Form 10-Q GREENLIGHT CAPITAL RE, For: Sep 30

November 3, 2021 4:41 PM EDT

News and research before you hear about it on CNBC and others. Claim your 1-week free trial to StreetInsider Premium here.
glre-20210930
000138561312/312021Q3falsehttp://fasb.org/us-gaap/2021-01-31#AccountingStandardsUpdate201613MemberP3D00013856132021-01-012021-09-30xbrli:shares0001385613us-gaap:CommonClassAMember2021-10-290001385613us-gaap:CommonClassBMember2021-10-29iso4217:USD00013856132021-09-3000013856132020-12-31iso4217:USDxbrli:shares0001385613us-gaap:CommonClassAMember2021-09-300001385613us-gaap:CommonClassAMember2020-12-310001385613us-gaap:CommonClassBMember2021-09-300001385613us-gaap:CommonClassBMember2020-12-3100013856132021-07-012021-09-3000013856132020-07-012020-09-3000013856132020-01-012020-09-300001385613us-gaap:CommonStockMember2021-06-300001385613us-gaap:CommonStockMember2020-06-300001385613us-gaap:CommonStockMember2020-12-310001385613us-gaap:CommonStockMember2019-12-310001385613us-gaap:CommonStockMember2021-07-012021-09-300001385613us-gaap:CommonStockMember2020-07-012020-09-300001385613us-gaap:CommonStockMember2021-01-012021-09-300001385613us-gaap:CommonStockMember2020-01-012020-09-300001385613us-gaap:CommonStockMember2021-09-300001385613us-gaap:CommonStockMember2020-09-300001385613us-gaap:AdditionalPaidInCapitalMember2021-06-300001385613us-gaap:AdditionalPaidInCapitalMember2020-06-300001385613us-gaap:AdditionalPaidInCapitalMember2020-12-310001385613us-gaap:AdditionalPaidInCapitalMember2019-12-310001385613us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001385613us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001385613us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300001385613us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300001385613us-gaap:AdditionalPaidInCapitalMember2021-09-300001385613us-gaap:AdditionalPaidInCapitalMember2020-09-300001385613us-gaap:RetainedEarningsMember2021-06-300001385613us-gaap:RetainedEarningsMember2020-06-300001385613us-gaap:RetainedEarningsMember2020-12-310001385613us-gaap:RetainedEarningsMember2019-12-3100013856132019-01-012019-12-310001385613srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2019-12-310001385613us-gaap:RetainedEarningsMember2021-07-012021-09-300001385613us-gaap:RetainedEarningsMember2020-07-012020-09-300001385613us-gaap:RetainedEarningsMember2021-01-012021-09-300001385613us-gaap:RetainedEarningsMember2020-01-012020-09-300001385613us-gaap:RetainedEarningsMember2021-09-300001385613us-gaap:RetainedEarningsMember2020-09-3000013856132020-09-3000013856132019-12-310001385613us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001385613us-gaap:EmployeeStockOptionMember2020-07-012020-09-300001385613us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001385613us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001385613us-gaap:RestrictedStockMember2021-07-012021-09-300001385613us-gaap:RestrictedStockMember2020-07-012020-09-300001385613us-gaap:RestrictedStockMember2021-01-012021-09-300001385613us-gaap:RestrictedStockMember2020-01-012020-09-300001385613srt:ScenarioForecastMemberus-gaap:AccountingStandardsUpdate202006Member2021-12-310001385613srt:ScenarioForecastMemberus-gaap:AccountingStandardsUpdate202006Member2021-01-012021-12-310001385613glre:SILPMemberglre:GreenlightCapitalReLimitedPartnersMember2021-09-300001385613glre:SILPMemberglre:GreenlightCapitalReLimitedPartnersMember2020-12-31xbrli:pure0001385613us-gaap:GeneralPartnerMember2021-09-300001385613us-gaap:GeneralPartnerMember2020-12-310001385613glre:LimitedPartnershipAgreementMember2021-01-012021-09-300001385613us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMemberglre:SolasglasInvestmentLPSILPMember2021-09-300001385613us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMemberglre:SolasglasInvestmentLPSILPMember2020-12-310001385613glre:SolasglasInvestmentLPSILPMember2021-07-012021-09-300001385613glre:SolasglasInvestmentLPSILPMember2020-07-012020-09-300001385613glre:SolasglasInvestmentLPSILPMember2021-01-012021-09-300001385613glre:SolasglasInvestmentLPSILPMember2020-01-012020-09-300001385613glre:PrivateAndUnlistedEquitySecuritiesMember2021-09-300001385613glre:DerivativeFinancialInstrumentsMember2021-09-300001385613glre:PrivateAndUnlistedEquitySecuritiesMember2020-12-310001385613glre:DerivativeFinancialInstrumentsMember2020-12-310001385613us-gaap:OtherInvestmentsMember2020-12-310001385613us-gaap:EquityMethodInvestmentsMember2020-12-310001385613glre:PrivateAndUnlistedEquitySecuritiesMember2021-07-012021-09-300001385613glre:PrivateAndUnlistedEquitySecuritiesMember2021-01-012021-09-300001385613glre:PrivateAndUnlistedEquitySecuritiesMember2020-07-012020-09-300001385613glre:PrivateAndUnlistedEquitySecuritiesMember2020-01-012020-09-300001385613glre:AccuRiskHoldingsLLCMemberus-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2021-01-012021-09-300001385613us-gaap:HealthInsuranceProductLineMember2020-12-310001385613us-gaap:HealthInsuranceProductLineMember2019-12-310001385613us-gaap:HealthInsuranceProductLineMember2021-01-012021-09-300001385613us-gaap:HealthInsuranceProductLineMember2020-01-012020-09-300001385613us-gaap:HealthInsuranceProductLineMember2021-09-300001385613us-gaap:HealthInsuranceProductLineMember2020-09-300001385613glre:UnratedMemberus-gaap:CededCreditRiskUnsecuredMember2021-09-300001385613glre:UnratedMemberus-gaap:CededCreditRiskUnsecuredMember2020-12-310001385613glre:UnratedMemberus-gaap:CededCreditRiskSecuredMember2021-09-300001385613glre:UnratedMemberus-gaap:CededCreditRiskSecuredMember2020-12-310001385613srt:AMBestAMinusRatingMember2021-09-300001385613srt:AMBestAMinusRatingMember2020-12-310001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMember2018-08-070001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMember2021-09-300001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMember2020-12-310001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMemberus-gaap:AdditionalPaidInCapitalMember2021-09-300001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMember2021-07-012021-09-300001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMember2021-01-012021-09-300001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMember2020-07-012020-09-300001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMember2020-01-012020-09-300001385613us-gaap:CommonClassAMemberus-gaap:StockCompensationPlanMember2020-10-290001385613us-gaap:CommonClassAMembersrt:MinimumMemberus-gaap:StockCompensationPlanMember2020-10-290001385613us-gaap:CommonClassAMembersrt:MaximumMemberus-gaap:StockCompensationPlanMember2020-10-290001385613us-gaap:CommonClassAMember2020-03-260001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMember2020-03-260001385613glre:SeniorUnsecuredConvertibleNotesMemberus-gaap:SeniorNotesMember2021-05-040001385613us-gaap:CommonClassAMember2021-01-012021-09-300001385613us-gaap:CommonClassAMember2019-12-310001385613us-gaap:CommonClassBMember2019-12-310001385613us-gaap:CommonClassBMember2021-01-012021-09-300001385613us-gaap:CommonClassAMember2020-01-012020-09-300001385613us-gaap:CommonClassBMember2020-01-012020-09-300001385613us-gaap:CommonClassAMember2020-09-300001385613us-gaap:CommonClassBMember2020-09-300001385613us-gaap:CommonClassAMemberus-gaap:RestrictedStockMember2021-01-012021-09-300001385613us-gaap:CommonClassAMemberus-gaap:RestrictedStockMember2020-01-012020-09-300001385613us-gaap:RestrictedStockMember2021-01-012021-09-300001385613us-gaap:RestrictedStockMember2020-01-012020-09-300001385613us-gaap:RestrictedStockMember2021-09-300001385613us-gaap:RestrictedStockMember2020-12-310001385613us-gaap:RestrictedStockMember2021-09-302021-09-300001385613us-gaap:RestrictedStockMember2020-12-312020-12-310001385613us-gaap:CommonClassAMemberglre:NonEmployeeDirectorMemberMemberus-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001385613us-gaap:CommonClassAMemberglre:NonEmployeeDirectorMemberMemberus-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001385613us-gaap:CommonClassAMembersrt:ChiefExecutiveOfficerMemberus-gaap:EmployeeStockOptionMember2020-01-012020-09-300001385613us-gaap:CommonClassAMembersrt:ChiefExecutiveOfficerMemberus-gaap:EmployeeStockOptionMember2021-01-012021-09-300001385613us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001385613us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001385613us-gaap:EmployeeStockOptionMember2021-09-300001385613us-gaap:EmployeeStockOptionMember2020-12-310001385613us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001385613us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001385613us-gaap:CommonClassAMemberus-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001385613us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001385613us-gaap:RestrictedStockUnitsRSUMember2021-09-300001385613us-gaap:RestrictedStockUnitsRSUMember2020-09-300001385613us-gaap:RestrictedStockUnitsRSUMember2020-12-310001385613us-gaap:RestrictedStockMembersrt:ChiefExecutiveOfficerMember2021-01-012021-09-300001385613us-gaap:RestrictedStockMembersrt:ChiefExecutiveOfficerMember2021-09-300001385613us-gaap:RestrictedStockMembersrt:ChiefExecutiveOfficerMember2020-12-310001385613us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300001385613us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001385613us-gaap:OtherAssetsMember2021-09-300001385613us-gaap:OtherAssetsMember2020-09-300001385613srt:BoardOfDirectorsChairmanMemberglre:LimitedPartnershipAgreementMember2018-09-012018-09-010001385613srt:BoardOfDirectorsChairmanMemberglre:LimitedPartnershipAgreementMember2021-01-012021-09-300001385613srt:BoardOfDirectorsChairmanMemberglre:InvestmentAdvisoryAgreementMember2018-09-012018-09-010001385613glre:GreenBricksPartnersIncGRBKMembersrt:AffiliatedEntityMember2021-09-300001385613srt:BoardOfDirectorsChairmanMemberglre:ServiceAgreementMember2021-01-012021-09-300001385613glre:CollateralAssetsInvestementManagementAgreementMembersrt:BoardOfDirectorsChairmanMember2019-01-012019-01-01glre:facility0001385613glre:CitibankEuropePlcMemberus-gaap:FinancialStandbyLetterOfCreditMember2021-09-300001385613glre:CitibankEuropePlcMemberus-gaap:FinancialStandbyLetterOfCreditMember2021-01-012021-09-300001385613srt:MinimumMember2021-01-012021-09-300001385613srt:MaximumMember2021-01-012021-09-300001385613us-gaap:ConvertibleDebtMember2021-09-30glre:segment0001385613us-gaap:PropertyAndCasualtyCommercialInsuranceProductLineMember2021-07-012021-09-300001385613us-gaap:PropertyAndCasualtyCommercialInsuranceProductLineMember2020-07-012020-09-300001385613us-gaap:PropertyAndCasualtyCommercialInsuranceProductLineMember2021-01-012021-09-300001385613us-gaap:PropertyAndCasualtyCommercialInsuranceProductLineMember2020-01-012020-09-300001385613glre:MotorVehiclePhysicalDamageProductLineMember2021-07-012021-09-300001385613glre:MotorVehiclePhysicalDamageProductLineMember2020-07-012020-09-300001385613glre:MotorVehiclePhysicalDamageProductLineMember2021-01-012021-09-300001385613glre:MotorVehiclePhysicalDamageProductLineMember2020-01-012020-09-300001385613us-gaap:PropertyAndCasualtyPersonalInsuranceProductLineMember2021-07-012021-09-300001385613us-gaap:PropertyAndCasualtyPersonalInsuranceProductLineMember2020-07-012020-09-300001385613us-gaap:PropertyAndCasualtyPersonalInsuranceProductLineMember2021-01-012021-09-300001385613us-gaap:PropertyAndCasualtyPersonalInsuranceProductLineMember2020-01-012020-09-300001385613us-gaap:PropertyInsuranceProductLineMember2021-07-012021-09-300001385613us-gaap:PropertyInsuranceProductLineMember2020-07-012020-09-300001385613us-gaap:PropertyInsuranceProductLineMember2021-01-012021-09-300001385613us-gaap:PropertyInsuranceProductLineMember2020-01-012020-09-300001385613us-gaap:GeneralLiabilityMember2021-07-012021-09-300001385613us-gaap:GeneralLiabilityMember2020-07-012020-09-300001385613us-gaap:GeneralLiabilityMember2021-01-012021-09-300001385613us-gaap:GeneralLiabilityMember2020-01-012020-09-300001385613glre:MotorVehicleLiabilityCasualtyProductLineMember2021-07-012021-09-300001385613glre:MotorVehicleLiabilityCasualtyProductLineMember2020-07-012020-09-300001385613glre:MotorVehicleLiabilityCasualtyProductLineMember2021-01-012021-09-300001385613glre:MotorVehicleLiabilityCasualtyProductLineMember2020-01-012020-09-300001385613us-gaap:ProfessionalMalpracticeLiabilityMember2021-07-012021-09-300001385613us-gaap:ProfessionalMalpracticeLiabilityMember2020-07-012020-09-300001385613us-gaap:ProfessionalMalpracticeLiabilityMember2021-01-012021-09-300001385613us-gaap:ProfessionalMalpracticeLiabilityMember2020-01-012020-09-300001385613glre:WorkersCompensationInsuranceProductLineMember2021-07-012021-09-300001385613glre:WorkersCompensationInsuranceProductLineMember2020-07-012020-09-300001385613glre:WorkersCompensationInsuranceProductLineMember2021-01-012021-09-300001385613glre:WorkersCompensationInsuranceProductLineMember2020-01-012020-09-300001385613glre:MultilineMember2021-07-012021-09-300001385613glre:MultilineMember2020-07-012020-09-300001385613glre:MultilineMember2021-01-012021-09-300001385613glre:MultilineMember2020-01-012020-09-300001385613glre:LiabilityandCasualtyInsuranceProductLineMember2021-07-012021-09-300001385613glre:LiabilityandCasualtyInsuranceProductLineMember2020-07-012020-09-300001385613glre:LiabilityandCasualtyInsuranceProductLineMember2021-01-012021-09-300001385613glre:LiabilityandCasualtyInsuranceProductLineMember2020-01-012020-09-300001385613us-gaap:HealthInsuranceProductLineMember2021-07-012021-09-300001385613us-gaap:HealthInsuranceProductLineMember2020-07-012020-09-300001385613glre:FinancialGuaranteeInsuranceandSuretyProductLineMember2021-07-012021-09-300001385613glre:FinancialGuaranteeInsuranceandSuretyProductLineMember2020-07-012020-09-300001385613glre:FinancialGuaranteeInsuranceandSuretyProductLineMember2021-01-012021-09-300001385613glre:FinancialGuaranteeInsuranceandSuretyProductLineMember2020-01-012020-09-300001385613glre:MarineCasualtyInsuranceMember2021-07-012021-09-300001385613glre:MarineCasualtyInsuranceMember2020-07-012020-09-300001385613glre:MarineCasualtyInsuranceMember2021-01-012021-09-300001385613glre:MarineCasualtyInsuranceMember2020-01-012020-09-300001385613us-gaap:OtherInsuranceProductLineMember2021-07-012021-09-300001385613us-gaap:OtherInsuranceProductLineMember2020-07-012020-09-300001385613us-gaap:OtherInsuranceProductLineMember2021-01-012021-09-300001385613us-gaap:OtherInsuranceProductLineMember2020-01-012020-09-300001385613glre:TotalSpecialtyDomain2021-07-012021-09-300001385613glre:TotalSpecialtyDomain2020-07-012020-09-300001385613glre:TotalSpecialtyDomain2021-01-012021-09-300001385613glre:TotalSpecialtyDomain2020-01-012020-09-300001385613srt:NorthAmericaMember2021-07-012021-09-300001385613srt:NorthAmericaMember2020-07-012020-09-300001385613srt:NorthAmericaMember2021-01-012021-09-300001385613srt:NorthAmericaMember2020-01-012020-09-300001385613glre:WorldwideMember2021-07-012021-09-300001385613glre:WorldwideMember2020-07-012020-09-300001385613glre:WorldwideMember2021-01-012021-09-300001385613glre:WorldwideMember2020-01-012020-09-300001385613srt:EuropeMember2021-07-012021-09-300001385613srt:EuropeMember2020-07-012020-09-300001385613srt:EuropeMember2021-01-012021-09-300001385613srt:EuropeMember2020-01-012020-09-300001385613srt:AsiaMember2021-07-012021-09-300001385613srt:AsiaMember2020-07-012020-09-300001385613srt:AsiaMember2021-01-012021-09-300001385613srt:AsiaMember2020-01-012020-09-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
__________________________
FORM 10-Q 
__________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021

or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-33493
____________________________________________________________________________________
GREENLIGHT CAPITAL RE, LTD.
(Exact name of registrant as specified in its charter)
____________________________________________________________________________________
Cayman IslandsN/A
(State or other jurisdiction of incorporation or organization)(I.R.S. employer identification no.)
65 Market Street
Suite 1207, Jasmine Court
P.O. Box 31110
Camana Bay
Grand Cayman
Cayman IslandsKY1-1205
(Address of principal executive offices)(Zip code)

(345) 943-4573
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Ordinary SharesGLRENasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
Yes No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 
Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filer ☐          Accelerated filer ☒          Non-accelerated filer ☐          Smaller reporting company           Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) 
Yes No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class A Ordinary Shares, $0.10 par value27,589,731
Class B Ordinary Shares, $0.10 par value6,254,715
(Class)Outstanding as of October 29, 2021



GREENLIGHT CAPITAL RE, LTD.
 
TABLE OF CONTENTS
 
  Page
 Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (unaudited)
 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)
 Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited)
 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)
 Notes to the Condensed Consolidated Financial Statements (unaudited)


 
2

PART I — FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS 
GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) 

September 30, 2021 and December 31, 2020
(expressed in thousands of U.S. dollars, except per share and share amounts)
 September 30, 2021December 31, 2020
Assets  
Investments  
Investment in related party investment fund$180,239 $166,735 
Other investments42,480 29,418 
Total investments222,719 196,153 
Cash and cash equivalents37,380 8,935 
Restricted cash and cash equivalents692,542 745,371 
Reinsurance balances receivable (net of allowance for expected credit losses of $89 and $89)
380,417 330,232 
Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses of $47 and $47)
13,082 16,851 
Deferred acquisition costs 60,634 51,014 
Unearned premiums ceded26  
Notes receivable 6,101 
Other assets6,737 2,993 
Total assets$1,413,537 $1,357,650 
Liabilities and equity 
Liabilities 
Loss and loss adjustment expense reserves$540,779 $494,179 
Unearned premium reserves237,926 201,089 
Reinsurance balances payable77,525 92,247 
Funds withheld5,087 4,475 
Other liabilities5,228 5,009 
Convertible senior notes payable96,478 95,794 
Total liabilities963,023 892,793 
Shareholders' 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, 27,589,731 (2020: 28,260,075): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715 (2020: 6,254,715))
3,384 3,452 
Additional paid-in capital480,939 488,488 
Retained earnings (deficit)(33,809)(27,083)
Total shareholders' equity450,514 464,857 
Total liabilities and equity$1,413,537 $1,357,650 
 
  The accompanying Notes to the Condensed Consolidated Financial Statements are an
integral part of the Condensed Consolidated Financial Statements.
3

GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
For the three and nine months ended September 30, 2021 and 2020
(expressed in thousands of U.S. dollars, except per share and share amounts)
Three months ended September 30Nine months ended September 30
 2021202020212020
Revenues 
Gross premiums written$128,735 $135,596 $440,249 $362,072 
Gross premiums ceded(60)(1,464)(6)(2,274)
Net premiums written128,675 134,132 440,243 359,798 
Change in net unearned premium reserves6,849 (18,613)(36,844)(24,844)
Net premiums earned135,524 115,519 403,399 334,954 
Income (loss) from investment in related party investment fund (net of related party expenses of $659 and $2,632 (three and nine months ended September 30, 2020: $703 and $1,981, respectively))
(6,214)6,431 (4,196)(34,086)
Net investment income (loss)10,303 466 28,999 11,237 
Other income (expense), net(380)1,569 (4,033)2,570 
Total revenues139,233 123,985 424,169 314,675 
Expenses
Net loss and loss adjustment expenses incurred110,400 88,053 295,078 252,944 
Acquisition costs35,048 27,018 106,060 76,660 
General and administrative expenses6,060 5,152 21,340 18,095 
Interest expense1,578 1,579 4,684 4,702 
Total expenses153,086 121,802 427,162 352,401 
Income (loss) before income tax(13,853)2,183 (2,993)(37,726)
Income tax (expense) benefit  (3,733)(424)
Net income (loss)$(13,853)$2,183 $(6,726)$(38,150)
Earnings (loss) per share
Basic$(0.42)$0.06 $(0.20)$(1.07)
Diluted$(0.42)$0.06 $(0.20)$(1.07)
Weighted average number of ordinary shares used in the determination of earnings and loss per share
Basic32,929,097 35,677,554 33,507,060 35,569,292 
Diluted32,929,097 35,779,703 33,507,060 35,569,292 
 

 
The accompanying Notes to the Condensed Consolidated Financial Statements are an
integral part of the Condensed Consolidated Financial Statements. 


 
 
4

GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
 
For the three and nine months ended September 30, 2021 and 2020
(expressed in thousands of U.S. dollars)

Three months ended September 30Nine months ended September 30
2021202020212020
Ordinary share capital
Balance - beginning of period$3,417 $3,627 $3,452 $3,699 
Issue of Class A ordinary shares, net of forfeitures3 (19)41 25 
Repurchase of Class A ordinary shares(36)(71)(109)(187)
Balance - end of period3,384 3,537 3,384 3,537 
Additional paid-in capital
Balance - beginning of period483,365 497,559 488,488 503,547 
Repurchase of Class A ordinary shares(3,216)(4,828)(9,891)(12,484)
Share-based compensation expense790 (302)2,342 1,366 
Balance - end of period480,939 492,429 480,939 492,429 
Retained earnings (deficit)
Balance - beginning of period(19,956)(71,282)(27,083)(30,063)
Cumulative effect of adoption of accounting guidance for expected credit losses at January 1, 2020
— — — (886)
Net income (loss)(13,853)2,183 (6,726)(38,150)
Balance - end of period(33,809)(69,099)(33,809)(69,099)
Total shareholders' equity$450,514 $426,867 $450,514 $426,867 


The accompanying Notes to the Condensed Consolidated Financial Statements are an
integral part of the Condensed Consolidated Financial Statements. 


 
5

GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended September 30, 2021 and 2020
(expressed in thousands of U.S. dollars) 
Nine months ended September 30
 20212020
Cash provided by (used in) operating activities 
Net income (loss)$(6,726)$(38,150)
Adjustments to reconcile net income or loss to net cash provided by (used in) operating activities
Loss (income) from investments in related party investment fund4,196 34,086 
Loss (income) from investment accounted for under the equity method (870)
Net change in unrealized gains and losses on investments and notes receivable(14,860)(19,153)
Net realized (gains) losses on investments and notes receivable(14,210)15,000 
Foreign exchange (gains) losses on investments14 232 
Current expected credit losses recognized on notes receivable and reinsurance assets  250 
Share-based compensation expense2,383 1,391 
Amortization and interest expense, net of change in accruals684 702 
Depreciation expense16 21 
Net change in
Reinsurance balances receivable(50,185)(33,932)
Loss and loss adjustment expenses recoverable3,769 7,535 
Deferred acquisition costs(9,620)(2,031)
Unearned premiums ceded(26)901 
Other assets, excluding depreciation(3,760)(1,121)
Loss and loss adjustment expense reserves46,600 11,182 
Unearned premium reserves36,837 24,395 
Reinsurance balances payable(14,722)(42,301)
Funds withheld612 274 
Other liabilities219 (3,069)
Net cash provided by (used in) operating activities(18,779)(44,658)
Investing activities
Proceeds from redemptions from related party investment fund51,904 69,108 
Contributions to related party investment fund(69,604)(48,094)
Purchases of investments(4,761)(944)
Sales of investments20,755  
Net change in notes receivable6,101 741 
Net cash provided by (used in) investing activities4,395 20,811 
Financing activities
Repurchase of Class A ordinary shares(10,000)(12,671)
Net cash provided by (used in) financing activities(10,000)(12,671)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash (122)
Net increase (decrease) in cash, cash equivalents and restricted cash(24,384)(36,640)
Cash, cash equivalents and restricted cash at beginning of the period 754,306 767,906 
Cash, cash equivalents and restricted cash at end of the period $729,922 $731,266 
Supplementary information 
Interest paid in cash$4,000 $4,000 
Income tax paid in cash3,700  

The accompanying Notes to the Condensed Consolidated Financial Statements are an
integral part of the Condensed Consolidated Financial Statements. 
6

GREENLIGHT CAPITAL RE, LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
September 30, 2021
 
 
1. ORGANIZATION AND BASIS OF PRESENTATION
 
Greenlight Capital Re, Ltd. (“GLRE”) was incorporated as an exempted company under the Companies Law of the Cayman Islands on July 13, 2004. GLRE’s wholly-owned subsidiary, Greenlight Reinsurance, Ltd. (“Greenlight Re”), provides global specialty property and casualty reinsurance. Greenlight Re has a Class D insurer license issued in accordance with the terms of The Insurance Act, 2010 (as amended) and underlying regulations thereto (the “Act”) and is subject to regulation by the Cayman Islands Monetary Authority, in terms of the Act. Greenlight Re commenced underwriting in April 2006. Verdant Holding Company, Ltd. (“Verdant”), a wholly-owned subsidiary of GLRE, was incorporated in 2008 in the state of Delaware. During 2010, GLRE established Greenlight Reinsurance Ireland, Designated Activity Company (“GRIL”), a wholly-owned reinsurance subsidiary based in Dublin, Ireland. GRIL is authorized as a non-life reinsurance undertaking in accordance with the provisions of the European Union (Insurance and Reinsurance) Regulations 2015. GRIL provides multi-line property and casualty reinsurance capacity to the European broker market and provides GLRE with an additional platform to serve clients located in Europe and North America.  In 2020, GLRE established Greenlight Re Marketing (UK) Limited (“Greenlight Re UK”) as a wholly-owned subsidiary to increase the Company’s presence in the London market. As used herein, the “Company” refers collectively to GLRE and its consolidated subsidiaries.

The Class A ordinary shares of GLRE are listed on Nasdaq Global Select Market under the symbol “GLRE.”

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In addition, the year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the U.S. Securities and Exchange Commission on March 10, 2021.

In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position and results of operations as at the end of and for the periods presented.

Significant estimates used in the preparation of the Company’s condensed consolidated financial statements, including those associated with premiums and the estimations of loss and loss adjustment expense reserves, including losses arising from the novel coronavirus (the “COVID-19 pandemic”), may be subject to significant adjustments in future periods. (See Note 5 for the significant assumptions that served as the basis for the Company's estimates of reserves for the COVID-19 pandemic). All significant intercompany accounts and transactions have been eliminated.

The results of operations and cash flows for any interim period will not necessarily be indicative of the results of operations and cash flows for the full fiscal year or subsequent periods.

2. SIGNIFICANT ACCOUNTING POLICIES
 
There have been no material changes to the Company’s significant accounting policies as described in its Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates
 
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. The significant estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, loss and loss adjustment expense reserves,
7

premiums written, earned and receivable, variability underlying risk transfer assessments, allowances for credit losses, bonus accruals, share-based compensation, valuation allowances associated with deferred tax assets and investment impairments.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
 
The Company maintains cash and cash equivalent balances to collateralize regulatory trusts and letters of credit issued to cedents (see Note 12). The following table reconciles the cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the total presented in the condensed consolidated statements of cash flows:

 September 30, 2021December 31, 2020
 ($ in thousands)
Cash and cash equivalents$37,380 $8,935 
Restricted cash and cash equivalents692,542 745,371 
Total cash, cash equivalents and restricted cash presented in the condensed consolidated statements of cash flows$729,922 $754,306 

Funds Held by Cedents

The caption “Reinsurance balances receivable” in the Company’s condensed consolidated balance sheets includes amounts held by cedents. Such amounts include premiums and funds held at Lloyd’s, which is held in trust at Lloyd's as security for members’ underwriting activities. At September 30, 2021, funds held by cedents were $201.3 million (December 31, 2020: $127.6 million).
 
Reinsurance Assets

The Company calculates an allowance for expected credit losses for its reinsurance balances receivable and loss and loss adjustment expenses recoverable by applying a Probability of Default (“PD”) / Loss Given Default (“LGD”) model. The PD / LGD approach considers the Company’s collectibility history on its reinsurance assets and representative external loss history. In calculating the probability of default, the Company also considers the estimated duration of its reinsurance assets.

The Company evaluates each counterparty’s creditworthiness based on credit ratings that independent agencies assign to the counterparty. The Company manages its credit risk in its reinsurance assets by transacting only with insurers and reinsurers that it considers financially sound.

For its retrocessional counterparties that are unrated, the Company may hold collateral in the form of funds withheld, trust accounts, or irrevocable letters of credit. In evaluating credit risk associated with reinsurance balances receivable, the Company considers its right to offset loss obligations against premiums receivable. The Company regularly evaluates its net credit exposure to assess the ability of cedents and retrocessionaires to honor their respective obligations.

At September 30, 2021, the Company has recorded an allowance for expected credit loss on its Reinsurance Assets of $0.1 million (December 31, 2020: $0.1 million).

Deposit Assets and Liabilities
 
The Company applies deposit accounting to reinsurance contracts that do not transfer sufficient insurance risk to merit reinsurance accounting. Under deposit accounting, the Company recognizes an asset or liability based on its paid or received consideration. The deposit asset or liability balance is subsequently adjusted using the interest method with the corresponding income or expense recorded in the Company’s condensed consolidated statements of operations under the caption “Other income (expense).” The Company records deposit assets and liabilities in its condensed consolidated balance sheets in the caption “Reinsurance balances receivable” and “Reinsurance balances payable,” respectively. At September 30, 2021, deposit assets and deposit liabilities were $4.9 million and $14.0 million, respectively (December 31, 2020: $4.6 million and $31.0 million, respectively). For the three and nine months ended September 30, 2021, and 2020, the interest income and (expense) on deposit accounted contracts were as follows:
8

 Three months ended September 30Nine months ended September 30
 2021202020212020
($ in thousands)($ in thousands)
Deposit interest income$ $560 $ $1,812 
Deposit interest expense$(38)$ $(2,957)$ 
Deposit interest income/(expense), net$(38)$560 $(2,957)$1,812 

Derivative instruments

The Company recognizes derivative financial instruments in the condensed consolidated balance sheets at their fair values. It includes any realized gains and losses and changes in unrealized gains and losses in the caption “Net investment income (loss)” in the condensed consolidated statements of operations.

The Company’s derivatives do not qualify as hedges for financial reporting purposes. The Company records the associated assets and liabilities in its condensed consolidated balance sheets on a gross basis. The Company does not offset these balances against collateral pledged or received.

Other Assets

The caption “Other assets” in the Company’s condensed consolidated balance sheets consists primarily of prepaid expenses, fixed assets, right-of-use lease assets, other receivables, and deferred tax assets.

Other Liabilities

The caption “Other liabilities” in the Company’s condensed consolidated balance sheets consists primarily of accruals for legal and other professional fees, employee bonuses, taxes payable, and lease liabilities.

Earnings (Loss) Per Share
 
The Company’s unvested restricted stock awards, which contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are considered “participating securities” for the purposes of calculating earnings (loss) per share. Basic earnings per share is calculated on the basis of the weighted average number of common shares and participating securities outstanding during the period. Diluted earnings (or loss) per share includes the dilutive effect of the following:

Restricted Stock Units (“RSUs”) issued that would convert to common shares upon vesting;
additional potential common shares issuable when in-the-money stock options are exercised, determined using the treasury stock method; and
those common shares with the potential to be issued in connection with convertible debt and other such convertible instruments, determined using the treasury stock method.

Diluted earnings (or loss) per share contemplates a conversion to common shares of all convertible instruments only if they are dilutive with regards to earnings per share. In the event of a net loss, all RSUs, stock options, convertible debt, and participating securities are excluded from the calculation of both basic and diluted loss per share as their inclusion would be anti-dilutive.

9

The table below presents the shares outstanding for the calculation of earnings (loss) per share for the three and nine months ended September 30, 2021 and 2020:
 Three months ended September 30Nine months ended September 30
 2021202020212020
Weighted average shares outstanding - basic32,929,097 35,677,554 33,507,060 35,569,292 
Effect of dilutive employee and director share-based awards 102,149   
Weighted average shares outstanding - diluted32,929,097 35,779,703 33,507,060 35,569,292 
Anti-dilutive stock options outstanding735,627 835,627 735,627 835,627 
Participating securities excluded from calculation of loss per share 946,556  946,556 878,498 

Taxation
 
Under current Cayman Islands law, no corporate entity, including GLRE and Greenlight Re, is obligated to pay taxes in the Cayman Islands on either income or capital gains. The Company has an undertaking from the Governor-in-Cabinet of the Cayman Islands, pursuant to the provisions of the Tax Concessions Law, as amended, that, in the event that the Cayman Islands enacts any legislation that imposes tax on profits, income, gains or appreciations, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to GLRE, Greenlight Re nor their respective operations, or to the Class A or Class B ordinary shares or related obligations, before February 1, 2025.
 
Verdant is incorporated in Delaware and therefore is subject to taxes in accordance with the U.S. federal rates and regulations prescribed by the U.S. Internal Revenue Service (“IRS”). Verdant’s taxable income is generally expected to be taxed at a marginal rate of 21% (2020: 21%). Verdant’s tax years 2017 and beyond remain open and subject to examination by the IRS.

GRIL is incorporated in Ireland and therefore is subject to the Irish corporation tax rate of 12.5% on its trading income and 25% on its non-trading income.

The Company records a valuation allowance to the extent that the Company considers it more likely than not that all or a portion of the deferred tax asset will not be realized in the future. Other than this valuation allowance, the Company has not taken any income tax positions subject to significant uncertainty that is reasonably likely to have a material impact on the Company. 

Recent Accounting Pronouncements

Recently Issued Accounting Standards Adopted

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) (“ASU 2020-01”). ASU 2020-01 clarifies interactions between the accounting guidance for (i) certain equity securities under Topic 321, (ii) investments under the equity method of accounting in Topic 323, and (iii) certain derivative instruments in Topic 815. ASU 2020-01 is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The adoption of ASU 2020-01 during the first quarter of 2021 had no material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”). ASU 2020-06 is designed to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments. The amendments remove the separation models in Subtopic 470-20 for certain contracts. As a result, entities will no longer present embedded conversion features separately in equity; rather, the convertible debt instrument will be accounted for as a single liability measured at its amortized cost. ASU 2020-06 also addresses the computation of earnings per share for convertible debt instruments, requiring
10

the application of the if-converted method when calculating diluted earnings per share. The Company intends to adopt ASU 2020-06 during the first quarter of 2022, using the “modified retrospective” transition method.

The Company expects that its adoption of ASU 2020-06 will impact the accounting for its senior convertible notes (see Note 7) and will lead to a decrease in its opening shareholders’ equity of approximately $2.5 million, with a corresponding increase in the carrying value of the senior convertible notes. The Company expects that in the periods in which the Company reports a net income, the number of shares outstanding for the diluted earnings per share calculation will be approximately 5.8 million higher under the if-converted method. The Company does not expect the adoption of ASU 2020-06 to have a material impact on net income, cash flows, or any other balances.

3. INVESTMENT IN RELATED PARTY INVESTMENT FUND

On September 1, 2018, the Company entered into an amended and restated exempted limited partnership agreement (as amended by the letter agreement dated as of August 5, 2020, (the “Previous SILP LPA”) of Solasglas Investments, LP (“SILP”), with DME Advisors II, LLC (“DME II”), as General Partner, Greenlight Re, and GRIL, (together the “GLRE Limited Partners”), and the initial limited partner (each, a “Partner”). On September 1, 2018, SILP also entered into a SILP investment advisory agreement (“IAA”) with DME Advisors. LP (“DME Advisors”) pursuant to which DME Advisors is the investment manager for SILP. DME II and DME Advisors are related to the Company, and each is an affiliate of David Einhorn, Chairman of the Company’s Board of Directors.

On January 7, 2021, the Company and DME II entered into the Second Amended and Restated Exempted Limited Partnership Agreement, effective as of January 1, 2021 (the “SILP LPA”). The SILP LPA amends, restates, supersedes, and incorporates all material terms of the Previous SILP LPA, as amended as of February 26, 2019, and the letter agreements dated June 18, 2019, December 27, 2019, and August 5, 2020 (collectively, the “Amendments”). The SILP LPA agreement also amended the definition of “Additional Investment Ratio” and each of the defined terms “Greenlight Re Surplus” and the “GRIL Surplus” so as to clarify that each of the respectively referenced “financial statements” are “U.S. GAAP financial statements.” In addition, the SILP LPA included the following: “The Investment Portfolio of each Partner will not exceed the product of (a) such Partner’s surplus (Greenlight Re Surplus or GRIL Surplus, as the case may be) multiplied by (b) the Investment Cap (50%), and the General Partner will designate any portion of a Partner’s Investment Portfolio as Designated Securities to effectuate such limit”. The SILP LPA also amended the investment guidelines to reflect the amended investment guidelines adopted by the Company’s Board of Directors effective as of January 1, 2021.

The Company has concluded that SILP qualifies as a variable interest entity (“VIE”) under U.S. GAAP. In assessing its interest in SILP, the Company noted the following:

DME II serves as SILP’s general partner and has the power of appointing the investment manager. The Company does not have the power to appoint, change or replace the investment manager or the general partner except “for cause.” Neither of the GLRE Limited Partners can participate in the investment decisions of SILP as long as SILP adheres to the investment guidelines provided within the SILP LPA. For these reasons, the GLRE Limited Partners are not considered to have substantive participating rights or kick-out rights.

DME II holds an interest in excess of 10% of SILP’s net assets, which the Company considers to represent an obligation to absorb losses and a right to receive benefits of SILP that are significant to SILP.

Consequently, the Company has concluded that DME II’s interests, not the Company’s, meet both the “power” and “benefits” criteria associated with VIE accounting guidance, and therefore DME II is SILP’s primary beneficiary. The Company presents its investment in SILP in its condensed consolidated balance sheets in the caption “Investment in related party investment fund.”

The Company’s maximum exposure to loss relating to SILP is limited to the net asset value of the GLRE Limited Partners’ investment in SILP. At September 30, 2021, the net asset value of the GLRE Limited Partners’ investment in SILP was $180.2 million (December 31, 2020: $166.7 million), representing 78.0% (December 31, 2020: 75.7%) of SILP’s total net assets. DME II held the remaining 22.0% (December 31, 2020: 24.3%) of SILP’s total net assets. The investment in SILP is recorded at the GLRE Limited Partners’ share of the net asset value of SILP as reported by SILP’s third-party administrator. The GLRE Limited Partners can redeem their assets from SILP for operational purposes by providing three business days’ notice to DME II. At September 30, 2021, the majority of SILP’s long investments were composed of cash and publicly traded equity securities, which could be readily liquidated to meet the GLRE Limited Partners’ redemption requests.

The Company’s share of the change in the net asset value of SILP for the three and nine months ended September 30,
11

2021, was $(6.2) million and $(4.2) million, respectively, (three and nine months ended September 30, 2020: $6.4 million and $(34.1) million, respectively), and shown in the caption “Income (loss) from investment in related party investment fund” in the Company’s condensed consolidated statements of operations.

The summarized financial statements of SILP are presented below.

Summarized Statement of Assets and Liabilities of Solasglas Investments, LP
September 30, 2021December 31, 2020
($ in thousands)
Assets
Investments, at fair value$262,058 $272,398 
Derivative contracts, at fair value9,071 1,450 
Due from brokers77,638 92,053 
Cash and cash equivalents1,076  
Interest and dividends receivable14 59 
Total assets349,857 365,960 
Liabilities and partners’ capital
Liabilities
Investments sold short, at fair value(109,044)(131,902)
Derivative contracts, at fair value(7,793)(4,156)
Due to brokers(1,170)(9,179)
Interest and dividends payable(603)(429)
Other liabilities(133)(175)
Total liabilities(118,743)(145,841)
Net Assets$231,114 $220,119 
GLRE Limited Partners’ share of Net Assets$180,239 $166,735 


12

Summarized Statement of Operations of Solasglas Investments, LP
Three months ended September 30Nine months ended September 30
2021202020212020
($ in thousands)
Investment income
Dividend income (net of withholding taxes)$146 $170 $509 $1,204 
Interest income51 36 770 262 
Total Investment income197 206 1,279 1,466 
Expenses
Management fee(883)(703)(2,632)(1,981)
Interest(205)(176)(874)(518)
Dividends(306)(213)(852)(612)
Professional fees and other(227)(432)(786)(764)
Total expenses(1,621)(1,524)(5,144)(3,875)
Net investment income (loss)(1,424)(1,318)(3,865)(2,409)
Realized and change in unrealized gains (losses)
Net realized gain (loss) (1,411)(1,412)(14,809)(44,972)
Net change in unrealized appreciation (depreciation) (5,437)10,832 12,143 5,811 
Net gain (loss) on investment transactions(6,848)9,420 (2,666)(39,161)
Net income (loss)$(8,272)$8,102 $(6,531)$(41,570)
GLRE Limited Partners’ share of net income (loss) (1)
$(6,214)$6,431 $(4,196)$(34,086)

(1) Net income (loss) is net of management fees and performance allocation presented below:

Three months ended September 30Nine months ended September 30
2021202020212020
($ in thousands)
Management fees$883 $703 $2,632 $1,981 
Performance allocation$(224)$ $ $ 
Total$659 $703 $2,632 $1,981 

See Note 11 for further details on management fees and performance allocation.

4. FINANCIAL INSTRUMENTS 
 
Investments
  
Other Investments

The Company’s “Other investments” are composed of the following:

Private investments and unlisted equities, which consist primarily of Innovations-related investments supporting technology innovators in the (re)insurance market; and
Derivative financial instruments associated with the Company’s Innovations investments.
13


At September 30, 2021, the Company included the following securities in the caption “Other investments”:
CostUnrealized
gains
Unrealized
losses
Fair value / carrying value
 ($ in thousands)
Private investments and unlisted equities $17,175 $24,017 $(1,800)$39,392 
Derivative financial instruments (not designated as hedging instruments) 3,088  3,088 
Total other investments$17,175 $27,105 $(1,800)$42,480 

At December 31, 2020, the Company included the following securities in the caption “Other investments”: 
CostUnrealized
gains
Unrealized
losses
Fair value / carrying value
 ($ in thousands)
Private investments and unlisted equities$12,414 $10,679 $(1,300)$21,793 
Derivative financial instruments (not designated as hedging instruments) 1,080  1,080 
Other investments$12,414 $11,759 $(1,300)$22,873 
Investment accounted for under the equity method6,545 
Total other investments$29,418 

Private investments and unlisted equities include securities that do not have readily determinable fair values. The carrying values of these holdings are determined based on their original cost minus impairment, if any, plus or minus changes resulting from observable price changes. At September 30, 2021, the carrying value of private investments and unlisted equities was $39.4 million (December 31, 2020: $21.8 million). It incorporated upward adjustments of $7.6 million and $12.9 million during the three and nine months ended September 30, 2021, respectively (three and nine months ended September 30, 2020: $0.0 million and $4.1 million, respectively), excluding any unrealized gains or losses related to changes in foreign currency exchange rates. Since acquiring these private investments, the Company has recognized net upward adjustments of $22.1 million and $9.3 million as of September 30, 2021, and December 31, 2020, respectively.

At December 31, 2020, the investment accounted for under the equity method represented an investment in AccuRisk Holdings LLC (“AccuRisk”), a Chicago, Illinois-based managing general underwriter focused on employee and health insurance benefits. During the nine months ended September 30, 2021, the Company sold its investment in AccuRisk and realized a pre-tax gain of $14.2 million.

The Company’s derivative financial instruments are composed of warrants granting the Company the right, but not the obligation, to purchase shares at a specified price on or before the maturity date. The Company has not designated any of its derivative financial instruments as hedging instruments. The Company’s maximum exposure to loss relating to these warrants is limited to the warrants’ carrying amount.

Fair Value Hierarchy

The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

14

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.
Level 3: Unobservable inputs supported by little or no market activity and significant to the fair value of the assets and liabilities. The term “unobservable inputs” includes certain pricing models, discounted cash flow methodologies, and similar techniques.

The Company values its derivative instruments using the Black-Scholes option pricing model based on Level 3 inputs. The Company uses the carrying value of the underlying stock as an input in the option pricing model. The underlying stock does not have a readily determinable fair value. Its carrying value is determined based on its original cost minus impairment, if any, plus or minus changes resulting from observable price changes. The other assumptions applied to the option pricing model include a risk-free rate of 0.50% and estimated volatility of 50%. The carrying value of the derivative instruments represents the fair value.

For the derivative instruments valued on the basis of Level 3 inputs, the Company includes any change in unrealized gains or losses in the caption “Net investment income (loss)” in the condensed consolidated statements of operations.

At September 30, 2021, and December 31, 2020, the Company did not carry any other investments at fair value with an assigned Level within the fair value hierarchy. The Company’s investment in the related party investment fund is measured at fair value using the net asset value practical expedient. It is therefore not classified within the fair value hierarchy. (See Note 3 for further details on the related party investment fund.)

Financial Instruments Disclosed, But Not Carried, at Fair Value

The caption “Convertible senior notes payable” represents financial instruments that the Company carries at amortized cost. The fair value of the convertible senior notes payable is estimated based on the bid price observed in an inactive market for the identical instrument (Level 2 input) (see Note 7).

5. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

At September 30, 2021, the Company’s loss and loss adjustment expense reserves included estimated amounts for several catastrophe events. For significant catastrophe events, including, but not limited to, hurricanes, typhoons, floods, wildfires, and pandemics, loss reserves are generally established based on loss payments and case reserves reported by clients when, and if, received. To establish IBNR loss estimates, the Company makes use of, among other things, the following:

estimates communicated by ceding companies;
information received from clients, brokers, and loss adjusters;
an understanding of the underlying business written and its exposures to catastrophe event-related losses;
industry data;
catastrophe scenario modeling software; and
management’s judgment.

The COVID-19 pandemic is unprecedented, and the Company does not have previous loss experience on which to base the associated estimate for loss and loss adjustment expenses. The Company based its estimate on the following:

a review of in-force treaties that may provide coverage and incur losses;
catastrophe and scenario modeling analyses and results shared by cedents;
preliminary loss estimates received from clients and their analysts and loss adjusters;
reviews of industry insured loss estimates and market share analyses; and
management’s judgment.

Significant assumptions which served as the basis for the Company's estimates of reserves for the COVID-19 pandemic losses and loss adjustment expenses include:

the scope of coverage provided by the underlying policies, particularly those that provide for business interruption coverage;
15

the regulatory, legislative, and judicial actions that could influence contract interpretations across the insurance industry;
the extent of economic contraction caused by the COVID-19 pandemic and associated measures, particularly in the United States; and
the ability of the cedents and insured to mitigate some or all of their losses.

While the Company believes its estimate of loss and loss adjustment expense reserves for the COVID-19 pandemic is adequate as of September 30, 2021, based on available information, actual losses may ultimately differ materially from the Company's current estimates. The Company will continue to monitor the appropriateness of its assumptions as new information becomes available and will adjust its estimates accordingly. Such adjustments may be material to the Company's results of operations and financial condition.

The Company made no significant changes in the actuarial methodology or reserving process related to its loss and loss adjustment expense reserves for the nine months ended September 30, 2021.

At September 30, 2021 and December 31, 2020, loss and loss adjustment expense reserves were composed of the following:
September 30, 2021December 31, 2020
 ($ in thousands)
Case reserves$191,151 $176,805 
IBNR349,628 317,374 
Total$540,779 $494,179 

A summary of changes in outstanding loss and loss adjustment expense reserves for all lines of business consolidated
for the nine months ended September 30, 2021 and 2020 is as follows: 
Consolidated20212020
 ($ in thousands)
Gross balance at January 1$494,179 $470,588 
Less: Losses recoverable(16,851)(27,531)
Net balance at January 1477,328 443,057 
Incurred losses related to:  
Current year296,333 247,559 
Prior years(1,255)5,385 
Total incurred295,078 252,944 
Paid losses related to:  
Current year(96,442)(72,453)
Prior years(146,545)(161,222)
Total paid(242,987)(233,675)
Foreign currency revaluation(1,722)(505)
Net balance at September 30527,697 461,821 
Add: Losses recoverable13,082 19,949 
Gross balance at September 30$540,779 $481,770 
    
For the nine months ended September 30, 2021, the estimate of net losses incurred relating to prior accident years decreased by $1.3 million, due primarily to favorable development on catastrophe events, a mortgage contract associated with the COVID-19 pandemic, and certain health contracts. The decrease in prior accident years was partially offset by adverse loss development on certain workers’ compensation and multi-line casualty contracts written between 2014 and 2018. The favorable loss development on a mortgage contract was offset by increased profit commissions on the same contract.

For the nine months ended September 30, 2020, the estimate of net losses incurred relating to prior accident years increased by $5.4 million, due primarily to certain general liability, health and multi-line contracts, partially offset by favorable loss development on professional liability contracts.
16

The changes in the outstanding loss and loss adjustment expense reserves for health claims for the nine months ended September 30, 2021 and 2020 are as follows:
Health20212020
 ($ in thousands)
Gross balance at January 1$17,485 $18,063 
Less: Losses recoverable  
Net balance at January 117,485 18,063 
Incurred losses related to: 
Current year31,189 25,032 
Prior years(1,898)1,341 
Total incurred29,291 26,373 
Paid losses related to: 
Current year(20,224)(15,115)
Prior years(13,824)(16,327)
Total paid(34,048)(31,442)
Foreign currency revaluation  
Net balance at September 3012,728 12,994 
Add: Losses recoverable  
Gross balance at September 30$12,728 $12,994 


6. RETROCESSION
 
From time to time, the Company purchases retrocessional coverage for one or more of the following reasons: to manage its overall exposure, reduce its net liability on individual risks, obtain additional underwriting capacity and balance its underwriting portfolio. The Company records loss and loss adjustment expenses recoverable from retrocessionaires as assets.

For the three and nine months ended September 30, 2021, the Company’s earned ceded premiums were insignificant compared to $1.7 million and $3.2 million for the three and nine months ended September 30, 2020, respectively. For the three and nine months ended September 30, 2021, loss and loss expenses recovered were insignificant compared to $2.5 million and $6.2 million for the three and nine months ended September 30, 2020, respectively.

Retrocession contracts do not relieve the Company from its obligations to its cedents. Failure of retrocessionaires to honor their obligations could result in losses to the Company. At September 30, 2021, the Company’s loss reserves recoverable consisted of (i) $9.9 million (December 31, 2020: $12.6 million) from unrated retrocessionaires, of which $9.7 million (December 31, 2020: $11.9 million) were secured by cash, letters of credit and collateral held in trust accounts for the benefit of the Company and (ii) $3.2 million (December 31, 2020: $4.3 million) from retrocessionaires rated A- or above by A.M. Best.

The Company regularly evaluates its net credit exposure to assess the ability of the retrocessionaires to honor their respective obligations. At September 30, 2021, the Company had recorded an allowance for expected credit losses of $47.0 thousand (December 31, 2020: $47.0 thousand).

7. SENIOR CONVERTIBLE NOTES

On August 7, 2018, the Company issued $100.0 million of senior unsecured convertible notes (the “Notes”), which mature on August 1, 2023. The Notes bear interest at 4.0%, payable semi-annually on February 1 and August 1 of each year beginning February 1, 2019.

Note holders have the option, under certain conditions, to redeem the Notes prior to maturity.
If a holder redeems the Notes, the Company shall have the option to settle the conversion obligation in cash, ordinary shares of the Company, or a combination thereof pursuant to the terms of the indenture governing the Notes. The Company has therefore bifurcated the Notes into liability and equity components.
17

At September 30, 2021, the Company’s share price was lower than the conversion price of $17.19 per share.
The Company’s effective borrowing rate for non-convertible debt at the time of issuance of the Notes was estimated to be 6.0%, which equated to an $8.2 million discount. At September 30, 2021, and December 31, 2020, the unamortized debt discount was $3.0 million and $4.2 million, respectively. The debt discount also represents the portion of the Note’s principal amount allocated to the equity component.
The Company incurred issuance costs in connection with the issuance of the Notes. At September 30, 2021, the unamortized portion of these costs attributed to the debt component was $1.2 million (December 31, 2020: $1.6 million), which the Company expects to amortize through the maturity date. The Company netted the portion of these issuance costs attributed to the equity component against the gross proceeds allocated to equity, resulting in the Company including $7.9 million in the caption “Additional paid-in capital” in the Company’s condensed consolidated balance sheets.

The carrying value of the Notes at September 30, 2021, including accrued interest of $0.7 million, was $96.5 million (December 31, 2020: $95.8 million). At September 30, 2021, the Company estimated the fair value of the Notes to be $94.6 million (December 31, 2020: $83.6 million) (see Note 4 Financial Instruments).
For the three and nine months ended September 30, 2021, the Company recognized interest expenses of $1.6 million and $4.7 million, respectively (2020: $1.6 million and $4.7 million, respectively) in connection with the interest coupon, amortization of issuance costs, and amortization of the discount.

The Company was in compliance with all covenants relating to the Notes at September 30, 2021, and December 31, 2020.

8. SHARE CAPITAL

The Company’s share capital is made up of ordinary share capital and additional paid-in capital. Ordinary share capital represents the issued and outstanding Class A and Class B ordinary shares at their par values of $0.10 per share. Additional paid-in capital includes the premium paid per share by the subscribing shareholders for Class A and Class B ordinary shares, as well as the earned portion of the grant-date fair value of share-based awards.

On October 29, 2020, the Company’s shareholders approved an amendment to the stock incentive plan to increase the number of Class A ordinary shares available for issuance by 3.0 million shares from 5.0 million to 8.0 million. At September 30, 2021, 3,128,276 (December 31, 2020: 3,474,888) Class A ordinary shares remained available for future issuance under the Company’s stock incentive plan. The Compensation Committee of the Board of Directors administers the Company’s stock incentive plan. 

The Board has adopted a share repurchase plan. The timing of such repurchases and the actual number of shares repurchased will depend on various factors, including price, market conditions, and applicable regulatory and corporate requirements. On March 26, 2020, the Board of Directors extended the share repurchase plan to June 30, 2021. It increased the number of shares authorized to be repurchased to 5.0 million Class A ordinary shares or securities convertible into Class A ordinary shares in the open market through privately negotiated transactions or Rule 10b5-1 stock trading plans. In addition, the Board of Directors also authorized the Company to repurchase up to $25.0 million aggregate face amount of the Company’s 4.00% Convertible Senior Notes due 2023 (the “Notes”) in privately negotiated transactions, in open market repurchases, or pursuant to one or more tender offers. The Company did not repurchase any Notes under the repurchase plan.

On May 4, 2021, the Board of Directors approved a new share repurchase plan effective from July 1, 2021, until June 30, 2022, authorizing the Company to purchase up to $25 million of Class A ordinary shares or securities convertible into Class A ordinary shares in the open market, through privately negotiated transactions or Rule 10b5-1 stock trading plans. The Company is not required to repurchase any of the Class A ordinary shares or the Notes. The repurchase plans may be modified, suspended, or terminated at the election of our Board of Directors at any time without prior notice.

The Company repurchased 1,079,544 Class A ordinary shares during the nine months ended September 30, 2021. All Class A ordinary shares repurchased are canceled immediately upon repurchase.


18

The following table is a summary of ordinary shares issued and outstanding:
Nine months ended September 30Nine months ended September 30
 20212020
Class AClass BClass AClass B
Balance – beginning of period28,260,075 6,254,715 30,739,395 6,254,715 
Issue of ordinary shares, net of forfeitures409,200  248,726  
Repurchase of ordinary shares(1,079,544) (1,874,419) 
Balance – end of period27,589,731 6,254,715 29,113,702 6,254,715 


9. SHARE-BASED COMPENSATION
 
The Company has a stock incentive plan for directors, employees, and consultants administered by the Compensation Committee of the Board of Directors.
 
Employee and Director Restricted Shares
 
For the nine months ended September 30, 2021, the Company issued 334,312 (2020: 306,264) Class A ordinary shares to employees pursuant to the Company’s stock incentive plan. These shares contain certain restrictions relating to, among other things, vesting, forfeiture in the event of termination of employment, and transferability. The restricted shares cliff vest three years after the date of issuance, subject to the grantee’s continued service with the Company. During the vesting period, the holder of the restricted shares retains voting rights and is entitled to any dividends declared by the Company.

For the nine months ended September 30, 2021, grantees forfeited 20,592 (2020: 210,109) restricted shares. For the nine months ended September 30, 2021, the Company reversed $0.1 million of stock compensation expense (2020: $0.7 million) in relation to the forfeited restricted shares.

The Company recorded $1.8 million of share-based compensation expense, net of forfeiture reversals, relating to restricted shares for the nine months ended September 30, 2021 (2020: $0.6 million). At September 30, 2021, there was $3.3 million (December 31, 2020: $1.9 million) of unrecognized compensation cost relating to non-vested restricted shares (excluding any restricted shares with performance conditions that the Company currently does not expect will be met), which the Company expects to recognize over a weighted-average period of 1.9 years (December 31, 2020: 1.5 years). For the nine months ended September 30, 2021, the total fair value of restricted shares vested was $1.6 million (2020: $2.8 million).

For the nine months ended September 30, 2021, the Company also issued to non-employee directors an aggregate of 74,769 (2020: 0) restricted Class A ordinary shares as part of their remuneration for services to the Company. Each of these restricted shares issued to non-employee directors contains similar restrictions to those issued to employees and will vest on the earlier of the first anniversary of the date of the share issuance or the Company’s next annual general meeting, subject to the grantee’s continued service with the Company.

The following table summarizes the activity for unvested outstanding restricted share awards during the nine months ended September 30, 2021:

 Number of
non-vested
restricted
 shares
Weighted
 average
grant date
fair value
Balance at December 31, 2020697,549 $9.38 
Granted409,081 9.11 
Vested(139,482)11.53 
Forfeited(20,592)8.35 
Balance at September 30, 2021946,556 $8.97 
 
19

Employee and Director Stock Options

For the nine months ended September 30, 2021, and 2020, no Class A ordinary share purchase options were granted or exercised by directors or employees. For the nine months ended September 30, 2021, 100,000 (2020: 40,000) stock options expired and 80,000 (2020: 80,000) stock options vested. When the Company grants stock options, it reduces the corresponding number from the shares authorized for issuance as part of the Company’s stock incentive plan.

The Board of Directors does not currently anticipate that the Company will declare any dividends during the expected term of the options. The Company uses graded vesting for expensing employee stock options. The total compensation cost expensed relating to stock options for the nine months ended September 30, 2021, was $0.3 million (2020: $0.5 million). At September 30, 2021, the total compensation cost related to non-vested options not yet recognized was $0.3 million (December 31, 2020: $0.7 million), which will be recognized over a weighted-average period of 1.4 years (December 31, 2020: 1.8 years) assuming the grantee completes the service period for vesting of the options.

At September 30, 2021, and December 31, 2020, 0.7 million and 0.8 million stock options were outstanding, respectively, with a weighted average exercise price of $22.35 and $22.22 per share, respectively, and a weighted average grant date fair value of $10.23 and $10.25 per share, respectively. The stock options’ weighted-average remaining contractual terms were 4.9 years and 5.1 years, at September 30, 2021, and December 31, 2020, respectively.

 Employee Restricted Stock Units

The Company issues RSUs to certain employees as part of the stock incentive plan.

These RSUs contain restrictions relating to vesting, forfeiture in the event of termination of employment, transferability, and other matters. Each RSU grant cliff vests three years after the date of issuance, subject to the grantee’s continued service with the Company. On the vesting date, the Company converts each RSU into one Class A ordinary share and issues new Class A ordinary shares from the shares authorized for issuance as part of the Company’s stock incentive plan. For the nine months ended September 30, 2021, the Company issued 58,123 (2020: 60,622) RSUs to employees pursuant to the Company’s stock incentive plan. For the nine months ended September 30, 2021, and 20