Greenlight Re Announces 2017 Fourth Quarter and Year-End Financial Results

GRAND CAYMAN, Cayman Islands, Feb. 20, 2018 (GLOBE NEWSWIRE) -- Greenlight Capital Re, Ltd. (NASDAQ:GLRE) today announced financial results for the fourth quarter and year ended December 31, 2017. Greenlight Re reported a net loss of $37.7 million for the fourth quarter of 2017, compared to net income of $49.2 million for the same period in 2016. The net loss per share for the fourth quarter of 2017 was $1.02, compared to fully diluted net income per share of $1.31 for the same period in 2016.

Fully diluted adjusted book value per share was $22.22 as of December 31, 2017, a 5.0% decrease from $23.38 per share as of December 31, 2016.

Management Commentary

Simon Burton, Chief Executive Officer of Greenlight Re, stated, “Our fourth quarter results were negatively impacted by reserve strengthening, an investment loss and, to a lesser extent, losses from the California wildfires. The reserving action taken this quarter is the result of a detailed ground-up review led by our Chief Operating Officer, Mike Belfatti, during his first full quarter with the Company. Our current underwriting portfolio performed acceptably well in the quarter and I’m pleased with our progress in repositioning the business.”

David Einhorn, Chairman of the Board of Directors, stated, “2017 continued to be a challenging environment for our investment style as our managed portfolio returned 1.5% for the year. Despite the headwinds caused by natural catastrophic events and reserve strengthening, I am pleased with the proactive actions taken by our management team during the second half of 2017.”

Financial and Operating Highlights

Fourth Quarter 2017

  • Gross written premiums were $139.0 million, compared to $148.8 million in the prior year period. Net written premiums were $96.3 million compared to $146.6 million in the prior year period. Gross premium ceded increased during the fourth quarter as the Company ceded off a portion of its non-standard automobile business.

  • Net earned premiums were $141.1 million, a 3.3% increase compared to $136.6 million in the prior year period.

  • Net investment loss was $16.2 million (or 1.3%) for the fourth quarter of 2017, compared to net investment income of $52.9 million for the prior year period.

  • Underwriting loss was $19.7 million, compared to underwriting income of $1.4 million in the fourth quarter of 2016. Included in this underwriting loss is an estimated $4.7 million loss, net of reinstatement premiums, from the recent California wildfires.

  • The Company strengthened prior year reserves by $16.5 million during the period primarily due from additional reporting on individual claims as well as industry wide performance on professional liability exposures and to a lesser extent due to higher reserves on various casualty and multi-line contracts.

  • Composite ratio for the three months ended December 31, 2017 was 111.8%, compared to 96.3% for the prior-year period. Combined ratio for the three months ended December 31, 2017 was 114.0%, compared to 99.0% in the prior year period. Catastrophe losses contributed 3.5 percentage points to the composite and combined ratio for the three month period.

2017 Annual

  • Gross written premiums were $692.7 million, an increase of 29.2% from $536.1 million in the prior year. Net written premiums increased to $636.1 million, compared to $526.1 million in the prior year.

  • Net premiums earned increased 22.0% to $626.0 million, from $513.1 million in the prior year.

  • Net investment income was $20.2 million (or 1.5%), compared to net investment income of $76.2 million during 2016.

  • The composite ratio was 106.1%, compared to 100.4% for the prior-year. Combined ratio for the twelve months ended December 31, 2017 was 108.6%, compared to 103.6% in the prior year. Catastrophe losses contributed 6.9 percentage points to the composite and combined ratios for the year.

  • Net loss was $45.0 million, or $1.21 per diluted share, compared to net income of $44.9 million, or $1.20 per diluted share, in 2016.

Conference Call Details
Greenlight Re will hold a live conference call to discuss its financial results for the fourth quarter and year ended December 31, 2017 on Wednesday February 21, 2018 at 9:00 a.m. Eastern time. The conference call title is Greenlight Capital Re, Ltd. Fourth Quarter 2017 Earnings Call.

To participate in the Greenlight Capital Re, Ltd. Fourth Quarter 2017 Earnings Call, please dial in to the conference call at:

U.S. toll free 1-888-336-7152
International 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/10116537

The conference call can also be accessed via webcast at:

https://services.choruscall.com/links/glre180221.html

A telephone replay of the call will be available from 11:00 a.m. Eastern time on February 21, 2018 until 9:00 a.m. Eastern time on February 18, 2018. 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 10116537. An audio file of the call will also be available on the Company’s website, www.greenlightre.ky.

Regulation G

Fully diluted adjusted book value per share is considered a non-GAAP measure and represents basic adjusted book value per share combined with the impact from dilution of share based compensation including in-the-money stock options and RSUs as of any period end. Book value is adjusted by subtracting the amount of the non-controlling interest in joint venture from total shareholders’ equity to calculate adjusted book value. 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 of benefit to our investors, shareholders and other interested parties to form a basis of comparison with other companies within the property and casualty reinsurance industry.

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. The measure includes underwriting expenses which are directly related to underwriting activities as well as an allocation of other general and administrative expenses. Net underwriting income (loss) is calculated as net premiums earned, less net loss and loss adjustment expenses incurred, less, acquisition costs and less underwriting expenses. The measure excludes, on a recurring basis: (1) net investment income; (2) any foreign exchange gains or losses; (3) corporate general and administrative expenses; (4) other income (expense) not related to underwriting, and (5) income taxes and income attributable to non-controlling interest. We exclude net investment income and foreign exchange gains or losses as we believe these are influenced by market conditions and other factors not related to underwriting decisions. We exclude corporate general and administrative 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 distorts 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 believe are part of our underwriting operations and should be reflected in our underwriting income (loss). Net underwriting income should not be viewed as a substitute for U.S. GAAP net income.

Forward-Looking Statements

This 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.

About Greenlight Capital Re, Ltd.

Established in 2004, Greenlight Re (www.greenlightre.ky) 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 Prior
The Equity Group Inc.
(212) 836-9606
IR@greenlightre.ky

Public Relations/Media:
Mairi Mallon
Rein4ce
+44 (0)203 786 1160
mairi.mallon@rein4ce.co.uk

GREENLIGHT CAPITAL RE, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, 2017 and 2016
(expressed in thousands of U.S. dollars, except per share and share amounts)
2017 2016
Assets
Investments
Debt instruments, trading, at fair value$7,180 $22,473
Equity securities, trading, at fair value1,203,672 844,001
Other investments, at fair value152,132 156,063
Total investments1,362,984 1,022,537
Cash and cash equivalents27,285 39,858
Restricted cash and cash equivalents1,503,813 1,202,651
Financial contracts receivable, at fair value12,893 76,381
Reinsurance balances receivable301,762 219,126
Loss and loss adjustment expenses recoverable29,459 2,704
Deferred acquisition costs, net62,350 61,022
Unearned premiums ceded25,120 2,377
Notes receivable, net28,497 33,734
Other assets3,230 4,303
Total assets$3,357,393 $2,664,693
Liabilities and equity
Liabilities
Securities sold, not yet purchased, at fair value$912,797 $859,902
Financial contracts payable, at fair value22,222 2,237
Due to prime brokers and other financial institutions672,700 319,830
Loss and loss adjustment expense reserves464,380 306,641
Unearned premium reserves255,818 222,527
Reinsurance balances payable144,058 41,415
Funds withheld23,579 5,927
Other liabilities10,413 14,527
Total liabilities2,505,967 1,773,006
Redeemable non-controlling interest in related party joint venture7,169 5,884
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, 31,104,830 (2016: 31,111,432): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715 (2016: 6,254,895))3,736 3,737
Additional paid-in capital503,316 500,337
Retained earnings324,272 370,168
Shareholders’ equity attributable to shareholders831,324 874,242
Non-controlling interest in related party joint venture12,933 11,561
Total equity844,257 885,803
Total liabilities, redeemable non-controlling interest and equity$3,357,393 $2,664,693


GREENLIGHT CAPITAL RE, LTD.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2017, 2016 and 2015
(expressed in thousands of U.S. dollars, except per share and share amounts)
2017 2016 2015
Revenues
Gross premiums written$692,651 $536,072 $502,124
Gross premiums ceded(56,587) (10,015) (9,001)
Net premiums written636,064 526,057 493,123
Change in net unearned premium reserves(10,060) (12,939) (84,736)
Net premiums earned626,004 513,118 408,387
Net investment income (loss) [net of related party expenses of $19,863, $24,543 and $19,246]20,231 76,183 (281,924)
Other income (expense), net(560) (935) (3,413)
Total revenues645,675 588,366 123,050
Expenses
Loss and loss adjustment expenses incurred, net502,404 380,815 317,097
Acquisition costs, net161,740 134,534 116,207
General and administrative expenses26,356 25,808 23,434
Total expenses690,500 541,157 456,738
Income (loss) before income tax(44,825) 47,209 (333,688)
Income tax (expense) benefit451 (509) 1,755
Net income (loss) including non-controlling interest(44,374) 46,700 (331,933)
Loss (income) attributable to non-controlling interest in related party joint venture(578) (1,819) 5,508
Net income (loss)$(44,952) $44,881 $(326,425)
Earnings (loss) per share
Basic$(1.21) $1.20 $(8.90)
Diluted$(1.21) $1.20 $(8.90)
Weighted average number of ordinary shares used in the determination of earnings and loss per share
Basic37,002,260 37,267,145 36,670,466
Diluted37,002,260 37,340,018 36,670,466

The following table provides the ratios for the years ended December 31, 2017, 2016 and 2015:

Year ended December 31
2017 2016 2015
Frequency Severity Total Frequency Severity Total Frequency Severity Total
Loss ratio75.4% 141.9% 80.3% 75.8% 55.4% 74.2% 82.6% 9.5% 77.6%
Acquisition cost ratio27.1% 9.8% 25.8% 26.5% 23.2% 26.2% 28.0% 35.2% 28.5%
Composite ratio102.5% 151.7% 106.1% 102.3% 78.6% 100.4% 110.6% 44.7% 106.1%
Underwriting expense ratio 2.5% 3.2% 4.2%
Combined ratio 108.6% 103.6% 110.3%


Source:Greenlight Capital Re