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Item 2. Management’s Discussion and Analysis

2022-05-03 compared with 2021-11-03 · 244 added, 333 removed, 327 unchanged (64% of the section changed)

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References to “we,” “us,” “our,” “our company,” or “the Company” refer to Greenlight Capital Re, Ltd.

(“GLRE”) and our wholly-owned subsidiaries, Greenlight Reinsurance, Ltd, (“Greenlight Re”), Greenlight Reinsurance Ireland, Designated Activity Company (“GRIL”), Greenlight Re Marketing (UK) Limited (“Greenlight Re UK”) and Verdant Holding Company, Ltd.

(“GLRE”) and its wholly-owned subsidiaries, Greenlight Reinsurance, Ltd, (“Greenlight Re”), Greenlight Reinsurance Ireland, Designated Activity Company (“GRIL”), Greenlight Re Marketing (UK) Limited (“Greenlight Re UK”) and Verdant Holding Company, Ltd.

(“Verdant”), unless the context dictates otherwise.

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 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, 2021.

The following is a discussion and analysis of our results of operations for the three months ended March 31, 2022 and 2021 and financial condition at March 31, 2022 and December 31, 2021.

Special Note About Forward-Looking Statements

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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.

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.

Risk Factors” included in this Form 10-Q for the three months ended March 31, 2022, and in the section entitled “Part I, Item 1A.

Risk Factors” contained in our Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2022.

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

• The impact of disruptions to commerce, reduced economic activity, and other consequences of a pandemic, including the novel coronavirus (“COVID-19”), is unknown;

Best may downgrade or withdraw either of our ratings;

• A downgrade or withdrawal of either of our A.M.

Best ratings would materially and adversely affect our ability to implement our business strategy successfully;

• Our results of operations will likely fluctuate from period to period and may not be indicative of our long-term prospects;

• Under our investment management structure, we have limited control over Solasglas Investments, LP (“SILP”);

• SILP may be concentrated in a few large positions, which could result in large losses;

• Competitors with greater resources may make it difficult for us to effectively market our products or offer our products at a profit;

• If our losses and loss adjustment expenses greatly exceed our loss reserves, our financial condition may be significantly and negatively affected;

• We may face risks from future strategic transactions such as acquisitions, dispositions, mergers, or joint ventures;

• Our results of operations and financial condition could be adversely affected by the ongoing conflict between Russia and Ukraine and related disruptions in the global economy;

• The impact of COVID-19 and related risks could materially and adversely affect our results of operations, financial position, and liquidity;

• SILP may be concentrated in a few large positions, which could result in investment volatility;

• The performance of our Innovations investments could result in financial losses and reduce our capital;

• If our losses and loss adjustment expenses greatly exceed our loss reserves, our financial condition may be materially and adversely affected;

• Inflation may adversely impact our results of operations or financial condition;

• The effect of emerging claim and coverage issues on our business is uncertain;

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• The loss of key executives could adversely impact our ability to implement our business strategy.

• 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 due to new information, future events, or otherwise.

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Our investment portfolio is managed according to a value-oriented philosophy, in which our investment advisor takes long positions in perceived undervalued securities and short positions in perceived overvalued securities.

In 2018, we launched our Greenlight Re Innovations unit, which supports technology innovators in the (re)insurance market by providing investment, risk capacity, and access to a broad insurance network.

Through Greenlight Re Innovations, we support technology innovators in the (re)insurance market by providing investment, risk capacity, and access to a broad insurance network.

Because we seek to capitalize on favorable market conditions and opportunities, period-to-period comparisons of our underwriting results may not be meaningful.

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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, 2021, describes our critical accounting policies and estimates.

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.

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

Outlook and Trends

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.

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

In February 2022, the Russian army commenced military actions against Ukraine.

The ongoing Russian-Ukrainian conflict has resulted in the U.S., United Kingdom, European Union, and other countries imposing financial and economic sanctions, which have caused disruption in the global economy and have increased economic and geopolitical uncertainty.

Our underwriting results for the quarter included $13.6 million of losses attributed to the Russian-Ukrainian conflict.

If this conflict is prolonged, we may incur additional losses in future periods.

During the January 1, 2022 renewal period, we saw improved rates in most of the classes of business we write, 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 of risk to individual counterparties than at any other time in our history.

After another year of significant property catastrophe losses in 2021 and several years of generally weak performance of reinsurers, premium rates continue to increase overall.

We believe that structural problems within the “pure catastrophe” class will limit premium rate increases in the class.

However, we believe that the recent property catastrophe losses, along with the Russian-Ukrainian conflict will help support and extend the generally favorable market conditions in most other classes.

We expect that the impact of inflation on our claims costs may partially reduce the extent of the overall premium adequacy, mainly with respect to longer-tailed classes.

Over the past four years, our underwriting portfolio has become considerably more diversified as we have shifted our underwriting away from being dominated by a small number of large accounts.

This diversification has also exposed us to a wider array of global insurance events.

However, we believe that taking on risk that is well priced, diversified and risk-managed, is key to achieving optimal underwriting results.

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

Our Innovations-related premiums accounted for approximately 10% of our net premiums written in the first quarter of 2022.

We see the potential for significant growth from Innovations-derived underwriting opportunities going forward.

In April 2022, we launched a Lloyd’s approved insurtech-focused syndicate (“Syndicate 3456”).

We expect Syndicate 3456 to enable us to provide capacity to our growing portfolio of Innovations partners.

Key Financial and Non-GAAP Measures

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

GAAP rules and standards (“non-GAAP financial measures”), to evaluate our financial performance, financial position, and the change in shareholder value.

Generally, a non-GAAP financial measure, as defined in SEC Regulation G, is a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented under U.S.

We believe that these measures, which may be calculated or defined differently by other companies, provide consistent and comparable metrics of our business performance to help shareholders understand performance trends and facilitate a more thorough understanding of the Company’s business.

Non-GAAP financial measures should not be viewed as substitutes for those determined under U.S.

The key non-GAAP financial measures used in this report are:

• Basic book value per share and fully diluted book value per share;

• Net underwriting income (loss)

These non-GAAP measures are described below.

Basic Book Value Per Share and Fully Diluted Book Value Per Share

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We believe that long-term growth in fully diluted book value per share is the most relevant measure of our financial performance because it provides management and investors a yardstick to monitor the shareholder value generated.

Fully diluted book value per share may also help our investors, shareholders, and other interested parties form a basis of comparison with other companies within the property and casualty reinsurance industry.

We calculate basic book value per share based on ending shareholders' equity and aggregate of Class A and Class B Ordinary shares issued and outstanding, as well as all unvested restricted shares.

Fully diluted book value per share represents basic book value per share combined with any dilutive impact of in-the-money stock options and RSUs issued and outstanding as of any period end.

Fully diluted book value per share also includes the dilutive effect, if any, of ordinary shares to be issued upon conversion of the convertible notes.

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

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

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

Basic book value per share and fully diluted book value per share should not be viewed as substitutes for the comparable U.S.

GAAP measures.

We calculate basic book value per share as (a) ending shareholders' equity, divided by (b) aggregate of Class A and Class B Ordinary shares issued and outstanding, including all unvested service-based restricted shares, and the earned portion of performance-based restricted shares granted after December 31, 2021.

Fully diluted book value per share represents basic book value per share combined with any dilutive impact of in-the-money stock options, unvested service-based RSUs, and the earned portion of unvested performance-based RSUs granted.

Fully diluted book value per share also includes the dilutive effect, if any, of ordinary shares expected to be issued upon settlement of the convertible notes.

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

We use fully diluted book value per share as a financial measure in our annual incentive compensation.

The following table presents a reconciliation of the non-GAAP financial measures basic and fully diluted book value per share to the most comparable U.S.

GAAP measure:

March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021

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

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Denominator for basic and fully diluted book value per share:

Ordinary shares issued and outstanding (denominator for basic book value per share) 33,844,446 34,171,068 34,850,528 34,514,790 35,368,417

In-the-money stock options and RSUs issued and outstanding 154,134 154,134 154,134 116,722 116,722

Ordinary shares issued and outstanding as presented in the Company’s condensed consolidated balance sheets 34,721,231 33,844,446 33,844,446 34,171,068 34,850,528

Unearned performance-based restricted shares granted after December 31, 2021 (581,593) — — — —

Denominator for basic book value per share 34,139,638 33,844,446 33,844,446 34,171,068 34,850,528

In-the-money stock options, service-based RSUs granted, and earned performance-based RSUs granted 176,379 154,134 154,134 154,134 154,134

Denominator for fully diluted book value per share 34,316,017 33,998,580 33,998,580 34,325,202 35,004,662

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Increase (decrease) in fully diluted book value per share (%) (2.4) % 4.2 % (2.6) % 0.8 % 0.5 %

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

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:

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

GAAP rules and standards (“non-GAAP financial measures”), to evaluate our financial performance, financial position, and the change in shareholder value.

We believe that these measures, which may be calculated or defined differently by other companies, provide consistent and comparable metrics of our business performance to help shareholders understand performance trends and allow for a more thorough understanding of the Company’s business.

Non-GAAP financial measures should not be viewed as a substitute for those determined under U.S.

The key non-GAAP financial measures used in this report are:

• Adjusted combined ratio;

• Net underwriting income (loss).

These non-GAAP measures are described below.

Adjusted combined ratio

“Combined ratio” is a commonly used measure in the property and casualty insurance industry and is calculated using U.S.

GAAP components.

We use the combined ratio, as well as an adjusted combined ratio that excludes the impacts of certain items, to evaluate our underwriting performance.

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

(1) For periods prior to March 31, 2022, all unvested restricted shares are included in the “basic” and “fully diluted” denominators.

Restricted shares with performance-based vesting conditions granted after December 31, 2021, are included in

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

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

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

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

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

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

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

Combined ratio 109.3 % 100.4 % 102.4 % 100.1 %

Impact on combined ratio of selected items:

Prior-year development (0.1) % (0.2) % 0.8 % 1.4 %

Catastrophes (current year) 19.1 % 7.0 % 7.9 % 2.4 %

Other adjustments — % — % 0.7 % 1.8 %

Adjusted combined ratio 90.3 % 93.6 % 93.0 % 94.5 %

• 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 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.

the “basic” and “fully diluted” denominators to the extent that the Company has recognized the corresponding share-based compensation expense.

At March 31, 2022, the aggregate number of unearned restricted shares with performance conditions was 774,742 (December 31, 2021:

193,149, September 30, 2021:

193,149, June 30, 2021:

193,149, March 31, 2021:

Net Underwriting Income (Loss)

One way that we evaluate the Company’s underwriting performance is through the measurement of net underwriting income (loss).

One way that we evaluate the Company’s underwriting performance is by measuring net underwriting income (loss).

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

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We believe that the use of net underwriting income (loss) enables investors and other users of the Company’s financial information to analyze our performance in a manner similar to how management analyzes performance.

Management also believes that this measure follows industry practice and allows the users of financial information to compare the Company’s performance with those of our industry peer group.

Management also believes that this measure follows industry practice and allows the users of financial information to compare the Company’s performance with that of our industry peer group.

Net underwriting income (loss) is considered a non-GAAP financial measure because it excludes items used to calculate net income before taxes under U.S.

We calculate net underwriting income (loss) as net premiums earned, plus other income (expense) relating to reinsurance and deposit-accounted contracts, less net loss and loss adjustment expenses, acquisition costs, and underwriting expenses.

We calculate net underwriting income (loss) as net premiums earned, plus other income relating to reinsurance and deposit-accounted contracts, less deposit interest expense, less net loss and loss adjustment expenses, acquisition costs, and underwriting expenses.

The measure excludes, on a recurring basis:

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GAAP net income before income taxes.

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The reconciliations of net underwriting income (loss) to income (loss) before income taxes (the most directly comparable U.S.

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

Three months ended September 30 Nine months ended September 30

2021 2020 2021 2020

Three months ended March 31

($ in thousands)

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Results of Operations

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

The table below summarizes our operating results for the three months ended March 31, 2022, and 2021:

Three months ended March 31

(in thousands, except percentages)

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* 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 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.

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 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:

* 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 loss of $2.6 million and a gain of $0.2 million for the three months ended March 31, 2022, and 2021, respectively.

Three months ended March 31, 2022, and 2021

For the three months ended March 31, 2022, fully diluted book value per share decreased by $0.34, or 2.4%, to $13.65 per share from $13.99 per share at December 31, 2021.

For the three months ended March 31, 2022, basic book value per share decreased by $0.33, or 2.3%, to $13.72 per share from $14.05 per share at December 31, 2021.

The decrease in fully diluted book value per share included $0.07, or 0.50%, adverse impact relating to the adoption of ASU 2020-06 during the three months ended March 31, 2022 (see Note 2 of the accompanying condensed consolidated financial statements for recently issued accounting standards adopted).

For the three months ended March 31, 2022, our net loss was $5.7 million, compared to a net income of $6.5 million reported for the equivalent 2021 period.

The developments that most significantly affected our financial performance during the three months ended March 31, 2022, compared to the equivalent 2021 period, are summarized below:

• Underwriting:

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.

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.

The underwriting loss for the three months ended March 31, 2022, was $7.7 million, driven primarily by $13.6 million of losses related to the Russian-Ukrainian conflict and $2.8 million of losses related to Tennessee wildfires.

By comparison, the underwriting loss for the same period in 2021 was $2.0 million, driven by $2.9 million of deposit accounting interest expense.

Our overall combined ratio was 106.2% for the three months ended March 31, 2022, compared to 101.5% for the same period in 2021.

The Russian-Ukrainian conflict contributed 10.8 percentage points to the combined ratio for the three months ended March 31, 2022.

• Investments:

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.

Our total investment income for the three months ended March 31, 2022, was $7.7 million compared to a total investment income of $18.7 million incurred during the equivalent 2021 period.

For the three months ended March 31, 2022, our investment in SILP reported a gain of $4.1 million, while our Innovations-related investments reported an unrealized gain of $3.9 million.

The investment income during the equivalent 2021 period was driven by a $14.7 million gain realized on the sale of our investment in AccuRisk.

Underwriting results

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

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)

Property $ 18,535 12.7 % $ 14,915 8.8 %

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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 September 30, 2021

Increase (decrease)

($ in millions) % change Explanation

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

For the three months ended March 31, 2022, our gross premiums written decreased by $24.0 million, or 14.2%, compared to the equivalent 2021 period.

The primary drivers of this change are the following:

Gross Premiums Written

Nine months ended September 30, 2021

Three months ended March 31, 2022

Increase (decrease)

($ in millions) % change Explanation

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.

Property $3.6 24.3% The increase in property premiums written during the three months ended March 31, 2022, over the comparable 2021 period was primarily attributable to growth in underlying business relating to one of our Innovations-related contracts.

To a lesser extent, the increase in property premiums was driven by new personal and commercial property contracts during 2022.

A decrease in motor premiums partially offset the increase in property premiums as we elected to reduce or not renew our participation on certain motor contracts.

Casualty $(35.4) (31.1)% The decrease in casualty premiums written during the three months ended March 31, 2022, over the comparable 2021 period was due primarily to motor and workers’ compensation contracts on which we elected to reduce or not renew our participation.

The decrease in casualty premiums was partially offset by growth in general liability and multi-line premiums resulting from new and renewed contracts, including Innovations-related business.

Other $7.7 18.7% The increase in “other” premiums written during the three months ended March 31, 2022, over the comparable 2021 period was due primarily to:

• financial lines, including transactional liability business;

• new marine and energy contracts bound during 2022;

• new contracts bound during 2022 relating to other specialty classes.

These increases were partially offset by decreases in health premiums due primarily to a contract in which we shifted our participation from proportional basis to excess of loss basis.

Premiums Ceded

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.

For the three months ended March 31, 2022, premiums ceded were $6.0 million compared to $(0.1) million for the three months ended March 31, 2021.

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

In 2022, we entered into new retrocession agreements, primarily to reduce our exposure to large marine and energy loss events and certain property losses.

Net Premiums Written

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

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)

Property $ 16,435 11.7 % $ 14,956 8.8 %

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Total $ 139,877 100.0 % $ 169,990 100.0 %

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.

For the three months ended March 31, 2022, net premiums written decreased by $30.1 million, or 17.7%, compared to the three months ended March 31, 2021.

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 September 30 Nine months ended September 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Three months ended March 31

($ in thousands)

Property $ 14,490 11.5 % $ 14,155 10.5 %

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

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)

Property $ 9,713 9.9 % $ 11,385 11.6 %

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Total $ 97,407 100.0 % $ 97,721 100.0 %

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

The below table summarizes the loss ratios for the three months ended March 31, 2022 and 2021:

Three months ended March 31

2022 2021 Increase / (decrease) in loss ratio points

Property 67.0 % 80.4 % (13.4)

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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 September 30, 2021

Increase (decrease)

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

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.

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 nine months ended September 30, 2021, were attributable to the following:

The changes in net losses incurred and loss ratios during the three months ended March 31, 2022, were attributable to the following:

Net Losses Incurred

Nine months ended September 30, 2021

Three months ended March 31, 2022

Increase (decrease)

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

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 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;

• 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.

Property $(1.7) (13.4) The decrease in property losses incurred during the three months ended March 31, 2022, compared to the same period in 2021, was due primarily to a reduction in motor business related to contracts on which we elected to reduce or non-renew our participation.

The decrease was partially offset by higher personal lines losses from Tennessee wildfires.

The property loss ratio decreased 13.4 percentage points during the three months ended March 31, 2022, over the equivalent 2021 period, due primarily to the reasons described above.

Casualty $(8.8) (5.5) The decrease in casualty losses incurred during the three months ended March 31, 2022, compared to the same period in 2021, was due primarily to a reduction in motor business related to contracts on which we elected to reduce or non-renew our participation.

The decrease was partially offset by higher incurred losses relating to the multi-line business driven by growth in Lloyd’s syndicate contracts.

The casualty loss ratio decreased 5.5 percentage points during the three months ended March 31, 2022, over the equivalent 2021 period, due primarily to the reasons described above.

Other $10.1 42.0 The increase in “other” losses incurred during the three months ended March 31, 2022, compared to the same period in 2021, was due primarily to losses relating to the Russian-Ukrainian conflict.

The increase was partially offset by lower losses incurred on health contracts on which we elected to reduce or not renew our participation.

The “other” loss ratio increased 42.0 percentage points during the three months ended March 31, 2022, over the equivalent 2021 period, due primarily to the reasons described above.

Russian-Ukrainian Conflict

Our loss and loss adjustment expenses from the Russian-Ukrainian conflict relate primarily to marine, energy, political violence, and terrorism (“MEPVT”) policies and whole account contracts, all of which are included in our Specialty book of business.

We have purchased excess of loss reinsurance to reduce our net exposure relating to MEPVT exposures.

As of March 31, 2022, we have not recorded any reinsurance recoveries, as the estimated losses had not impacted the excess layers.

However, we may generate recoveries under the retroceded contracts if we recognize significant further MEPVT losses from the Russian-Ukrainian conflict.

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 September 30 Nine months ended September 30

2021 2020 2021 2020

($ in thousands) ($ in thousands)

Three months ended March 31

($ in thousands)

Property $ 3,348 10.2 % $ 2,800 8.4 %

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Total $ 32,945 100.0 % $ 33,381 100.0 %

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)

The acquisition cost ratios for the three months ended March 31, 2022 and 2021, were as follows:

Three months ended March 31

2022 2021 Increase / (decrease)

Property 23.1 % 19.8 % 3.3 %

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Total 26.2 % 24.7 % 1.5 %

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 September 30, 2021

Increase / (decrease) in acquisition cost ratio points Explanation

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 nine months ended September 30, 2021, compared to the equivalent period in 2020, were attributable to the following:

The changes in the acquisition cost ratios during the three months ended March 31, 2022, compared to the equivalent period in 2021, were attributable to the following:

Change in Acquisition Cost Ratios

Nine months ended September 30, 2021

Three months ended March 31, 2022

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 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.

Property 3.3 The increase in property acquisition cost ratio during the three months ended March 31, 2022, compared to the equivalent period in 2021, was due primarily to an increase in quota share commercial and personal property business.

This business had a higher acquisition cost ratio relative to motor business that decreased during the three months ended March 31, 2022, compared to the same period in 2021.

Casualty 1.2 The increase in the casualty acquisition cost ratio during the three months ended March 31, 2022, compared to the equivalent period in 2021, related primarily to growth in multi-line and Lloyd’s syndicate business.

Other 1.9 The increase in the “other” acquisition cost ratio was due primarily to the change in the mix of business during the three months ended March 31, 2022, compared to the equivalent period in 2021.

The “other” acquisition cost expense and earned premiums were lower due to decreased health business.

However, the growth in transactional liability business, which has a higher acquisition cost ratio relative to other specialty business, increased the overall “other” acquisition cost ratio.

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

Three months ended September 30 Three months ended September 30

Property Casualty Other Total Property Casualty Other Total

Loss ratio 101.9 % 79.8 % 76.8 % 81.5 % 92.9 % 70.8 % 83.3 % 76.2 %

Acquisition cost ratio 21.6 26.1 27.2 25.9 20.7 26.3 15.0 23.4

Composite ratio 123.5 % 105.9 % 104.0 % 107.4 % 113.6 % 97.1 % 98.3 % 99.6 %

Underwriting expense ratio 1.9 0.8

Combined ratio 109.3 % 100.4 %

Nine months ended September 30 Nine months ended September 30

Three months ended March 31 Three months ended March 31

Property Casualty Other Total Property Casualty Other Total

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Combined ratio 106.2 % 101.5 %

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.

The underwriting expense ratio for the three months ended March 31, 2021, included 2.2% percentage points relating to interest expense on deposit-accounted contracts based on revised expectations of ultimate cash flows.

There was no similar impact on the underwriting expense ratio for the three months ended March 31, 2022.

General and Administrative Expenses

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

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)

Underwriting expenses $ 3,221 $ 3,337

1 unchanged sentence

General and administrative expenses $ 7,232 $ 7,541

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.

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

For the three months ended March 31, 2022, and 2021, general and administrative expenses included $1.0 million and $0.8 million, respectively, of costs related to stock compensation granted to employees and directors.

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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 September 30 Nine months ended September 30

2021 2020 2021 2020

Three months ended March 31

($ in thousands)

4 unchanged sentences

Interest, dividend, and other expenses (223) (882)

Income (loss) from equity method investment — 80 — 869

Net investment-related income (loss) $ 3,660 $ 14,650

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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 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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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 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

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

For the three months ended March 31, 2022, the Investment Portfolio managed by DME Advisors reported a gain of 1.7%, compared to a gain of 1.5% for the three months ended March 31, 2021.

The long portfolio lost 6.0%, while the short portfolio and macro positions gained 4.9% and 3.5%, respectively, during the three months ended March 31, 2022.

For the three months ended March 31, 2022, the most significant contributors to SILP’s investment return were long positions in Rheinmetall AG (RHM GY), Teck Resources (TECK), and The Chemours Company (CC).

During the three months ended March 31, 2022, the most significant detractors were Green Brick Partners (GRBK), Capri Holdings (CPRI), and various short positions.

During the three months ended March 31, 2022, we recorded a net unrealized gain of $3.9 million on our portfolio of Innovations-related investments.

For the three months ended March 31, 2022, and 2021, 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 March 31

Long portfolio gains (losses) (6.0) % 11.7 %

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Other income and expenses 1

(0.4) (0.2) (1.4) (0.4)

Gross investment return 1.9 % 1.6 %

Net investment return 1

(2.7) % 1.4 % (2.2) % (6.5) %

1 “Other income and expenses” excludes performance compensation but includes management fees.

“Net investment return” incorporates both of these amounts.

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.

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

GAAP financial statements.

It is adjusted monthly for our share of the net profits and net losses reported by SILP during any intervening period.

It is adjusted

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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.

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We are not obligated to pay taxes in the Cayman Islands on either income or capital gains.

The Governor-In-Cabinet has granted us an exemption from any income taxes that may be imposed in the Cayman Islands for a period of 20 years, expiring on February 1, 2025.

The Governor-In-Cabinet has granted us an exemption from any income taxes that may be imposed in the Cayman Islands for the 20 years expiring February 1, 2025.

GRIL is incorporated in Ireland and is subject to the Irish corporation tax.

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

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:

At March 31, 2022, we have included a gross deferred tax asset of $3.8 million (December 31, 2021:

$3.2 million) in the caption “Other assets” in the Company’s condensed consolidated balance sheets.

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

At March 31, 2022, a valuation allowance of $3.3 million (December 31, 2021:

$2.7 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 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.

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.

The total investments reported in the condensed consolidated balance sheets at March 31, 2022, was $205.7 million, compared to $231.0 million at December 31, 2021,a decrease of $25.3 million, or 11.0%.

The decrease was primarily related to net redemptions from SILP which were used primarily to fund collateral required by our ceding insurers.

New Innovations-related investments, and the gains from SILP and the Innovations-related investments partially offset the decrease.

At March 31, 2022, 92.5% of SILP’s portfolio was valued based on quoted prices in actively traded markets (Level 1), 4.9% was composed of instruments valued based on observable inputs other than quoted prices (Level 2), and 0.2% was composed of instruments valued based on non-observable inputs (Level 3).

At March 31, 2022, 2.4% of SILP’s portfolio consisted of private equity funds valued using the funds’ net asset values as a practical expedient.

At March 31, 2022, our Innovations-related investments did not have readily determinable fair values and were carried at their original cost minus impairment plus changes resulting from observable price changes.

Other than our investment in SILP (see Notes 3 of the accompanying condensed consolidated financial statements), we have not participated in transactions that created relationships with unconsolidated entities or financial partnerships, including VIEs, established to facilitate off-balance sheet arrangements.

Cash and cash equivalents;

Restricted cash and cash equivalents

The unrestricted cash and cash equivalents decreased by $45.0 million, or 58.9%, from $76.3 million at December 31, 2021, to $31.3 million at March 31, 2022, primarily due to collateral posted to 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.

Our restricted cash increased by $66.6 million, or 10.5%, from $634.8 million at December 31, 2021, to $701.4 million, at March 31, 2022, primarily due to collateral required by our ceding insurers.

The increase in collateral was partially funded from withdrawals from SILP and partially from unrestricted cash and cash equivalents.

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Reinsurance balances receivable

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.

During the three months ended March 31, 2022, reinsurance balances receivable increased by $36.3 million, or 8.9%, to $441.6 million from $405.4 million at December 31, 2021.

This increase was related primarily to increases in (i) premiums receivable on new contracts bound during the first quarter of 2022 and (ii) funds withheld on reinsurance contracts with Lloyd’s syndicates.

Loss and Loss Adjustment Expense Reserves;

Loss and Loss Adjustment Expenses Recoverable

The COVID-19 pandemic is unprecedented, and we do not have previous loss experience on which to base our estimates for the associated loss and loss adjustment expense reserves.

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

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Reserves IBNR Total Case

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Total $ 189,312 $ 359,829 $ 549,141 $ 190,220 $ 333,790 $ 524,010

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.

During the three months ended March 31, 2022, the total gross loss and loss adjustment expense reserves increased by $25.1 million, or 4.8%, to $549.1 million from $524.0 million at December 31, 2021.

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 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.

During the three months ended March 31, 2022, the total loss and loss adjustment expenses recoverable decreased by $0.3 million, or 2.4%, to $11.4 million from $11.1 million at December 31, 2021.

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

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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.

We estimate catastrophe loss exposure in terms of our PML.

We anticipate that our PML will vary from period to period depending upon the modeled simulated losses and the composition of our in-force book of business.

We describe projected severity levels in terms of a 1-in-250 year return period.

The 1-in-250 year return period PML means that we believe there is a 0.4% chance in any given year that an occurrence of a natural catastrophe will lead to losses exceeding the stated estimate.

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

PMLs are estimates.

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

We currently monitor our catastrophe loss exposure in terms of our PML (probable maximum loss).

We anticipate that our PMLs will vary from period to period depending upon the modeled simulated losses and the composition of our in-force book of business.

We monitor our natural peril PMLs on a worldwide basis, with a particular focus on our peak peril regions.

When these perils consist of a large geographic area, we split them into sub-regions, where the underlying geographic components can also be considered individual peril zones.

For our natural catastrophe PMLs, we utilize the output of catastrophe models at the 1-in-250 year return period.

The 1-in-250 year return period PML means that we believe there is a 0.4% probability that in any given year, an occurrence of a natural catastrophe will lead to losses exceeding the stated estimate.

It is important to note that PMLs are best estimates based on the modeled data available for each underlying risk.

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 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

Zone Single Event Loss Aggregate Loss

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

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At April 1, 2022, our estimated largest PML (net of retrocession and reinstatement premiums) at a 1-in-250 year return period for a single event and in aggregate was $87.6 million and $95.9 million, respectively, both relating to the peril of North Atlantic Hurricane.

The below table contains the expected modeled loss for each of our peak peril regions and sub-regions, for both a single event loss and aggregate loss measures at the 1-in-250 year return period.

April 1, 2022

Net 1-in-250 Year Return Period

Peril Single Event Loss Aggregate Loss

($ in thousands)

United States, Canada and the Caribbean $ 84,502 $ 97,574

Europe 45,134 51,491

Japan 45,240 49,105

Rest of the world 53,492 58,751

Maximum 84,502 107,331

North Atlantic Hurricane $ 87,558 $ 95,876

Southeast Hurricane 66,237 71,541

Gulf of Mexico Hurricane 58,736 64,145

Northeast Hurricane 60,540 61,924

North America Earthquake 60,733 65,126

California Earthquake 54,407 57,088

Earthquake 34,533 36,329

Japan Earthquake 39,227 42,101

Japan Windstorm 39,734 43,498

Europe Windstorm 30,041 36,550

Total shareholders’ equity

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.

Total equity reported on the condensed consolidated balance sheet decreased by $7.3 million to $468.4 million at March 31, 2022, compared to $475.7 million at December 31, 2021.

The decrease in shareholders’ equity during the three months ended March 31, 2022, was primarily due to (i) the adoption of ASU 2020-06 (see Note 2 of the accompanying condensed consolidated financial statements) and (ii) the net loss of $5.7 million reported for the period.

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

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

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

At March 31, 2022, 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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They are not evaluations directed toward the protection of investors or a recommendation to buy, sell or hold our Class A ordinary shares.

Best downgrades our ratings below “A- (Excellent)” or withdraws our rating, we could be severely limited or prevented from writing any new reinsurance contracts, which would significantly and negatively affect our business.

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

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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 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.

At March 31, 2022, 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.

At March 31, 2022, 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 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.

For the three months ended March 31, 2022 and 2021, the net cash used in operating activities was $11.6 million and $18.7 million, respectively.

The net cash used in operating activities was used primarily for our underwriting activities and for payment of corporate and general administrative expenses for the three months ended March 31, 2022 and 2021.

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 nine months ended September 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 three months ended March 31, 2022 and 2021, as the losses we paid exceeded the premiums we collected.

On our Lloyd’s syndicate contracts we do not receive any premiums until the year of account is settled, net of losses, at the end of three years.

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 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 $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.

For the three months ended March 31, 2022, our investing activities provided $36.7 million of cash from redemptions from SILP (net of contributions) and used $3.4 million for new Innovations investments.

By comparison, for the same period in 2021 our investing activities used cash of $4.3 million.

For the three months ended March 31, 2022 and 2021, there were no financing activities.

At March 31, 2022, 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 global events, including the Russian-Ukrainian conflict 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 March 31, 2022, 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 September 30, 2021, Greenlight Re and GRIL both exceeded the regulatory minimum capital requirements.

At March 31, 2022, Greenlight Re and GRIL exceeded their regulatory minimum capital requirements.

Letters of Credit and Trust Arrangements

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.

At March 31, 2022, 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 and some non-U.S.

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

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

At March 31, 2022, we had one letter of credit facility available with an aggregate capacity of $275.0 million (December 31, 2021:

$275.0 million).

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

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

At March 31, 2022, the aggregate amount of collateral provided to cedents under such arrangements was $700.6 million (December 31, 2021:

$633.9 million).

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:

At March 31, 2022, the letters of credit and trust accounts were secured by restricted cash and cash equivalents with a total fair value of $701.4 million (December 31, 2021:

$634.8 million).

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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 September 30, 2021.

The Company was in compliance with all the covenants of this facility at March 31, 2022.

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

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

We did not make any significant commitments for capital expenditures during the 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.

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

On May 4, 2021, the Board of Directors approved a share repurchase plan effective from July 1, 2021, until June 30, 2022, authorizing the Company to purchase up to $25.0 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 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 nine months ended September 30, 2021, the Company repurchased 1,079,544 Class A ordinary shares.

We did not make any significant commitments for capital expenditures during the three months ended March 31, 2022.

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.

On April 26, 2022, the Board of Directors renewed and extended the share repurchase plan until June 30, 2023.The Company is not required to repurchase any Class A ordinary shares, and the repurchase plan may be modified, suspended, or terminated at the election of our Board of Directors at any time without prior notice.

During the three months ended March 31, 2022, the Company repurchased no 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.

At March 31, 2022, 2,092,276 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.

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

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

At March 31, 2022, 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

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

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

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GRIL has entered into a lease agreement for office space in Dublin, Ireland commencing from October 1, 2021.

This lease expires on September 30, 2031, unless GRIL exercises the break clause by providing a notice of termination at least nine months prior to September 30, 2026.

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

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

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

Pursuant to the SILP LPA, DME II is entitled to a performance allocation equal to 20% of the net profit, calculated per annum, of each limited partner’s share of the capital account managed by DME Advisors, subject to a loss carry-forward provision.

Pursuant to the SILP

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LPA, DME II is entitled to a performance allocation equal to 20% of the net profit, calculated per annum, of each limited partner’s share of the capital account managed by DME Advisors, subject to a loss carry-forward provision.

DME II is not entitled to earn a performance allocation in a year in which SILP incurs a loss.

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 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%.

At March 31, 2022, we estimate the reduced performance allocation of 10% to continue to be applied until SILP achieves additional investment returns of 173%, at which point the performance allocation will revert to 20%.

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

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

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Our related party transactions are presented in Note 11 to the accompanying condensed consolidated financial statements.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets, or liabilities which would be considered off-balance sheet arrangements.

Other than our investment in SILP (see Note 3 of the accompanying condensed consolidated financial statements), we have not participated in transactions that created relationships with unconsolidated entities or financial partnerships, including VIEs, established to facilitate off-balance sheet arrangements.

Effects of Inflation

Inflation generally affects the cost of claims and claim expenses, as well as asset values in our investment portfolio.

Our pricing and reserving models incorporate considerations of the anticipated effects of inflation on our claim costs.

Our pricing and reserving models incorporate the anticipated effects of inflation on our claim costs.

However, we cannot predict or estimate the onset, duration, and severity of an inflationary period with precision.

This actual effect of inflation may differ significantly from our estimate.

The actual effect of inflation may differ significantly from our estimate.

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