# GREENLIGHT CAPITAL RE, LTD. (GLRE) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from GREENLIGHT CAPITAL RE, LTD.'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1385613/000138561324000016/glre-20231231.htm
Accession: 0001385613-24-000016
Filing date: 2024-03-05
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/GLRE/
All MD&A years: /company/GLRE/mda/
Previous year: /company/GLRE/mda/fy2022/ (FY 2022)
Next year: /company/GLRE/mda/fy2024/ (FY 2024)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion and analysis (“MD&A”) of our results of operations for the years ended December 31, 2023, and 2022, and our financial condition at December 31, 2023 and 2022. This discussion should be read in conjunction with “Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report.

              Page

[[GREPCENT_TABLE]]
[["Overview","51"],["Business Overview","51"],["Outlook and Trends","51"],["Revenues and Expenses","51"],["Key Financial Measures and Non-GAAP Measures","52"],["Consolidated Results of Operations","55"],["Financial Condition","63"],["Liquidity and Capital Resources","66"],["Liquidity","66"],["Capital Resources","67"],["Contractual Obligations and Commitments","68"],["Critical Accounting Estimates","69"],["Premium Revenues","69"],["Loss and Loss Adjustment Expense Reserves","70"],["Investments","72"]]
[[/GREPCENT_TABLE]]

For the discussion and analysis of our results of operations and changes in financial condition for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to our 2022 Annual Report.

All amounts are reported in U.S. dollars, unless otherwise noted. Tabular dollars are presented in thousands, with the exception of per share amounts or as otherwise noted.

50

Link to Table of Contents

Overview

Business Overview

We are a global specialty property and casualty reinsurer 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. Refer to “Part 1, Item 1. Business” for additional information.

We earned a net income of $86.8 million for the year ended December 31, 2023, an increase of $61.5 million, or 243% over the prior year, as a result of favorable reinsurance pricing conditions with lower losses from catastrophe and weather-related events (collectively referred as “CAT losses”), coupled with favorable rising interest rate environment for our cash and fixed maturity investments (relating to the Lloyd’s syndicates) as well as favorable foreign exchange movement in 2023.

The following is a summary of our financial performance for the year ended December 31, 2023, compared to the prior year:

•Gross premiums written was $636.8 million, an increase of 13.1%;

•Net premiums earned was $583.1 million, an increase of 24.2%;

•Net underwriting income (1) was $32.0 million, compared to an underwriting loss of $10.7 million;

•Total investment income was $66.1 million, a decrease of 4.2% (include 9.4% net return from our investment in SILP, compared to 25.3%);

•Diluted EPS was $2.50, an increase of 242%; and

•Fully diluted book per share(1) was $16.74, an increase of 16.8%.

(1) See “Key Financial Measures and Non-GAAP Measures” section of this MD&A.

Outlook and Trends

Following strong pricing improvements at the January 1, 2023 renewal season and throughout 2023 (primarily in property catastrophe, aviation, war and terror and marine), we witnessed a more disciplined but still attractive January 1, 2024 renewal season. In the property market we noted additional capacity entering the market, but we still saw favorable market conditions to grow our book. On our Specialty and FAL books, we noted a healthy amount of competitive interest but we were successful in securing the accounts we targeted for both renewal and new business with some modest rate increases.

The global inflationary pressures have abated from their recent highs. However, we believe loss cost inflation will continue to be a significant concern within 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 continue to manage these concerns and risks in multiple ways:

•Our underwriting strategy focuses on relatively shorter-tailed business, which is inherently less exposed to inflation than longer-tailed lines. We estimate the payout duration of our existing reserves at less than three years.

•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.

The rising interest rate environment over the last two years has had a mixed impact on our financial results. The Term Loans we secured in 2023 are partially exposed to fluctuations in the SOFR interest rate, and we stand to benefit if the interest rates start decreasing. The higher interest rates have improved the yield on our restricted cash and cash equivalents and our funds held at Lloyd’s. To the extent interest rates begin to decrease, we may see some of these trends reverse. The SILP investment portfolio is positioned to benefit from an inflationary environment.

Revenues and Expenses

Revenues

We derive our revenues from two principal sources: 

•premiums from reinsurance on property and casualty business assumed (net of any premiums ceded) - see “Critical Accounting Estimates” section of this MD&A; and

51

Link to Table of Contents

•income from investments, including:

•income (or loss) generated from our investment in SILP, net of management fee and performance compensation;

•gains (or losses) from our other investments, including Innovations-related investments; and

•interest income on our cash and cash equivalents and FAL.

 In addition, we may from time to time derive other income from foreign exchange gains (or losses) relating to underwriting balances, net investment income from Lloyd’s syndicates, fees generated from advisory services, and fees relating to overrides, profit commissions, and fees due upon the early termination of contracts.

Expenses

Our expenses consist primarily of the following: 

[[GREPCENT_TABLE]]
[["","\u25cf","underwriting losses and LAE;"],["","\u25cf","acquisition costs;"],["","\u25cf","general and administrative (\u201cG&A\u201d) expenses; and"],["","\u25cf","interest expense on deposit-accounted contracts and debt."]]
[[/GREPCENT_TABLE]]

The extent of our net losses and LAE incurred is a function of the amount and type of reinsurance contracts we write and the loss experience of the underlying coverage. Refer to “Critical Accounting Estimates” section of this MD&A.

Acquisition costs consist primarily of brokerage fees, ceding commissions, premium taxes, profit commissions, letters of credit and trust fees, and federal excise taxes. We amortize deferred acquisition costs relating to successfully bound reinsurance contracts over the related contract term.

General and administrative expenses consist primarily of salaries and benefits and related costs, including costs associated with our incentive compensation plan, bonuses, and stock compensation expenses. General and administrative expenses also include professional fees (non-claim related), travel and entertainment, information technology, rent, and other general operating costs. General and administrative expenses reported in our consolidated statements of operations include both underwriting and corporate expenses.

Deposit interest expense relates to the accretion costs for deposit-accounted contracts that did not meet the risk transfer condition for reinsurance accounting under U.S. GAAP.

Interest expense consists of interest paid and accrued on our debt and the amortization of the related deferred financing costs.

Key Financial Measures and Non-GAAP Measures

Management uses certain key financial measures, some of which are not prescribed under U.S. GAAP rules and standards (“non-GAAP financial measures”), to evaluate our financial performance, financial position, and the change in shareholder value. Generally, a non-GAAP financial measure, as defined in SEC Regulation G, is a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented under U.S. GAAP. We believe that these measures, which may be calculated or defined differently by other companies, provide consistent and comparable metrics of our business performance to help shareholders understand performance trends and facilitate a more thorough understanding of the Company’s business. Non-GAAP financial measures should not be viewed as substitutes for those determined under U.S. GAAP.

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

•Fully diluted book value per share; and

•Net underwriting income (loss).

These non-GAAP financial measures are described below.

52

Link to Table of Contents

Fully Diluted Book Value Per Share

Our primary financial goal is to increase fully diluted book value per share over the long term. We use fully diluted book value as a financial measure in our incentive compensation plan.

We believe that long-term growth in fully diluted book value per share is the most relevant measure of our financial performance because it provides management and investors a yardstick to monitor the shareholder value generated. Fully diluted book value per share may also help our investors, shareholders, and other interested parties form a basis of comparison with other companies within the property and casualty reinsurance industry. Fully diluted book value per share should not be viewed as a substitute for the most comparable U.S. GAAP measure, which in our view is the basic book value per share.

We calculate basic book value per share as (a) ending shareholders' equity, divided by (b) the total ordinary shares issued and outstanding, as reported in the consolidated financial statements. In prior years, we calculated the basic book value per share by modifying the denominator to exclude unearned performance-based restricted shares granted after December 31, 2021. We have revised this calculation in 2023 to eliminate the basic book value per share non-GAAP financial measure and have restated the 2022 comparative basic book value per share in the table below and elsewhere in this Annual Report to conform with the current presentation.

Fully diluted book value per share represents basic book value per share combined with any dilutive impact of in-the-money stock options and all outstanding restricted stock units “RSUs”. We believe these adjustments better reflect the ultimate dilution to our shareholders.

The following table presents a reconciliation of the fully diluted book value per share to basic book value per share (the most directly comparable U.S. GAAP financial measure):

[[GREPCENT_TABLE]]
[["","December 31, 2023","","December 31, 2022"],["Numerator for basic and fully diluted book value per share:"],["Total equity as reported under U.S. GAAP","$","596,095","","","$","503,120"],["Denominator for basic and fully diluted book value per share:"],["Ordinary shares issued and outstanding as reported and denominator for basic book value per share","35,336,732","","","34,824,061"],["Add: In-the-money stock options and all outstanding RSUs","264,870","","","277,960"],["Denominator for fully diluted book value per share","35,601,602","","","35,102,021"],["Basic book value per share","$","16.87","","","$","14.45"],["Increase in basic book value per share ($)","$","2.42","","","$","0.40"],["Increase in basic book value per share (%)","16.8","%","","2.8","%"],["Fully diluted book value per share","$","16.74","","","$","14.33"],["Increase in fully diluted book value per share ($)","$","2.41","","","$","0.34"],["Increase in fully diluted book value per share (%)","16.8","%","","2.4","%"]]
[[/GREPCENT_TABLE]]

Net Underwriting Income (Loss)

One way that we evaluate the Company’s underwriting performance is by measuring net underwriting income (loss). We do not use premiums written as a measure of performance. Net underwriting income (loss) is a performance measure used by management to evaluate the fundamentals underlying the Company’s underwriting operations. We believe that the use of net underwriting income (loss) enables investors and other users of the Company’s financial information to analyze our performance in a manner similar to how management analyzes performance. 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.

53

Link to Table of Contents

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. GAAP. We calculate net underwriting income (loss) as net premiums earned less net loss and loss adjustment expenses, acquisition costs, underwriting expenses (including related G&A expenses), and deposit interest expense. The measure excludes, on a recurring basis: (1) investment income (loss); (2) other income (expense) not related to underwriting, including foreign exchange gains or losses, and Lloyd’s interest income and expense; (3) corporate G&A expenses; and (4) interest expense. We exclude total investment income or loss, foreign exchange gains or losses, and Lloyd’s interest income or expense as we believe these items are influenced by market conditions and other factors unrelated to underwriting decisions. Additionally, we exclude corporate G&A 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. Net underwriting income (loss) should not be viewed as a substitute for U.S. GAAP net income before income taxes.

The reconciliations of net underwriting income (loss) to income (loss) before income taxes (the most directly comparable U.S. GAAP financial measure) on a consolidated basis are shown below:

[[GREPCENT_TABLE]]
[["","Year ended December 31"],["","2023","","2022"],["Income (loss) before income tax","$","86,930","","","$","24,526"],["Add (subtract):"],["Total investment (income) loss","(66,063)","","","(68,983)"],["Other non-underwriting (income) expense","(17,872)","","","11,777"],["Corporate expenses","23,653","","","17,793"],["Interest expense","5,344","","","4,201"],["Net underwriting income (loss)","$","31,992","","","$","(10,686)"]]
[[/GREPCENT_TABLE]]

54

Link to Table of Contents

Consolidated Results of Operations

The table below summarizes our consolidated operating results for the years ended December 31:

[[GREPCENT_TABLE]]
[["","","2023","","2022"],["Underwriting revenue"],["Gross premiums written","","$","636,810","","","$","563,171"],["Gross premiums ceded","","(42,762)","","","(33,429)"],["Net premiums written","","594,048","","","529,742"],["Change in net unearned premium reserves","","(10,901)","","","(60,265)"],["Net premiums earned","","583,147","","","469,477"],["Underwriting related expenses"],["Net loss and loss adjustment expenses incurred:"],["Current year","","348,798","","","316,367"],["Prior year (1)","","11,206","","","118"],["Net loss and loss adjustment expenses incurred","","360,004","","","316,485"],["Acquisition costs","","168,877","","","143,148"],["Underwriting expenses","","19,587","","","13,813"],["Deposit interest expense","","2,687","","","6,717"],["Net underwriting income (loss) (2)","","31,992","","","(10,686)"],["Income from investment in SILP","","28,696","","","54,844"],["Net investment income","","37,367","","","14,139"],["Total investment income","","66,063","","","68,983"],["Corporate expenses","","23,653","","","17,793"],["Foreign exchange (gains) losses","","(11,566)","","","5,988"],["Other (income) expense, net","","(6,306)","","","5,789"],["Interest expense","","5,344","","","4,201"],["Income tax expense (benefit)","","100","","","(816)"],["Net income","","$","86,830","","","$","25,342"],["Earnings per share:"],["Basic","","$","2.55","","","$","0.75"],["Diluted","","$","2.50","","","$","0.73"],["Underwriting ratios:"],["Loss ratio - current year","","59.8","%","","67.4","%"],["Loss ratio - prior year","","1.9","%","","\u2014","%"],["Loss ratio","","61.7","%","","67.4","%"],["Acquisition cost ratio","","29.0","%","","30.5","%"],["Composite ratio","","90.7","%","","97.9","%"],["Underwriting expense ratio","","3.8","%","","4.4","%"],["Combined ratio","","94.5","%","","102.3","%"]]
[[/GREPCENT_TABLE]]

1 The net financial impacts associated with changes in the estimate of losses incurred in prior years, which incorporate earned reinstatement premiums assumed and ceded, adjustments to assumed and ceded acquisition costs, and deposit interest expense, were a loss of $15.7 million in 2023 (2022: $12.2 million).

2 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.

55

Link to Table of Contents

The following provides further details on the significant variances for the year ended December 31, 2023, compared to 2022.

Overview

For the year ended December 31, 2023, fully diluted book value per share increased by $2.41, or 16.8%, to $16.74 per share and basic book value per share increased by $2.42, or 16.8%, to $16.87 per share since December 31, 2022 driven by strong underwriting performance.

For the year ended December 31, 2023, our net income increased by $61.5 million to $86.8 million, driven mainly by the following:

•Underwriting income: Increased by $42.7 million to $32.0 million, primarily driven by combined ratio improving 7.8 percentage points mainly due to lower CAT losses and favorable pricing in 2023, partially offset by an increase in adverse loss development from prior years. For further information on CAT losses and prior year loss development, refer to Note 7 - Loss and Loss Adjustment Expense Reserves of the consolidated financial statements.

•Investment income: Declined by $2.9 million to $66.1 million. While we benefited from the rising U.S. interest rates on our cash and short-term investment holdings, this was offset by a decline in SILP’s net income. SILP generated a net return of 9.4% in 2023, compared to 25.3% in 2022.

•Foreign exchange gains: Increased by $17.6 million driven mainly by the strengthening of the U.S. dollar over the pound sterling.

•Other income: Increased by $12.1 million driven primarily by an increase in investment income on funds withheld by third party Lloyd’s syndicates. 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 fair value adjustments on these securities when the syndicates report them to us, generally on a quarter in arrears.

•Corporate expenses: Increased by $5.9 million primarily driven by $4.3 million of severance relating to the separation agreement entered with our former CEO. For further details, see “Separation Agreement with CEO” in Note 15 - “Related Party Transactions” in the consolidated financial statements.

Underwriting Results by Segment

For our Property and Casualty Reinsurance segment, we analyze it based on three lines of business: “property,” “casualty,” and “other.”

Gross Premiums Written

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

[[GREPCENT_TABLE]]
[["","","Year ended December 31"],["","","2023","","2022"],["Property","","$","113,291","","","17.8","%","","$","85,323","","","15.2","%"],["Casualty","","351,037","","","55.1","","","325,103","","","57.7"],["Other","","172,482","","","27.1","","","152,745","","","27.1"],["Total","","$","636,810","","","100.0","%","","$","563,171","","","100.0","%"]]
[[/GREPCENT_TABLE]]

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.

56

Link to Table of Contents

Our gross premiums written increased by $73.6 million, or 13.1%, compared to the same period in 2022. The following table provides a further analysis of this overall increase:

[[GREPCENT_TABLE]]
[["Gross Premiums Written"],["Year ended December 31, 2023"],["","","Increase (decrease) ($ in millions)","","% change","","Explanation"],["Property","","$28.0","","32.8%","","The increase was driven from growth in our Commercial class, mainly due to new quota share treaties bound in mid-2022 and new Innovations contracts via Syndicate 3456 in 2023. This resulted in a change in business mix for Property, predominantly with Commercial and Personal which accounted for 46% and 54%, respectively, of total Property, compared to 17% and 80%, respectively, for the same period in 2022."],["Casualty","","$25.9","","8.0%","","The increase was driven mainly from growth in General Liability, Professional Liability, and Motor Liability from new contracts and premiums written from quota share treaties bound in 2022. This growth was partially offset by a reduction in the Workers\u2019 Compensation class, where we have significantly reduced our appetite for quota share treaties beginning in 2022, coupled with a premium decrease in the Multi-line class. As a result, the business mix within our Casualty line of business has shifted between General Liability and Multi-line classes, accounting for 27% and 62% of total Casualty, respectively, compared to 19% and 69%, respectively, in same period in 2022."],["Other","","$19.7","","12.9%","","The increase was driven mainly by new contracts within our Marine class and Other Specialty class, primarily in energy, aviation and cyber risk. This was partially offset by a reduction in premiums from our Financial class, predominantly due to lower merger and acquisition activity in 2023 impacting premium from transactional liability programs, partially offset by new premiums from credit and surety contracts. As a result, the change in business mix was follows: Other Specialty, Financial, and Marine represented 45%, 33%, and 18%, respectively, compared to 36%, 44%, and 15%, respectively, for the same period in 2022."]]
[[/GREPCENT_TABLE]]

Premiums Ceded

For the year ended December 31, 2023, ceded premiums were $42.8 million, or 6.7% of gross premiums written, compared to $33.4 million, or 5.9% of gross premiums written, for the year ended December 31, 2022. The increase was mainly due to purchasing an aviation quota share retrocession coverage, as well as an additional $10.0 million excess of loss coverage to manage our exposure to marine and energy.

Net Premiums Written

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

[[GREPCENT_TABLE]]
[["","","Year ended December 31"],["","","2023","","2022"],["Property","","$","94,651","","","15.9","%","","$","67,680","","","12.8","%"],["Casualty","","337,111","","","56.7","","","315,935","","","59.6"],["Other","","162,286","","","27.3","","","146,127","","","27.6"],["Total","","$","594,048","","","100.0","%","","$","529,742","","","100.0","%"]]
[[/GREPCENT_TABLE]]

Our net premiums written increased by $64.3 million, or 12.1%, compared to the year ended December 31, 2022. The movement in net premiums written resulted from the changes in gross premiums written and ceded during the periods.

57

Link to Table of Contents

Net Premiums Earned

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

[[GREPCENT_TABLE]]
[["","","Year ended December 31"],["","","2023","","2022"],["Property","","$","86,539","","","14.8","%","","$","52,397","","","11.2","%"],["Casualty","","331,196","","","56.8","","","289,820","","","61.7"],["Other","","165,412","","","28.4","","","127,260","","","27.1"],["Total","","$","583,147","","","100.0","%","","$","469,477","","","100.0","%"]]
[[/GREPCENT_TABLE]]

Net premiums earned increased by $113.7 million or 24.2%, compared to the prior year. 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 with the mix of business written in the form of excess of loss versus proportional contracts.

Loss and LAE Incurred, Net

The components of the loss ratio were as follows:

[[GREPCENT_TABLE]]
[["","","Year ended December 31"],["","","2023","","2022","","Increase / (decrease) in loss ratio points"],["Current accident year loss ratio","","59.8","%","","67.4","%","","(7.6)"],["Prior year reserve development ratio","","1.9","%","","\u2014","%","","1.9"],["Loss ratio","","61.7","%","","67.4","%","","(5.7)"]]
[[/GREPCENT_TABLE]]

Current accident year loss ratio improved by 7.6 points for the year ended December 31, 2023, compared to the same period in 2022 primarily due to 3.6 points in lower CAT losses, coupled with favorable pricing and change in business mix in 2023.

For the year ended December 31, 2023, prior year adverse loss development was 1.9%, compared to a negligible amount in 2022. Refer to Note 7 Loss and Loss Adjustment Expense Reserves to the consolidated financial statements for further details on prior year loss developments.

The following table provides a breakdown of net losses incurred by lines of business:

[[GREPCENT_TABLE]]
[["","","Year ended December 31"],["","","2023","","2022"],["Property","","$","62,266","","","17.3","%","","$","40,885","","","12.9","%"],["Casualty","","225,314","","","62.6","","","205,641","","","65.0"],["Other","","72,424","","","20.1","","","69,959","","","22.1"],["Total","","$","360,004","","","100.0","%","","$","316,485","","","100.0","%"]]
[[/GREPCENT_TABLE]]

58

Link to Table of Contents

The loss ratios by lines of business were as follows:

[[GREPCENT_TABLE]]
[["","","Year ended December 31"],["","","2023","","2022","","","Increase / (decrease) in loss ratio points"],["Property","","72.0","%","","78.0","%","","","(6.0)","%"],["Casualty","","68.0","","","71.0","","","","(3.0)"],["Other","","43.8","","","55.0","","","","(11.2)"],["Total","","61.7","%","","67.4","%","","","(5.7)","%"]]
[[/GREPCENT_TABLE]]

The following provides further details on the change in 2023 vs. 2022:

[[GREPCENT_TABLE]]
[["","","Increase (decrease) ($ in millions)","","Increase / (decrease) in loss ratio points","","Explanation"],["Property","","$21.4","","(6.0)%","","The increase in losses incurred is primarily due to 65.2% increase in net premiums earned, and to a lesser degree due to a higher dollar amount of current year CAT losses. However, our loss ratio improved mainly due to a decrease of 4.7 loss ratio points from current CAT losses, in part due to higher premiums earned. In 2023, the U.S. severe storms losses and other CAT events contributed 19.3 loss ratio points to the Property loss ratio. During the comparable period in 2022, CAT losses from Hurricane Ian, Typhoons Nanmadol and Hinnamnor, and Tennessee wildfires contributed 24.0 percentage points to the Property loss ratio. Additionally, the Property loss ratio benefited by 2.1 percentage points due to an increase in favorable prior year CAT loss development for various underwriting years (2017 to 2022)."],["Casualty","","$19.7","","(3.0)%","","The increase in losses incurred was primarily driven by the 14.3% increase in net premiums earned, coupled with an increase of $19.7 million or 5.5 loss ratio points in prior year loss development predominantly driven by attritional losses relating to motor, general liability, multiline, workers\u2019 compensation and professional liability programs. However, our Casualty business benefited by 5.1 loss ratio points from lower current year CAT losses, compared to 2022 when the Multi-line class was adversely impacted by Hurricane Ian. Further, the overall decrease in loss ratio was also driven by the change in business mix. We significantly grew General Liability and Multi-line classes at much lower loss ratios than the Workers\u2019 Compensation class."],["Other","","$2.5","","(11.2)%","","Despite the 30.0% increase in net premiums earned, driven from growth in our Marine and Other Specialty classes, we had only a marginal increase in losses incurred for Other, primarily due to 8.2 loss ratio point improvement from prior year favorable loss development, and to a lesser extent, from lower CAT losses. The prior year favorable loss development was predominantly from the following classes of business: Mortgage, Transactional Liability, and Whole Account Marine and Energy."]]
[[/GREPCENT_TABLE]]

See “Critical Accounting Estimates, Loss and Loss Adjustment Expense Reserves” in this MD&A and “Note 7. Loss and Loss Adjustment Expense Reserves ” to the consolidated financial statements for additional discussion of our reserving techniques and prior year development of net claims and claim expenses.

59

Link to Table of Contents

Acquisition Costs, Net

Our total acquisition costs increased by 18.0% to $168.9 million, compared to 2022, mainly due to growth in net premiums earned, offset partially by lower broker commissions from excess of loss contracts compared to proportional treaties. For the year ended December 31, 2023, net profit commission expense of $14.8 million, (2022: $16.0 million) was included in our total acquisition costs.

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

[[GREPCENT_TABLE]]
[["","","","","","2023","","2022","","Increase / (decrease)"],["Property","","","","","18.7","%","","22.2","%","","(3.5)","%"],["Casualty","","","","","30.5","","","29.0","","","1.5"],["Other","","","","","31.3","","","37.4","","","(6.1)"],["Total","","","","","29.0","%","","30.5","%","","(1.5)","%"]]
[[/GREPCENT_TABLE]]

The following provides further details on the change in 2023 vs. 2022:

[[GREPCENT_TABLE]]
[["","","Increase / (decrease) in acquisition cost ratio points","Explanation"],["Property","","(3.5)%","The decrease was due primarily to the higher proportion of excess of loss contracts that have a lower ceding commission rate than proportional treaties. Based on net premiums earned for Property, excess of loss contracts accounted for 10% compared to 6% in 2022."],["Casualty","","1.5%","The marginal increase was due primarily to changes in our business mix, particularly with an increase in net premiums earned from General Liability, Professional Liability and Multi-line (including FAL) classes, which have higher ceding commission rates than the Workers\u2019 Compensation business."],["Other","","(6.1)%","The decrease was driven primarily by change in business mix, coupled with a higher proportion of excess of loss contracts than proportional treaties. Based on net premiums earned for Other, excess of loss contracts accounted for 23% compared to 18% in 2022."]]
[[/GREPCENT_TABLE]]

Ratio Analysis

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

[[GREPCENT_TABLE]]
[["","Year ended December 31","","Year ended December 31"],["","2023","","2022"],["","Property","","Casualty","","Other","","Total","","Property","","Casualty","","Other","","Total"],["Loss ratio","72.0","%","","68.0","%","","43.8","%","","61.7","%","","78.0","%","","71.0","%","","55.0","%","","67.4","%"],["Acquisition cost ratio","18.7","","","30.5","","","31.3","","","29.0","","","22.2","","","29.0","","","37.4","","","30.5"],["Composite ratio","90.7","%","","98.5","%","","75.1","%","","90.7","%","","100.2","%","","100.0","%","","92.4","%","","97.9","%"],["Underwriting expense ratio","","","","","","","3.8","","","","","","","","","4.4"],["Combined ratio","","","","","","","94.5","%","","","","","","","","102.3","%"]]
[[/GREPCENT_TABLE]]

Our underwriting expense ratio decreased by 0.6 points, compared to the same period in 2022, mainly due to 0.8 point reduction from lower interest expense on deposit-accounted contracts based on revised expectations of ultimate cash flows in 2023.

60

Link to Table of Contents

G&A Expenses

The breakdown of our G&A expenses between under underwriting and corporate functions was as follows:

[[GREPCENT_TABLE]]
[["","Year ended December 31"],["","2023","","2022"],["Underwriting expenses","$","19,587","","","$","13,813"],["Corporate expenses","23,653","","","17,793"],["Total G&A expenses","$","43,240","","","$","31,606"]]
[[/GREPCENT_TABLE]]

G&A expenses increased by $11.6 million, or 36.8%, compared to the prior year. The increase was driven by:

•Underwriting expenses: Increased by $5.8 million, or 41.8%, mainly due to scaling up as we added to our talent pool, which contributed to the growth in gross premiums written in 2023. Increase in allowance for credit losses relating to certain reinsurance balances receivable and loss recoverable also accounted for the increase in underwriting expenses. The increase was partially offset by lower legal and other professional fees. See above “Ratio Analysis” for a discussion on our underwriting expense ratio.

•Corporate expenses: Increased by $5.9 million or 32.9%, driven mainly by $6.4 million of severance related costs compared to $1.1 million in the prior year. The 2023 severance costs included a $1.5 million non-cash charge relating to the accelerated vesting of the former CEO’s restricted shares as well as the modified grant relating to his unvested performance-based restricted shares. The remaining increase was mainly due to an increase in personnel costs, including an increase in accrued incentive compensation costs in light of the Company’s performance in 2023. The incentive compensation cost for 2022 was nil due to the net underwriting loss. This increase in corporate expenses was partially offset by lower D&O insurance expense.

Total Investment Income

Total investment income incorporates (i) changes in the net asset value of our investment in SILP, (ii) interest income earned on cash and cash equivalents, including the restricted funds pledged as collateral to our clients, and (iii) gains (or losses) and interest on our portfolio of Innovations investments. 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 is as follows:

[[GREPCENT_TABLE]]
[["","","Year ended December 31"],["","","2023","","2022"],["Interest and dividend income, net of withholding taxes and other expenses","","$","35,629","","","$","4,466"],["Net realized and unrealized gains on other investments (see Note 4)","","1,738","","","9,673"],["Net investment-related income","","$","37,367","","","$","14,139"],["Share of SILP's net income (see Note 3)","","28,696","","","54,844"],["Total investment income","","$","66,063","","","$","68,983"]]
[[/GREPCENT_TABLE]]

61

Link to Table of Contents

Net investment-related income

Our net investment-related income increased by $23.2 million or 164.3% compared to 2022 mainly due to rising U.S. interest rates, which resulted in an increase in interest income from our cash and cash equivalent (including restricted cash), partially offset by lower average outstanding balance in 2023. The U.S. Federal Reserve hiked its benchmark rate 11 times for a total of 5.25 percentage points since March 2022. Our Innovations-related investments had less gains in 2023 in part due to less favorable pricing conditions from completed financing rounds by some of our Innovation investees compared to 2022.

Share of SILP’s Net Income

Our share of SILP’s net income decreased by $26.1 million in 2023 compared to 2022. For the year ended December 31, 2023, SILP reported a net investment return of 9.4%, compared to 25.3% for 2022. The following table provides a breakdown of the gross and net investment returns:

[[GREPCENT_TABLE]]
[["","Year ended December 31"],["","2023","","2022"],["Long portfolio gains (losses)","32.1","%","","\u2014","%"],["Short portfolio gains (losses)","(22.1)","","","26.1"],["Macro gains (losses)","3.7","","","3.8"],["Other income and expenses 1","(3.2)","","","(1.8)"],["Gross investment return","10.5","%","","28.1","%"],["Net investment return 1","9.4","%","","25.3","%"]]
[[/GREPCENT_TABLE]]

1 “Other income and expenses” excludes performance compensation but includes management fees. “Net investment return” incorporates both of these amounts. For further information about management fees and performance compensation, refer to Note 15 “Related Party Transactions” of the consolidated financial statements.

The most significant contributors to SILP’s net investment return for the year ended December 31, 2023 were long positions in Green Brick Partners Inc., CONSOL Energy Inc., and a S&P 500 / U.S. interest rate derivative position. For the same period, the most significant detractors were three single-name short positions.

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

Interest Expense

Our interest expense for the year ended December 31, 2023 increased by $1.1 million to $5.3 million compared to 2022. The increase was driven primarily by the increase in borrowing cost for new Term Loans, which were partially used to repay the outstanding Convertible Notes (see Note 9 “Debt and Credit Facilities” to the consolidated financial statements). The interest expense for the year ended December 31, 2023 included $0.6 million of unrealized loss on the interest rate swaps used to partially hedge the Term Loans.

Income Taxes

For the year ended December 31, 2023, we incurred net income tax expense of $0.1 million, net of a $2.3 million reversal of deferred tax asset provision based on management’s conclusion that it was more likely than not that the Company will fully realize the deferred tax asset. For the year ended December 31, 2022, we had a net income tax recovery of $0.8 million primarily due to a tax refund relating to Verdant. For further information, see Note 14 “Income Taxes” to the consolidated financial statements.

62

Link to Table of Contents

Financial Condition

Investments

The following table provides a breakdown of our total investments: 

[[GREPCENT_TABLE]]
[["","","December 31"],["","","2023","","2022"],["Investment in related party investment fund (SILP)","","$","258,890","","","78.0","%","","$","178,197","","","71.7","%"],["Other investments:"],["Private investments and unlisted equities","","71,157","","","21.4","","","62,433","","","25.1"],["Debt and convertible debt securities","","2,136","","","0.6","","","1,846","","","0.8"],["Certificates of deposit","","\u2014","","","\u2014","","","6,000","","","2.4"],["Total other investments","","$","73,293","","","22.0","%","","$","70,279","","","28.3","%"],["Total investments","","$","332,183","","","100.0","%","","$","248,476","","","100.0","%"]]
[[/GREPCENT_TABLE]]

At December 31, 2023, our total investments increased by $83.7 million, or 33.7%, to $332.2 million from December 31, 2022. The increase was primarily driven from net additional contributions into SILP, coupled with the net investment return in 2023.

Investments in SILP

DME Advisors reports the composition of SILP’s portfolio on a delta-adjusted basis, which it believes is the appropriate manner to assess the exposure and profile of investments and reflects how it manages the portfolio. An option’s delta is the option price’s sensitivity to the underlying stock (or commodity) price. The delta-adjusted basis is the number of shares or contracts underlying the option multiplied by the delta and the underlying stock (or commodity) price.

The following table represents the composition of SILP’s investments:

[[GREPCENT_TABLE]]
[["","","December 31"],["","","2023","","2022"],["","","Long %","","Short %","","Long %","","Short %"],["Equities and related derivatives","","90.2","","","53.8","","","84.4","","","49.7"],["Private and unlisted equity securities","","2.0","","","\u2014","","","3.2","","","\u2014"],["Debt instruments","","0.3","","","\u2014","","","0.6","","","\u2014"],["Total","","92.5","%","","53.8","%","","88.2","%","","49.7","%"]]
[[/GREPCENT_TABLE]]

The above exposure analysis does not include cash (U.S. dollar and foreign currencies), gold and other commodities, credit default swaps, sovereign debt, foreign currency derivatives, interest rate derivatives, inflation swaps and other macro positions. Under this methodology, a total return swap’s exposure is reported at its full notional amount and options are reported at their delta-adjusted basis. At December 31, 2023, SILP’s exposure to gold on a delta-adjusted basis was 11.2% (2022: 15.2%).

63

Link to Table of Contents

The following table represents the composition of SILP by industry sector at December 31, 2023:

[[GREPCENT_TABLE]]
[["Sector","","Long %","","Short %","","Net %"],["Communication Services","","\u2014","%","","(3.7)","%","","(3.7)","%"],["Consumer Discretionary","","38.7","","","(11.9)","","","26.8"],["Consumer Staples","","\u2014","","","(1.0)","","","(1.0)"],["Energy","","14.2","","","\u2014","","","14.2"],["Financial","","15.5","","","(11.7)","","","3.8"],["Healthcare","","7.2","","","(1.8)","","","5.4"],["Industrials","","3.7","","","(7.6)","","","(3.9)"],["Materials","","6.6","","","(0.6)","","","6.0"],["Real Estate","","\u2014","","","(4.0)","","","(4.0)"],["Technology","","4.5","","","(8.2)","","","(3.7)"],["Utilities","","1.3","","","(3.3)","","","(2.0)"],["Other","","0.8","","","\u2014","","","0.8"],["Total","","92.5","%","","(53.8)","%","","38.7","%"]]
[[/GREPCENT_TABLE]]

The following table represents the composition of SILP, by the market capitalization of the underlying issuer, at December 31, 2023:

[[GREPCENT_TABLE]]
[["Capitalization","","Long %","","Short %","","Net %"],["Mega Cap Equity (\u2265$25 billion)","","0.6","%","","(16.4)","%","","(15.8)","%"],["Large Cap Equity (\u2265$10 billion and $25 billion)","","5.7","","","(6.3)","","","(0.6)"],["Mid Cap Equity (\u2265$2 billion and $10 billion)","","80.5","","","(25.3)","","","55.2"],["Small Cap Equity ($2 billion)","","3.4","","","(5.8)","","","(2.4)"],["Debt Instruments","","0.3","","","\u2014","","","0.3"],["Other","","2.0","","","\u2014","","","2.0"],["Total","","92.5","%","","(53.8)","%","","38.7","%"]]
[[/GREPCENT_TABLE]]

At December 31, 2023, 95.0% of SILP’s portfolio was valued based on quoted prices in actively traded markets (Level 1), 3.6% was composed of instruments valued based on observable inputs other than quoted prices (Level 2), and a nominal amount was composed of instruments valued based on non-observable inputs (Level 3). At December 31, 2023, 1.4% of SILP’s portfolio consisted of private equity funds valued using the funds’ net asset values as a practical expedient.

Other Investments

The other investment holdings relate to private investments made by Innovations. During 2023, we made $7.1 million of new private investments compared to $13.2 million in the prior year. While we manage a diversified Innovations-related investment portfolio with approximately 40 holdings, our top five holdings accounted for 67% of the total carrying value as a result of favorable fair value remeasurement since our initial investments, net of impairment charges. For further information, see Note 4 “Other Investments” of the consolidated financial statements.

The certificate of deposit was redeemed in 2023 to provide cash collateral for the new Loan Facility (see “Debt” below).

Restricted cash and cash equivalents

We use our restricted cash and cash equivalents primarily for funding trusts and letters of credit issued to our ceding insurers. Our restricted cash decreased by $63.7 million, or 9.5%, from $668.3 million at December 31, 2022, to $604.6 million at December 31, 2023, primarily due to release of collateral from our ceding insurers relating to legacy contracts in run-off. During the year ended December 31, 2023, we also pledged $10.0 million collateral as security for the new Loan Facility (see “Debt” below).

64

Link to Table of Contents

Reinsurance balances receivable

Our reinsurance balances receivable increased by $113.8 million, or 22.5%, to $619.4 million from $505.6 million at December 31, 2022. This increase was driven primarily by premiums held by Lloyd’s syndicates through GCM. See “Concentration of Credit Risk - Reinsurance Balances Receivable, net” in Note 16 “Commitments and Contingencies” to the consolidated financial statements.

Loss and LAE Reserves; Loss and LAE Recoverable

Our reserves for loss and LAE by lines of business were as follows: 

[[GREPCENT_TABLE]]
[["","December 31, 2023","","December 31, 2022"],["","Case Reserves","","IBNR","","Total","","Case Reserves","","IBNR","","Total"],["Property","$","24,181","","","$","41,056","","","$","65,237","","","$","20,354","","","$","41,361","","","$","61,715"],["Casualty","136,713","","","299,933","","","436,646","","","146,702","","","227,979","","","374,681"],["Other","28,156","","","131,515","","","159,671","","","17,700","","","101,372","","","119,072"],["Total","$","189,050","","","$","472,504","","","$","661,554","","","$","184,756","","","$","370,712","","","$","555,468"]]
[[/GREPCENT_TABLE]]

Our total gross loss and LAE reserves increased by $106.1 million, or 19.1%, to $661.6 million from $555.5 million at December 31, 2022. See Note 7 “Loss and Loss Adjustment Expense Reserves” of the consolidated financial statements for a summary of changes in outstanding loss and LAE reserves and a description of prior period loss developments.

Our total loss and LAE recoverable increased by $12.4 million, or 94.0%, to $25.7 million from $13.2 million at December 31, 2022. See Note 8 “Retrocession” of the consolidated financial statements for a description of the credit risk associated with our retrocessionaires.

PML

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, do 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 (net of retrocession and reinstatement premiums). 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 exposures.

At January 1, 2024, our estimated largest PML at a 1-in-250-year return period for a single event and in aggregate was $89.7 million and $97.0 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. We have increased our PMLs in response to favorable market conditions and attractive opportunities, coupled with increased surplus.

65

Link to Table of Contents

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.

[[GREPCENT_TABLE]]
[["","","January 1, 2024"],["","","Net 1-in-250 Year Return Period"],["Peril","","Single Event Loss","","Aggregate Loss"],["","","($ in thousands)"],["North Atlantic Hurricane","","$","89,651","","","$","97,041"],["Southeast Hurricane","","83,339","","","85,296"],["Gulf of Mexico Hurricane","","66,557","","","68,830"],["Northeast Hurricane","","51,028","","","51,028"],["North America Earthquake","","87,227","","","90,414"],["California Earthquake","","74,105","","","77,981"],["Other N.A. Earthquake","","45,187","","","46,177"],["Japan Earthquake","","34,998","","","35,941"],["Japan Windstorm","","29,766","","","31,695"],["Europe Windstorm","","52,360","","","55,980"]]
[[/GREPCENT_TABLE]]

Debt

Our total debt decreased by $7.3 million, or 9.0%, to $73.3 million from $80.5 million at December 31, 2022. During 2023, we repurchased $17.5 million of Convertible Notes for a marginal realized gain. Further, we repaid the remaining $63.4 million of Convertible Notes, including accrued interest, which matured on August 1, 2023. To repay this debt, we entered into a $75.0 million Loan Facility with a group of banks. In connection with this Loan Facility, we contractually agreed to hedge 50% of the floating rate Term Loans for the duration of the Loan Facility. Refer to Note 9 “Debt and Credit Facilities” of the consolidated financial statements for further information.

Total shareholders’ equity

Total shareholders’ equity increased by $93.0 million to $596.1 million, compared to $503.1 million at December 31, 2022. The increase was primarily due to the net income of $86.8 million reported for the year. For details of other movements in shareholders’ equity, see the consolidated statements of shareholders’ equity.

Liquidity and Capital Resources

Liquidity

Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet the short-term and long-term cash requirements of its business operations. We manage liquidity at the holding company and operating subsidiary level.

Holding Company

Greenlight Capital Re is a holding company with no operations of its own and its assets consist primarily of investments in its subsidiaries. Accordingly, Greenlight Capital Re’s future cash flows depend on the availability of dividends or other statutorily permissible distributions, such as returns of capital, from its subsidiaries. The ability to pay dividends and/or distributions is limited by:

•the applicable laws and regulations of the countries in which Greenlight Capital Re’s subsidiaries operate (see Note 18 “Statutory Requirements” to the consolidated financial statements);

•the need to maintain adequate capital levels to support our reinsurance operations; and

•the need to preserve our current “A- (Excellent)” rating with a stable outlook by A.M. Best.

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. Our current policy is to retain earnings to support the growth of our business. We currently do not expect to pay dividends on our ordinary shares.

66

Link to Table of Contents

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 (subject to three day’s notice to the general partner), we believe we have sufficient liquidity to cover our working capital requirements and other contractual obligations and commitments through the foreseeable future.

Operating Subsidiaries

Our sources of funds from operating subsidiaries 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 G&A expenses. Our reinsurance business inherently provides liquidity as premiums are received well in advance of the time claims are paid. However, the amount of cash required to fund loss payments can fluctuate significantly from period to period due to the low frequency / high severity nature of certain types of business we write.

The following table summarizes our sources and uses of funds:

[[GREPCENT_TABLE]]
[["","Year ended December 31"],["","2023","","2022"],["Total cash provided by (used in):"],["Operating activities","$","7,507","","","$","(31,799)"],["Investing activities","(53,133)","","","47,015"],["Financing activities","(5,292)","","","(19,828)"],["Effect of currency exchange on cash(1)","100","","","59"],["Net cash inflows (outflows)","(50,818)","","","(4,553)"],["Cash, beginning of period","706,548","","","711,101"],["Cash, end of period","$","655,730","","","$","706,548"]]
[[/GREPCENT_TABLE]]

(1) Cash includes unrestricted and restricted cash and cash equivalents - see Note 5 of the consolidated financial statements.

Cash provided by operating activities

The increase in cash provided by operating activities was driven mainly by $42.7 million improved underwriting income, coupled with 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 used in investing activities

The increase in cash used for investing activities was driven mainly by the net change in our investment in SILP where we made a net contribution of $52.0 million during 2023 compared to a net redemption of $60.2 million during 2022. During 2023, we deployed $6.1 million less on Innovations-related investments compared to 2022, and collected $6.0 million of proceeds from a matured term deposit.

Cash used in financing activities

The decrease in cash used in our financing activities was due to drawing $74.1 million from the new Loan Facility, offset by the repayment of the remaining Convertible Notes on August 1, 2023, in addition to the partial repurchase of these Convertible Notes at a discount in 2023. In 2022, we had repurchased $19.8 million of our Convertible Notes.

Capital Resources

The following table summarizes our capital structure:

67

Link to Table of Contents

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["Debt","","$","74,062","","","$","80,534"],["Shareholders\u2019 equity","","596,095","","","503,120"],["Ratio of debt to shareholders\u2019 equity","","12","%","","16","%"]]
[[/GREPCENT_TABLE]]

The debt to shareholders’ equity provides an indication of our leverage and capital structure, along with some insights into our financial strength. In addition to the above capital, we also have LOC facilities to support our reinsurance business operations where we are not licensed or admitted as a reinsurer.

The following is a summary of the changes in our capital:

Debt

At December 31, 2023, our debt consisted of the new $75.0 million Loan Facility used principally to repay the Convertible Notes that were outstanding at December 31, 2022, net of repurchases during 2023. We also made the initial loan installment repayment on the Loan Facility. The facility will mature on August 1, 2026.

Ordinary Shares

At December 31, 2023, there were 35,336,732 outstanding ordinary shares, an increase of 512,671 since December 31, 2022, due to restricted shares granted to our employees and non-executive directors.

While our Board of Directors renewed the $25.0 million share repurchase plan in 2023, we did not repurchase any ordinary shares for year ended December 31, 2023 (see “Item 5 - Market for Registrants’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities”).

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

Secured LOC Facilities

    At December 31, 2023, our total LOC capacity was $489.0 million, compared to $289.0 million at December 31, 2022. The increase was due to a new LOC credit facility established to accommodate future growth and to diversify the concentration risk of having a single facility. At December 31, 2023, we had $290.7 million LOCs outstanding compared to $203.9 million at December 31, 2022. The increase is driven by, among other factors, the amount of unearned premiums, development of loss reserves, the expansion of our business and loss experience of that business.

The amount drawn from the LOC facilities are secured by cash collateral, reported as restricted cash and cash equivalents in the consolidated balance sheets.

Contractual Obligations and Commitments

At December 31, 2023, our contractual obligations and commitments by period due were as follows: 

[[GREPCENT_TABLE]]
[["","Less than 1 year","","1-3 years","","3-5 years","","More than 5 years","","Total"],["Operating activities"],["Loss and loss adjustment expense reserves (1)","$","314,238","","","$","209,713","","","$","78,063","","","$","59,540","","","$","661,554"],["Operating lease obligations (2)","637","","","1,005","","","\u2014","","","\u2014","","","1,642"],["Financing activities"],["Debt (3)","3,703","","","70,359","","","\u2014","","","\u2014","","","74,062"],["Total","$","318,578","","","$","281,077","","","$","78,063","","","$","59,540","","","$","737,258"]]
[[/GREPCENT_TABLE]]

68

Link to Table of Contents

(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.

(2) See Note 16 “Commitments and Contingencies” of the consolidated financial statements.

(3) See Note 9 “Debt and Credit Facilities” of the consolidated financial statements.

Critical Accounting Estimates

Our 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 I, Item IA. — Risk Factors,” cause actual events or results to differ materially from our underlying assumptions or estimates, there could be a material adverse effect on our results of operations, financial condition, or liquidity. We believe the following accounting policies affect the more significant estimates used to prepare our consolidated financial statements. We have summarized the descriptions below for clarity. We have included a more detailed description of our significant accounting policies and recently issued accounting standards in Note 2 “Significant Accounting Policies” to the consolidated financial statements. 

Premium Revenues

Gross Premiums Written

We record our property and casualty reinsurance premiums as premiums written based on our best estimate of the ultimate premiums for the contract period. Our estimates are based on actuarial pricing models and information received from ceding companies. Further, we record reinsurance premiums so long as they meet the risk transfer criteria under U.S. GAAP (see “Deposit Contracts” below).

Excess of loss reinsurance contracts typically state premiums as a percentage of the subject premiums written by the client, subject to a minimum and deposit premium. The minimum and deposit premium is generally based on an estimate of subject premiums expected to be written by the client during the contract term. The minimum and deposit premium is reported initially as premiums written and adjusted, if necessary, in subsequent periods once the actual subject premium is known.

For quota share (also known as proportional) contracts, we record premiums in the same periods in which the underlying insurance contracts are written, based on cession statements from cedents. We typically receive these statements monthly or quarterly, depending on the terms specified in each contract. For any reporting lag, we estimate premiums written based on the portion of the estimated ultimate premiums relating to the risks bound during the lag period. 

For multi-year contracts, reinsurance premiums are recorded at the inception of the contract based on our best estimate of total premiums to be received. Premiums are recognized on an annual basis for multi-year contracts where the cedants have the ability to unilaterally commute or cancel coverage within the term of the contract.

We regularly review premium estimates. Such review includes our experience with the ceding companies, managing general underwriters, familiarity with each market, the timing of the reported information, a comparison of reported premiums to expected ultimate premiums, along with a review of the aging and collection of premiums. We evaluate the appropriateness of the premium estimates on the basis of these reviews and record any adjustments to these estimates in the period in which they are determined. Changes in premium estimates, including premium receivable on both excess of loss and quota share contracts, are not unusual and may result in significant adjustments in any period. A portion of amounts included in “Reinsurance balances receivable” in the consolidated balance sheets represent estimated premiums written, net of commissions and brokerage, that are not currently due based on the terms of the underlying contracts. Additional premiums due on a contract with no remaining coverage period are earned in full when written.

Certain contracts provide for reinstatement premiums in the event of a loss. Reinstatement premiums are written and earned when a triggering loss event occurs.

Net Premiums Earned

We earn premiums over the risk coverage period. Unearned premiums represent the unexpired portion of reinsurance provided. Changes in circumstances subsequent to the inception of contracts can impact the earnings period. For instance, when exposure limits for a reinsurance contract are reached, any associated unearned premiums are fully earned.

69

Link to Table of Contents

Excess of loss reinsurance contracts are generally written on a “losses occurring” or “claims made” basis over the term of the policy. Accordingly, premiums are earned evenly over the contract term, which is generally 12 months.

Line slip or proportional insurance/reinsurance contracts are generally written on a “risks attaching” basis, covering claims that relate to the underlying policies written during the terms of these contracts. As the underlying business incepts throughout the contract term, which is generally one year, and the underlying business generally has a one year coverage period, these premiums are generally earned evenly over a 24-month period from inception.

Deposit Contracts

If we determine that a reinsurance contract does not transfer sufficient risk to merit reinsurance accounting treatment, we report the premium we receive as a deposit liability. Similarly, we report the premium we pay as a deposit asset for ceded contracts that do not transfer sufficient risk to merit reinsurance accounting. Any income and expense on deposit-accounted contracts is calculated using the interest method and recorded in the consolidated statements of operations under “Other income (expense)” and “Deposit interest expense,” respectively.

Loss and Loss Adjustment Expense Reserves

Estimating our loss and LAE reserves involves a considerable degree of judgment, and our estimates as of any given date are inherently uncertain. Estimating loss and LAE reserves requires us to make assumptions regarding reporting and development patterns, frequency and severity trends, claims settlement practices, potential changes in legal environments, inflation, loss amplification, foreign exchange movements, and other factors. These estimates and judgments are based on numerous considerations and are often revised as (i) we receive changes in loss amounts reported by ceding companies and brokers; (ii) we obtain additional information, experience, or other data; (iii) we develop new or improved methodologies; or (iv) we observe changes in the legal environment.

Our loss and LAE reserves relating to short-tail property risks are typically reported to us and settled more promptly than those relating to long-tail risks. However, the timeliness of loss reporting can be affected by such factors as the nature of the event causing the loss, the location of the loss, whether the loss is from policies in force with primary insurers or with reinsurers, and where our exposure falls within the cedent’s overall reinsurance program.

Our loss and LAE reserves are composed of case reserves (based on claims reported to us) and IBNR reserves, including the associated claims handling costs.

We determine case reserve estimates based on loss reports received. We determine our IBNR reserve estimates using standard actuarial methods and a combination of our own historical and current loss experience, insurance industry loss experience, assessments of pricing adequacy trends, and our professional judgment. In estimating our IBNR reserve, we estimate the total ultimate loss and LAE we expect to incur and subtract paid claims and case reserves.

The nature and extent of our judgment in the reserving process depend in part upon the type of business. Some of our property treaty reinsurance contracts represent business with a low frequency of claims occurrence and a high potential loss severity, such as claims arising from natural catastrophes. Given the nature of these events, traditional actuarial reserving methods may not be reliable indicators of the final outcome. As such, for contracts or losses of this type, we estimate the ultimate cost associated with a single loss event rather than perform analysis on the historical development patterns of past events to estimate the ultimate losses for an entire accident year. We estimate our reserves for these large events on a by-contract basis by reviewing policies with known or potential exposure to a particular loss event.

For non-catastrophe losses, we apply standard actuarial methodologies in setting reserves, including paid and incurred loss development, Bornheutter-Ferguson, burning cost, and frequency and severity techniques. We supplement our analysis with industry loss ratio and development pattern information in conjunction with our own experience. The weight given to a particular method will depend on many factors, including the homogeneity within the class of business, the volume of losses, the maturity of the accident year, and the length of the expected development tail. For example, the expected loss ratio method assumes that the ratio of premiums and losses remains constant. In contrast, development methods rely on observable patterns within reported losses, both historical and newly reported, to establish a view of the ultimate loss incurred. Therefore, as an accident year matures, we may migrate from an expected loss ratio method to an incurred development method.

As a predominantly broker-market reinsurer for both excess-of-loss and proportional contracts, we rely on loss information reported to brokers by primary insurers who, in turn, must estimate their losses at the policy level, often based on incomplete and changing information. The information we receive varies by cedent and may include paid losses, estimated case reserves, and an estimated provision for IBNR reserves. Reserving practices and data-reporting quality differ among ceding

70

Link to Table of Contents

companies, which adds further uncertainty to our estimation of ultimate losses. The nature and extent of information received from ceding companies and brokers also vary widely depending on the type of coverage, the contractual reporting terms (which are affected by market conditions and practices), and other factors. Due to the lack of standardization of the terms and conditions of reinsurance contracts, the differences in coverage provided to individual clients, and the tendency of those coverages to change rapidly in response to market conditions, we cannot always reliably measure the ongoing economic impact of such uncertainties and inconsistencies.

Time lags are inherent in loss reporting, especially in the case of excess-of-loss reinsurance contracts. The time lags, coupled with the combined characteristics of low claim frequency and high claim severity on such contracts, make the available data less useful for predicting ultimate losses.

In the case of proportional contracts, we rely on an analysis of a cedent’s historical experience, industry information, and the underwriters’ professional judgment in estimating reserves. We also utilize ultimate loss ratio forecasts when reported by cedents and brokers, which are ordinarily subject to three to six-month lags for proportional business. Due to our reliance on ceding companies for claims reporting, our reserve estimates are highly dependent on ceding companies’ judgment. Furthermore, during the loss settlement period, which may last several years, additional facts regarding individual claims and trends will often become known, and case law may change, affecting ultimate expected losses.

Since we rely on ceding company data in establishing our loss and LAE reserves, we maintain procedures designed to mitigate the risk that such information is incomplete or inaccurate. These procedures include: (i) comparisons of expected premiums to reported premiums, which helps us to identify delinquent client periodic reports; (ii) ceding company audits to identify inaccurate or incomplete reporting of claims and ensure that claims are actively and appropriately managed in line with agreed protocols and settlement authority limits; and (iii) underwriting reviews to ascertain that the losses ceded are covered as provided under the contract terms. These procedures are incorporated in our internal controls and are regularly evaluated and amended as market conditions, risk factors, and unanticipated areas of exposure develop.

We engage an independent third-party actuarial firm to perform a quarterly reserve review and annually opine on the reasonableness and adequacy of the aggregate loss reserves. We provide the third-party actuarial firm with our pricing models, reserving analysis, and other data. The actuarial firm may also inquire about the various assumptions and estimates used in the reserving analysis. The actuarial firm independently creates its own reserving models based on industry loss information, augmented by client-specific loss information and independent assumptions and estimates. Based on various reserving methodologies that the actuarial firm considers appropriate, it creates a loss reserve estimate for each segment in the portfolio. It recommends an aggregate loss reserve, including IBNR. In the event of material differences between our aggregated booked reserves and the actuarial firm's recommended reserves, the reserving committee would be notified, with the reserves adjusted as deemed appropriate. To date, there have been no material differences resulting from the external actuary’s reviews requiring adjustments to our booked reserves.

We monitor the development of our prior-year losses during subsequent calendar years by comparing the actual reported losses against previous estimates and current expectations. The analysis of this loss development is important to the ongoing refinement of our reserving assumptions. Each additional year of loss experience with a given cedent provides additional insight into the accuracy and timeliness of previously reported information.

Estimating loss reserves for our book of longer-tail casualty reinsurance business, which we write on both a proportional and non-proportional basis, involves further uncertainties. In addition to the uncertainties described above, casualty business is generally subject to longer reporting lags than property business, and claims often take several years to settle. During this period, additional factors and trends will be revealed, and we may adjust our reserves accordingly. Therefore, any factors that extend the time until our cedents settle claims add uncertainty to the reserving process.

The uncertainties inherent in the reserving process and the potential for unforeseen developments, including changes in laws and the prevailing interpretation of policy terms, may result in our loss and LAE reserves being materially greater or less than the loss and LAE reserves we initially established. We reflect adjustments to our loss and LAE reserves in our financial results during the period they are determined. Changes to our prior year loss reserves will impact our current underwriting results by improving our results if the prior year reserves prove redundant or impairing our results if the prior year reserves prove insufficient.

We believe that our reserves for loss and LAE are sufficient to cover losses that fall within the terms of our policies and agreements with our insured and reinsured customers based on the methodologies used to estimate those reserves. However, we can provide no assurance that actual losses will not (i) be less than or (ii) exceed our total established reserves.

71

Link to Table of Contents

Please refer to Notes 2 “Significant Accounting Policies - Loss and Loss Adjustment Expense Reserves and Recoverable” and 7 “Loss and Loss Adjustment Expense Reserves” of our consolidated financial statements for a more detailed explanation of our loss reserving methodology and the loss development tables by accident year, respectively, as required under U.S. GAAP.

Investments

We carry our investment in SILP at fair value, based on the most recent net asset value obtained from SILP’s third-party administrator. Further, SILP’s financial statements for the years ended December 31, 2023, 2022, and 2021 were subject to an independent audit in which SILP’s external auditors issued an unqualified opinion for these years (see “Report of Independent Registered Public Accounting Firm” in the Exhibits).

Other investments in our consolidated balance sheets includes private and unlisted equity securities that do not have readily determinable fair values. We determine these private equity securities’ carrying value based on the original cost, less impairment, plus or minus observable price changes in orderly transactions for an identical or similar investment of the same issuer. At each reporting date, we qualitatively consider whether the investment is impaired on the basis of certain impairment indicators. If we determine that the equity security is impaired on the basis of the qualitative assessment and the estimated fair value is less than the carrying value, we recognize an impairment loss in “Net investment income (loss)” in the consolidated statements of operations. We determine realized gains and losses from other investments based on the specific identification method (by reference to cost or amortized cost, as appropriate). These gains and losses are included in “Net investment income (loss)” in the consolidated statements of operations.