term strategy.

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 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 financial 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 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. We repaid all outstanding convertible notes on August 1, 2023 without issuing any shares.

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.

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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, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 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)	$	575,865	$	561,121	$	510,041	$	503,120	$	466,952