GREENLIGHT CAPITAL RE LTD

The following table provides a breakdown of our total investments:

At December 31, 2023, our total investments increased by $83.7 million, or 33.7%, to $332.2 million from December 31, 2022. The increase was primarily driven from net additional contributions into SILP, coupled with the net investment return in 2023.

Investments in SILP

DME Advisors reports the composition of SILP’s portfolio on a delta-adjusted basis, which it believes is the appropriate manner to assess the exposure and profile of investments and reflects how it manages the portfolio. An option’s delta is the option price’s sensitivity to the underlying stock (or commodity) price. The delta-adjusted basis is the number of shares or contracts underlying the option multiplied by the delta and the underlying stock (or commodity) price.

The following table represents the composition of SILP’s investments:

The above exposure analysis does not include cash (U.S. dollar and foreign currencies), gold and other commodities, credit default swaps, sovereign debt, foreign currency derivatives, interest rate derivatives, inflation swaps and other macro positions. Under this methodology, a total return swap’s exposure is reported at its full notional amount and options are reported at their delta-adjusted basis. At December 31, 2023, SILP’s exposure to gold on a delta-adjusted basis was 11.2% (2022: 15.2%).

The following table represents the composition of SILP by industry sector at December 31, 2023:

The following table represents the composition of SILP, by the market capitalization of the underlying issuer, at December 31, 2023:

At December 31, 2023, 95.0% of SILP’s portfolio was valued based on quoted prices in actively traded markets (Level 1), 3.6% was composed of instruments valued based on observable inputs other than quoted prices (Level 2), and a nominal amount was composed of instruments valued based on non-observable inputs (Level 3). At December 31, 2023, 1.4% of SILP’s portfolio consisted of private equity funds valued using the funds’ net asset values as a practical expedient.

Other Investments

The other investment holdings relate to private investments made by Innovations. During 2023, we made $7.1 million of new private investments compared to $13.2 million in the prior year. While we manage a diversified Innovations-related investment portfolio with approximately 40 holdings, our top five holdings accounted for 67% of the total carrying value as a result of favorable fair value remeasurement since our initial investments, net of impairment charges. For further information, see Note 4 “Other Investments” of the consolidated financial statements.

The certificate of deposit was redeemed in 2023 to provide cash collateral for the new Loan Facility (see “Debt” below).

Restricted cash and cash equivalents

We use our restricted cash and cash equivalents primarily for funding trusts and letters of credit issued to our ceding insurers. Our restricted cash decreased by $63.7 million, or 9.5%, from $668.3 million at December 31, 2022, to $604.6 million at December 31, 2023, primarily due to release of collateral from our ceding insurers relating to legacy contracts in run-off. During the year ended December 31, 2023, we also pledged $10.0 million collateral as security for the new Loan Facility (see “Debt” below).

Reinsurance balances receivable

Our reinsurance balances receivable increased by $113.8 million, or 22.5%, to $619.4 million from $505.6 million at December 31, 2022. This increase was driven primarily by premiums held by Lloyd’s syndicates through GCM. See “Concentration of Credit Risk - Reinsurance Balances Receivable, net” in Note 16 “Commitments and Cont ingencies” to the consolidated financial statements.

Loss and LAE Reserves; Loss and LAE Recoverable

Our reserves for loss and LAE by lines of business were as follows:

Our total gross loss and LAE reserves increased by $106.1 million, or 19.1%, to $661.6 million from $555.5 million at December 31, 2022. See Note 7 “Loss and Loss Adjust ment Expense Reserves” of the consolidated financial statements for a summary of changes in outstanding loss and LAE reserves and a description of prior period loss developments.

Our total loss and LAE recoverable increased by $12.4 million, or 94.0%, to $25.7 million from $13.2 million at December 31, 2022. See Note 8 “Retrocession” of the consolidated financial statements for a description of the credit risk associated with our retrocessionaires.

PML

For most of the contracts we write, defined limits of liability limit our risk exposure. Once each contract’s limit of liability has been reached, we have no further exposure to additional losses from that contract. However, certain contracts, particularly quota share contracts covering first-dollar exposure, do not contain aggregate limits.

Our property and Lloyd’s business, and to a lesser extent our casualty and other business, incorporate contracts that contain natural peril loss exposure. We currently monitor our catastrophe loss exposure in terms of our PML (net of retrocession and reinstatement premiums). We anticipate that our PMLs will vary from period to period depending upon the modeled simulated losses and the composition of our in-force book of business.

We monitor our natural peril PMLs on a worldwide basis, with a particular focus on our peak peril regions. When these perils consist of a large geographic area, we split them into sub-regions, where the underlying geographic components can also be considered individual peril zones.

For our natural catastrophe PMLs, we utilize the output of catastrophe models at the 1-in-250-year return period. The 1-in-250-year return period PML means that we believe there is a 0.4% probability that, in any given year, an occurrence of a natural catastrophe will lead to losses exceeding the stated estimate.

It is important to note that PMLs are best estimates based on the modeled data available for each underlying risk. As a result, we cannot provide assurance that any actual event will align with the modeled event or that actual losses from events similar to the modeled events will not vary materially from the modeled event PML.

Our PML estimates incorporate all significant exposure from our reinsurance operations, including coverage for property, marine and energy, motor, and catastrophe workers’ compensation exposures.

At January 1, 2024, our estimated largest PML at a 1-in-250-year return period for a single event and in aggregate was $89.7 million and $97.0 million, respectively, both relating to the peril of North Atlantic Hurricane, compared to $77.5 million and $83.5 million, respectively, at January 1, 2023. We have increased our PMLs in response to favorable market conditions and attractive opportunities, coupled with increased surplus.

The below table contains the expected modeled loss for each of our peak peril regions and sub-regions for both a single event loss and aggregate loss measures at the 1-in-250-year return period.

Debt

Our total debt decreased by $7.3 million, or 9.0%, to $73.3 million from $80.5 million at December 31, 2022. During 2023, we repurchased $17.5 million of Convertible Notes for a marginal realized gain. Further, we repaid the remaining $63.4 million of Convertible Notes, including accrued interest, which matured on August 1, 2023. To repay this debt, we entered into a $75.0 million Loan Facility with a group of banks. In connection with this Loan Facility, we contractually agreed to hedge 50% of the floating rate Term Loans for the duration of the Loan Facility. Refer to Note 9 “Debt and Credit Facilities” of the consolidated financial statements for further information.

Total shareholders’ equity

Total shareholders’ equity increased by $93.0 million to $596.1 million, compared to $503.1 million at December 31, 2022. The increase was primarily due to the net income of $86.8 million reported for the year. For details of other movements in shareholders’ equity, see the consolidated statements of shareholders’ equity.