David Einhorn - Chairman Simon Burton - CEO Tim Courtis - CFO Mike Belfatti - COO.

Bob Glasspiegel - Janney Montgomery Scott Brian Meredith - UBS.

Thank you for joining us for the Greenlight Re Conference Call for the Fourth Quarter 2017 Earnings. Joining us today on the call are David Einhorn, Chairman; Simon Burton, Chief Executive Officer; Tim Courtis, Chief Financial Officer; Brendan Barry, Vice President, Underwriting Officer; and Mike Belfatti, Chief Operating Officer.

All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this even is being recorded.

The company reminds you that forward-looking statements that are 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 fact, but rather reflect the company's current expectations, estimates and predictions about future results and events and are subject to risks, uncertainties and assumptions, including those enumerated in the company's Form 10-K dated February 20, 2018, 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 differ 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.

I would now like to turn the conference over to Simon Burton. Please go ahead, sir..

Good morning, and thank you for joining our call. Our results for the year were disappointing overall measured by the reduction in fully diluted adjusted book value of 5%. It is worth reflecting on the two largest components of our results; reserve development and natural catastrophe losses.

To give you a clearer picture of IR, I'll start by describing the adjustments to loss reserves. Mike joined us late in Q3 and has led a thorough review of reserves over the last four months of 2017. This resulted in reserve adjustments to a range of legacy contracts and classes that include professional indemnity, medical stop loss and other casualty.

For 2017, the prior year reserve development was $36.2 million which produced a net income impact of $31.5 million, approximately half of these adjustments were made in Q4.

We estimate fourth quarter net natural catastrophe losses of $4.7 million from the California wildfires and our previously reported third quarter net loss estimates of $37.9 million from the Hurricane and Mexican earthquakes was largely unchanged at year end.

The industry was severely tested by the scale and unusual nature of these events that combined produced more than $100 billion in industry losses. Our share of this industry loss was within expectations and I continue to be pleased with the resilience of our business to cash events.

Our exposure to natural hazards is approximately flat from prior quarters which reflects our view that CAT has a modestly sized block of exposure is reasonably priced but is not sufficiently interesting for us to take an outsized position.

Our portfolio repositioning work continued during the quarter with an entry into several new classes of specialty business at January 1, notably marine energy and space.

Timing was fortunate as recent CAT losses appear to have reversed from the capacity and price stagnation in many classes allowing us as a new entrant to be fairly selective in our approach.

Rate changes vary significantly by class, mortgage overall is trending down around 10% or more, casualty renewals were mixed with some areas slightly down and some up, driven more by specific deal circumstances than macro pressure.

As you would expect, rates in catastrophe exposed classes improved across the board but increases in excess of 10% were isolated. Other short tailed specialty classes not exposed to natural perils were approximately flatter renewal.

As a general comment, we were not surprised by the muted rate changes we saw at January 1 as it seemed clear that the supply of capital could not support the pricing dislocation that was predicted by some. For too long our industry has relied on post-loss price increases to offset underpriced risk.

It has been delusional behavior for some time and I hope that's the end of it. Finally, we completed a second retro session transaction on our non-standard auto portfolio which explains large increase in CD premium during Q4.

This deal also represents our first step in an insurance linked asset management strategy where we seek to use our relationships and expertise to distribute underwriting risk to the capital markets.

Unlike many of our peers, this effort is focused on classes of business other than CAT where the need for product innovation is a good fit for our capabilities.

Since I joined in July, we have been hard at work transforming Greenlight Re for the future, building on our base of long-term client relationships we have expanded the portfolio pipeline and our appetite for diversifying classes.

As part of this, we streamline the underwriting teams and processes to efficiently deploy our expertise in each area which will positive results for the January renewal business. As we head into 2018, our traditional portfolio construction will be complemented by focus on insurance linked asset management and initiatives in technology and innovation.

We will have more to say on this in the coming weeks and months. Now I'd like to turn the call over to David to discuss our investment results and the progress in our overall strategy..

Thanks Simon and good morning, everyone. The Greenlight Re investment portfolio declined 1.3% in the fourth quarter; our longs contributed 5.3% and our shorts detracted 6.4%. Our biggest winners for our long traditions in Mylan and CONSOL Energy, and our largest detractors included shorts in Caterpillar and Continental Resources.

Mylan advanced 35% after the FDA approved it's generic versions of Copaxone. With the key approval and others, the company has recently received the value of the company's pipeline and management ability to achieve future earnings guidance are becoming more evident. Mylan trades under 8x 2018 estimated earnings.

Our second biggest winner was CONSOL Energy which completed the spin-off of it's coal business from it's natural gas business, both companies have high quality resource positions, favorable cost structures and strong management teams.

We expect this spin will result in both companies having enhanced growth opportunities, reduced complexity and more analyst coverage. The natural gas pure play, CNX Resources, trades at less than 6x 2018 EBITDA and the call and remaining assets traded less than 5x 2018 EBITDA under the company's original name, CONSOL Energy.

As for losers; our short position in Caterpillar rose 26% during the quarter as the company exceeded margins expectations in this construction segment. We believe this will be temporary as the company faces headwinds from raw materials. Our short position in Continental Resources advanced 37%, mostly because oil prices climbed 17%.

We established a new position in Brighthouse Financial which spun out from MetLife last summer. Brighthouse right life insurance and annuities which makes it overall business sensitive to both equity markets and interest rates at the time of the spin management's plan included no capital return for the next three years.

In our opinion, the downside from a potential bear market and a prolonged low interest rate environment was reflected in the valuation. This sensitivity works both ways, favorable equity markets and rising rates would put Brighthouse in the position to return capital much sooner than forecast.

If this proves correct, the share should re-rate as it traded only half a book value and 6x normalized earnings. Investment portfolio declined 5.5% in January as the market shifted from grind up to straight up in January, our loan portfolio only rose about half of the S&P500 while our short portfolio more than doubled the index.

While we've never underperformed like this, our prior worst underperformance compared to the S&P came in March of 2000 which was a similar environment. We are managing the growth exposure prudently while maintaining exposure to the fundamentally challenged shorts that hurt us.

The Greenlight reinvestment portfolio is currently about 102% gross long, by 69% gross short. While the environment has remained difficult with gross stocks accelerating their outperformance against value stocks this year including February, we think reversion maybe finally coming soon.

Corporate tax cuts are a benefit to companies with profits which are a hallmark of our loan portfolio. Higher interest rates are beginning to offer investors an alternative they haven't had in many years and should render uncertain future profits of our business and story stocks less valuable.

The valuation spread between our longs and our shorts is incredibly wide. Turning to underwriting and operations; Simon, Mike and the rest of the team have started to read [ph] every area of our business. It's satisfying to see the internal changes that they have managed to accomplish in less than 6 months in Cayman.

Though many of the endeavors will take time to flow to operating results, I'm very constructive on their ability to guide strategic growth in a second decade as a public company. While 2017 was a disappointing year overall, I'm excited about the company's prospects. Now I'd like to turn the call over to Tim to discuss the financial results..

Thanks, David. I'll briefly go through the financial results, starting with the fourth quarter where Greenlight Re reported a net loss of $37.7 million, compared to net income of $49.2 million for the fourth quarter in 2016.

The net loss per share was $1.02 for the fourth quarter 2017, compared to fully diluted net income per share of $1.31 in the prior year period. Gross premiums written during the fourth quarter were $139 million which is a reduction of 6.6% over premiums written in the fourth quarter of 2016.

The decrease was primarily due to the commutation and return of unearned premium on our Florida homeowner's contract during the quarter. As Simon indicated, our gross premium ceded increased during the fourth quarter as we continue to retro-see the portion of our non-standard automobile business.

The composite ratio for the fourth quarter of 2017 was 111.8%, included there-in were $4.7 million of estimated catastrophe losses, net of reinstatement premiums from the California wildfires. Fourth quarter CAT losses added 3.5 points to the fourth quarter composite ratio.

We reported a net investment loss of $16.2 million during the fourth quarter of 2017, reflecting a net loss of 1.3% on our investment portfolio. Moving to the full year results, Greenlight Re reported a net loss of $45 million, compared to net income of $44.9 million in 2016. The net loss per share for 2017 was $1.21.

Gross premiums written were $692.7 million for the year, an increase of approximately 29% over 2016. As reported in our prior quarterly numbers, the 2017 premiums have increased primarily due to increased premiums on our non-standard automobile business and to a lesser extent to new workers compensation contracts written during the year.

For 2017, our composite ratio was 106.1% with net catastrophe losses adding 6.9 points and net prior year loss development adding a further 5 points. Our general and administrative expenses for the year totaled $26.4 million which is approximately $0.5 million higher than the prior year.

Underwriting expenses of $15.1 million were lower than the $16.6 million in 2016 primarily as a result of reduced accruals for quantitative bonuses due to the reduction in prior year underwriting profitability. The underwriting expense ratio for the year was 2.5%, resulting in a combined ratio for the year of 108.6%.

Our corporate expenses during 2017 of $11.2 million compares to $9.2 million for the prior year and is higher due to approximately $2.2 million of non-reoccurring expenses primarily relating to consulting and professional fees. We reported net investment income of $20.2 million, reflecting a net gain of 1.5% on our investment account.

Fully diluted adjusted book value per share as of December 31, 2017 was $22.22, a 5% decrease from $23.38 per share reported at December 31, 2016. As you can appreciate, we have spent considerable time analyzing the new tax law enacted in the U.S.

In particular, we continue to consider the provisions relating to the passive foreign investment company rules often referred to as the PFIC rules and their impact on our company and the way we conduct our business. The new PFIC rules provide both a brightline test, as well as the facts and circumstances test for qualifying insurance companies.

While we wait for the interpreters regulatory guidance that is still to be issued, we are diligently looking at a range of options with respect to the brightline test and our goal is to meet this hurdle. We'll provide further details in due course as our work progresses. Now I'd like to turn the call back to the operator and open it up to questions..

[Operator Instructions] And the first question comes from Bob Glasspiegel with Janney..

Couple of questions on the auto transaction, I've always thought about that as one of your competitive strengths.

By retaining less business does it suggest that you thought you were little bit overweighted in that segment or you had some concerns about the profitability of the business?.

Yes, we liked the business, we've got great client relationships, we're looking to keep for sure. We were relatively overweight in the class, so you should consider this more than anything, a rebalancing of our portfolio and also creation of some room to enter new classes..

I have to go through an each step process to calculate the expense ratio in the quarter. My math is right, it looks like it came down.

Is there some dynamics of the ceding commission working through expense loss ratio in play or do they not impact the expense ratio and it was an incentive accruals?.

The actual dollar value is less because of those accruals for less quantitative bonus but obviously with the added premium and this is more speaking to the year-to-date results, obviously more net earned premium on drive down the ratio as well given that the dollar value is somewhat fixed and has reduced a bit..

But there is no impact to the expense ratio in the quarter from the ceding transaction?.

No. The expense ratio for the quarter was 2.7%..

On the reserve review; did you use outside actuaries or was it internal -- was it based on outside review or an internal review?.

We set reserves based on internal review. However, we did multiple levels of external announces as well. One of the things that I wanted to bring to the table in addition to all the enhancements internally is sort of maximum use of second set of eyes as well, so we did both..

David, one quick question. You mentioned the February portfolio -- it sounded like you lagged a little bit.

To date, how did the portfolio perform in the down draft of the market?.

In January we dramatically underperformed as I discussed. I would say that in the month of February throughout the month, the portfolio has performed relatively as one would expect given it's net long exposure. It has not underperformed materially but it has not outperformed either..

On the test that you said you're looking at options, there are scenarios where it would materially change how you operate or is it just a couple of side dances to comply?.

There are a range of things we can do to address the brightline test that is primarily imposed on us now. One thing I would say is, beyond any doubt we're a real bonafide reinsurance company with every employee here spending their days working on the reinsurance business.

So the facts and circumstances seems almost beyond any question but the brightline test is important. It's too early to indicate the steps we take but the majority of this will fit certainly, if not all of it will fit within our underwriting appetite and these steps that we'd otherwise be interested in anyway..

And the next question comes from Brian Meredith of UBS..

First, I just want to dive into the reserve additions again, a little more detail here.

Was it that you saw some acceleration in loss trend happening? Was it much to more conservative pick kind of in the range? What happened here with respect to the ground up review?.

I think it's mostly reacting to what we're seeing in the claim experience and obviously, I was new set of eyes over the last few months here, so my experience in managing large complex reserve portfolios with sort of global insurance and reinsurance classes is something that I bring directly to bare when looking at the individual deals, number one.

And number two, looking at the class of business trends, more at a macro level. So in that analysis process, we looked very closely at what we're seeing in the claim reporting, of course industry trends more generally and did reprojections as we always do of every single account.

There isn't one thing I'd point to in that process; industry reserve levels are at an interesting point. Clearly, the longer term abatement of frequency and severity trends, frankly that has occurred over 15 years, certainly showed signs of bottoming and even turning.

So there is some of that coming through in the claim reporting clearly, but -- most of it is just following where the data leads us and our understanding of where things can be going at a macro level..

Simon, you talked about entering marine energy and couple of other classes of business. Can you talk a little bit about your one month [ph] renewals and kind of how they kind of played out? Some of them -- just maybe color on the portfolio repositioning going on..

Sure, Brian. The backdrop in the market is still challenging. We did have some fortunate timing with the CATs last year, so it created an uptick in rate but more importantly, it created a bit of room as some of our peers rebounced a bit and revisited their appetite.

So where I would describe a lot of these specialty classes as being somewhat stagnant for the last few years, those bit [indiscernible] and that played well for us.

So having said all that our entry was pretty modest in dollar terms but it was a definitive change in green light strategy where we're acting as a follower with relatively smaller shares in syndicated business and primarily London market classes.

And this is really a new ground for us where we've never been active before; so raising our profile in those markets was as much an objective as the business itself.

Onto the specific business, yes, so the classes that we are interested in, marine energy and space were deliberately selected, there are few other classes that we considered, classes like aviation for example where we're considerably less interested given their terms and conditions today.

So we were quite selective on the classes and we like our account parties, several of whom are continuation of our long standing relationship I've had from the past..

I'm just curious, given the business now you're doing at Lloyds [ph] in terms of this -- acting of tolerance and some of these treaties; does it make sense maybe strategically to think about having indicative [ph] at some point?.

It's only been discussed Brian, it is one of the long list of strategic directions that we may consider in the future..

[Operator Instructions] And the next question comes from [indiscernible]..

I know that last year EBITDA [ph] versus the second quarter or third quarter -- the company took advantage of low share price to buyback some stock.

I know that Greenlight Re didn't -- wasn't born to buyback out of existence but given the spread between the stock price and the book value, even after the January loss, is this something that you're contemplating or that you can think of going forward? Thank you..

The goal of the company is to maximize the book value per share, overall long period of time and buybacks are certainly one tool that we have used in the past and we prospectively could use in the future. The purpose of the buyback when -- and we have an authorization to do that is to add value to the book value per share over a long period of time.

It has to be balanced against other considerations which include the opportunity to make sure we have enough capital to run the insurance operations, maintain our AM Best rating and any other factors that may come in to compete for that use of capital.

So while this is something that we have done before and we may do in the future, it's fact and circumstances dependent, it depends upon also how deep into the discount -- if there is a discount, the share is trade towards -- from book value. So we look at all those things and then we decide what to do from time to time..

And 15% discount is duly for you or it's something that you're happy to pass on?.

I don't think it's a question do you see or happy to pass on, I think it's a question of looking at all the different factors which are not static; the company's needs for capital for other purposes varies from time to time.

And so as we look at the different choices for capital, there is no particular magic price related to book value where the stock becomes something that we would do versus not do, obviously the deeper the discount, the more attractive a buyback becomes as you think about the different uses of capital..

And the next question comes from Dunstan Fitzgerald [ph], a private investor..

I'm thinking about what are we going to do about improving the basic business? Most of this conference call is dealt with the past results, and what steps can we take to simply strengthen the business and get our loss ratio back in the better zone?.

I think the answer to that in a sense is sort of stay tuned.

Last year we went through a management change, the new management who you've heard from on the call today has taken significant efforts to reposition the portfolio, to reposition the underwriting philosophy, actually to talking through pricing and risk in different kinds of ways than we've been able to do before.

I think we're very early days in the results and I think the results that we're seeing today don't particularly reflect the underwriting decisions of the present senior management team, and I think that we've hired now absolutely first state leaders and I'm optimistic that as they have an opportunity to implement the business plan which they've already begun doing, those results will flow through overtime in the form of improved underwriting results..

And as there is nothing else in the present time, I would like to have -- should you have any follow-up question, please direct them to Adam Prior at The Equity Group on 212-836-9606, 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. Thank you so much for attending today's call. And you may now disconnect..