Greenlight Capital Re, Ltd. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with 2022. Greenlight Capital Re is a Cayman Islands-based specialty property and casualty reinsurer, operating through entities in the Cayman Islands and Ireland and a Lloyd’s platform. Its strategy combines reinsurance underwriting with investments, including the related-party fund SILP.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Gross premiums written | $636.8 million | $563.2 million |
| Net premiums earned | $583.1 million | $469.5 million |
| Net underwriting income (loss), non-GAAP | $32.0 million | $(10.7) million |
| Net income | $86.8 million | $25.3 million |
| Diluted earnings per share | $2.50 | $0.73 |
| Total investment income | $66.1 million | $69.0 million |
| Fully diluted book value per share, non-GAAP | $16.74 | $14.33 |
Gross premiums written rose 13.1% and net premiums earned rose 24.2%. Property premiums grew 32.8%, casualty 8.0%, and other lines 12.9%. Property, casualty, and other represented 17.8%, 55.1%, and 27.1% of gross premiums, respectively.
The combined ratio improved to 94.5% from 102.3%; below 100% indicates underwriting profitability. The loss ratio fell to 61.7% from 67.4%, reflecting lower catastrophe losses and favorable pricing and mix, partly offset by adverse prior-year reserve development. The acquisition cost ratio was 29.0%, versus 30.5%.
Investment income declined 4.2% as SILP’s net return fell to 9.4% from 25.3%, despite substantially higher interest income on cash and short-term holdings. Foreign-exchange gains were $11.6 million, compared with a $6.0 million loss in 2022; other income also improved, mainly from investment income on funds withheld by Lloyd’s syndicates.
Financial position, cash flow and capital
- Total assets were $1.74 billion and shareholders’ equity was $596.1 million at year-end; equity increased $93.0 million, mainly from net income.
- Cash, cash equivalents and restricted cash totaled $655.7 million, down from $706.5 million. This included $604.6 million of restricted cash, principally supporting trusts and letters of credit.
- Cash from operating activities was $7.5 million, compared with cash used of $31.8 million in 2022. Investing activities used $53.1 million, including a net $52.0 million contribution to SILP; financing activities used $5.3 million.
- Debt was $73.3 million on the balance sheet (principal outstanding was $74.1 million), compared with $80.5 million at year-end 2022. The company repaid its maturing convertible notes using a $75 million term loan facility; the term loans mature August 1, 2026, bear interest at adjusted SOFR plus 3.5%, and had an 8.9% rate at year-end. Half the floating-rate exposure is hedged. Debt-to-equity was 12%, down from 16%.
- Letter-of-credit capacity was $489.0 million, with $290.7 million issued. The company reported compliance with credit-facility covenants and applicable statutory capital requirements. Management said expected operating cash flows, financing arrangements and potential SILP redemptions should cover foreseeable liquidity needs.
Material changes, outlook and notable items
- Management attributed the strong earnings improvement primarily to better underwriting results, favorable pricing and lower catastrophe losses. Current-year catastrophe losses, net of reinsurance, were $28.8 million, versus $39.7 million in 2022. Prior-year reserve development was adverse by $11.2 million, including $39.8 million of strengthening in casualty, workers’ compensation and auto, partly offset by favorable development in property catastrophe and other classes.
- Gross loss and LAE reserves increased 19.1% to $661.6 million. Management identifies reserve estimation as a significant judgment; the independent auditor identified reserves, particularly IBNR, as a critical audit matter.
- At January 1, 2024, modeled net 1-in-250-year North Atlantic hurricane PML was $89.7 million for a single event and $97.0 million in aggregate, up from $77.5 million and $83.5 million a year earlier. These are model estimates, not maximum possible losses.
- Management described January 2024 renewals as disciplined but still attractive, with additional property-market capacity and modest rate increases in specialty and Funds at Lloyd’s business. No quantified earnings or premium guidance was provided. Management expects loss-cost inflation to remain a concern, especially for longer-tail claims, and noted that lower interest rates could reverse some benefits to cash and fixed-income yields.
- The company acquired Lloyd’s corporate member GCM effective January 1, 2023, and incorporated Viridis Re in December 2023 to develop solutions for insurtech and MGA partners. Shareholders also eliminated the dual-class share structure in July 2023. The CEO’s departure effective December 31, 2023 resulted in a $4.3 million charge, including severance and share-based compensation.
- SILP represented $258.9 million, or 43.4% of shareholders’ equity, and 78.0% of total investments at year-end. It is managed by an affiliate of Chairman David Einhorn; the filing discusses related-party fees, investment concentration and potential conflicts. The top five Innovations holdings accounted for 67% of that portfolio’s carrying value, which may not equal realizable fair value.
- A.M. Best reaffirmed the principal reinsurance subsidiaries’ “A-” rating with a stable outlook. The company reported no cybersecurity incidents likely to have a material effect in 2023, no material legal dispute expected to adversely affect it, and effective internal control over financial reporting; the financial statement audit opinion was unqualified.
Key investor verification points
- Track reserve development, particularly casualty and other long-tail claims, inflation assumptions, and subsequent catastrophe-loss estimates.
- Assess the liquidity, concentration, leverage and performance of SILP, including related-party management and performance fees and the material GRBK position.
- Reconcile debt principal with balance-sheet carrying value; monitor floating-rate costs, loan covenants, and renewal of the Citi letter-of-credit facility, which had a stated termination date in August 2024.
- Evaluate the collectibility and concentration of $619.4 million in net reinsurance balances receivable and the adequacy of collateral and retrocession recoverables.
- Monitor whether the 2024 renewal environment, loss-cost inflation and catastrophe exposure support sustained underwriting profitability; the filing gives no quantified forward guidance.