UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
April 30, 2020
Date of report (Date of earliest event reported) 

GREENLIGHT CAPITAL RE, LTD.
(Exact name of registrant as specified in charter) 
 
 
 
Cayman Islands
(State or other jurisdiction of incorporation)
001-33493
(Commission file number)
N/A
(IRS employer identification no.)
 
 
 
65 Market Street, Suite 1207,
Jasmine Court, Camana Bay,
P.O. Box 31110
Grand Cayman, Cayman Islands
(Address of principal executive offices)
 
KY1-1205
(Zip code)
 
(345) 943-4573
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Ordinary Shares
GLRE
Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if 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. ¨







Item 2.02 Results of Operations and Financial Condition
 
On May 5, 2020, Greenlight Capital Re, Ltd. (the "Registrant") issued a press release announcing its financial results for the first quarter March 31, 2020. A copy of the press release is attached hereto as Exhibit 99.1 to this Form 8-K and incorporated herein by reference.
 
In accordance with general instruction B.2 to Form 8-K, the information set forth in this Item 2.02 (including Exhibit 99.1) shall be deemed “furnished” and not “filed” with the Securities and Exchange Commission for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 

Item 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
Cash Retention Bonuses

On May 4, 2020, Greenlight Reinsurance, Ltd. (“Greenlight Re”), a wholly owned subsidiary of Greenlight Capital Re, Ltd. (the “Company” and, together with Greenlight Re, the “Employer”)), and Greenlight Reinsurance Ireland, DAC (“GRIL”), as applicable, entered into a retention bonus agreement with each of Simon Burton, Tim Courtis, Brendan Barry, Patrick O’Brien and Laura Accurso (each, a “Retention Bonus Agreement”).

Pursuant and subject to the terms and conditions of each Retention Bonus Agreement, each of Messrs. Burton, Courtis, Barry and O’Brien and Ms. Accurso is eligible to receive a retention bonus in the aggregate amount of US$500,000, US$200,000, US$200,000, US$200,000 and US$300,000, respectively (each, a “Retention Bonus”), subject to, among other things, the executive’s continuous employment by the Employer, Greenlight Re or GRIL, as applicable, in good standing through and including June 30, 2021 (the “Retention Date”) (and not having given notice of termination for any reason or received notice of termination, in the case of Messrs. Burton, Courtis and Barry and Ms. Accurso, by the Employer or Greenlight Re, as applicable, for cause (as defined in each executive’s employment agreement) or due to disability (as defined in the executive’s employment agreement) or, in the case of Mr. O’Brien, for a reason that permits GRIL to terminate employment without notice or payment in lieu of notice as provided for in his employment agreement) and compliance by the executive with any and all confidentiality, non-competition, non-solicitation, non-disparagement and assignment of inventions provisions by which the executive may be bound through the Payment Date (as defined below). If all conditions are satisfied, the Retention Bonus will be paid to the executive in a lump sum cash payment on July 1, 2021 (the “Payment Date”).

If the Employer, Greenlight Re or GRIL, as applicable, terminates the executive’s employment, in the case of Messrs. Burton, Courtis and Barry and Ms. Accurso, without cause (other than due to death or disability) or, in the case of Mr. O’Brien, for a reason that requires GRIL to terminate employment with notice or payment in lieu of notice as provided for in his employment agreement (and other than due to death), prior to the Retention Date, and all other conditions are otherwise satisfied, the executive will be entitled to receive the Retention Bonus in a lump sum cash payment on the Payment Date.

Notwithstanding anything in the Retention Bonus Agreement to the contrary, (i) except as otherwise described above regarding a termination without cause (other than due to death or disability) or for a reason that requires notice or pay in lieu of notice (and other than due to death), as applicable, if (x) the executive’s employment terminates for any reason at any time or (y) the executive has given notice of termination for any reason or received notice of termination, in the case of Messrs. Burton, Courtis and Barry and Ms. Accurso, by the Employer or Greenlight Re, as applicable, for cause or due to disability or, in the case of Mr. O’Brien, for a reason that permits GRIL to terminate employment without notice or payment in lieu of notice as provided in the employment agreement, in any such case, the executive’s Retention Bonus Agreement will automatically terminate without any further action and will be null and void and have no further force and effect and the executive will have no rights thereunder, and (ii) if the executive breaches any confidentiality, non-competition, non-solicitation, non-disparagement, and assignment of inventions provisions by which the executive may be bound, the executive’s Retention Bonus Agreement will automatically terminate without any further action and will be null and void and have no further force and effect and the executive will have no rights thereunder.






Third Amendment to Accurso Employment Agreement

On April 30, 2020, the boards of directors of each of the Company and Greenlight Re approved the entry into a third amendment to the employment agreement with Laura Accurso, the General Counsel and Corporate Secretary of the Employer (the “Accurso Amendment”). The Accurso Amendment amends Ms. Accurso’s existing employment agreement, dated October 1, 2017, as amended February 18, 2019, and as further amended on September 2, 2019, among the Employer and Ms. Accurso (the “Accurso Employment Agreement”).

Pursuant to the Accurso Amendment, effective as of April 1, 2020, Ms. Accurso’s base salary shall be US$500,000 per year. Except as specifically amended by the Accurso Amendment, the Accurso Employment Agreement shall remain in full force.

The foregoing summary of the Accurso Amendment does not purport to be complete and is qualified in its entirety by reference to the Accurso Amendment. A copy of the Accurso Amendment is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits
 
(d) Exhibits
 
10.1

99.1
Earnings press release, "GREENLIGHT RE ANNOUNCES FIRST QUARTER 2020 FINANCIAL RESULTS", dated May 5, 2020, issued by the Registrant.









SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
GREENLIGHT CAPITAL RE, LTD.
 
(Registrant)
 
 
 
 
By:
/s/ Tim Courtis              
 
Name:
Tim Courtis
 
Title:
Chief Financial Officer
 
Date:
May 5, 2020



Exhibit


THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

This THIRD AMENDMENT TO THE EMPLOYMENT AGREEMENT (this “Third Amendment”), dated as of May 1, 2020 (the “Third Amendment Date”), is entered into by and among GREENLIGHT CAPITAL RE, LTD. (the “Company”), GREENLIGHT REINSURANCE, LTD. (the “Subsidiary”) and LAURA ACCURSO (the “Executive”).

RECITALS

WHEREAS, the Company, the Subsidiary, and the Executive have entered into that certain Employment Agreement, dated as of October 1, 2017, as amended by that certain Amendment to Employment Agreement, dated as of February 18, 2019 and by that certain Second Amendment to Employment Agreement, dated as of September 2, 2019 (the “Employment Agreement”); and
WHEREAS, the Company, the Subsidiary and Executive desire to make certain changes to the Employment Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and in the Employment Agreement, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein are used as defined in the Employment Agreement.
SECTION 2. Amendment to Employment Agreement. The Employment Agreement is hereby amended as follows on the date as set forth below:
2.1 Section 5.1 of the Employment Agreement is hereby amended and restated in its entirety as follows, effective as of the Third Amendment Date:
“Effective as of April 1, 2020, the Subsidiary shall pay the Executive a base salary of US $500,000 per annum (the “Base Salary”), such salary to be paid monthly in arrears by direct deposit to a bank account nominated by the Executive.”
SECTION 3.    Miscellaneous.
3.1 Effect on Employment Agreement. Except as specifically amended by this Third Amendment, the Employment Agreement shall remain in full force and effect and is hereby ratified and confirmed.
3.2 Entire Agreement; Amendment. The Employment Agreement, as amended by the terms of this Third Amendment, will supersede the prior terms of the Employment Agreement and sets forth the entire agreement and understanding of the parties relating to the subject matter herein and

1




therein. No modification of or amendment to this Third Amendment, nor any waiver of any rights under this Third Amendment, shall be effective unless given in a writing signed by the party to be charged.
3.3 Governing Law; Dispute Resolutions. This Third Amendment shall be governed by and construed in accordance with, the laws of the Cayman Islands and any controversy or claim related hereto shall be resolved in accordance with Section 15 of the Employment Agreement.
3.4 Successors and Assigns. This Third Amendment shall be binding upon and shall inure to the benefit of the parties hereto and the successors and assigns of the Company and the Subsidiary.
3.5 Headings. Section headings are for convenience of reference only and shall in no way affect the interpretation of this Third Amendment.
3.6 Counterparts. This Third Amendment may be executed in any number of counterparts, all of which when taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Third Amendment by signing any such counterpart. Electronic signatures shall be effective as originals.


[SIGNATURE PAGE FOLLOWS]






IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed effective as of the Third Amendment Date.

 
GREENLIGHT CAPITAL RE, LTD.
 

By: /s/ Simon Burton  
Name: Simon Burton
Title: CEO
 
 
 
GREENLIGHT REINSURANCE, LTD
 

By: /s/ Simon Burton    
Name: Simon Burton
Title: CEO
 
 
 

/s/ Laura Accurso
 
LAURA ACCURSO



[SIGNATURE PAGE TO THIRD AMENDMENT TO EMPLOYMENT AGREEMENT]

Exhibit




GREENLIGHT RE ANNOUNCES
FIRST QUARTER 2020 FINANCIAL RESULTS

Net loss per share of $1.11 for the quarter
Fully diluted book value per share of $11.63 at quarter end

Company to Hold Conference Call at 9:00 a.m. ET on Wednesday May 6, 2020

GRAND CAYMAN, Cayman Islands - May 5, 2020 - Greenlight Capital Re, Ltd. (NASDAQ: GLRE) (“Greenlight Re” or the “Company”) today announced financial results for the first quarter ended March 31, 2020.

Greenlight Re reported a net loss attributable to common shareholders of $40.3 million for the first quarter of 2020, compared to net income attributable to common shareholders of $5.9 million for the same period in 2019. The net loss per share for the first quarter of 2020 was $1.11, compared to net income per share of $0.16 for the same period in 2019. The Company’s net loss for the quarter included an investment loss in the Solasglas Investments, LP (“SILP”) fund of $42.1 million, representing a loss of 8.1% for the quarter as previously reported.

Fully diluted book value per share was $11.63 as of March 31, 2020, compared to $12.88 as of December 31, 2019.

Management Commentary

Simon Burton, Chief Executive Officer of Greenlight Re, stated, “Overall, we were satisfied with the quarter, with our reinsurance business showing resilience to almost unprecedented turmoil and uncertainty in global financial markets.”

Mr. Burton continued, “In early April, the Company announced the completion of its review of strategic transaction alternatives, concluding that stockholder value is likely to be better enhanced on a standalone basis than by pursuing a transaction with a third party. We expanded our share repurchase program in order to capitalize on the current market opportunity to maximize shareholder value.”

Commenting on the investment portfolio, David Einhorn, Chairman of the Board of Directors, stated, “Our investment performance from the Solasglas fund during the first quarter of 2020 was impacted by the considerable market turmoil surrounding COVID-19. Solasglas reported an 8.1% net loss during the quarter. We continued to focus on fundamental securities analysis, while continuing to gauge the possible long-term impact that the pandemic has had on companies and the economy as a whole. The market remains very difficult for value investing.”







Financial and Operating Highlights
First Quarter 2020

Gross written premiums were $109.8 million, compared to $162.6 million in the first quarter of 2019. The quarterly decrease was largely due to the non-renewal of certain auto business, offset by additional new business written in several different specialty lines.

Net written premiums decreased 22.7% to $109.1 million, compared to $141.2 million reported in the prior-year period. Ceded premiums were $0.7 million compared to $21.4 million in the prior year period. The significant decrease in ceded premium in the quarter was primarily due to the non-renewal of retrocessional coverage on auto business.

Net earned premiums were $111.0 million, a decrease from $125.4 million reported in the prior-year period.

Net underwriting income of $1.3 million, compared to a net underwriting loss of $21.8 million reported in the first quarter of 2019. The underwriting income was largely driven by a $47.2 million decrease in loss and loss adjustment expenses compared to the first quarter of 2019, which included adverse development from the Company’s auto class. The quarterly loss reserve review resulted in prior year adverse development of $4.2 million booked in the first quarter 2020.

A composite ratio for the quarter of 96.8%, compared to 115.2% for the prior-year period. The combined ratio for the quarter was 98.9%, compared to 117.4% for the prior-year period.

A net investment loss of $35.3 million, compared to net investment income of $32.3 million in the first quarter of 2019.


Conference Call Details

Greenlight Re will hold a live conference call to discuss its financial results for the first quarter ended March 31, 2020 on Wednesday, May 6, 2020 at 9:00 a.m. Eastern time. The conference call title is Greenlight Capital Re, Ltd. First Quarter 2020 Earnings Call.

To participate in the Greenlight Capital Re, Ltd. First Quarter 2020 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/10142272

The conference call can also be accessed via webcast at:

https://services.choruscall.com/links/glre200506.html






A telephone replay of the call will be available from 11:00 a.m. Eastern time on May 6, 2020 until 9:00 a.m. Eastern time on May 13, 2020. 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 10142272. An audio file of the call will also be available on the Company’s website, www.greenlightre.com .

###

Non-GAAP Financial Measures

In presenting the Company’s results, management has included financial measures that are not calculated under standards or rules that comprise accounting principles generally accepted in the United States (GAAP). Such measures, including fully diluted book value per share and net underwriting income (loss), are referred to as non-GAAP measures. These non-GAAP measures may be defined or calculated differently by other companies. Management believes these measures allow for a more complete understanding of the underlying business. These measures are used to monitor our results and should not be viewed as a substitute for those determined in accordance with GAAP. Reconciliations of such measures to the most comparable GAAP figures are included in the attached financial information in accordance with Regulation G.



Forward-Looking 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 Form 10-K and Amendment No. 1 to Form 10-K filed with the Securities Exchange Commission on April 29, 2020. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as provided by law.


About Greenlight Capital Re, Ltd.
Established in 2004, Greenlight Re (www.greenlightre.com) is a NASDAQ listed company with specialist property and casualty reinsurance companies based in the Cayman Islands and Ireland. Greenlight Re provides risk management products and services to the insurance, reinsurance and other risk marketplaces. The Company focuses on delivering risk solutions to clients and brokers by whom Greenlight Re's expertise, analytics and customer service offerings are demanded. With an emphasis on deriving superior returns from both sides of the balance sheet, Greenlight Re manages its assets according to a value-oriented equity-focused strategy that supports the goal of long-term growth in book value per share.

Contact:
Investor Relations:
Adam Prior
The Equity Group Inc.
(212) 836-9606
IR@greenlightre.ky





GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
March 31, 2020 and December 31, 2019
(expressed in thousands of U.S. dollars, except per share and share amounts)
 
March 31, 2020
 
December 31, 2019
 
(unaudited)
 
(audited)
Assets
 
 
 
Investments
 
 
 
Investment in related party investment fund
$
189,898

 
$
240,056

Other investments
17,724

 
16,384

Total investments
207,622

 
256,440

Cash and cash equivalents
8,094

 
25,813

Restricted cash and cash equivalents
735,954

 
742,093

Reinsurance balances receivable (net of allowance for expected credit losses of $89)
243,754

 
230,384

Loss and loss adjustment expenses recoverable (net of allowance for expected credit losses of $47)
23,095

 
27,531

Deferred acquisition costs
48,034

 
49,665

Unearned premiums ceded
558

 
901

Notes receivable (net of allowance for expected credit losses of $1,000)
19,200

 
20,202

Other assets
1,738

 
2,164

Total assets
$
1,288,049

 
$
1,355,193

Liabilities and equity
 
 
 
Liabilities
 
 
 
Loss and loss adjustment expense reserves
$
455,669

 
$
470,588

Unearned premium reserves
177,469

 
179,460

Reinsurance balances payable
114,208

 
122,665

Funds withheld
5,664

 
4,958

Other liabilities
5,064

 
6,825

Convertible senior notes payable
93,076

 
93,514

Total liabilities
851,150

 
878,010

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, 31,179,529 (2019: 30,739,395): Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,715 (2019: 6,254,715))
3,743

 
3,699

Additional paid-in capital
504,375

 
503,547

Retained earnings (deficit)
(71,219
)
 
(30,063
)
Total shareholders' equity
436,899

 
477,183

Total liabilities, redeemable non-controlling interest and equity
$
1,288,049

 
$
1,355,193








GREENLIGHT CAPITAL RE, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
For the three months ended March 31, 2020 and 2019
(expressed in thousands of U.S. dollars, except per share and share amounts)
 
Three months ended March 31
 
2020
 
2019
Revenues
 
 
 
Gross premiums written
$
109,787

 
$
162,560

Gross premiums ceded
(678
)
 
(21,401
)
Net premiums written
109,109

 
141,159

Change in net unearned premium reserves
1,912

 
(15,797
)
Net premiums earned
111,021

 
125,362

Income (loss) from investment in related party investment fund [net of related party expenses of $662 and $5,432, respectively]
(42,126
)
 
30,756

Net investment income
6,837

 
1,567

Other income (expense), net
213

 
1,069

Total revenues
75,945

 
158,754

Expenses

 
 
Net loss and loss adjustment expenses incurred
75,697

 
122,865

Acquisition costs
31,739

 
21,526

General and administrative expenses
6,794

 
6,840

Interest expense
1,561

 
1,544

Total expenses
115,791

 
152,775

Income (loss) before income tax
(39,846
)
 
5,979

Income tax (expense) benefit
(424
)
 
(73
)
Net income (loss)
$
(40,270
)
 
$
5,906

Earnings (loss) per share
 
 
 
Basic
$
(1.11
)
 
$
0.16

Diluted
$
(1.11
)
 
$
0.16

Weighted average number of ordinary shares used in the determination of earnings and loss per share
 
 
 
Basic
36,138,245

 
35,972,665

Diluted
36,138,245

 
36,364,358


 






The following table provides the ratios categorized as Property, Casualty and Other: 
 
Three months ended March 31
 
Three months ended March 31
 
2020
 
2019
 
Property
 
Casualty
 
Other
 
Total
 
Property
 
Casualty
 
Other
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
64.0
%
 
72.7
%
 
60.7
%
 
68.2
%
 
70.8
%
 
107.9
%
 
82.9
%
 
98.0
%
Acquisition cost ratio
19.5

 
27.1

 
36.2

 
28.6

 
10.6

 
15.3

 
31.7

 
17.2

Composite ratio
83.5
%
 
99.8
%
 
96.9
%
 
96.8
%
 
81.4
%
 
123.2
%
 
114.6
%
 
115.2
%
Underwriting expense ratio
 
 
 
 
 
 
2.1

 
 
 
 
 
 
 
2.2

Combined ratio
 
 
 
 
 
 
98.9
%
 
 
 
 
 
 
 
117.4
%










GREENLIGHT CAPITAL RE, LTD.
NON-GAAP MEASURES AND RECONCILIATION

Basic Book Value Per Share and Fully Diluted Book Value Per Share

We believe that long-term growth in fully diluted 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 book value per share may be useful to our investors, shareholders and other interested parties to form a basis of comparison with other companies within the property and casualty reinsurance industry.

Fully diluted book value per share is considered a non-GAAP financial measure and represents basic book value per share combined with any dilutive impact of in-the-money stock options and RSUs issued and outstanding as of any period end. In addition, the fully diluted book value per share includes the dilutive effect, if any, of ordinary shares to be issued upon conversion of the convertible notes. Basic book value per share and fully diluted book value per share should not be viewed as substitutes for the comparable U.S. GAAP measures.

Our primary financial goal is to increase fully diluted book value per share over the long term.

The following table presents a reconciliation of the non-GAAP financial measures basic and fully diluted book value per share to the most comparable U.S. GAAP measure.
 
March 31, 2020
 
December 31, 2019
 
March 31, 2019
 
  ($ in thousands, except per share and share amounts)
Numerator for basic and fully diluted book value per share:
 
 
 
 
 
Total equity (U.S. GAAP) (numerator for basic book value per share)
$
436,899

 
$
477,183

 
$
484,315

Add: Proceeds from in-the-money stock options issued and outstanding

 

 

Numerator for fully diluted book value per share
$
436,899

 
$
477,183

 
$
484,315

Denominator for basic and fully diluted book value per share: (1)
 
 
 
 
 
Ordinary shares issued and outstanding (denominator for basic book value per share)
37,434,244

 
36,994,110

 
36,717,761

Add: In-the-money stock options and RSUs issued and outstanding
116,722

 
63,582

 
87,747

Denominator for fully diluted book value per share
37,550,966

 
37,057,692

 
36,805,508

Basic book value per share
$
11.67

 
$
12.90

 
$
13.19

Quarterly increase (decrease) in basic book value per share ($)
$
(1.23
)
 
$
(0.79
)
 
$
0.07

Quarterly increase (decrease) in basic book value per share (%)
(9.5
)%
 
(5.8
)%
 
0.5
 %
 
 
 
 
 
 
Fully diluted book value per share
$
11.63

 
$
12.88

 
$
13.16

Quarterly increase (decrease) in fully diluted book value per share ($)
$
(1.25
)
 
$
(0.79
)
 
$
(0.32
)
Quarterly increase (decrease) in fully diluted book value per share (%)
(9.7
)%
 
(5.9
)%
 
(2.4
)%

(1) All unvested restricted shares, including those with performance conditions, are included in the “basic” and “fully diluted” denominators. As of March 31, 2020, the number of unvested restricted shares with performance conditions was 501,989 (356,900 and 120,605, as of December 31, 2019 and March 31, 2019, respectively).

Net Underwriting Income (Loss)

One way that we evaluate the Company’s underwriting performance is through the measurement of net underwriting income (loss). We do not use premiums written as a measure of performance. Net underwriting income (loss) is a performance measure used by management as it measures the fundamentals underlying the Company’s underwriting operations. We believe that the use of net underwriting income (loss) enables investors and other users of the Company’s financial information to analyze our performance in a manner similar to how management analyzes performance. Management also believes that this measure





follows industry practice and allows the users of financial information to compare the Company’s performance with its those of our industry peer group.

Net underwriting income (loss) is considered a non-GAAP financial measure because it excludes items used in the calculation of net income before taxes under U.S. GAAP. Net underwriting income (loss) is calculated as net premiums earned, plus other income (expense) relating to deposit-accounted contracts, less net loss and loss adjustment expenses, less acquisition costs, and less underwriting expenses. The measure excludes, on a recurring basis: (1) investment income (loss); (2) other income (expense) not related to underwriting, including foreign exchange gains or losses and adjustments to the allowance for expected credit losses; (3) corporate general and administrative expenses; (4) interest expense and (5) income taxes. We exclude total investment related income or loss and foreign exchange gains or losses as we believe these items are influenced by market conditions and other factors not related to underwriting decisions. We exclude corporate expenses because these expenses are generally fixed and not incremental to or directly related to our underwriting operations. We believe all of these amounts are largely independent of our underwriting process and including them could hinder the analysis of trends in our underwriting operations. Net underwriting income (loss) should not be viewed as a substitute for U.S. GAAP net income.

The reconciliations of net underwriting income (loss) to income (loss) before income taxes (the most directly comparable U.S. GAAP financial measure) on a consolidated basis is shown below:

 
Three months ended March 31
 
2020
 
2019
 
 
($ in thousands)
Income (loss) before income tax
$
(39,846
)
 
$
5,979

 
Add (subtract):
 
 
 
 
Investment related (income) loss
35,289

 
(32,323
)
 
Other non-underwriting (income) expense
394

 
(69
)
 
Corporate expenses
3,858

 
3,034

 
Interest expense
1,561

 
1,544

 
Net underwriting income (loss)
$
1,256

 
$
(21,835
)