References to "we," "us," "our," "our company," "Greenlight Re," or "the Company" refer to Greenlight Capital Re, Ltd. ("GLRE") and its wholly-owned subsidiaries, Greenlight Reinsurance, Ltd, ("Greenlight Reinsurance"), Greenlight Reinsurance Ireland, Ltd. ("GRIL") and Verdant Holding Company, Ltd. ("Verdant"), unless the context dictates otherwise. References to our "Ordinary Shares" refers collectively to our Class A Ordinary Shares and Class B Ordinary Shares.

The following is a discussion and analysis of our results of operations for the three and six months ended June 30, 2012 and 2011 and financial condition as of June 30, 2012 and December 31, 2011. The following discussion should be read in conjunction with the audited consolidated financial statements and accompanying notes, which appear in our annual report on Form 10-K for the fiscal year ended December 31, 2011.

Special Note About Forward-Looking Statements

Certain statements in Management's Discussion and Analysis ("MD&A"), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements generally are identified by the words "believe," "project," "predict," "expect," "anticipate," "estimate," "intend," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled "Risk Factors" (refer to Part I, Item 1A) contained in our annual report on Form 10-K for the fiscal year ended December 31, 2011. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned not to place undue reliance on the forward looking statements which speak only to the dates on which they were made.

We intend to communicate certain events that we believe may have a material adverse impact on our operations or financial position, including property and casualty catastrophic events and material losses in our investment portfolio, in a timely manner through a public announcement. Other than as required by the Exchange Act, we do not intend to make public announcements regarding reinsurance or investments events that we do not believe, based on management's estimates and current information, will have a material adverse impact on our operations or financial position.

General

We are a Cayman Islands headquartered global specialty property and casualty reinsurer with a reinsurance and investment strategy that we believe differentiates us from our competitors. Our goal is to build long-term shareholder value by selectively offering customized reinsurance solutions, in markets where capacity and alternatives are limited, which we

believe will yield favorable long-term returns on equity.

We aim to complement our underwriting results with a non-traditional investment approach in order to achieve higher rates of return over the long term than reinsurance companies that employ more traditional, fixed-income investment strategies. We manage our investment portfolio according to a value-oriented philosophy, in which we take long positions in perceived undervalued securities and short positions in perceived overvalued securities.

Because we employ an opportunistic underwriting philosophy, period-to-period comparisons of our underwriting results may not be meaningful. In addition, our historical investment results may not necessarily be indicative of future performance. Due to the nature of our reinsurance and investment strategies, our operating results will likely fluctuate from period to period.

Segments

We manage our business on the basis of one operating segment, property and casualty reinsurance, in accordance with the qualitative and quantitative criteria established by United States generally accepted accounting principles ("U.S. GAAP"). Within the property and casualty reinsurance segment, we analyze our underwriting operations using two categories:

• frequency business; and
• severity business.

Frequency business is characterized by contracts containing a potentially large number of small losses emanating from multiple events. Clients generally buy this protection to increase their own underwriting capacity and typically select a reinsurer based upon the reinsurer's financial strength, service and expertise. We expect the results of frequency business to be less volatile than those of severity business from period to period due to greater predictability. We also expect that over time the profit margins and return on equity of our frequency business will be lower than those of our severity business.

Severity business is typically characterized by contracts with the potential for significant losses emanating from one event or multiple events. Clients generally buy this protection to remove volatility from their balance sheets, and accordingly, we expect the results of severity business to be volatile from period to period. However, over the long term, we also expect that our severity business will generate higher profit margins and return on equity than those of our frequency business.

Outlook and Trends

We believe the reinsurance industry, in general has been, and for the foreseeable future will remain, over capitalized. There is an influx of new capital for peak zone catastrophe risk from alternative capital market participants such as hedge funds, pension funds and other fixed income bond managers. Additionally, we believe that the slowdown in worldwide economic activity continues to weaken the overall demand for property and casualty insurance and, accordingly, reinsurance.
Notwithstanding the foregoing, the over-capitalization of the reinsurance industry may be countered by the introduction of more stringent capital requirements in the industry (particularly in Europe), the recalibration of catastrophe risk models to reflect recent catastrophic activity and a sustained low interest rate environment. We believe the introduction of Solvency II for European insurers and reinsurers will create a demand for capital and/or reinsurance solutions for some smaller and less diversified companies. Risk Management Solutions ("RMS") released a new version of its widely used catastrophe model ("RMS 11.0") which has had the impact of increasing the modeled expected losses for many catastrophe programs in the United States. If the new model version is widely adopted by the reinsurance market, property catastrophe pricing could increase. The persistent low interest rate environment has reduced the earnings of many insurance and reinsurance companies. We believe the continuation of low interest rates, coupled with the reduction of prior years' reserve redundancies, could cause the industry to adopt overall higher pricing.
Overall, we believe we are in a hardening market, but industry over-capitalization will temper rate increases and that overall increases will not significantly exceed loss trends. The result is a slightly improving market, but with many areas of the market continuing to operate at levels which we believe are economically irrational. Price increases could occur earlier if financial and credit markets experience adverse shocks that result in the loss of capital of insurers and reinsurers, or if there are major catastrophic events, especially in North America.
Our reinsurance portfolio is currently concentrated in five areas - Florida homeowners, small account workers' compensation and general liability for contractors, U.S. employer health stop loss, catastrophe retrocession and private passenger automobile. While each of these areas is competitive, we believe we are experiencing rate increases that are in excess

of loss trends. In particular, the Florida homeowners' insurance market continues to experience rate increases, although the rate of increase has slowed relative to the prior period. Additionally, property catastrophe retrocession pricing increased moderately during 2011 and increased again during the first half of 2012. We continue to look for attractive opportunities in this area of the market; however, as mentioned earlier, the influx of new capacity has increased competition.
We believe that we are well positioned to compete for frequency business due to our increasing market recognition, the development of strategic relationships and our "A (Excellent)" rating by A.M. Best. Meanwhile, there are a number of insurers and reinsurers that have suffered and continue to suffer from capacity issues. So far in 2012, we have seen a number of large, frequency-oriented opportunities that we believe fit well within our business strategy. We converted some of these opportunities into bound contracts, and are currently analyzing others. Further, there has been additional consolidation activity in the industry and we believe if such activity continues and the number of industry participants decreases, we could benefit from increased opportunities since insurers may prefer to diversify their reinsurance placements. We believe our investment portfolio continues to be conservatively postured in 2012, with a net long position of 51% as of June 30, 2012. The challenging investment environment has continued throughout the year, with significant uncertainty and global geopolitical and economic headwinds. Equity markets in the U.S. and Europe are volatile, due to slowing economic growth and concerns about the sustainability of monetary and fiscal policies. Rising concern about sovereign debt, particularly in Europe, appears likely to limit further fiscal stimulus. Given the challenging macroeconomic environment, we intend, for the foreseeable future, to continue holding a significant position in gold and other macro hedges in the form of options on higher interest rates and foreign exchange rates, short positions in sovereign debt and sovereign credit default swaps.
We intend to continue to monitor market conditions to position ourselves to participate in future under-served or capacity-constrained markets as they arise and intend to offer products that we believe will generate favorable returns on equity over the long term. Accordingly, our underlying results and product line concentrations in any given period may not be indicative of our future results of operations.
Critical Accounting Policies

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect reported and disclosed amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. We believe that the critical accounting policies set forth in our annual report on Form 10-K for the fiscal year ended December 31, 2011 continue to describe the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements. These accounting policies pertain to premium revenues and risk transfer, valuation of investments, loss and loss adjustment expense reserves, acquisition costs, bonus accruals and share-based payments. If actual events differ significantly from the underlying judgments or estimates used by management in the application of these accounting policies, there could be a material effect on our results of operations and financial condition.

Recently issued accounting standards and their impact to the Company have been presented under "Recently Issued Accounting Standards" in Note 2 of the accompanying condensed consolidated financial statements.

Results of Operations

Three and six months ended June 30, 2012 and 2011

For the three months ended June 30, 2012, we reported a net loss of $36.1 million, as compared to a net loss of $16.0 million reported for the same period in 2011. The underwriting income before general and administrative expenses for the three months ended June 30, 2012 was $4.8 million, compared to $7.5 million for the same period in 2011. The decrease in underwriting income for the three months ended June 30, 2012 was primarily due to an increase in the composite ratio for the period. For the three months ended June 30, 2012, our overall composite ratio increased to 96.4%, from 93.0% during the same period in 2011. For the three months ended June 30, 2012, our investment portfolio reported a net loss of $36.9 million, or a loss of 3.3%, on our investment account, compared to a net investment loss of $19.5 million, or a loss of 1.9%, for the same period in 2011.

For the six months ended June 30, 2012, we reported a net income of $29.1 million, compared to a net loss of $59.0 million reported for the same period in 2011. Our investment portfolio reported a net income of $34.7 million, or a return of 3.0%, for the six months ended June 30, 2012, compared to a net investment loss of $55.6 million, or a loss of 5.2%, for the same period in 2011. Underwriting income reported for the six months ended June 30, 2012 increased by $2.2 million to $7.0 million from $4.8 million reported for the six months ended June 30, 2011.

For the three months ended June 30, 2012, the basic adjusted book value per share decreased by $0.98 per share, or 4.1%, to $22.74 per share from $23.72 per share at March 31, 2012. During the three months ended June 30, 2012, fully diluted adjusted book value decreased by $0.95 per share, or 4.1%, to $22.34 per share from $23.29 per share at March 31, 2012.

For the six months ended June 30, 2012, the basic adjusted book value per share increased by $0.76 per share, or 3.5%, to $22.74 per share from $21.98 per share at December 31, 2011. During the six months ended June 30, 2012, fully diluted adjusted book value increased by $0.73 per share, or 3.4%, to $22.34 per share from $21.61 per share at December 31, 2011.

Basic adjusted book value per share is a non-GAAP measure as it excludes the non-controlling interest in a joint venture from total equity. In addition, fully diluted adjusted book value per share is also a non-GAAP measure and represents basic adjusted book value per share combined with the impact from dilution of all in-the-money stock options issued and outstanding as of any period end. We believe that long-term growth in fully diluted adjusted book value per share is the most relevant measure of our financial performance. In addition, fully diluted adjusted book value per share may be of benefit to our investors, shareholders and other interested parties to form a basis of comparison with other companies within the property and casualty reinsurance industry.

The following table presents a reconciliation of the non-GAAP basic adjusted and fully diluted adjusted book value per share to the most comparable GAAP measure.

                           June 30,        March 31,       December 31,      September 30,        June 30,
                             2012             2012             2011               2011              2011
                                         ($ in thousands, except per share and share amounts)
Basic adjusted and
fully diluted
adjusted book value per
share numerator:
Total equity (GAAP)     $    845,696     $    881,304     $     845,698     $      765,958     $    770,185
Less: Non-controlling
interest in joint
venture                      (11,778 )        (12,227 )         (42,595 )          (33,866 )        (33,709 )
Basic adjusted book
value per share
numerator                    833,918          869,077           803,103            732,092          736,476
Add: Proceeds from
in-the-money stock
options issued and
outstanding                   18,215           18,215            18,215             16,590           16,590
Fully diluted adjusted
book value per share
numerator               $    852,133     $    887,292     $     821,318     $      748,682     $    753,066
Basic adjusted and
fully diluted adjusted
book value per share
denominator:
Ordinary shares issued
and outstanding for
basic adjusted book
value per share
denominator               36,678,653       36,633,638        36,538,149         36,509,036       36,575,816
Add: In-the-money stock
options issued and
outstanding                1,469,000        1,469,000         1,469,000          1,419,000        1,419,000
Fully diluted adjusted
book value per share
denominator               38,147,653       38,102,638        38,007,149         37,928,036       37,994,816
Basic adjusted book
value per share         $      22.74     $      23.72     $       21.98     $        20.05     $      20.14
Fully diluted adjusted
book value per share    $      22.34     $      23.29     $       21.61     $        19.74     $      19.82

Premiums Written

Details of gross premiums written are provided in the following table:
                Three months ended June 30,               Six months ended June 30,
                 2012                2011                 2012                 2011
                     ($ in thousands)                          ($ in thousands)
Frequency $ 80,706    96.1 %  $ 108,601    95.9 %  $ 217,313    92.0 %  $ 200,954    93.9 %
Severity     3,280     3.9        4,665     4.1       18,893     8.0       13,051     6.1
Total     $ 83,986   100.0 %  $ 113,266   100.0 %  $ 236,206   100.0 %  $ 214,005   100.0 %

We expect quarterly reporting of premiums written to be volatile as our underwriting portfolio continues to develop. Additionally, the composition of premiums written between frequency and severity business may vary from quarter to quarter depending on the specific market opportunities that we pursue.

For the three months ended June 30, 2012, the premiums written relating to frequency contracts decreased by $27.9 million, or 25.7%, compared to the same period in 2011. The decrease in frequency premiums written is primarily related to the Florida homeowners' personal lines contracts which decreased by $52.4 million due to the termination of a large contract during the fourth quarter of 2011, as well as due to a decrease in the underlying premiums on other existing Florida homeowners' contracts where the ceding insurer culled its non-performing third party agents in order to maintain a more profitable book of business. Furthermore, one of the Florida homeowners' contracts was renewed during the second quarter of 2012 at a lower quota share percentage than the expiring contract, which resulted in a decrease in premiums written for the quarter compared to same quarter in 2011.

Offsetting these decreases, our motor liability and motor physical damage premiums for the three months ended June 30, 2012 increased by $16.7 million and $17.1 million, respectively. The motor liability line includes both commercial automobile contracts as well as private automobile contracts (also referred to as non-standard automobile). For the three months ended June 30, 2012, the commercial automobile premiums written decreased by $17.3 million, while the private automobile premiums written increased by $34.0 million as a result of new non-standard automobile contracts entered into during late 2011 and early 2012. We canceled the commercial automobile coverage on a multi-line contract during 2012 which resulted in the decrease in commercial automobile premiums. Other less significant decreases related to our general liability and specialty health lines which decreased $5.1 million and $3.8 million, respectively, primarily due to the cancellation of one contract for each of these lines.

For the six months ended June 30, 2012, the frequency gross premiums increased by $16.4 million, or 8.1%, primarily as a result of our motor liability and motor physical damage premiums, which increased by $55.8 million and $37.0 million, respectively. The increase in motor liability line includes an increase of $86.9 million in private automobile premiums written as a result of new non-standard automobile contracts entered into during late 2011 and early 2012, offset by a decrease of $31.5 million in commercial automobile premiums written as we canceled the commercial automobile coverage on a multi-line contract during 2012. For the six months ended June 30, 2012, our Florida homeowners' personal lines contracts decreased by $54.2 million due to the reasons explained above. Other less significant decreases related to our workers' compensation, general liability, specialty health, and financial (surety and trade credit) lines which decreased $7.6 million, $3.7 million, $6.6 million and $3.0 million, respectively.

For the three months ended June 30, 2012, the premiums written relating to severity contracts decreased by $1.4 million, or 29.7%, compared to the same period in 2011. The decrease was primarily due to timing of a property catastrophe contract, which was renewed in the first quarter of 2012, while in the prior year it was written in the second quarter of 2011.

For the six months ended June 30, 2012, the increase in severity premiums of $5.8 million, or 44.8%, compared to the same period in 2011 was principally due to the renewal of our existing multi-line property catastrophe contracts with higher aggregate limits as well as higher pricing. During the six month ended June 30, 2012 we restructured some of our property catastrophe contracts and increased our limits of coverage while also increasing the thresholds for losses entering our layer of coverage. As a result, while direct comparison of pricing is not possible, overall we obtained slightly higher prices on renewing contracts that had no claims reported during the prior year and significantly higher prices on catastrophe contracts that experienced losses during 2011.

For the three months ended June 30, 2012, our ceded premiums decreased by $21.8 million, to negative $4.6 million compared to $17.2 million for the same period in 2011. For the six months ended June 30, 2012, our ceded premiums decreased by $14.3 million, to $6.4 million compared to $20.7 million for the same period in 2011. The decrease in ceded premiums for both the three and six months ended June 30, 2012 was principally due to downward premium adjustments on a retroceded Florida homeowners' personal lines contract based on indications from the ceding insurer during the second quarter of 2012 that the underlying premiums will be lower than previously estimated due to culling of its third party agents.

Details of net premiums written are provided in the following table:

                Three months ended June 30,               Six months ended June 30,
                 2012                 2011                2012                 2011
                     ($ in thousands)                          ($ in thousands)
Frequency $  85,308    96.3 %  $ 91,418    95.1 %  $ 210,920    91.8 %  $ 180,295    93.2 %
Severity      3,280     3.7       4,665     4.9       18,893     8.2       13,051     6.8
Total     $  88,588   100.0 %  $ 96,083   100.0 %  $ 229,813   100.0 %  $ 193,346   100.0 %

 Net Premiums Earned

Net premiums earned reflect the pro-rata inclusion into income of net premiums
written over the life of the reinsurance contracts. Details of net premiums
earned are provided in the following table:
                Three months ended June 30,                Six months ended June 30,
                 2012                 2011                 2012                 2011
                      ($ in thousands)                          ($ in thousands)
Frequency $ 125,130    96.2 %  $ 104,594    97.6 %  $ 222,013    95.9 %  $ 202,879    95.6 %
Severity      4,884     3.8        2,557     2.4        9,589     4.1        9,429     4.4
Total     $ 130,014   100.0 %  $ 107,151   100.0 %  $ 231,602   100.0 %  $ 212,308   100.0 %

Premiums relating to quota share contracts are earned over the contract period in proportion to the period of protection. Similarly, incoming unearned premiums are earned in proportion to the remaining period of protection. For the three months ended June 30, 2012, the frequency earned premiums increased by $20.5 million, or 19.6%, primarily as a result of our motor liability and motor physical damage contracts which increased net earned premiums by $37.7 million and $15.4 million, respectively. The increase in motor liability line includes an increase of $43.3 million in private automobile earned premiums as a result of new non-standard automobile contracts entered into during late 2011 and early 2012, offset by a decrease of $5.6 million in commercial automobile earned premiums as we canceled the commercial automobile coverage on a multi-line contract during 2012. For the three months ended June 30, 2012, our Florida homeowners' personal lines earned premiums decreased by $26.1 million primarily due to a contract commuted during the fourth quarter of 2011. Other less significant decreases related to our general liability and specialty health lines which decreased $6.6 million and $4.7 million, respectively, due to cancellation of one contract for each of these lines.

For the six months ended June 30, 2012, the frequency earned premiums increased by $19.1 million, or 9.4%, primarily due to the same reasons explained above for the three months ended June 30, 2012.

Premiums relating to severity contracts are earned over the contract period in proportion to the period of protection. For the three months ended June 30, 2012, severity net earned premiums increased $2.3 million, or 91.0%, compared to the same period in 2011. The increase related to the higher premiums written on catastrophe contracts renewed during 2012 compared to 2011.

For the six months ended June 30, 2012, severity net earned premiums increased $0.2 million, or 1.7%, compared to the same period in 2011. The increase in severity earned premiums is principally a result of higher premiums written on the catastrophe contracts renewed during 2012 compared to 2011, offset by the lack of additional premiums that had been included in the comparative period on a catastrophe contract which had reported a full limit loss.

Losses Incurred

Losses incurred include losses paid and changes in loss reserves, including reserves for IBNR, net of actual and estimated loss recoverables. Details of net losses incurred for the three and six months ended June 30, 2012 and 2011, are provided in the following table:

. . .