What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-03 compared with 2021-05-05 · 257 added, 169 removed, 402 unchanged (51% of the section changed)

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References to our “Ordinary Shares” refer collectively to our Class A Ordinary Shares and Class B Ordinary Shares.

The following is a discussion and analysis of our results of operations for the three months ended March 31, 2021 and 2020 and financial condition at March 31, 2021 and December 31, 2020.

The following is a discussion and analysis of our results of operations for the three and six months ended June 30, 2021 and 2020 and financial condition at June 30, 2021 and December 31, 2020.

The following discussion should be read in conjunction with the audited consolidated financial statements and accompanying notes, which appear in our annual report on Form 10-K for the fiscal year ended December 31, 2020.

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We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of 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 on which they were made.

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.

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Outlook and Trends

January 1st is a key renewal date for the global reinsurance industry, and in the first quarter of 2021 we saw improved rates in most of the classes of business we wrote.

A hardening market enabled us to selectively expand our specialty book while taking advantage of improved rates.

Our in-force portfolio reflects increased diversification across the classes of business we write and a lower concentration risk to individual counterparties.

We wrote significantly more premium in the first quarter of 2021 than we did in the comparable 2020 period.

In the first half of 2021 we saw improved rates in most of the classes of business we wrote which enabled us to selectively expand our specialty book while taking advantage of improved rates.

Our in-force portfolio reflects increased diversification across the classes of business we write and a lower concentration risk to individual counterparties than at any time in our history.

We wrote significantly more premium in the first half of 2021 than we did in the comparable 2020 period.

The largest area of growth was in support of various Lloyd’s syndicates, an institution that we believe is ideally situated to respond to the insurance market dislocation.

Improved market conditions also drove our expanded participation in marine and other specialty classes.

The increases in our motor and workers’ compensation classes of business resulted mainly from the growth of several partners who cede business to us via quota share arrangements.

However, we expect to see a decrease in these classes of business as the contracts come up for renewal over the coming year.

During the first quarter of 2021, we reduced the amount of property catastrophe business we wrote.

Our exposure to motor business increased during the past several quarters, as we saw an opportunity to benefit from relatively favorable claim frequency.

However, as more workers in the U.S.

return to pre-pandemic commuting routines, we are expecting claim frequency to increase.

We believe that the increase in claims frequency, combined with increased interest from other reinsurers, will cause motor business to become less profitable.

As a result, we have taken steps to reduce our motor exposure over the next six to twelve months.

We believe the workers’ compensation class will likely experience a similar post-pandemic increase in claim frequency, despite the underlying premium rates trending flat to slightly down.

We still see areas of opportunity but our overall exposure to the class is likely to reduce in future quarters.

During the first half of 2021, we reduced the amount of “pure catastrophe” business we wrote.

Although catastrophe premium rates did increase as compared to the January 1, 2020, renewals, in our view these increases were not sufficient to compensate reinsurers for the risks associated with this business as compared to other classes.

As a result, we reduced our exposure from “pure catastrophe” contracts.

However, as this reduction has been offset by our increased incidental exposure from specialty classes of business, our overall exposure to catastrophe events has remained largely consistent with last year.

By reducing our property, motor, and workers’ compensation exposure we plan to free up capacity to support underwriting opportunities generated from our Innovations unit and the specialty class, which we believe will produce higher margins.

Key Financial Measures and Non-GAAP Measures

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Our primary financial goal is to increase fully diluted book value per share over the long term.

The following table presents the basis and fully diluted book value per share for the recent periods:

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March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020

The following table presents the basis and fully diluted book value per share for the recent periods:

June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020

($ in thousands, except per share and share amounts)

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(1) All unvested restricted shares, including those with performance conditions, are included in the “basic” and “fully diluted” denominators.

At March 31, 2021, the number of unvested restricted shares with performance conditions was 193,149 (at December 31, 2020:

At June 30, 2021, the number of unvested restricted shares with performance conditions was 193,149 (at March 31, 2021:

193,149, December 31, 2020:

193,149, September 30, 2020:

429,444, June 30, 2020:

501,989, March 31, 2020:

Management also uses certain key financial measures, some of which are not prescribed under U.S.

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We believe this adjusted non-GAAP measure provides management and financial statement users with a better understanding of the factors influencing our underwriting results.

In calculating the adjusted combined ratio, we exclude underwriting losses attributable to (i) prior accident-year reserve development, (ii) catastrophe losses, and (iii) certain significant, infrequent loss events.

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In calculating the adjusted combined ratio, we exclude underwriting income and losses attributable to (i) prior accident-year reserve development, (ii) catastrophe events, and (iii) other significant infrequent adjustments.

Prior accident-year reserve development, which can be favorable or unfavorable, represents changes in our estimates of losses and loss adjustment expenses associated with loss events that occurred in prior years.

We believe a discussion of current accident-year performance, which excludes prior accident-year reserve development, is helpful since it provides more insight into current underwriting performance.

By their nature, catastrophe losses and other significant, infrequent loss events are not representative of the type of loss activity that we would expect to occur in every period.

By their nature, catastrophe events and other significant infrequent adjustments are not representative of the type of loss activity that we would expect to occur in every period.

We believe an adjusted combined ratio that excludes the effects of these items aids in understanding the underlying trends and variability in our underwriting results that these items may obscure.

The following table reconciles the combined ratio to the adjusted combined ratio:

Three months ended March 31

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

Combined ratio 96.5 % 101.2 % 99.0 % 100.0 %

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Prior-year development 2.7 % 1.0 % 1.3 % 2.3 %

Catastrophes 3.4 % — %

Catastrophes (current year) 0.8 % — % 2.1 % — %

Other adjustments — % 5.5 % 1.1 % 2.7 %

Adjusted combined ratio 93.0 % 94.7 % 94.5 % 95.0 %

1 In the periods presented, “Other adjustments” represents interest income and expense on deposit-accounted contracts due to changes in the associated estimated ultimate cash flows.

• For the three and six months ended June 30, 2021, the caption “Prior-year development” includes development on losses relating to the COVID-19 pandemic.

• The caption “Catastrophes (current year)” includes events that occur during a given period, as well as current-period development on catastrophe events occurring earlier in the fiscal year.

• The caption “Other adjustments” represents, for the six months ended June 30, 2021, interest income and expense on deposit-accounted contracts due to changes in the associated estimated ultimate cash flows and, for the three and six months ended June 30, 2020, losses relating to the COVID-19 pandemic.

Net Underwriting Income (Loss)

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We do not use premiums written as a measure of performance.

Net underwriting income (loss) is a performance measure used by management to measure the fundamentals underlying the Company’s underwriting operations.

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.

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(3) corporate general and administrative expenses;

(4) interest expense and (5) income taxes.

and (4) interest expense.

We exclude total investment income or loss and foreign exchange gains or losses as we believe these items are influenced by market conditions and other factors not related to underwriting decisions.

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Net underwriting income (loss) should not be viewed as a substitute for U.S.

GAAP net income.

GAAP net income before income taxes.

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GAAP financial measure) on a consolidated basis are shown below:

Three months ended March 31

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

($ in thousands)

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Results of Operations

The table below summarizes our operating results for the three months ended March 31, 2021 and 2020:

Three months ended March 31

The table below summarizes our operating results for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

(in thousands, except percentages)

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Deposit accounting and other reinsurance expense (income) (28) (645) 2,919 (1,252)

Underwriting income (loss) $ (1,990) $ 1,256

Net underwriting income (loss) $ 4,562 $ (1,306) $ 2,572 $ (50)

Income (loss) from investment in related party investment fund $ (2,006) $ 1,609 $ 2,018 $ (40,517)

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Combined ratio 96.5 % 101.2 % 99.0 % 100.0 %

* The net favorable (adverse) financial impact associated with changes in the estimate of losses incurred in prior years was $0.2 million and $(3.9) million for the three months ended March 31, 2021 and 2020, respectively, and incorporates earned reinstatement premiums assumed and ceded, and adjustments to assumed and ceded acquisition costs.

Three months ended March 31, 2021 and 2020

For the three months ended March 31, 2021, fully diluted book value per share increased by $0.07 per share, or 0.5%, to $13.49 per share from $13.42 per share at December 31, 2020.

For the three months ended March 31, 2021, basic book value per share increased by $0.08 per share, or 0.6%, to $13.55 per share from $13.47 per share at December 31, 2020.

For the three months ended March 31, 2021, net income was $6.5 million, compared to a net loss of $40.3 million reported for the equivalent 2020 period.

* The net financial impact associated with changes in the estimate of losses incurred in prior years, which incorporates earned reinstatement premiums assumed and ceded, and adjustments to assumed and ceded acquisition costs, was a loss of $3.6 million and $1.1 million for the three months ended June 30, 2021 and 2020, respectively, and a loss of $3.4 million and $5.0 million, for the six months ended June 30, 2021 and 2020, respectively.

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The developments that most significantly affected our financial performance during the three months ended March 31, 2021, compared to the equivalent 2020 period, are summarized below:

Three months ended June 30, 2021 and 2020

For the three months ended June 30, 2021, the fully diluted book value per share increased by $0.11 per share, or 0.8%, to $13.60 per share from $13.49 per share at March 31, 2021.

For the three months ended June 30, 2021, the basic book value per share increased by $0.11 per share, or 0.8%, to $13.66 per share from $13.55 per share at March 31, 2021.

For the three months ended June 30, 2021, net income was $0.6 million, compared to a net loss of $0.1 million reported for the equivalent 2020 period.

The developments that most significantly affected our financial performance during the three months ended June 30, 2021, compared to the equivalent 2020 period, are summarized below:

• Underwriting:

The underwriting loss for the three months ended March 31, 2021 was $2.0 million.

By comparison, the underwriting income for the same period in 2020 was $1.3 million.

The underwriting loss was primarily due to the Texas winter storms during the first quarter of 2021, and losses associated with deposit-accounted contracts.

Our overall composite ratio was 96.9% for the three months ended March 31, 2021, compared to 96.8% for the same period in 2020.

The Texas winter storms contributed 3.4% to the composite ratio for the three months ended March 31, 2021.

The underwriting income for the three months ended June 30, 2021 was $4.6 million.

By comparison, the equivalent period in 2020 reported an underwriting loss of $1.3 million.

The increase in underwriting income was due primarily to the comparative period being impacted by COVID-19 pandemic losses.

Our overall combined ratio was 96.5% for the three months ended June 30, 2021, compared to 101.2% during the equivalent 2020 period.

The net impact of changes in the estimate of losses incurred in prior years contributed 2.7% to the combined ratio for three months ended June 30, 2021.

• Investments:

Our total investment income for the three months ended March 31, 2021, was $18.7 million compared to our total investment loss of $35.3 million incurred during the equivalent 2020 period.

The investment income for the three months ended March 31, 2021 was due primarily to a gain realized on the sale of our investment in AccuRisk.

Additionally, our investment in SILP reported a gain of $4.0 million for the three months ended March 31, 2021, compared to a loss of $42.1 million during the equivalent 2020 period.

Our total investment income for the three months ended June 30, 2021 was $2.0 million compared to total investment income of $5.5 million reported for the same period in 2020.

The decrease was due primarily to lower investment return on our investment in SILP during the three months ended June 30, 2021, compared to the same period in 2020.

Six months ended June 30, 2021 and 2020

For the six months ended June 30, 2021, fully diluted book value per share increased by $0.18 per share, or 1.3%, to $13.60 per share from $13.42 per share at December 31, 2020.

For the six months ended June 30, 2021, basic book value per share increased by $0.19 per share, or 1.4%, to $13.66 per share from $13.47 per share at December 31, 2020.

For the six months ended June 30, 2021, net income was $7.1 million, compared to a net loss of $40.3 million reported for the equivalent 2020 period.

The developments that most significantly affected our financial performance during the six months ended June 30, 2021, compared to the equivalent 2020 period, are summarized below:

• Underwriting:

The underwriting income for the six months ended June 30, 2021 was $2.6 million.

By comparison, the underwriting loss for the same period in 2020 was $0.1 million.

The higher underwriting income was due primarily to the comparative period being impacted by COVID-19 pandemic losses.

The higher underwriting income was partially offset by (i) losses from the winter storm Uri during the first quarter of 2021, (ii) losses associated with deposit-accounted contracts and (iii) the net financial impact of prior-year loss development.

Our overall combined ratio was 99.0% for the six months ended June 30, 2021, compared to 100.0% for the same period in 2020.

The winter storm Uri contributed 2.1% to the combined ratio for the six months ended June 30, 2021.

• Investments:

Our total investment income for the six months ended June 30, 2021, was $20.7 million compared to our total investment loss of $29.7 million incurred during the equivalent 2020 period.

The investment income for the six months ended June 30, 2021 was due primarily to a gain realized on the sale of our investment in AccuRisk.

Additionally, our investment in SILP reported a gain of $2.0 million for the six months ended June 30, 2021, compared to a loss of $40.5 million during the equivalent 2020 period.

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Underwriting results

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Details of gross premiums written are provided in the following table:

Three months ended March 31

($ in thousands)

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Property $ 16,508 11.7 % $ 13,551 11.6 % $ 31,423 10.1 % $ 27,710 12.2 %

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As a result of our underwriting philosophy, the total premiums we write, as well as the mix of premiums between property, casualty, and other business, may vary significantly from period to period depending on the market opportunities that we identify.

For the three months ended June 30, 2021, our gross premiums written increased by $24.9 million, or 21.3%, compared to the equivalent 2020 period.

The primary drivers for this change are the following:

Gross Premiums Written

Three months ended June 30, 2021

Increase (decrease)

($ in millions) % change Explanation

Property $3.0 21.8% The increase in property gross premiums written during the three months ended June 30, 2021 over the comparable 2020 period was partially related to new commercial property contracts, and partially to motor contracts.

Effective July 1, 2021, we did not renew a quota share motor contract and decreased our share on another motor contract.

As part of our strategy to diversify premiums between classes of business, we expect our motor premiums to decrease in future periods.

Casualty $27.8 37.2% The increase in casualty gross premiums written during the three months ended June 30, 2021 over the comparable 2020 period was due primarily to an increase in Lloyd’s syndicate multi-line quota share contracts written during 2021.

To a lesser extent, the increase in casualty gross premiums written related to higher motor premiums.

The increase in casualty premiums was partially offset by workers’ compensation business.

Other $(5.9) (20.8)% The decrease in “other” gross premiums written during the three months ended June 30, 2021 over the comparable 2020 period was primarily related to certain crop contracts not renewed during 2021.

To a lesser extent the decrease in other premiums related to health contracts.

The decrease in other gross premiums written was partially offset by an increase in premiums relating to financial lines.

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For the three months ended March 31, 2021, our gross premiums written increased by $60.1 million, or 54.8%, compared to the equivalent 2020 period.

For the six months ended June 30, 2021, our gross premiums written increased by $85.0 million, or 37.5%, compared to the equivalent 2020 period.

The primary drivers of this change are as follows:

Gross Premiums Written

Three months ended March 31, 2021

Six months ended June 30, 2021

Increase (decrease)

($ in millions) % change Explanation

Property $0.8 5.3% The increase in property gross premiums written during the first three months of 2021 over the comparable 2020 period was primarily related to motor contracts where underlying business written was higher in the first quarter of 2021 compared to the same period in 2020.

Casualty $52.1 84.6% The increase in casualty gross premiums written during the first three months of 2021 over the comparable 2020 period was due primarily to an increase in Lloyd’s syndicate multi-line quota share contracts written during 2021, and an increase in motor and workers’ compensation business.

Other $7.3 21.4% The increase in “other” gross premiums written during the first three months of 2021 over the comparable 2020 period was primarily attributable to new contracts relating to marine, energy, and other specialty lines.

Property $3.7 13.4% The increase in property gross premiums written during the first half of 2021 over the comparable 2020 period was primarily related to motor contracts where underlying business written was higher in the first half of 2021 compared to the same period in 2020.

Effective July 1, 2021, we did not renew a quota share motor contract and decreased our share on another motor contract.

As part of our strategy to diversify premiums between classes of business, we expect our motor premiums to decrease in future periods.

Casualty $80.0 58.6% The increase in casualty gross premiums written during the first half of 2021 over the comparable 2020 period was due primarily to an increase in Lloyd’s syndicate multi-line quota share contracts written during 2021.

To a lesser extent, we also experienced an increase in motor and general liability business.

For the reasons explained above, we expect our motor premiums to decrease in future periods.

Other $1.4 2.2% The increase in “other” gross premiums written during the first half of 2021 over the comparable 2020 period was primarily attributable to new contracts relating to financial lines, marine, energy, and other specialty lines.

The hardening market enabled us to selectively expand our specialty book while taking advantage of improved rates.

A decrease in health premiums partially offset the increase as we lowered our participation in a quota share contract upon renewal in 2021.

A decrease in health and crop premiums partially offset the increase as we lowered our participation in these lines in 2021.

Premiums Ceded

For the three months ended March 31, 2021, premiums ceded were negative $0.1 million, compared to $0.7 million for the three months ended March 31, 2020.

The negative premiums ceded for the three months ended March 31, 2021, resulted primarily from premium adjustments on contracts retroceded in prior periods.

For the three and six months ended June 30, 2021, premiums ceded were $0.0 million and (0.1) million, respectively, compared to $0.1 million and $0.8 million for the three and six months ended June 30, 2020, respectively.

The negative premiums ceded for the six months ended June 30, 2021, resulted primarily from premium adjustments on contracts retroceded in prior periods.

We have not entered into any retrocession contracts during 2021.

In general, we use retrocessional coverage to manage our net portfolio exposure, leverage areas of expertise, and improve our strategic position in meeting the needs of clients and brokers.

In general, we use retrocessional coverage to manage our net portfolio exposure, to leverage areas of expertise and to improve our strategic position in meeting the needs of clients and brokers.

Net Premiums Written

Details of net premiums written are provided in the following table:

Three months ended March 31

($ in thousands)

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Property $ 16,506 11.7 % $ 13,641 11.7 % $ 31,462 10.1 % $ 27,620 12.2 %

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Total $ 141,578 100.0 % $ 116,557 100.0 % $ 311,568 100.0 % $ 225,666 100.0 %

For the three months ended March 31, 2021, net premiums written increased by $60.9 million, or 55.8%, compared to the three months ended March 31, 2020.

For the three and six months ended June 30, 2021, net premiums written increased by $25.0 million, or 21.5%, and $85.9 million, or 38.1%, respectively, compared to the three and six months ended June 30, 2020.

The movement in net premiums written resulted from the changes in gross premiums written and ceded during the periods.

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Details of net premiums earned are provided in the following table:

Three months ended March 31

($ in thousands)

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Property $ 14,761 11.1 % $ 14,257 13.2 % $ 28,916 10.8 % $ 29,066 13.2 %

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Details of net losses incurred are provided in the following table:

Three months ended March 31

($ in thousands)

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Property $ 7,261 8.4 % $ 10,323 11.6 % $ 18,646 10.1 % $ 19,795 12.0 %

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Total $ 86,957 100.0 % $ 89,194 100.0 % $ 184,678 100.0 % $ 164,891 100.0 %

The below table summarizes the loss ratios for the three months ended March 31, 2021 and 2020:

Three months ended March 31

2021 2020 Increase / (decrease) in loss ratio points

The below table summarizes the loss ratios for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30 Six months ended June 30

2021 2020 Increase / (decrease) in loss ratio points 2021 2020 Increase / (decrease) in loss ratio points

Property 49.2 % 72.4 % (23.2) 64.5 % 68.1 % (3.6)

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The changes in net losses incurred and loss ratios during the three months ended March 31, 2021 were attributable to the following:

The changes in net losses incurred for the three months ended June 30, 2021 as compared to the equivalent 2020 period were attributable to the following:

Net Losses Incurred

Three months ended March 31, 2021

Three months ended June 30, 2021

Increase (decrease)

($ in millions) Increase / (decrease) in loss ratio points Explanation

Property $1.9 16.4 The increase in property losses incurred during the three months ended March 31, 2021, compared to the equivalent 2020 period, related primarily to catastrophe losses from the Texas winter storm Uri.

Losses relating to the winter storm Uri contributed to the 16.4 percentage point increase in the property loss ratio during the three months ended March 31, 2021, compared to the equivalent 2020 period.

Casualty $16.7 1.0 The increase in casualty losses incurred during the three months ended March 31, 2021, as compared to the equivalent 2020 period related primarily to:

• an increase in new business;

Property $(3.1) (23.2) The decrease in property losses incurred during the three months ended June 30, 2021, over the comparable 2020 period, was due primarily to:

• favorable development on prior catastrophe events;

• the comparable period included COVID-19 pandemic related business interruption claims.

The decrease in property losses was partially offset by an increase in the motor line which, in the comparable 2020 period, had benefited from a lower level of losses during the shelter-in-place orders in the U.S.

During the three months ended June 30, 2021, the property loss ratio decreased 23.2 percentage points for reasons consistent with those driving the decrease in losses incurred noted above.

Casualty $16.5 5.7 The increase in losses incurred during the three months ended June 30, 2021, over the comparable 2020 period was due primarily to:

• an increase in the volume of motor, workers’ compensation and Lloyd’s business;

• favorable loss development recorded in the comparable 2020 period on professional liability contracts;

• a lower level of motor losses reported in the comparable 2020 period due to the shelter-in-place orders in the U.S.

The casualty loss ratio increased 5.7 percentage points during the three months ended June 30, 2021 over the comparable 2020 period for reasons consistent with those driving the increase in losses incurred noted above.

Other $(15.7) (75.7) The decrease in “other” losses incurred during the three months ended June 30, 2021 over the equivalent 2020 period was due primarily to:

• favorable loss development on a mortgage contract relating to the COVID-19 pandemic, and

• the prior period included loss estimates relating to COVID-19 pandemic.

The above factors contributed to the other loss ratio decreasing 75.7 percentage points during the three months ended June 30, 2021 over the comparable 2020 period.

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The changes in net losses incurred and loss ratios during the six months ended June 30, 2021 were attributable to the following:

Net Losses Incurred

Six months ended June 30, 2021

Increase (decrease)

($ in millions) Increase / (decrease) in loss ratio points Explanation

Property $(1.1) (3.6) The decrease in property losses incurred during the first half of 2021, over the comparable 2020 period, was due primarily to favorable development on prior catastrophe events.

The decrease was partially offset by losses relating to the winter storm Uri and an increase in motor losses which, in the comparable 2020 period, had benefited from a lower level of losses during the shelter-in-place order in the U.S.

During the first half of 2021, the property loss ratio decreased 3.6 percentage points for reasons consistent with those driving the decrease in losses incurred noted above.

Casualty $33.3 3.3 The increase in casualty losses incurred during the first half of 2021, over the comparable 2020 period, was due primarily to:

• losses from the winter storm Uri on certain multi-line contracts;

The winter storm Uri was the primary driver of the 1.0 percentage point increase in the casualty loss ratio during the three months ended March 31, 2021, compared to the equivalent 2020 period.

Other $3.4 4.3 The increase in “Other” losses incurred during the three months ended March 31, 2021, as compared to the equivalent 2020 period related primarily to:

• a satellite loss occurring during the first quarter of 2021;

• increase in premiums earned on specialty health, marine, energy, and other specialty contracts.

The primary drivers of the 4.3 percentage points increase in loss ratio during the three months ended March 31, 2021, as compared to the equivalent 2020 period, were the satellite loss noted above and a shift in the mix of business from financial lines towards specialty lines, which generally incorporates a higher loss ratio.

• an increase in the motor, workers’ compensation and Lloyd’s business;

• a lower level of motor losses reported in the comparable 2020 period due to the shelter-in-place orders in the U.S.

During the first half of 2021, the casualty loss ratio increased 3.3 percentage point over the comparable 2020 period for reasons consistent with those driving the increase in losses incurred noted above.

Other $(12.3) (32.2) The decrease in other losses incurred during the first half of 2021, over the comparable 2020 period, was due primarily to:

• favorable development on a mortgage contract relating to the COVID-19 pandemic losses;

• the prior period included loss estimates relating to COVID-19 pandemic.

The decrease in losses incurred was partially offset by increases related primarily to:

• a satellite loss occurring during 2021;

• increase in volume of specialty health, marine, energy, and other specialty business.

The primary drivers of the 32.2 percentage points were consistent with those driving the decrease in losses incurred noted above.

See Note 5 of the accompanying condensed consolidated financial statements for additional discussion of our reserving techniques and prior period development of net claims and claim expenses.

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Acquisition Costs, Net

Details of acquisition costs are provided in the following table:

Three months ended March 31

($ in thousands)

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Property $ 3,282 8.7 % $ 2,977 16.6 % $ 6,082 8.6 % $ 5,862 11.8 %

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Total $ 37,631 100.0 % $ 17,903 100.0 % $ 71,012 100.0 % $ 49,642 100.0 %

The acquisition cost ratios for the three months ended March 31, 2021 and 2020, were as follows:

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Three months ended March 31

2021 2020 Increase / (decrease)

The acquisition cost ratios for the six months ended June 30, 2021 and 2020, were as follows:

Three months ended June 30 Six months ended June 30

2021 2020 Increase / (decrease) 2021 2020 Increase / (decrease)

Property 22.2 % 20.9 % 1.3 % 21.0 % 20.2 % 0.8 %

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Total 28.4 % 16.5 % 11.9 % 26.5 % 22.6 % 3.9 %

The changes in the acquisition cost ratios during the three months ended March 31, 2021, compared to the same period in 2020, were attributable to the following:

The changes in the acquisition cost ratios for the three months ended June 30, 2021, compared to the same period in 2020, were attributable to the following:

Change in Acquisition Cost Ratios

Three months ended March 31, 2021

Three months ended June 30, 2021

Increase / (decrease) in acquisition cost ratio points Explanation

Property 0.3 There was no significant change in the property acquisition cost ratio during the three months ended March 31, 2021 over the comparable 2020 period.

Casualty (2.1) The casualty acquisition cost ratio decreased during the three months ended March 31, 2021 over the comparable 2020 period.

Property 1.3 The increase in the property acquisition cost ratio during the three months ended June 30, 2021 over the comparable 2020 period was due primarily to growth in certain quota share commercial property contracts with higher ceding commissions than our other property contracts.

Casualty (2.3) The decrease in the casualty acquisition cost ratio during the three months ended June 30, 2021 over the comparable 2020 period was due primarily to favorable ceding commission adjustments on workers’ compensation contracts that experienced adverse loss development during the first quarter of 2021.

Other 56.6 The increase in the “other” acquisition cost ratio during the three months ended June 30, 2021 over the comparable 2020 period was due to profit commissions on a mortgage contract, offsetting most of the corresponding decrease in loss reserves relating to the COVID-19 pandemic.

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The changes in the acquisition cost ratios during the six months ended June 30, 2021, compared to the equivalent period in 2020, were attributable to the following:

Change in Acquisition Cost Ratios

Six months ended June 30, 2021

Increase / (decrease) in acquisition cost ratio points Explanation

Property 0.8 There was no significant change in the property acquisition cost ratio during the first half of 2021 over the comparable 2020 period.

Casualty (2.2) The casualty acquisition cost ratio decreased during the first half of 2021 over the comparable 2020 period.

The decrease related to favorable ceding commission adjustments on workers’ compensation contracts that experienced adverse loss development during the first quarter of 2021.

Other (10.5) The decrease in the “other” acquisition cost ratio during the three months ended March 31, 2021, over the comparable 2020 period was due to a shift in the mix of business towards non-proportional specialty business during the first three months of 2021.

Other 19.9 The increase in the “other” acquisition cost ratio during the first half of 2021, over the comparable 2020 period was due to profit commissions that were previously reversed during 2020 as a result of COVID-19 losses.

The increase was partially offset by shift in the mix of business towards non-proportional specialty business during the first half of 2021.

This business incorporates relatively lower commission rates as compared to proportional health and financial lines business.

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The following table provides our underwriting ratios by line of business:

Three months ended March 31 Three months ended March 31

Three months ended June 30 Three months ended June 30

Property Casualty Other Total Property Casualty Other Total

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Combined ratio 96.5 % 101.2 %

The increase in underwriting expense ratio for three months ended March 31, 2021, compared to the equivalent 2020 period, was primarily due to interest expense on deposit-accounted contracts based on revised expectations of ultimate cash flows.

Six months ended June 30 Six months ended June 30

Property Casualty Other Total Property Casualty Other Total

Loss ratio 64.5 % 74.9 % 55.2 % 68.9 % 68.1 % 71.6 % 87.4 % 75.1 %

Acquisition cost ratio 21.0 25.8 30.8 26.5 20.2 28.0 10.9 22.6

Composite ratio 85.5 % 100.7 % 86.0 % 95.4 % 88.3 % 99.6 % 98.3 % 97.7 %

Underwriting expense ratio 3.6 2.3

Combined ratio 99.0 % 100.0 %

The increase in underwriting expense ratio for the six months ended June 30, 2021, compared to the equivalent 2020 period, was primarily due to interest expense on deposit-accounted contracts based on revised expectations of ultimate cash flows.

Overall, our underwriting related general and administrative expenses have remained steady for the three and six months ended June 30, 2021 and 2020.

General and Administrative Expenses

Details of general and administrative expenses are provided in the following table:

Three months ended March 31

($ in thousands)

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Underwriting expenses $ 3,357 $ 3,268 $ 6,694 $ 6,204

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General and administrative expenses $ 7,739 $ 6,149 $ 15,280 $ 12,943

For the three months ended March 31, 2021, general and administrative expenses increased by $0.7 million, or 11.0%, compared to the equivalent 2020 period.

The increase was due primarily to higher personnel costs and increased directors’ and officers’ insurance premiums.

For the three months ended June 30, 2021, general and administrative expenses increased by $1.6 million, or 25.9%, compared to the equivalent 2020 period.

The increase was due primarily to higher expenses relating to (i) our Innovations unit, (ii) directors’ and officers’ insurance premiums and (iii) information systems and technology, compared to the same period in 2020.

For the six months ended June 30, 2021, general and administrative expenses increased by $2.3 million, or 18.1%, compared to the equivalent 2020 period.

The increase was due primarily to higher expenses relating to (i) our Innovations unit, (ii) directors’ and officers’ insurance premiums, (iii) personnel costs, and (iv) information system and technology.

The increase was partially offset by lower legal and other professional fees.

For the three months ended March 31, 2021, and 2020, general and administrative expenses included $0.8 million and $0.9 million, respectively, of expenses related to stock compensation granted to employees and directors.

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For the six months ended June 30, 2021, and 2020, general and administrative expenses included $1.6 million and $1.7 million, respectively, of expenses related to stock compensation granted to employees and directors.

Total Investment Income (Loss)

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A summary of our total investment income (loss) is as follows:

Three months ended March 31

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

($ in thousands)

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No performance compensation is allocated in periods of loss reported by SILP.

For detailed breakdowns of management fees and performance compensation for the three months ended March 31, 2021 and 2020, please refer to Note 3 of the condensed consolidated financial statements.

For the three months ended March 31, 2021, investment income, net of fees and expenses, resulted in a gain of 1.5% on the Investment Portfolio managed by DME Advisors, compared to a loss of 8.1% for the three months ended March 31, 2020.

The long portfolio gained 11.7%, while the short portfolio and macro positions lost 6.8% and 2.8%, respectively, during the three months ended March 31, 2021.

For the three months ended March 31, 2021, the largest contributors to SILP’s investment income were long positions in AerCap Holdings (AER), Brighthouse Financial (BHF), and Danimer Scientific (DNMR).

Various short positions were the largest detractors during the three months ended March 31, 2021

For the three months ended March 31, 2021, the decrease in interest income compared to the equivalent period in 2020 resulted primarily from lower interest rates offered by financial institutions on the restricted cash and cash equivalents we have pledged as collateral to our clients.

During the three months ended March 31, 2021, we recorded a realized gain of $14.2 million (pre-tax) relating to the sale of our investment in AccuRisk.

Additionally, during the three months ended March 31, 2021, we recorded a net unrealized gain of $1.2 million on our portfolio of Innovations related investments.

During the equivalent period in 2020, we wrote off a valuation allowance previously recorded on certain other notes receivable.

The write-off represented a realized loss, which was fully offset by a reduction in unrealized loss.

For detailed breakdowns of management fees and performance compensation for the three and six months ended June 30, 2021 and 2020, please refer to Note 3 of the condensed consolidated financial statements.

For the three months ended June 30, 2021, investment income, net of fees and expenses, resulted in a loss of 0.9%, on the Investment Portfolio managed by DME Advisors, compared to a gain of 0.3% for the three months ended June 30, 2020.

SILP’s long portfolio gained 4.2%, while the short portfolio and macro positions lost 2.3%, and 2.4%, respectively during the three months ended June 30, 2021.

For the three months ended June 30, 2021, the significant contributors to SILP’s investment income were long positions in The Chemours Company (CC), and CONSOL Energy (CEIX), and short positions in a basket of U.S.

home builders.

The largest detractors were various short positions and a long position in Danimer Scientific (DNMR).

For the six months ended June 30, 2021, investment income, net of fees and expenses, resulted in a gain of 0.5% on the Investment Portfolio managed by DME Advisors, compared to a loss of 7.8% for the six months ended June 30, 2020.

The long portfolio gained 16.0%, while the short portfolio and macro positions lost 9.1% and 5.3%, respectively, during the six months ended June 30, 2021.

For the six months ended June 30, 2021, the largest contributors to SILP’s investment income were long positions in Brighthouse Financial (BHF), The Chemours Company (CC), and CONSOL Energy (CEIX).

Various short positions were the largest detractors during the six months ended June 30, 2021.

For the three and six months ended June 30, 2021, the decrease in interest income compared to the equivalent period in 2020 resulted primarily from lower interest rates offered by financial institutions on the restricted cash and cash equivalents we have pledged as collateral to our clients.

During the six months ended June 30, 2021, we recorded a realized gain of $14.2 million (pre-tax) relating to the sale of our investment in AccuRisk.

Additionally, during the three and six months ended June 30, 2021, we recorded a net unrealized gain of $4.0 million and $5.2 million, respectively, on our portfolio of Innovations related investments.

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For the three months ended March 31, 2021 and 2020, the gross investment return (loss) on our Investment Portfolio managed by DME Advisors (excluding investment advisor performance allocation) was composed of the following:

Three months ended March 31

equivalent period in 2020, we wrote off a valuation allowance previously recorded on certain notes receivable.

The write-off represented a realized loss, which was fully offset by a reduction in unrealized losses.

For the three months ended June 30, 2021 and 2020, and for the six months ended June 30, 2021 and 2020, the gross investment return (loss) on our investments managed by DME Advisors (excluding investment advisor performance allocation) was composed of the following:

Three months ended June 30 Six months ended June 30

2021 2020 2021 2020

Long portfolio gains (losses) 4.2 % 7.6 % 16.0 % (1.9) %

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Other income and expenses 1

(0.5) (0.2) (1.0) (0.3)

Gross investment return (1.0) % 0.3 % 0.6 % (7.8) %

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Effective January 1, 2021, the Investment Portfolio is calculated based on 50% of GLRE Surplus, or the shareholders’ equity of the Company, as reported in the then most recent quarterly U.S.

GAAP financial statements, and is adjusted monthly for our share of the net profits and net losses as reported by Solasglas during any intervening period.

Prior to January 1, 2021, the Investment Portfolio was calculated based on several factors, including our share of Solasglas’s net asset value, our posted collateral, and our net reserves.

GAAP financial statements, and is adjusted monthly for our share of the net profits and net losses as reported by SILP during any intervening period.

Prior to January 1, 2021, the Investment Portfolio was calculated based on several factors, including our share of SILP’s net asset value, our posted collateral, and our net reserves.

Each month, we post on our website ( www.greenlightre.com ) the returns from our investment in SILP.

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We expect Verdant’s future taxable income to be taxed at 21%.

For the three months ended March 31, 2021, the income tax expense of $3.7 million was due primarily to the gain on the sale of our investment in AccuRisk.

At March 31, 2021, we have included a gross deferred tax asset of $3.7 million (December 31, 2020:

For the six months ended June 30, 2021, the income tax expense of $3.7 million was due primarily to the gain on the sale of our investment in AccuRisk.

At June 30, 2021, we have included a gross deferred tax asset of $3.7 million (December 31, 2020:

$3.5 million) in the caption “Other assets” in the Company’s condensed consolidated balance sheets.

At March 31, 2021, a valuation allowance of $3.2 million (December 31, 2020:

At June 30, 2021, a valuation allowance of $3.2 million (December 31, 2020:

$3.0 million) partially offset this gross deferred tax asset.

We have determined that it is more likely than not that the Company will fully realize the recorded deferred tax asset (net of the valuation allowance) in the future.

We have based this determination on the expected timing of the reversal of the temporary differences, and the likelihood of generating sufficient taxable income to realize the future tax benefit.

We have concluded that it is more likely than not that the Company will fully realize the recorded deferred tax asset (net of the valuation allowance) in the future.

We have based this conclusion on the expected timing of the reversal of the temporary differences, and the likelihood of generating sufficient taxable income to realize the future tax benefit.

We have not taken any other tax positions that we believe are subject to uncertainty or reasonably likely to have a material impact on the Company.

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Total investments

The total investments reported in the condensed consolidated balance sheets at March 31, 2021, was $226.0 million, compared to $196.2 million at December 31, 2020, an increase of $29.8 million, or 15.2%.

The total investments reported in the condensed consolidated balance sheets at June 30, 2021, was $206.6 million, compared to $196.2 million at December 31, 2020, an increase of $10.4 million, or 5.3%.

The increase was primarily related to net contributions into SILP from the collateral released by our ceding insurers.

The income from our investment in SILP also contributed to the increase.

The sale of our investment in AccuRisk partially offset these increases.

At March 31, 2021, 93.1% of SILP’s investments were valued based on quoted prices in actively traded markets (Level 1), 3.1% was composed of instruments valued based on observable inputs other than quoted prices (Level 2), and 1.1% was

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composed of instruments valued based on non-observable inputs (Level 3).

At March 31, 2021, 2.7% of SILP’s investments were private equity funds valued using the funds’ net asset values as a practical expedient.

At June 30, 2021, 92.9% of SILP’s investments were valued based on quoted prices in actively traded markets (Level 1), 3.6% was composed of instruments valued based on observable inputs other than quoted prices (Level 2), and 0.7% was composed of instruments valued based on non-observable inputs (Level 3).

At June 30, 2021, 2.8% of SILP’s investments were private equity funds valued using the funds’ net asset values as a practical expedient.

Restricted cash and cash equivalents

We use our restricted cash and cash equivalents for funding trusts and letters of credits issued to our ceding insurers.

Our restricted cash decreased by $47.7 million, or 6.4%, from $745.4 million at December 31, 2020 to $697.7 million, at March 31, 2021, primarily due to a reduction in collateral held by our ceding insurers.

Our restricted cash decreased by $35.7 million, or 4.8%, from $745.4 million at December 31, 2020 to $709.7 million, at June 30, 2021, primarily due to a reduction in collateral held by our ceding insurers.

Reinsurance balances receivable

During the three months ended March 31, 2021, reinsurance balances receivable increased by $56.6 million, or 17.1%, to $386.9 million from $330.2 million at December 31, 2020.

This increase was related primarily to premiums written on new and renewed contracts during the three months ended March 31, 2021, including increases in funds withheld on reinsurance contracts with Lloyd’s syndicates.

During the six months ended June 30, 2021, reinsurance balances receivable increased by $61.9 million, or 18.8%, to $392.2 million from $330.2 million at December 31, 2020.

This increase was related primarily to premiums written on new and renewed contracts during the six months ended June 30, 2021, including increases in funds withheld on reinsurance contracts with Lloyd’s syndicates.

Loss and Loss Adjustment Expense Reserves;

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See Note 5 of the accompanying condensed consolidated financial statements for assumptions used in our loss estimates relating to the COVID-19 pandemic.

Losses in respect of the COVID-19 pandemic recognized after March 31, 2021, will be reflected in the periods in which those losses are incurred.

Losses in respect of the COVID-19 pandemic recognized after June 30, 2021, will be reflected in the periods in which those losses are incurred.

Reserves for loss and loss adjustment expenses were composed of the following:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Reserves IBNR Total Case

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Total $ 186,395 $ 328,247 $ 514,642 $ 176,805 $ 317,374 $ 494,179

During the three months ended March 31, 2021, the total gross loss and loss adjustment expense reserves increased by $18.7 million, or 3.8%, to $512.8 million from $494.2 million at December 31, 2020.

During the six months ended June 30, 2021, the total gross loss and loss adjustment expense reserves increased by $20.5 million, or 4.1%, to $514.6 million from $494.2 million at December 31, 2020.

See Note 5 of the accompanying condensed consolidated financial statements for a summary of changes in outstanding loss and loss adjustment expense reserves and a description of prior period loss developments.

During the three months ended March 31, 2021, total loss and loss adjustment expenses recoverable decreased by $1.8 million, or 10.9%, to $15.0 million from $16.9 million at December 31, 2020.

During the six months ended June 30, 2021, the total loss and loss adjustment expenses recoverable decreased by $2.5 million, or 14.9%, to $14.3 million from $16.9 million at December 31, 2020.

See Note 6 of the accompanying condensed consolidated financial statements for a description of the credit risk associated with our retrocessionaires.

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In other words, it corresponds to a 99.6% probability that the loss from an event will fall below the indicated PML.

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PMLs are estimates.

As a result, we cannot provide any assurance that any actual event will align with the modeled event or that actual losses from events similar to the modeled events will not vary materially from the modeled event PML.

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Our PML estimate incorporates all significant exposure from our reinsurance operations, including coverage for property, marine and energy, motor, and catastrophe workers’ compensation.

At April 1, 2021, our estimated PML exposure (net of retrocession and reinstatement premiums) at a 1-in-250 year return period for a single event and in aggregate was $87.7 million and $112.9 million, respectively.

The following table provides the PML for single event loss exposure and aggregate loss exposure to natural peril losses for each of the peak zones at April 1, 2021:

April 1, 2021

At July 1, 2021, our estimated PML exposure (net of retrocession and reinstatement premiums) at a 1-in-250 year return period for a single event and in aggregate was $84.5 million and $109.0 million, respectively.

The following table provides the PML for single event loss exposure and aggregate loss exposure to natural peril losses for each of the peak zones at July 1, 2021:

1-in-250 year return period

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Total shareholders’ equity

Total equity reported on the condensed consolidated balance sheet increased by $7.3 million to $472.1 million at March 31, 2021, compared to $464.9 million at December 31, 2020, due primarily to a net income of $6.5 million reported for the three months ended March 31, 2021.

Total equity reported on the condensed consolidated balance sheet increased by $2.0 million to $466.8 million at June 30, 2021, compared to $464.9 million at December 31, 2020, due primarily to a net income of $7.1 million reported for the six months ended June 30, 2021, and partially offset by funds used to repurchase shares during the same period.

For details of other movements in shareholders’ equity, see the “Condensed Consolidated Statements of Shareholders’ Equity.”

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We currently do not expect to pay dividends on our ordinary shares.

At March 31, 2021, Greenlight Re and GRIL were each rated “A- (Excellent)” with a negative outlook by A.M.

On July 22, 2020, A.M.

Best affirmed the “A- (Excellent)” ratings.

At June 30, 2021, Greenlight Re and GRIL were each rated “A- (Excellent)” with a negative outlook by A.M.

The ratings reflect A.M.

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Best ratings may be revised or revoked at the sole discretion of the rating agency.

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Sources and Uses of Funds

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We use cash from our operations to pay losses and loss adjustment expenses, profit commissions, interest, and general and administrative expenses.

At March 31, 2021, all of our investable assets, excluding strategic investments and funds required for business operations and capital risk management, are invested by DME Advisors in SILP, subject to our investment guidelines.

At June 30, 2021, all of our investable assets, excluding strategic and Innovations investments and funds required for business operations and capital risk management, are invested by DME Advisors in SILP, subject to our investment guidelines.

We have the ability to redeem funds from SILP at any time for operational purposes by providing three days’ notice to the general partner.

At March 31, 2021, the majority of SILP’s long investments were composed of cash and cash equivalents and publicly traded equity securities, which can be readily liquidated to meet our redemption requests.

At June 30, 2021, the majority of SILP’s long investments were composed of cash and cash equivalents and publicly traded equity securities, which can be readily liquidated to meet our redemption requests.

We record all investment income (loss), including any changes in the net asset value of SILP, and any unrealized gains and losses, in our condensed consolidated statements of operations for each reporting period.

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For the three months ended March 31, 2021 and 2020, the net cash used in operating activities was $18.7 million and $31.8 million, respectively.

The net cash used in our underwriting activities and for payment of corporate and general administrative expenses was $18.0 million and $37.5 million for the three months ended March 31, 2021 and 2020, respectively.

For the six months ended June 30, 2021 and 2020, the net cash used in operating activities was $19.8 million and $42.7 million, respectively.

The net cash used in our underwriting activities and for payment of corporate and general administrative expenses was $19.1 million and $49.0 million for the six months ended June 30, 2021 and 2020, respectively.

Generally, if the premiums collected exceed claim payments within a given period, we generate cash from our underwriting activities.

Our underwriting activities represented a net use of cash for the three months ended March 31, 2021 and 2020, as the losses we paid exceeded the premiums we collected.

Our underwriting activities represented a net use of cash for the six months ended June 30, 2021 and 2020, as the losses we paid exceeded the premiums we collected.

The cash used in, and generated from, underwriting activities may vary significantly from period to period depending on the underwriting opportunities available and claims submitted to us by our cedents.

For the three months ended March 31, 2021, our investing activities used $29.1 million of cash for contribution into SILP (net of redemptions).

They provided $26.9 million of cash from the sale of our AccuRisk investment and the collection of a note receivable from AccuRisk.

For the six months ended June 30, 2021, our investing activities used $6.4 million of cash for contribution into SILP (net of redemptions) and $3.3 million for new Innovations investments.

Investing activities also provided $26.9 million of cash from the sale of our AccuRisk investment and the collection of a note receivable from AccuRisk.

By comparison, for the same period in 2020 our investing activities provided cash of $21.3 million.

At March 31, 2021, we believe we have sufficient cash flow from operating and investing activities to meet our foreseeable liquidity requirements.

For the six months ended June 30, 2021, our financing activities used $6.7 million relating to repurchase of our Class A ordinary shares.

By comparison, for the same period in 2020 our financing activities used $7.8 million relating to repurchase of our Class A ordinary shares.

At June 30, 2021, we believe we have sufficient cash flow from operating and investing activities to meet our foreseeable liquidity requirements.

We do not expect that the COVID-19 pandemic will materially impact our operational liquidity needs, which will be met by cash, funds generated from underwriting activities, and investment income, including withdrawals from SILP if necessary.

At March 31, 2021, we expect to fund our operations for the next twelve months from operating and investing cash flow.

At June 30, 2021, we expect to fund our operations for the next twelve months from operating and investing cash flow.

However, we may explore various financing options, including capital raising alternatives, to fund our business strategy, improve our capital structure, increase surplus, pay claims or make acquisitions.

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In addition, any dividend payment would have to be approved by the relevant regulatory authorities prior to payment.

At March 31, 2021, Greenlight Re and GRIL both exceeded the regulatory minimum capital requirements.

At June 30, 2021, Greenlight Re and GRIL both exceeded the regulatory minimum capital requirements.

Letters of Credit and Trust Arrangements

At March 31, 2021, neither Greenlight Re nor GRIL was licensed or admitted as a reinsurer in any jurisdiction other than the Cayman Islands and the European Economic Area, respectively.

At June 30, 2021, neither Greenlight Re nor GRIL was licensed or admitted as a reinsurer in any jurisdiction other than the Cayman Islands and the European Economic Area, respectively.

Because many jurisdictions do not permit domestic insurance companies to take credit on their statutory financial statements for loss recoveries or ceded unearned premiums unless appropriate measures are in place for reinsurance obtained from unlicensed or non-admitted insurers, we anticipate that all of our U.S.

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clients will require us to provide collateral through funds withheld, trust arrangements, letters of credit or a combination thereof.

At March 31, 2021, we had one letter of credit facility available with an aggregate capacity of $275.0 million (December 31, 2020:

At June 30, 2021, we had one letter of credit facility available with an aggregate capacity of $275.0 million (December 31, 2020:

$275.0 million).

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We provide collateral to cedents in the form of letters of credit and trust arrangements.

At March 31, 2021, the aggregate amount of collateral provided to cedents under such arrangements was $696.6 million (December 31, 2020:

At June 30, 2021, the aggregate amount of collateral provided to cedents under such arrangements was $706.3 million (December 31, 2020:

$743.0 million).

At March 31, 2021, the letters of credit and trust accounts were secured by restricted cash and cash equivalents with a total fair value of $697.7 million (December 31, 2020:

At June 30, 2021, the letters of credit and trust accounts were secured by restricted cash and cash equivalents with a total fair value of $709.7 million (December 31, 2020:

$745.4 million).

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The letter of credit facility contains customary events of default and restrictive covenants, including but not limited to limitations on liens on collateral, transactions with affiliates, mergers and sales of assets, as well as solvency and maintenance of certain minimum pledged equity requirements, and restricts issuance of any debt without the consent of the letter of credit provider.

Additionally, if an event of default exists, as defined in the letter of credit facility, Greenlight Re would be prohibited from paying dividends to its parent company.

The Company was in compliance with all the covenants of this facility at March 31, 2021.

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The Company was in compliance with all the covenants of this facility at June 30, 2021.

Our capital structure currently consists of senior convertible notes and equity issued in two classes of ordinary shares.

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In addition, as noted above, we may explore various financing alternatives, although there can be no assurance that additional financing will be available on acceptable terms when needed or desired.

We did not make any significant commitments for capital expenditures during the three months ended March 31, 2021.

On March 26, 2020, the Board of Directors extended the share repurchase plan to June 30, 2021, and increased the number of shares authorized to be repurchased to 5.0 million Class A ordinary shares or securities convertible into Class A ordinary shares in the open market, through privately negotiated transactions or Rule 10b5-1 stock trading plans.

In addition, the Board of Directors also authorized the Company to repurchase up to $25.0 million aggregate face amount of the Company’s 4.00% Convertible Senior Notes due 2023 (the “Notes”) in privately negotiated transactions, in open market repurchases, or pursuant to one or more tender offers.

We did not make any significant commitments for capital expenditures during the six months ended June 30, 2021.

Our Board of Directors had previously extended the share repurchase plan to June 30, 2021, and the authorized repurchase of up to 5.0 million Class A ordinary shares or securities convertible into Class A ordinary shares in the open market, through privately negotiated transactions or Rule 10b5-1 stock trading plans.

In addition, the Board of Directors had also authorized the Company to repurchase up to $25.0 million aggregate face amount of the Company’s 4.00% Convertible Senior Notes due 2023 (the “Notes”) in privately negotiated transactions, in open market repurchases, or pursuant to one or more tender offers.

On May 4, 2021, the Board of Directors approved a share repurchase plan effective from July 1, 2021 until June 30, 2022 authorizing the Company to purchase up to $25 million of Class A ordinary shares or securities convertible into Class A ordinary shares in the open market, through privately negotiated transactions or Rule 10b5-1 stock trading plans.

The Company is not required to repurchase any of the Class A ordinary shares or the Notes, and the repurchase plans may be modified, suspended, or terminated at the election of our Board of Directors at any time without prior notice.

During the three months ended March 31, 2021, the Company did not repurchase any Class A ordinary shares.

At March 31, 2021, 2.5 million Class A ordinary shares and $25.0 million of the Notes, remained available for repurchase under the repurchase plans.

During the six months ended June 30, 2021, the Company repurchased 725,133 Class A ordinary shares.

Under the Company’s stock incentive plan, the number of Class A ordinary shares available for issuance is 8.0 million shares.

At March 31, 2021, there were 3,101,738 Class A ordinary shares available for future issuance under the Company’s stock incentive plan.

At June 30, 2021, there were 3,056,065 Class A ordinary shares available for future issuance under the Company’s stock incentive plan.

The Compensation Committee of the Board of Directors administers the stock incentive plan.

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Due to the nature of our reinsurance operations, the amount and timing of the cash flows associated with our reinsurance contractual liabilities will fluctuate, perhaps materially, and, therefore, are highly uncertain.

As of March 31, 2021, we expect to pay the loss and loss adjustment expense reserves as follows:

As of June 30, 2021, we expect to pay the loss and loss adjustment expense reserves as follows:

1 year 1-3 years 3-5 years More than

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($ in thousands)

Operating lease obligations (1)

$ 386 $ — $ — $ — $ 386

Interest and convertible note payable (2)

4,000 106,000 — — 110,000

Loss and loss adjustment expense reserves (1)

$ 252,175 $ 150,790 $ 55,581 $ 56,096 $ 514,642

$ 255,679 $ 256,263 $ 55,387 $ 55,900 $ 623,229

(1) Reflects our minimum contractual obligations pursuant to the lease agreements as described below.

(2) Includes interest payments due on $100.0 million of senior convertible note payable at 4.0% per annum, as well as the payment of principal upon maturity on August 1, 2023.

(1) Due to the nature of our reinsurance operations, the amount and timing of the cash flows associated with our reinsurance contractual liabilities will fluctuate, perhaps materially, and, therefore, are highly uncertain.

Greenlight Re had entered into a lease agreement for office space in the Cayman Islands.

The lease expired on December 31, 2020, and the parties have agreed to extend the lease until December 31, 2021 while a new lease agreement is negotiated.

GRIL had entered into a lease agreement for office space in Dublin, Ireland.

Under the terms of this lease agreement, GRIL was committed to minimum annual rent payments denominated in Euros approximating €0.1 million until May 2021.

Greenlight Re has entered into a lease agreement for office space in the Cayman Islands commencing from July 1, 2021.

The lease expires on June 30, 2026 unless Greenlight Re exercises its right to renew the lease for another five year period.

The annual lease obligation ranges from $0.5 million to $0.6 million.

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GRIL has exercised its option to terminate the lease agreement in May 2021.

The minimum lease payment obligations are included in the above table under operating lease obligations and in Note 12 to the accompanying condensed consolidated financial statements.

The Company has $100.0 million of senior convertible notes payable, which mature on August 1, 2023.

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The loss carry-forward provision contained in the SILP LPA allows DME II to earn reduced performance allocation of 10% of net profits in years subsequent to the year in which the capital accounts of the limited partners incur a loss, until all losses are recouped and an additional amount equal to 150% of the loss is earned.

At March 31, 2021, we expect the reduced performance allocation of 10% to be applied to 178% of future net investment returns before reverting to 20%.

For detailed breakdowns of management fees and performance compensation for the three months ended March 31, 2021 and 2020, please refer to Note 3 of the condensed consolidated financial statements.

At June 30, 2021, we estimate the reduced performance allocation of 10% to continue to be applied until SILP achieves additional investment returns of 191%, at which point the performance allocation will revert to 20%.

The Company has entered into a service agreement with DME Advisors pursuant to which DME Advisors will provide investor relations services to us for compensation of $5,000 per month plus expenses.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis