Greenlight Capital Re, Ltd. CEO Discusses Q2 2011 Results - Earnings Call Transcript

Greenlight Capital Re, Ltd. ( GLRE)

Q2 2011 Earnings Call

August 10, 2011, 09:00 a.m. ET


David Einhorn - Chairman

Len Goldberg - CEO

Bart Hedges - President and Chief Underwriting Officer

Tim Courtis - CFO



Thank you for joining the Greenlight Re Conference Call on Second Quarter 2011 Earnings. Joining us on the 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.

All participants will be in listen-only mode. (Operator Instructions) The company reminds you that forward-looking statements that may be made in 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 fact, but rather reflect the company’s current expectations, estimates and projections about 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 22nd, 2011and other documents filed by the company with the SEC. If one or more risks or uncertainties materialize or if the company’s underlying assumptions proved 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 being recorded. I’d now like to turn the conference over to Mr. 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 second quarter of 2011, in what remains a challenging market for reinsurers and investors alike, Greenlight Re produced a small gain in our underwriting portfolio and a small loss in our investment portfolio. Overall, our fully diluted adjusted book value per share decreased by 2% in the quarter and by 7.3% for the year-to-date.

Our year-to-date combined ratio of 102.1 has improved from our first quarter 2011 combined ratio of 107.4. This is mainly due to a small reduction in our ultimate losses for storms during this period offset by limited adverse development on a commercial auto program that is (inaudible) us. In addition, we had no additional storm related losses in the second quarter of 2011 as we continue to benefit from right into (inaudible) for peak exposures and high attachment points. Bart will give us more details when he discusses our underwriting results.

Our gross written premium increased by 27% in the quarter compared to the same period in the prior year and by 37% for the year-to-date. In addition, the frequency we are in a business we prefer grew by 44% on a year-to-date basis while severity business declined by 22% reflecting the execution of our strategy. Much of the increase in frequency premiums is a result of further success in our Florida home owner’s portfolio which continues to perform well as we have seen strong rate increases in the Florida insurance market.

Our investment portfolio lost 1.9% in the second quarter of 2011 as we maintained (inaudible) position portfolio. We believe our investment portfolio was well positioned for the uncertainty that is ahead of us, but we did have some things worked against us in the quarter which David will discuss further. In the month of July we reported a 1% gain on our investment portfolio.

In a week’s time I will officially step down as CEO of Greenlight Re and (inaudible) over to Bart while I continue to serve Greenlight Re as a Director. I’m proud of the team we have build and our ability to capitalize on opportunities in the market. It has been a great partnership for the last 5.5 years and I’m confident that Bart will continue his successful development of our company. Together we have developed a strong deep and talented organization that we believe will excel in both good times and difficult times.

And now I’d like to turn the call over to our Chairman, David Einhorn, to discuss our investment results in more detail and the progress of Greenlight Re’ overall strategy.

David Einhorn

Thanks Len and thanks everyone for joining us today. The Greenlight Re investment portfolio was down 1.9% in the second quarter of 2011 brining our first half of 2011 net returns to negative 5.2%. In the volatile yet relatively flat second quarter for the S&P, our long portfolio was up slightly but our short portfolio was up a little bit more than the market in losses in our euro and yen positions more than offset a slight gain in goal.

In July we had a small loss on our longs and positive returns for our shorts and macro positions which added up to a gain for over 1% for the month. Although, we had a slight gain in our short portfolio in June and July, the loss in our investment portfolio for the first half of the year came from our shorts. As we saw at the end of the internet bubble, markets have performed when it simply becomes too expensive on the day-to-day basis to hold (inaudible) research in short positions.

In the first half of the year we witnessed the bifurcated market where a small number of momentum starts rose mostly because they were rising. These markets continue until they don’t and we have seen what can happen when the enthusiasm ends. It is also becoming increasingly clear that the (inaudible) economic stimulus through [QE2] was not only ineffective but has brought about inflation in items that consumers use on the daily basis such as food and energy. This has caused consumers to have to reduce other consumption which has caused a global economy to slow.

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