The following table sets forth our selected historical consolidated statement of income data for the fiscal years ended December 31, 2015, 2014, 2013, 2012 and 2011, as well as our selected historical consolidated balance sheet data as of December 31, 2015, 2014, 2013, 2012 and 2011, which are derived from our audited consolidated financial statements. The audited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and have been audited by BDO USA, LLP, an independent registered public accounting firm.
References to "we," "us," "our," "our company," or "the Company" refer to Greenlight Capital Re, Ltd. ("GLRE") and its wholly-owned subsidiaries, Greenlight Reinsurance, Ltd, ("Greenlight Re"), 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.
A key part of our underwriting strategy is to identify and partner with companies that have suffered dislocation. Accordingly, given declining or flat investment earnings for fixed income investors, resulting from a prolonged low interest rate environment, we believe underwriting opportunities may increase, which we intend to pursue where we believe pricing is economically rational. Conversely, if attractive opportunities are not available on economically rational terms, we anticipate that we will seek to maintain or even reduce premium writings rather than accept mispriced risk in order to conserve our capital for a more opportune environment. We believe that significant price increases could occur 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 specialty casualty business is comprised of larger, syndicated reinsurance placements for general casualty and professional liability. For most of this business, we are not a lead underwriter and, instead are following the market on these transactions. This business has a longer duration of claim payments than business we have historically written, which leads to a build-up of reserves and exposure over a longer period of time. We expect this portion of our business to grow modestly in 2016.
On October 23, 2015 A.M. Best affirmed Greenlight Re's rating of "A (Excellent)" but revised the outlook from stable to negative. We do not expect any of our current business to be affected due to strong client relationships and our capital position; however, there is the potential for new business generation in the rating sensitive areas of the market to be adversely impacted.
General and administrative expenses consist primarily of salaries and benefits and related costs, including costs associated with our incentive compensation plan, bonuses and stock compensation expenses. General and administrative expenses also include professional fees, travel and entertainment, information technology, rent and other general operating expenses.
For each quota share or proportional property and casualty reinsurance contract we underwrite, our client estimates gross premiums written at inception of the contract. We generally account for such premiums using our best estimates and then adjust our estimates based on actual reports provided by our client and based on our expectations of industry developments. As the contract progresses, we monitor actual premiums received in conjunction with correspondence from the client in order to refine our estimate. Variances from initial gross premiums written estimates can be greater for quota share contracts than for excess of loss contracts. All premiums on quota share contracts are earned over the risk coverage period. Unearned premiums consist of the unexpired portion of reinsurance provided.
Investments. Our investments in debt and equity securities that are classified as "trading securities" are carried at fair value in accordance with U.S. GAAP. The fair values of the listed equities are derived based on the last reported price on the balance sheet date as reported by a recognized exchange. The fair values of listed equities that have restrictions on sale or transfer which expire within one year, are determined by adjusting the observed market price of the equity using a liquidity discount based on observable market inputs. The fair values of debt instruments are generally derived based on the average of
multiple market maker or broker quotes which are considered to be binding. Where quotes are not available, debt instruments are valued using cash flow models using assumptions and estimates that may be subjective and non-observable.
The fair values of our investments in commodities are based on the commodity’s last reported price on the balance sheet date as reported by a recognized commodities exchange. Our investments in private and unlisted equity securities and limited partnerships are all carried at fair value, based on broker or market maker quotes, or based on management’s assumptions developed from available information, using the services of our investment advisor including the most recent net asset values obtained from the managers of those underlying investments. Investments in private equity funds are valued based on unadjusted net asset values reported by the funds’ managers.
For securities classified as "trading securities" and "other investments", any realized and unrealized gains or losses are determined on the basis of specific identification method (by reference to cost or amortized cost, as appropriate) and included in net investment income in the consolidated statements of income.
We establish reserves for contracts based on estimates of the ultimate cost of all losses including IBNR. These estimated ultimate reserves are based on our own actuarial estimates derived from reports received from ceding companies, industry data and historical experience. These estimates are periodically reviewed by the Company on a contract by contract basis and adjusted when necessary. Since reserves are estimates, the setting of appropriate reserves is an inherently uncertain process. Our estimates are based upon actuarial and statistical projections and on our assessment of currently available data, predictions of future developments and estimates of future trends and other factors. The final settlement of losses may vary, perhaps materially, from the reserves initially established and periodically adjusted. All adjustments to the estimates are recorded in the period in which they are determined. Under U.S. GAAP, we are not permitted to establish loss reserves, which include case reserves and IBNR loss reserves, until the occurrence of an event which may give rise to a claim. As a result, only loss reserves applicable to losses incurred up to the reporting date are established, with no allowance for the establishment of loss reserves to account for expected future loss events.
For most of the contracts we write, our risk exposure is limited by defined limits of liability. Once the loss limit for a contract has been reached, we have no further exposure to additional losses from that contract. However, certain contracts, particularly quota share contracts that relate to first dollar exposure, may not contain aggregate limits.
we receive from our client, if any, to publicly available financial statements of the client in an effort to identify, confirm and monitor the accuracy and completeness of the data. We require each of our clients to provide loss information for each reporting period, which, depending on the contract, could be monthly or quarterly. The loss information required depends on the terms and conditions of each contract and may include many years of history. Depending on the type of business underwritten, we are entitled to receive client and industry information on historical paid losses, incurred losses, number of open claims, number of closed claims, number of total claims, listings of individual large losses, earned premiums, policy count, policy limits underwritten, exposure information and rate change information. We may also receive information by class or subclass of business. If the reserving data is not available from a client, we rely on industry data, as well as the judgment and experience of our underwriters and actuaries.
Reported Loss Development Method. We estimate ultimate losses by calculating past reported loss development factors and applying them to exposure periods with further expected reported loss development. Since reported losses include payments and case reserves, changes in both of these amounts are incorporated in this method. This approach provides a larger volume of data to estimate ultimate losses than paid loss methods. Thus, reported loss patterns may be less varied than paid loss patterns, especially for coverage that have historically been paid out over a long period of time but for which claims are reported relatively early and case loss reserve estimates have been established.
For each contract, we utilize such reserving methodology that our actuaries deem appropriate in order to calculate a best estimate, or point estimate, of reserves. We use various actuarial methods to provide data point estimates to aid us in our estimation of reasonable and adequate loss reserves. In setting our reserves, we do not select a range of estimates that may be subject to adjustment. We analyze reserves on a contract by contract basis and do not reserve based on aggregated product lines. Whether we use one methodology, a combination of methodologies or all methodologies depends upon the contract and the judgment of the actuaries responsible for the contract. We do not have a set weighting of the various methods we use. Certain of the methods we consider are more appropriate depending on the type and structure of the contract, how mature is the contract, and the duration of the expected paid losses on the contract. For example, the data estimation for contracts that are relatively new and therefore have little paid loss development is more appropriately considered using the Bornhuetter-Ferguson Reported Loss Method than a paid loss development method.
For the year ended December 31, 2015, we reported net loss of $326.4 million, compared to net income of $109.6 million reported for the year ended December 31, 2014. Our investment portfolio reported net loss of $281.9 million, or a return of (20.2)%, for the year ended December 31, 2015, compared to net investment income of $122.6 million, or a return of 8.7%, for the same period in 2014. The underwriting loss before general and administrative expenses for the year ended December 31, 2015 was $24.9 million, compared to underwriting income of $11.6 million reported for the year ended December 31, 2014. The underwriting loss for the 2015 fiscal year was driven by adverse loss development relating to construction defect losses on legacy
general liability contracts written during the 2008 to 2011 underwriting years. For the year ended December 31, 2015, our overall composite ratio was 106.1% compared to 96.7% for the year ended December 31, 2014. General and administrative expenses decreased for the year ended December 31, 2015 to $23.4 million from $24.5 million for the year ended December 31, 2014, primarily as a result of lower quantitative bonuses accrued relating to prior underwriting years, partially offset by non-recurring professional fees incurred during the year.
The poor investment performance during 2015 was primarily the result of losses experienced on three equity securities (CONSOL Energy, Micron Technology, and SunEdison) which were among our largest long positions. This coupled with very few securities that reported gains during the year, combined to result in the large investment loss reported during 2015.
The poor underwriting performance of certain contracts that were written between 2008 and 2011, and are currently in run-off, have had a negative impact on our recent reported financial results. The below graph presents our underwriting results reported during each of the fiscal accounting years from 2007 to 2015 compared to the underwriting results for each of those underwriting years. This graph shows that while accounting results have been negatively impacted in recent periods, particularly from adverse loss development on contracts written during the 2009 and 2010 underwriting years, the underlying business written in the more recent years has been profitable and the contracts written since 2012 are performing well.
For the year ended December 31, 2014, we reported net income of $109.6 million, compared to net income of $225.7 million reported for the year ended December 31, 2013. Our investment portfolio reported net income of $122.6 million, or a return of 8.7%, for the year ended December 31, 2014, compared to net investment income of $218.1 million, or a return of 19.6%, for the same period in 2013. The underwriting income before general and administrative expenses for the year ended December 31, 2014 was $11.6 million, compared to underwriting income of $37.5 million reported for the year ended December 31, 2013. The decrease in underwriting income was driven by adverse loss development on prior year contracts and to a lesser extent by lower volume of premiums earned during 2014 compared to 2013. By comparison, the 2013 underwriting income included a reversal of $12.4 million of loss reserves (net of reinstatement premiums) relating to super-storm Sandy due to revised loss estimates recorded during 2013. For the year ended December 31, 2014, our overall composite ratio was 96.7% compared to 93.2% for the year ended December 31, 2013. General and administrative expenses increased for the year ended December 31, 2014 to $24.5 million from $21.0 million for the year ended December 31, 2013, primarily as a result of higher quantitative bonuses accrued relating to the 2012, 2013 and 2014 underwriting years.
Our primary financial goal is to increase the long-term value in fully diluted adjusted book value per share. For the year ended December 31, 2015, the fully diluted adjusted book value per share decreased by $8.59 per share, or 27.9%, to $22.17 per share from $30.76 per share at December 31, 2014. For the year ended December 31, 2015, the basic adjusted book value per share decreased by $8.88 per share, or 28.5%, to $22.29 per share from $31.17 per share at December 31, 2014.
During 2015, our gross premiums written increased by $178.1 million, or 55.0%, compared to the year ended December 31, 2014. For the year ended December 31, 2015, our frequency gross premiums written increased by $168.5 million, or 57.0%, compared to the same period in 2014. The increase was primarily driven by new contracts bound during 2015 and premium growth on existing contracts renewed during 2015.
The gross premiums written for motor liability (including motor physical damage) increased by $86.3 million during the year ended December 31, 2015 compared to the same period in 2014. The increase was partially a result of higher premiums on an existing private passenger motor contract which was renewed during 2015. New motor contracts written during 2015 also contributed partially to the increase in motor liability gross premiums written. The frequency gross premiums written for professional liability increased by $41.3 million during the year ended December 31, 2015, compared to the same period in 2014, as a result of new quota share casualty contracts bound during 2015 and during the second half of 2014. The frequency gross premiums written for specialty health, general liability, workers' compensation, and commercial property lines increased by $12.9 million, $13.5 million, $11.9 million, and $7.5 million, respectively, as a result of new quota share contracts written during 2015 and the latter half of 2014. Other lines of business also reported increases in gross written premiums with financial, marine, aviation and energy, in the aggregate, accounting for $5.5 million of the increase in gross written premiums during the year ended December 31, 2015 compared to the same period in 2014. The increase in gross premiums written were partially offset by a $11.6 million decrease in the personal property line for the year ended December 31, 2015. The decrease was primarily a result of a Florida homeowners' contract which expired during 2015 and was not renewed.
swap and the cost of the ILW is amortized over the risk period and recorded in the consolidated statements of income as "other income (expense), net" and not as part of premiums ceded. For the year ended December 31, 2015, the ILW amortization expense was $2.3 million.
For the year ended December 31, 2015, the frequency net premiums earned increased by $49.9 million, or 15.1%, compared to the same period in 2014. The increase was primarily as a result of the motor liability and physical damage business which increased by $41.0 million during the year ended December 31, 2015, compared to the same period in 2014, primarily due to an increase in volume of underlying premiums earned on private passenger motor contracts in effect during the current period. Our professional lines premiums earned increased primarily due to new contracts entered into during 2015 and the second half of 2014 which contributed $29.7 million of the increase. The increase in professional liability premiums earned was partially offset by a decrease of $11.3 million relating to solicitors' professional indemnity business due to a lower volume of underlying business written by the cedents. Additionally, the general liability, specialty health and workers' compensation premiums earned increased by $11.1 million, $7.9 million and $4.5 million respectively, during the year ended December 31, 2015 as a result of new contracts entered into during 2015 and the second half of 2014. New contracts entered in other lines of business also contributed to increases in premiums earned with marine, financial and commercial property, in the aggregate, accounting for $6.6 million of the increase in net premiums earned during the year ended December 31, 2015. The increases in premiums earned were partially offset by a $40.7 million decrease in personal property premiums partly due to a Florida homeowners' contract not renewed upon
For the year ended December 31, 2014, the frequency net premiums earned decreased by $199.2 million, or 37.6%, compared to the same period in 2013. The decrease was primarily attributed to a private passenger motor contract terminated at the end of 2013 which accounted for $159.5 million of the decrease. Additionally, the volume of premiums earned on other private passenger motor contracts decreased by $13.9 million, compared to the same period in 2013. This decrease was due to a reduction in earned premiums reported during 2014 resulting from competitive pricing pressure on the underlying premiums written by the insurers. The personal line premiums earned decreased by $40.1 million during 2014, compared to the same period in 2013 primarily due to the explanation provided above for gross premiums written. Other decreases in net premiums earned related to the workers' compensation line and the general liability line which decreased by $11.1 million and $2.4 million, respectively, primarily as a result of certain multi-line contracts terminated during 2013. The decreases in frequency net premiums earned were partially offset by net premiums earned on new contracts and increases in the volume of underlying business in other lines including $10.3 million relating to professional liability contracts and $3.0 million relating to specialty health contracts.
Premiums written relating to severity contracts are earned over the contract period in proportion to the period of protection. For the year ended December 31, 2014, severity net premiums earned increased $5.5 million, or 30.4%, compared to the same period in 2013. The increase is partially a function of the reversal of reinstatement premiums reflected in the comparative period and partially due to the new and renewed severity contracts entered into during 2014. The increases were partially offset by decreases due to catastrophe contracts expired but not renewed during 2014 due to inadequate pricing.
The higher frequency loss ratio for the year ended December 31, 2015 primarily related to the adverse loss development on the general liability contracts discussed above. Excluding the affected general liability contracts, the loss ratio for frequency business for the year ended December 31, 2015 was 69.1%. The loss ratio for the Florida homeowners' insurance contracts also increased during the year ended December 31, 2015 due to unfavorable loss development primarily as a result of sinkhole claims, higher than anticipated water damage claims from rainstorms and an increase in the practice of "assignment of benefits" whereby homeowners assign their rights for filing and settling claims to attorneys and public adjusters which led to increases in the frequency of claims reported as well as the severity of loss adjustment expenses. The increase in the loss ratio for the year ended December 31, 2015 was partially offset by a lower loss ratio on specialty health contracts due to no adverse losses developing on the employers' medical stop-loss contracts in the current period compared to adverse losses recorded during the comparable period in 2014. The loss ratio for professional liability line was also lower for the year ended December 31, 2015 compared to the same period in 2014 due to a shift in the mix of business from predominantly solicitors' indemnity contracts to a more diversified professional liability book of business.
For the years ended December 31, 2014 and 2013, the loss ratios for our severity business were 16.1% and (48.1)%, respectively. During the year ended December 31, 2014 our severity business was not impacted by any major catastrophe events. The net losses incurred on severity contracts was $3.8 million for the year ended December 31, 2014, and primarily related to attritional loss reserves on certain excess of loss contracts. The negative loss ratio of (48.1)% for the comparable year ended December 31, 2013 was due to the reversal of loss reserves relating to super-storm Sandy. Excluding the effect of that loss reserve reversal (and the corresponding reversal of reinstatement premiums), the severity loss ratio for the year ended December 31, 2013 was 29.9%, which included a $4.0 million increase in loss reserves on a casualty clash contract.
For the year ended December 31, 2015, our net loss reserves on prior period contracts increased by $50.3 million primarily related to adverse loss development on general liability contracts relating to construction defect claims. For the year ended December 31, 2014, our net loss reserves on prior period contracts increased by $18.2 million, which primarily related to adverse loss development on general liability, commercial motor, solicitors' professional liability and employers' medical stop-loss businesses, partially offset by favorable loss development on private passenger automobile business. For the year ended December 31, 2013, our net loss reserves relating to prior period contracts decreased by $6.1 million, which was partially due to the elimination of reserves relating to super-storm Sandy, and partially due to the favorable loss development on the private passenger automobile, commercial motor and personal property businesses. The decrease was partially offset by adverse loss development on the general liability and casualty clash businesses.
For further details on prior period loss developments, please refer to Note 7 "Loss and loss adjustment expense reserves" of the consolidated financial statements.
We expect acquisition costs to be higher for frequency business than for severity business. Acquisition cost as a percentage of net premiums earned (referred to as acquisition cost ratio) are generally higher for our frequency business than for our severity business, but fluctuate based on the mix of business. The acquisition cost ratios for the years ended December 31, 2015, 2014 and 2013, were as follows:
For the year ended December 31, 2014, the slightly lower frequency acquisition cost ratio compared to the same period in 2013 was related to a combination of decreases in specialty health, professional liability and workers' compensation lines, partially offset by increases in general liability and personal property lines. Acquisition cost ratio for the motor line remained unchanged due to the lower ceding commissions on the in-force private passenger contracts being entirely offset by an increase in sliding scale commission adjustments from the favorable loss development on prior period private passenger contracts.
Internal expenses include all general and administrative expenses except for corporate expenses. Corporate expenses included those expenses directly related to being a publicly listed entity and certain non-core operating expenses. Prior to 2015, corporate expenses also included non-investment related foreign exchange gains and losses. Effective from January 1, 2015, the presentation was modified and any non-investment related foreign exchange gains and losses are now presented on the consolidated statements of income under the caption "other income (expenses), net". As a result, foreign exchange gain of $2.6 million and loss of $0.8 million that were previously included in corporate expenses for the years ended December 31, 2014 and 2013, respectively, have been reclassified to "other income (expense), net", to conform to the current period presentation. For the year ended December 31, 2015, a foreign exchange gain of $0.03 million was included in "other income (expense), net".
For the year ended December 31, 2014, the increase in internal expenses was primarily related to higher underwriting quantitative bonuses estimated relating to the 2012, 2013 and 2014 underwriting years, and to a lesser extent, related to information technology system upgrades and an increase in head-count from the comparative period in 2013.
For the year ended December 31, 2015, investment loss, net of fees and expenses, resulted in a loss of 20.2% on our investments managed by DME Advisors, compared to gains of 8.7% and 19.6% for the years ended December 31, 2014 and 2013, respectively. The investment loss for the year ended December 31, 2015 was primarily driven by our long portfolio, which reported an investment loss of 17.2%. Our three large long investments (CONSOL Energy, Micron Technology and SunEdison) combined, resulted in a 14.9% investment loss. Additionally, the macro positions and other expenses accounted for 1.9% and 1.5%, respectively, of the investment loss. The short portfolio reported a gain of 0.4% for the year ended December 31, 2015.
DME Advisors and its affiliates manage and expect to manage other client accounts besides ours, some of which have investment objectives similar to ours. To comply with Regulation FD, our investment returns are posted on our website on a monthly basis. Additionally, our website (www.greenlightre.ky) provides the names of the largest disclosed long positions in our investment portfolio as of the last business day of the month of the relevant posting, as well as information on our long and short exposures. Although DME Advisors discloses all investment positions to us, it may choose not to disclose certain positions to its other clients in order to protect its investment strategy. Therefore, we present on our website the relevant largest long positions and exposure information as disclosed by DME Advisors or its affiliates to their other clients.
was recorded on the consolidated balance sheets relating to a refund for taxes paid by GRIL in prior years. Based on the timing of the reversal of the temporary differences and likelihood of generating sufficient taxable income to realize the future tax benefit, management believes it is more likely than not that the deferred tax asset will be fully realized in the future and therefore no valuation allowance has been recorded. The Company has not taken any other tax positions that management believes are subject to uncertainty or that are reasonably likely to have a material impact to the Company, GRIL or Verdant.
The corporate expense ratio is the ratio of corporate expenses to net premiums earned. Corporate expenses include expenses relating to GLRE being a publicly listed entity and certain non-core operating expenses.
Prior to January 1, 2015, non-investment related foreign exchange gains and losses were recorded under corporate expenses. Effective from January 1, 2015, the presentation has been modified and any non-investment related foreign exchange gains or losses are now recorded under "other income (expense), net" in the consolidated statements of income. Therefore, the corporate expense ratios and combined ratios for prior periods have been reclassified in the above table to conform to the current year presentation.
Our investment portfolio, including any derivatives, is valued at fair value and any unrealized gains or losses are reflected in net investment income (loss) in the consolidated statements of income. As of December 31, 2015, 90.9% (2014: 83.9%) of our investment portfolio (excluding restricted and unrestricted cash and cash equivalents) was comprised of investments valued based on quoted prices in actively traded markets (Level 1), 8.0% (2014: 14.5%) was comprised of securities valued based on observable inputs other than quoted prices (Level 2) and 1.1% (2014: 1.6%) was comprised of securities valued based on non-observable inputs (Level 3). (Refer to Note 3 "Financial Instruments" in the consolidated financial statements for details of transfers into and out of Level 3 during the year ended December 31, 2015).
As of December 31, 2015, our securities sold, not yet purchased were $882.9 million compared to $1,090.7 million at December 31, 2014, a decrease of 19.1%, primarily due to disposal of certain non-U.S. sovereign debt short positions and, to a lesser extent, due to an increase in unrealized gains on the short equity securities. However, since macro positions such as sovereign debt are not included in the exposure analysis, our short exposure was 74.0% as of December 31, 2015, compared to 66.9% at December 31, 2014.
Unlike long investments, short sales theoretically involve unlimited loss potential since there is no limit as to how high the market price of a security may rise. While it is not possible to list all of the reasons why a loss on a short sale may occur, a loss on a short sale may be caused by one or more of the following factors:
As of December 31, 2015, the restricted cash included $882.9 million relating to collateral for securities sold, not yet purchased, compared to $1,090.7 million as of December 31, 2014.
Overall, our restricted cash decreased by $60.3 million, or 4.7%, from $1,296.9 million to $1,236.6 million, primarily due to the decrease in securities sold, not yet purchased. The cash collateral held by derivative counterparties decreased by $19.0 million to $52.2 million during the year ended December 31, 2015 due to a decrease in derivatives. Additionally, as of December 31, 2015, included in restricted cash and cash equivalents was $301.4 million (2014: $135.0 million) of cash and cash equivalents pledged as collateral (for letters of credit and trust accounts) to our cedents to satisfy our reinsurance collateral obligations.
At December 31, 2015, reinsurance balances receivable were $187.9 million compared to $151.2 million as of December 31, 2014, an increase of $36.7 million, or 24.3%. The increase in reinsurance balances receivable was primarily attributable to the increase in premiums written during the year ended December 31, 2015 compared to the same period in 2014.
As of December 31, 2015, notes receivable increased by $23.6 million to $25.1 million from $1.6 million as of December 31, 2014. The increase was primarily related to a settlement agreement entered into with a ceding insurer during 2015 whereby certain amounts, previously classified under reinsurance balances receivable, were converted into a ten-year note receivable. For further details on notes receivable, refer to Note 2 "Significant Accounting Policies" in the consolidated financial statements.
During the year ended December 31, 2015, the frequency loss reserves increased by $41.6 million, or 18.3%, to $269.1 million from $227.5 million as of December 31, 2014. The increase in the frequency IBNR was driven primarily by an increase in booked reserves on prior period contracts as a result of unfavorable loss development, partially offset by a net decrease in claims reported on active contracts during the period.
For most of our contracts written as of December 31, 2015, our risk exposure is limited by defined limits of liability. Once the loss limit for a contract has been reached, we have no further exposure to additional losses from that contract. However, certain contracts, particularly quota share contracts that relate to first dollar exposure, may not contain aggregate limits. Our severity and frequency business both have certain contracts that contain natural peril loss exposure. As of January 1, 2016, our maximum aggregate loss exposure to any series of natural peril events was $236.3 million. For purposes of the preceding sentence, aggregate loss exposure is net of any retrocession (including any ILWs) and is equal to the difference between the aggregate limits available in the contracts that contain natural peril exposure minus reinstatement premiums, if any, for the same contracts.
We categorize peak zones as: United States, Canada and the Caribbean; Europe; Japan; and the rest of the world. The following table provides the theoretical maximum single event loss exposure and aggregate loss exposure to natural peril losses for each of the peak zones as of January 1, 2016:
Since our maximum loss exposures are theoretical maximums based on contract limits, these limits may be significantly higher than modeled loss estimates which are commonly used in the insurance industry. Therefore as of January 1, 2016, we also estimate catastrophe losses in terms of the probable maximum loss ("PML"). We define PML as the anticipated loss, taking into account contract terms and limits, caused by a catastrophe affecting a broad geographic area, such as that caused by an earthquake or hurricane. We anticipate that the PML will vary depending upon the modeled simulated losses and the composition of the in-force book of business. The projected severity levels are described in terms of a 1-in-250 year return period. The 1-in-250 year return period PML means that there is a 0.4% chance in any given year that an occurrence of a natural catastrophe will lead to losses exceeding the stated estimate. In other words, it corresponds to a 99.6% probability that the loss from an event will fall below the indicated PML.
It is important to note that PMLs are estimates. As a result, we cannot provide any 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.
Total equity reported on the consolidated balance sheet, which includes non-controlling interest, decreased by $345.3 million to $848.8 million as of December 31, 2015, compared to $1,194.0 million as of December 31, 2014. Retained earnings decreased primarily due to net loss of $326.4 million reported for the year ended December 31, 2015 and $9.2 million related to repurchase of Class A ordinary shares. The non-controlling interest decreased by $5.5 million due to investment losses attributable to DME's interest in the joint venture during the year ended December 31, 2015. The decrease in additional paid-in capital for the year ended December 31, 2015 of $4.2 million primarily related to common shares repurchased during the period, partially offset by stock based compensation for the year ended December 31, 2015.
Greenlight Capital Re is organized as a holding company with no operations of its own. As a holding company, Greenlight Capital Re has minimal continuing cash needs, most of which are related to the payment of administrative expenses. All of our underwriting operations are conducted through our wholly-owned reinsurance subsidiaries, Greenlight Re and GRIL, which underwrite risks associated with our property and casualty reinsurance programs. There are restrictions on Greenlight Re’s and GRIL’s ability to pay dividends which are described in more detail below. It is our current policy to retain earnings to support the growth of our business. We currently do not expect to pay dividends on our ordinary shares.
As of December 31, 2015, Greenlight Re and GRIL were each rated "A (Excellent)" by A.M. Best. On October 23, 2015, A.M. Best affirmed the "A (Excellent)" ratings but revised the ratings' outlook from stable to negative. The ratings reflect A.M. Best’s opinion of our reinsurance subsidiaries’ financial strength, operating performance and ability to meet obligations and it is not an evaluation directed toward the protection of investors or a recommendation to buy, sell or hold our Class A ordinary shares. If A.M. Best downgrades our ratings below "A- (Excellent)" or withdraws our rating, we could be severely limited or prevented from writing any new reinsurance contracts, which would significantly and negatively affect our business. Insurer financial strength ratings are based upon factors relevant to policyholders and are not directed toward the protection of investors. Our A.M. Best ratings may be revised or revoked at the sole discretion of the rating agency.
Our sources of funds consist primarily of premium receipts (net of brokerage and ceding commissions), investment income (net of advisory compensation and investment expenses), including realized gains, and other income. We use cash from our operations to pay losses and loss adjustment expenses, profit commissions and general and administrative expenses. Substantially all of our funds, including shareholders’ capital, net of funds required for business operations, are invested by DME Advisors in accordance with our investment guidelines. As of December 31, 2015, approximately 96% (December 31, 2014: 96%) of our long investments were comprised of publicly-traded equity securities and other holdings which can be readily liquidated to meet current and future liabilities. Given our value-oriented long and short investment strategy, if markets are distressed we would expect the liability of the short portfolio to decline. Any reduction in the liability would cause our need for restricted cash to decrease and thereby free up cash to be used for any purpose. Additionally, since the majority of our invested assets can be readily liquidated, even in distressed markets, we believe sufficient securities can be readily sold or covered in a timely manner to generate cash to pay claims. Since we classify our investments as "trading," we book all gains and losses (including unrealized gains and losses) on all our investments (including derivatives) as net investment income or loss in our consolidated statements of income for each reporting period.
For the years ended December 31, 2015, 2014 and 2013, the net cash used in operating activities was $59.9 million, $133.7 million and $92.7 million, respectively. Included in the net cash used in operating activities were investment related expenses, such as investment advisor compensation, and net interest and dividend expenses of $35.0 million, $56.6 million and $97.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. Excluding the investment related expenses from the net cash used in operating activities results in net cash primarily provided by (used in) our underwriting activities, which was $(24.9) million, $(77.1) million and $5.2 million for the years ended December 31, 2015, 2014 and 2013, respectively. During the year ended December 31, 2015 and 2014 , the use of cash for underwriting activities was primarily a result of losses paid in excess of the premiums collected (net of acquisition costs). Generally, in a given period if the premiums collected are sufficient to cover claim payments, we would generate cash from our underwriting activities. Due to the inherent nature of our underwriting portfolio, claims are often paid several months or even years after the premiums are collected. The cash generated from underwriting activities, however, may be volatile from period to period depending on the underwriting opportunities available.
Each of the facilities contain customary events of default and restrictive covenants, including but not limited to, limitations on liens on collateral, transactions with affiliates, mergers and sales of assets, as well as solvency and maintenance of certain minimum pledged equity requirements, and restricts issuance of any debt without the consent of the letter of credit provider. Additionally, if an event of default exists, as defined in the letter of credit facilities, Greenlight Re would be prohibited from paying dividends to its parent company. The Company was in compliance with all the covenants of each of these facilities as of December 31, 2015.
Our Board of Directors has adopted a share repurchase plan authorizing the Company to repurchase up to 2.0 million Class A ordinary shares or securities convertible into Class A ordinary shares in the open market, through privately negotiated transactions or Rule 10b5-1 stock trading plans. The current share repurchase plan was renewed on April 29, 2015 by the Board of Directors and expires on June 30, 2016. The Company is not required to repurchase any of the Class A ordinary shares and the repurchase plan may be modified, suspended or terminated at the election of our Board of Directors at any time without prior notice. During the year ended December 31, 2015, 613,540 Class A ordinary shares were repurchased by the Company.
The following table shows our aggregate contractual obligations as of December 31, 2015 by time period remaining:
As of December 31, 2015, $882.9 million of securities sold, not yet purchased, were secured by $882.9 million of restricted cash held by prime brokers to cover obligations relating to securities sold, not yet purchased. These amounts are not included in the contractual obligations table above because there is no maturity date for securities sold, not yet purchased, and their maturities are not set by any contract and as such their due dates cannot be estimated.
Greenlight Re has entered into lease agreements for office space in the Cayman Islands. The leases expire on June 30, 2018 and Greenlight Re has the option to renew the leases for a further five year term. Under the terms of the lease agreements, Greenlight Re is committed to annual rent payments ranging from $0.3 million at inception to $0.5 million at expiry. The minimum lease payment obligations are included in the above table under operating lease obligations and in Note 14 to the accompanying consolidated financial statements.
We consider the effects of inflation in our pricing and when estimating loss and loss adjustment expense reserves. The actual effects of inflation on our results of operations cannot be accurately known until claims are ultimately settled. For the years ended December 31, 2015, 2014 and 2013, inflation had no significant impact on our revenues or net income. We do not believe that inflation has had or will have a material effect on our combined results of operations, except insofar as inflation may affect interest rates and the asset values in our investment portfolio.
Information with respect to this Item is set forth under Part IV Item 15.