GREENLIGHT REINSURANCE, LTD. A GREENLIGHT REINSURANCE IRELAND, LIMITED A- A A- 2013 A.M. Best Company, Oldwick, NJ 08858 Printed July 1, 2013 www.ambest.com Page 1 of 8
Operating Company Non-Life Ultimate Parent: Greenlight Capital Re, Ltd. GREENLIGHT REINSURANCE, LTD. 65 Market Street, Jasmine Court, Camana Bay, P.O. Box 31110, Grand Cayman KY1-1205, Cayman Islands Web: www.greenlightre.ky Tel.: 345-943-4573 Fax: 345-745-4576 AMB#: 076873 AIIN#: AA-3770280 Ultimate Parent#: 055430 BEST S CREDIT RATING Best s Financial Strength Rating: A Outlook: Stable Best s Financial Size Category: XI RATING RATIONALE Rating Rationale: The ratings of Greenlight Reinsurance, Ltd. (Greenlight Re), are based on its excellent risk-adjusted capitalization, experienced management team, and the disciplined implementation of its overall business strategy. The ratings also recognize the company s exceptional Enterprise Risk Management as it aggressively manages risks on both sides of the balance sheet. These strengths are partially offset by the challenges associated with writing profitable business in a market with increased capacity and further competition from new reinsurance companies with a similar alternative investment strategy. Also detracting from the strengths is the leverage resulting from an investment portfolio that is primarily composed of publicly traded equity securities. This concern has been diminished as the investment portfolio has performed well over time. Greenlight Re operates as a Cayman Islands-based broker market reinsurer writing a combination of property, casualty, and specialty reinsurance business. It has been successful in building its underwriting team infrastructure and adding new business using its partnership-oriented approach to underwriting. This underwriting approach allows Greenlight Re to focus on a small number of large relationships, which enables pricing and structuring on a deal-by-deal basis. Underwriting and investment assumptions are combined to develop a risk profile of both sides of the balance sheet. Catastrophe aggregate downside limits are in place and capped at the board level. Greenlight Re s underwriting results to date are favorable, and its large surplus base supports the current and expected growth in premium volume. The underwriting acumen of the team performed well as the company took very minimal CAT losses in 2011, which proved to be a high CAT event year. While Greenlight Re s capital footprint entails 100% common equity with no use of debt, A.M. Best is somewhat concerned with the asset risk represented by its equity-based investment portfolio. Mitigating this concern are the absence of financial leverage, the partially hedged nature of the investment portfolio, and the experience of the investment manager. The risk of the investment portfolio was stressed in 2008 when it lost 17.6% followed by a return of 32.1% in 2009. More than 80% of the invested assets are in highly liquid investments and generally no position can be greater than 20% of invested assets. A.M. Best s rating approach involves assessing Greenlight Re s risk correlations across the enterprise by subjecting its capitalization to concurrent adverse stress test events. The company s robust risk-adjusted capitalization withstands substantial amounts of strain when subjected to these various stress scenarios. Positive rating actions may result from continued improvements in Greenlight Re s operating results, lower adverse development, continued lack of CAT losses and a continued positive investment performance. Negative rating actions may result from continued abnormal adverse development, severe negative investment results, significant loss of surplus and/or poor underwriting performance. FIVE YEAR RATING HISTORY Date Best s FSR Date Best s FSR 10/09/12 A 09/17/09 A- 09/26/11 A 09/09/08 A- 10/08/10 A- 11/06/07 A- BUSINESS PROFILE Greenlight Reinsurance, Ltd. (Greenlight Re) is headquartered and domiciled in the Cayman Islands. Greenlight Re is a global specialist property and casualty reinsurer established in 2004 and is wholly owned by Greenlight Capital Re, Ltd. (NASDAQ: GLRE). Greenlight Capital Re, Ltd. has two other wholly owned subsidiaries, Greenlight Reinsurance Ireland, Ltd. ( GRIL ) and Verdant Holding Company, Ltd. ( Verdant ). GRIL is based in Dublin, Ireland and was established in September 2010 to provide multi-line property and casualty reinsurance capacity to the European broker market and offer service to clients in Europe. Verdant is a Delaware corporation which was established to facilitate strategic alliances that Greenlight Re may seek to form with insurance companies and general agents in the U.S. Greenlight Re writes a combination of property, casualty and specialty reinsurance distributed primarily through the broker market. The mix of business between the property, casualty and specialty segments will vary based on overall market conditions. The company writes worldwide with concentrations of cedants in the United States, the United Kingdom, Europe, Bermuda and Cayman Islands. In 2008 the Cayman Islands Monetary Authority granted approval for Greenlight Re to engage in long term business, but to date Greenlight Re has not offered or written any long term products. A portion of the company s portfolio is exposed to natural perils. Natural peril-exposed business is underwritten and modeled utilizing conventional methods. For internal risk management purposes, the company monitors accumulations by geographic zone based on potential loss scenarios, which are at least as conservative as those employed in the rating process. The purpose is to prevent, to the greatest extent possible, erosion of capital in the event of a major covered catastrophe. In addition to the standard underwriting risk/reward footprint of most global reinsurers, Greenlight Re has introduced an additional investment risk/reward architecture with a partially hedged equity portfolio that is the vast majority of unencumbered assets. The equity portfolio primarily consists of publicly traded securities with a long and short philosophy that produces a partial hedge on market performance and asset value. This strategy has been employed by the asset manager in a separate though similarly structured multibillion dollar value portfolio for over fifteen years. RISK MANAGEMENT Greenlight Re has a very strong enterprise risk management culture starting from the top down. Greenlight Re s small staff compared to other reinsures works to their advantage. A transaction is handled by an underwriter and an actuary who evaluate the specifics of the deal. Each new deal is presented to the senior staff who evaluates the transaction. The CEO and CUO must both agree that each deal meets the firms underwriting guidelines. Greenlight Re aims to act as the lead underwriter in deals since the lead typically has greater influence in pricing terms and conditions. Greenlight Re also has a cradle to grave philosophy where the same underwriter also services the contract. Each account is reviewed on a quarterly basis and a meeting is held annually with clients. Greenlight Re uses an in-house developed simulation model for pricing. The investment piece of Greenlight Re is also very intertwined in the risk management culture. Greenlight Re has weekly calls with DME Advisors to discuss their overall underwriting and investment strategy. This is detailed quarterly at the Board level. On the investment side multiple, stable prime brokers are used to reduce counterparty risk. Investment Risk Management: Greenlight Re follows investment guidelines that were adopted by the Board of Directors. The guidelines state that at least 80% of invested assets must be held in quality investments. This includes debt or equity securities of publicly traded companies, government securities of developed countries, cash and cash equivalents as well as gold. Private equity securities cannot be more than 10% of the investment portfolio. No single investment can be more than 20% of the portfolio, with the exception of cash, cash equivalents and U.S. government obligations. Liquidity of the portfolio is dictated by the expectation of the liabilities and the portfolio is reviewed with the investment advisor on a periodic basis. 2013 A.M. Best Company, Oldwick, NJ 08858 Printed July 1, 2013 www.ambest.com Page 2 of 8
OPERATING PERFORMANCE Operating Results: Greenlight Re reported net income of $15.3 million in 2012 reversing three years of declining net income. Net underwriting losses have increased over the past two years as the commercial motor contracts in run off are reporting adverse development. Loss reserves continue to increase as the frequency underwriting portfolio continues to mature. Investment income has been positive in four of the past five years with 2012 reporting better results than last year. Greenlight Re still has a high geographic concentration of business with 93% of premiums coming from the U.S. ROE and ROR increased year over year by small margins, after trending lower over the past four years. Underwriting Results: Greenlight Re s underwriting losses have increased over the past two years with 2012 showing an underwriting loss before general and administrative expenses of $44.4 million. The primary driver of the loss was adverse development of $40.7 million related to commercial motor contracts that are in run off. Frequency premiums written continue to be the bulk of premiums contributing 95.1% versus 4.9% for severity. The primary driver of the increase in frequency net premiums written was driven by motor liability and motor physical damage contracts. The increase in motor liability includes private automobile premiums from new non-standard automobile contracts. Severity contracts increased due to reinstatement premiums on a catastrophe contract that incurred a full limit loss from super storm Sandy. Geographically Greenlight Re writes 93.3% of its gross premiums in the U.S. with Europe constituting 4.0%, followed by other at 2.7%. Investment Results: Greenlight Re s investment portfolio, although reporting positive returns, was trending lower from 2009 to 2011. In 2012 the investment portfolio returned 7.1% versus a 2.1% return in 2011 net of all fees and expenses. Given the overall investment environment Greenlight s investment advisor, DME Advisors, has been in a defensive investing position. The five year average return for the investment portfolio is 6.9%. Greenlight Re s investment portfolio is considered a trading portfolio and therefore under U.S. GAAP, realized as well as unrealized gains and losses are included, and represent the biggest drivers of net investment income. Also included in net investment income is the change in market value of exchange-traded call and put options BALANCE SHEET STRENGTH Capitalization: Greenlight Re was initially capitalized with $212 million, and it added approximately $256 million in 2007 through an IPO and related private placement. The company has also generated capital through retained earnings and surplus has steadily grown over the past three years and as of year-end 2012 was above $860 million. This additional capital supports Greenlight Re s growth in premium volume. Underwriting leverage measures are minimal and A.M. Best expects these measures to remain moderate. Greenlight Re has no debt and a liquid investment portfolio; however, the concentration of investments in equity security positions represents a significant risk to the company s capitalization. Nevertheless, its risk-adjusted capitalization is excellent and withstands significant potential asset value impairments when stress tested. In addition, the portfolio is partially hedged with a long and short investment strategy. Though variable asset values are expected, extreme volatility and capital loss are not. Greenlight Re s risk adjusted capitalization remains robust even with the introduction of heavy stress-test scenarios that simultaneously compromise asset values and underwriting results. Loss Reserves: Greenlight Re has reported increasing adverse development in three of the past five years. The adverse development has not had a significant impact on overall earnings. Frequency loss reserves increased partially due to adverse loss development on prior year contracts related to commercial motor liability that are now in run off. Also contributing to the increase was estimated losses incurred associated with the increase in premiums earned during the 2012 year. Severity loss reserves increased due to a full limit loss on a catastrophe contract from super-storm Sandy, as well as an increase in reserves related to the 2010 New Zealand earthquake. Liquidity: As it first began to assume business in 2006, Greenlight Re s liabilities from underwriting activities are still relatively modest. The company s investment portfolio, composed essentially of publicly traded equity securities, is highly liquid. As most of Greenlight Re s invested assets are trading securities, the sale and purchase of these assets are reported as operating cash flows. In 2007, with the proceeds from the IPO being invested in equity securities, a large negative operating cash flow was reported. Investments: Greenlight Re s investment portfolio is managed by DME Advisors which is controlled by David Einhorn who is also Chairman of the Board of Directors and the president of Greenlight Capital, Inc. The investment strategy used is a value-oriented strategy that identifies undervalued and overvalued securities by analyzing companies available financial data. The portfolio is naturally hedged with both long and short positions. DME Advisors goal is to achieve higher rates of return while minimizing the risk of capital losses. The investment guidelines are adopted by the Board of Directors. At least 80% of the invested assets will be held in publicly traded debt or equity, governments, cash, cash equivalents and gold. Other than cash and U.S. government obligations, no single investment can be more than 20% of the portfolio. At year end 2012, 81% of the portfolio was in listed equity securities. Liquidity is reviewed on a periodic basis to ensure that Greenlight Re will be able to meet any of its liabilities as they come due. The investment portfolio does hold a physical position in gold as well as futures contracts for gold. Although this produces no income it has contributed to unrealized gains in the investment portfolio. Summarized Accounts as of December 31, 2012 Data reflected within all tables of this report has been compiled from the financial statements of this company (Source: Company Financial Statement). ASSETS Cash and equivalents 1,223,178 45.8 998,259 Long term fixed maturity investments 1,763 0.1 10,639 Equity investments 1,042,715 39.0 890,822 Other investments 133,450 5.0 128,685 Invested assets 1,177,928 44.1 1,030,146 Receivables 177,950 6.7 153,042 Reinsurance recoverable 34,447 1.3 29,550 Deferred policy acquisition cost 52,817 2.0 64,125 Other assets 6,123 0.2 31,768 Total assets 2,672,443 100.0 2,306,890 2013 A.M. Best Company, Oldwick, NJ 08858 Printed July 1, 2013 www.ambest.com Page 3 of 8
LIABILITIES & SURPLUS STATEMENT OF CHANGES IN EQUITY Property / Casualty reserves 344,339 12.9 235,371 Unearned premium reserves 161,904 6.1 207,047 Total policy reserves 506,243 18.9 442,418 Other liabilities 1,316,404 49.3 1,030,191 Total liabilities 1,822,647 68.2 1,472,609 Paid-in capital 472,379 17.7 472,379 Retained earnings 288,487 10.8 273,170 Other equity 88,930 3.3 88,732 Total equity 849,796 31.8 834,281 Total liabilities & equity 2,672,443 100.0 2,306,890 Paid-in capital - Beg bal 472,379 472,379 Paid-in capital - End bal 472,379 472,379 Other equity, beg. bal. 88,732 88,184 Other equity, misc. 198 548 Other equity, end. bal. 88,930 88,732 Retained earnings, beginning balance 273,170 262,833 Retained earnings, net income 15,317 10,337 Retained earnings, ending balance 288,487 273,170 Total shareholder equity 849,796 834,281 STATEMENT OF CASH FLOWS STATEMENT OF INCOME Reins assumed 385,764 365,266 Gross premiums written 385,764 365,266 Net cash provided/(used) in operating activities -55,914-33,628 Net cash provided/(used) in investment activities 31,458 29,856 Total increase (decrease) in cash -24,456-3,772 Reins ceded -24,644 46,870 Net premiums written 410,408 318,396 Change in unearned premiums -21,564-41,986 Net premiums earned 431,972 360,382 Net investment income -53,135-34,404 Net realized gains/(losses) 64,444 132,807 Net unrealized gains/(losses) 67,569-75,719 Total revenue 510,850 383,066 Benefits & reserves 343,022 227,252 Operating expenses 144,254 143,469 Total benefits & expenses 487,276 370,721 Earnings before interest & taxes (EBIT) 23,574 12,345 Pre-tax income/(loss) from continuing operations 23,574 12,345 Net income/(loss) before minority interest 23,574 12,345 Minority interest -8,257-2,008 Net income/(loss) from continuing operations 15,317 10,337 Cash, beginning balance 40,797 44,569 Cash, ending balance 16,341 40,797 PREMIUMS BY LINE OF BUSINESS GPW-Health 2,393 0.6 7,065 GPW-Total life 2,393 0.6 7,065 GPW-Automobile 169,104 43.8 86,937 GPW-Automobile - physical damage 59,251 15.4 7,026 GPW-Liability 39,275 10.2 54,192 GPW-Marine 2,240 0.6 360 GPW-Property - commercial 15,110 3.9 10,019 GPW-Property - personal 81,662 21.2 158,482 GPW-Surety -256-0.1 12,364 GPW-Workers compensation 16,985 4.4 28,821 GPW-Total non-life 383,371 99.4 358,201 GPW-Total business 385,764 100.0 365,266 Net income/(loss) 15,317 10,337 2013 A.M. Best Company, Oldwick, NJ 08858 Printed July 1, 2013 www.ambest.com Page 4 of 8
PREMIUMS - GEOGRAPHIC LIQUIDITY RATIOS (%) GPW-Other Europe 16,813 4.4 19,947 GPW-Total Europe 16,813 4.4 19,947 GPW-United States 357,489 92.7 322,424 GPW-Total North America 357,489 92.7 322,424 Total investments to total reserves 474.3 458.5 495.1 567.0 491.0 Liquid assets to total liabilities 124.4 129.0 125.7 144.9 176.2 Total investments to total liabilities 131.7 137.7 137.7 160.5 179.3 Bonds to total reserves 0.4 2.4 3.8 37.4 41.2 PROFITABILITY RATIOS (%) GPW-Other Caribbean 328 0.1 300 GPW-Total Caribbean 328 0.1 300 GPW-Other World-Wide 11,134 2.9 22,595 GPW-Total World-Wide 385,764 100.0 365,266 HISTORY Greenlight Re was incorporated as an exempted company under the Companies Law of the Cayman Islands on July 13, 2004. The company is a wholly owned subsidiary of Greenlight Capital Re, Ltd. Greenlight Re holds a Class D insurer licence under Section 4(3)(d) of the Cayman Islands Insurance Law, 2010. Greenlight Re bound its first coverage during the second quarter of 2006. MANAGEMENT Officers: Chief Executive Officer, Bart Hedges; Chief Financial Officer, Tim Courtis; Chief Underwriting Officer, Brendan Barry. Directors: Alan Brooks, David Einhorn (Chairman), Leonard Goldberg, Bart Hedges, Ian Isaacs, Frank Lackner, Bryan Murphy, Joseph Platt. REINSURANCE In general, Greenlight Re retains 100% of all premiums and losses it reinsures. However, retrocession may be used to manage accumulations, as well as on a transaction-by-transaction basis. In those cases where retrocession is purchased, the company closely monitors counterparty credit risk. BALANCE SHEET ITEMS USD USD USD USD USD (000) (000) (000) (000) (000) Invested assets 1,177,928 1,030,146 1,034,554 830,600 493,966 Total assets 2,672,443 2,306,890 2,317,046 1,635,201 960,793 Total liabilities 1,822,647 1,472,609 1,493,650 905,124 466,565 Total equity 849,796 834,281 823,396 730,077 494,228 Total capital 849,796 834,281 823,396 730,077 494,228 INCOME STATEMENT ITEMS USD USD USD USD USD (000) (000) (000) (000) (000) Gross premiums written 385,764 365,266 408,738 258,818 162,395 Net premiums written 410,408 318,396 396,727 245,542 145,999 Net investment income -53,135-34,404-30,244-32,669-7,459 Net realized gains/(losses) 64,444 132,807 85,485 232,410-118,667 Net income/(loss) 15,317 10,337 92,232 211,310-117,887 Loss ratio 79.4 63.1 61.5 55.5 48.3 Expense ratio 33.3 39.6 39.8 39.4 45.6 Combined ratio 112.7 102.6 101.3 94.8 93.8 Investment income ratio -12.3-9.6-10.5-15.2-6.5 Return on assets 0.6 0.5 4.7 16.3-11.5 Return on revenues 3.6 2.9 32.1 98.4-99.9 Return on equity 1.8 1.3 11.9 34.5-21.4 LEVERAGE & DEBT RATIOS (%) Net premiums written to equity 48.3 38.2 48.2 33.6 29.5 Cash and equivalents to total assets 45.8 43.3 44.1 38.1 35.6 Operating Company Non-Life Ultimate Parent: Greenlight Capital Re, Ltd. GREENLIGHT REINSURANCE IRELAND, LIMITED Ground Floor, La Touche House, IFSC, Dublin 1, Ireland AMB#: 091169 Ultimate Parent#: 055430 BEST S CREDIT RATING Best s Financial Strength Rating: A- Outlook: Stable Best s Financial Size Category: VI RATING RATIONALE Rating Rationale: The ratings of Greenlight Reinsurance Ireland, Ltd. (GRIL), are based on its excellent risk-adjusted capitalization, experienced management team, and the disciplined implementation of its business plan. The ratings also recognize the company s exceptional Enterprise Risk Management as it aggressively manages risks on both sides of the balance sheet. These strengths are partially offset by the start-up nature of the company, writing business in the EU, and the leverage resulting from an investment portfolio that is primarily composed of publicly traded equity securities. GRIL operates as an Ireland-domiciled reinsurer writing a combination of global property, casualty, and specialty reinsurance business primarily through the broker market. The company follows stringent underwriting and risk management guidelines as it does at its sister company, Greenlight Reinsurance, Ltd. While GRIL s capital footprint entails 100% common equity with no use of debt, A.M. Best is somewhat concerned with the asset risk represented by its equity-based investment portfolio. Mitigating this concern are the absence of financial leverage, the partially hedged nature of the investment portfolio, the experience of the investment manager, the reasonable asset performance of the investment manager during a difficult equity market in 2008 and the low underwriting leverage contemplated in GRIL s business plan. A.M. Best s 2013 A.M. Best Company, Oldwick, NJ 08858 Printed July 1, 2013 www.ambest.com Page 5 of 8
rating approach involves assessing GRIL s risk correlations across the enterprise by subjecting its capitalization to concurrent adverse events. The company s robust risk-adjusted capitalization withstands substantial amounts of strain when subjected to these various stress scenarios. A.M. Best will continue to closely monitor GRIL s underwriting and asset risks and its progress against the business plan used to assess the initial ratings. Positive rating actions may result from continued improvements in Greenlight Re s operating results, lower adverse development, continued lack of cat losses and a continued positive investment performance. Negative rating actions may result from continued abnormal adverse development, severe negative investment results, significant loss of surplus and/or poor underwriting performance. FIVE YEAR RATING HISTORY Date Best s FSR Date Best s FSR 10/09/12 A- 10/08/10 A- 09/26/11 A- BUSINESS PROFILE Greenlight Reinsurance Ireland, Ltd. ( GRIL ) writes a combination of global property, casualty and specialty reinsurance distributed primarily through the broker market. The mix of business between the property, casualty and specialty segments will vary based on overall market conditions. The company writes worldwide with concentrations of cedants in the United States, the United Kingdom, and Europe. In addition to the standard underwriting risk/reward footprint of most global reinsurers, GRIL has introduced an additional investment risk/reward architecture with a partially hedged equity portfolio that is the vast majority of unencumbered assets. The equity portfolio consists of publicly traded securities with a long and short philosophy that produces a partial hedge on market performance and asset value. This strategy has been employed by the asset manager in a separate though similarly structured multi-billion dollar value portfolio for the last fifteen years. RISK MANAGEMENT The following text is derived from A.M. Best s Credit Report on Greenlight Reinsurance, Ltd. (AMB# 076873). Greenlight Re has a very strong enterprise risk management culture starting from the top down. Greenlight Re s small staff compared to other reinsures works to their advantage. A transaction is handled by an underwriter and an actuary who evaluate the specifics of the deal. Each new deal is presented to the senior staff who evaluates the transaction. The CEO and CUO must both agree that each deal meets the firms underwriting guidelines. Greenlight Re aims to act as the lead underwriter in deals since the lead typically has greater influence in pricing terms and conditions. Greenlight Re also has a cradle to grave philosophy where the same underwriter also services the contract. Each account is reviewed on a quarterly basis and a meeting is held annually with clients. Greenlight Re uses an in-house developed simulation model for pricing. The investment piece of Greenlight Re is also very intertwined in the risk management culture. Greenlight Re has weekly calls with DME Advisors to discuss their overall underwriting and investment strategy. This is detailed quarterly at the Board level. On the investment side multiple, stable prime brokers are used to reduce counterparty risk. Investment Risk Management: Greenlight Re follows investment guidelines that were adopted by the Board of Directors. The guidelines state that at least 80% of invested assets must be held in quality investments. This includes debt or equity securities of publicly traded companies, government securities of developed countries, cash and cash equivalents as well as gold. Private equity securities cannot be more than 10% of the investment portfolio. No single investment can be more than 20% of the portfolio, with the exception of cash, cash equivalents and U.S. government obligations. Liquidity of the portfolio is dictated by the expectation of the liabilities and the portfolio is reviewed with the investment advisor on a periodic basis. OPERATING PERFORMANCE Operating Results: Greenlight Reinsurance Ireland, Ltd. ( GRIL ) has steadily increased net premiums written over the past two years. Net underwriting losses have decreased over the past two years as GRIL slowly grows its business in the EU. Operating expenses have increased as they continue to add staff in Ireland. There is an 80% quota share on non-u.s. business to Greenlight Re Cayman and an aggregate stop-loss provided by Greenlight Re Cayman to GRIL. BALANCE SHEET STRENGTH Capitalization: Greenlight Reinsurance Ireland, Ltd. ( GRIL ) was initially capitalized with $40 million of capital from the Cayman Islands based parent company, and currently holds over $42 million in surplus. GRIL has no debt and a liquid investment portfolio; however, the concentration of investments in equity security positions represents a significant risk to the company s capitalization. Nevertheless, its risk-adjusted capitalization is excellent and withstands significant potential asset value impairment when stress tested. In addition, the portfolio is partially hedged with a long and short investment strategy. Though variable asset values are expected, extreme volatility and capital loss are not. GRIL s risk-adjusted capitalization remains robust even with the introduction of heavy stress-test scenarios that simultaneously compromise asset values and underwriting results. Summarized Accounts as of December 31, 2012 Data reflected within all tables of this report has been compiled from the financial statements of this company (Source: Company Financial Statement). STATEMENT OF INCOME Technical account: Reinsurance premiums assumed 44,922 35,667 Gross premiums written 44,922 35,667 Reinsurance ceded 3,211 3,324 Net premiums written 41,711 32,343 Increase/(decrease) in gross unearned premiums 6,440 15,275 Reinsurers share unearned premiums -529 2,325 Net premiums earned 34,742 19,393 Total underwriting income 34,742 19,393 Net claims paid 17,160 8,796 Net increase/(decrease) in claims provision 6,420 5,643 Net claims incurred 23,580 14,439 Net operating expenses 12,736 7,093 Total underwriting expenses 36,316 21,532 Balance on technical account -1,574-2,139 Combined technical account: Reinsurance premiums assumed 44,922 35,667 Gross premiums written 44,922 35,667 Reinsurance ceded 3,211 3,324 Net premiums written 41,711 32,343 Increase/(decrease) in gross unearned premiums 6,440 15,275 Increase/(decrease) in reinsurers share unearned premiums -529 2,325 Net premiums earned 34,742 19,393 Total revenue 34,742 19,393 Net claims paid 17,160 8,796 Net increase/(decrease) in claims provision 6,420 5,643 Net claims incurred 23,580 14,439 Net operating expenses 12,736 7,093 Total underwriting expenses 36,316 21,532 Balance on combined technical account -1,574-2,139 2013 A.M. Best Company, Oldwick, NJ 08858 Printed July 1, 2013 www.ambest.com Page 6 of 8
Non-technical account: Net investment income -2,414-1,455 Realised capital gains/(losses) 1,795 5,000 Unrealised capital gains/(losses) 4,069-2,975 Profit/(loss) before tax 1,876-1,569 Taxation 70-16 Profit/(loss) after tax 1,806-1,553 Retained profit/(loss) for the financial year 1,806-1,553 Retained profit/(loss) brought forward 587 2,140 Retained profit/(loss) carried forward 2,393 587 LIABILITIES Capital 40,133 31.8 40,047 Paid-up capital 40,133 31.8 40,047 Retained earnings 2,393 1.9 587 Capital & surplus 42,526 33.7 40,634 Gross provision for unearned premiums 27,873 22.1 21,303 Gross provision for outstanding claims 15,080 11.9 6,217 Total gross technical reserves 42,953 34.0 27,520 MOVEMENT IN CAPITAL & SURPLUS Capital & surplus brought forward 40,634 42,140 Insurance/reinsurance creditors 1,476 1.2 3,122 Inter-company creditors 630 0.5 1,736 Other creditors 3,025 2.4 542 Total creditors 5,131 4.1 5,400 Change in share capital 86 47 Profit or loss for the year 1,806-1,553 Total change in capital & surplus 1,892-1,506 Capital & surplus carried forward 42,526 40,634 ASSETS Cash & deposits with credit institutions 41,620 33.0 32,853 Bonds & other fixed interest securities 65 0.1 434 Shares & other variable interest instruments 44,393 35.1 36,437 Liquid assets 86,078 68.2 69,724 Unquoted investments 1,623 1.3 1,286 Other investments 4,465 3.5 5,127 Total investments 92,166 73.0 76,137 Reins. sh. of tech. reserves - unearned premiums 1,900 1.5 2,325 Reinsurers share of technical reserves - claims 3,088 2.4 615 Total reinsurers share of technical reserves 4,988 3.9 2,940 Insurance/reinsurance debtors 22,026 17.4 17,525 Total debtors 22,026 17.4 17,525 Fixed assets 367 0.3 432 Prepayments & accrued income 6,751 5.3 5,065 Total assets 126,298 100.0 102,099 Other liabilities 35,688 28.3 28,545 Total liabilities & surplus 126,298 100.0 102,099 MANAGEMENT Officers: Chief Executive Officer, Bart Hedges; Chief Financial Officer, Tim Courtis; Chief Underwriting Officer, Brendan Barry; General Manager, Caryl Traynor. ANALYSIS OF GROSS PREMIUMS WRITTEN USD USD USD (000) (000) (000) Reinsurance 44,922 35,667 6,113 Total non-life 44,922 35,667 6,113 REINSURANCE Currently Greenlight Re Ireland, Ltd. has a 80% quota share on non-u.s. business to Greenlight Re Cayman. Additionally, Greenlight Re Cayman provides an aggregate stop-loss protection to GRIL. BALANCE SHEET ITEMS USD USD USD (000) (000) (000) Liquid assets 86,078 69,724 66,594 Total investments 92,166 76,137 72,298 Total assets 126,298 102,099 78,489 Total gross technical reserves 42,953 27,520 6,085 Net technical reserves 37,965 24,580 6,085 Total liabilities 83,772 61,465 36,349 Capital & surplus 42,526 40,634 42,140 INCOME STATEMENT ITEMS USD USD USD (000) (000) (000) Gross premiums written 44,922 35,667 6,113 Net premiums written 41,711 32,343 6,113 Balance on technical account(s) -1,574-2,139-612 Profit/(loss) before tax 1,876-1,569 2,446 Profit/(loss) after tax 1,806-1,553 2,140 LIQUIDITY RATIOS (%) Total debtors to total assets 17.4 17.2 5.9 Liquid assets to net technical reserves 226.7 283.7 999.9 Liquid assets to total liabilities 102.8 113.4 183.2 Total investments to total liabilities 110.0 123.9 198.9 2013 A.M. Best Company, Oldwick, NJ 08858 Printed July 1, 2013 www.ambest.com Page 7 of 8
LEVERAGE RATIOS (%) Net premiums written to capital & surplus 98.1 79.6 14.5 Net technical reserves to capital & surplus 89.3 60.5 14.4 Gross premiums written to capital & surplus 105.6 87.8 14.5 Gross technical reserves to capital & surplus 101.0 67.7 14.4 Total debtors to capital & surplus 51.8 43.1 11.0 Total liabilities to capital & surplus 197.0 151.3 86.3 PROFITABILITY RATIOS (%) Loss ratio 67.9 74.5 68.2 Operating expense ratio 30.5 21.9 10.5 Combined ratio 98.4 96.4 78.7 Net investment income ratio -6.9-7.5-99.9 Operating ratio 105.4 103.9 898.7 Return on net premiums written 4.3-4.8 35.0 Return on total assets 1.6-1.7 Return on capital & surplus 4.3-3.8 Why is this Best s Rating Report important to you? A Rating Report from the A.M. Best Company represents an independent opinion from the leading provider of insurer ratings of a company's financial strength and ability to meet its obligations to policyholders. The A.M. Best Company is the oldest, most experienced rating agency in the world and has been reporting on the financial condition of insurance companies since 1899. The Best's Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. The rating is not assigned to specific insurance policies or contracts and does not address any other risk, including, but not limited to, an insurer's claims-payment policies or procedures; the ability of an insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. A Best's Financial Strength Rating is not a recommendation to purchase, hold or terminate any insurance policy, contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. The company information appearing in this pamphlet is an extract from the complete company report prepared by the A.M. Best Company. A Best's Financial Strength Rating is assigned after a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance and business profile. Best's Financial Strength Ratings are assigned according to the following scale: Secure Best's Financial Strength Ratings A++ and A+.......................... Superior A and A-............................ Excellent B++ and B+............................. Good Vulnerable Best's Financial Strength Ratings B and B-.................................Fair C++ and C+.......................... Marginal C and C-............................... Weak D......................................Poor E..................Under Regulatory Supervision F...............................In Liquidation S............................Rating Suspended For the latest Best's Financial Strength Ratings and AMB Credit Reports visit the A.M. Best web site at www.ambest.com. You may also obtain AMB Credit Reports by calling our Customer Service department at +1-908-439-2200, ext. 5742. To expedite your request, please provide the company's identification number (AMB #). 2013 A.M. Best Company, Oldwick, NJ 08858 Printed July 1, 2013 www.ambest.com Page 8 of 8