Greenlight Re(US:GLRE)2021-05-05 20:36PART I — FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2021, with accompanying detailed notes Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $1,422,112 | $1,357,650 | | Total Investments | $226,034 | $196,153 | | Cash and cash equivalents | $33,537 | $8,935 | | Restricted cash and cash equivalents | $697,689 | $745,371 | | Total Liabilities | $949,993 | $892,793 | | Loss and loss adjustment expense reserves | $512,843 | $494,179 | | Unearned premium reserves | $235,725 | $201,089 | | Total Shareholders' Equity | $472,119 | $464,857 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Account | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Gross premiums written | $169,935 | $109,787 | | Net premiums earned | $135,396 | $111,021 | | Total revenues | $150,420 | $75,945 | | Total expenses | $140,187 | $115,791 | | Net income (loss) | $6,499 | $(40,270) | | Diluted EPS | $0.19 | $(1.11) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(18,743) | $(31,770) | | Net cash provided by (used in) investing activities | $(4,337) | $8,034 | | Net increase (decrease) in cash | $(23,080) | $(23,858) | | Cash, cash equivalents and restricted cash at end of period | $731,226 | $744,048 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial performance, highlighting a return to profitability driven by strong investment results despite an underwriting loss Key Financial Measures and Non-GAAP Measures The company's fully diluted book value per share increased by 0.5% in Q1 2021, with non-GAAP measures like adjusted combined ratio and net underwriting income used for performance evaluation Book Value Per Share Performance | Metric | March 31, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Basic book value per share | $13.55 | $13.47 | 0.6% | | Fully diluted book value per share | $13.49 | $13.42 | 0.5% | Adjusted Combined Ratio Reconciliation | Ratio Component | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Combined ratio (GAAP) | 101.5% | 98.9% | | Prior-year development | (0.2)% | 3.5% | | Catastrophes (Texas winter storms) | 3.4% | —% | | Other adjustments | 2.2% | —% | | Adjusted combined ratio (Non-GAAP) | 96.1% | 95.4% | Net Underwriting Income (Loss) Reconciliation (in thousands) | Line Item | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Income (loss) before income tax | $10,233 | $(39,846) | | Less: Total investment income (loss) | $(18,674) | $35,289 | | Less: Other non-underwriting items | $703 | $394 | | Less: Corporate & Interest expenses | $5,748 | $5,419 | | Net underwriting income (loss) | $(1,990) | $1,256 | Results of Operations The company achieved a net income of $6.5 million in Q1 2021, driven by strong investment income despite an underwriting loss impacted by winter storms Gross Premiums Written by Segment (in thousands) | Segment | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Property | $14,915 | $14,159 | 5.3% | | Casualty | $113,674 | $61,563 | 84.6% | | Other | $41,346 | $34,065 | 21.4% | | Total | $169,935 | $109,787 | 54.8% | Underwriting Ratios by Segment (Q1 2021 vs Q1 2020) | Ratio | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Loss ratio | 72.2% | 68.2% | | Acquisition cost ratio | 24.7% | 28.6% | | Composite ratio | 96.9% | 96.8% | | Underwriting expense ratio | 4.6% | 2.1% | | Combined ratio | 101.5% | 98.9% | - The underwriting loss of $2.0 million was primarily due to the Texas winter storms, which contributed 3.4% to the composite ratio, and losses on deposit-accounted contracts159 Total Investment Income (Loss) (in thousands) | Component | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net investment related income (loss) | $14,650 | $6,837 | | Income (loss) from SILP | $4,024 | $(42,126) | | Total investment income (loss) | $18,674 | $(35,289) | - A realized gain of $14.2 million (pre-tax) was recorded from the sale of the company's investment in AccuRisk during Q1 2021177 Financial Condition Total investments and shareholders' equity increased in Q1 2021, while gross loss reserves also rose, with the company's PML estimated at $87.7 million - Total investments increased by $29.8 million (15.2%) to $226.0 million at March 31, 2021, primarily due to net contributions into the SILP investment fund from released collateral184 - Gross loss and loss adjustment expense reserves increased by $18.7 million (3.8%) to $512.8 million during the first quarter of 2021191 Probable Maximum Loss (PML) at 1-in-250 Year Return Period (April 1, 2021) | Zone | Single Event Loss (in thousands) | Aggregate Loss (in thousands) | | :--- | :--- | :--- | | United States, Canada and the Caribbean | $87,692 | $102,617 | | Europe | $44,379 | $51,054 | | Japan | $44,909 | $48,198 | | Rest of the world | $47,241 | $51,060 | | Maximum | $87,692 | $112,879 | Liquidity and Capital Resources The company's liquidity is supported by premium receipts and investment income, with a $275.0 million letter of credit facility and ongoing share repurchase plans - Net cash used in operating activities was $18.7 million for Q1 2021, compared to $31.8 million for Q1 2020201 - The company has a letter of credit facility with an aggregate capacity of $275.0 million and provided total collateral of $696.6 million to cedents as of March 31, 2021206 - The Board extended the share repurchase plan to June 30, 2021, authorizing the repurchase of up to 5.0 million Class A shares and $25.0 million of convertible notes; no shares were repurchased in Q1 2021210212 - On May 4, 2021, the Board approved a new share repurchase plan effective July 1, 2021, authorizing the purchase of up to $25 million of Class A ordinary shares211249 Quantitative and Qualitative Disclosures about Market Risk The company is exposed to various market risks, primarily through its SILP fund investment, with sensitivity analyses provided for equity, commodity, and foreign currency exposures - A hypothetical 10% decline in the price of each underlying listed equity security and equity-based derivative instrument would result in a $4.6 million loss to the Investment Portfolio224 Impact of 10% Change in Commodity Prices on Investment Portfolio (in millions) | Commodity | 10% Increase | 10% Decrease | | :--- | :--- | :--- | | Gold | $1.7 | $(1.7) | | Silver | $0.4 | $(0.4) | | Total | $2.1 | $(2.1) | - The company's primary foreign currency exposure is to the British Pound (GBP), with a net asset balance of £13.1 million; a 10% strengthening of the U.S. dollar against the GBP would result in an estimated $1.8 million foreign exchange loss230 - A 100 basis point increase or decrease in interest rates would have no meaningful impact on the value of the Investment Portfolio as of March 31, 2021234 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures are effective as of the end of the period covered by the report239 - There were no changes in the Company's internal control over financial reporting during the fiscal quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting242 PART II — OTHER INFORMATION Legal Proceedings The company is involved in normal course legal disputes, but management does not anticipate any material adverse effects on its financial condition or operations - The company does not believe that any of its existing contractual disputes, when finally resolved, will have a material adverse effect on its business, financial condition or operating results245 Risk Factors No material changes to risk factors have occurred since the Form 10-K filing for the fiscal year ended December 31, 2020 - As of the date of this report, there have been no other material changes to the risk factors as disclosed in the Form 10-K filed on March 10, 2021247 Unregistered Sales of Equity Securities and Use of Proceeds The company details its share and note repurchase plans, including an extended plan through June 2021 and a new plan effective July 2021, with no repurchases in Q1 2021 - There were no repurchases of Class A ordinary shares or Notes during the three months ended March 31, 2021250 - On May 4, 2021, the Board approved a new share repurchase plan effective from July 1, 2021, to June 30, 2022, authorizing the purchase of up to $25 million of Class A ordinary shares249 Defaults Upon Senior Securities No defaults upon senior securities were reported - None251 Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Not applicable252 Other Information No other material information was reported - None252 Exhibits This section lists exhibits filed with the Form 10-Q, including partnership agreements, CEO/CFO certifications, and Inline XBRL data files - Exhibit 10.1: Second Amended and Restated Exempted Limited Partnership Agreement of Solasglas Investments, LP, dated as of January 7, 2021254 - Exhibits 31.1, 31.2, 32.1, 32.2: Certifications of the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act254