What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-03 · 218 added, 217 removed, 442 unchanged (50% 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 and six months ended June 30, 2021 and 2020 and financial condition at June 30, 2021 and December 31, 2020.

The following is a discussion and analysis of our results of operations for the three and nine months ended September 30, 2021 and 2020 and financial condition at September 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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Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from the forward-looking statements.

A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” (refer to Part I, Item 1A) contained in our Form 10-K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2021.

We have included a detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements in the section entitled “Risk Factors” (refer to Part I, Item 1A) contained in our Form 10-K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2021.

Such risks and uncertainties include, but are not limited to:

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• Currency fluctuations could result in exchange rate losses and negatively impact our business.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

We undertake no obligation to publicly update or revise any forward-looking statements, whether due to new information, future events, or otherwise.

Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only to the dates they were made.

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The Company’s subsidiaries hold an A.M.

Best Financial Strength Rating of A- (Excellent) with a negative outlook.

Best Financial Strength Rating of A- (Excellent) with a stable outlook.

Critical Accounting Policies and Estimates

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— Management’s Discussion and Analysis of Financial Condition and Results on Operations” included in our annual report on Form 10-K for the fiscal year ended December 31, 2020, describes our critical accounting policies and estimates.

The most significant estimates relate to premium revenues and risk transfer, investments, loss and loss adjustment expense reserves, bonus accruals, and share-based payments.

The most significant estimates relate to premium revenues and risk transfer, loss and loss adjustment expense reserves, investment impairments, allowances for credit losses, bonus accruals, and share-based compensation.

Recently issued and adopted accounting standards and their impact on the Company, if any, are presented under “Recent Accounting Pronouncements” in Note 2 to the condensed consolidated financial statements.

We have one operating segment, Property & Casualty reinsurance, and we analyze our business based on the following categories:

Property business covers automobile physical damage, personal lines (including homeowners’ insurance), and commercial lines exposures.

Property business covers automobile physical damage, personal lines, and commercial lines exposures.

Property business includes both catastrophe and non-catastrophe coverage.

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Casualty business generally has losses reported and paid over a longer period than property business.

We categorize Lloyd’s syndicate contracts, which incorporate incidental catastrophe exposure, as multi-line (and therefore casualty) business.

Other business covers accident and health, financial lines (including transactional liability, mortgage insurance, surety, and trade credit), marine, energy, and to a lesser extent, other specialty business such as aviation, crop, cyber, political, and terrorism exposures.

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Outlook and Trends

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.

During the first nine months 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.

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.

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.

In the third quarter of 2021, the reinsurance industry was challenged by an unusually high incidence of large losses.

Our adjusted combined ratio, which excludes the impact of such catastrophes, has reduced steadily over the past few quarters, reflecting improvements in our underwriting quality and the overall rating environment.

Looking forward to 2022, it is not clear to us how the reinsurance market will respond to another year of significant property-catastrophe losses.

Our current expectation is that structural problems within the “pure catastrophe” class will limit premium rate increases.

However, we do expect that the recent property catastrophe losses will help support and extend the generally favorable market conditions in most other classes.

We expect that the continued low interest rate environment will further support overall pricing conditions.

We continue to be encouraged by our Innovations unit, whose central objective is enhancing our underwriting product and quality of return by establishing a range of strategic partnerships.

Year to date, Innovations business represents approximately 6% of our total written premium, and we see the potential for significant growth from Innovations-derived underwriting opportunities going forward.

Key Financial Measures and Non-GAAP Measures

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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

September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 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 June 30, 2021, the number of unvested restricted shares with performance conditions was 193,149 (at March 31, 2021:

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

193,149, March 31, 2021:

193,149, December 31, 2020:

193,149, September 30, 2020:

429,444, June 30, 2020:

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

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

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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Adjusted combined ratio 90.3 % 93.6 % 93.0 % 94.5 %

• 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.

• For the three and nine months ended September 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.

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

Net Underwriting Income (Loss)

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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.

We exclude corporate expenses because these expenses are generally fixed and not incremental to or directly related to our underwriting operations.

We exclude total investment income or loss, foreign exchange gains or losses, 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.

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

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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Results of Operations

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

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

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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Total investment income (loss) $ 4,089 $ 6,897 $ 24,803 $ (22,849)

Net underwriting and investment income (loss) $ (8,489) $ 6,477 $ 14,797 $ (23,319)

Corporate expenses $ 3,444 $ 2,972 $ 12,030 $ 9,711

Other (income) expense, net 342 (257) 1,076 (6)

Interest expense 1,578 1,579 4,684 4,702

Income tax expense (benefit) — — 3,733 424

Net income (loss) $ (13,853) $ 2,183 $ (6,726) $ (38,150)

Earnings (loss) per share

Basic $ (0.42) $ 0.06 $ (0.20) $ (1.07)

Diluted $ (0.42) $ 0.06 $ (0.20) $ (1.07)

Underwriting ratios

Loss ratio - current year 81.9 % 76.5 % 73.5 % 73.9 %

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Combined ratio 109.3 % 100.4 % 102.4 % 100.1 %

* 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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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:

* The net financial impacts associated with changes in the estimate of losses incurred in prior years, which incorporate earned reinstatement premiums assumed and ceded, and adjustments to assumed and ceded acquisition costs, were a gain of $0.2 million and $0.2 million for the three months ended September 30, 2021, and 2020, respectively, and a loss of $3.2 million and $4.8 million, for the nine months ended September 30, 2021, and 2020, respectively.

Three months ended September 30, 2021 and 2020

For the three months ended September 30, 2021, the fully diluted book value per share decreased by $0.35 per share, or 2.6%, to $13.25 per share from $13.60 per share at June 30, 2021.

For the three months ended September 30, 2021, the basic book value per share decreased by $0.35 per share, or 2.6%, to $13.31 per share from $13.66 per share at June 30, 2021.

For the three months ended September 30, 2021, our net loss was $13.9 million, compared to net income of $2.2 million reported for the equivalent 2020 period.

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

• Underwriting:

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

The underwriting loss for the three months ended September 30, 2021, was $12.6 million.

This underwriting loss included catastrophe losses of $25.9 million, principally from Hurricane Ida, the European floods and hailstorms, and South African riots.

By comparison, the equivalent period in 2020 reported an underwriting loss of $0.4 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.

Natural catastrophe losses from hurricanes Laura, Isaias and Sally, the Midwest derecho storm, and North American wildfires, in aggregate contributed $8.1 million to the underwriting loss during the third quarter of 2020.

Our overall combined ratio was 109.3% for the three months ended September 30, 2021, compared to 100.4% during the equivalent 2020 period.

The net impact of catastrophe losses contributed 19.1% to the combined ratio for three months ended September 30, 2021.

• Investments:

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:

Our total investment income for the three months ended September 30, 2021, was $4.1 million compared to total investment income of $6.9 million reported for the same period in 2020.

Our investment in SILP reported a loss of $6.2 million during the three months ended September 30, 2021, compared to a gain of $6.4 million during the equivalent period in 2020.

Other investment income totaled $10.3 million and $0.5 million during the three months ended September 30, 2021, and 2020, respectively.

The investment income recognized during the third quarter of 2021 was driven primarily by gains in our Innovations portfolio.

Nine months ended September 30, 2021 and 2020

For the nine months ended September 30, 2021, fully diluted book value per share decreased by $0.17 per share, or 1.3%, to $13.25 per share from $13.42 per share at December 31, 2020.

For the nine months ended September 30, 2021, basic book value per share decreased by $0.16 per share, or 1.2%, to $13.31 per share from $13.47 per share at December 31, 2020.

For the nine months ended September 30, 2021, our net loss was $6.7 million, compared to a net loss of $38.2 million reported for the equivalent 2020 period.

The developments that most significantly affected our financial performance during the nine months ended September 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.

The underwriting loss for the nine months ended September 30, 2021, was $10.0 million, driven primarily by Hurricane Ida, winter storm Uri, the European floods and hailstorms, and the South African riots.

Losses from deposit-accounted contracts also contributed to the underwriting loss for the nine months ended September 30, 2021.

By comparison, the underwriting loss for the same period in 2020 was $0.5 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.

Our overall combined ratio was 102.4% for the nine months ended September 30, 2021, compared to 100.1% for the same period in 2020.

The catastrophe events contributed 7.9% to the combined ratio for the nine months ended September 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.

Our total investment income for the nine months ended September 30, 2021, was $24.8 million compared to a total investment loss of $22.8 million incurred during the equivalent 2020 period.

The investment

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income for the nine months ended September 30, 2021, was due primarily to a gain realized on the sale of our investment in AccuRisk and the third-quarter Innovations gains noted earlier.

For the nine months ended September 30, 2021, our investment in SILP reported a loss of $4.2 million.

The investment loss during the equivalent 2020 period was driven by $34.1 million of losses from our investment in SILP, partially offset by other investment income of $11.2 million.

Underwriting results

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

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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Total $ 128,735 100.0 % $ 135,596 100.0 % $ 440,249 100.0 % $ 362,072 100.0 %

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.

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

For the three months ended September 30, 2021, our gross premiums written decreased by $6.9 million, or 5.1%, compared to the equivalent 2020 period.

The primary drivers for this change are the following:

Gross Premiums Written

Three months ended June 30, 2021

Three months ended September 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.

Property $(4.0) (23.6)% The decrease in property gross premiums written during the three months ended September 30, 2021, over the comparable 2020 period was primarily related to motor contracts on which we elected to reduce or not renew our participation.

As part of our strategy to reduce our exposure to motor business, effective July 1, 2021, we did not renew a quota share motor contract and decreased our share on another motor contract.

Casualty $(8.1) (8.8)% The decrease in casualty gross premiums written during the three months ended September 30, 2021, over the comparable 2020 period was due primarily to motor contracts as described above.

To a lesser extent, the decrease is also related to certain workers’ compensation contracts we elected not to renew during 2021.

The decrease was partially offset by an increase in multi-line contracts driven primarily by Lloyd’s syndicate business written during 2021.

Other $5.3 20.8% The increase in “other” gross premiums written during the three months ended September 30, 2021 over the comparable 2020 period was primarily related to financial lines driven by growth in transactional liability business.

The increase was partially offset by a decrease in premiums relating to health contracts.

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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:

For the nine months ended September 30, 2021, our gross premiums written increased by $78.2 million, or 21.6%, compared to the equivalent 2020 period.

The primary drivers of this change are the following:

Gross Premiums Written

Six months ended June 30, 2021

Nine months ended September 30, 2021

Increase (decrease)

($ in millions) % change Explanation

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

Property $(0.3) (0.7)% The personal and commercial property premiums remained steady during the nine months ended September 30, 2021, over the comparable 2020 period.

Casualty $71.8 31.3% The increase in casualty gross premiums written during the first nine 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.

We also experienced an increase in general liability business.

These increases were partially offset by decreases in workers’ compensation business resulting from a contract we did not renew in 2021.

Other $6.7 7.6% The increase in “other” gross premiums written during the first nine months of 2021 over the comparable 2020 period was primarily attributable to new contracts and improved rates relating to financial, marine, energy, and other specialty lines.

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

Premiums Ceded

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, to leverage areas of expertise and to improve our strategic position in meeting the needs of clients and brokers.

For the three and nine months ended September 30, 2021, premiums ceded were insignificant compared to $1.5 million and $2.3 million for the three and nine months ended September 30, 2020, respectively.

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.

Net Premiums Written

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

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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Total $ 128,675 100.0 % $ 134,132 100.0 % $ 440,243 100.0 % $ 359,798 100.0 %

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.

For the three and nine months ended September 30, 2021, net premiums written decreased by $5.5 million, or 4.1%, and increased by $80.4 million, or 22.4%, respectively, compared to the three and nine months ended September 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 June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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Total $ 110,400 100.0 % $ 88,053 100.0 % $ 295,078 100.0 % $ 252,944 100.0 %

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

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

Three months ended September 30 Nine months ended September 30

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

4 unchanged sentences

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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:

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

Net Losses Incurred

Three months ended June 30, 2021

Three months ended September 30, 2021

Increase (decrease)

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

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;

Property $0.1 9.0 The property losses incurred during the three months ended September 30, 2021, included approximately $7.3 million of estimated losses relating to the 2021 European floods and hailstorms and Hurricane Ida.

The comparable 2020 period included losses from hurricanes Isaias, Laura, and Sally, the Midwest derecho storm, and the North American wildfires.

Despite the small increase in losses incurred during the three months ended September 30, 2021, the property loss ratio increased 9.0 percentage points due to lower earned premiums on property contracts during the third quarter of 2021.

Casualty $15.1 9.0 The increase in losses incurred during the three months ended September 30, 2021, over the comparable 2020 period was due primarily to:

• losses relating to Hurricane Ida;

• increased workers' compensation and Lloyd's syndicate losses due to increased exposure in these lines of 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.

The casualty loss ratio increased 9.0 percentage points during the three months ended September 30, 2021 over the comparable 2020 period due to (i) losses from Hurricane Ida and (ii) favorable loss development recognized in the comparable 2020 period.

Other $7.1 (6.5) The increase in “other” losses incurred during the three months ended September 30, 2021, over the comparable 2020 period was due primarily to:

• losses on marine and energy contracts relating to Hurricane Ida;

• losses on certain terrorism contracts relating to the South African riots.

Despite the increase in losses incurred during the three months ended September 30, 2021, the property loss ratio decreased 6.5 percentage points due to higher earned premiums on other contracts during the third quarter of 2021.

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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:

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

Net Losses Incurred

Six months ended June 30, 2021

Nine months ended September 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;

• 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:

Property $(1.0) 0.2 The decrease in property losses incurred during the first nine months 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, Hurricane Ida, and the 2021 European floods and hailstorms.

During the first nine months of 2021, the property loss ratio increased 0.2 percentage points due to the decrease in earned premiums, which outweighed the impact of the reduction in property losses incurred.

Casualty $48.4 5.3 The increase in casualty losses incurred during the first nine months of 2021, over the comparable 2020 period, was due primarily to:

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

• increased workers' compensation and Lloyd's syndicate losses due to increased exposure in these lines of business.

During the first nine months of 2021, the casualty loss ratio increased 5.3 percentage points over the comparable 2020 period for reasons consistent with those driving the increase in losses incurred noted above.

Other $(5.2) (23.9) The decrease in other losses incurred during the first nine months 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 prior period included losses relating to the COVID-19 pandemic.

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

• losses on marine and energy contracts relating to Hurricane Ida;

• losses relating to the South African riots on certain terrorism contracts;

• 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.

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

The reasons for the 23.9 percentage point decrease in the “other” loss ratio are consistent with those driving the reduction in losses incurred.

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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Details of acquisition costs are provided in the following table:

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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Total $ 35,048 100.0 % $ 27,018 100.0 % $ 106,060 100.0 % $ 76,660 100.0 %

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

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

Three months ended September 30 Nine months ended September 30

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

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Total 25.9 % 23.4 % 2.5 % 26.3 % 22.9 % 3.4 %

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:

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

Change in Acquisition Cost Ratios

Three months ended June 30, 2021

Three months ended September 30, 2021

Increase / (decrease) in acquisition cost ratio points Explanation

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.

Property 0.9 There was no significant change in the property acquisition cost ratio during the three months ended September 30, 2021, over the comparable 2020 period.

Casualty (0.2) The decrease in the casualty acquisition cost ratio during the three months ended September 30, 2021, over the comparable 2020 period was due primarily to lower ceding commissions on certain quota share workers’ compensation contracts relative to other casualty contracts.

The decrease in casualty acquisition cost ratio was partially offset by higher commissions relating to multi-line contracts.

Other 12.2 The increase in the “other” acquisition cost ratio during the three months ended September 30, 2021, over the comparable 2020 period was due to the reversal in 2020 of profit commissions on mortgage contracts as a result of COVID-19 losses.

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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:

The changes in the acquisition cost ratios during the nine months ended September 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

Nine months ended September 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 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.

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

Casualty (1.5) The casualty acquisition cost ratio decreased during the first nine months of 2021 over the comparable 2020 period due primarily to lower ceding commissions on certain quota share workers’ compensation contracts relative to other casualty contracts.

Other 17.5 The increase in the “other” acquisition cost ratio during the first nine months of 2021 over the comparable 2020 period is related to profit commission adjustments on mortgage contracts.

The increase was partially offset by a shift in the business mix towards non-proportional specialty business during the first nine months 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 June 30 Three months ended June 30

Three months ended September 30 Three months ended September 30

Property Casualty Other Total Property Casualty Other Total

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Combined ratio 109.3 % 100.4 %

Six months ended June 30 Six months ended June 30

Nine months ended September 30 Nine months ended September 30

Property Casualty Other Total Property Casualty Other Total

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Combined ratio 102.4 % 100.1 %

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.

The underwriting expense ratio for the nine months ended September 30, 2021, compared to the equivalent 2020 period, included 0.7 percentage points relating to interest expense on deposit-accounted contracts based on revised expectations of ultimate cash flows.

General and Administrative Expenses

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

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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General and administrative expenses $ 6,060 $ 5,152 $ 21,340 $ 18,095

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.

For the three months ended September 30, 2021, general and administrative expenses increased by $0.9 million, or 17.6%, compared to the equivalent 2020 period.

The increase was due primarily to higher expenses relating to (i) our Innovations unit, (ii) legal and other professional fees, and (iii) information systems and technology, compared to the same period in 2020.

For the nine months ended September 30, 2021, general and administrative expenses increased by $3.2 million, or 17.9%, 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, (iii) personnel costs, and (iv) information system and technology.

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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.

For the nine months ended September 30, 2021, and 2020, general and administrative expenses included $2.4 million and $1.4 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 June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

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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 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.

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

For the three months ended September 30, 2021, the Investment Portfolio managed by DME Advisors reported a loss of 2.7%, compared to a gain of 1.4% for the three months ended September 30, 2020.

SILP’s long portfolio lost 3.5%, while the short portfolio gained 1.1% during the three months ended September 30, 2021.

For the three months ended September 30, 2021, the significant contributors to SILP’s investment return were a long position in Atlas Air Worldwide (AAWW) and various short positions.

The largest detractors were long positions in The Chemours Company (CC) and Green Brick Partners (GRBK).

For the nine months ended September 30, 2021, the Investment Portfolio managed by DME Advisors reported a loss of 2.2% on the Investment Portfolio managed by DME Advisors, compared to a loss of 6.5% for the nine months ended September 30, 2020.

The long portfolio gained 12.3%, while the short portfolio and macro positions lost 7.9% and 5.2%, respectively, during the nine months ended September 30, 2021.

For the nine months ended September 30, 2021, the most significant contributors to SILP’s investment return were long positions in Brighthouse Financial (BHF), CONSOL Energy (CEIX), and AAWW.

During the nine months ended September 30, 2021, the most significant detractors were GRBK and various short positions.

For the three and nine months ended September 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 nine months ended September 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 nine months ended September 30, 2021, we recorded a net unrealized gain of $9.6 million and $14.9 million, respectively, on our portfolio of Innovations related investments.

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

During the 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

For the three months ended September 30, 2021, and 2020, and for the nine months ended September 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 September 30 Nine months ended September 30

2021 2020 2021 2020

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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 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.

GAAP financial statements.

It is adjusted monthly for our share of the net profits and net losses 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 and our posted collateral and 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 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:

For the nine months ended September 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 September 30, 2021, we have included a gross deferred tax asset of $4.0 million (December 31, 2020:

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

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

At September 30, 2021, a valuation allowance of $3.5 million (December 31, 2020:

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

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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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Financial Condition

Total investments

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 total investments reported in the condensed consolidated balance sheets at September 30, 2021, was $222.7 million, compared to $196.2 million at December 31, 2020, an increase of $26.5 million, or 13.5%.

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.

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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.

New Innovation investments and income from the Innovation investments also contributed to the increase, which was partially offset by losses from our investment in SILP.

At September 30, 2021, 92.5% of SILP’s investments were valued based on quoted prices in actively traded markets (Level 1), 4.3% 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 September 30, 2021, 2.5% of SILP’s investments consisted of 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 $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.

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

Our restricted cash decreased by $52.8 million, or 7.1%, from $745.4 million at December 31, 2020, to $692.5 million, at September 30, 2021, primarily due to collateral released by our ceding insurers.

Reinsurance balances receivable

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.

During the nine months ended September 30, 2021, reinsurance balances receivable increased by $50.2 million, or 15.2%, to $380.4 million from $330.2 million at December 31, 2020.

This increase was related primarily to increases in funds withheld on reinsurance contracts with Lloyd’s syndicates.

A decrease in premiums receivable partially offset the increase during the nine months ended September 30, 2021.

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 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:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Reserves IBNR Total Case

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Total $ 191,151 $ 349,628 $ 540,779 $ 176,805 $ 317,374 $ 494,179

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.

During the nine months ended September 30, 2021, the total gross loss and loss adjustment expense reserves increased by $46.6 million, or 9.4%, to $540.8 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 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.

During the nine months ended September 30, 2021, the total loss and loss adjustment expenses recoverable decreased by $3.8 million, or 22.4%, to $13.1 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.

For most of the contracts we write, our risk exposure is limited by defined limits of liability.

For most of the contracts we write, defined limits of liability limit our risk exposure.

Once each contract’s limit of liability has been reached, we have no further exposure to additional losses from that contract.

However, certain contracts, particularly quota share contracts covering first-dollar exposure, may not contain aggregate limits.

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Our property business, and to a lesser extent our casualty and other business, incorporate contracts that contain natural peril loss exposure.

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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.

As a result, we cannot provide 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.

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

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:

At October 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 $107.3 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 October 1, 2021:

October 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 $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.

Total equity reported on the condensed consolidated balance sheet decreased by $14.3 million to $450.5 million at September 30, 2021, compared to $464.9 million at December 31, 2020.

The decrease in shareholders’ equity during the nine months ended September 30, 2021, was due to (i) the repurchase of the Class A ordinary shares and (ii) the net loss of $6.7 million reported for the period.

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

Liquidity and Capital Resources

Greenlight Capital Re is organized as a holding company with no operations of its own.

As a holding company, Greenlight Capital Re has minimal continuing cash needs, most of which are related to the payment of corporate and general administrative expenses and interest expense.

Greenlight Capital Re is a holding company with no operations of its own.

As a holding company, Greenlight Capital Re has minimal continuing cash needs, most of which are related to the payment of corporate and general administrative expenses and interest expenses.

We conduct all our underwriting operations through our wholly-owned reinsurance subsidiaries, Greenlight Re and GRIL, which underwrite property and casualty reinsurance.

There are restrictions on each of Greenlight Re’s and GRIL’s ability to pay dividends, described in more detail below.

There are restrictions on Greenlight Re’s and GRIL’s ability to pay dividends, described in more detail below.

It is our current policy to retain earnings to support the growth of our business.

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

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

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

The ratings reflect A.M.

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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 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 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.

At September 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 can redeem funds from SILP at any time for operational purposes by providing three days’ notice to the general partner.

At September 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.

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.

For the nine months ended September 30, 2021 and 2020, the net cash used in operating activities was $18.8 million and $44.7 million, respectively.

The net cash used in operating activities was primarily used for our underwriting activities and for payment of corporate and general administrative expenses for the nine months ended September 30, 2021 and 2020.

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 six months ended June 30, 2021 and 2020, as the losses we paid exceeded the premiums we collected.

Our underwriting activities represented a net use of cash for the nine months ended September 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 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.

For the nine months ended September 30, 2021, our investing activities used $17.7 million of cash for contribution into SILP (net of redemptions) and $4.8 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.

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

By comparison, for the same period in 2020 our investing activities provided cash of $20.8 million as a result of net redemptions from SILP.

For the nine months ended September 30, 2021, our financing activities included the repurchase of $10.0 million of our Class A ordinary shares, compared to $12.7 million of repurchases during the equivalent 2020 period.

At September 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 recent catastrophic events, including Hurricane Ida, the European floods and hailstorm, and 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 September 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 June 30, 2021, Greenlight Re and GRIL both exceeded the regulatory minimum capital requirements.

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

Letters of Credit and Trust Arrangements

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.

At September 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.

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.

As a result, we anticipate that all of our U.S.

clients and some of our non-U.S.

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

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

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

$275.0 million).

1 unchanged sentence

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

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

At September 30, 2021, the aggregate amount of collateral provided to cedents under such arrangements was $688.6 million (December 31, 2020:

$743.0 million).

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:

At September 30, 2021, the letters of credit and trust accounts were secured by restricted cash and cash equivalents with a total fair value of $692.5 million (December 31, 2020:

$745.4 million).

2 unchanged sentences

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 June 30, 2021.

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

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

3 unchanged sentences

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 six months ended June 30, 2021.

We did not make any significant commitments for capital expenditures during the nine months ended September 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.

2 unchanged sentences

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

During the nine months ended September 30, 2021, the Company repurchased 1,079,544 Class A ordinary shares.

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

At September 30, 2021, 3,128,276 Class A ordinary shares were available for future issuance under the Company’s stock incentive plan.

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

1 unchanged sentence

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

As of September 30, 2021, we estimate that we will pay the loss and loss adjustment expense reserves as follows:

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

16 unchanged sentences

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 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%.

At September 30, 2021, we estimate the reduced performance allocation of 10% to continue to be applied until SILP achieves additional investment returns of 197%, 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.

11 unchanged sentences

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