Greenlight Capital Re, Ltd. ( GLRE)

Q1 2011 Earnings Call

May 3, 2011 9:00 am ET


David Einhorn – Chairman

Len Goldberg – CEO

Bart Hedges – President and Chief Underwriting Officer

Tim Courtis – CFO


Brian Meredith – UBS

Russell Mollen – Bares Capital Management



Good morning. Thank you for joining the Greenlight Re first quarter 2011 earnings call. Joining us on this call this morning are, David Einhorn, Chairman; Len Goldberg, Chief Executive Officer, Bart Hedges, President and Chief Underwriting Officer, and Tim Courtis, Chief Financial Officer.

The company reminds you that forward-looking statements that may be made on this call are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical facts, but rather reflect the company’s current expectations, estimates and predictions of our future results and events, and are subject to risks, uncertainties and assumptions, including risks, uncertainties and assumptions that are enumerated in the company’s Form 10-K dated February 22, 2011 and other documents filed by the company with the SEC.

If one or more risks or uncertainties materialize, or if the company’s underlying assumptions prove to be incorrect, actual results may vary materially from what the company projects. The company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please note this event is under being recorded.

I’d now like to turn the conference to Len Goldberg. Please go ahead.

Len Goldberg

Good morning. My name is Len Goldberg, Chief Executive Officer of Greenlight Re. Thank you for taking the time to join us today. In the first quarter of 2011, Greenlight Re reported loss in both our underwriting portfolio and our investment portfolio.

Overall, our fully-diluted adjusted book value per share decreased by 5.4% in the quarter. Included in our 107.4 combined ratio for the first quarter of 2011, a $10 million in combined losses relating to the Christchurch earthquake in New Zealand and the Tohoku earthquake and tsunami in Japan.

As we expected given our business model, we benefited from writing catastrophe retrocessional business on peak exposures. In addition, we had decreased our catastrophe risk to exposure in early 2011, due to a softening in market prices. Bart will discuss our underwriting results in greater detail later in this call.

Our gross written premium increased more than 50% compared to the first quarter of 2010. At the same time, during the quarter, the frequency-oriented business we prefer grew by 76%, while severity business declined by 42%. This is a reflection of the continued progress in executing our strategy. Most of the increase in frequency premiums came from further successes in our Florida homeowners’ portfolio, which continues to perform well, particularly as we have seen significant and continued rate increases in the Florida insurance market.

Whether the unfortunate events in Japan and New Zealand will lead to a strengthening in primary insurance pricing is too early to tell. However, we’ve built a strong and vivid team which is assessing the impact of these events and will allow us to identify and capitalize on any opportunities as the year progresses.

Our investment portfolio lost 3.4% in the first quarter of 2010. During that time, we maintained a defensively positioned portfolio in what was a very strong quarter for the equity markets, the best first quarter for US equity markets since the tech bubble of 1999. We had a particularly tough time in the short portfolio, which David will discuss later in the call. In the month of April, we reported a 0.8% gain on our investment portfolio.

As you probably saw on our announcement yesterday, I am retiring and will be stepping down as CEO of Greenlight Re effective at the end of my current contract on August 15 to spend more time with my family in the US.

Over the past five-and-a-half-years, even though [ph] one of the best teams in the industry and I’m pleased to report that Bart Hedges, our current President and Chief Underwriting Officer, will be appointed CEO. I intend to continue to serve Greenlight Re, but from adjacency and will remain on the Board of Directors of the company. I was the first employee of Greenlight Re and in the last six years, we’ve developed from the ground operations a great franchise with a strong following in the marketplace.

From the beginning, Bart has led the development and implementation of our underwriting strategy. It would be my pleasure to work alongside him and the talented, dedicated team we assembled together. I have no doubt that Bart will be an excellent leader for Greenlight Re.

Now, I’d like to turn the call over to our Chairman, David Einhorn, to discuss our investments results in more detail and the progress in Greenlight Re’s overall strategy.

David Einhorn

Thanks, Len and good morning, everyone. When we hired Len as the Greenlight Re’s CEO back in 2005, we gave him the task of developing an organization from scratch, assembling a first-class team and building Greenlight Re’s brand in the reinsurance industry.

Lenny has accomplished these tasks with enthusiasm and diligence. He’s built a terrific reinsurance team, with a strong culture and a track record of success. Len moved from his home to New Jersey to the Cayman Islands six years ago. Len has decided it’s time to go home. And, although we’re sad to see him go, he will remain intimately involved with the future success of the company, the members of Board of Directors and as a valuable resource to the Greenlight Re team.

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