GREENLIGHT REINSURANCE, LTD. A- Best’s Rating Report ... · writes a combination of property, casualty and specialty reinsurance distributedprimarily throughthe broker market. Themixofbusiness

Printed December 15, 2017 www.ambest.com Page 1 of 13

GREENLIGHT REINSURANCE, LTD. A-

GREENLIGHT REINSURANCE IRELAND, DESIGNATED ACTIVITY COMPANY A-

Best’s Rating Report

Operating Company Non-LifeUltimate Parent: Greenlight Capital Re, Ltd.

GREENLIGHT REINSURANCE, LTD.65 Market Street, Jasmine Court, Camana Bay, Grand Cayman, Cayman

IslandsWeb: www.greenlightre.ky

Tel.: 345-943-4573 Fax: 345-745-4576AMB#: 076873 AIIN#: AA-3770280Ultimate Parent#: 055430

BEST’S CREDIT RATING

Best’s Financial Strength Rating: A- Outlook: StableBest’s Financial Size Category: XI

RATING RATIONALERating Rationale: The ratings of Greenlight Reinsurance, Ltd. (GreenlightRe), are based on its strong risk-adjusted capitalization and experiencedmanagement team. The ratings also consider the company’s business profileand strategy as it seeks to aggressively manage risks on both sides of thebalance sheet.

Partially offsetting these positive rating factors are the greater investmentrisk associated with its alternative investment strategy and the continuedcompetition and capacity in the reinsurance marketplace. Greenlight Re couldbe exposed to a convergence of events that could test its capital strength. Theunderwriting risk along with significant investment risk could have aduplicative adverse effect on its risk-adjusted capital.

The ratings reflect Greenlight Re’s improved underwriting results,following less favorable results in recent years, which have fallen short ofA.M. Best’s long-term expectations. While A.M. Best acknowledges that theunderwriting process and controls have since been strengthened, the currentmarket environment will continue to present challenges and will ultimatelytest the sufficiency of the current underwriting rigor, undertaken by thecompany, and enterprise risk management.

At the current rating level, A.M. Best can be slightly more accepting ofvariability in operating results, though, A.M. Best is looking for operatingresults, that over the long term, generate solid profit from both underwritingand investment activities. While Greenlight Re’s capital footprint entails100% common equity with no use of debt, A.M. Best recognizes the asset riskrepresented by its equity-based investment portfolio. Mitigating this concernis the inherent partially hedged nature of the investment portfolio, and theexperience and strong, long-term track record of the investment manager.More than 80% of the invested assets are in highly liquid investments, andgenerally no position can be greater than 20% of invested assets. A.M. Best’srating approach involves assessing Greenlight Re’s risk correlations across theenterprise by subjecting its capitalization to concurrent adverse stress testevents. The company’s risk-adjusted capitalization withstands substantial

amounts of strain when subjected to various catastrophe and investment stressscenarios.

Factors that may contribute to positive rating actions include improvementsin the company’s underwriting results, continued lack of material catastrophelosses and positive investment performance. Alternatively, ratings could benegatively impacted by continued adverse reserve development, coupled withnegative investment results and poor underwriting performance, which couldcollectively contribute to a significant deterioration of surplus.

Additionally, ratings could also be impacted by turmoil in the capitalmarkets that results in significant fluctuation, which negatively impactsrisk-adjusted capitalization and overall operating performance.

FIVE YEAR RATING HISTORY

DateBest’sFSR Date

Best’sFSR

09/28/17 A- 10/30/14 A11/03/16 A- 10/17/13 A10/23/15 A 10/09/12 A

RATING UNIT MEMBERSGreenlight Reinsurance, Ltd. (AMB# 076873):

AMB# COMPANYBEST’SFSR

091169 Greenlight Re Ireland, DAC A-

BUSINESS PROFILEGreenlight Reinsurance, Ltd. (Greenlight Re) is headquartered and

domiciled in the Cayman Islands. Greenlight Re is a global specialist propertyand casualty reinsurer established in 2004 and is wholly owned by GreenlightCapital Re, Ltd. (NASDAQ: GLRE). Greenlight Capital Re, Ltd. has twoother wholly owned subsidiaries, Greenlight Reinsurance Ireland, DAC(“GRIL”) and Verdant Holding Company, Ltd. (“Verdant”). GRIL is based inDublin, Ireland and was established in September 2010 to provide multi-lineproperty and casualty reinsurance capacity to the European broker market andoffer service to clients in Europe. Verdant is a Delaware corporation whichwas established to facilitate strategic alliances that Greenlight Re may seek toform with insurance companies and general agents in the U.S. Greenlight Rewrites a combination of property, casualty and specialty reinsurancedistributed primarily through the broker market. The mix of business betweenthe property, casualty and specialty segments will vary based on overallmarket conditions. The company writes worldwide with concentrations ofcedants in the United States, the United Kingdom, Europe and Bermuda. In2008 the Cayman Islands Monetary Authority granted approval for GreenlightRe to engage in long term business, but to date Greenlight Re has not offeredor written any long term products.

A portion of the company’s portfolio is exposed to natural perils. Naturalperil-exposed business is underwritten and modeled utilizing conventionalmethods. For internal risk management purposes, the company monitorsaccumulations by geographic zone based on potential loss scenarios, whichare 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 theevent of a major covered catastrophe. In addition to the standard underwritingrisk/reward footprint of most global reinsurers, Greenlight Re has analternative investment strategy with a partially hedged equity portfolio that isthe vast majority of unencumbered assets. The equity portfolio primarilyconsists of publicly traded securities with a long and short philosophy thatproduces a partial hedge on market performance and asset value. This strategyhas been employed by the asset manager in a separate, though similarlystructured multi-billion dollar value portfolio for over fifteen years.

RISK MANAGEMENTGreenlight Re has an enterprise risk management culture starting from the

top down. Greenlight Re’s small staff compared to other reinsurers aids theflow of communication. A transaction is handled by an underwriter and anactuary who evaluate the specifics of the deal. Each new deal is presented tothe senior staff who evaluates the transaction. The CEO and CUO must bothagree that each deal meets the firms underwriting guidelines. Greenlight Reaims to act as the lead underwriter in deals since the lead typically has greaterinfluence in pricing terms and conditions. Greenlight Re also has a “cradle tograve” philosophy where the same underwriter also services the contract.Each account is reviewed on a quarterly basis and a meeting is held annuallywith clients. Greenlight Re uses an in-house developed simulation model forpricing. Greenlight has recently implemented some underwriting changes,however the market remains challenging and the sufficiency of the changes inthe scope of enterprise risk management remains untested.

The investment piece of Greenlight Re is also very intertwined in the riskmanagement culture. Greenlight Re has weekly calls with DME Advisors todiscuss their overall underwriting and investment strategy. This is detailedquarterly at the Board level. On the investment side multiple, stable primebrokers are used to reduce counterparty risk.Investment Risk Management: Greenlight Re follows investment guidelinesthat are adopted by the Board of Directors. The guidelines state that at least80% of invested assets must be held in quality investments. This includes debtor equity securities of publicly traded companies, government securities ofdeveloped countries, cash and cash equivalents as well as gold. Private equitysecurities cannot be more than 10% of the investment portfolio. No singleinvestment can be more than 20% of the portfolio, with the exception of cash,cash equivalents and U.S. government obligations. Liquidity of the portfolio isdictated by the expectation of the liabilities and the portfolio is reviewed withthe investment advisor on a periodic basis.

The portfolio that has been put in place is highly liquid, actively managedand is fluid based upon various investment opportunities.

OPERATING PERFORMANCEOperating Results: Greenlight Re’s operating results have had variability inrecent years. The company has reported adverse development on prior yearclaims. Furthermore, investment returns have been varied, with 2015 being aparticularly challenging year for the company. However, 2016 saw a positiveinvestment returns trend, generating returns of over 7%.

Generally, investment income has been positive and A.M. Best understandsthat investments results may have more volatility given the investmentstrategy. This volatility is captured and accounted for in A.M. Best’srisk-adjusted capital model (BCAR).

Greenlight Re still has a high geographic concentration of business comingfrom the U.S. Return on equity metrics are at the lower end of established peerson a 5-year basis.Underwriting Results: Geographically Greenlight Re writes approximately79% of its gross premiums in the U.S. with Europe constituting less than 5%,followed by the rest of the world. Greenlight Re’s underwriting results havebeen varied over the recent 5-year period and adverse loss reservedevelopment has impacted results. On the whole, Greenlight Re’sunderwriting results have underperformed most peers on a 5-year basis. In2016, Greenlight Re entered into a novation to remove a specific book ofbusiness and provided excess of loss coverage to a run-off specialist. Whilethere is still uncertainty with regards to the ultimate liability associated withthis particular book of business, the coverage to which Greenlight Re remainsliable is substantially beyond the high point of the actuarial range and allowsGreenlight Re to refocus on its current book of business and prospectivestrategic opportunities.

The underwriting loss for year-end 2016 was mainly driven by a $19 millionloss from the novation of the legacy construction defect liabilities.Investment Results: Greenlight Re’s investment portfolio, although reportingpositive returns through year-end 2014, was trending lower from 2009 to 2011.In 2014 the investment portfolio returned a gain of roughly 9% compared to analmost 20% return in 2013 net of all fees and expenses. The large gain in 2013was mostly a result of an increase in market value of the company’sinvestments. In 2014 the income was mostly attributable to large realizedgains partly offset by unrealized losses.

In 2015 the portfolio returned a sizeable loss of approximately 20%. Thelarge loss was due to a decrease in market value of the investment portfolio.Given the overall investment environment Greenlight Re’s investment advisor,DME Advisors, has been in a defensive investing position. Greenlight Re’sinvestment portfolio is considered a “trading portfolio” and therefore underU.S. GAAP, realized as well as unrealized gains and losses are included, andrepresent the biggest drivers of net investment income. Also included in netinvestment income is the change in market value of exchange-traded call andput options.

In 2016, the portfolio rebounded with a 7.2% investment gain, stemmingfrom the performance of the long portfolio, as well as gains relating to goldand natural gas.

While the investment portfolio has some volatility, this volatility has beencontemplated and various stress tests are performed in A.M. Best’srisk-adjusted capital model.

BALANCE SHEET STRENGTHCapitalization: Greenlight Re was initially capitalized with $212 million, andit added approximately $256 million in 2007 through an IPO and relatedprivate placement. The company has also generated capital through retained



earnings and surplus has grown since inception. Underwriting leveragemeasures are minimal and A.M. Best expects these measures to remainmoderate.

Greenlight Re has no debt and a liquid investment portfolio; however, theconcentration of investments in equity security positions represents asignificant risk to the company’s capitalization. Nevertheless, its risk-adjustedcapitalization is excellent and withstands significant potential asset valueimpairments when stress tested. In addition, the portfolio is partially hedgedwith a long and short investment strategy. Though variable asset values areexpected, extreme volatility and capital loss are not.

Greenlight Re’s risk adjusted capitalization remains robust even with theintroduction of heavy stress-test scenarios that simultaneously compromiseasset values and underwriting results.Loss Reserves: Greenlight Re has reported some adverse reservedevelopment in recent years. The majority of the 2014 development wasrelated to a general liability contract and a commercial auto multi-line contractwhose clients reported additional open claims activity; both contracts arecurrently in run-off.

In 2015, Greenlight Re experienced unfavorable development in certainfrequency business relating to Florida home-owners contracts as a result of thedeterioration of sinkhole claims and the increase in the practice of“assignment of benefits” in the state of Florida. For the year ended December31, 2016, the net loss reserves for past periods were increased due to adversedevelopment primarily on the legacy construction defect liabilities.Liquidity: As it first began to assume business in 2006, Greenlight Re’sliabilities from underwriting activities are still relatively modest. Thecompany’s investment portfolio, composed essentially of publicly tradedequity securities, is highly liquid. As most of Greenlight Re’s invested assetsare trading securities, the sale and purchase of these assets are reported asoperating cash flows.Investments: Greenlight Re’s investment portfolio is managed by DMEAdvisors which is controlled by David Einhorn who is also Chairman of theBoard of Directors and the president of Greenlight Capital, Inc. Theinvestment strategy used is a value-oriented strategy that identifiesundervalued and overvalued securities by analyzing companies’ availablefinancial data. The portfolio is somewhat naturally hedged with both long andshort positions. DME Advisors goal is to achieve higher rates of return whileminimizing the risk of capital losses.

The investment guidelines are adopted by the Board of Directors. At least80% 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 theportfolio.

Liquidity is reviewed on a periodic basis to ensure that Greenlight Re willbe able to meet any of its liabilities as they come due. The investment portfoliodoes 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 theinvestment portfolio in prior years.

Summarized Accounts as of December 31, 2016Data reflected within all tables of this report has been compiled from theconsolidated financial statements of this company (Source: CompanyFinancial Statement).

An independent audit of the company’s affairs through December 31, 2016,was conducted by BDO Cayman Ltd.

ASSETS

12/31/2016USD(000)

12/31/2016% of total

12/31/2015USD(000)

Cash and equivalents 1,228,759 46.6 1,345,878

Long term fixed maturity investments 22,473 0.9 39,087Equity investments 844,001 32.0 905,994Other investments 156,063 5.9 119,083

Invested assets 1,022,537 38.7 1,064,164

Receivables 323,282 12.3 214,760Reinsurance recoverable 2,670 0.1 3,333Deferred policy acquisition cost 57,544 2.2 54,187Other assets 4,431 0.2 6,453

Total assets 2,639,223 100.0 2,688,775



LIABILITIES & SURPLUS

12/31/2016USD(000)

12/31/2016% of total

12/31/2015USD(000)

Property / Casualty reserves 279,610 10.6 273,686Unearned premium reserves 203,203 7.7 184,533

Total policy reserves 482,813 18.3 458,219

Other liabilities 1,233,267 46.7 1,341,551

Total liabilities 1,716,080 65.0 1,799,770

Paid-in capital 472,379 17.9 472,379Retained earnings 361,901 13.7 317,102Other equity 88,863 3.4 99,524

Total equity 923,143 35.0 889,005

Total liabilities & equity 2,639,223 100.0 2,688,775

STATEMENT OF INCOME

12/31/2016USD(000)

12/31/2015USD(000)

Reins assumed 470,600 414,795

Gross premiums written 470,600 414,795

Reins ceded 8,152 7,146

Net premiums written 462,448 407,649

Change in unearned premiums 20,839 83,301

Net premiums earned 441,609 324,348

Net investment income -20,918 -38,706Net realized gains/(losses) -113,836 22,227Net unrealized gains/(losses) 209,993 -265,401

Total revenue 516,848 42,468

Benefits & reserves 326,358 259,596Operating expenses 140,097 114,801

Total benefits & expenses 466,455 374,397

Earnings before interest & taxes (EBIT) 50,393 -331,929

Pre-tax income/(loss) from continuingoperations 50,393 -331,929

Net income/(loss) before minority interest 50,393 -331,929

Minority interest -5,594 22,445

Net income/(loss) from continuing operations 44,799 -309,484

Net income/(loss) 44,799 -309,484



STATEMENT OF CHANGES IN EQUITY

12/31/2016USD(000)

12/31/2015USD(000)

Paid-in capital - Beg bal 472,379 472,379

Paid-in capital - End bal 472,379 472,379

Other equity, beg. bal. 99,524 96,469Other equity, misc. -10,661 3,055

Other equity, end. bal. 88,863 99,524

Retained earnings, beginning balance 317,102 631,586Retained earnings, net income 44,799 -309,484Retained earnings, common dividends … 5,000

Retained earnings, ending balance 361,901 317,102

Total shareholder equity 923,143 889,005

STATEMENT OF CASH FLOWS

12/31/2016USD(000)

12/31/2015USD(000)

Net cash provided/(used) in operating activities -43,759 -96,896Net cash provided/(used) in investment activities -25,946 203,795Net cash provided/(used) in financing activities … -5,000Effect of exchange rates on cash -6,082 -2,500

Total increase (decrease) in cash -75,787 99,399

Cash, beginning balance 109,289 9,890

Cash, ending balance 33,502 109,289

PREMIUMS BY LINE OF BUSINESS

12/31/2016USD(000)

12/31/2016% of total

12/31/2015USD(000)

GPW-Accident & health 51,945 11.0 25,860GPW-Automobile 174,530 37.1 158,582GPW-Automobile - physical damage 30,028 6.4 27,562GPW-Liability 72,674 15.4 92,433GPW-Marine 7,533 1.6 7,744GPW-Other classes 9,877 2.1 10,200GPW-Property - commercial 13,683 2.9 13,192GPW-Property - personal 49,467 10.5 58,975GPW-Surety 35,420 7.5 7,614GPW-Workers’ compensation 25,443 5.4 12,633

GPW-Total non-life 470,600 100.0 414,795

GPW-Total business 470,600 100.0 414,795

PREMIUMS - GEOGRAPHIC

12/31/2016USD(000)

12/31/2016% of total

12/31/2015USD(000)

GPW-Other Asia -132 -0.0 467

GPW-Total Asia -132 -0.0 467

GPW-Other Europe 18,459 3.9 8,863

GPW-Total Europe 18,459 3.9 8,863

GPW-United States 371,321 78.9 300,304

GPW-Total North America 371,321 78.9 300,304

GPW-Other World-Wide 80,952 17.2 105,161

GPW-Total World-Wide 470,600 100.0 414,795

HISTORYGreenlight Re was incorporated as an exempted company under the

Companies Law of the Cayman Islands on July 13, 2004. The company is awholly owned subsidiary of Greenlight Capital Re, Ltd. Greenlight Re holds aClass D insurer license under Section 4(3)(d) of the Cayman Islands Insurance



Law, 2010. Greenlight Re bound its first coverage during the second quarter of2006.

MANAGEMENTOfficers: Chief Executive Officer, Simon Burton; Chief Financial Officer,Tim Courtis; Chief Underwriting Officer, Brendan Barry.Directors: Alan Brooks, Simon Burton, David Einhorn (Chairman), LeonardGoldberg, Ian Isaacs, Frank Lackner, Bryan Murphy, Joseph Platt, Hope Taitz.

REINSURANCEIn general, Greenlight Re retains 100% of all premiums and losses it

reinsures. However, retrocession may be used to manage accumulations, aswell as on a transaction-by-transaction basis. During 2015 the companypurchased an industry loss warrant to reduce its net exposure to catastropheevents. In 2016, the company novated a specific book of business that wasproblematic for the company to a run-off specialist. In those cases whereretrocession is purchased, the company closely monitors counterparty creditrisk.

BALANCE SHEET ITEMSUSD USD USD USD USD(000) (000) (000) (000) (000)2016 2015 2014 2013 2012

Invested assets 1,022,537 1,064,164 1,430,978 1,393,679 1,177,928Total assets 2,639,223 2,688,775 2,962,199 3,056,151 2,672,443Total liabilities 1,716,080 1,799,770 1,761,765 1,962,251 1,822,647Total equity 923,143 889,005 1,200,434 1,093,900 849,796Total capital 923,143 889,005 1,200,434 1,093,900 849,796

INCOME STATEMENT ITEMS

USD USD USD USD USD(000) (000) (000) (000) (000)2016 2015 2014 2013 2012

Gross premiums written 470,600 414,795 252,339 464,127 385,764Net premiums written 462,448 407,649 239,685 462,793 410,408Net investment income -20,918 -38,706 -42,221 -73,061 -49,453Net realized gains/(losses) -113,836 22,227 347,633 141,976 60,762Net income/(loss) 44,799 -309,484 113,286 229,813 15,317

LIQUIDITY RATIOS (%)

2016 2015 2014 2013 2012Total investments to total reserves 466.3 526.0 805.3 596.1 474.3Liquid assets to total liabilities 122.1 127.3 148.8 133.6 124.4Total investments to total liabilities 131.2 133.9 155.4 139.1 131.7Bonds to total reserves 4.7 8.5 14.5 0.9 0.4

PROFITABILITY RATIOS (%)

2016 2015 2014 2013 2012Loss ratio 73.9 80.0 63.1 60.1 79.4Expense ratio 31.5 34.4 37.8 34.7 33.3Combined ratio 105.4 114.5 100.9 94.7 112.7Investment income ratio -4.7 -11.9 -14.7 -15.4 -11.5Return on assets 1.7 -11.0 3.8 8.0 0.6Return on revenues 10.1 -95.4 39.5 48.5 3.6Return on equity 4.9 -29.6 9.9 23.7 1.8

LEVERAGE & DEBT RATIOS (%)

2016 2015 2014 2013 2012Net premiums written to equity 50.1 45.9 20.0 42.3 48.3Cash and equivalents to total assets 46.6 50.1 44.1 43.7 45.8

—— ♦ ——Operating Company Non-Life

Ultimate Parent: Greenlight Capital Re, Ltd.

GREENLIGHT REINSURANCE IRELAND, DESIGNATEDACTIVITY COMPANY

La Touche House, IFSC, Ground Floor, Dublin 1, IrelandWeb: www.greenlightre.ky

Tel.: 353-1687-0534AMB#: 091169Ultimate Parent#: 055430

BEST’S CREDIT RATING

Best’s Financial Strength Rating: A- Outlook: StableBest’s Financial Size Category: XI



RATING RATIONALERating Rationale: The ratings of Greenlight Reinsurance, Ltd. (GreenlightRe), have been extended to Greenlight Reinsurance Ireland, DesignatedActivity Company, as Greenlight Re provides explicit support in the form ofaggregate stop-loss and quota-share contracts.

The following text is derived from A.M. Best’s Credit Report on GreenlightReinsurance, Ltd. (AMB# 076873).

The ratings of Greenlight Reinsurance, Ltd. (Greenlight Re), are based onits strong risk-adjusted capitalization and experienced management team. Theratings also consider the company’s business profile and strategy as it seeks toaggressively manage risks on both sides of the balance sheet.

Partially offsetting these positive rating factors are the greater investmentrisk associated with its alternative investment strategy and the continuedcompetition and capacity in the reinsurance marketplace. Greenlight Re couldbe exposed to a convergence of events that could test its capital strength. Theunderwriting risk along with significant investment risk could have aduplicative adverse effect on its risk-adjusted capital.

The ratings reflect Greenlight Re’s improved underwriting results,following less favorable results in recent years, which have fallen short ofA.M. Best’s long-term expectations. While A.M. Best acknowledges that theunderwriting process and controls have since been strengthened, the currentmarket environment will continue to present challenges and will ultimatelytest the sufficiency of the current underwriting rigor, undertaken by thecompany, and enterprise risk management.

At the current rating level, A.M. Best can be slightly more accepting ofvariability in operating results, though, A.M. Best is looking for operatingresults, that over the long term, generate solid profit from both underwritingand investment activities. While Greenlight Re’s capital footprint entails100% common equity with no use of debt, A.M. Best recognizes the asset riskrepresented by its equity-based investment portfolio. Mitigating this concernis the inherent partially hedged nature of the investment portfolio, and theexperience and strong, long-term track record of the investment manager.More than 80% of the invested assets are in highly liquid investments, andgenerally no position can be greater than 20% of invested assets. A.M. Best’srating approach involves assessing Greenlight Re’s risk correlations across theenterprise by subjecting its capitalization to concurrent adverse stress testevents. The company’s risk-adjusted capitalization withstands substantialamounts of strain when subjected to various catastrophe and investment stressscenarios.

Factors that may contribute to positive rating actions include improvementsin the company’s underwriting results, continued lack of material catastrophelosses and positive investment performance. Alternatively, ratings could benegatively impacted by continued adverse reserve development, coupled withnegative investment results and poor underwriting performance, which couldcollectively contribute to a significant deterioration of surplus.

Additionally, ratings could also be impacted by turmoil in the capitalmarkets that results in significant fluctuation, which negatively impactsrisk-adjusted capitalization and overall operating performance.

FIVE YEAR RATING HISTORY

DateBest’sFSR Date

Best’sFSR

09/28/17 A- 10/30/14 A11/03/16 A- 10/17/13 A-10/23/15 A 10/09/12 A-

BUSINESS PROFILEGreenlight Reinsurance Ireland, Designated Activity Company writes a

combination of global property, casualty and specialty reinsurance distributedprimarily through the broker market. The mix of business between theproperty, casualty and specialty segments will vary based on overall marketconditions. The company writes worldwide with concentrations of cedants inthe United States, the United Kingdom, and Europe.

In addition to the standard underwriting risk/reward footprint of most globalreinsurers, GRIL has introduced an additional investment risk/rewardarchitecture with a partially hedged equity portfolio that is the vast majority ofunencumbered assets. The equity portfolio consists of primarily publiclytraded securities with a long and short philosophy that produces a partialhedge on market performance and asset value. This strategy has beenemployed by the asset manager in a separate though similarly structuredmulti-billion dollar value portfolio for the last twenty years.


Greenlight Reinsurance, Ltd. (Greenlight Re) is headquartered anddomiciled in the Cayman Islands. Greenlight Re is a global specialist propertyand casualty reinsurer established in 2004 and is wholly owned by GreenlightCapital Re, Ltd. (NASDAQ: GLRE). Greenlight Capital Re, Ltd. has twoother wholly owned subsidiaries, Greenlight Reinsurance Ireland, DAC(“GRIL”) and Verdant Holding Company, Ltd. (“Verdant”). GRIL is based inDublin, Ireland and was established in September 2010 to provide multi-lineproperty and casualty reinsurance capacity to the European broker market andoffer service to clients in Europe. Verdant is a Delaware corporation whichwas established to facilitate strategic alliances that Greenlight Re may seek toform with insurance companies and general agents in the U.S. Greenlight Rewrites a combination of property, casualty and specialty reinsurancedistributed primarily through the broker market. The mix of business betweenthe property, casualty and specialty segments will vary based on overallmarket conditions. The company writes worldwide with concentrations ofcedants in the United States, the United Kingdom, Europe and Bermuda. In2008 the Cayman Islands Monetary Authority granted approval for GreenlightRe to engage in long term business, but to date Greenlight Re has not offeredor written any long term products.

A portion of the company’s portfolio is exposed to natural perils. Naturalperil-exposed business is underwritten and modeled utilizing conventionalmethods. For internal risk management purposes, the company monitorsaccumulations by geographic zone based on potential loss scenarios, whichare 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 theevent of a major covered catastrophe. In addition to the standard underwritingrisk/reward footprint of most global reinsurers, Greenlight Re has analternative investment strategy with a partially hedged equity portfolio that isthe vast majority of unencumbered assets. The equity portfolio primarilyconsists of publicly traded securities with a long and short philosophy thatproduces a partial hedge on market performance and asset value. This strategyhas been employed by the asset manager in a separate, though similarlystructured multi-billion dollar value portfolio for over fifteen years.

RISK MANAGEMENTThe following text is derived from A.M. Best’s Credit Report on Greenlight

Reinsurance, Ltd. (AMB# 076873).

Greenlight Re has an enterprise risk management culture starting from thetop down. Greenlight Re’s small staff compared to other reinsurers aids theflow of communication. A transaction is handled by an underwriter and anactuary who evaluate the specifics of the deal. Each new deal is presented tothe senior staff who evaluates the transaction. The CEO and CUO must bothagree that each deal meets the firms underwriting guidelines. Greenlight Reaims to act as the lead underwriter in deals since the lead typically has greaterinfluence in pricing terms and conditions. Greenlight Re also has a “cradle tograve” philosophy where the same underwriter also services the contract.Each account is reviewed on a quarterly basis and a meeting is held annuallywith clients. Greenlight Re uses an in-house developed simulation model forpricing. Greenlight has recently implemented some underwriting changes,however the market remains challenging and the sufficiency of the changes inthe scope of enterprise risk management remains untested.

The investment piece of Greenlight Re is also very intertwined in the riskmanagement culture. Greenlight Re has weekly calls with DME Advisors todiscuss their overall underwriting and investment strategy. This is detailedquarterly at the Board level. On the investment side multiple, stable primebrokers are used to reduce counterparty risk.Investment Risk Management: Greenlight Re follows investment guidelinesthat are adopted by the Board of Directors. The guidelines state that at least80% of invested assets must be held in quality investments. This includes debtor equity securities of publicly traded companies, government securities ofdeveloped countries, cash and cash equivalents as well as gold. Private equitysecurities cannot be more than 10% of the investment portfolio. No singleinvestment can be more than 20% of the portfolio, with the exception of cash,cash equivalents and U.S. government obligations. Liquidity of the portfolio isdictated by the expectation of the liabilities and the portfolio is reviewed withthe investment advisor on a periodic basis.

The portfolio that has been put in place is highly liquid, actively managedand is fluid based upon various investment opportunities.

OPERATING PERFORMANCEThe following text is derived from A.M. Best’s Credit Report on Greenlight


Operating Results: Greenlight Re’s operating results have had variability inrecent years. The company has reported adverse development on prior yearclaims. Furthermore, investment returns have been varied, with 2015 being aparticularly challenging year for the company. However, 2016 saw a positiveinvestment returns trend, generating returns of over 7%.

Generally, investment income has been positive and A.M. Best understandsthat investments results may have more volatility given the investmentstrategy. This volatility is captured and accounted for in A.M. Best’srisk-adjusted capital model (BCAR).

Greenlight Re still has a high geographic concentration of business comingfrom the U.S. Return on equity metrics are at the lower end of established peerson a 5-year basis.Underwriting Results: Geographically Greenlight Re writes approximately79% of its gross premiums in the U.S. with Europe constituting less than 5%,followed by the rest of the world. Greenlight Re’s underwriting results havebeen varied over the recent 5-year period and adverse loss reservedevelopment has impacted results. On the whole, Greenlight Re’sunderwriting results have underperformed most peers on a 5-year basis. In2016, Greenlight Re entered into a novation to remove a specific book ofbusiness and provided excess of loss coverage to a run-off specialist. Whilethere is still uncertainty with regards to the ultimate liability associated withthis particular book of business, the coverage to which Greenlight Re remainsliable is substantially beyond the high point of the actuarial range and allowsGreenlight Re to refocus on its current book of business and prospectivestrategic opportunities.

The underwriting loss for year-end 2016 was mainly driven by a $19 millionloss from the novation of the legacy construction defect liabilities.Investment Results: Greenlight Re’s investment portfolio, although reportingpositive returns through year-end 2014, was trending lower from 2009 to 2011.In 2014 the investment portfolio returned a gain of roughly 9% compared to analmost 20% return in 2013 net of all fees and expenses. The large gain in 2013was mostly a result of an increase in market value of the company’sinvestments. In 2014 the income was mostly attributable to large realizedgains partly offset by unrealized losses.

In 2015 the portfolio returned a sizeable loss of approximately 20%. Thelarge loss was due to a decrease in market value of the investment portfolio.Given the overall investment environment Greenlight Re’s investment advisor,DME Advisors, has been in a defensive investing position. Greenlight Re’sinvestment portfolio is considered a “trading portfolio” and therefore underU.S. GAAP, realized as well as unrealized gains and losses are included, andrepresent the biggest drivers of net investment income. Also included in netinvestment income is the change in market value of exchange-traded call andput options.

In 2016, the portfolio rebounded with a 7.2% investment gain, stemmingfrom the performance of the long portfolio, as well as gains relating to goldand natural gas.

While the investment portfolio has some volatility, this volatility has beencontemplated and various stress tests are performed in A.M. Best’srisk-adjusted capital model.



BALANCE SHEET STRENGTHThe following text is derived from A.M. Best’s Credit Report on Greenlight


Capitalization: Greenlight Re was initially capitalized with $212 million, andit added approximately $256 million in 2007 through an IPO and relatedprivate placement. The company has also generated capital through retainedearnings and surplus has grown since inception. Underwriting leveragemeasures are minimal and A.M. Best expects these measures to remainmoderate.

Greenlight Re has no debt and a liquid investment portfolio; however, theconcentration of investments in equity security positions represents asignificant risk to the company’s capitalization. Nevertheless, its risk-adjustedcapitalization is excellent and withstands significant potential asset valueimpairments when stress tested. In addition, the portfolio is partially hedgedwith a long and short investment strategy. Though variable asset values areexpected, extreme volatility and capital loss are not.

Greenlight Re’s risk adjusted capitalization remains robust even with theintroduction of heavy stress-test scenarios that simultaneously compromiseasset values and underwriting results.Loss Reserves: Greenlight Re has reported some adverse reservedevelopment in recent years. The majority of the 2014 development wasrelated to a general liability contract and a commercial auto multi-line contractwhose clients reported additional open claims activity; both contracts arecurrently in run-off.

In 2015, Greenlight Re experienced unfavorable development in certainfrequency business relating to Florida home-owners contracts as a result of thedeterioration of sinkhole claims and the increase in the practice of“assignment of benefits” in the state of Florida. For the year ended December31, 2016, the net loss reserves for past periods were increased due to adversedevelopment primarily on the legacy construction defect liabilities.

The following text is derived from A.M. Best’s Credit Report on GreenlightReinsurance, Ltd. (AMB# 076873).Liquidity: As it first began to assume business in 2006, Greenlight Re’sliabilities from underwriting activities are still relatively modest. Thecompany’s investment portfolio, composed essentially of publicly tradedequity securities, is highly liquid. As most of Greenlight Re’s invested assetsare trading securities, the sale and purchase of these assets are reported asoperating cash flows.

The following text is derived from A.M. Best’s Credit Report on GreenlightReinsurance, Ltd. (AMB# 076873).Investments: Greenlight Re’s investment portfolio is managed by DMEAdvisors which is controlled by David Einhorn who is also Chairman of theBoard of Directors and the president of Greenlight Capital, Inc. Theinvestment strategy used is a value-oriented strategy that identifiesundervalued and overvalued securities by analyzing companies’ availablefinancial data. The portfolio is somewhat naturally hedged with both long and

short positions. DME Advisors goal is to achieve higher rates of return whileminimizing the risk of capital losses.

The investment guidelines are adopted by the Board of Directors. At least80% 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 theportfolio.

Liquidity is reviewed on a periodic basis to ensure that Greenlight Re willbe able to meet any of its liabilities as they come due. The investment portfoliodoes 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 theinvestment portfolio in prior years.

Summarized Accounts as of December 31, 2016Data reflected within all tables of this report has been compiled from thefinancial statements of this company (Source: Company Financial Statement).

An independent audit of the company’s affairs through December 31, 2016,was conducted by BDO.

STATEMENT OF INCOME12/31/2016 12/31/2015USD(000) USD(000)

Technical account:Reinsurance premiums assumed 86,217 106,618_________ _________Gross premiums written 86,217 106,618Reinsurance ceded 22,608 21,144_________ _________Net premiums written 63,609 85,474Increase/(decrease) in gross unearned premiums -7,496 7,105Reinsurers share unearned premiums 404 5,670_________ _________Net premiums earned 71,509 84,039_________ _________

Total underwriting income 71,509 84,039_________ _________

Net claims paid 59,620 52,569Net increase/(decrease) in claims provision -5,163 4,933_________ _________

Net claims incurred 54,457 57,502

Net operating expenses 17,140 24,204_________ _________Total underwriting expenses 71,597 81,706_________ _________Balance on technical account -88 2,333



12/31/2016 12/31/2015USD(000) USD(000)

Combined technical account:Reinsurance premiums assumed 86,217 106,618_________ _________Gross premiums written 86,217 106,618Reinsurance ceded 22,608 21,144_________ _________Net premiums written 63,609 85,474Increase/(decrease) in gross unearned premiums -7,496 7,105Increase/(decrease) in reinsurers share unearned premiums 404 5,670_________ _________Net premiums earned 71,509 84,039_________ _________

Total revenue 71,509 84,039_________ _________

Net claims paid 59,620 52,569Net increase/(decrease) in claims provision -5,163 4,933_________ _________

Net claims incurred 54,457 57,502

Net operating expenses 17,140 24,204_________ _________Total underwriting expenses 71,597 81,706_________ _________Balance on combined technical account -88 2,333

Non-technical account:Net investment income -1,531 -2,126Realised capital gains/(losses) -7,804 1,091Unrealised capital gains/(losses) 12,926 -16,105Exchange gains/(losses) 178 197_________ _________Profit/(loss) before tax 3,681 -14,610Taxation 502 -1,763_________ _________

Profit/(loss) after tax 3,179 -12,847

Retained profit/(loss) for the financial year 3,179 -12,847Retained profit/(loss) brought forward -10,139 2,708_________ _________

Retained profit/(loss) carried forward -6,960 -10,139

MOVEMENT IN CAPITAL & SURPLUS12/31/2016

USD(000)12/31/2015

USD(000)Capital & surplus brought forward 50,318 42,939

Change in share capital -71 20,226Profit or loss for the year 3,179 -12,847

Total change in capital & surplus 3,108 7,379Capital & surplus carried forward 53,426 50,318

ASSETS12/31/2016

USD(000)12/31/2016

% of total12/31/2015

USD(000)Cash & deposits with credit institutions 82,751 40.5 71,551Bonds & other fixed interest securities 1,348 0.7 2,642Shares & other variable interest instruments 43,114 21.1 62,048

Liquid assets 127,213 62.3 136,241

Unquoted investments 1,107 0.5 1,373Other investments 10,069 4.9 6,939

Total investments 138,389 67.8 144,553

Reins. sh. of tech. reserves - unearned premiums 8,354 4.1 7,950Reinsurers’ share of technical reserves - claims 13,900 6.8 8,867

Total reinsurers share of technical reserves 22,254 10.9 16,817

Insurance/reinsurance debtors 38,468 18.8 37,880Other debtors … … 526

Total debtors 38,468 18.8 38,406

Fixed assets 124 0.1 173Prepayments & accrued income 4,920 2.4 7,725

Total assets 204,155 100.0 207,674

LIABILITIES12/31/2016

USD(000)12/31/2016

% of total12/31/2015

USD(000)Capital 60,386 29.6 60,457

Paid-up capital 60,386 29.6 60,457

Retained earnings -6,960 -3.4 -10,139Capital & surplus 53,426 26.2 50,318

Gross provision for unearned premiums 27,166 13.3 34,747Gross provision for outstanding claims 40,740 20.0 40,993Gross provision for other technical reserves 875 0.4 863

Total gross technical reserves 68,781 33.7 76,603

Insurance/reinsurance creditors 18,921 9.3 11,867Inter-company creditors 925 0.5 884Other creditors 8,843 4.3 5,601

Total creditors 28,689 14.1 18,352

Other liabilities 53,259 26.1 62,401Total liabilities & surplus 204,155 100.0 207,674



MANAGEMENTOfficers: Chief Financial Officer, Edward Brady; Chief UnderwritingOfficer, Brendan Barry; Chief Executive Officer, Patrick O’Brien.Directors: Tim Courtis (Non-Executive Director), Philip Harkin(Independent Non-Executive Director), Frank Lackner (IndependentNon-Executive Director), Patrick O’Brien (Executive Director), BrendanTuohy (Independent Non-Executive Director).

ANALYSIS OF GROSS PREMIUMS WRITTENUSD USD USD USD USD(000) (000) (000) (000) (000)2016 2015 2014 2013 2012

Reinsurance 86,217 106,618 79,866 75,134 44,922

Total non-life 86,217 106,618 79,866 75,134 44,922

REINSURANCECurrently GRIL has a 80% quota share on non-U.S. business to Greenlight

Reinsurance, Ltd. Additionally, Greenlight Reinsurance, Ltd. provides anaggregate stop-loss protection to GRIL.


In general, Greenlight Re retains 100% of all premiums and losses itreinsures. However, retrocession may be used to manage accumulations, aswell as on a transaction-by-transaction basis. During 2015 the companypurchased an industry loss warrant to reduce its net exposure to catastropheevents. In 2016, the company novated a specific book of business that wasproblematic for the company to a run-off specialist. In those cases whereretrocession is purchased, the company closely monitors counterparty creditrisk.

BALANCE SHEET ITEMSUSD USD USD USD USD(000) (000) (000) (000) (000)2016 2015 2014 2013 2012

Liquid assets 127,213 136,241 110,625 109,669 86,078Total investments 138,389 144,553 118,336 119,752 92,166Total assets 204,155 207,674 159,594 153,038 126,298Total gross technical reserves 68,781 76,603 61,768 50,432 43,398Net technical reserves 46,527 59,786 53,253 45,291 38,410Total liabilities 150,729 157,356 116,655 106,986 83,772Capital & surplus 53,426 50,318 42,939 46,052 42,526

INCOME STATEMENT ITEMSUSD USD USD USD USD(000) (000) (000) (000) (000)2016 2015 2014 2013 2012

Gross premiums written 86,217 106,618 79,866 75,134 44,922Net premiums written 63,609 85,474 70,845 70,130 41,711Balance on technical account(s) -88 2,333 -6,895 -4,799 -1,574Profit/(loss) before tax 3,681 -14,610 -3,708 4,119 1,876Profit/(loss) after tax 3,179 -12,847 -3,273 3,588 1,806

LIQUIDITY RATIOS (%)2016 2015 2014 2013 2012

Total debtors to total assets 18.8 18.5 16.8 14.5 17.4Liquid assets to net technical reserves 273.4 227.9 207.7 242.1 224.1Liquid assets to total liabilities 84.4 86.6 94.8 102.5 102.8Total investments to total liabilities 91.8 91.9 101.4 111.9 110.0

LEVERAGE RATIOS (%)2016 2015 2014 2013 2012

Net premiums written to capital & surplus 119.1 169.9 165.0 152.3 98.1Net technical reserves to capital & surplus 87.1 118.8 124.0 98.3 90.3Gross premiums written to capital & surplus 161.4 211.9 186.0 163.2 105.6Gross technical reserves to capital & surplus 128.7 152.2 143.9 109.5 102.1Total debtors to capital & surplus 72.0 76.3 62.3 48.1 51.8Total liabilities to capital & surplus 282.1 312.7 271.7 232.3 197.0

PROFITABILITY RATIOS (%)2016 2015 2014 2013 2012

Loss ratio 76.2 68.4 80.1 72.5 67.9Operating expense ratio 24.0 28.8 30.1 34.0 36.7Combined ratio 100.1 97.2 110.2 106.5 104.5Net investment income ratio -2.1 -2.5 -3.3 -5.5 -6.9Operating ratio 102.3 99.8 113.5 112.0 111.5Return on net premiums written 5.0 -15.0 -4.6 5.1 4.3Return on total assets 1.5 -7.0 -2.1 2.6 1.6Return on capital & surplus 6.1 -27.6 -7.4 8.1 4.3




Copyright © 2017 A.M. Best Company, Inc. and/or its affiliates. All rights reserved.No part of this report may be reproduced, distributed, or stored in a database or retrieval system, or transmitted in any form or by any means without the priorwritten permission of the A.M. Best Company. While the data in this report was obtained from sources believed to be reliable, its accuracy is not guaranteed.

Why is this Best’s® Rating Report important to you?The A.M. Best Company is the oldest, most experienced rating agency inthe world and has been reporting on the financial condition of insurancecompanies since 1899.

A Best's Financial Strength Rating (FSR) is an independent opinion ofan insurer's financial strength and ability to meet its ongoing insurancepolicy and contract obligations. An FSR is not assigned to specificinsurance policies or contracts and does not address any other risk,including, but not limited to, an insurer's claims-payment policies orprocedures; the ability of the insurer to dispute or deny claims payment ongrounds of misrepresentation or fraud; or any specific liabilitycontractually borne by the policy or contract holder. An FSR is not arecommendation to purchase, hold or terminate any insurance policy,

contract or any other financial obligation issued by an insurer, nor doesit address the suitability of any particular policy or contract for aspecific purpose or purchaser.

The company information appearing in this pamphlet is an extractfrom the complete AMB Credit Report. You may obtain the completereport by contacting Customer Service at +1(908)439-2200 [email protected]. Please reference the company'sidentification number (AMB#) listed on this rating report.

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GREENLIGHT REINSURANCE, LTD. A- Best’s Rating Report ... · writes a combination of property, casualty and specialty reinsurance distributedprimarily throughthe broker market. Themixofbusiness