Christopher Coleman - Chief Financial Officer John Berger – Chairman Daniel Loeb - CEO of Third Point LLC Robert Bredahl - President and Chief Executive Officer.

Chai Gohil - Morgan Stanley Jay Cohen - Bank of America Meyer Shields - KBW Greg Locraft - T. Rowe Price Ken Billingsley - Compass Point.

Greetings and welcome to the Third Point Reinsurance First Quarter and 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr.

Chris Coleman, Chief Financial Officer. Thank you, Mr. Coleman. You may begin..

Thank you, operator, welcome to the Third Point Reinsurance Limited earnings call for the first quarter of 2017. Last night, we issued an earnings press release and financial supplement which is available on our website, www.thirdpointre.bm. Leading today's call will be John Berger, Chairman of Third Point Re and Rob Bredahl, President and CEO.

But before we begin, I would also like to remind you that many of the remarks today will contain forward-looking statements based on current expectations. Actual results may differ materially from those projected as a result of certain risks and uncertainties.

Please refer to the first quarter 2017 earnings press release and the company's other public filings including the risks factors in the company's 10-K where you will factors that could cause actual results to differ materially from these forward-looking statements.

Forward-looking statements speak only as of the date they are made and the company assumes no obligation to update or revise them in light of new information, future events or otherwise.

In addition, management will refer to certain non-GAAP measures such as diluted book value per share which management believes allow for a more complete understanding of the company's financial results. A reconciliation of these measures to the most comparable GAAP measure is presented in the company's earnings press release.

At this time, I will turn the call over to John Berger.

John?.

Thanks, Chris. Good morning and thank you for taking the time to join our first quarter 2017 earnings call. In addition to Chris Coleman, Chief Financial Officer of Third Point Re, with me today are Daniel Loeb, CEO of Third Point LLC, our Investment Manager, and Rob Bredahl. The management changes we announced in March have gone extremely well.

Rob Bredahl taking over as CEO has been a comfortable transition for the company and has allowed me to increase my focus on originating deals with brokers and clients and are contributing to underwriting decisions. Rob took over at a good time. The first quarter of 2017 was our most profitable one in our five and quarter year history.

We produced 104 million of net income as a result of strong performance from our investment manager Third Point LLC. Now that I've taken away all the thunder, I will hand the call over to Rob..

Thanks John. Here's the plan for the call. I will provide a brief overview of our results. Daniel will discuss the performance of our investment portfolio and Chris will discuss our financial results in more detail. We will then open the call up for questions. I will start by discussing our results for the first quarter.

We reported net income of 104 million as John has already previewed. This was $0.98 per diluted share. This compares to a net loss of 51 million or $0.49 per diluted share in last year's first quarter. The record results were driven by strong investment returns delivered by our investment manager Third Point LLC.

The investment return for the quarter was 5.8%. We had a few quarters with high accrual investment returns in 2012 and 2013, but this was before we generated a meaningful amount of float and therefore we had very little investment leverage.

Within invested asset to equity ratio that is now at 1.5 times, we can take full advantage of strong investment results. Our return on beginning equity for the quarter was 7.4%. Now, let's talk about our underwriting results.

Our combined ratio for the first quarter was 106.3% which is in line with our expectation given the current market conditions and the lines of business on which we focus. With stable long term float and investment leverage in our target range, we're well positioned to push for better terms and conditions.

In recent quarters we have deemphasized lines of business where marketing conditions are particularly bad. For example, we've significantly decreased our ratings of nonstandard auto and Florida home owners. At the same time we've increased our focus for generating deals in higher margin transactions such as mortgage insurance.

Gross premium in the quarter dropped by 26% from last year's first quarter to $146 million. This decrease was due primarily to the nonrenewal of one large global auto warranty and fiscal damage tree that's not performed up to our expectations. We believe that premium for the year could be lower than in 2016.

We have shifted the overall portfolio towards higher margin business as we continue to work towards lowering our combined ratio. Before I conclude, I'll provide you with an update on our share buyback program. As we've advised we intend to buy back shares whenever our share price is 90% of diluted book value or lower.

During the first quarter our shares traded below 90% of book for most of the quarter and therefore we actively bought back shares. We repurchased 1.53 million of our common shares at an aggregate cost $18.9 million and a weighted average cost of $12.32.

We effectively maxed out our buying availability within our open trading window given daily volume restrictions. As of March 31, 2017, we had 73.7 million of remaining capacity under our authorized buyback program, which we plan to use if our share price remains below 90% of book.

I will now hand the call over to Daniel Loeb who will discuss our investment performance in more detail..

Thanks, Rob and good morning. The Third Point Reinsurance investment portfolio managed by Third Point LLC returned 5.8% in the first quarter of 2017, net of fees and expenses versus returns for the S&P and CS event-driven indices of 6.1% and 2.7% respectively for the quarter.

The Third Point Reinsurance account represents approximately 15% of assets managed by Third Point LLC. During the first three months of 2017, volatility declined as stronger global growth and expectations of reflation sparked a rise in most investment markets.

Portfolio repositioning following the US election and successful security selection combined to generate positive returns for our portfolio. We earned profits in every strategy and sector other than our hedges.

We increased net exposure throughout the quarter by adding primarily to equities and initiating several significant investments in the financials, industrials and energy sectors. Third Point's equity portfolio returned 10.2% on average exposure during Q1. Healthcare and industrial investments were the primary drivers of profit.

We also meaningfully increased exposure outside the US, especially to Europe and uncovered several new constructive initiatives. Credit was Third Point's best performing strategy in 2016.

In 2017, our portfolio continues to generate profits, but we're finding fewer opportunities for new investments in corporate structured and sovereign credit and have reduced exposure in each area accordingly. In Q1 corporate credit, including both distress and performing credit positions returned 2.8% on average exposure.

Our ABS book was up slightly, returning 1.5% on average exposure. Sovereign credit led by Argentine Government debt returned 4.1% during the quarter. We believe the current environment is favorable for Third Point's investment strategy.

We expect increasing corporate activities in the US, more opportunities for activist and constructivist investing across sectors and continued tailwinds from global reflation to drive further portfolio gains this year. Now I'd like to turn the call over to Chris to discuss our financial results..

Thanks, Daniel. For the three months ended March 31, 2017, diluted book value per share increased by $0.88 per share or 6.7%, to $14.04 per share. Gross written premiums decreased by 51 million or 26% to 146 million from 197 million in the first quarter of 2016.

The main driver of the decrease was the nonrenewal of $95 million auto contract that was just discussed by Rob, but also $15 million reduction in premium on renewals of other contracts mostly due to the clients increasing their retention. These decreases were partially offset by net increase in premium from new business and other timing differences.

Net premiums earned for the three months ended March 31, 2017 were consistent with the three months ended March 31, 2016. For the three months ended March 31, 2017, we incurred 1.6 million of net favorable prior year's reserve development.

The 1.6 million of net favorable prior year's reserve development was accompanied by net increases of 1.6 million in acquisition cost resulting in minimal impact on our net underwriting results.

We generated $8.7 million net underwriting loss for the three months ended March 31, 2017 versus an underwriting loss of 6.6 million in the prior year period and our combined ratio was 106.3%, compared to 104.9%.

For the three months ended March 31, 2017, Third Point Re recorded net investment income of 129 million, compared to a net investment loss of 40 million for the prior year period. The changes in net investment income were primarily driven by the returns in the respective periods that Daniel discussed in detail.

General and administrative expenses in the first quarter of 2017 were 11million, which was consistent with last year's first quarter. Other than incentive compensation expenses that were very based on our results, our G&A expenses have remained steady for several quarters and we do not anticipate any significant changes.

We expect a run rate of approximately 11 million per quarter of total G&A subject to the impact of our performance on bonus accruals and performance based share awards. We had $5.3 million tax expense for the quarter, compared to an income tax benefit of 1.9 million in last year's first quarter.

The change in tax expense relates primarily to Third Point Reinsurance USA moving from a loss to a profit in this year's first quarter. I will now hand the call back over to Rob..

Thank you, Chris. We generated record results this quarter due to strong investment returns and unlike prior periods in which we generated similarly strong investment returns, we can now take full advantage of that. Our float has grown to grown $612 million and invested assets to equity ratio is slightly above 1.5 times and within our targeted range.

Reinsurance market conditions remain challenging, but our total return business model allows us to be patient. We're reshaping portfolio gradually to towards higher margin business, but only where we believe we're being properly compensated for the increased risk.

As a result we might experience a decrease in gross premium again this year, but we still expect a modest improvement in our combined ratio over the next several quarters. We thank you for your time. We'll now open up the call for questions.

Operator?.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions].

Hey, operator. I think I was cut off in the very end and just the last part of the last sentence. And so what I intended to say was that we might experience a decrease in gross written premium again this year, but we still expect a modest improvement in our combined ratio. And so that was the end of the prepared comments. Now, we can move to questions..

Okay. Our first question comes from Kai Pan with Morgan Stanley. Please proceed with your question..

Hi, this is Chai Gohil for Kai Pan. Dan, first just going back to your comments on the investor letter, so you talk about the late stage economic cycle and it's a favorable investing environment for you.

Why do you think this late cycle environment is not different than some previous cycle, especially with the upcoming election season in multiple countries and the geo political tensions we have..

Hi. I mean from my standpoint we focus a lot more on our bottoms up approach and top down macro prognostications. I think the consensus has been marginally wrong and on the sidelines at various points since the election.

So we're comfortable with US growth and European growth and even though it does - even though this recovery is long in the tooth, we see it continuing for the time being.

Having said that, what we're most excited about isn't really the environment so much as some of the investments that we've found either current investments that are in later stages of consolidation and mergers and about to realize significant synergies and earnings growth like Sherwin Williams, our investment in Honeywell that we disclosed recently where we were very excited about that company's prospects, with or without a spinoff of its aerospace division, but although we think obviously that would be a big plus not just in terms of creating value for shareholders, but in terms of operations for the business.

And other business that we haven't disclosed yet that we have invested in where we see potential inflection points for companies that are under earning that have real ability to drive earnings growth, that isn't yet perceived by the general public, but we think that they will follow that kind of course..

Okay.

And you talk about the activist and constructivist approach, so I just want to get your thoughts on how do you distinguish between those two and how do you balance that as part of your investing process?.

Yeah, I don't really get caught up in kind of splitting hairs in what we label, what we do. I think that we have - that we've demonstrated over a long time the ability to identify companies that might be underperforming or under earning or can benefit from better capital allocation strategy or sometimes even management changes.

So we'll continue to engage with shareholders - I mean, sorry, we'll continue to engage with managements and if necessary with Boards to try to advance our ideas where we think it will be in the interest of shareholders and the long term benefit of the companies that we're invested in..

Okay, thanks. And moving to the underwriting side, Rob, just want to get an update on the demand for the ADP contracts especially in this environment versus let's say six to twelve months ago.

Are you seeing any big differences on how the demand is, especially that reserves are becoming more prominent point for a lot of these companies?.

Well, we're about to make a push with the hiring of David Govrin to market reserve coverage in the US and so that remains to be seen. We have seen an increased demand coming from Europe, especially UK. The reserve cover structure that we're marketing work very well within the solvency 2 model.

Also, the audit and rate change which resulted in GBP6 billion hole in the industry's balance sheet has created increased demand in those auto companies we've already been marketing to and so that digs in well. So I think it’s been a good event for us..

Thanks, John. And so with the hiring of David, do you think you would expand into any other lines that you have not been in until now and like I think Rob mentioned that moving to a more lower combined ratio down the line..

Yeah, we were focused mostly on nonstandard auto in the US and other NJ driven lines business. We're pulling back from those, deemphasizing them, going after reserve covers as I just mentioned, but we're also looking at some A&H deals and going after professional liability treaties..

Okay, alright. Thank you..

Thank you. Our next question comes from Jay Cohen with Bank of America. Please proceed with your question..

Yes, thank you. I just want to follow up on the comment about the potential for a somewhat lower combined ratio Rob, over the next couple of quarters.

I guess this is a function of the change in business mix, but if you could expand on that a little bit?.

Yeah, Jay we make those comments because we've written a good amount of mortgage insurance and we also have some exposure to the GSE through the financial lines of virtual quarter share we do. And so the premium's been written, but most of it hasn't been earned yet. It earns in over a long period of time, seven years.

So we look out over the next year to two years and earn premium on lower composite ratio business will increase. We're booking on average the mortgage insurance at 83, Chris..

Well over 80, yeah..

Yeah, so about 83 composite, so it's about our lowest composite ratio business..

And just for modeling purposes, the split between the loss ratio and expense ratio, are they kind of both lower than your other business?.

Yeah, I mean - as we've said in the past, we don't focus too much on that component parts of the composite ratio. And then as we said over time, the overall composite ratio will be reducing as the mortgage business earns in. Overall definitely the expenses on the mortgages are lower..

Got it, that's helpful. And then lastly because you'd mentioned this first, new businesses professional lines being one of them, we hear all kinds of things about professional lines. Some people say it is increasingly competitive and claims are rising and others seem to find it still pretty attractive.

What part of the professional lines business are you guys interested in at this point?.

So right now almost all of our exposure to professional lines is coming through a couple of retro contracts and these are broad casualty retro contracts because now we have a reasonable size portfolio. We want to go after some of the underlying business and professional lines, it's a very big segment.

I don't think we've quite targeted those areas where we expect to fund the best returns, but we're putting a plan together..

Okay, thank you..

Thank you. Our next question comes from Meyer Shields with KBW. Please proceed with your question..

Thanks. Chris, just to clarify something because I'm not sure I understood it.

Was the increase in the acquisition cost a function of the favorable reserve developments or those are two things that coincided in the quarter?.

Yeah, the reference to the development in the quarter and these are tiny amounts, so we had 1.6 million of favorable reserve development. However, those were generally on contracts where there is an offsetting slide, so you would have noted in my remarks the related increase in acquisition cost of a similar amount.

So the net effect to our underwriting results of development on the reserves in the quarter was essentially close to zero..

Okay, that's helpful. I just want to make sure I understood it.

Broadly speaking I guess, is there any reason for us to relate the fact that you're focusing on longer duration contracts like mortgage when you're expecting less premium? In other words, you have more sustainable float on those longer duration contracts, I just can’t tell if that’s coincidence or an intentional part of the strategy?.

I think it's probably coincidence. The focus in our early years was on generating long term stable float, which we've done. And so now we're in a position to focus on pushing down combined ratio knowing that our investment leverage is going to remain stable.

And so whether that comes from - or the drop is coming from a decrease in short term or long term tail of liabilities is not something we're really focused on..

Okay and then finally, John if you could characterize how you're anticipating liability related loss trends and maybe how potential [CDs] [ph] are looking at it, is there a gap there?.

I think people are - you talk to people and they're - I think they're just pleasantly pleased that they're not really seeing an uptick in trends that much. Rates are going down, professional liability across the board rates continue to go down, but in many areas you're not seeing an uptick in loss development.

At the same time, having been as well as we are you're starting to see a linkage in a lot of places. So I think it's an interesting time and I think we're seeing, as Rob said, we're seeing and we're going to continue to see an increase in reserve deals which tells you that people are worried about the reserves.

So it's - it could be an inflection point time right now..

I just want to come back to the comments on gross written premium. We're definitely advising that premium might drop this year, but as you know our deals are relatively big on average and we're working on a number of large deals and so premium won’t necessarily drop..

Okay, I appreciate the clarification on all the answers. Thanks so much..

Thank you. [Operator Instructions] Our next comes from Greg Locraft with T. Rowe Price. Please proceed with your question..

Yeah, hi, good morning.

Thanks, can you guys hear me?.

Yeah, hey Greg..

Hey, guys. I actually had a question for Dan. Dan, you've got a large hedge fund business with a current and I would assume perspective clients and they're purchasing your returns directly. Can you kind of compare - can you compare kind of trust what CPR is as these will be your directly purchasing the hedge funds from you guys.

Just go through the pros and the corns and why one would take the other, one versus the other and the reason I ask is because the security is trading at such substantial discount to the book value. So I just wanted you to put your investor head on and compare the two return streams..

Sure, well for one thing, anyone as a stockbroker can buy shares in TPRE and have access to our investment strategy, so the biggest distinguishing factor is the daily liquidity that you get in investing in a public security where the underlying investment portfolio is virtually the same as our main hedge fund.

So as you probably know, if you want to invest directly you have to be a qualified investor and you can - there are liquidity restrictions around redemptions, so that's the biggest difference.

Obviously we are - if you are investing in Third Point via TP Re, you own an equity - security which is also an insurance company, so you're getting whatever the advantages are or disadvantages of owning an insurance company and we believe that over the long run as John and team bring down the combined ratios, you'll have two opportunities to win.

You'll get some positive return from the insurance company added to the investment returns. I think the reason for the discount is that it's been a very difficult environment for reinsurance, but as that reality and perception changes I think you'll see that discount shrink.

John did you guys have anything you want to add to that?.

Dan, this is Rob. I would just say that investors also get embedded investment leverage and so for each share we have about 150% of that share value in invested assets. So there is a leverage effect as well..

Thanks, guys.

Dan would you consider steering current or perspective clients into TPRE because it trades - because of the same return stream, its leverage, its liquid and it trades at a substantial discount of the book value or is that not something from a business perspective that you consider?.

No, we do it all the time. Look, we have - obviously our investors know about it. It's a way of getting in on a discount when we're approached by people who don't meet the investment qualifications to invest in Third Point directly through the hedge fund.

Of course we refer - we also make our investors aware that it exists and we're not really in the business of like steering people one way or the other, but we certainly let know about and talk about it..

Okay, thanks a lot guys..

Thank you. Our next question comes from Ken Billingsley with Compass Point. Please proceed with your question..

Good morning, it's a follow up to some comments you made a little bit earlier, I just wanted to qualify them. One, on the reserve release and the associated increase in acquisition cost, is that a one for one as you increase reserves or you add to reserves that there's going to be an associated change equal to that in the acquisition cost..

It just depends on and it's a contract by contract. I think as you know we reserve on a contract by contract basis and some of our contracts have one for one slides, some are not necessarily one to one and many others don't have any features where acquisition cost move in conjunction with reserves.

It just so happened that the contracts during this quarter that we had reserved, loss reserve changes on had structures where there was offsetting slides. So that's not necessarily always going to be the case..

So in those contracts any reserve benefit is going to the primary insurer..

Yeah, in the case of this quarter that's how it worked out..

And are those - is there a shift as well if the losses are higher that there is a recoup on fees and acquisition cost or is that [indiscernible]?.

It can be depending on where you are relative to the slide and based on the structure, they can work both ways..

Okay and the other question I have is, I mean you talked premiums and it sounds like we should expect that they couldn't decrease in this year not necessarily a guarantee, but one comment that you made earlier was that the primary insurers it seems like they're retaining more of the risk, obviously it's a competitive market for you.

From a risk standpoint are you seeing better terms those are retaining risk or from an exposure standpoint are you having to offer some better terms to get the piece of business that they're still willing to put out there?.

You know Ken, we mentioned that one reason why premium dropped this quarter versus last quarter was because one of our clients increased the retention. I don't think we're seeing that across the board. In fact, I think there's more buying going and I think just the opposite.

The attractive reinsurance market conditions are bringing in new buyers, which we view as being a big positive. Yeah, there is kind of one off increases in retentions here and there, but that's not what's going on overall in the market..

And Ken I'll note that one particular deal, we've had that contract for four years and this year the company decided to keep a piece of what they receiving in task and we took that as a very favorable indication on the terms and conditions that the deal has worked well for four years and they're looking at it and basically said, let's keep part of this.

So again, to reemphasize what Rob said, what was isolated was one account, but in this particular example we took it as a very good news..

Ana maybe I misunderstood what was said earlier, so it was not a commentary in general that people are retaining more. It was either a commentary form a prior quarter or just one account in the current..

It was very specific to our decrease in premium quarter-over-quarter..

Very good. Thank you for taking my questions..

Thank you. There are no further questions at this time. I would like to turn the call back over to management for closing remarks..

Thanks everybody for your time. We look forward to talking to you next quarter. If you have any questions in the meantime, please give us a call. Thank you..

This concludes today's teleconference. You may disconnect your lines at the time. Thank you for your participation and have a wonderful day..