Greenlight Capital Re, Ltd. (NASDAQ: GLRE) (“Greenlight Re” or the
“Company”) today announced financial results for the first quarter
ended March 31, 2019.
Greenlight Re reported net income attributable
to common shareholders of $5.9 million for the first quarter of
2019, compared to a net loss attributable to common shareholders of
$142.8 million for the same period in 2018. The fully diluted net
income per share for the first quarter of 2019 was $0.16, compared
to a net loss per share of $3.85 for the same period in 2018.
Fully diluted adjusted book value per share was
$13.16 as of March 31, 2019, compared to $18.35 per share as
of March 31, 2018 and $13.10 as of December 31, 2018.
Management Commentary
Simon Burton, Chief Executive Officer of
Greenlight Re, stated, “We increased fully diluted book value per
share by 0.5% in the quarter, driven by strong investment
performance and offset by a reserve increase in our auto class.
While this issue clouded the quarter, our ongoing work to diversify
underwriting is aided by tailwinds from an overall improving rate
environment and from dislocation in several London market specialty
classes.”
David Einhorn, Chairman of the Board of
Directors, stated, “We were pleased to see our investment in
Solasglas bounce back with the market at the start of 2019. The
fund’s investment portfolio posted a positive return of 6.2%, net
of all fees and expenses for the quarter. Even though growth stocks
continue to lead value stocks, we achieved better results due to a
series of positive company-specific developments. We generated an
additional 4.8% return in April.”
Financial and Operating
Highlights
First Quarter 2019
- Gross written premiums were $162.6 million, a decrease from
$175.1 million in the first quarter of 2018. The year-over-year
decrease of $12.5 million was primarily due to the non-renewal of
two accounts in the financial and health lines of
business.
- Net written premiums were $141.2 million, compared to $145.3
million reported in the prior year period. Ceded premiums were
$21.4 million compared to $29.8 million in the prior year
period.
- Net earned premiums were $125.4 million, a decrease from $145.8
million reported in the prior-year period.
- A net underwriting loss of $21.8 million, compared to net
underwriting income of $2.5 million reported in the first quarter
of 2018. The underwriting loss was primarily due to adverse
prior-year loss development which resulted in a net negative
financial impact of $25.7 million.
- A composite ratio for the quarter of 115.2%, compared to 96.0%
for the prior-year period. The combined ratio for the quarter
was 117.4%, compared to 98.3% for the prior-year period.
- Total net investment income of $32.3 million, compared to net
investment loss of $145.2 million in the first quarter of
2018.
Conference Call Details
Greenlight Re will hold a live conference call
to discuss its financial results for the first quarter ended
March 31, 2019 on Tuesday, May 7, 2019 at 9:00 a.m.
Eastern time. The conference call title is Greenlight Capital
Re, Ltd. First Quarter 2019 Earnings Call.
To participate in the Greenlight Capital Re,
Ltd. First Quarter 2019 Earnings Call, please dial in to the
conference call at:
U.S. toll free
1-888-336-7152International
1-412-902-4178
Telephone participants may avoid any delays by
pre-registering for the call using the following link to receive a
special dial-in number and PIN.
Conference Call registration
link: http://dpregister.com/10131141
The conference call can also be accessed via
webcast at:
https://services.choruscall.com/links/glre190507.html
A telephone replay of the call will be available
from 11:00 a.m. Eastern time on May 7, 2019 until 9:00 a.m.
Eastern time on May 14, 2019. The replay of the call may
be accessed by dialing 1-877-344-7529 (U.S. toll free) or
1-412-317-0088 (international), access code 10131141. An audio file
of the call will also be available on the Company’s website,
www.greenlightre.com.
Non-GAAP Financial Measures
In presenting the Company’s results, management
has included financial measures that are not calculated under
standards or rules that comprise accounting principles generally
accepted in the United States (GAAP). Such measures, including
fully diluted adjusted book value per share and net underwriting
income (loss), are referred to as non-GAAP measures. These non-GAAP
measures may be defined or calculated differently by other
companies. Management believes these measures allow for a more
complete understanding of the underlying business. These measures
are used to monitor our results and should not be viewed as a
substitute for those determined in accordance with GAAP.
Reconciliations of such measures to the most comparable GAAP
figures are included in the attached financial information in
accordance with Regulation G.
Forward-Looking StatementsThis
news release contains forward-looking statements within the meaning
of the U.S. federal securities laws. We intend these
forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements in the U.S. Federal
securities laws. These statements involve risks and uncertainties
that could cause actual results to differ materially from those
contained in forward-looking statements made on behalf of the
Company. These risks and uncertainties include the impact of
general economic conditions and conditions affecting the insurance
and reinsurance industry, the adequacy of our reserves, our ability
to assess underwriting risk, trends in rates for property and
casualty insurance and reinsurance, competition, investment market
fluctuations, trends in insured and paid losses, catastrophes,
regulatory and legal uncertainties and other factors described in
our annual report on Form 10-K filed with the Securities Exchange
Commission. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
provided by law.
About Greenlight Capital Re,
Ltd.Established in 2004, Greenlight Re
(www.greenlightre.com) is a NASDAQ listed company with specialist
property and casualty reinsurance companies based in the Cayman
Islands and Ireland. Greenlight Re provides risk management
products and services to the insurance, reinsurance and other risk
marketplaces. The Company focuses on delivering risk
solutions to clients and brokers by whom Greenlight Re's expertise,
analytics and customer service offerings are demanded. With
an emphasis on deriving superior returns from both sides of the
balance sheet, Greenlight Re manages its assets according to a
value-oriented equity-focused strategy that supports the goal of
long-term growth in book value per share.
Contact:
Investor Relations:Adam PriorThe Equity Group
Inc.(212) 836-9606IR@greenlightre.ky
Public Relations/Media:Mairi MallonRein4ce+44
(0)203 786 1160mairi.mallon@rein4ce.co.uk
|
GREENLIGHT CAPITAL RE,
LTD.CONDENSED CONSOLIDATED BALANCE
SHEETSMarch 31, 2019 and December 31,
2018 (expressed in thousands of U.S. dollars,
except per share and share amounts) |
|
|
|
|
|
March 31, 2019 |
|
December 31, 2018 |
|
(unaudited) |
|
(audited) |
Assets |
|
|
|
Investments |
|
|
|
Investment in related
party investment fund |
$ |
246,392 |
|
|
$ |
235,612 |
|
Equity securities,
trading, at fair value |
— |
|
|
36,908 |
|
Other investments |
11,172 |
|
|
11,408 |
|
Total investments |
257,564 |
|
|
283,928 |
|
Cash and cash
equivalents |
9,500 |
|
|
18,215 |
|
Restricted cash and
cash equivalents |
730,155 |
|
|
685,016 |
|
Reinsurance balances
receivable |
326,618 |
|
|
300,251 |
|
Loss and loss
adjustment expenses recoverable |
46,196 |
|
|
43,705 |
|
Deferred acquisition
costs |
52,657 |
|
|
49,929 |
|
Unearned premiums
ceded |
24,253 |
|
|
24,981 |
|
Notes receivable |
29,464 |
|
|
26,861 |
|
Other assets |
2,849 |
|
|
2,559 |
|
Total
assets |
$ |
1,479,256 |
|
|
$ |
1,435,445 |
|
Liabilities and
equity |
|
|
|
Liabilities |
|
|
|
Due to related party
investment fund |
$ |
— |
|
|
$ |
9,642 |
|
Loss and loss
adjustment expense reserves |
507,931 |
|
|
482,662 |
|
Unearned premium
reserves |
226,968 |
|
|
211,789 |
|
Reinsurance balances
payable |
150,071 |
|
|
139,218 |
|
Funds withheld |
15,056 |
|
|
16,418 |
|
Other liabilities |
4,119 |
|
|
5,067 |
|
Convertible senior
notes payable |
90,796 |
|
|
91,185 |
|
Total
liabilities |
994,941 |
|
|
955,981 |
|
|
|
|
|
Redeemable
non-controlling interest in related party joint venture |
— |
|
|
1,692 |
|
|
|
|
|
Equity |
|
|
|
Preferred share capital
(par value $0.10; authorized, 50,000,000; none issued) |
— |
|
|
— |
|
Ordinary share capital
(Class A: par value $0.10; authorized, 100,000,000; issued and
outstanding, 30,463,046 (2018: 30,130,214): Class B: par value
$0.10; authorized, 25,000,000; issued and outstanding, 6,254,715
(2018: 6,254,715)) |
3,672 |
|
|
3,638 |
|
Additional paid-in
capital |
500,814 |
|
|
499,726 |
|
Retained earnings
(deficit) |
(20,171 |
) |
|
(26,077 |
) |
Shareholders’
equity attributable to Greenlight Capital Re, Ltd. |
484,315 |
|
|
477,287 |
|
Non-controlling
interest in related party joint venture |
— |
|
|
485 |
|
Total
equity |
484,315 |
|
|
477,772 |
|
Total
liabilities, redeemable non-controlling interest and
equity |
$ |
1,479,256 |
|
|
$ |
1,435,445 |
|
|
|
|
|
|
|
|
|
|
GREENLIGHT CAPITAL RE,
LTD.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONSFor the three months ended March 31,
2019 and 2018(expressed in thousands of U.S.
dollars, except per share and share amounts) |
|
|
|
Three months endedMarch 31 |
|
2019 |
|
2018 |
Revenues |
|
|
|
Gross premiums
written |
$ |
162,560 |
|
|
$ |
175,125 |
|
Gross premiums
ceded |
(21,401 |
) |
|
(29,843 |
) |
Net premiums
written |
141,159 |
|
|
145,282 |
|
Change in net unearned
premium reserves |
(15,797 |
) |
|
562 |
|
Net premiums
earned |
125,362 |
|
|
145,844 |
|
Income (loss) from
investment in related party investment fund [net of related party
expenses of $5,432 and $0, respectively] |
30,756 |
|
|
— |
|
Net investment income
(loss) [net of related party expenses of $0 and $4,454,
respectively] |
1,567 |
|
|
(145,216 |
) |
Other income (expense),
net |
1,069 |
|
|
(487 |
) |
Total revenues |
158,754 |
|
|
141 |
|
Expenses |
|
|
|
Net loss and loss
adjustment expenses incurred |
122,865 |
|
|
95,824 |
|
Acquisition costs |
21,526 |
|
|
44,209 |
|
General and
administrative expenses |
6,840 |
|
|
5,956 |
|
Interest expense |
1,544 |
|
|
— |
|
Total expenses |
152,775 |
|
|
145,989 |
|
Income (loss) before
income tax |
5,979 |
|
|
(145,848 |
) |
Income tax (expense)
benefit |
(73 |
) |
|
770 |
|
Net income (loss) |
5,906 |
|
|
(145,078 |
) |
Loss (income)
attributable to non-controlling interest in related party joint
venture |
— |
|
|
2,326 |
|
Net income
(loss) attributable to Greenlight Capital Re, Ltd. |
$ |
5,906 |
|
|
$ |
(142,752 |
) |
Earnings (loss)
per share |
|
|
|
Basic |
$ |
0.16 |
|
|
$ |
(3.85 |
) |
Diluted |
$ |
0.16 |
|
|
$ |
(3.85 |
) |
Weighted
average number of ordinary shares used in the determination of
earnings and loss per share |
|
|
|
Basic |
35,972,665 |
|
|
37,087,169 |
|
Diluted |
36,364,358 |
|
|
37,087,169 |
|
|
|
|
|
|
|
The following table provides the ratios categorized as Property,
Casualty and Other:
|
Three months ended March 31 |
|
Three months ended March 31 |
|
2019 |
|
2018 |
|
Property |
|
Casualty |
|
Other |
|
Total |
|
Property |
|
Casualty |
|
Other |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
70.8 |
% |
|
107.9 |
% |
|
82.9 |
% |
|
98.0 |
% |
|
40.3 |
% |
|
78.1 |
% |
|
49.0 |
% |
|
65.7 |
% |
Acquisition cost
ratio |
10.6 |
|
|
15.3 |
|
|
31.7 |
|
|
17.2 |
|
|
22.8 |
|
|
24.7 |
|
|
53.0 |
|
|
30.3 |
|
Composite ratio |
81.4 |
% |
|
123.2 |
% |
|
114.6 |
% |
|
115.2 |
% |
|
63.1 |
% |
|
102.8 |
% |
|
102.0 |
% |
|
96.0 |
% |
Underwriting expense
ratio |
|
|
|
|
|
|
2.2 |
|
|
|
|
|
|
|
|
2.3 |
|
Combined ratio |
|
|
|
|
|
|
117.4 |
% |
|
|
|
|
|
|
|
98.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GREENLIGHT CAPITAL RE,
LTD.NON-GAAP MEASURES AND
RECONCILIATION
Basic Adjusted Book Value Per Share and
Fully Diluted Adjusted Book Value Per Share
We believe that long-term growth in fully
diluted adjusted book value per share is the most relevant measure
of our financial performance because it provides management and
investors a yardstick by which to monitor the shareholder value
generated. In addition, fully diluted adjusted book value per share
may be useful to our investors, shareholders and other interested
parties to form a basis of comparison with other companies within
the property and casualty reinsurance industry.
Basic adjusted book value per share is
considered a non-GAAP financial measure because the numerator
excludes non-controlling interests in the Joint Venture. The Joint
Venture was terminated during the first quarter of 2019, and as a
result no such adjustment is required as at March 31, 2019.
Fully diluted adjusted book value per share is also considered a
non-GAAP financial measure and represents basic adjusted book value
per share combined with the impact of dilution of all in-the-money
stock options and RSUs issued and outstanding as of any period end.
In addition, the fully diluted adjusted book value per share
includes the dilutive effect, if any, of ordinary shares to be
issued upon conversion of the convertible notes. Basic adjusted
book value per share and fully diluted adjusted book value per
share should not be viewed as substitutes for the comparable U.S.
GAAP measures.
Our primary financial goal is to increase fully
diluted adjusted book value per share over the long term.
The following table presents a reconciliation of
the non-GAAP financial measures basic adjusted and fully diluted
adjusted book value per share to the most comparable U.S. GAAP
measure.
|
March 31,2019 |
|
December 31,2018 |
|
March 31,2018 |
|
|
|
|
|
|
|
($ in thousands, except per share and
share amounts) |
Numerator for
basic adjusted and fully diluted adjusted book value per
share: |
|
|
|
|
|
Total equity (U.S.
GAAP) |
$ |
484,315 |
|
|
$ |
477,772 |
|
|
$ |
700,916 |
|
Less: Non-controlling
interest in joint venture |
— |
|
|
(485 |
) |
|
(11,071 |
) |
Numerator for
basic adjusted book value per share |
484,315 |
|
|
477,287 |
|
|
689,845 |
|
Add: Proceeds from
in-the-money stock options issued and outstanding |
— |
|
|
— |
|
|
— |
|
Numerator for fully
diluted adjusted book value per share |
$ |
484,315 |
|
|
$ |
477,287 |
|
|
$ |
689,845 |
|
Denominator for
basic adjusted and fully diluted adjusted book value per
share: |
|
|
|
|
|
Ordinary shares issued
and outstanding (denominator for basic adjusted book
value per share) |
36,717,761 |
|
|
36,384,929 |
|
|
37,550,648 |
|
Add: In-the-money
stock options and RSUs issued and outstanding |
87,747 |
|
|
46,398 |
|
|
46,398 |
|
Denominator for fully
diluted adjusted book value per share |
36,805,508 |
|
|
36,431,327 |
|
|
37,597,046 |
|
Basic adjusted book
value per share |
$ |
13.19 |
|
|
$ |
13.12 |
|
|
$ |
18.37 |
|
Increase (decrease) in
basic adjusted book value per share ($) |
$ |
0.07 |
|
|
$ |
(2.19 |
) |
|
$ |
(3.88 |
) |
Increase (decrease) in
basic adjusted book value per share (%) |
0.5 |
% |
|
(14.3 |
)% |
|
(17.4 |
)% |
|
|
|
|
|
|
Fully diluted adjusted
book value per share |
$ |
13.16 |
|
|
$ |
13.10 |
|
|
$ |
18.35 |
|
Change in fully diluted
adjusted book value per share ($) |
$ |
0.06 |
|
|
$ |
(2.19 |
) |
|
$ |
(3.87 |
) |
Change in fully diluted
adjusted book value per share (%) |
0.5 |
% |
|
(14.3 |
)% |
|
(17.4 |
)% |
|
|
|
|
|
|
|
|
|
Net Underwriting Income
(Loss)
One way that we evaluate the Company’s
underwriting performance is through the measurement of 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 as it measures 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 that this measure
follows industry practice and allows the users of financial
information to compare the Company’s performance with its those of
our industry peer group.
Net underwriting income (loss) is considered a
non-GAAP financial measure because it excludes items used in the
calculation of net income before taxes under U.S. GAAP. Net
underwriting income (loss) is calculated as net premiums earned,
plus other income (expense) related to underwriting activities,
less net loss and loss adjustment expenses, less acquisition costs,
and less underwriting expenses. The measure excludes, on a
recurring basis: (1) investment income (loss); (2) foreign exchange
gains or losses; (3) corporate general and administrative expenses;
(4) interest expense and other income (expense) not related to
underwriting, (5) income taxes and (6) income attributable to
non-controlling interest. We exclude total investment-related
income or loss and foreign exchange gains or losses as we believe
these items are influenced by market conditions and other factors
not related to underwriting decisions. We exclude corporate
expenses because these expenses are generally fixed and not
incremental to or directly related to our underwriting operations.
We 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. We include other income
and expense relating to deposit accounted contracts and industry
loss warranty contracts, which we consider part of our underwriting
operations. Net underwriting income (loss) should not be viewed as
a substitute for U.S. GAAP net income.
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 is
shown below:
|
Three months ended March 31 |
|
2019 |
|
2018 |
|
|
|
|
|
($ in thousands) |
Income (loss) before
income tax |
$ |
5,979 |
|
|
$ |
(145,848 |
) |
Add (subtract): |
|
|
|
Investment related (income) loss |
(32,323 |
) |
|
145,216 |
|
Other
(income) expense |
(69 |
) |
|
670 |
|
Corporate
expenses |
3,034 |
|
|
2,463 |
|
Interest
expense |
1,544 |
|
|
— |
|
Net underwriting income
(loss) |
$ |
(21,835 |
) |
|
$ |
2,501 |
|
|
|
|
|
|
|
|
|
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