Net income for the quarter of $34.8
million; Fully diluted book value per share increased 7.7%
in the quarter to $14.59
Greenlight Capital Re, Ltd. (NASDAQ: GLRE) (“Greenlight Re” or
the “Company”) today reported its financial results for the fourth
quarter and year ended December 31, 2022. The results included:
- A net income of $34.8 million, or $0.91 per diluted ordinary
share for the fourth quarter of 2022, compared to a net income of
$24.3 million, or $0.71 per diluted ordinary share, in the fourth
quarter of 2021;
- A combined ratio of 94.2%, compared to a combined ratio of
96.4% in the fourth quarter of 2021;
- Total investment income of $32.5 million, compared to total
investment income of $25.3 million in the fourth quarter of 2021;
and
- An increase in fully diluted book value per share in the for
the fourth quarter of 2022 of $1.04, or 7.7%, to $14.59.
The following summarizes the Company’s underwriting results for
the fourth quarters and years ended December 31, 2022 and 2021:
Three months ended December
31,
Year ended December
31,
2022
2021
2022
2021
($ in thousands)
Gross premiums written
$
127,359
$
125,144
$
563,171
$
565,393
Net premiums earned
111,385
135,880
469,477
539,279
Underwriting income (loss)
6,519
4,810
(10,686
)
(5,196
)
Combined ratio
94.2
%
96.4
%
102.3
%
100.9
%
Simon Burton, Chief Executive Officer of Greenlight Re, stated,
“The past twelve months represent a watershed for Greenlight Re. We
grew book value in 2022 amidst volatile investment and reinsurance
markets, and in 2023 we are experiencing some of the best
underwriting conditions we have ever seen. Our near to medium term
prospects are excellent.”
David Einhorn, Chairman of the Board of Directors, said,
“Greenlight Re had a very strong fourth quarter, with gains in both
underwriting and investing. The Solasglas fund returned 13.4%
during the quarter and 25.3% in 2022, our second-best result ever.
We are well-positioned going into 2023.”
Underwriting and Investment
Results
Fourth Quarter of 2022
Gross premiums written in the fourth quarter of 2022 were $127.4
million, compared to $125.1 million in the fourth quarter of 2021.
The $2.2 million increase, or 1.8%, relates primarily to growth in
personal property, general liability, and other specialty business,
including premiums underwritten by the Company’s Innovations
partners. This increase was partially offset by the Company’s
decision to reduce its exposure to personal motor and workers’
compensation risks.
Net premiums earned were $111.4 million during the fourth
quarter of 2022, a decrease from $135.9 million in the comparable
2021 period.
The Company recognized net underwriting income of $6.5 million
in the fourth quarter of 2022. By comparison, the equivalent period
in 2021 reported net underwriting income of $4.8 million.
The Company’s total investment income during the fourth quarter
of 2022 was $32.5 million. The Company’s Investment Portfolio,
managed by DME Advisors, returned 13.4%, representing income of
$30.4 million from the Solasglas fund. The Company reported $2.2
million of other investment income, primarily from interest earned
on its restricted cash and cash equivalents.
The Company incurred other non-underwriting income of $1.6
million during the fourth quarter of 2022, due primarily to foreign
exchange gains driven by the strengthening of the pound
sterling.
Year ended December 31, 2022
Gross written premiums were $563.2 million for the year ended
December 31, 2022, a decrease of $2.2 million, or 0.4%, compared to
the comparable 2021 period. The reduction in personal motor
premiums that drove the decrease was mostly offset by growth in
personal property, marine and energy, and other specialty
classes.
Net premiums earned were $469.5 million for the year ended
December 31, 2022, a decrease of $69.8 million, or 12.9%, compared
to the equivalent 2021 period.
The Company incurred a net underwriting loss for the year ended
December 31, 2022, of $10.7 million, which equates to a combined
ratio of 102.3%. The underwriting loss for the equivalent 2021
period was $5.2 million, representing a combined ratio of 100.9%.
The underwriting loss for the year ended December 31, 2022, was
driven primarily by $13.6 million of losses related to the
Russian-Ukrainian conflict and $25.7 million related to Hurricane
Ian, Typhoon Nanmadol, and wildfires in Tennessee. By comparison,
the underwriting loss for the equivalent 2021 period was driven by
losses from Hurricane Ida, winter storm Uri, European floods and
hailstorms, and South African riots.
Total investment income for the year ended December 31, 2022,
was $69.0 million, compared to income of $50.2 million earned
during the equivalent 2021 period. The investment income for the
year ended December 31, 2022, included $9.9 million of gains
recognized in connection with the Company’s Innovations-related
investments. The Company’s investment in the Solasglas fund
generated income of $54.8 million for the year ended December 31,
2022, compared to income of $18.1 million during the equivalent
2021 period.
Greenlight Capital Re, Ltd. Fourth
Quarter and Year-End 2022 Earnings Call
Greenlight Re will host a live conference call to discuss its
financial results on Thursday, March 9, 2023, 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=1592350&tp_key=f3e3ab288a
A telephone replay will be available following the call through
March 14, 2023. 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 13735400. 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 Form 10-K filed with the Securities Exchange Commission on
March 8, 2023. 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.
GREENLIGHT CAPITAL RE,
LTD.
CONSOLIDATED BALANCE
SHEETS (expressed in thousands of U.S. dollars, except per
share and share amounts)
December 31, 2022
December 31, 2021
Assets
Investments
Investment in related party investment
fund
$
178,197
$
183,591
Other investments
70,279
47,384
Total investments
248,476
230,975
Cash and cash equivalents
38,238
76,307
Restricted cash and cash equivalents
668,310
634,794
Reinsurance balances receivable (net of
allowance for expected credit losses)
505,555
405,365
Loss and loss adjustment expenses
recoverable (net of allowance for expected credit losses)
13,239
11,100
Deferred acquisition costs
82,391
63,026
Unearned premiums ceded
18,153
42
Other assets
6,019
5,885
Total assets
$
1,580,381
$
1,427,494
Liabilities and equity
Liabilities
Loss and loss adjustment expense
reserves
$
555,468
$
524,010
Unearned premium reserves
307,820
227,584
Reinsurance balances payable
105,135
91,224
Funds withheld
21,907
3,792
Other liabilities
6,397
7,164
Convertible senior notes payable
80,534
98,057
Total liabilities
1,077,261
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
478,439
481,784
Retained earnings (deficit)
21,199
(9,505
)
Total shareholders' equity
503,120
475,663
Total liabilities and equity
$
1,580,381
$
1,427,494
GREENLIGHT CAPITAL RE,
LTD.
CONSOLIDATED RESULTS OF
OPERATIONS (expressed in thousands of U.S. dollars, except
percentages and per share amounts)
Three months ended December
31
Year ended December 31
2022
2021
2022
2021
Underwriting revenue
Gross premiums written
$
127,359
$
125,144
$
563,171
$
565,393
Gross premiums ceded
(11,456
)
(35
)
(33,429
)
(41
)
Net premiums written
115,903
125,109
529,742
565,352
Change in net unearned premium
reserves
(4,518
)
10,771
(60,265
)
(26,073
)
Net premiums earned
$
111,385
$
135,880
$
469,477
$
539,279
Underwriting related expenses
Net loss and loss adjustment expenses
incurred
Current year
$
65,135
$
92,753
$
316,367
$
389,080
Prior year
(1,440
)
(12,851
)
118
(14,100
)
Net loss and loss adjustment expenses
incurred
63,696
79,902
316,485
374,980
Acquisition costs
37,047
38,900
143,148
144,960
Underwriting expenses
3,779
3,570
13,813
12,880
Deposit accounting and other reinsurance
expense (income)
344
8,698
6,717
11,655
Net underwriting income (loss)
$
6,519
$
4,810
$
(10,686
)
$
(5,196
)
Income (loss) from investment in related
party investment fund
$
30,370
$
22,283
$
54,844
$
18,087
Net investment income (loss)
2,161
3,066
14,139
32,065
Total investment income (loss)
$
32,531
$
25,349
$
68,983
$
50,152
Net underwriting and investment income
(loss)
$
39,050
$
30,159
$
58,297
$
44,956
Corporate expenses
$
5,100
$
4,459
$
17,793
$
16,489
Other (income) expense, net
(1,597
)
(196
)
11,777
880
Interest expense
790
1,579
4,201
6,263
Income tax expense (benefit)
7
13
(816
)
3,746
Net income (loss)
$
34,750
$
24,304
$
25,342
$
17,578
Earnings (loss) per share (Class A and
Class B)
Basic
$
1.02
$
0.72
$
0.75
$
0.51
Diluted
$
0.91
$
0.71
$
0.73
$
0.51
Underwriting ratios
Loss ratio - current year
58.5
%
68.3
%
67.4
%
72.1
%
Loss ratio - prior year
(1.3
)%
(9.5
)%
—
%
(2.6
)%
Loss ratio
57.2
%
58.8
%
67.4
%
69.5
%
Acquisition cost ratio
33.3
%
28.6
%
30.5
%
26.9
%
Composite ratio
90.5
%
87.4
%
97.9
%
96.4
%
Underwriting expense ratio
3.7
%
9.0
%
4.4
%
4.5
%
Combined ratio
94.2
%
96.4
%
102.3
%
100.9
%
The following tables present the Company’s net premiums earned
and underwriting ratios by line of business:
Three months ended December
31
Three months ended December
31
2022
2021
Property
Casualty
Other
Total
Property
Casualty
Other
Total
($ in thousands except
percentage)
Net premiums earned
$ 14,820
$ 64,498
$ 32,067
$ 111,385
$ 12,415
$ 90,649
$ 32,816
$ 135,880
Underwriting ratios
Loss ratio
82.6
%
70.9
%
17.9
%
57.2
%
99.2
%
63.1
%
31.7
%
58.8
%
Acquisition cost ratio
21.3
30.1
45.1
33.3
21.6
28.7
31.2
28.6
Composite ratio
103.9
%
101.0
%
63.0
%
90.5
%
120.8
%
91.8
%
62.9
%
87.4
%
Underwriting expense ratio
3.7
9.0
Combined ratio
94.2
%
96.4
%
Year ended December 31
Year ended December 31
2022
2021
Property
Casualty
Other
Total
Property
Casualty
Other
Total
($ in thousands except
percentage)
Net premiums earned
$ 52,397
$
289,820
$
127,260
$ 469,477
$
56,075
$
351,390
$
131,814
$
539,279
Underwriting ratios
Loss ratio
78.0
%
71.0
%
55.0
%
67.4
%
82.0
%
73.1
%
54.7
%
69.5
%
Acquisition cost ratio
22.2
29.0
37.4
30.5
21.3
26.6
30.0
26.9
Composite ratio
100.2
%
100.0
%
92.4
%
97.9
%
103.3
%
99.7
%
84.7
%
96.4
%
Underwriting expense ratio
4.4
4.5
Combined ratio
102.3
%
100.9
%
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:
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 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)
$
503,120
$
466,952
$
484,293
$
468,407
$
475,663
Denominator for basic and fully diluted
book value per share: (1)
Ordinary shares issued and outstanding as
presented in the Company’s consolidated balance sheets
34,824,061
34,824,061
34,721,231
34,721,231
33,844,446
Less: Unearned performance-based
restricted shares granted after December 31, 2021
(516,489
)
(539,161
)
(560,927
)
-581,593
—
Denominator for basic book value per
share
34,307,572
34,284,900
34,160,304
34,139,638
33,844,446
Add: In-the-money stock options,
service-based RSUs granted, and earned performance-based RSUs
granted
187,750
183,790
179,988
176,379
154,134
Denominator for fully diluted book value
per share
34,495,322
34,468,690
34,340,292
34,316,017
33,998,580
Basic book value per share
$
14.66
$
13.62
$
14.18
$
13.72
$
14.05
Increase (decrease) in basic book value
per share ($)
$
1.04
$
(0.56
)
$
0.46
$
(0.33
)
$
0.74
Increase (decrease) in basic book value
per share (%)
7.6
%
(3.9
) %
3.4
%
(2.3
) %
5.6
%
Fully diluted book value per share
$
14.59
$
13.55
$
14.10
$
13.65
$
13.99
Increase (decrease) in fully diluted book
value per share ($)
$
1.04
$
(0.55
)
$
0.45
$
(0.34
)
$
0.74
Increase (decrease) in fully diluted book
value per share (%)
7.7
%
(3.9
) %
3.3
%
(2.4
) %
5.6
%
(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 December 31, 2022, the aggregate number of unearned
restricted shares with performance conditions not included in the
“basic” and “fully diluted” denominators was 709,638 (September 30,
2022: 732,310, June 30, 2022: 754,076, March 31, 2022: 774,742,
December 31, 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 December
31
Year ended December 31
2022
2021
2022
2021
($ in thousands)
Income (loss) before income tax
$
34,757
$
24,317
$
24,526
$
21,324
Add (subtract):
Total investment (income) loss
(32,531
)
(25,349
)
(68,983
)
(50,152
)
Other non-underwriting (income)
expense
(1,597
)
(196
)
11,777
880
Corporate expenses
5,100
4,459
17,793
16,489
Interest expense
790
1,579
4,201
6,263
Net underwriting income (loss)
$
6,519
$
4,810
$
(10,686
)
$
(5,196
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230308005726/en/
Investor Relations Karin Daly Vice President, The Equity
Group Inc. (212) 836-9623 IR@greenlightre.ky
Greenlight Capital Re (NASDAQ:GLRE)
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