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Item 2. Management’s Discussion and Analysis

2023-05-09 compared with 2022-11-02 · 248 added, 437 removed, 274 unchanged (71% 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 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”), as well as Greenlight Innovation Syndicate 3456 (“Syndicate 3456”), unless the context dictates otherwise.

(“GLRE”) and its wholly-owned subsidiaries unless the context dictates otherwise.

See Item 1, Note 1 of the unaudited condensed consolidated financial statements for list of our wholly-owned subsidiaries.

References to our “ordinary shares” refer collectively to our Class A ordinary shares and Class B ordinary shares.

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, 2022.

The following is a discussion and analysis of our results of operations for the nine months ended September 30, 2022 and 2021 and financial condition at September 30, 2022 and December 31, 2021.

The following is a discussion and analysis of our results of operations for the three months ended March 31, 2023 and 2022 and financial condition at March 31, 2023 and December 31, 2022.

Special Note About Forward-Looking Statements

Certain statements in Management’s Discussion and Analysis, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Certain statements in Management’s Discussion and Analysis, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended , and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These forward-looking statements generally are identified by the words “believe,” “project,” “predict,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.

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 “Part II.

Risk Factors” included in our Form 10-Q for the three months ended March 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on May 3, 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 SEC on March 8, 2022.

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

• 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;

• 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;

• The property and casualty reinsurance market may be affected by cyclical trends;

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

Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

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● Our results of operations fluctuate from period to period and may not be indicative of our long-term prospects.

● The impact of general economic, capital and credit market conditions, including banking sector instability, financial market illiquidity and fluctuations in interest rates, equity securities’ prices and/or foreign currency exchange rates.

● A downgrade or withdrawal of our A.M.

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

● Any suspension or revocation of any of our licenses would materially and adversely affect our business, financial condition and results of operations .

● Our investment performance depends in part on the performance of SILP and may suffer as a result of adverse financial market developments or other factors that impact SILP’s liquidity, which could materially and adversely affect our investment results, financial condition and results of operations.

● The carry values of our Innovations investments may differ significantly from those that would be used if we carried these investments at fair value.

● Our level of debt may have an adverse impact on our liquidity, restrict our current and future operations, particularly our ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.

● Greenlight Capital Re, Greenlight Re and/or GRIL may be subject to United States federal income taxation.

● The other matters set forth in the section entitled “Part I, Item 1A.

Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on March 8, 2023.

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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Other than as required by the Exchange Act, we do not intend to make public announcements regarding reinsurance or investment events that we do not believe, based on management’s estimates and current information, will have a material adverse impact on our operations or financial position.

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We are a global specialty property and casualty reinsurer headquartered in the Cayman Islands, with a reinsurance and investment strategy that we believe differentiates us from most of our competitors.

We are a global specialty property and casualty (re)insurer headquartered in the Cayman Islands, with an underwriting and investment strategy that we believe differentiates us from most of our competitors.

Our goal is to build long-term shareholder value by providing risk management solutions to the insurance, reinsurance, and other risk marketplaces.

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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.

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

Through Greenlight Re Innovations (“Innovations”), we support technology innovators in the (re)insurance market by providing investment capital, 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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Due to the nature of our reinsurance and investment strategies, our operating results will likely fluctuate from period to period.

The Company’s subsidiaries hold an A.M.

The Company’s reinsurance subsidiaries hold an A.M.

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

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Critical Accounting Policies and Estimates

Our condensed consolidated financial statements contain certain amounts that are inherently subjective and have required management to make assumptions and best estimates to determine reported values.

Our unaudited condensed consolidated financial statements contain certain amounts that are inherently subjective and have required management to make assumptions and best estimates to determine reported values.

If certain factors, including those described in “Part II.

Risk Factors” included in our Form 10-Q for the three months ended March 31, 2022, as filed with the SEC on May 3, 2022, and in “Part I.

— Risk Factors” included in our Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on March 8, 2022, cause actual events or results to differ materially from our underlying assumptions or estimates.

Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on March 8, 2023, cause actual events or results to differ materially from our underlying assumptions or estimates.

In that case, there could be a material adverse effect on our results of operations, financial condition, or liquidity.

— 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, and share-based compensation.

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

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

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

The most significant estimates relate to:

premium revenues and risk transfer, loss and loss adjustment expense reserves, investment impairments, allowances for credit losses, and share-based compensation.

We believe that the critical accounting estimates discussion in “Part II.

— Management’s Discussion and Analysis of Financial Condition and Results on Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 continues to describe the significant estimates and judgments included in the preparation of these unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements

At March 31, 2023, there were no recently issued accounting pronouncements that we have not yet adopted that we expect could have a material impact on our results of operations, financial condition, or liquidity.

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

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

Property business includes both catastrophe and non-catastrophe coverage.

We expect catastrophe business to make up a small proportion of our property business.

Casualty business covers general liability, motor liability, professional liability, and workers’ compensation exposures.

The Company’s multi-line business relates predominantly to casualty reinsurance, and as such, the Company includes all multi-line business within the casualty category.

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

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

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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.

The Company’s multi-line business includes the Funds at Lloyd’s business.

As our Lloyd’s syndicate contracts incorporate property (including incidental catastrophe), casualty, and other exposures, we categorize them as multi-line (and therefore casualty) business.

However, these contracts are composed of primarily short-tailed risks.

Other business covers accident and health, financial (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

We operate in a business where we expect volatility in our underwriting results.

Hurricane Ian, which struck the southeast U.S.

in September, 2022, is likely to prove one of the costliest natural disasters ever in terms of insured losses.

This storm, along with the Russian-Ukraine conflict and several smaller events, have combined to make the first nine months of 2022 another challenging period for companies that participate in the global reinsurance market.

We were not immune from these events;

our combined ratio for the nine months ended September 30, 2022, was 104.8%.

Further, 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.

During the three months ended March 31, 2023, we incurred losses from catastrophe and weather-related events (herein referred as “CAT” losses) of $10.3 million from Cyclone Gabrielle, the Turkey earthquake, the U.S.

convective storms in 2023, and Winter Storm Elliott in December 2022.

As noted below, these loss trends have led to improved pricing at the January 1st and April 1st renewal seasons.

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

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

The continuing widespread inflation is a significant concern to the industry, as it can add uncertainty to the cost of claims, particularly for classes of business with long payout tails.

While there are signs that global inflationary pressures may be abating, this continues to be a significant concern to the (re)insurance industry, as it can add uncertainty to the cost of claims, particularly for classes of business with long payout tails.

As a result, it creates pricing challenges for new business and valuation challenges in claims reserves.

We are addressing these concerns in multiple ways:

• Our underwriting strategy focuses on relatively short-tailed business, which is inherently less exposed to high inflation than long-tailed lines.

We estimate the payout duration of our existing reserves at approximately two years.

We continue to manage these concerns and risks in multiple ways:

• Our underwriting strategy focuses on relatively short-tailed business, which is inherently less exposed to inflation than long-tailed lines.

We estimate the payout duration of our existing reserves at less than three years.

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• We incorporate inflation assumptions in all our pricing and reassess these assumptions frequently.

• We are minimizing our exposure to classes that are experiencing severe supply-chain-driven inflation.

We expect that the rising interest rate environment will have a mixed impact on our financial results.

While we have some exposure to interest rate risk from fixed income securities held by the Lloyd’s syndicates in which we participate, we expect that the higher interest rates will improve the yield on our restricted cash and cash equivalents.

The combination of the recent loss events, continued inflation and rising interest rates have led to a significant reduction in the amount of reinsurance capital available for deployment.

As we approach the January 1 renewal season, we see market conditions that we consider more favorable than any we have experienced in more than a decade.

The rising interest rate environment has had a mixed impact on our financial results.

While in 2022 we experienced losses driven by fixed-income securities held by the Lloyd’s syndicates in which we participate, the higher interest rates have improved the yield on our restricted cash and cash equivalents.

To the extent interest rates continue to increase, we expect to see these trends continue.

The SILP portfolio is positioned to also benefit from rising interest rates and an inflationary environment.

The combination of the recent loss events, continued inflation, and rising interest rates led to a significant reduction in the amount of reinsurance capital available for deployment, which in turn has led to market conditions that we consider more favorable than any we have experienced in more than a decade.

The January 1 renewal season saw widespread pricing improvements in the aviation, war and terror, and marine classes and even higher increases in property catastrophe rates.

These short-tailed specialty and property catastrophe classes represent a significant portion of our 2023 business plan.

For the three months ended March 31, 2023, we grew our property line by 63.9% over the same quarter in 2022 to $30.4 million (representing 16.3% of total gross premiums written).

Elsewhere in our portfolio, average percentage rate improvements were in the single digits.

Additionally, 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 12% of our net premiums written in the first nine months of 2022.

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

Our Innovations-related premiums, including premiums written by Syndicate 3456, grew by 57.2% for three months ended March 31, 2023 over the same quarter in 2022, and accounted for approximately 14.9% of our net premiums written for the three months ended March 31, 2023.

We see the potential for continued growth from Innovations-derived underwriting opportunities in 2023.

Key Financial Measures and Non-GAAP Measures

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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:

The 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.

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These non-GAAP financial measures are described below.

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

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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.

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

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GAAP measure:

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

March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022

($ 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 as presented in the Company’s condensed consolidated balance sheets 34,824,061 34,721,231 34,721,231 33,844,446 33,844,446

Ordinary shares issued and outstanding as presented in the Company’s consolidated balance sheets 35,262,678 34,824,061 34,824,061 34,721,231 34,721,231

Unearned performance-based restricted shares granted after December 31, 2021 (851,828) (516,489) (539,161) (560,927) (581,593)

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Increase (decrease) in fully diluted book value per share (%) 1.1 % 7.7 % (3.9) % 3.3 % (2.4) %

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

Restricted shares with performance-based vesting conditions granted after December 31, 2021, are included in the “basic” and “fully diluted” denominators to the extent that the Company has recognized the corresponding share-based compensation expense.

At September 30, 2022, the aggregate number of unearned restricted shares with performance conditions not included in the “basic” and “fully diluted” denominators was 732,310 (June 30, 2022:

754,076, March 31, 2022:

774,742, December 31, 2021:

At March 31, 2023, the aggregate number of unearned restricted shares with performance conditions not included in the “basic” and “fully diluted” denominators was 1,014,317 (December 31, 2022:

709,638, September 30, 2022:

732,310, June 30, 2022:

754,076, March 31, 2022:

Net Underwriting Income (Loss)

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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 that of our industry peer group.

Management also believes 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.

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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.

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(1) investment income (loss);

(2) other income (expense) not related to underwriting, including foreign exchange gains or losses, Lloyd’s interest income or expense and adjustments to the allowance for expected credit losses;

(2) other income (expense) not related to underwriting, including foreign exchange gains or losses, Lloyd’s interest income and expense, and adjustments to the allowance for expected credit losses;

(3) corporate general and administrative expenses;

and (4) interest expense.

We exclude total investment income or loss, foreign exchange gains or losses, Lloyd’s interest income or expense and expected credit losses as we believe these items are influenced by market conditions and other factors not related to underwriting decisions.

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

Additionally, we exclude corporate and interest expenses because these costs are generally fixed and not incremental to or directly related to our underwriting operations.

We believe all of these amounts are largely independent of our underwriting process, and including them could hinder the analysis of trends in our underwriting operations.

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

Three months ended September 30 Nine months ended September 30

2022 2021 2022 2021

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, 2022, and 2021:

Three months ended September 30 Nine months ended September 30

2022 2021 2022 2021

The table below summarizes our operating results for the three months ended March 31, 2023 and 2022:

Three months ended March 31

(in thousands, except percentages)

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Net underwriting income (loss) 1

$ 377 $ (7,682)

Income (loss) from investment in related party investment fund $ (3,138) $ 4,077

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Net income (loss) $ 5,887 $ (5,727)

Earnings (loss) per share (Class A and Class B)

Earnings (loss) per share (Class A and Class B) (Note 2)

Basic $ 0.17 $ (0.17)

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Combined ratio 99.8 % 106.2 %

* 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 $12.0 million and a loss of $2.6 million for the three months ended March 31, 2023 and 2022, respectively.

1 Net underwriting income (loss) is a non-GAAP financial measure.

See “ Key Financial Measures and Non-GAAP Measures” above for discussion and reconciliation of non-GAAP financial measures.

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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 loss of $2.9 million and a gain of $0.2 million for the three months ended September 30, 2022, and 2021, respectively, and losses of $9.0 million and $3.2 million for the nine months ended September 30, 2022, and 2021, respectively.

Three months ended September 30, 2022, and 2021

For the three months ended September 30, 2022, the fully diluted book value per share decreased by $0.55 per share, or 3.9%, to $13.55 per share from $14.10 per share at June 30, 2022.

For the three months ended September 30, 2022, basic book value per share decreased by $0.56 per share, or 3.9%, to $13.62 per share from $14.18 per share at June 30, 2022.

For the three months ended September 30, 2022, our net loss was $18.5 million, compared to a net loss of $13.9 million reported for the equivalent 2021 period.

The developments that most significantly affected our financial performance during the three months ended September 30, 2022, compared to the equivalent 2021 period, are summarized below:

Three months ended March 31, 2023 and 2022

For the three months ended March 31, 2023, the fully diluted book value per share increased by $0.16 per share, or 1.1%, to $14.75 per share from $14.59 per share at December 31, 2022.

For the three months ended March 31, 2023, basic book value per share increased by $0.16 per share, or 1.1%, to $14.82 per share from $14.66 per share at December 31, 2022.

For the three months ended March 31, 2023, our net income was $5.9 million, compared to a net loss of $5.7 million reported for the equivalent 2022 period.

The developments that most significantly affected our financial performance during the three months ended March 31, 2023, compared to the equivalent 2022 period, are summarized below:

• Underwriting :

The underwriting loss for the three months ended September 30, 2022, was $18.9 million.

This underwriting loss included $19.5 million of losses estimated from Hurricane Ian and $3.2 million from Typhoons Nanmadol and Hinnamnor.

By comparison, the equivalent period in 2021 reported an underwriting loss of $12.6 million, which included $25.9 million of catastrophe losses from Hurricane Ida, the European floods and hailstorms, and South African riots.

The underwriting loss for the three months ended September 30, 2022, also included $6.1 million of expense relating to deposit-accounted contracts.

Our combined ratio was 115.4% for the three months ended September 30, 2022, compared to 109.3% during the equivalent 2021 period.

The catastrophe losses and the expense relating to deposit-accounted contracts contributed 23.6 percentage points to the combined ratio for the three months ended September 30, 2022.

The underwriting income for the three months ended March 31, 2023 was $0.4 million.

This underwriting income included $7.9 million of net prior year attritional loss development, coupled with $10.3 million of total catastrophe losses from the Turkey earthquake, New Zealand Cyclone Gabrielle, and the U.S.

convective storms that occurred during the current quarter, as well as $4.1 million of losses resulting from Winter Storm Elliott that occurred in late December 2022.

By comparison, the equivalent period in 2022 reported an underwriting loss of $7.7 million, which included $1.5 million of net prior year attritional loss development, coupled with CAT losses of $13.6 million from the Russian-Ukrainian war and $2.8 million from Tennessee wildfires.

Our combined ratio was 99.8% for the three months ended March 31, 2023 compared to 106.2% during the equivalent 2022 period.

The lower CAT losses quarter over quarter contributed favorably to the combined ratio for the three months ended March 31, 2023.

The improved underwriting performance was partially offset by higher adverse attritional loss development from prior years, which added 5.6 percentage points to our combined ratio for the three months ended March 31, 2023, compared to 0.6 percentage points for same period in 2022.

• Investments :

Our total investment income for the three months ended September 30, 2022, was $11.6 million, compared to total investment income of $4.1 million reported for the same period in 2021.

Our investment in SILP reported a gain of $8.5 million during the three months ended September 30, 2022, compared to a loss of $6.2 million during the equivalent period in 2021.

Other investment income totaled $3.0 million and $10.3 million during the three months ended September 30, 2022, and 2021, respectively.

Our total investment income for the three months ended March 31, 2023 was $5.2 million, compared to total investment income of $7.7 million reported for the same period in 2022.

Our investment in SILP reported a loss of $3.1 million during the three months ended March 31, 2023, compared to a gain of $4.1 million during the equivalent period in 2022.

Other investment income from our Innovations investments and restricted cash and cash equivalents totaled $8.4 million and $3.7 million during the three months ended March 31, 2023 and 2022, respectively.

The increase in other investment income was driven primarily by increase in short-term yields in the last twelve months.

• Other (income) expense :

For the three months ended September 30, 2022, we incurred $6.8 million of other non-underwriting expenses, primarily as a result of foreign exchange losses.

The weakening of the pound sterling against the U.S.

dollar drove the foreign exchange loss.

In addition, the other income (expense) included our share of Lloyd’s syndicates’ investment losses on the Funds at Lloyd’s business, which is generally conducted on a funds withheld basis.

The syndicates invest a portion of these funds in fixed-maturity securities and investment funds, which were negatively impacted by rising interest rates and market volatility.

We record our share of these mark-to-market adjustments when the syndicates report them to us, generally one quarter in arrears.

Nine months ended September 30, 2022, and 2021

For the nine months ended September 30, 2022, fully diluted book value per share decreased by $0.44, or 3.1%, to $13.55 per share from $13.99 per share at December 31, 2021.

For the nine months ended September 30, 2022, basic book value per share decreased by $0.43, or 3.1%, to $13.62 per share from $14.05 per share at December 31, 2021.

The decrease in fully diluted book value per share during the nine months ended September 30, 2022, included $0.07, or 0.5%, adverse impact relating to the adoption of ASU 2020-06 (see Note 2 of the accompanying condensed consolidated financial statements for recently issued accounting standards adopted).

For the nine months ended September 30, 2022, our net loss was $9.4 million, compared to a net loss of $6.7 million reported for the equivalent 2021 period.

The developments that most significantly affected our financial performance during the nine months ended September 30, 2022, compared to the equivalent 2021 period, are summarized below:

For the three months ended March 31, 2023, we earned other income of $7.1 million, compared to incurring other expense of $0.6 million for the same quarter in 2022.

The favorable change was driven primarily by:

◦ $4.9 million of foreign exchange gains during the current quarter, compared to $1.1 million of foreign exchange loss in the same quarter in 2022, due mainly to the strengthening of the pound sterling against the U.S.

◦ our share of Lloyd’s syndicates’ investment income on Funds at Lloyd’s business, which is generally conducted on a funds withheld basis.

The Lloyd’s syndicates invest a portion of these funds in fixed-maturity securities and investment funds.

We record our share of the investment income and mark-to-market adjustments of these fixed maturity securities when the syndicates report them to us, generally one quarter in arrears.

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• Underwriting:

The underwriting loss for the nine months ended September 30, 2022, was $17.2 million, driven primarily by $13.6 million of losses related to the Russian-Ukrainian conflict and $25.5 million of losses related to Hurricane Ian, Typhoon Nanmadol, and wildfires in Tennessee.

By comparison, the underwriting loss for the equivalent period in 2021 was $10.0 million, driven by losses from Hurricane Ida, the winter storm Uri, the European floods and hailstorms, and South African riots.

Our combined ratio was 104.8% for the nine months ended September 30, 2022, compared to 102.4% for the same period in 2021.

The Russian-Ukrainian conflict and natural catastrophe losses contributed 10.9 percentage points to the combined ratio for the nine months ended September 30, 2022.

• Investments:

Our total investment income for the nine months ended September 30, 2022, was $36.5 million, compared to $24.8 million earned during the equivalent 2021 period.

For the nine months ended September 30, 2022, our investment in SILP reported a gain of $24.5 million, compared to a loss of $4.2 million during the equivalent period in 2021.

Other investment income totaled $12.0 million and $29.0 million during the nine months ended September 30, 2022, and 2021, respectively.

• Other income (expense):

For the nine months ended September 30, 2022, other expense of $13.4 million was driven primarily by the mark-to-market adjustments and foreign exchange losses for the reasons explained above for the three months ended September 30, 2022.

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

2022 2021 2022 2021

($ in thousands) ($ in thousands)

Three months ended March 31

($ in thousands)

Property $ 30,372 16.3 % $ 18,535 12.7 %

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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, 2022, our gross premiums written increased by $26.4 million, or 20.5%, compared to the equivalent 2021 period.

The primary drivers for this change are the following:

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Gross Premiums Written

Three months ended September 30, 2022

Increase (decrease)

($ in millions) % change Explanation

Property $6.9 52.5% The increase in property gross premiums written during the three months ended September 30, 2022, over the comparable 2021 period was due primarily to personal lines business, driven by the growth of our Innovations partners.

Our decision to reduce or terminate our participation in certain motor business partially offset this increase.

Casualty $6.6 7.8% The increase in casualty gross premiums written during the three months ended September 30, 2022, over the comparable 2021 period was due primarily to new contracts bound during 2022 relating to general liability and multi-line business.

The growth in Lloyd’s syndicate business was also a significant driver of the increase in casualty gross premiums written.

Our decision to reduce or terminate our participation in certain motor business partially offset this increase.

Other $12.9 41.7% The increase in “other” gross premiums written during the three months ended September 30, 2022, over the comparable 2021 period was related primarily to marine, energy, and financial lines.

New business drove most of the increase in marine and energy premiums.

The growth in financial lines was driven primarily by an increase in transactional liability business.

For the nine months ended September 30, 2022, our gross premiums written decreased by $4.4 million, or 1.0%, compared to the equivalent 2021 period.

The primary drivers of this change are the following:

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For the three months ended March 31, 2023, our gross premiums written increased by $40.6 million, or 27.8%, compared to the equivalent 2022 period.

The following table provides a further analysis of this overall increase:

Gross Premiums Written

Nine months ended September 30, 2022

Three months ended March 31, 2023

Increase (decrease)

($ in millions) % change Explanation

Property $14.3 32.1% The increase in property gross premiums written during the nine months ended September 30, 2022, over the comparable 2021 period was due primarily to personal lines business, as discussed above.

Our decision to reduce or terminate our participation in certain motor business partially offset this increase.

Casualty $(52.7) (17.5)% The decrease in casualty premiums written during the nine months ended September 30, 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.

Growth in general liability and multi-line premiums, driven by new and renewed Lloyd’s and Innovations-related business, partially offset the decrease in casualty premiums.

Other $34.0 35.9% The increase in “other” premiums written during the nine months ended September 30, 2022, over the comparable 2021 period was due primarily to the following:

• increased financial lines business, including transactional liability contracts;

• new marine and energy contracts bound during 2022;

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

The increase was partially offset by a decrease in Health premiums, due primarily to changing certain exposures from a proportional basis to excess of loss.

Property $11.8 63.9% The increase was driven mainly from growth in our commercial lines and to a lesser extent personal lines of business, mainly due to favorable pricing and new contracts.

This was partially offset by our continued exit strategy from motor business with only a negligible amount written during the current quarter.

Casualty $16.9 21.6% The increase was due primarily to favorable pricing and new contracts bound during 2023 relating to general liability and multi-line business.

This was partially offset by our continued tactical strategy to lower our exposure to workers’ compensation business.

Other $11.8 24.0% The increase was driven mainly by new contracts within our “other specialty” lines of business, primarily in aviation and cyber risk lines.

Our Innovations-related contracts contributed $9.5 million to the overall net increase in gross premiums written for the three months ended March 31, 2023.

Premiums Ceded

For the three and nine months ended September 30, 2022, premiums ceded were $8.8 million and $22.0 million, respectively, compared to insignificant premiums ceded for the three and nine months ended September 30, 2021.

In 2022, we entered into new retrocession agreements to reduce our exposure to marine, energy, and property losses.

For the three months ended March 31, 2023, premiums ceded were $11.2 million, or 6.0% of gross premiums written, compared to $6.0 million, or 4.1% of gross premiums written for the three months ended March 31, 2022.

The increase was driven mainly by rate increase and purchase of an additional $10.0 million excess of loss coverage to reduce our exposure to marine and energy, coupled with an increase in quota share retrocessions for property lines due to growth from inward premiums.

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Net Premiums Written

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

Three months ended September 30 Nine months ended September 30

2022 2021 2022 2021

($ in thousands) ($ in thousands)

Three months ended March 31

($ in thousands)

Property $ 26,005 14.8 % $ 16,435 11.7 %

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Total $ 175,243 100.0 % $ 139,877 100.0 %

For the three and nine months ended September 30, 2022, net premiums written increased by $17.7 million, or 13.7%, and decreased by $26.4 million, or 6.0%, respectively, compared to the three and nine months ended September 30, 2021.

For the three months ended March 31, 2023 net premiums written increased by $35.4 million, or 25.3%, compared to the three months ended March 31, 2022.

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

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Net Premiums Earned

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

Three months ended September 30 Nine months ended September 30

2022 2021 2022 2021

($ in thousands) ($ in thousands)

Three months ended March 31

($ in thousands)

Property $ 18,743 13.1 % $ 14,490 11.5 %

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Total $ 142,649 100.0 % $ 125,925 100.0 %

Net premiums earned are primarily a function of the amount and timing of net premiums written during the current and prior periods.

Net premiums earned for the three months ended March 31, 2023, increased by $16.7 million or 13.3%, compared to the three months ended March 31, 2022.

The change in net premiums earned is primarily a function of the amount and timing of net premiums written during the current and prior periods, coupled by the mix of business written in the form of excess of loss versus quota share reinsurance contracts.

Loss and Loss Adjustment Expenses Incurred, Net

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

Three months ended September 30 Nine months ended September 30

2022 2021 2022 2021

($ in thousands) ($ in thousands)

For the three months ended March 31, 2023 and 2022, the components of the loss ratio were as follows:

Three months ended March 31

2023 2022 Increase / (decrease) in loss ratio points

Current accident year loss ratio 59.4 % 75.5 % (16.1)

Prior year reserve development ratio 8.4 % 1.8 % 6.6

Loss ratio 67.8 % 77.4 % (9.5)

Current accident year loss ratio decreased to 59.4% for the three months ended March 31, 2023, from 75.5% for the three months ended March 31, 2022.

Adjusting for the impact of CAT losses (including Ukrainian-Russian conflict), the current accident year loss ratio decreased to 55.1% for the three months ended March 31, 2023, from 62.5% for the three months ended March 31, 2022.

This positive change was principally due to the impact of favorable pricing over loss trends in our lines of business.

Prior year reserve development ratio deteriorated by 6.6 points in the current quarter compared to the first quarter in 2022.

Refer to Note 5 to the condensed consolidated financial statements for further details on prior year developments.

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

Three months ended March 31

($ in thousands)

Property $ 17,530 $ 9,713

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Total $ 96,725 $ 97,407

The below table summarizes the loss ratios for the nine months ended September 30, 2022, and 2021:

Three months ended September 30 Nine months ended September 30

2022 2021 Increase / (decrease) in loss ratio points 2022 2021 Increase / (decrease) in loss ratio points

The below table summarizes the loss ratios by line of business:

Three months ended March 31

2023 2022 Increase / (decrease) in loss ratio points

Property 93.5 % 67.0 % 26.5

2 unchanged sentences

Total 67.8 % 77.4 % (9.6)

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The changes in net losses incurred for the three months ended September 30, 2022, as compared to the equivalent 2021 period, were attributable to the following:

The changes in net losses incurred for the three months ended March 31, 2023, as compared to the equivalent 2022 period, were attributable to the following:

Net Losses Incurred

Three months ended September 30, 2022

Three months ended March 31, 2023

Increase (decrease)

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

Property $(1.9) 18.2 The decrease in property losses incurred during the three months ended September 30, 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.

Higher personal lines business and losses from Hurricane Ian and Typhoons Nanmadol and Hinnamnor partially offset the decrease.

The property loss ratio increased 18.2 percentage points during the three months ended September 30, 2022, over the equivalent 2021 period, due primarily to losses from Hurricane Ian and Typhoons Nanmadol and Hinnamnor.

Casualty $(9.3) (0.2) The decrease in losses incurred during the three months ended September 30, 2022, over the comparable 2021 period was due primarily to reductions in motor and workers’ compensation exposures.

Partially offsetting the decrease were losses driven by the following:

• Hurricane Ian;

• new and renewed multi-line contracts;

• adverse prior-year development

The casualty loss ratio decreased 0.2 percentage points during the three months ended September 30, 2022, over the equivalent 2021 period, due primarily to changes in our business mix.

Our underlying casualty loss ratios have improved as we significantly reduced our motor and workers’ compensation exposures and increased our multi-line business.

However, losses from Hurricane Ian on certain multi-line contracts mostly offset the improvement in the casualty loss ratio.

Other $(4.7) (17.4) The decrease in “other” losses incurred during the three months ended September 30, 2022, over the comparable 2021 period was due primarily to the following:

• our decision to reduce or terminate our participation in certain health and crop contracts;

• losses incurred during the comparable 2021 period from South African riots and Hurricane Ida.

Increased losses on marine and energy contracts and our growing transactional liability business partially offset this overall decrease.

The “other” loss ratio decreased 17.4 percentage points during the three months ended September 30, 2022, over the equivalent 2021 period, due primarily to the reasons described above.

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

Property $7.8 26.5 The increase in incurred losses from property is primarily driven by the 29.4% increase in net premiums earned, coupled with CAT losses.

During the three months ended March 31, 2023, we incurred $7.9 million of CAT losses relating to the Turkey earthquake, New Zealand Cyclone Gabrielle, and the U.S.

convective storms in 2023, including $4.1 million relating to Winter Storm Elliott in December 2022.

For the same quarter in 2022, we incurred $2.8 million of CAT losses related to the Tennessee wildfires.

Casualty $5.7 4.4 The increase in losses incurred and loss ratio points was primarily due to adverse loss development on our professional liability, motor and workers’ compensation exposures.

Other $(14.2) (61.4) Despite the 31.7% increase in net premiums earned from other specialty lines of business, the decrease in incurred losses and loss ratio points was mainly driven by favorable pricing and lower CAT events, coupled by higher volume of adverse attritional loss development in the comparative period.

During the three months ended March 31, 2023, we incurred $1.4 million of adverse loss development mainly relating to the Ukraine-Russia conflict.

During the same quarter in 2022, we incurred $9.5 million losses related to the Ukraine-Russia conflict.

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The changes in net losses incurred and loss ratios during the nine months ended September 30, 2022, were attributable to the following:

Net Losses Incurred

Nine months ended September 30, 2022

Increase (decrease)

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

Property $(5.0) (0.9) Our decision to reduce or terminate our participation in certain motor business was the primary driver of the decrease in property losses incurred during the nine months ended September 30, 2022, compared to the same period in 2021.

The decrease was partially offset by losses relating to the following:

• our growing personal lines portfolio;

• catastrophes that occurred during 2022, including Hurricane Ian, Typhoons Nanmadol and Hinnamnor, and Tennessee wildfires.

The property loss ratio decreased 0.9 percentage points during the nine months ended September 30, 2022 over the equivalent 2021 period.

This decrease was due primarily to the reduction in our motor business.

Catastrophe losses partially offset the decrease.

Casualty $(39.7) (5.6) Our decision to reduce or terminate our participation in certain motor business was the primary driver of the decrease in casualty losses incurred during the nine months ended September 30, 2022, compared to the same period in 2021.

The decrease was partially offset by higher incurred losses in our Lloyd’s syndicate business relating to the following:

• Hurricane Ian;

• general liability and multi-line contracts.

Additionally, the prior period incurred losses included losses from winter storm Uri.

The casualty loss ratio decreased 5.6 percentage points during the nine months ended September 30, 2022, over the equivalent 2021 period, due primarily to changes in our business mix.

We increased our general liability and multi-line business, which generally incorporates lower loss ratios than the motor and workers’ compensation business it replaced.

Adverse loss development on certain motor, workers’ compensation, and multi-line contracts partially offset the loss ratio decreases.

Other $2.5 5.1 The increase in “other” losses incurred during the nine months ended September 30, 2022, compared to the same period in 2021, was due primarily to losses relating to the Russian-Ukrainian conflict.

Our growing book of transactional liability and marine and energy business also contributed to the increase.

The increase was partially offset by the following:

• lower losses incurred on health contracts on which we elected to reduce or not renew our participation;

• the release of loss reserves on certain mortgage contracts;

• crop losses incurred in the equivalent 2021 period.

The “other” loss ratio increased 5.1 percentage points during the nine months ended September 30, 2022, over the equivalent 2021 period, due primarily to the reasons described above.

Russian-Ukrainian Conflict

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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 September 30, 2022, we have not recorded any reinsurance recoveries, as the estimated losses had not impacted the excess layers.

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, which are included mostly in the “Other” line of business.

As of March 31, 2023, we had recorded $14.3 million incurred losses related to this CAT event (December 31, 2022:

$13.6 million).

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

As of March 31, 2023, 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.

Acquisition Costs, Net

Details of acquisition costs are provided in the following table:

Three months ended September 30 Nine months ended September 30

2022 2021 2022 2021

($ in thousands) ($ in thousands)

Property $ 2,081 5.7 % $ 3,178 9.1 % $ 8,474 8.0 % $ 9,260 8.7 %

Casualty 24,200 65.7 22,942 65.5 64,511 60.8 67,499 63.6

Other 10,540 28.6 8,928 25.5 33,116 31.2 29,301 27.6

Total $ 36,821 100.0 % $ 35,048 100.0 % $ 106,101 100.0 % $ 106,060 100.0 %

The acquisition cost ratios for the nine months ended September 30, 2022 and 2021, were as follows:

Three months ended September 30 Nine months ended September 30

2022 2021 Increase / (decrease) 2022 2021 Increase / (decrease)

For the three months ended March 31, 2023, our total acquisition cost increased by 25.9% to $41.5 million, compared to the same quarter in 2022, mainly due to growth in net premiums earned.

The acquisition cost ratios by line of business were as follows:

Three months ended March 31

2023 2022 Increase / (decrease) in acquisition cost ratio points

Property 19.0 % 23.1 % (4.1)

2 unchanged sentences

Total 29.1 % 26.2 % 2.9

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The changes in the acquisition cost ratios for the three months ended September 30, 2022, compared to the equivalent period in 2021, were attributable to the following:

Change in Acquisition Cost Ratios

Three months ended September 30, 2022

Increase / (decrease) in acquisition cost ratio points Explanation

Property (2.6) The decrease in the property acquisition cost ratio during the three months ended September 30, 2022, over the comparable 2021 period, was due primarily to a change in our business mix.

During the 2022 period, a higher proportion of the property business we wrote related to excess of loss contracts, which incorporate lower commissions than the quota share contracts that comprised a larger proportion of the business we wrote during the third quarter of 2021.

Casualty 5.5 The increase in the casualty acquisition cost ratio during the three months ended September 30, 2022, over the comparable 2021 period, was due primarily to changes in our business mix.

Our motor and workers’ compensation premium, which decreased in 2022, generally incorporates lower ceding commission ratios than our general liability and multi-line business, which grew compared to the equivalent 2021 period.

Other 3.4 The increase in the “other” acquisition cost ratio during the three months ended September 30, 2022, over the comparable 2021 period was due primarily to the following:

• growth in transactional liability business, which carries higher ceding commission ratios than other specialty business;

• new specialty quota share contracts bound in 2022, which incorporate relatively high acquisition costs.

The changes in the acquisition cost ratios during the nine months ended September 30, 2022, compared to the equivalent period in 2021, were attributable to the following:

The changes in the acquisition cost ratios for the three months ended March 31, 2023, compared to the equivalent period in 2022, were attributable to the following:

Change in Acquisition Cost Ratios

Nine months ended September 30, 2022

Three months ended March 31, 2023

Increase / (decrease) in acquisition cost ratio points Explanation

Property 1.4 The year-to-date increase was driven by the higher ceding commissions on the growing personal property quota share contracts relative to the shrinking motor business.

Casualty 2.7 The year-to-date increase was driven by the same trends as those discussed above in reference to the third quarter.

Other 5.2 The year-to-date increase was driven by the same trends as those discussed above in reference to the third quarter.

A decrease in health business, which generally carries relatively low ceding commissions, was an additional driver of the increase.

Property (4.1) The decrease was due primarily to a change in our business mix, coupled with a higher proportion of excess of loss contracts written during the current quarter, which incorporate lower commissions than quota share contracts.

Casualty 4.2 The increase was due primarily to changes in our business mix, particularly with the 29% increase in earned premium from FAL business, which has a higher ceding commission than other lines within this business.

Other 3.4 The increase was driven by business mix and higher profit commission within our financial business due to favorable underwriting performance, coupled with growth in quota share contracts within our other specialty business, which has higher acquisition cost ratio than excess of loss reinsurance treaties.

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1 unchanged sentence

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 120.1 % 79.6 % 59.4 % 77.5 % 101.9 % 79.8 % 76.8 % 81.5 %

Acquisition cost ratio 19.0 31.6 30.6 30.2 21.6 26.1 27.2 25.9

Composite ratio 139.1 % 111.2 % 90.0 % 107.7 % 123.5 % 105.9 % 104.0 % 107.4 %

Underwriting expense ratio 7.7 1.9

Combined ratio 115.4 % 109.3 %

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

4 unchanged sentences

Combined ratio 99.8 % 106.2 %

The higher underwriting expense ratio for the three months ended September 30, 2022, compared to the same period in 2021, was due to the following:

• interest expense on deposit-accounted contracts based on revised expectations of ultimate cash flows;

• lower net earned premiums compared to the same period in 2021;

• expenses related to forming and managing Syndicate 3456;

• share-based compensation expenses.

The underwriting expense ratio for the three and nine months ended September 30, 2022, included 5.0 and 1.7 percentage points, respectively, (2021:

nil and 0.7 percentage points, respectively) relating to expense on deposit-accounted contracts based on revised expectations of ultimate cash flows.

Excluding deposit-accounted contracts, the higher underwriting expense ratio for the nine months ended September 30, 2022, compared to the same period in 2021, was due to the same reasons provided above for the three-month period.

The higher underwriting expense ratio for the three months ended March 31, 2023, compared to the same period in 2022, was due mainly to the additional personnel costs and outsourcing services.

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

2022 2021 2022 2021

($ in thousands) ($ in thousands)

Three months ended March 31

($ in thousands)

Underwriting expenses $ 3,939 $ 3,221

1 unchanged sentence

General and administrative expenses $ 9,936 $ 7,232

For the three months ended September 30, 2022, general and administrative expenses increased by $1.3 million, or 21.9%, compared to the equivalent 2021 period.

The increase was due primarily to higher expenses relating to (i) Syndicate

For the three months ended March 31, 2023, general and administrative expenses increased by $2.7 million, or 37.4%, compared to the equivalent 2022 period.

In addition to the increase in underwriting expenses as previously noted above, our corporate expenses increased mainly due to severance relating to the former CFO and higher legal professional fees as a result of outsourced legal services while we sought a replacement General Counsel.

For the three months ended March 31, 2023 and 2022, general and administrative expenses included $1.0 million (net of $0.3 million forfeiture credit) and $1.0 million (net of insignificant forfeiture credit), respectively, of costs related to share-based compensation granted to employees and directors.

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3456-related expenses, (ii) share-based compensation, and (iii) information technology costs, compared to the same period in 2021.

For the nine months ended September 30, 2022, general and administrative expenses increased by $1.4 million, or 6.5%, compared to the equivalent 2021 period.

The increase was due primarily to higher expenses relating to (i) share-based compensation, (ii) Syndicate 3456-related expenses, (iii) information technology costs, and (iv) legal and other professional fees.

Lower D&O insurance and personnel costs partially offset the increase.

For the nine months ended September 30, 2022, and 2021, general and administrative expenses included $3.3 million and $2.4 million, respectively, of costs related to share-based compensation granted to employees and directors.

Total Investment Income (Loss)

Total investment income (loss) incorporates (i) changes in the net asset value of our investment in SILP managed by DME Advisors, (ii) interest income earned on the restricted cash and cash equivalents pledged as collateral to our clients, and (iii) gains (or losses) and interest on our portfolio of strategic and Innovations investments, notes receivable and investments accounted for under the equity method.

We expect our total investment income, including any change in the net asset value of our investment in SILP, to fluctuate from period to period.

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

Three months ended September 30 Nine months ended September 30

2022 2021 2022 2021

Three months ended March 31

($ in thousands)

Realized gains (losses) $ — $ — $ — $ 14,210

Interest and dividend income, net of withholding taxes $ 8,646 $ 22

Change in unrealized gains and losses 550 3,899

Investment-related foreign exchange gains (losses) — (38)

Interest and dividend income, net of withholding taxes 3,220 691 4,228 175

Interest, dividend, and other expenses (18) (223)

Realized gains (losses) (800) —

Net investment-related income (loss) $ 8,378 $ 3,660

3 unchanged sentences

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, 2022, and 2021, please refer to Note 3 of the condensed consolidated financial statements.

For the three months ended September 30, 2022, the Investment Portfolio managed by DME Advisors reported a gain of 3.6%, compared to a loss of 2.7% for the three months ended September 30, 2021.

SILP’s long portfolio gained 6.0%, while the short portfolio and macro positions lost 0.1% and 1.4%, respectively, during the three months ended September 30, 2022.

For the three months ended September 30, 2022, the significant contributors to SILP’s investment return were long positions in Atlas Air Worldwide and Green Brick Partners (GRBK) and a short position in a basket of housing-sensitive stocks to hedge the GRBK exposure.

The largest detractors were gold and two short positions.

For the three months ended September 30, 2022, there were no notable increases or decreases in our Innovations-related investments, compared to $9.6 million net unrealized gains recorded for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, the Investment Portfolio managed by DME Advisors reported a gain of 10.5%, compared to a loss of 2.2% for the nine months ended September 30, 2021.

The long portfolio lost 10.5%, while the short portfolio and macro positions gained 21.1% and 2.6%, respectively, during the nine months ended September 30, 2022.

For the nine months ended September 30, 2022, the most significant contributors to SILP’s investment return were short positions in the S&P 500 index and a basket of stocks perceived to be overvalued, and a long position in CONSOL Energy.

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the nine months ended September 30, 2022, the most significant detractors were long positions in Brighthouse Financial, GRBK, and gold.

During the nine months ended September 30, 2022, some of our Innovations-related investees completed new financing rounds.

The associated carry-value increases contributed to a net unrealized gain of $9.2 million.

The unrealized gains are net of a $2.2 million valuation allowance on certain Innovations-related investments recorded during the nine months ended September 30, 2022.

The increase in interest income for the three and nine months ended September 30, 2022, was primarily related to our restricted cash and cash equivalents, which benefited from rising U.S.

For further information about management fees and performance compensation for the three months ended March 31, 2023 and 2022, please refer to Note 3 of the condensed consolidated financial statements.

For the three months ended March 31, 2023, the Investment Portfolio managed by DME Advisors reported a loss of 1.1%, compared to a gain of 1.7% for the three months ended March 31, 2022.

SILP’s long portfolio gained 8.9%, the short portfolio lost 9.0%, and macro positions lost 0.3%, during the three months ended March 31, 2023.

For the three months ended March 31, 2023, the significant contributors to SILP’s investment return were long positions in Green Brick Partners (GRBK), Kyndryl Holdings Inc., and gold.

The largest detractors were Brighthouse Financial, one short position, and a hedge position for GRBK.

For the three months ended March 31, 2023, we had an unrealized loss of $0.3 million in our Innovations-related investments, compared to $3.9 million net unrealized gains recorded for the three months ended March 31, 2022.

The increase in interest income for the three months ended March 31, 2023 was primarily related to our restricted cash and cash equivalents, which benefited from rising U.S.

interest rates.

For the three months ended September 30, 2022, and 2021, the gross investment return (loss) on our investments managed by DME Advisors (excluding the investment advisor performance allocation) was composed of the following:

Three months ended September 30 Nine months ended September 30

2022 2021 2022 2021

For the three months ended March 31, 2023 and 2022, the gross investment return (loss) on our investments managed by DME Advisors (excluding the investment advisor performance allocation) was composed of the following:

Three months ended March 31

Long portfolio gains (losses) 8.9 % (6.0) %

2 unchanged sentences

Other income and expenses 1

(0.5) (0.4) (1.5) (1.4)

Gross investment return (1.1) % 1.9 %

3 unchanged sentences

“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 Company’s shareholders’ equity, as reported in the Company’s then most recent quarterly U.S.

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

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

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

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 the 20 years expiring February 1, 2025.

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

We expect GRIL to be taxed at 12.5% on its taxable trading income and 25% on its non-trading income, if any.

Verdant is incorporated in Delaware and is subject to taxes under the U.S.

federal rates and regulations prescribed by the Internal Revenue Service.

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

At September 30, 2022, we have included a gross deferred tax asset of $3.7 million (December 31, 2021:

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

At September 30, 2022, a valuation allowance of $3.2 million (December 31, 2021:

$2.7 million) partially offset this gross deferred tax asset.

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

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

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

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The investment performance for the three months ended March 31, 2022 reflects the Investment Portfolio 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 adjusted monthly for our share of the net profits and net losses reported by SILP during any intervening period (the “adjusted GLRE Surplus”).

Effective January 1, 2023, the Investment Portfolio is calculated based on 60% of adjusted GLRE Surplus.

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

Financial Condition

Total investments

The total investments reported in the condensed consolidated balance sheets at September 30, 2022, was $260.3 million, compared to $231.0 million at December 31, 2021, an increase of $29.3 million, or 12.7%.

The increase was primarily related to gains on SILP and Innovations-related investments and purchase of certificates of deposit.

The increase was partially offset by net redemptions from SILP.

At September 30, 2022, 91.5% of SILP’s portfolio was valued based on quoted prices in actively traded markets (Level 1), 6.0% was composed of instruments valued based on observable inputs other than quoted prices (Level 2), and 0.0% was composed of instruments valued based on non-observable inputs (Level 3).

At September 30, 2022, 2.5% of SILP’s portfolio consisted of private equity funds valued using the funds’ net asset values as a practical expedient.

At September 30, 2022, 87% of our Innovations-related portfolio was carried at fair value on a nonrecurring basis, measured as of the investees’ most recent completed financing round, and 13% was carried at original cost.

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;

The total investments reported in the unaudited condensed consolidated balance sheets at March 31, 2023 was $267.2 million, compared to $248.5 million at December 31, 2022, an increase of $18.7 million, or 7.5%.

The increase was primarily related to net contribution into SILP resulting from release of restricted cash.

The increase was partially offset by an investment loss reported by SILP.

At March 31, 2023, 91.8% of SILP’s portfolio was valued based on quoted prices in actively traded markets (Level 1), 6.1% was composed of instruments valued based on observable inputs other than quoted prices (Level 2), and 0.0% was composed of instruments valued based on non-observable inputs (Level 3).

At March 31, 2023, 2.1% of SILP’s portfolio consisted of private equity funds valued using the funds’ net asset values as a practical expedient.

At March 31, 2023, 85.4% of our Innovations-related portfolio was carried at fair value on a nonrecurring basis, measured as of the investees’ most recently completed financing round, and 14.6% was carried at the original cost.

Other than our investment in SILP (see Note 3 of the accompanying unaudited 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.

Restricted cash and cash equivalents

The unrestricted cash and cash equivalents decreased by $44.0 million, or 57.7%, from $76.3 million at December 31, 2021, to $32.3 million at September 30, 2022, primarily due to cash used for operations, including the repurchase of senior convertible debt, purchase of Innovations-related investments and 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 increased by $14.1 million, or 2.2%, from $634.8 million at December 31, 2021, to $648.9 million at September 30, 2022, primarily due to collateral required by our ceding insurers.

Our restricted cash decreased by $42.1 million, or 6.3%, from $668.3 million at December 31, 2022, to $626.2 million at March 31, 2023, primarily due to release of collateral from our ceding insurers relating to legacy contracts in run-off.

Reinsurance balances receivable

During the nine months ended September 30, 2022, reinsurance balances receivable increased by $68.2 million, or 16.8%, to $473.6 million from $405.4 million at December 31, 2021.

This increase was related primarily to funds withheld by cedents.

At September 30, 2022, funds held by cedents were $303.1 million, compared to $246.9 million at December 31, 2021.

The remaining increases related to premiums receivable on new contracts bound during nine months ended September 30, 2022.

During the three months ended March 31, 2023, reinsurance balances receivable increased by $76.1 million, or 15.0%, to $581.6 million from $505.6 million at December 31, 2022.

This increase was related partially to funds withheld by cedents.

At March 31, 2023, funds held by cedents were $367.8 million, compared to $337.4 million at December 31, 2022.

Funds withheld predominantly relate to premiums withheld by Lloyd’s syndicates and funds contributed by the Company to Lloyd's as security for members’ underwriting activities.

The remaining increase related to premiums receivable on new contracts bound during the three months ended March 31, 2023.

Loss and Loss Adjustment Expense Reserves;

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Reserves IBNR Total Case

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Total $ 195,957 $ 399,842 $ 595,799 $ 184,756 $ 370,712 $ 555,468

During the nine months ended September 30, 2022, the total gross loss and loss adjustment expense reserves increased by $16.8 million, or 3.2%, to $540.8 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.

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During the nine months ended September 30, 2022, the total loss and loss adjustment expenses recoverable decreased by $0.5 million, or 4.5%, to $10.6 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.

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

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

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

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 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 October 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 $88.7 million and $95.9 million, respectively, both relating to the peril of North Atlantic Hurricane.

During the three months ended March 31, 2023, the total gross loss and loss adjustment expense reserves increased by $40.3 million, or 7.3%, to $595.8 million from $555.5 million at December 31, 2022.

At April 1, 2023, our estimated largest probable maximum loss (net of retrocession and reinstatement premiums) at a 1-in-250 year return period for a single event and in aggregate was $78.0 million and $84.7 million, respectively, both relating to the peril of North Atlantic Hurricane, compared to $77.5 million and $83.5 million, respectively, at January 1, 2023.

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.

October 1, 2022

April 1, 2023

Net 1-in-250 Year Return Period

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Europe Windstorm 31,941 36,236

The Japanese peril exposures include new contracts bound effective April 1, 2023.

Total shareholders’ equity

Total equity reported on the condensed consolidated balance sheet decreased by $8.7 million to $467.0 million at September 30, 2022, compared to $475.7 million at December 31, 2021.

The decrease in shareholders’ equity during the nine months ended September 30, 2022, was primarily due to the net loss of $9.4 million reported for the period, partially offset by the adoption of ASU 2020-06 (see Note 2 of the accompanying condensed consolidated financial statements).

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

Total equity reported on the unaudited condensed consolidated balance sheet increased by $6.9 million to $510.0 million at March 31, 2023, compared to $503.1 million at December 31, 2022.

The increase in shareholders’ equity during the three months ended March 31, 2023, was primarily due to the net income of $5.9 million reported for the period.

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

Liquidity and Capital Resources

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

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

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

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

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

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

At September 30, 2022, Greenlight Re and GRIL were each rated “A- (Excellent)” with a stable outlook by A.M.

The ratings reflect A.M.

Best’s opinion of our reinsurance subsidiaries’ financial strength, operating performance, and ability to meet obligations.

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

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We anticipate positive cash flows from operations (underwriting activities and investment income) to be sufficient to cover cash outflows under most loss scenarios in the near term.

Based on expected cash flows from operations, financing arrangements and redemptions from related party investment fund as needed, we believe we have sufficient liquidity to cover our working capital requirements and other contractual obligations and commitments through the foreseeable future.

Refer to the “ Liquidity and Capital Resources ” section included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 for a general discussion of liquidity and capital resources.

The following provides an update on material changes to our liquidity and capital resources during the three months ended March 31, 2023.

Sources and Uses of Funds

Our sources of funds consist primarily of premium receipts (net of brokerage and ceding commissions), investment income, and other income.

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

At September 30, 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, 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, 2022 and 2021, the net cash used in operating activities was $27.4 million and $18.8 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 nine months ended September 30, 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, 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.

Our Lloyd’s syndicate business has been growing in recent years, contributing to the net use of cash for underwriting activities.

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

For the nine months ended September 30, 2022, our investing activities provided $12.9 million of cash from redemptions from SILP (net of contributions) and used $8.6 million for new Innovations and other investments.

By comparison, for the same period in 2021 our investing activities provided net cash of $4.4 million.

For the nine months ended September 30, 2022, we used $6.4 million to repurchase our convertible senior notes.

During the same period in 2021, we used $10.0 million to repurchase our Class A ordinary shares.

At September 30, 2022, we believe we have sufficient liquidity to meet our foreseeable financial requirements.

We do not expect the recent global events, including Hurricane Ian, the Russian-Ukrainian conflict, and the COVID-19 pandemic, to materially impact our operational liquidity needs.

These needs will be met by cash, funds generated from underwriting activities, and investment income, including withdrawals from SILP if necessary.

At September 30, 2022, we expect to fund our operations for the next twelve months from operating and investing cash flow.

We are evaluating various alternatives in relation to the convertible senior notes that mature in August 2023.

In addition, we may explore various financing options, including debt refinancing and other capital raising alternatives, to fund our business strategy, improve our capital structure, increase surplus, pay claims or make acquisitions.

We can provide no assurances regarding the terms of such transactions or that any such transactions will occur.

If we are unable to refinance the convertible senior notes, we will be required to fund settlement at maturity using cash on hand, or withdrawals from SILP, which may significantly and negatively affect our ability to implement our business strategy.

Although GLRE is not subject to any significant legal prohibitions on the payment of dividends, Greenlight Re and GRIL are each subject to regulatory minimum capital requirements and regulatory constraints that affect their ability to pay dividends to us.

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

At September 30, 2022, Greenlight Re and GRIL exceeded their regulatory minimum capital requirements.

Letters of Credit and Trust Arrangements

At September 30, 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 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, 2022, we had one letter of credit facility available with an aggregate capacity of $275.0 million (December 31, 2021:

$275.0 million).

See Note 12 of the accompanying condensed consolidated financial statements for details

The following table summarizes our sources and uses of funds for the respective periods:

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on the letter of credit facility.

Three months ended March 31

2023 2022 Change

($ in thousands)

Total cash provided by (used in):

Operating activities $ (1,259) $ (11,618) $ 10,359

Investing activities (22,076) 33,256 (55,332)

Financing activities (17,085) — (17,085)

Effect of currency exchange on cash (1)

Net cash inflows (outflows) (40,288) 21,638 (61,926)

Cash, beginning of period 706,548 711,101 (4,553)

Cash, end of period $ 666,260 $ 732,739 $ (66,479)

(1) Cash includes unrestricted and restricted cash and cash equivalents - see Note 2 of the unaudited condensed consolidated financial statements .

Cash used in operating activities

The decrease in cash used in our operating activities for the three months ended March 31, 2023 over the same quarter in 2022 was driven mainly by the ebb and flow from our underwriting activities, which may vary significantly from period to period depending on the mix of business, the nature of underwriting opportunities available and volume of claims submitted to us by our cedents.

Cash provided by investing activities

The increase in cash used for our investing activities for the three months ended March 31, 2023 over the same quarter in 2022 was mainly due to contributions (net of redemptions) of $21.0 million into SILP, compared to net redemptions from SILP of $36.7 million during the same period in 2022.

Cash used in financing activities

The increase in cash used in our financing activities for the three months ended March 31, 2023 over the same quarter in 2022 was due to the partial repurchase of our outstanding convertible senior notes at a discount.

Cash at March 31, 2023

As a result of the above activities, coupled with the foreign exchange rate adjustment on foreign cash, our consolidated cash position declined to $666.3 million at March 31, 2023, from $706.5 million at December 31, 2022.

Letters of Credit and Trust Arrangements

See Note 11 of the accompanying condensed consolidated financial statements for details on the committed and uncommitted letter of credit facilities.

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

At September 30, 2022, the aggregate amount of collateral provided to cedents under such arrangements was $648.2 million (December 31, 2021:

At March 31, 2023, the aggregate amount of collateral provided to cedents under such arrangements was $625.5 million (December 31, 2022:

$667.6 million).

At September 30, 2022, the letters of credit and trust accounts were secured by restricted cash and cash equivalents with a total fair value of $648.9 million (December 31, 2021:

At March 31, 2023, the letters of credit and trust accounts were secured by restricted cash and cash equivalents with a total fair value of $626.2 million (December 31, 2022:

$668.3 million).

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

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

The Company was in compliance with all the covenants of this facility at September 30, 2022.

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

We expect that the existing capital base and internally generated funds will be sufficient to implement our business strategy for the foreseeable future.

Consequently, we do not presently anticipate that we will incur any additional material indebtedness in the ordinary course of our business.

However, to provide us with flexibility and timely access to public capital markets should we require additional capital for working capital, capital expenditures, acquisitions, or other general corporate purposes, we have filed a Form S-3 registration statement, which expires in July 2024.

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, 2022.

The Board of Directors had previously approved a share repurchase plan 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 nine months ended September 30, 2022, the Company repurchased 4,933 Class A ordinary shares at an average share price of $7.04.

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, 2022, 2,011,426 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.

Contractual Obligations and Commitments

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.

At September 30, 2022, we estimate that we will pay the loss and loss adjustment expense reserves as follows:

Since December 31, 2022, the material changes to our contractual obligations and commitments at March 31, 2023 were as follows:

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

3 unchanged sentences

$ 295,516 $ 176,952 $ 67,325 $ 56,005 $ 595,799

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

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

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

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.

At September 30, 2022, the Company has $93.4 million of senior convertible notes payable, which mature on August 1, 2023.

The Company is obligated to make semiannual interest payments of $2.0 million at an interest rate of 4.0% per annum.

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The Company has received regulatory approval to declare dividends from Greenlight Re to meet the interest payments obligation.

Pursuant to the IAA between SILP and DME Advisors, DME Advisors is entitled to a monthly management fee equal to 0.125% (1.5% on an annual basis) of each limited partner’s Investment Portfolio, as provided in the SILP LPA.

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.

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, 2022, we estimate the reduced performance allocation of 10% to continue to be applied until SILP achieves additional investment returns of 164%, at which point the performance allocation will revert to 20%.

For detailed breakdowns of management fees and performance compensation for the three and nine months ended September 30, 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.

The service agreement had an initial term of one year and continues for sequential one-year periods until terminated by us or DME Advisors.

Either party may terminate the service agreement for any reason with 30 days prior written notice to the other party.

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

Additionally, we have related party commitments as disclosed in Note 11 of the condensed consolidated financial statements.

At March 31, 2023, we estimate the reduced performance allocation of 10% to continue to be applied until SILP achieves additional investment returns of 150%, 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, 2023 and 2022, refer to Note 3 of the condensed consolidated financial statements.

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

We expect that the existing capital base and internally generated funds will be sufficient to implement our business strategy for the foreseeable future.

We are in the process of arranging refinancing for the outstanding convertible senior notes that mature in August 2023.

If we are unable to refinance the convertible senior notes, we may find alternative financing arrangements, or fund the settlement at maturity using cash on hand, or withdrawals from SILP.

Effects of Inflation

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Long-tailed lines of business generally have greater exposure to inflation than short-tailed lines, with this differential becoming more pronounced as the severity of inflation increases.

Our underwriting portfolio is predominantly short-tailed, and we actively manage our exposures to classes that experience significant inflation.

Our underwriting portfolio is predominantly short-tailed, and we actively manage our exposures to lines that experience significant inflation.

Our pricing and reserving models incorporate the anticipated effects of inflation on our claim costs, and we regularly review and update our assumptions.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis