What changed in this filing

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Item 1. Financial Statements

2022-05-03 compared with 2021-11-03 · 266 added, 252 removed, 510 unchanged (50% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2021 and December 31, 2020

March 31, 2022 and December 31, 2021

(expressed in thousands of U.S.

dollars, except per share and share amounts)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Investment in related party investment fund $ 151,010 $ 183,591

3 unchanged sentences

Restricted cash and cash equivalents 701,412 634,794

Reinsurance balances receivable (net of allowance for expected credit losses of $ 89 and $ 89 )

Reinsurance balances receivable (net of allowance for expected credit losses of $ 89 )

441,645 405,365

Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses of $ 47 and $ 47 )

Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses of $ 47 )

11,369 11,100

1 unchanged sentence

Unearned premiums ceded 4,878 42

Notes receivable — 6,101

Other assets 5,882 5,885

28 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the three months ended March 31, 2022 and 2021

(expressed in thousands of U.S.

dollars, except per share and share amounts)

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

Three months ended March 31

Gross premiums written $ 145,886 $ 169,935

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Net premiums earned 125,925 135,396

Income (loss) from investment in related party investment fund (net of related party expenses of $ 659 and $ 2,632 (three and nine months ended September 30, 2020:

$ 703 and $ 1,981 , respectively))

( 6,214 ) 6,431 ( 4,196 ) ( 34,086 )

Income (loss) from investment in related party investment fund (net of related party expenses of $ 1,344 (three months ended March 31, 2021:

Net investment income (loss) 3,660 14,650

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General and administrative expenses 7,232 7,541

Deposit interest expense 34 2,947

Interest expense 1,154 1,544

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

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

For the three months ended March 31, 2022 and 2021

(expressed in thousands of U.S.

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

Three months ended March 31

Ordinary share capital

1 unchanged sentence

Issue of Class A ordinary shares, net of forfeitures 88 33

Repurchase of Class A ordinary shares ( 36 ) ( 71 ) ( 109 ) ( 187 )

Balance - end of period 3,472 3,485

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Balance - beginning of period 481,784 488,488

Repurchase of Class A ordinary shares ( 3,216 ) ( 4,828 ) ( 9,891 ) ( 12,484 )

Cumulative effect of adoption of accounting guidance for convertible debt at January 1, 2022 ( 7,896 ) —

Share-based compensation expense 917 730

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Balance - beginning of period ( 9,505 ) ( 27,083 )

Cumulative effect of adoption of accounting guidance for expected credit losses at January 1, 2020

— — — ( 886 )

Cumulative effect of adoption of accounting guidance for convertible debt at January 1, 2022 5,362 —

Net income (loss) ( 5,727 ) 6,499

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2021 and 2020

For the three months ended March 31, 2022 and 2021

(expressed in thousands of U.S.

Nine months ended September 30

Three months ended March 31

Cash provided by (used in) operating activities

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Loss (income) from investments in related party investment fund ( 4,077 ) ( 4,024 )

Loss (income) from investment accounted for under the equity method — ( 870 )

Net change in unrealized gains and losses on investments and notes receivable ( 3,899 ) ( 1,228 )

1 unchanged sentence

Foreign exchange (gains) losses on investments 38 19

Current expected credit losses recognized on notes receivable and reinsurance assets — 250

Share-based compensation expense 1,005 763

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Purchases of investments ( 3,402 ) ( 2,070 )

Sales of investments 20,755 —

Net change in notes receivable 6,101 741

Proceeds from sales of investments — 20,755

Change in notes receivable — 6,101

Net cash provided by (used in) investing activities 33,256 ( 4,337 )

Financing activities

Repurchase of Class A ordinary shares ( 10,000 ) ( 12,671 )

Net cash provided by (used in) financing activities ( 10,000 ) ( 12,671 )

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash — —

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

ORGANIZATION AND BASIS OF PRESENTATION

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(“Greenlight Re”), provides global specialty property and casualty reinsurance.

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

Greenlight Re commenced underwriting in April 2006.

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Securities and Exchange Commission on March 8, 2022.

The condensed consolidated financial statements include the accounts of GLRE and its wholly-owned subsidiaries, Greenlight Re, GRIL, Verdant, and Greenlight Re UK.

All significant intercompany transactions and balances have been eliminated on consolidation.

Certain amounts in the prior periods presented have been reclassified to confirm to the current period financial statements presentation.

These reclassifications have no effect on previously reported net income or retained earnings.

In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position and results of operations as at the end of and for the periods presented.

Significant estimates used in the preparation of the Company’s condensed consolidated financial statements, including those associated with premiums and the estimations of loss and loss adjustment expense reserves, including losses arising from the novel coronavirus (the “COVID-19 pandemic”), may be subject to significant adjustments in future periods.

(See Note 5 for the significant assumptions that served as the basis for the Company's estimates of reserves for the COVID-19 pandemic).

All significant intercompany accounts and transactions have been eliminated.

The results of operations and cash flows for any interim period will not necessarily be indicative of the results of operations and cash flows for the full fiscal year or subsequent periods.

Significant estimates used in the preparation of the Company’s condensed consolidated financial statements, including those associated with premiums and the estimations of loss and loss adjustment expense reserves, may be subject to significant adjustments in future periods.

SIGNIFICANT ACCOUNTING POLICIES

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Actual results could differ from these estimates.

The significant estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, loss and loss adjustment expense reserves,

The significant estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, loss and loss adjustment expense reserves, premiums written, earned and receivable, variability underlying risk transfer assessments, allowances for credit losses, share-based compensation, valuation allowances associated with deferred tax assets and investment impairments.

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premiums written, earned and receivable, variability underlying risk transfer assessments, allowances for credit losses, bonus accruals, share-based compensation, valuation allowances associated with deferred tax assets and investment impairments.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

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The following table reconciles the cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the total presented in the condensed consolidated statements of cash flows:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

($ in thousands)

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Such amounts include premiums and funds held at Lloyd’s, which is held in trust at Lloyd's as security for members’ underwriting activities.

At September 30, 2021, funds held by cedents were $ 201.3 million (December 31, 2020:

At March 31, 2022, funds held by cedents were $ 272.3 million (December 31, 2021:

$ 246.9 million).

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The Company manages its credit risk in its reinsurance assets by transacting only with insurers and reinsurers that it considers financially sound.

Credit ratings of the counterparties are forward-looking and consider a variety of economic scenarios.

The Company's evaluation of the required allowance for reinsurance balances receivable and loss and loss adjustment expenses recoverable considers the current economic environment as well as potential macroeconomic outcomes.

For its retrocessional counterparties that are unrated, the Company may hold collateral in the form of funds withheld, trust accounts, or irrevocable letters of credit.

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The Company regularly evaluates its net credit exposure to assess the ability of cedents and retrocessionaires to honor their respective obligations.

At September 30, 2021, the Company has recorded an allowance for expected credit loss on its Reinsurance Assets of $ 0.1 million (December 31, 2020:

At March 31, 2022, the Company has recorded an allowance for expected credit loss on its Reinsurance Assets of $ 0.1 million (December 31, 2021:

$ 0.1 million).

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Under deposit accounting, the Company recognizes an asset or liability based on its paid or received consideration.

The deposit asset or liability balance is subsequently adjusted using the interest method with the corresponding income or expense recorded in the Company’s condensed consolidated statements of operations under the caption “Other income (expense).” The Company records deposit assets and liabilities in its condensed consolidated balance sheets in the caption “Reinsurance balances receivable” and “Reinsurance balances payable,” respectively.

At September 30, 2021, deposit assets and deposit liabilities were $ 4.9 million and $ 14.0 million, respectively (December 31, 2020:

The Company records deposit assets and liabilities in its condensed consolidated balance sheets in the caption “Reinsurance balances receivable” and “Reinsurance balances payable,” respectively.

At March 31, 2022, deposit assets and deposit liabilities were $ 3.5 million and $ 17.8 million, respectively (December 31, 2021:

$ 3.5 million and $ 18.6 million, respectively).

For the three and nine months ended September 30, 2021, and 2020, the interest income and (expense) on deposit accounted contracts were as follows:

For the three months ended March 31, 2022, and 2021, the interest income and expense on deposit accounted contracts were as follows:

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Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Three months ended March 31

($ in thousands)

Deposit interest income $ — $ —

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The Company does not offset these balances against collateral pledged or received.

The caption “Other assets” in the Company’s condensed consolidated balance sheets consists primarily of prepaid expenses, fixed assets, right-of-use lease assets, other receivables, and deferred tax assets.

Other Liabilities

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Earnings (Loss) Per Share

The Company’s unvested restricted stock awards, which contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are considered “participating securities” for the purposes of calculating earnings (loss) per share.

The Company has issued unvested restricted stock awards containing non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid.

These awards are considered “participating securities” for the purposes of calculating earnings (loss) per share.

Basic earnings per share is calculated on the basis of the weighted average number of common shares and participating securities outstanding during the period.

Diluted earnings (or loss) per share includes the dilutive effect of the following:

• Restricted Stock Units (“RSUs”) issued that would convert to common shares upon vesting;

• Restricted Stock Units (“RSUs”) issued that convert to common shares upon vesting;

• Unvested restricted stock awards which are not considered “participating securities”;

• Additional potential common shares issuable when in-the-money stock options are exercised, determined using the treasury stock method;

• those common shares with the potential to be issued in connection with convertible debt and other such convertible instruments, determined using the treasury stock method.

• For periods prior to January 1, 2022, those common shares with the potential to be issued in connection with convertible notes and other such convertible instruments, determined using the treasury stock method;

• Effective from January 1, 2022, the maximum number of additional common shares required to settle the convertible notes, as required under the if-converted method.

Diluted earnings (or loss) per share contemplates a conversion to common shares of all convertible instruments only if they are dilutive with regards to earnings per share.

In the event of a net loss, all RSUs, stock options, convertible debt, and participating securities are excluded from the calculation of both basic and diluted loss per share as their inclusion would be anti-dilutive.

In the event of a net loss, all RSUs, stock options, shares potentially issuable in connection with convertible notes, and participating securities are excluded from the calculation of both basic and diluted loss per share as their inclusion would be anti-dilutive.

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The table below presents the shares outstanding for the calculation of earnings (loss) per share 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

The table below presents the shares outstanding for the calculation of earnings (loss) per share for the three months ended March 31, 2022 and 2021:

Three months ended March 31

Weighted average shares outstanding - basic 32,926,227 34,522,994

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Participating securities excluded from calculation of loss per share 815,847 —

Shares potentially issuable in connection with convertible notes excluded from calculation of loss per share 5,818,182 —

Under current Cayman Islands law, no corporate entity, including GLRE and Greenlight Re, is obligated to pay taxes in the Cayman Islands on either income or capital gains.

The Company has an undertaking from the Governor-in-Cabinet of the Cayman Islands, pursuant to the provisions of the Tax Concessions Law, as amended, that, in the event that the Cayman Islands enacts any legislation that imposes tax on profits, income, gains or appreciations, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to GLRE, Greenlight Re nor their respective operations, or to the Class A or Class B ordinary shares or related obligations, before February 1, 2025.

The Company has an undertaking from the Governor-in-Cabinet of the Cayman Islands, pursuant to the provisions of the Tax Concessions Act, as amended, that, in the event that the Cayman Islands enacts any legislation that imposes a tax on profits, income, gains, or appreciations, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to GLRE, Greenlight Re nor their respective operations, or to the Class A or Class B ordinary shares or related obligations, before February 1, 2025.

Verdant is incorporated in Delaware and therefore is subject to taxes in accordance with the U.S.

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Recently Issued Accounting Standards Adopted

In January 2020, the FASB issued ASU No.

2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) (“ASU 2020-01”).

ASU 2020-01 clarifies interactions between the accounting guidance for (i) certain equity securities under Topic 321, (ii) investments under the equity method of accounting in Topic 323, and (iii) certain derivative instruments in Topic 815.

ASU 2020-01 is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The adoption of ASU 2020-01 during the first quarter of 2021 had no material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU No.

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As a result, entities will no longer present embedded conversion features separately in equity;

rather, the convertible debt instrument will be accounted for as a single liability measured at its amortized cost.

ASU 2020-06 also addresses the computation of earnings per share for convertible debt instruments, requiring

instead, the convertible debt instrument will be accounted for as a single liability measured at its amortized cost.

ASU 2020-06 also addresses the computation of earnings per share for convertible debt instruments, requiring the application of the if-converted method when calculating diluted earnings per share.

Under the if-converted method, the shares potentially issuable in connection with convertible debt are assumed to be converted at the beginning of the period.

The resulting common shares are included in the denominator of the diluted earnings per share calculation for the period being presented.

The Company adopted ASU 2020-06 during the first quarter of 2022, using the “modified retrospective” transition method.

The adoption of ASU 2020-06 resulted in a decrease in the Company’s opening shareholders’ equity of approximately $ 2.5 million, with a corresponding increase in the carrying value of the senior convertible notes (see Note 7).

For the periods in which the Company reports a net income, the number of shares outstanding for the diluted earnings per share calculation will be

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the application of the if-converted method when calculating diluted earnings per share.

The Company intends to adopt ASU 2020-06 during the first quarter of 2022, using the “modified retrospective” transition method.

The Company expects that its adoption of ASU 2020-06 will impact the accounting for its senior convertible notes (see Note 7) and will lead to a decrease in its opening shareholders’ equity of approximately $ 2.5 million, with a corresponding increase in the carrying value of the senior convertible notes.

The Company expects that in the periods in which the Company reports a net income, the number of shares outstanding for the diluted earnings per share calculation will be approximately 5.8 million higher under the if-converted method.

The Company does not expect the adoption of ASU 2020-06 to have a material impact on net income, cash flows, or any other balances.

approximately 5.8 million higher under the if-converted method.

The adoption of ASU 2020-06 did not have a material impact on the Company’s net income, cash flows, or any other balances.

INVESTMENT IN RELATED PARTY INVESTMENT FUND

On September 1, 2018, the Company entered into an amended and restated exempted limited partnership agreement (as amended by the letter agreement dated as of August 5, 2020, (the “Previous SILP LPA”) of Solasglas Investments, LP (“SILP”), with DME Advisors II, LLC (“DME II”), as General Partner, Greenlight Re, and GRIL, (together the “GLRE Limited Partners”), and the initial limited partner (each, a “Partner”).

On September 1, 2018, SILP also entered into a SILP investment advisory agreement (“IAA”) with DME Advisors.

The Company has entered into the Second Amended and Restated Exempted Limited Partnership Agreement, (the “SILP LPA”) of Solasglas Investments, LP (“SILP”), with DME Advisors II, LLC (“DME II”), as General Partner, Greenlight Re, and GRIL, (together the “GLRE Limited Partners”).

SILP has entered into a SILP investment advisory agreement (“IAA”) with DME Advisors.

LP (“DME Advisors”) pursuant to which DME Advisors is the investment manager for SILP.

DME II and DME Advisors are related to the Company, and each is an affiliate of David Einhorn, Chairman of the Company’s Board of Directors.

On January 7, 2021, the Company and DME II entered into the Second Amended and Restated Exempted Limited Partnership Agreement, effective as of January 1, 2021 (the “SILP LPA”).

The SILP LPA amends, restates, supersedes, and incorporates all material terms of the Previous SILP LPA, as amended as of February 26, 2019, and the letter agreements dated June 18, 2019, December 27, 2019, and August 5, 2020 (collectively, the “Amendments”).

The SILP LPA agreement also amended the definition of “Additional Investment Ratio” and each of the defined terms “Greenlight Re Surplus” and the “GRIL Surplus” so as to clarify that each of the respectively referenced “financial statements” are “U.S.

GAAP financial statements.” In addition, the SILP LPA included the following:

The SILP LPA includes the following proviso:

“The Investment Portfolio of each Partner will not exceed the product of (a) such Partner’s surplus (Greenlight Re Surplus or GRIL Surplus, as the case may be) multiplied by (b) the Investment Cap (50%), and the General Partner will designate any portion of a Partner’s Investment Portfolio as Designated Securities to effectuate such limit”.

The SILP LPA also amended the investment guidelines to reflect the amended investment guidelines adopted by the Company’s Board of Directors effective as of January 1, 2021.

The Company has concluded that SILP qualifies as a variable interest entity (“VIE”) under U.S.

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The Company’s maximum exposure to loss relating to SILP is limited to the net asset value of the GLRE Limited Partners’ investment in SILP.

At September 30, 2021, the net asset value of the GLRE Limited Partners’ investment in SILP was $ 180.2 million (December 31, 2020:

At March 31, 2022, the net asset value of the GLRE Limited Partners’ investment in SILP was $ 151.0 million (December 31, 2021:

$ 183.6 million), representing 74.2 % (December 31, 2021:

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The GLRE Limited Partners can redeem their assets from SILP for operational purposes by providing three business days’ notice to DME II.

At September 30, 2021, the majority of SILP’s long investments were composed of cash and publicly traded equity securities, which could be readily liquidated to meet the GLRE Limited Partners’ redemption requests.

The Company’s share of the change in the net asset value of SILP for the three and nine months ended September 30,

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2021, was $( 6.2 ) million and $( 4.2 ) million, respectively, (three and nine months ended September 30, 2020:

$ 6.4 million and $( 34.1 ) million, respectively), and shown in the caption “Income (loss) from investment in related party investment fund” in the Company’s condensed consolidated statements of operations.

At March 31, 2022, the majority of SILP’s long investments were composed of cash and publicly traded equity securities, which could be readily liquidated to meet the GLRE Limited Partners’ redemption requests.

The Company’s share of the change in the net asset value of SILP for the three months ended March 31, 2022, was $ 4.1 million (three months ended March 31, 2021:

$ 4.0 million), and shown in the caption “Income (loss) from investment in related party investment fund” in the Company’s condensed consolidated statements of operations.

The summarized financial statements of SILP are presented below.

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Summarized Statement of Assets and Liabilities of Solasglas Investments, LP

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

($ in thousands)

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Due from brokers 50,467 84,775

Cash and cash equivalents 1,076 —

Interest and dividends receivable 18 28

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Derivative contracts, at fair value ( 12,001 ) ( 7,253 )

Capital withdrawals payable ( 379 ) ( 10,000 )

Due to brokers ( 2,737 ) —

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Summarized Statement of Operations of Solasglas Investments, LP

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

Three months ended March 31

($ in thousands)

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

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

Three months ended March 31

($ in thousands)

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At September 30, 2021, the Company included the following securities in the caption “Other investments”:

At March 31, 2022, the Company included the following securities in the caption “Other investments”:

Cost Unrealized

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Derivative financial instruments (not designated as hedging instruments) — 335 — 335

Other investments $ 12,414 $ 11,759 $ ( 1,300 ) $ 22,873

Investment accounted for under the equity method 6,545

Total other investments $ 17,411 $ 31,773 $ ( 1,800 ) $ 47,384

Private investments and unlisted equities include securities that do not have readily determinable fair values.

The carrying values of these holdings are determined based on their original cost minus impairment, if any, plus or minus changes resulting from observable price changes.

At September 30, 2021, the carrying value of private investments and unlisted equities was $ 39.4 million (December 31, 2020:

$ 21.8 million).

It incorporated upward adjustments of $ 7.6 million and $ 12.9 million during the three and nine months ended September 30, 2021, respectively (three and nine months ended September 30, 2020:

$ 0.0 million and $ 4.1 million, respectively), excluding any unrealized gains or losses related to changes in foreign currency exchange rates.

Since acquiring these private investments, the Company has recognized net upward adjustments of $ 22.1 million and $ 9.3 million as of September 30, 2021, and December 31, 2020, respectively.

At December 31, 2020, the investment accounted for under the equity method represented an investment in AccuRisk Holdings LLC (“AccuRisk”), a Chicago, Illinois-based managing general underwriter focused on employee and health insurance benefits.

During the nine months ended September 30, 2021, the Company sold its investment in AccuRisk and realized a pre-tax gain of $ 14.2 million.

The Company’s derivative financial instruments are composed of warrants granting the Company the right, but not the obligation, to purchase shares at a specified price on or before the maturity date.

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The Company’s maximum exposure to loss relating to these warrants is limited to the warrants’ carrying amount.

Private investments and unlisted equity securities without readily determinable fair values

The Company measures its private investments and unlisted equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from identical or similar investments of the same issuers (the “measurement alternative”), with such changes recognized in the caption “Net investment income (loss)” in the condensed consolidated statements of operations.

The Company considers the need for impairment on a by-investment basis, based on certain indicators.

Under the measurement alternative, the Company makes two types of valuation adjustments:

• When the Company observes an orderly transaction of an investee’s identical or similar equity securities, the Company adjusts the carrying value based on the observable price as of the transaction date.

Once the Company records such an adjustment, the investment is considered an “asset measured at fair value on a nonrecurring basis.”

• If the Company determines that the investment is impaired and the fair value is less than its carrying value, it writes down the investment to its fair value.

The following table presents the carrying values of the private investments and unlisted equity securities carried under the measurement alternative at March 31, 2022, and 2021, and the related adjustments recorded during the years then ended.

Three months ended March 31

($ in thousands)

Carrying value (1)

$ 54,312 $ 25,062

Upward carrying value changes (2)

$ 3,827 $ 1,218

Downward carrying value changes and impairment (3)

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

(2) The cumulative upward carrying value changes from inception to March 31, 2022, totaled $ 35.4 million.

(3) The cumulative downward carrying value changes and impairments from inception to March 31, 2022, totaled $ 2.0 million.

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Fair Value Hierarchy

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The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

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Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

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The term “unobservable inputs” includes certain pricing models, discounted cash flow methodologies, and similar techniques.

Assets measured at fair value on a nonrecurring basis

At March 31, 2022, and December 31, 2021, the Company held $ 44.3 million and $ 40.5 million, respectively, of private investments and unlisted equities measured at fair value on a nonrecurring basis.

The Company classifies these assets as Level 3 within the fair value hierarchy due to their illiquidity.

At March 31, 2022, and December 31, 2021, the Company held $ 10.0 million and $ 6.6 million, respectively, of private investments and unlisted equities measured at cost.

Derivative instruments

The Company values its derivative instruments using the Black-Scholes option pricing model based on Level 3 inputs.

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For the derivative instruments valued on the basis of Level 3 inputs, the Company includes any change in unrealized gains or losses in the caption “Net investment income (loss)” in the condensed consolidated statements of operations.

At September 30, 2021, and December 31, 2020, the Company did not carry any other investments at fair value with an assigned Level within the fair value hierarchy.

At March 31, 2022, and December 31, 2021, the Company did not carry any other investments at fair value with an assigned Level within the fair value hierarchy.

The Company’s investment in the related party investment fund is measured at fair value using the net asset value practical expedient.

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LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

At September 30, 2021, the Company’s loss and loss adjustment expense reserves included estimated amounts for several catastrophe events.

For significant catastrophe events, including, but not limited to, hurricanes, typhoons, floods, wildfires, and pandemics, loss reserves are generally established based on loss payments and case reserves reported by clients when, and if, received.

To establish IBNR loss estimates, the Company makes use of, among other things, the following:

At March 31, 2022, the Company’s loss and loss adjustment expense reserves included estimated amounts for several catastrophe events.

For significant catastrophe events, including, but not limited to, hurricanes, tornados, typhoons, floods, earthquakes, wildfires, and pandemics, loss reserves are generally established based on loss payments and case reserves reported by clients when received.

To establish IBNR loss estimates, the Company makes use of, among other things, the following information:

• estimates communicated by ceding companies;

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• industry data;

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• catastrophe scenario modeling software;

• management’s judgment.

The COVID-19 pandemic is unprecedented, and the Company does not have previous loss experience on which to base the associated estimate for loss and loss adjustment expenses.

The Company based its estimate on the following:

At March 31, 2022, the Company’s loss and loss adjustment expense reserves included $ 13.6 million from the Russian-Ukrainian conflict.

Additional information the Company considered in estimating its loss reserves included the following:

• a review of in-force treaties that may provide coverage and incur losses;

• catastrophe and scenario modeling analyses and results shared by cedents;

• preliminary loss estimates received from clients and their analysts and loss adjusters;

• preliminary loss estimates received from clients, brokers, and loss adjusters;

• reviews of industry insured loss estimates and market share analyses;

• management’s judgment.

Significant assumptions which served as the basis for the Company's estimates of reserves for the COVID-19 pandemic losses and loss adjustment expenses include:

• the scope of coverage provided by the underlying policies, particularly those that provide for business interruption coverage;

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• the regulatory, legislative, and judicial actions that could influence contract interpretations across the insurance industry;

• the extent of economic contraction caused by the COVID-19 pandemic and associated measures, particularly in the United States;

The Company’s Russian-Ukrainian conflict loss estimates include actuarial assumptions, including:

• the areas within the affected regions that have incurred losses;

• the scope of coverage provided by the underlying policies;

• the interpretation of contract terms;

• the determination of loss-triggering events;

• regulatory, legislative, and judicial actions that could influence contract interpretations across the insurance industry;

• the ability of the cedents and insured to mitigate some or all of their losses.

While the Company believes its estimate of loss and loss adjustment expense reserves for the COVID-19 pandemic is adequate as of September 30, 2021, based on available information, actual losses may ultimately differ materially from the Company's current estimates.

The Company will continue to monitor the appropriateness of its assumptions as new information becomes available and will adjust its estimates accordingly.

Due to the uncertainty associated with these assumptions, the Company’s loss estimates are subject to significant variability, and actual losses may ultimately differ materially from the Company's current estimates.

The Company will evaluate its assumptions as new information becomes available and may adjust its loss estimates in future periods.

Such adjustments may be material to the Company's results of operations and financial condition.

The Company made no significant changes in the actuarial methodology or reserving process related to its loss and loss adjustment expense reserves for the nine months ended September 30, 2021.

At September 30, 2021 and December 31, 2020, loss and loss adjustment expense reserves were composed of the following:

September 30, 2021 December 31, 2020

Additionally, if the Russian-Ukrainian conflict is prolonged, the Company may incur additional losses in subsequent periods.

The Company made no significant changes in the actuarial methodology or reserving process related to its loss and loss adjustment expense reserves for the three months ended March 31, 2022.

At March 31, 2022 and December 31, 2021, loss and loss adjustment expense reserves were composed of the following:

March 31, 2022 December 31, 2021

($ in thousands)

2 unchanged sentences

Total $ 549,141 $ 524,010

A summary of changes in outstanding loss and loss adjustment expense reserves for all lines of business consolidated

for the nine months ended September 30, 2021 and 2020 is as follows:

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A summary of changes in outstanding loss and loss adjustment expense reserves for all lines of business consolidated for the three months ended March 31, 2022 and 2021 is as follows:

Consolidated 2022 2021

12 unchanged sentences

Foreign currency revaluation ( 2,741 ) 145

Net balance at September 30 527,697 461,821

Net balance at March 31 537,772 497,834

Losses recoverable 11,369 15,009

Gross balance at September 30 $ 540,779 $ 481,770

For the nine months ended September 30, 2021, the estimate of net losses incurred relating to prior accident years decreased by $ 1.3 million, due primarily to favorable development on catastrophe events, a mortgage contract associated with the COVID-19 pandemic, and certain health contracts.

The decrease in prior accident years was partially offset by adverse loss development on certain workers’ compensation and multi-line casualty contracts written between 2014 and 2018.

The favorable loss development on a mortgage contract was offset by increased profit commissions on the same contract.

For the nine months ended September 30, 2020, the estimate of net losses incurred relating to prior accident years increased by $ 5.4 million, due primarily to certain general liability, health and multi-line contracts, partially offset by favorable loss development on professional liability contracts.

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The changes in the outstanding loss and loss adjustment expense reserves for health claims for the nine months ended September 30, 2021 and 2020 are as follows:

Gross balance at March 31 $ 549,141 $ 512,843

For the three months ended March 31, 2022, the estimate of net losses incurred relating to prior accident years increased by $ 2.3 million, primarily due to adverse development on a health contract and additional losses from the COVID-19 pandemic.

For the three months ended March 31, 2021, the estimate of net losses incurred relating to prior accident years decreased by $ 0.1 million.

The changes in the outstanding loss and loss adjustment expense reserves for health claims for the three months ended March 31, 2022 and 2021 are as follows:

Health 2022 2021

12 unchanged sentences

Foreign currency revaluation — —

Net balance at September 30 12,728 12,994

Net balance at March 31 7,272 17,899

Losses recoverable — —

Gross balance at September 30 $ 12,728 $ 12,994

Gross balance at March 31 $ 7,272 $ 17,899

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From time to time, the Company purchases retrocessional coverage for one or more of the following reasons:

1 unchanged sentence

The Company records loss and loss adjustment expenses recoverable from retrocessionaires as assets.

For the three and nine months ended September 30, 2021, the Company’s earned ceded premiums were insignificant compared to $ 1.7 million and $ 3.2 million for the three and nine months ended September 30, 2020, respectively.

For the three and nine months ended September 30, 2021, loss and loss expenses recovered were insignificant compared to $ 2.5 million and $ 6.2 million for the three and nine months ended September 30, 2020, respectively.

For the three months ended March 31, 2022, the Company’s earned ceded premiums were $ 1.2 million (2021:

$ 0.1 million).

For the three months ended March 31, 2022, loss and loss adjustment expenses recovered and changes in losses recoverable were $ 0.7 million.

The recoveries recognized by the Company for the three months ended March 31, 2021, were insignificant.

Retrocession contracts do not relieve the Company from its obligations to its cedents.

Failure of retrocessionaires to honor their obligations could result in losses to the Company.

At September 30, 2021, the Company’s loss reserves recoverable consisted of (i) $ 9.9 million (December 31, 2020:

$ 12.6 million) from unrated retrocessionaires, of which $ 9.7 million (December 31, 2020:

At March 31, 2022, the Company’s loss reserves recoverable consisted of (i) $ 8.8 million (December 31, 2021:

$ 8.4 million) recoverable from unrated retrocessionaires, of which $ 8.3 million (December 31, 2021:

$ 8.2 million) were secured by cash, letters of credit and collateral held in trust accounts for the benefit of the Company and (ii) $ 2.7 million (December 31, 2021:

$ 4.3 million) from retrocessionaires rated A- or above by A.M.

$ 2.8 million) recoverable from retrocessionaires rated A- or above by A.M.

The Company regularly evaluates its net credit exposure to assess the ability of the retrocessionaires to honor their respective obligations.

At September 30, 2021, the Company had recorded an allowance for expected credit losses of $ 47.0 thousand (December 31, 2020:

At March 31, 2022, the Company had recorded an allowance for expected credit losses of $ 47.0 thousand (December 31, 2021:

$ 47.0 thousand).

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Note holders have the option, under certain conditions, to redeem the Notes prior to maturity.

At March 31, 2022, the Company’s share price was lower than the conversion price of $ 17.19 per share.

If a holder redeems the Notes, the Company shall have the option to settle the conversion obligation in cash, ordinary shares of the Company, or a combination thereof pursuant to the terms of the indenture governing the Notes.

The Company has therefore bifurcated the Notes into liability and equity components.

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At September 30, 2021, the Company’s share price was lower than the conversion price of $ 17.19 per share.

The Company’s effective borrowing rate for non-convertible debt at the time of issuance of the Notes was estimated to be 6.0 %, which equated to an $ 8.2 million discount.

At September 30, 2021, and December 31, 2020, the unamortized debt discount was $ 3.0 million and $ 4.2 million, respectively.

The debt discount also represents the portion of the Note’s principal amount allocated to the equity component.

Prior to January 1, 2022, the Company bifurcated the Notes into liability and equity components.

Effective January 1, 2022, upon adoption of ASU 2020-06, the Company no longer bifurcates the Notes and presents the entire balance as a single liability on the Company’s condensed consolidated balance sheets (see Note 2 for recently issued accounting standards adopted).

The Company’s effective borrowing rate for non-convertible debt at the time of issuance of the Notes was estimated to be 6.0 %.

The Company incurred issuance costs in connection with the issuance of the Notes.

At September 30, 2021, the unamortized portion of these costs attributed to the debt component was $ 1.2 million (December 31, 2020:

At March 31, 2022, the unamortized portion of these costs was $ 0.9 million (December 31, 2021:

$ 1.0 million), which the Company expects to amortize through the maturity date.

The Company netted the portion of these issuance costs attributed to the equity component against the gross proceeds allocated to equity, resulting in the Company including $ 7.9 million in the caption “Additional paid-in capital” in the Company’s condensed consolidated balance sheets.

The carrying value of the Notes at September 30, 2021, including accrued interest of $ 0.7 million, was $ 96.5 million (December 31, 2020:

The carrying value of the Notes at March 31, 2022, including accrued interest of $ 0.7 million, was $ 99.7 million (December 31, 2021:

$ 98.1 million).

At September 30, 2021, the Company estimated the fair value of the Notes to be $ 94.6 million (December 31, 2020:

At March 31, 2022, the Company estimated the fair value of the Notes to be $ 95.5 million (December 31, 2021:

$ 97.5 million) (see Note 4 Financial Instruments).

For the three and nine months ended September 30, 2021, the Company recognized interest expenses of $ 1.6 million and $ 4.7 million, respectively (2020:

$ 1.6 million and $ 4.7 million, respectively) in connection with the interest coupon, amortization of issuance costs, and amortization of the discount.

The Company was in compliance with all covenants relating to the Notes at September 30, 2021, and December 31, 2020.

For the three months ended March 31, 2022, the Company recognized interest expenses of $ 1.2 million (2021:

$ 1.5 million) in connection with the interest coupon and amortization of issuance costs.

The Company was in compliance with all covenants relating to the Notes at March 31, 2022, and December 31, 2021.

At March 31, 2022, the Company had a remaining obligation for interest and principal payments of $ 2.0 million and $ 104.0 million during 2022 and 2023, respectively.

SHARE CAPITAL

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The Company’s share capital is made up of ordinary share capital and additional paid-in capital.

2 unchanged sentences

On October 29, 2020, the Company’s shareholders approved an amendment to the stock incentive plan to increase the number of Class A ordinary shares available for issuance by 3.0 million shares from 5.0 million to 8.0 million.

At September 30, 2021, 3,128,276 (December 31, 2020:

At March 31, 2022, 2,092,276 (December 31, 2021:

3,128,276 ) Class A ordinary shares remained available for future issuance under the Company’s stock incentive plan.

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

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

The Board has adopted a share repurchase plan.

The timing of such repurchases and the actual number of shares repurchased will depend on various factors, including price, market conditions, and applicable regulatory and corporate requirements.

On March 26, 2020, the Board of Directors extended the share repurchase plan to June 30, 2021.

It 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.

The Company did not repurchase any Notes under the repurchase plan.

On May 4, 2021, the Board of Directors approved a new 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.

The repurchase plans may be modified, suspended, or terminated at the election of our Board of Directors at any time without prior notice.

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

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 repurchase up to $ 25.0 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.

The repurchase plan may be modified, suspended, or terminated at the election of our Board of Directors at any time without prior notice.

The Company repurchased no Class A ordinary shares during the three months ended March 31, 2022.

All Class A ordinary shares repurchased are canceled immediately upon repurchase.

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The following table is a summary of ordinary shares issued and outstanding:

Nine months ended September 30 Nine months ended September 30

Three months ended March 31 Three months ended March 31

Class A Class B Class A Class B

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Issue of ordinary shares, net of forfeitures 876,785 — 335,738 —

Repurchase of ordinary shares ( 1,079,544 ) — ( 1,874,419 ) —

Balance – end of period 28,466,516 6,254,715 28,595,813 6,254,715

Additional paid-in capital includes the premium per share paid by the subscribing shareholders for Class A and B ordinary shares, which have a par value of $ 0.10 each.

It also includes the earned portion of the grant-date fair value of share-based awards that have not yet vested.

SHARE-BASED COMPENSATION

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Employee and Director Restricted Shares

For the nine months ended September 30, 2021, the Company issued 334,312 (2020:

The restricted shares issued to certain employees contain restrictions relating to vesting, forfeiture in the event of termination of employment, transferability, and other matters.

For the three months ended March 31, 2022, the Company issued 885,261 (2021:

334,312 ) Class A ordinary shares to employees pursuant to the Company’s stock incentive plan.

These shares contain certain restrictions relating to, among other things, vesting, forfeiture in the event of termination of employment, and transferability.

The restricted shares cliff vest three years after the date of issuance, subject to the grantee’s continued service with the Company.

During the vesting period, the holder of the restricted shares retains voting rights and is entitled to any dividends declared by the Company.

For the nine months ended September 30, 2021, grantees forfeited 20,592 (2020:

The Restricted Shares granted to employees in 2022 include (i) restricted shares with both performance and service-based vesting conditions (“Performance RSs”) and (ii) restricted shares with only service-based vesting conditions (“Service RSs”).

The Service RSs vest evenly each year on January 1, subject to the grantees’ continued service with the Company.

If performance goals are achieved, the Performance RSs will cliff vest at the end of a three-year performance period within a range of 25 % and 100 % of the awarded Performance RSs, with a target of 50 %.

During the vesting period, the holder of the Service RSs and Performance RSs retains voting rights but is entitled to any dividends declared by the Company only upon vesting.

Prior to fiscal year 2022, the restricted shares granted to employees cliff vested three years after the date of issuance, subject to the grantee’s continued service with the Company.

During the vesting period, the holder of the restricted shares retained voting rights and was entitled to any dividends declared by the Company.

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Prior to fiscal year 2021, the Company issued Class A ordinary shares to the Chief Executive Officer (“CEO”) pursuant to the Company’s stock incentive plan (“CEO RSs”).

These shares contain performance and service conditions and certain restrictions relating to, among other things, vesting, forfeiture in the event of termination of the CEO’s employment, and transferability.

The CEO RSs cliff vest five years after the date of issuance, subject to the performance condition being met and the CEO’s continued service with the Company.

At March 31, 2022, there were 193,149 non-vested CEO RSs with a weighted average grant date fair value of $ 10.10 per share.

As the performance conditions associated with these restricted shares have not been met, the Company recognized no compensation cost relating to the unvested shares for the three months ended March 31, 2022, and 2021.

The Company recognizes compensation expense associated with Performance RSs and Service RSs based on the fair value of the Company's Class A ordinary shares measured at the grant date.

For Service RSs, the Company recognizes this expense on a straight-line basis over the requisite service period.

For Performance RSs, the Company recognizes the associated compensation expense based on achieving established performance criteria during the performance period.

For the three months ended March 31, 2022, grantees forfeited 8,476 (2021:

19,285 ) restricted shares.

For the nine months ended September 30, 2021, the Company reversed $ 0.1 million of stock compensation expense (2020:

For the three months ended March 31, 2022, the Company reversed $ 26 thousand of stock compensation expense (2021:

$ 0.1 million) in relation to the forfeited restricted shares.

The Company recorded $ 1.8 million of share-based compensation expense, net of forfeiture reversals, relating to restricted shares for the nine months ended September 30, 2021 (2020:

The Company recorded $ 0.7 million of share-based compensation expense, net of forfeiture reversals, relating to restricted shares for the three months ended March 31, 2022 (2021:

$ 0.5 million).

At September 30, 2021, there was $ 3.3 million (December 31, 2020:

$ 1.9 million) of unrecognized compensation cost relating to non-vested restricted shares (excluding any restricted shares with performance conditions that the Company currently does not expect will be met), which the Company expects to recognize over a weighted-average period of 1.9 years (December 31, 2020:

For the nine months ended September 30, 2021, the total fair value of restricted shares vested was $ 1.6 million (2020:

At March 31, 2022, there was $ 5.1 million (December 31, 2021:

$ 2.7 million) of unrecognized compensation cost relating to non-vested restricted shares (excluding CEO RSs), which the Company expects to recognize over a weighted-average period of 2.1 years (2021:

For the three months ended March 31, 2022, the total fair value of restricted shares vested was $ 1.3 million (2021:

$ 1.1 million).

For the nine months ended September 30, 2021, the Company also issued to non-employee directors an aggregate of 74,769 (2020:

0 ) restricted Class A ordinary shares as part of their remuneration for services to the Company.

Each of these restricted shares issued to non-employee directors contains similar restrictions to those issued to employees and will vest on the earlier of the first anniversary of the date of the share issuance or the Company’s next annual general meeting, subject to the grantee’s continued service with the Company.

The following table summarizes the activity for unvested outstanding restricted share awards during the nine months ended September 30, 2021:

The following table summarizes the activity for unvested outstanding restricted share awards during the three months ended March 31, 2022:

Performance Restricted Stock Service Restricted Stock

shares Weighted

fair value Number of

shares Weighted

Balance at December 31, 2021 193,149 $ 10.10 753,407 $ 8.68

2 unchanged sentences

Forfeited — — ( 8,476 ) 7.67

Balance at September 30, 2021 946,556 $ 8.97

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Employee and Director Stock Options

For the nine months ended September 30, 2021, and 2020, no Class A ordinary share purchase options were granted or exercised by directors or employees.

For the nine months ended September 30, 2021, 100,000 (2020:

40,000 ) stock options expired and 80,000 (2020:

80,000 ) stock options vested.

When the Company grants stock options, it reduces the corresponding number from the shares authorized for issuance as part of the Company’s stock incentive plan.

The Board of Directors does not currently anticipate that the Company will declare any dividends during the expected term of the options.

The Company uses graded vesting for expensing employee stock options.

The total compensation cost expensed relating to stock options for the nine months ended September 30, 2021, was $ 0.3 million (2020:

$ 0.5 million).

At September 30, 2021, the total compensation cost related to non-vested options not yet recognized was $ 0.3 million (December 31, 2020:

$ 0.7 million), which will be recognized over a weighted-average period of 1.4 years (December 31, 2020:

1.8 years) assuming the grantee completes the service period for vesting of the options.

At September 30, 2021, and December 31, 2020, 0.7 million and 0.8 million stock options were outstanding, respectively, with a weighted average exercise price of $ 22.35 and $ 22.22 per share, respectively, and a weighted average grant date fair value of $ 10.23 and $ 10.25 per share, respectively.

The stock options’ weighted-average remaining contractual terms were 4.9 years and 5.1 years, at September 30, 2021, and December 31, 2020, respectively.

Balance at March 31, 2022 794,362 $ 7.62 871,357 $ 7.86

Employee Restricted Stock Units

The Company issues RSUs to certain employees as part of the stock incentive plan.

These RSUs contain restrictions relating to vesting, forfeiture in the event of termination of employment, transferability, and other matters.

Each RSU grant cliff vests three years after the date of issuance, subject to the grantee’s continued service with the Company.

The Company issues RSUs to certain employees as part of the stock incentive plan and contain restrictions relating to vesting, forfeiture in the event of termination of employment, transferability, and other matters.

On the vesting date, the Company converts each RSU into one Class A ordinary share and issues new Class A ordinary shares from the shares authorized for issuance as part of the Company’s stock incentive plan.

For the nine months ended September 30, 2021, the Company issued 58,123 (2020:

The RSUs granted to employees in 2022 include (i) RSUs with both performance and service-based vesting conditions (“Performance RSUs”) and (ii) RSUs with only service-based vesting conditions (“Service RSUs”).

The Service RSUs vest evenly each year on January 1, subject to the grantee’s continued service with the Company.

If performance goals are achieved, the Performance RSUs will cliff vest at the end of a three-year performance period within a range of 25 % and 100 % of the awarded Performance RSUs, with a target of 50 %.

The Company recognizes compensation expense associated with Performance RSUs and Service RSUs based on the fair value of the Company's Class A ordinary shares measured at the grant date.

For Service RSUs, the Company recognizes this expense on a straight-line basis over the requisite service period.

For Performance RSUs, the Company recognizes the associated compensation expense based on achieving established performance criteria during the performance period.

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Prior to 2022, the RSUs issued to employees cliff vested three years after the date of issuance, subject to the grantee’s continued service with the Company.

For the three months ended March 31, 2022, the Company issued 159,215 (2021:

58,123 ) RSUs to employees pursuant to the Company’s stock incentive plan.

For the nine months ended September 30, 2021, and 2020, no RSUs were forfeited.

The Company recorded $ 0.3 million of share-based compensation expense relating to RSUs for the nine months ended September 30, 2021 (2020:

For the three months ended March 31, 2022, and 2021, no RSUs were forfeited.

The Company recorded $ 0.1 million of share-based compensation expense relating to RSUs for the three months ended March 31, 2022 (2021:

$ 0.1 million).

At September 30, 2021, the total compensation cost related to non-vested RSUs not yet recognized was $ 0.6 million (2020:

At March 31, 2022, the total compensation cost related to non-vested RSUs not yet recognized was $ 1.0 million (2021:

$ 0.5 million), which the Company expects to recognize over a weighted-average period of 2.0 years (2021:

Employee RSU activity during the nine months ended September 30, 2021, was as follows:

Employee RSU activity during the three months ended March 31, 2022, was as follows:

Performance Restricted Stock Units Service Restricted Stock Units

RSUs Weighted

fair value Number of

RSUs Weighted

Balance at December 31, 2020 — $ — 116,722 $ 9.60

1 unchanged sentence

Vested — — ( 20,711 ) 15.90

Balance at September 30, 2021 154,134 $ 8.59

Performance Restricted Shares

Prior to 2021, the Company issued Class A ordinary shares to the Chief Executive Officer (“CEO”) pursuant to the Company’s stock incentive plan.

These restricted shares cliff vest five years after the date of issuance, subject to the performance condition being met and the CEO’s continued service with the Company.

The weighted average grant date fair value of these restricted shares subject to performance conditions was $ 6.72 per share.

At September 30, 2021, 193,149 unvested performance restricted shares were outstanding (December 31, 2020:

As the performance conditions associated with these restricted shares have not been met, the Company recognized no compensation cost relating to the unvested shares for the nine months ended September 30, 2021, and 2020.

Balance at December 31, 2021 — $ — 154,134 $ 8.59

Granted 105,008 6.82 54,207 6.82

Vested — — ( 35,389 ) 10.84

Balance at March 31, 2022 105,008 $ 6.82 172,952 $ 7.58

Employee and Director Stock Options

For the three months ended March 31, 2022, and 2021, no Class A ordinary share purchase options were granted or exercised by directors or employees and no stock options expired or vested.

When the Company grants stock options, it reduces the corresponding number from the shares authorized for issuance as part of the Company’s stock incentive plan.

The Board of Directors does not currently anticipate that the Company will declare any dividends during the expected term of the options.

The Company uses graded vesting for expensing employee stock options.

The total compensation cost expensed relating to stock options for the three months ended March 31, 2022, was $ 0.1 million (2021:

$ 0.1 million).

At March 31, 2022, the total compensation cost related to non-vested options not yet recognized was $ 0.2 million (December 31, 2021:

$ 0.3 million), which will be recognized over a weighted-average period of 1.1 years (December 31, 2021:

1.2 years) assuming the grantee completes the service period for vesting of the options.

Employee and director stock option activity during the three months ended March 31, 2022 was as follows:

options outstanding Weighted

price Weighted

fair value Intrinsic value

($ in millions) Weighted average remaining contractual term

Balance at December 31, 2021 735,627 $ 22.35 $ 10.23 $ — 4.7 years

Granted — — — — —

Exercised — — — — —

Expired — — — — —

Balance at March 31, 2022 735,627 $ 22.35 $ 10.23 $ — 4.4 years

Stock Compensation Expense

For the three months ended March 31, 2022, and 2021, the combined stock compensation expenses (net of forfeitures) included in the caption “General and administrative expenses” in the Company’s condensed consolidated statements of operations were $ 1.0 million and $ 0.8 million, respectively.

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For the nine months ended September 30, 2021 and 2020, the combined stock compensation expense (net of forfeitures) included in the caption “General and administrative expenses” in the Company’s statements of operations was $ 2.4 million and $ 1.4 million, respectively.

At September 30, 2021, the Company recorded a gross deferred tax asset of $ 4.0 million (2020:

$ 3.5 million) and a deferred tax asset valuation allowance of $ 3.5 million (2020:

At March 31, 2022, the Company recorded a gross deferred tax asset of $ 3.8 million (December 31, 2021:

$ 3.2 million) and a deferred tax asset valuation allowance of $ 3.3 million (December 31, 2021:

$ 2.7 million).

2 unchanged sentences

The Company 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.

The following table sets forth our current and deferred income tax benefit (expense) on a consolidated basis for the nine months ended September 30, 2021 and 2020:

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

The following table sets forth our current and deferred income tax benefit (expense) on a consolidated basis for the three months ended March 31, 2022 and 2021:

Three months ended March 31

($ in thousands)

Current tax (expense) benefit $ ( 412 ) $ ( 3,734 )

Tax recovered 428 —

Deferred tax (expense) benefit 556 184

Decrease (increase) in deferred tax valuation allowance ( 556 ) ( 184 )

Income tax (expense) benefit $ 16 $ ( 3,734 )

For the nine months ended September 30, 2021, the income tax expense of $ 3.7 million resulted from Verdant’s gain on the sale of its AccuRisk investment.

RELATED PARTY TRANSACTIONS

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DME II receives a performance allocation equal to (with capitalized terms having the meaning provided under the SILP LPA) (a) 10 % of the portion of the Positive Performance Change for each limited partner’s capital account that is less than or equal to the positive balance in such limited partner’s Carryforward Account, plus (b) 20 % of the portion of the Positive Performance Change for each limited partner’s capital account that exceeds the positive balance in such limited partner’s Carryforward Account.

The Carryforward Account for Greenlight Re and GRIL includes the amount of losses that were to be recouped under the Joint Venture as well as any loss generated on the assets invested in SILP, subject to adjustments for redemptions.

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

The Carryforward Account for Greenlight Re and GRIL includes the amount of investment losses to be recouped, including any loss generated on the assets invested in SILP, subject to adjustments for redemptions.

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

In accordance with the SILP LPA, DME Advisors constructs a levered investment portfolio as agreed by the Company (the “Investment Portfolio” as defined in the SILP LPA).

1 unchanged sentence

The IAA has an initial term ending on August 31, 2023, subject to an automatic extension for successive three-year terms.

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

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For a detailed breakdown of management fees and performance compensation for the three months ended March 31, 2022, and 2021, refer to Note 3 of the condensed consolidated financial statements.

Pursuant to the SILP LPA and the IAA, the Company has agreed to indemnify DME, DME II, and DME Advisors for any expense, loss, liability, or damage arising out of any claim asserted or threatened in connection with DME Advisors serving as the Company’s or SILP’s investment advisor.

The Company will reimburse DME, DME II, and DME Advisors for reasonable costs and expenses of investigating and defending such claims, provided such claims were not caused due to gross negligence, breach of contract, or misrepresentation by DME, DME II, or DME Advisors.

The Company will reimburse DME, DME II, and DME Advisors for reasonable costs and expenses of investigating and defending such claims, provided such claims were not caused due to gross

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negligence, breach of contract, or misrepresentation by DME, DME II, or DME Advisors.

The Company incurred no indemnification amounts during the periods presented.

2 unchanged sentences

(“GRBK”), a publicly-traded company.

At September 30, 2021, SILP, along with certain affiliates of DME Advisors, collectively owned 34.3 % of the issued and outstanding common shares of GRBK.

Under applicable securities laws, DME Advisors may be limited at times in its ability to trade GRBK shares on behalf of SILP.

At March 31, 2022, SILP, along with certain affiliates of DME Advisors, collectively owned 34.3 % of the issued and outstanding common shares of GRBK.

Under applicable securities laws, DME Advisors may sometimes be limited in its ability to trade GRBK shares held in SILP.

At March 31, 2022, SILP held 2.7 million shares of GRBK.

Service Agreement

The Company has entered into a service agreement with DME Advisors, pursuant to which DME Advisors provides certain investor relations services to the Company for compensation of five thousand dollars per month (plus expenses).

The agreement is automatically renewed annually until terminated by either the Company or DME Advisors for any reason with 30 days prior written notice to the other party.

The agreement automatically renews annually until terminated by either the Company or DME Advisors for any reason with 30 days prior written notice to the other party.

Collateral Assets Investment Management Agreement

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Letters of Credit and Trusts

At September 30, 2021, the Company had one letter of credit facility, which automatically renews each year unless terminated by either party in accordance with the applicable required notice period:

At March 31, 2022, the Company had one letter of credit facility, which automatically renews each year unless terminated by either party in accordance with the applicable required notice period:

Maximum Facility Limit Termination Date Notice period required for termination

1 unchanged sentence

Citibank Europe plc $ 275,000 August 20, 2022 120 days before the termination date

At September 30, 2021, an aggregate amount of $ 138.4 million (December 31, 2020:

At March 31, 2022, an aggregate amount of $ 184.7 million (December 31, 2021:

$ 136.8 million) in letters of credit was issued under the credit facility.

At September 30, 2021, the Company had pledged total cash and cash equivalents with a fair value in the aggregate of $ 142.4 million (December 31, 2020:

At March 31, 2022, the Company had pledged total cash and cash equivalents with a fair value in the aggregate of $ 185.5 million (December 31, 2021:

$ 137.6 million) as collateral against the letters of credit issued and included in the caption “Restricted cash and cash equivalents” in the Company’s condensed consolidated balance sheets.

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

The Company was in compliance with all the credit facility covenants at September 30, 2021 and December 31, 2020.

The Company was in compliance with all the credit facility covenants at March 31, 2022 and December 31, 2021.

The Company has also established regulatory trust arrangements for certain cedents.

At September 30, 2021, collateral of $ 550.2 million (December 31, 2020:

At March 31, 2022, collateral of $ 515.9 million (December 31, 2021:

$ 497.1 million) was provided to cedents in the form of regulatory trust accounts and included in the caption “Restricted cash and cash equivalents” in the Company’s condensed consolidated balance sheets.

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Lease Obligations

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

The Company determined that this agreement qualifies as an operating lease.

At September 30, 2021, the right-of-use asset and a corresponding lease liability relating to the lease agreement were $ 2.2 million.

The operating lease expense for the three and nine months ended September 30, 2021, was $ 0.1 million and $ 0.1 million, respectively.

Greenlight Re’s previous lease arrangement qualified as a short-term lease.

The short-term lease expense for the three and nine months ended September 30, 2021, was nil and $ 0.3 million, respectively (three and nine months ended September 30, 2020:

$ 0.1 million and $ 0.4 million, respectively).

Schedule of Commitments and Contingencies

The following is a schedule of future minimum payments required under the above commitments:

2021 2022 2023 2024 2025 Thereafter Total

($ in thousands)

Operating lease obligations $ 130 $ 588 $ 624 $ 640 $ 657 $ 788 $ 3,427

Interest and convertible note payable $ — $ 4,000 $ 104,000 — — — 108,000

$ 130 $ 4,588 $ 104,624 $ 640 $ 657 $ 788 $ 111,427

From time to time, in the normal course of business, the Company may be involved in formal and informal dispute resolution procedures, which may include arbitration or litigation.

The Company has determined that its lease agreements for office space qualify as operating lease arrangements.

At the commencement date, the Company determined the lease term by assuming the exercise of those renewal options deemed to be reasonably certain.

The exercise of lease renewal options is at the Company's sole discretion, and these options do not contain any material residual value guarantees or material restrictive covenants.

The Company’s weighted-average remaining operating lease term is approximately 4.5 years at March 31, 2022.

As the lease contracts generally do not provide an implicit discount rate, the Company used the weighted-average discount rate of 6 %, representing its incremental borrowing rate based on information available at the commencement date, to determine the present value of lease payments.

The incremental borrowing rate is based on a borrowing with a term similar to that of the associated lease.

The Company has made an accounting policy election not to include renewal, termination, or purchase options that are not reasonably certain of exercise when determining the term of the borrowing.

At March 31, 2022, the right-of-use assets and lease liabilities relating to the operating leases were $ 2.3 million and $ 2.4 million, respectively.

The operating expense for the three months ended March 31, 2022, was $ 0.2 million (2021:

$ 0.04 million).

At March 31, 2022, the commitment for operating lease liabilities for future annual periods was as follows:

Year ending December 31, ($ in thousands)

Total lease payments 2,717

Less Imputed Interest ( 358 )

Present value of lease liabilities $ 2,359

From time to time, in the ordinary course of business, the Company may be involved in formal and informal dispute resolution procedures, which may include arbitration or litigation.

The outcomes of these procedures determine the rights and obligations under the Company’s reinsurance contracts and other contractual agreements.

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The Company has one operating segment, Property & Casualty Reinsurance.

Substantially all of the Company’s business is sourced through reinsurance brokers.

The following table sets forth the premiums generated through our largest brokers and their subsidiaries and affiliates (totals may not sum due to rounding):

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

Gross Premiums Written by Line of Business

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Three months ended March 31

($ in thousands)

Commercial $ 3,986 2.7 % $ 2,148 1.3 %

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Gross Premiums Written by Geographic Area of Risks Insured

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Three months ended March 31

($ in thousands)

and Caribbean $ 76,037 52.1 % $ 104,854 61.7 %

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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 1. Financial Statements