Bart Hedges - CEO David Einhorn - Chairman Tim Courtis - CFO.

Brian Meredith - UBS.

Thank you for joining the Greenlight Re Conference Call for the Third Quarter 2015 Earnings. Joining us on the call this morning are David Einhorn, Chairman; Bart Hedges, Chief Executive Officer; Tim Courtis, Chief Financial Officer; and Jim McNichols, Chief Actuarial Officer. [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 facts, but rather reflect the Company's current expectations, estimates and predictions about future results and events are subject to risks, uncertainties and assumptions, including those enumerated in the Company's Form 10-K dated February 17 of 2015 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 being recorded. I would now like to turn the conference over to Bart Hedges. Please go ahead, sir..

Good morning and thank you for taking the time to join us today. In the third quarter of 2015 Greenlight Re generated a loss on both our underwriting and investment portfolios.

The underwriting loss was driven by reserve adjustment on one contract in run-off and the investment loss was driven primarily by poor performance on three of our largest long positions. Overall, our fully diluted adjusted book value per share decreased by approximately 20% from the prior quarter-end.

During the third quarter of 2015 we reported an underwriting loss before general and administrative expenses of $27.6 million compared to underwriting income of $4 million during the third quarter of 2014. Underwriting loss was primarily due to adverse development on a contract in run-off which I will discuss in detail.

The third quarter is a fairly quiet quarter for new business. However written and earned premiums continued to grow quarter over quarter which is an indication that we're converting our pipeline opportunities to new business despite the challenging underwriting environment.

There were no significant property catastrophe events in the quarter and thus our catastrophe accounts continued to perform well. With respect to our property catastrophe aggregate, our maximum exposure to a single event is currently $210.4 million and our maximum exposure to all events is $243.8 million.

Our catastrophe aggregates remained relatively stable during the third quarter. As a reminder, we measure our aggregates as the maximum amount of limit available less the amount of reinstatement premiums due. We do not use a model of probable maximum loss or PML approach.

Between 2008 and 2011 we supported two MGAs that wrote general liability for contractors and subcontractors. The reserve charge of this quarter of $36.9 million relates to the construction defect exposure for one of these contracts. Last quarter, we made an adjustment to the other contract which led us to an extensive review of this class of exposure.

Ideally we would have been able to address this all in one quarter but our work with the claims handlers and third-party experts required significant time. We have also reviewed our portfolio for similar exposure on other contracts and we do not believe there is any.

The range of uncertainty for the ultimate value on the construction defect claims is fairly large and given the complicated nature of these claims and our poor track record of reserving for this business, we have booked reserves towards the higher end of the actuarial range. We feel comfortable with the outcome of this exercise.

Outside of the construction defect reserve charge, we reported a net reserve release of approximately $2.6 million during the quarter on the remaining reserves in our underwriting portfolio. A.M. Best recently completed its annual review of our financial strength rating. They affirmed our A rating but changed the outlook to negative.

The rationale for the rating noted are strong capital position and corporate risk management while the negative outlook is driven by the underperformance of our underwriting results in recent years and the creep in our loss reserves. We have had ongoing negative development in the 2008 to 2011 underwriting years due to three contracts.

The reserve creep was primarily a result of the late construction defect claims which led to poor initial claims handling and slow emergence of data. Since 2011 we made changes to our underwriting and monitoring procedures and we strengthened the team to avoid these types of problems in the future.

Our more recent underwriting years are performing well and we believe they are indicative of our future underwriting performance. There were some bright spots in the quarter. We continued to win new business in the casualty space and our in-force portfolio continues to perform in line with our expectations.

The team is preparing for the upcoming January renewal season and despite this challenging quarter, we're well positioned for 2016. We're focused on delivering improved underwriting results to regain the confidence in all of our constituencies.

Now I would like to turn the call over to our Chairman, David Einhorn, to discuss our investment performance and our progress with Greenlight Re's overall strategy..

Thanks, Bart and good morning everyone. The Greenlight Re investment portfolio lost 14.2% in the third quarter, bringing the year-to-date return to minus 16.9%. Our biggest detractors in the quarter were long investments in CONSOL Energy and SunEdison.

We continue to hold positions in both companies and believe that each was traded at a price that severely understates the fundamental value of the business. A number of our other longs including Apple, AerCap, Chicago Bridge & Iron and General Motors also sold off during the quarter on worries about the impact of a slowdown in emerging markets.

CONSOL Energy's stock price dropped 55% in the third quarter, far outpacing the drop in coal and natural gas prices. The market remains rapidly focused on the near-term prospects for Appalachian coal and natural gas and is overly discounting the Company's long-term resource value.

CONSOL's management is taking measures to improve operational efficiency while growing its production. Even at current depressed commodity prices, we expect the company will be cash flow breakeven or better from here as the management team is focused on cost cutting and reducing CapEx without sacrificing production.

A number of factors contributed to SunEdison's stock price collapse in the third quarter. Just as investor appetite for energy dividend flow through structures began to vain, SunEdison launched the IPO of TerraForm Global, a yield-co created to purchase emerging markets' projects.

As the share price of both SunEdison and its related yield vehicles fell, the company effectively lost access to the capital markets and the market worried that SunEdison could run out of money in the absence of a natural buyer for its projects.

We think the sell-off is overdone; SunEdison management has adjusted its strategy in response to the falling stock price. The company has raised additional equity, identified a third party to buy its projects and slowed its development pipeline.

We think the situation has stabilized and we see the potential for a significant recovery in the stock price from current levels. Our short book contributed 7.5% in the third quarter and helped offset some of the negative performance in our long portfolio. The winners include Mallinckrodt in Keurig Green Mountain.

During the quarter we added two new medium-sized positions in Michael Kors and UIL Holdings. Michael Kors' shares fell after a disappointing first quarter. But we believe the fall product line has much improved and the company has multiple avenues of growth going forward.

The company has a net cash balance sheet in trades at a single-digit multiple of expected earnings.

UIL Holdings is as an owner and operator of regulated utility assets and announced a merger with Iberdrola U.S.A in February that we believe will result in a less levered entity than its peers with a large tax asset and attractive renewables cash flows that are not fully reflected in the current stock price.

We reduced our gross exposure by 30 points in the quarter. Our net exposure increased slightly from 21% to 26% as we covered several shorts during the market sell-off in August. We continue to hold macro positions including gold, short Asian currencies and short French sovereign bonds. Overall, it's been a challenging environment.

We're optimistic that we should get some recovery from our beaten down long portfolio. On the underwriting side, I am also disappointed by our overall performance. Our combined ratio inception-to-date is 104% detracting from our overall results. For the business model to succeed we need to improve our results on both sides of the balance sheet.

Now I'd like to turn the call over to Tim to discuss the financial results..

Thanks, David. For the third quarter of 2015, Greenlight Re reported a net loss of $219.7 million compared to a net loss of $51.8 million for the comparable period in 2014. The net loss per share was $5.98 for the third quarter of 2015 compared to a net loss per share of $1.40 for the same period in 2014.

For the nine months ended September 30, 2015, we reported a net loss of $283.3 million compared to net income of $48.9 million for the nine months ended September 30, 2014. The net loss per share was $7.73 for the nine months ended September 30, 2015 compared to net income of $1.29 per share on a fully-diluted basis for the same period in 2014.

Gross premiums written were $357.2 million for the nine months ended September 30, 2015, an increase of 43% from gross premiums written of $249.8 million during the first nine months of 2014.

Our net earned premiums for the first nine months of 2015 increased by approximately 3% to $288.5 million when compared with premiums earned during the same period in 2014. Over the next 12 months we expect to experience similar growth in earned premiums that we experienced in written premiums as the premium from our new frequency business is earned.

The composite ratio for our frequency business for the first nine months of 2015 was 115.3% compared to a composite ratio of 98.3% during the comparable period in 2014. As Bart described, this year we have increased reserves by $51.6 million on two contracts in run-off with construction defect exposure.

These reserve increases accounted for an increase of approximately 19 points on the frequency composite ratio. For our severity business, our composite ratio was 46.7%. Overall our composite ratio for the first nine months of 2015 was 111% compared to 94.2% for the comparable period of 2014.

Our total expense ratio, being the combination of internal expenses and corporate expenses, was 6.4% for the first nine months of both 2015 and 2014. Our internal expenses of $14.2 million for the first nine months of 2015 were in line with our expectation and compared to $15.4 million incurred in the comparable period in 2014.

Our corporate expenses were $1.8 million higher during the first nine months of 2015 due to certain non-reoccurring professional fees incurred related to strategic initiatives. The resulting combined ratio of 117.4% for the first nine months of 2015 compares to a combined ratio of 100.6% for the same period in 2014.

We reported a net investment loss of $191.3 million during the third quarter of 2015 reflecting a net loss of 14.2% on our investment portfolio. For the first nine months of 2015 we reported a net investment loss of $236.5 million, reflecting a net investment loss of 16.9%.

As we have described in previous presentations poor underwriting results from contracts written between 2008 and 2010 have been a continued drag on our financial performance. In spite of our current reported financial results, we're encouraged by the growth of our current underwriting portfolio and we're excited about the outlook of this business.

The contracts written between 2012 and 2014 are performing well. On our website under the news section we've updated the chart that we have presented in the past which compares our underwriting results reported for GAAP accounting and that reported by underwriting year.

This graphically shows that while GAAP accounting results have been negatively impacted in recent periods, particularly from contracts written in 2009 and 2010 the underlying business written in the most recent years has been profitable.

During the third quarter of this year, the Company repurchased 473,540 Class A ordinary shares of the Company's stock at an average price of $28.41 per share. This brings total year share repurchase 613,540 shares. We continue to monitor our share price and may make further repurchases if we believe an attractive purchasing opportunity exists.

The fully diluted adjusted book value per share as of September 30, 2015 was $23.29, a 20.1% decrease from $29.16 per share reported at September 30, 2014. I'll now turn the call back to Bart to provide some concluding remarks..

Thanks, Tim. While reserve increases on certain run-off contracts have been incredibly frustrating. We remain optimistic about our current underwriting portfolio. Our goals remain unchanged.

We aim to build long-term shareholder value by writing a concentrated underwriting portfolio with the best risk adjusted returns we can find and to utilize the float generated from these contracts to invest in our value oriented, long short investment program as investment approach has historically generated superior returns with less volatilities in the overall equity markets.

We will continue to strive to execute on both our underwriting and investment strategy and will remain focused on driving our key yardstick increased fully diluted book value per share. We appreciate your continued confidence in Greenlight Re. Thank you again for your time and now we would like to open up the call to questions..

[Operator Instructions]. We have a question from Brian Meredith from UBS. Please go ahead..

I have got a couple of questions here. First on, Bart, I'm just curious with the investment performance and with A.M.

Best at least the outlook changed, what kind of feedback are you getting from reinsurance brokers right now and clients?.

I had an opportunity to attend a recent industry conference just earlier this week, the PCI Conference and there's lots of brokers and clients and prospective clients that attend that. And I guess I was pleasantly surprised that people that we work with now, our current partners and brokers, understand it.

They also acknowledge that we have a very strong capital position for the Company. And as an offshore reinsurance company, a lot of those if they are U.S. clients, they would be sitting on collaterals that we provide for statutory reasons as well as the rating of the balance sheet. So I don't sense a lot of difficulty with existing clients.

When I was speaking to brokers and other people about new business, there will be will be additional headwinds, there's no doubt about it, but I think we'll only really feel that -- or we will feel that most on things that are most rating sensitive and a lot of the business that we do is not terribly rating sensitive.

So for instance, Florida homeowners business or non-standard automobile business, employer stop-loss business, even a lot of the cat business. That's not terribly rating sensitive. I think some other things in the portfolio maybe a little bit more challenge for new business. But overall, I thought it was pretty well received..

And then the next question, you talked about the current portfolio, I think it's performing pretty well. I am just noticing here that where you are booking your [indiscernible] combined ratios actually got underlying for the last couple of quarters is call it 101%, 102% range.

Is that kind of where you're targeting and would you be happy with those types of levels?.

No, I'm not sure I get your 101%, 102% and I don't have that number handy here. I think that when I think about the portfolio and what kinds of combined ratios, we would be targeting, it's going to be high 90%s kinds of numbers, 97%, 98%, 99% are numbers that I think would be representative of the all-in costs of doing the business.

But you have to put that into perspective of the kinds of business that we target. A lot of this very frequency oriented business is low profit margin because it should be fairly low volatility. So on a risk adjusted basis for us to make 3, 4 points net of all expenses that generally works out to be a pretty good deal for us.

And I think as a long-term goal I would think about this with the current portfolio and in the current environment as kind of a high 90%s kind of combined ratio business..

And when you are talking, are you talking more technical ratio or are you talking actual all-in expenses? That's what I am looking at is the G&A expenses, you actually have on a consolidated basis as well when I get to the one--.

No, I'm talking I'll call it the Greenlight combined ratio calculation, so all in G&A plus composite ratio..

And then my last question, I know there's been some hearings recently on PSEC in Congress, potential changes and stuff.

Any thoughts on that?.

Brian, I am going to ask Tim to chime in on that one..

Yes, Brian, as you can appreciate we have been following that very closely and the Reinsurance Association of America has been doing a lot of good work on that and we're a member of that organization. And following the proceedings along, certainly it seems that the path seems to be going towards some form a bright line test.

And I guess the real question is what will be the ultimate bright line test. Given the current development in our portfolio, we feel confident that even any reasonable bright line test we will be able to meet. And so, yes, obviously it's of interest to it and we're following it closely.

We don't believe it should be a problem for us given our current portfolio..

[Operator Instructions] Ladies and gentlemen, this will conclude our question and answer session. Should you have any follow-up questions, please direct them to Garrett Edson of ICR at 203-682-8331 and he will be happy to assist you.

We also remind you that a replay of this call and other pertinent information about Greenlight Re is available on our website at www.greenlightre.ky. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines..