Santangel's Review

Commentary

David Einhorn’s Comments on Greenlight Re’s Q4 2010 Earnings Conference Call

Some key takeaways from GLRE’s Q4 Conference call:

  • Greenlight was 20 percent net long in Q4 and averaged 26 percent net long in 2010
  • Greenlight was up 11 percent in 2010
  • There is a good pipeline coming up of spin-offs and corporate transactions, an area where Greenlight has historically been able to find inefficiently priced securities
  • Greenlight continues to hold macro hedges including currency and interest rate options
  • The economy is undergoing a cyclical recovery and corporations are generating higher margins and improving their balance sheets, which should lead to increased capital spending and higher employment over time
  • Greenlight’s enthusiasm is tempered by continued high unemployment, a housing market that remains challenged, and significant inflation in many commodities
  • US large caps look like they trade at reasonable levels, but many stocks from the broader market are at all time highs and he is seeing lofty multiples in more speculative and cyclical businesses
  • David also spoke about his investments in other reinsurance companies – Aspen Insurance Holdings (AHL), Everest Re (RE), and TransAtlantic Holdings (TRH. He is looking for companies trading at meaningful discounts to book value, with conservative reserves, run by good capital allocators. All three companies mentioned trade at a discount to book and are repurchasing material amounts of stock.