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| 8-K - 8-K FOR Q3 EARNINGS PRESS RELEASE - GREENLIGHT CAPITAL RE, LTD. | earningsreleaseform8kq32017.htm |
GREENLIGHT RE ANNOUNCES
THIRD QUARTER 2017 FINANCIAL RESULTS
Company to Hold Conference Call at 9:00 a.m. ET on Tuesday, October 31, 2017
GRAND CAYMAN, Cayman Islands - October 30, 2017 - Greenlight Capital Re, Ltd. (NASDAQ: GLRE) today announced financial results for the third quarter ended September 30, 2017.
Simon Burton, Chief Executive Officer of Greenlight Re, stated, “We were pleased to achieve profitability and grow book value during the quarter despite large natural catastrophe losses experienced by the reinsurance industry, which is a testament to the resiliency of our total return platform. We continued to see significant growth, with a 42% increase in gross written premium. As opportunities emerge from the recent large capital erosion, we are in a position to participate.”
Greenlight Re reported net income of $19.9 million for the third quarter of 2017, compared to net income of $30.0 million for the same period in 2016. The net income per share for the third quarter of 2017 was $0.53, compared to $0.80 for the same period in 2016.
Fully diluted adjusted book value per share was $23.18 as of September 30, 2017, a 5.2% increase from $22.04 per share as of September 30, 2016, and a 2.4% increase from the prior quarter.
Financial and operating highlights for Greenlight Re for the third quarter and nine months ended September 30, 2017 include:
• | Gross written premiums of $181.6 million, an increase from $128.2 million in the third quarter of 2016. Net earned premiums were $172.7 million, an increase from $112.8 million reported in the prior-year period. |
• | An underwriting loss of $38.5 million, compared to underwriting income of $0.6 million in the third quarter of 2016. Included in this underwriting loss is an estimated loss of $37.9 million resulting from natural catastrophes including hurricanes Harvey, Irma and Maria and the Mexican earthquake. |
• | A composite ratio for the nine months ended September 30, 2017 of 104.4%, compared to 101.9% for the prior-year period. The combined ratio for the nine months ended September 30, 2017 was 107.0%, compared to 105.3% for the prior-year period. Catastrophe losses contributed 7.8 points to both the composite and combined ratios for 2017. |
• | Net investment income of $64.0 million for the third quarter of 2017, representing a gain of 5.5%. For the nine months ended September 30, 2017, net investment income of $36.4 million, representing a gain of 2.9%, compared to net investment income of $23.3 million during the comparable period in 2016 when Greenlight Re reported a 2.1% gain. |
• | Greenlight Re strengthened its management team with the appointment of Michael Belfatti to the newly created position of Chief Operating Officer, effective August 21, 2017. Mr. Belfatti’s responsibilities as COO include oversight of the Company’s pricing, actuarial and risk management functions, and spearheading data collection, analytics and technology efforts across the Company. As a member of the executive team he will also assist with the development and execution of the Company’s overall strategy. |
“Our investment portfolio performed well, led by gains from some of our largest long positions,” stated David Einhorn, Chairman of the Board of Directors. “Despite the headwinds caused by natural disasters during the quarter, we are pleased with the overall progress and direction of our reinsurance strategy.”
Conference Call Details
Greenlight Re will hold a live conference call to discuss its financial results for the third quarter ended September 30, 2017 on Tuesday, October 31, 2017 at 9:00 a.m. Eastern time. The conference call title is Greenlight Capital Re, Ltd. Third Quarter 2017 Earnings Call.
To participate in the Greenlight Capital Re, Ltd. Third 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/10112759
The conference call can also be accessed via webcast at:
http://services.choruscall.com/links/glre171031.html
A telephone replay of the call will be available from 11:00 a.m. Eastern time on October 31, 2017 until 9:00 a.m. Eastern time on November 7, 2017. 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 10112759. An audio file of the call will also be available on the Company’s website, www.greenlightre.ky .
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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.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2017 and December 31, 2016
(expressed in thousands of U.S. dollars, except per share and share amounts)
September 30, 2017 | December 31, 2016 | ||||||
(unaudited) | (audited) | ||||||
Assets | |||||||
Investments | |||||||
Debt instruments, trading, at fair value | $ | 1,737 | $ | 22,473 | |||
Equity securities, trading, at fair value | 1,195,864 | 844,001 | |||||
Other investments, at fair value | 139,165 | 156,063 | |||||
Total investments | 1,336,766 | 1,022,537 | |||||
Cash and cash equivalents | 31,887 | 39,858 | |||||
Restricted cash and cash equivalents | 1,349,989 | 1,202,651 | |||||
Financial contracts receivable, at fair value | 20,644 | 76,381 | |||||
Reinsurance balances receivable | 294,253 | 219,126 | |||||
Loss and loss adjustment expenses recoverable | 18,447 | 2,704 | |||||
Deferred acquisition costs, net | 77,241 | 61,022 | |||||
Unearned premiums ceded | 6,131 | 2,377 | |||||
Notes receivable, net | 29,653 | 33,734 | |||||
Other assets | 5,697 | 4,303 | |||||
Total assets | $ | 3,170,708 | $ | 2,664,693 | |||
Liabilities and equity | |||||||
Liabilities | |||||||
Securities sold, not yet purchased, at fair value | $ | 890,001 | $ | 859,902 | |||
Financial contracts payable, at fair value | 10,409 | 2,237 | |||||
Due to prime brokers | 547,699 | 319,830 | |||||
Loss and loss adjustment expense reserves | 445,778 | 306,641 | |||||
Unearned premium reserves | 281,618 | 222,527 | |||||
Reinsurance balances payable | 76,292 | 41,415 | |||||
Funds withheld | 16,487 | 5,927 | |||||
Other liabilities | 12,739 | 14,527 | |||||
Performance compensation payable to related party | 3,955 | — | |||||
Total liabilities | 2,284,978 | 1,773,006 | |||||
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, 31,093,858 (2016: 31,111,432): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,895 (2016: 6,254,895)) | 3,735 | 3,737 | |||||
Additional paid-in capital | 501,766 | 500,337 | |||||
Retained earnings | 362,004 | 370,168 | |||||
Shareholders’ equity attributable to shareholders | 867,505 | 874,242 | |||||
Non-controlling interest in joint venture | 18,225 | 17,445 | |||||
Total equity | 885,730 | 891,687 | |||||
Total liabilities and equity | $ | 3,170,708 | $ | 2,664,693 | |||
GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the three and nine months ended September 30, 2017 and 2016
(expressed in thousands of U.S. dollars, except per share and share amounts)
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues | |||||||||||||||
Gross premiums written | $ | 181,588 | $ | 128,205 | $ | 553,691 | $ | 387,234 | |||||||
Gross premiums ceded | (7,931 | ) | (2,119 | ) | (13,880 | ) | (7,748 | ) | |||||||
Net premiums written | 173,657 | 126,086 | 539,811 | 379,486 | |||||||||||
Change in net unearned premium reserves | (964 | ) | (13,294 | ) | (54,892 | ) | (3,000 | ) | |||||||
Net premiums earned | 172,693 | 112,792 | 484,919 | 376,486 | |||||||||||
Net investment income (loss) | 63,976 | 32,945 | 36,445 | 23,326 | |||||||||||
Other income (expense), net | (520 | ) | (192 | ) | (224 | ) | (181 | ) | |||||||
Total revenues | 236,149 | 145,545 | 521,140 | 399,631 | |||||||||||
Expenses | |||||||||||||||
Loss and loss adjustment expenses incurred, net | 168,918 | 81,467 | 379,746 | 283,511 | |||||||||||
Acquisition costs, net | 38,011 | 25,844 | 126,651 | 100,291 | |||||||||||
General and administrative expenses | 8,202 | 6,937 | 21,292 | 18,930 | |||||||||||
Total expenses | 215,131 | 114,248 | 527,689 | 402,732 | |||||||||||
Income (loss) before income tax | 21,018 | 31,297 | (6,549 | ) | (3,101 | ) | |||||||||
Income tax (expense) benefit | (65 | ) | (305 | ) | 109 | (251 | ) | ||||||||
Net income (loss) including non-controlling interest | 20,953 | 30,992 | (6,440 | ) | (3,352 | ) | |||||||||
Loss (income) attributable to non-controlling interest in joint venture | (1,078 | ) | (981 | ) | (780 | ) | (963 | ) | |||||||
Net income (loss) | $ | 19,875 | $ | 30,011 | $ | (7,220 | ) | $ | (4,315 | ) | |||||
Earnings (loss) per share | |||||||||||||||
Basic | $ | 0.53 | $ | 0.80 | $ | (0.20 | ) | $ | (0.12 | ) | |||||
Diluted | $ | 0.53 | $ | 0.80 | $ | (0.20 | ) | $ | (0.12 | ) | |||||
Weighted average number of ordinary shares used in the determination of earnings and loss per share | |||||||||||||||
Basic | 37,345,985 | 37,323,575 | 36,994,969 | 36,928,283 | |||||||||||
Diluted | 37,375,273 | 37,385,481 | 37,022,347 | 36,928,283 | |||||||||||
The following table provides the ratios for the nine months ended September 30, 2017 and 2016:
Nine months ended September 30 | |||||||||||||||||
2017 | 2016 | ||||||||||||||||
Frequency | Severity | Total | Frequency | Severity | Total | ||||||||||||
Loss ratio | 73.4 | % | 144.5 | % | 78.3 | % | 76.4 | % | 62.9 | % | 75.3 | % | |||||
Acquisition cost ratio | 27.4 | % | 9.6 | % | 26.1 | % | 27.0 | % | 21.9 | % | 26.6 | % | |||||
Composite ratio | 100.8 | % | 154.1 | % | 104.4 | % | 103.4 | % | 84.8 | % | 101.9 | % | |||||
Underwriting expense ratio | 2.6 | % | 3.4 | % | |||||||||||||
Combined ratio | 107.0 | % | 105.3 | % | |||||||||||||