UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549







FORM
10-Q





(Mark
One)




þ
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the quarterly period ended March 31, 2009




or




o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the transition period from       to







Commission
file number 001-33493





GREENLIGHT
CAPITAL RE, LTD.


(Exact
Name of Registrant as Specified in Its Charter)







CAYMAN
      ISLANDS
            N/A(State
      or Other Jurisdiction of Incorporation or Organization)
            (I.R.S.
      Employer Identification No.)THE
      GRAND PAVILION
              802
      WEST BAY ROAD
              P.O.
      BOX 31110
              GRAND
      CAYMAN
              CAYMAN
      ISLANDS
            KY1-1205(Address
      of Principal Executive Offices)
            (Zip
      Code)





(345)
943-4573


(Registrant’s
Telephone Number, Including Area Code)




Not
Applicable


(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)






Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.




Yes x No o




Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such
files).




Yes
o No
o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ and
‘‘smaller reporting company’’ in Rule 12b-2 of the Exchange Act. (Check
one):




Large
accelerated filer oAccelerated filer
x


Non-accelerated
filer o(Do not check if a smaller
reporting
company)Smaller reporting company o




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).




Yes o No x




Class A
      Ordinary Shares, $0.10
      par value
              29,986,192Class
      B Ordinary Shares, $0.10 par value
              6,254,949(Class)
              (Outstanding
      as ofApril
      30, 2009)

















GREENLIGHT
CAPITAL RE, LTD.




TABLE OF CONTENTS




PagePART
      I — FINANCIAL INFORMATIONItem
      1.
              Financial StatementsCondensed Consolidated Balance Sheets as of March 31,
      2009 (unaudited) and December 31, 2008
              
              
              3Condensed Consolidated Statements of Income for
      the Three Months Ended March 31, 2009 and 2008
    (unaudited)
              
              
              4Condensed Consolidated Statements of
      Shareholders' Equity for the Three Months Ended March 31, 2009 and 2008
      (unaudited)
              
              
              5Condensed Consolidated Statements of Cash Flows
      for the Three Months Ended March 31, 2009 and 2008
      (unaudited)
              
              
              6Notes to the Condensed Consolidated Financial
      Statements (unaudited)
              
              
              7Item
      2.
              Management's Discussion and Analysis of Financial Condition
      and Results of Operations
              
              
              22Item
      3.
              Quantitative and Qualitative Disclosures about
      Market
      Risk
              
              
              34Item
      4.
              Controls and
      Procedures
              
              
              35PART
      II — OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              
              
              36Item
      1A.
              Risk
      Factors
              
              
              36Item
      2.
              Unregistered Sales of Equity Securities
      and Use of
      Proceeds
              
              
              36Item
      3.
              Defaults Upon Senior
      Securities
              
              
              36Item
      4.
              Submission of Matters to a Vote of Security
      Holders
              
              
              36Item
      5.
              Other
      Information
              
              
              37Item
      6.
              Exhibits
              
              
              37SIGNATURES
              
              
              38







2
 Table of contents







PART
I — FINANCIAL INFORMATION


Item 1. FINANCIAL STATEMENTS




GREENLIGHT
CAPITAL RE, LTD.


CONDENSED CONSOLIDATED BALANCE SHEETS




March
31, 2009 and December 31, 2008


(expressed
in thousands of U.S. dollars, except per share and share amounts)




March
      31,
                  2009
                  (unaudited)
              
              
              December
      31,
                  2008AssetsInvestments
      in securitiesDebt
      securities, trading, at fair value
              
              $
              109,091
              
              
              $
              70,214Equity
      securities, trading, at fair value
              
              
              436,490
              
              
              
              409,329Other
      investments, at fair value
              
              
              11,755
              
              
              
              14,423Total
      investments in securities
              
              
              557,336
              
              
              
              493,966Cash
      and cash equivalents
              
              
              56,310
              
              
              
              94,144Restricted
      cash and cash equivalents
              
              
              344,520
              
              
              
              248,330Financial
      contracts receivable, at fair value
              
              
              23,563
              
              
              
              21,419Reinsurance
      balances receivable
              
              
              87,932
              
              
              
              59,573Loss
      and loss adjustment expense recoverables
              
              
              7,000
              
              
              
              11,662Deferred
      acquisition costs, net
              
              
              24,347
              
              
              
              17,629Unearned
      premiums ceded
              
              
              6,464
              
              
              
              7,367Notes
      receivable
              
              
              16,915
              
              
              
              1,769Other
      assets
              
              
              4,417
              
              
              
              2,146Total
      assets
              
              $
              1,128,804
              
              
              $
              958,005Liabilities
      and shareholders’ equityLiabilitiesSecurities
      sold, not yet purchased, at fair value
              
              $
              319,337
              
              
              $
              234,301Financial
      contracts payable, at fair value
              
              
              26,465
              
              
              
              17,140Loss
      and loss adjustment expense reserves
              
              
              99,734
              
              
              
              81,425Unearned
      premium reserves
              
              
              112,482
              
              
              
              88,926Reinsurance
      balances payable
              
              
              37,176
              
              
              
              34,963Funds
      withheld
              
              
              3,382
              
              
              
              3,581Other
      liabilities
              
              
              6,651
              
              
              
              6,229Performance
      compensation payable to related party
              
              
              3,032
              
              
              
              —Total
      liabilities
              
              
              608,259
              
              
              
              466,565Shareholders’
      equityPreferred
      share capital (par value $0.10; authorized, 50,000,000; none
      issued)
              
              
              —
              
              
              
              —Ordinary
      share capital (Class A: par value $0.10; authorized, 100,000,000; issued
      and outstanding, 29,986,192 (2008: 29,781,736); Class B: par value $0.10;
      authorized, 25,000,000; issued and outstanding, 6,254,949 (2008:
      6,254,949))
              
              
              3,624
              
              
              
              3,604Additional
      paid-in capital
              
              
              478,516
              
              
              
              477,571Non-controlling
      interest in joint venture
              
              
              6,388
              
              
              
              6,058Retained
      earnings
              
              
              32,017
              
              
              
              4,207Total
      shareholders’ equity
              
              
              520,545
              
              
              
              491,440Total
      liabilities and shareholders’ equity
              
              $
              1,128,804
              
              
              $
              958,005







The
accompanying Notes to the Condensed Consolidated Financial Statements are
an
 integral
part of the Condensed Consolidated Financial Statements.
 3
 Table of contents







GREENLIGHT
CAPITAL RE, LTD.


CONDENSED CONSOLIDATED STATEMENTS OF
INCOME


(UNAUDITED)




For
the three months ended March 31, 2009 and 2008


(expressed
in thousands of U.S. dollars, except per share and share amounts)




Three
      months ended
                  March
      31,2009
              
              
              2008RevenuesGross
      premiums written
              
              $
              71,871
              
              
              $
              70,766Gross
      premiums ceded
              
              
              (1,220
              )
              
              
              (9,272
              )Net
      premiums written
              
              
              70,651
              
              
              
              61,494Change
      in net unearned premium reserves
              
              
              (24,458
              )
              
              
              (34,002
              )Net
      premiums earned
              
              
              46,193
              
              
              
              27,492Net
      investment income (loss)
              
              
              27,717
              
              
              
              (5,762
              )Other
      income
              
              
              2,124
              
              
              
              —Total
      revenues
              
              
              76,034
              
              
              
              21,730ExpensesLoss
      and loss adjustment expenses incurred, net
              
              
              30,196
              
              
              
              12,124Acquisition
      costs, net
              
              
              13,245
              
              
              
              9,929General
      and administrative expenses
              
              
              4,378
              
              
              
              4,460Total
      expenses
              
              
              47,819
              
              
              
              26,513Net
      income (loss) before non-controlling interest and corporate
      income tax expense
              
              
              28,215
              
              
              
              (4,783
              )Non-controlling
      interest in (income) loss of joint venture
              
              
              (330
              )
              
              
              33Net
      income (loss) before corporate income tax
expense
              
              
              27,885
              
              
              
              (4,750
              )Corporate
      income tax expense
              
              
              75
              
              
              
              —Net
      income (loss)
              
              $
              27,810
              
              
              $
              (4,750
              )Earnings
      (loss) per shareBasic
              
              $
              0.77
              
              
              $
              (0.13
              )Diluted
              
              $
              0.77
              
              
              $
              (0.13
              )Weighted
      average number of ordinary shares used in the determination ofBasic
              
              
              36,078,258
              
              
              
              35,981,312Diluted
              
              
              36,334,870
              
              
              
              35,981,312







The
accompanying Notes to the Condensed Consolidated Financial Statements are
an
 integral
part of the Condensed Consolidated Financial Statements.
 4
 Table of contents







GREENLIGHT
CAPITAL RE, LTD.


CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY (UNAUDITED)




For
the three months ended March 31, 2009 and 2008


(expressed
in thousands of U.S. dollars, except per share and share amounts)





Three
      months ended March 31, 2009
                          
                          
                          Three
      months ended March 31, 2008Ordinary
      share capitalBalance
      – beginning of period
                          
                          $
                          3,604
                          
                          
                          $
                          3,610Issue
      of Class A ordinary share capital
                          
                          
                          20
                          
                          
                          
                          13Balance
      – end of period
                          
                          $
                          3,624
                          
                          
                          $
                          3,623Additional
      paid-in capitalBalance
      – beginning of period
                          
                          $
                          477,571
                          
                          
                          $
                          476,861Issue
      of Class A ordinary share capital
                          
                          
                          221
                          
                          
                          
                          —Share-based
      compensation expense
                          
                          
                          724
                          
                          
                          
                          569Balance
      – end of period
                          
                          $
                          478,516
                          
                          
                          $
                          477,430Non-controlling
      interestBalance
      – beginning of period
                          
                          $
                          6,058
                          
                          
                          $
                          6,745Non-controlling
      interest in income (loss) of joint venture
                          
                          
                          330
                          
                          
                          
                          (33
                          )Balance
      – end of period
                          
                          $
                          6,388
                          
                          
                          $
                          6,712Retained
      earningsBalance
      – beginning of period
                          
                          $
                          4,207
                          
                          
                          $
                          125,111Net
      income (loss)
                          
                          
                          27,810
                          
                          
                          
                          (4,750
                          )Balance
      – end of period
                          
                          $
                          32,017
                          
                          
                          $
                          120,361Total
      shareholders’ equity
                          
                          $
                          520,545
                          
                          
                          $
                          608,126
  The
accompanying Notes to the Condensed Consolidated Financial Statements are
an
 integral
part of the Condensed Consolidated Financial Statements.
 5
 Table of contents







GREENLIGHT
CAPITAL RE, LTD.


CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


(UNAUDITED)




For
the three months ended March 31, 2009 and 2008


(expressed
in thousands of U.S. dollars, except per share and share amounts)




2009
              
              
              2008Cash
      provided by (used in)
                Operating
      activitiesNet
      income (loss)
              
              $
              27,810
              
              
              $
              (4,750
              )Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activitiesNet
      change in unrealized losses on securities and financial
      contracts
              
              
              6,738
              
              
              
              31,913Net
      realized gains on securities and financial contracts
              
              
              (42,477
              )
              
              
              (42,560
              )Foreign
      exchange loss on restricted cash and cash equivalents
              
              
              2,298
              
              
              
              15,310Non-controlling
      interest in income (loss) of joint venture
              
              
              330
              
              
              
              (33
              )Share-based
      compensation expense
              
              
              743
              
              
              
              582Depreciation
      expense
              
              
              10
              
              
              
              10Change
      inReinsurance
      balances receivable
              
              
              (28,359
              )
              
              
              (33,507
              )Loss
      and loss adjustment expense recoverables
              
              
              4,662
              
              
              
              (1,195
              )Deferred
      acquisition costs, net
              
              
              (6,718
              )
              
              
              (7,833
              )Unearned
      premiums ceded
              
              
              903
              
              
              
              (4,513
              )Other
      assets
              
              
              (2,281
              )
              
              
              (833
              )Loss
      and loss adjustment expense reserves
              
              
              18,309
              
              
              
              9,762Unearned
      premium reserves
              
              
              23,556
              
              
              
              38,594Reinsurance
      balances payable
              
              
              2,213
              
              
              
              8,361Funds
      withheld
              
              
              (199
              )
              
              
              1,434Other
      liabilities
              
              
              422
              
              
              
              1,036Performance
      compensation payable to related party
              
              
              3,032
              
              
              
              (6,885
              )Net
      cash provided by operating activities
              
              
              10,992
              
              
              $
              4,893Investing
      activitiesPurchases
      of securities and financial contracts
              
              
              (250,091
              )
              
              
              (383,978
              )Sales
      of securities and financial contracts
              
              
              314,677
              
              
              
              284,503Change
      in restricted cash and cash equivalents
              
              
              (98,488
              )
              
              
              83,302Change
      in notes receivable
              
              
              (15,146
              )
              
              
              —Non-controlling
      interest in joint venture
              
              
              —
              
              
              
              6,745Net
      cash used in investing activities
              
              
              (49,048
              )
              
              $
              (9,428
              )Financing
      activitiesNet
      proceeds from exercise of stock options
              
              
              222
              
              
              
              —Net
      cash provided by financing activities
              
              
              222
              
              
              $
              —Net
      decrease in cash and cash equivalents
              
              
              (37,834
              )
              
              
              (4,535
              )Cash
      and cash equivalents at beginning of the period
              
              
              94,144
              
              
              
              64,192Cash
      and cash equivalents at end of the period
              
              
              56,310
              
              
              $
              59,657Supplementary
      informationInterest
      paid in cash
              
              $
              1,574
              
              
              $
              3,227Interest
      received in cash
              
              
              629
              
              
              
              4,554







The
accompanying Notes to the Condensed Consolidated Financial Statements are an
 integral
part of the Condensed Consolidated Financial Statements.
 6
 Table of contents







GREENLIGHT
CAPITAL RE, LTD.


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)




March
31, 2009 and 2008


(expressed
in thousands of U.S. dollars, except per share and share amounts)






1.
            GENERAL




Greenlight
Capital Re, Ltd. (‘‘GLRE’’) was incorporated as an exempted company under the
Companies Law of the Cayman Islands on July 13, 2004. GLRE’s wholly-owned
subsidiary, Greenlight Reinsurance, Ltd. (the ‘‘Subsidiary’’), provides global
specialty property and casualty reinsurance. The Subsidiary has an unrestricted
Class ‘‘B’’ insurance license under Section 4(2) of the Cayman Islands Insurance
Law. The Subsidiary commenced underwriting in April 2006. Effective May 30,
2007, GLRE completed an initial public offering of 11,787,500 Class A ordinary
shares at $19.00 per share. Concurrently, 2,631,579 Class B ordinary shares of
GLRE were sold at $19.00 per share in a private placement
offering.  On December 9, 2008, Verdant Holding Company, Ltd.
(“Verdant”), a wholly owned subsidiary of GLRE, was incorporated in the state of
Delaware.




The Class A ordinary shares of GLRE are listed on Nasdaq Global Select Market
under the symbol ‘‘GLRE’’.




As used
herein, the ‘‘Company’’ refers collectively to GLRE and its
subsidiaries.




These
unaudited condensed consolidated financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America
(‘‘U.S. GAAP’’) and in accordance with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for complete consolidated financial
statements. These unaudited condensed consolidated financial statements should
be read in conjunction with the Company’s audited consolidated financial
statements for the year ended December 31, 2008. In the opinion of management,
these unaudited condensed consolidated financial statements reflect all the
normal recurring adjustments considered necessary for a fair presentation of the
Company’s financial position and results of operations as of the dates and for
the periods presented.




The
results for the three months ended March 31, 2009 are not necessarily indicative
of the results expected for the full year.




2.
            SIGNIFICANT
      ACCOUNTING POLICIES




Basis
of Presentation




The
condensed consolidated financial statements include the accounts of GLRE and the
consolidated financial statements of all of its wholly owned subsidiaries. All
significant intercompany transactions and balances have been eliminated in
consolidation.




Use
of Estimates




The
preparation of consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of income and expenses during the period. Actual results could
differ from these estimates.




Restricted
Cash and Cash Equivalents




The
Company is required to maintain cash in segregated accounts with prime brokers
and swap counterparties. The amount of restricted cash held by prime brokers is
used to support the liability created from securities sold, not yet purchased.
Cash held for the benefit of swap counterparties is used to collateralize the
current value of any amounts that may be due to the counterparty under the swap
contract.




7
 Table of contents




Loss
and Loss Adjustment Expense Reserves and Recoverables




The
Company establishes reserves for contracts based on estimates of the ultimate
cost of all losses including losses incurred but not reported. These estimated
ultimate reserves are based on reports received from ceding companies,
historical experience as well as the Company's own actuarial estimates. These
estimates are reviewed periodically and adjusted when deemed necessary. Since
reserves are estimates, the final settlement of losses may vary from the
reserves established and any adjustments to the estimates, which may be
material, are recorded in the period they are determined.




Loss and
loss adjustment expense recoverables include the amounts due from
retrocessionaires for paid and unpaid loss and loss adjustment expenses on
retrocession agreements. Ceded losses incurred but not reported are estimated
based on the Company’s actuarial estimates. These estimates are reviewed
periodically and adjusted when deemed necessary. The Company may not be able to
ultimately recover the loss and loss adjustment expense recoverable amounts due
to the retrocessionaires’ inability to pay. The Company regularly evaluates the
financial condition of its retrocessionaires and records provisions for
uncollectible reinsurance recoverable when recovery becomes
unlikely.




Notes
Receivable




Notes
receivable include promissory notes receivable from third party entities. These
notes are generally recorded at cost along with accrued interest, if any. The
Company regularly reviews all notes receivable for impairment and records
provisions for uncollectible notes and interest receivable for non-performing
notes. At March 31, 2009, the notes earned interest at annual interest rates
ranging from 5% to 10% and had maturity terms ranging from 2 years to 10 years.
Included in notes receivable balance were accrued interest of $0.2 million at
March 31, 2009 (December 31, 2008: $19,000) and all notes were considered
current and performing.




Deposit
Assets and Liabilities




The
Company accounts for reinsurance contracts in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 60, ‘‘Accounting and Reporting by
Insurance Enterprises,’’ and SFAS No. 113, ‘‘Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts.’’ In the event that a
reinsurance contract does not transfer sufficient risk, or a contract provides
retroactive reinsurance, deposit accounting is used. Any losses on such
contracts are charged to earnings immediately. Any gains relating to such
contracts are deferred and amortized over the estimated remaining settlement
period. All such deferred gains are included in reinsurance balances payable in
the condensed consolidated balance sheets. Amortized gains are recorded in the
consolidated statements of income as other income. At March 31, 2009, included
in the condensed consolidated balance sheets under reinsurance balances
receivable and reinsurance balances payable were $2.0 million and $1.9
million of deposit assets and deposit liabilities, respectively. There were
no deposit assets or liabilities at December 31, 2008.




Financial
Instruments




Investments
in Securities and Securities Sold, Not Yet Purchased




Effective
January 1, 2008, the Company adopted SFAS No. 157, “Fair Value
Measurements,” which establishes a framework for measuring fair value by
creating a hierarchy of fair value measurements based on inputs used in deriving
fair values and enhances disclosure requirements for fair value measurements.
The adoption of SFAS No. 157 had no material impact to the Company’s
results of operations or financial condition as there were no material changes
in the valuation techniques used by the Company to measure fair value. The
Company’s investments in debt and equity securities that are classified as
“trading securities” are carried at fair value. The fair values of the listed
equity and debt investments are derived based on quoted prices (unadjusted) in
active markets for identical assets (Level 1 inputs). The fair values of
most private debt securities are derived based on inputs that are observable,
either directly or indirectly, such as market maker or broker quotes reflecting
recent transactions (Level 2 inputs), and are generally derived based on
the average of multiple market maker or broker quotes which are considered to be
binding. Where quotes are not available, debt securities are valued using cash
flow models using assumptions and estimates that may be subjective and
non-observable (Level 3 inputs).





8
 Table of contents




The
Company’s “other investments” may include investments in private equity
securities, limited partnerships, futures, exchange traded options and
over-the-counter (“OTC”) options, which are all carried at fair value. The
Company maximizes the use of observable direct or indirect inputs (Level 2
inputs) when deriving the fair values for “other investments”. For limited
partnerships and private equity securities, where observable inputs are not
available, the fair values are derived based on unobservable inputs
(Level 3 inputs) such as management’s assumptions developed from available
information using the services of the investment advisor. Amounts invested in
exchange traded and OTC call and put options are recorded as an asset or
liability at inception. Subsequent to initial recognition, unexpired exchange
traded option contracts are recorded at fair value based on quoted prices in
active markets (Level 1 inputs). For OTC options or exchange traded options
where a quoted price in an active market is not available, fair values are
derived based upon observable inputs (Level 2 inputs) such as multiple
market maker quotes.





For
securities classified as “trading securities,” and “other investments,” any
realized and unrealized gains or losses are determined on the basis of specific
identification method (by reference to cost and amortized cost, as appropriate)
and included in net investment income in the consolidated statements of
income.





Dividend
income and expense are recorded on the ex-dividend date. The ex-dividend date is
the date as of when the underlying security must have been traded to be eligible
for the dividend declared. Interest income and interest expense are recorded on
an accrual basis.





Derivative
Financial Instruments




SFAS No.
133, ‘‘Accounting for Derivative Instruments and Hedging
Activities,’’ (“SFAS No. 133”) establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that an
entity recognize all derivatives in the balance sheet at fair value. It also
requires that unrealized gains and losses resulting from changes in fair value
be included in income or comprehensive income, depending on whether the
instrument qualifies as a hedge transaction, and if so, the type of hedge
transaction. Derivative financial instrument assets are generally included in
investments in securities or financial contracts receivable. Derivative
financial instrument liabilities are generally included in financial contracts
payable. The Company's derivatives do not constitute hedges for financial
reporting purposes.




Financial
Contracts





The
Company enters into financial contracts with counterparties as part of its
investment strategy. Derivatives not designated as hedging instruments under
SFAS No. 133, include total return swaps, credit default swaps, and other
derivative instruments which are recorded at their fair value with any
unrealized gains and losses included in net investment income in the
consolidated statements of income. On the consolidated balance sheets, financial
contracts receivable represents derivative contracts whereby the Company is
entitled to receive payments upon settlement of the contract. Financial
contracts payable represents derivative contracts whereby the Company is
obligated to make payments upon settlement of the contract.




Total
return swap agreements, included on the consolidated balance sheets as financial
contracts receivable and financial contracts payable, are derivative financial
instruments whereby the Company is either entitled to receive or obligated to
pay the product of a notional amount multiplied by the movement in an underlying
security, which the Company does not own, over a specified time frame. In
addition, the Company may also be obligated to pay or receive other payments
based on either interest rate, dividend payments and receipts, or foreign
exchange movements during a specified period. The Company measures its rights or
obligations to the counterparty based on the fair value movements of the
underlying security together with any other payments due. These contracts are
carried at fair value, based on observable inputs (Level 2 inputs) with the
resultant unrealized gains and losses reflected in net investment income in the
consolidated statements of income. Additionally, any changes in the value of
amounts received or paid on swap contracts are reported as a gain or loss in net
investment income in the consolidated statements of income.




9
 Table of contents




Financial
contracts may also include exchange traded futures or options contracts that are
based on the movement of a particular index or interest rate, and are entered
into for non-hedging purposes. Where such contracts are traded in an active
market, the Company’s obligations or rights on these contracts are recorded at
fair value measured based on the observable quoted prices of the same or similar
financial contract in an active market (Level 1) or on broker quotes which
reflect market information based on actual transactions (Level 2).




The
Company purchases and sells credit default swaps ("CDS") for the purposes of
either managing its exposure to certain investments, or for other strategic
investment purposes. A CDS is a derivative instrument that provides protection
against an investment loss due to specified credit or default events of a
reference entity. The seller of a CDS guarantees to the buyer a specified amount
if the reference entity defaults on its obligations or fails to perform. The
buyer of a CDS pays a premium over time to the seller in exchange for obtaining
this protection. The Company does not designate a CDS as a hedging
instrument. CDS trading in an active market are valued at fair value based on
broker or market maker quotes for identical instruments in an active market
(Level 2) or based on the current credit spreads on identical contracts
(Level 2) with any unrealized gains and losses reflected in net investment
income in the consolidated statements of income.




Earnings
(loss) Per Share




Basic earnings per share
is based on the weighted average number of common shares and participating
securities outstanding during the period. Diluted earnings per share
include the dilutive effect of additional potential common shares issuable under
our stock options and are determined using the treasury stock method. As
discussed below under the caption, “Recently Issued Accounting Standards,” FASB
Staff Position (“FSP”) EITF 03-6-1 was adopted effective January 1,
2009. This FSP requires that unvested stock awards
which contain non-forfeitable rights to dividends or dividend equivalents,
whether paid or unpaid (referred to as “participating securities”), be included
in the number of shares outstanding for both basic and diluted earnings per
share calculations. Our unvested restricted stock is considered a
participating security. All prior period earnings per share data presented
is required to be adjusted retrospectively to conform to the provisions of the
FSP. In the event of a net loss, the participating securities are excluded
from the calculation of both basic and diluted earnings per share. Due to our
net loss for the three months ended March 31, 2008, 252,889 unvested restricted
shares were not included in determining both basic and diluted earnings per
share. In addition, stock options for 1,529,000 shares of common stock were
anti-dilutive and were not included in determining diluted earnings per share
for the three months ended March 31, 2008. Weighted average diluted common
shares outstanding equals the weighted average common shares outstanding during
the three month periods ended March 31, 2008 due to the net loss recorded during
that period.




Three
      months ended
                  March
      31,2009
              
              
              2008Weighted
      average shares outstanding
              
              
              36,078,258
              
              
              
              35,981,312Effect
      of dilutive service provider stock options
              
              
              98,156
              
              
              
              —Effect
      of dilutive employee and director options
              
              
              158,456
              
              
              
              —36,334,870
              
              
              
              35,981,312




Taxation




Under
current Cayman Islands law, no corporate entity, including the Company, is
obligated to pay taxes in the Cayman Islands on either income or capital gains.
The Company has an undertaking from the Governor-in-Cabinet of the Cayman
Islands, pursuant to the provisions of the Tax Concessions Law, as amended,
that, in the event that the Cayman Islands enacts any legislation that imposes
tax on profits, income, gains or appreciations, or any tax in the nature of
estate duty or inheritance tax, such tax will not be applicable to the Company
or its operations, or to the Class A or Class B ordinary shares or  related
obligations, until February 1, 2025.




The
Company’s wholly owned subsidiary, Verdant, is incorporated in the U.S. and
therefore subject to taxes in accordance with the rates and regulations
prescribed by the Internal Revenue Service. Verdant’s taxable income is taxed at
an effective rate of 35%.






10
 Table of contents




Recently
Issued Accounting Standards




In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity For the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly." FSP FAS 157-4
provides further clarification of the principles established by SFAS No. 157 for
determining the fair values of assets and liabilities in inactive markets and
those transacted in distressed situations. This FSP is effective for periods
ending after June 15, 2009 with early adoption permitted for periods ending
after March 15, 2009. Retrospective application is not permitted. The Company
did not early adopt this FSP and is evaluating the impact of this FSP, but does
not expect the adoption of this FSP to have a material impact on the Company’s
results of operations or financial position.




In April
2009, the FASB issued FSP FAS 115-2, and FAS 124-2, “Recognition and
Presentation of Other-Than-Temporary Impairments.” This FSP, which is limited to
debt securities, provides guidance that aims to make other-than-temporary
impairments (“OTTI”) of debt securities more operational and improve the
presentation of OTTIs in the financial statements. This FSP is effective for
periods ending after June 15, 2009 with early adoption permitted for periods
ending after March 15, 2009. The Company did not early adopt this FSP
and does not expect the adoption of this FSP to have any impact on the
Company’s results of operations or financial position.




In April
2009, the FASB issued FSP 107-1 and APB 28-1, “Interim Disclosures about Fair
Value of Financial Instruments.” This FSP amends FASB Statement No. 107,
“Disclosures about Fair Value of Financial Instruments”, to require an entity to
provide disclosures about fair value of financial instruments in interim
financial information. This FSP is effective for periods ending after June 15,
2009 with early adoption permitted for period ending after March 15, 2009. The
Company did not early adopt this FSP and is evaluating the impact of this FSP,
but does not expect the adoption of this FSP to have a material impact on the
Company’s disclosures since its financial instruments are currently carried at
fair value.




In June
2008, the FASB issued FSP No. EITF 03-6-1 "Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities." This
FSP addresses whether instruments granted in share-based payment transactions
are participating securities prior to vesting and, therefore, need to be
included in the earnings allocation in computing earnings per share ("EPS").
This FSP is effective for periods beginning after December 15, 2008,
and interim periods within those years. The implementation of this FSP
did not have a material impact to the Company's EPS calculations given
that the Company has declared no dividends since inception and the number
of unvested restricted shares are insignificant compared to the total number of
outstanding shares. The Company does not anticipate the EPS calculations to
be materially affected in the foreseeable future as a result of adopting this
FSP.




In March
2008, the FASB issued SFAS No. 161, ‘‘Disclosures about Derivative Instruments
and Hedging Activities – an amendment of FASB Statement No. 133.’’ SFAS No. 161
is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early application encouraged.
This statement changes the disclosure requirements for derivative instruments
and hedging activities by requiring enhanced disclosures about how and why an
entity uses derivative instruments, how an entity accounts for the derivatives
and hedged items, and how derivatives and hedged items affect an entity’s
financial position, performance and cash flows. The effect of the statement’s
implementation did not have a material impact on the Company’s derivative
disclosures.




In
February 2008, the FASB issued FSP FAS 157-2 "Effective Date of FASB
Statement No. 157." FSP FAS 157-2 deferred the effective date of SFAS No. 157
until January 1, 2009 for non-financial assets and non-financial liabilities
except those items recognized or disclosed at fair value on an annual or more
frequently recurring basis.The implementation of this
FSP did not have a material impact on the Company’s results of operation or
financial position.




In
December 2007, the FASB issued SFAS No. 160, ‘‘Non-controlling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51.’’ SFAS No. 160
is effective for fiscal years beginning on or after December 15, 2008 and early
adoption is prohibited. This statement establishes accounting and reporting
standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary.  Upon adoption of this statement, the
Company's non-controlling interest in joint venture (previously referred to
as minority interest in joint venture) was reclassified from liabilities to
shareholders’ equity for all years presented. This reclassification resulted in
an increase in shareholders’ equity and a decrease in total liabilities.
However, the effect of the statement's implementation did not have
any impact on the Company's results of operations or retained
earnings.




11
 Table of contents




Reclassifications




Certain
prior period balances have been reclassified to conform to the
current period presentation. The reclassifications resulted in no changes
to net income (loss) or retained earnings for any of the periods
presented.




3.
            FINANCIAL
      INSTRUMENTS




Fair
Value Hierarchy




All of the Company’s financial instrumentsare carried at fair value, and the net
unrealized gains or losses are included in net investment income in the
consolidated statements of income.




The
following table presents the Company’s investments, categorized by the level of
the fair value hierarchy as at March 31, 2009:




Fair
      value measurements as at
                                  March
      31, 2009Description
                                
                                Quoted
      prices inactive
      markets(Level
      1)
                                
                                
                                Significantotherobservable
                                    inputs(Level
      2)
                                
                                
                                Significant
                                    unobservableinputs
                                    (Level
      3)
                                
                                
                                Total($
      in thousands)Debt
      securities
                                
                                $
                                —
                                
                                
                                $
                                99,739
                                
                                
                                $
                                9,352
                                
                                
                                $
                                109,091Listed
      equity securities
                                
                                
                                436,490
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                436,490Private
      equity securities
                                
                                
                                —
                                
                                
                                
                                1,147
                                
                                
                                
                                9,807
                                
                                
                                
                                10,954Call
      options
                                
                                
                                —
                                
                                
                                
                                801
                                
                                
                                
                                —
                                
                                
                                
                                801Financial
      contracts receivable (payable), net
                                
                                
                                —
                                
                                
                                
                                (2,902
                                )
                                
                                
                                —
                                
                                
                                
                                (2,902
                                )$
                                436,490
                                
                                
                                $
                                98,785
                                
                                
                                $
                                19,159
                                
                                
                                $
                                554,434Listed
      equity securities, sold not yet purchased
                                
                                $
                                (319,337
                                )
                                
                                $
                                —
                                
                                
                                $
                                —
                                
                                
                                $
                                (319,337
                                )




The
following table presents the reconciliation of the balances for all investments
measured at fair value using significant unobservable inputs (Level
3):




Fair
      value measurements using
                  significant
      unobservable inputs
                  (Level
      3)Debt
                  securities
              
              
              Private
                  equity
                  securities
              
              
              Total($
      in thousands)Beginning
      balance, January 1, 2009
              
              $
              4,115
              
              
              $
              11,776
              
              
              $
              15,891Purchases,
      sales, issuances, and settlements, net
              
              
              1,732
              
              
              
              (82
              )
              
              
              1,650Total
      gains or losses (realized & unrealized) included in earnings,
      net
              
              
              (1,485
              )
              
              
              (1,887
              )
              
              
              (3,372
              )Transfers
      in and/or (out of) Level 3
              
              
              4,990
              
              
              
              —
              
              
              
              4,990Ending
      balance, March 31, 2009
              
              
              9,352
              
              
              
              9,807
              
              
              
              19,159




12
 Table of contents




Transfers
into Level 3 represent the fair value on the date of transfer of debt securities
for which there was not an active market and multiple broker quotes were not
available. The fair values of these debt securities were estimated using the
last available transaction price, adjusted for credit risk, expected cash flows,
and other non-observable inputs.




For the
three months ended March 31, 2009, realized gains of $5,000 and change in
unrealized gains of $3.4 million on securities still held at the reporting date,
and valued using unobservable inputs, are included as net investment income
(loss) in the condensed consolidated statements of income.




Debt
Securities, trading





At March
31, 2009, the following investments are included in debt
securities:





2009
              
              Cost/amortized
                cost
              
              
              Unrealized
                gains
              
              
              Unrealized
                losses
              
              
              Fair
                value($
      in thousands)Corporate
      debt – U.S
              
              $
              100,433
              
              
              $
              9,750
              
              
              $
              (11,110)
              
              
              $
              99,073Corporate
      debt – Non U.S
              
              
              9,251
              
              
              
              948
              
              
              
              (181)
              
              
              
              10,018Total
      debt securities
              
              $
              109,684
              
              
              $
              10,698
              
              
              $
              (11,291)
              
              
              $
              109,091




At
December 31, 2008, the following investments are included in debt
securities:





2008
                      
                      Cost/amortized
                        cost
                      
                      
                      Unrealized
                        gains
                      
                      
                      Unrealized
                        losses
                      
                      
                      Fair
                        value($
      in thousands)Corporate
      debt – U.S
                      
                      $
                      74,833
                      
                      
                      $
                      1,204
                      
                      
                      $
                      (8,750
                      )
                      
                      $
                      67,287Corporate
      debt – Non U.S
                      
                      
                      2,978
                      
                      
                      
                      109
                      
                      
                      
                      (160
                      )
                      
                      
                      2,927Total
      debt securities
                      
                      $
                      77,811
                      
                      
                      $
                      1,313
                      
                      
                      $
                      (8,910
                      )
                      
                      $
                      70,214




The
maturity distribution for debt securities held at March 31, 2009 is as
follows:




Cost/amortized
                            cost
                          
                          
                          Fair
                            value($
      in thousands)Within
      one year
                          
                          $
                          15,337
                          
                          
                          $
                          15,683From
      one to five years
                          
                          
                          50,017
                          
                          
                          
                          55,676From
      five to ten years
                          
                          
                          36,146
                          
                          
                          
                          29,829More
      than ten years
                          
                          
                          8,184
                          
                          
                          
                          7,903$
                          109,684
                          
                          
                          $
                          109,091
   13
 Table of contents




Investment
in Equity Securities, Trading




At March
31, 2009, the following long positions are included in investment securities,
trading:




2009
                
                Cost
                
                
                Unrealized
                  gains
                
                
                Unrealized
                  losses
                
                
                Fair
                  value($
      in thousands)Equities
      – listed
                
                $
                582,708
                
                
                $
                20,995
                
                
                $
                (230,542)
                
                
                $
                373,161Exchange
      traded funds
                
                
                52,088
                
                
                
                11,241
                
                
                
                —
                
                
                
                63,329$
                634,796
                
                
                $
                32,236
                
                
                $
                (230,542)
                
                
                $
                436,490




At
December 31, 2008, the following long positions are included in investment
securities, trading:




2008
                
                Cost
                
                
                Unrealized
                  gains
                
                
                Unrealized
                  losses
                
                
                Fair
                  value($
      in thousands)Equities
      – listed
                
                $
                552,941
                
                
                $
                14,822
                
                
                $
                (219,173
                )
                
                $
                348,590Exchange
      traded funds
                
                
                53,364
                
                
                
                8,092
                
                
                
                (717
                )
                
                
                60,739$
                606,305
                
                
                $
                22,914
                
                
                $
                (219,890
                )
                
                $
                409,329




Other
Investments




“Other
investments” include options as well as private equity securities for which
quoted prices in active markets are not readily available. Options are
derivative financial instruments that give the buyer, in exchange for a premium
payment, the right, but not the obligation, to either purchase from (call
option) or sell to (put option) the option counterparty, a specified underlying
security at a specified price on or before a specified date. The Company enters
into option contracts to meet certain investment objectives. For exchange traded
option contracts, the exchange acts as the counterparty to specific transactions
and therefore bears the risk of delivery to and from counterparties of specific
positions. For OTC options, a dealer acts as the counterparty and therefore the
Company is exposed to credit risk to the extent the dealer is unable to meet its
obligations. As of March 31, 2009 and December 31, 2008, the Company did not
hold any OTC options.




At March
31, 2009, the following securities are included in other
investments:




2009
              
              Cost
              
              
              Unrealized
                  gains
              
              
              Unrealized
                  losses
              
              
              Fair
                  value($
      in thousands)Equities
      – unlisted
              
              $
              15,985
              
              
              $
              1,164
              
              
              $
              (6,195
              )
              
              $
              10,954Call
      options
              
              
              2,133
              
              
              
              —
              
              
              
              (1,332
              )
              
              
              801$
              18,118
              
              
              $
              1,164
              
              
              $
              (7,527
              )
              
              $
              11,755





At
December 31, 2008, the following securities are included in other
investments:


2008
              
              Cost
              
              
              Unrealized
                  gains
              
              
              Unrealized
                  losses
              
              
              Fair
                  value($
      in thousands)Equities
      – unlisted
              
              $
              15,395
              
              
              $
              1,236
              
              
              $
              (4,734
              )
              
              $
              11,897Call
      options
              
              
              2,133
              
              
              
              393
              
              
              
              —
              
              
              
              2,526$
              17,528
              
              
              $
              1,629
              
              
              $
              (4,734
              )
              
              $
              14,423





14
 Table of contents




Investments
in Securities Sold, Not Yet Purchased





At March
31, 2009, the following securities are included in investments in
securities sold, not yet purchased:




2009
                        
                        Proceeds
                        
                        Unrealized
      gains
                        
                        
                        Unrealized
      losses
                        
                        
                        Fair
                          value($
      in thousands)Equities
      - listed
                        $
                        386,927
                        
                        $
                        (115,131
                        )
                        
                        $
                        8,335
                        
                        $
                        280,131Warrants
      and rights on listed equities
                        
                        —
                        
                        
                        —
                        
                        
                        
                        574
                        
                        
                        574Exchange
      traded funds
                        
                        39,811
                        
                        
                        (1,179
                        )
                        
                        
                        —
                        
                        
                        38,632$
                        426,738
                        
                        $
                        (116,310
                        )
                        
                        $
                        8,909
                        
                        $
                        319,337





At
December 31, 2008, the following securities are included in investments in
securities sold, not yet purchased:




2008
                      
                      Proceeds
                      
                      Unrealized
      gains
                      
                      
                      Unrealized
      losses
                      
                      
                      Fair
      value($ in
      thousands)Equities
      - listed
                      $
                      343,079
                      
                      $
                      (115,619
                      )
                      
                      $
                      6,841
                      
                      $
                      234,301




Financial
Contracts




As of
March 31, 2009 and December 31, 2008, the Company had entered into total return
swaps, credit default swaps, and interest rate options contracts with various
financial institutions to meet certain investment objectives but not for hedging
purposes. Under the terms of each of these financial contracts, the Company is
either entitled to receive or is obligated to make payments which are based on
the product of a formula contained within the contract that includes the change
in the fair value of the underlying or reference security.




The fair
value of financial contracts outstanding at March 31, 2009 is as
follows:




Underlying
      security
                                  Listing
                                    currency
                                  
                                  Fair
                                    value
      of
                                    underlying
                                  
                                  Net
      assets/
                                    (obligations)
                                    on
      financial
                                    contracts($
      in thousands)Interest
      rate options
                                  USD
                                  $
                                  137,492
                                  
                                  $
                                  4,131Credit
      default swaps, purchased – Sovereign debt
                                  USD
                                  
                                  316,425
                                  
                                  
                                  10,373Credit
      default swaps, purchased – Corporate debt
                                  USD
                                  
                                  35,765
                                  
                                  
                                  9,059Total
      financial contracts receivable, at fair value
                                  
                                  
                                  
                                  
                                  $
                                  23,563Credit
      default swaps, purchased – Sovereign debt
                                  USD
                                  $
                                  1,317
                                  
                                  $
                                  (20)Credit
      default swaps, issued – Corporate debt
                                  USD
                                  
                                  9,180
                                  
                                  
                                  (9,180)Total
      return swaps - Equities
                                  USD
                                  
                                  17,035
                                  
                                  
                                  (17,265)Total
      financial contracts payable, at fair value
                                  
                                  
                                  
                                  
                                  $
                                  (26,465)





15
 Table of contents




The fair
value of financial contracts outstanding at December 31, 2008 was as
follows:




Underlying
      security
                                  Listing
                                    currency
                                  
                                  Fair
                                    value
      of
                                    underlying
                                  
                                  Net
      assets/
                                    (obligations)
                                    on
      financial
                                    contracts($
      in thousands)Interest
      rate options
                                  USD
                                  $
                                  85,935
                                  
                                  $
                                  2,564Credit
      default swaps, purchased – Sovereign debt
                                  USD
                                  
                                  322,516
                                  
                                  
                                  12,881Credit
      default swaps, purchased – Corporate debt
                                  USD
                                  
                                  54,509
                                  
                                  
                                  5,956Total
      return swaps - Equities
                                  USD
                                  
                                  3,249
                                  
                                  
                                  18Total
      financial contracts receivable, at fair value
                                  
                                  
                                  
                                  
                                  $
                                  21,419Credit
      default swaps, issued – Corporate debt
                                  USD
                                  $
                                  11,089
                                  
                                  $
                                  (7,024
                                  )Total
      return swaps - Equities
                                  USD
                                  
                                  26,844
                                  
                                  
                                  (10,116
                                  )Total
      financial contracts payable, at fair value
                                  
                                  
                                  
                                  
                                  $
                                  (17,140
                                  )




As of
March 31, 2009, included in financial contracts payable, was a CDS issued by the
Company relating to the debt issued by another entity ("reference
entity"). The CDS has a remaining term of four years and a notional amount of
$13.9 million. Under this contract, the Company receives fees for
guaranteeing the debt and in return will be obligated to pay the notional
amount to the counterparty if the reference entity defaults under its debt
obligations. As of March 31, 2009, based on the assessment conducted by the
Company’s investment advisor, the risk of default does not appear likely.
As of March 31, 2009, the reference entity had a financial
strength rating of (A2) and a surplus notes rating of (Baa1) from
Moody’s Investors Service. The fair value of the CDS at March 31, 2009 was
$9.2 million which was determined based on broker quotes obtained
for identical or similar contracts traded in an active market (Level 2
inputs).




During
the three months ended March 31, 2009 and 2008, the Company reported gains and
losses on derivatives as follows:





Derivatives
      not designated as hedging instruments
                                                                                                      
                                                                                                      Location
      of gains and losses on derivatives recognized in income
                                                                                                      
                                                                                                      Gain
      (loss) on derivatives recognized in income for the three months ended
      March 31,2009
                                                                                                      
                                                                                                      
                                                                                                      2008($
      in thousands)Interest
      rate options
                                                                                                      
                                                                                                      Net
      investment income
                                                                                                      
                                                                                                      $
                                                                                                      970
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      —Credit
      default swaps, purchased – Corporate debt
                                                                                                      
                                                                                                      Net
      investment income
                                                                                                      
                                                                                                      
                                                                                                      3,917
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      175Credit
      default swaps, purchased – Sovereign debt
                                                                                                      
                                                                                                      Net
      investment income
                                                                                                      
                                                                                                      
                                                                                                      (2,036
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      —Total
      return swaps – Equities
                                                                                                      
                                                                                                      Net
      investment income
                                                                                                      
                                                                                                      
                                                                                                      (10,586
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      4,689Credit
      default swaps, issued – Corporate debt
                                                                                                      
                                                                                                      Net
      investment income
                                                                                                      
                                                                                                      
                                                                                                      (1,986
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      —Total
      return swaps – Commodities
                                                                                                      
                                                                                                      Net
      investment income
                                                                                                      
                                                                                                      
                                                                                                      —
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      (7,292
                                                                                                      )Options,
      warrants, and rights
                                                                                                      
                                                                                                      Net
      investment income
                                                                                                      
                                                                                                      
                                                                                                      (2,389
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      (2,498
                                                                                                      )Total
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      (12,110
                                                                                                      )
                                                                                                      
                                                                                                      $
                                                                                                      (4,926
                                                                                                      )







16
 Table of contents





The
Company generally does not enter into derivatives for risk management or hedging
purposes, and the volume of derivative activities varies from period to period
depending on potential investment opportunities. For the three months ended
March 31, 2009, the Company’s volume of derivative activities was as
follows:





Derivatives
      not designated as hedging instruments
                                                                    
                                                                    Purchased
                                                                    
                                                                    
                                                                    Disposed($
      in thousands)Credit
      default swaps
                                                                    
                                                                    $
                                                                    33,343
                                                                    
                                                                    
                                                                    $
                                                                    20,850Total
      return swaps
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    2,509Interest
      rate options
                                                                    
                                                                    
                                                                    27,770
                                                                    
                                                                    
                                                                    
                                                                    —Options
      – equity
                                                                    
                                                                    
                                                                    2,971
                                                                    
                                                                    
                                                                    
                                                                    12,223Rights
      – equity
                                                                    
                                                                    
                                                                    4,126
                                                                    
                                                                    
                                                                    
                                                                    2,613Total
                                                                    
                                                                    $
                                                                    68,210
                                                                    
                                                                    
                                                                    $
                                                                    38,195




4.
            RETROCESSION




The
Company utilizes retrocession agreements to reduce the risk of loss on business
assumed. The Company currently has coverages that provide for recovery of a
portion of certain loss and loss expenses incurred on certain contracts. Loss
and loss adjustment expense recoverables from retrocessionaires are recorded as
assets. For the three months ended March 31, 2009 and 2008, loss and loss
adjustment expenses incurred are net of loss and loss expenses recovered and
recoverable of $3.5 million and $3.0 million, respectively. Retrocession
contracts do not relieve the Company from its obligations to policyholders.
Failure of retrocessionaires to honor their obligations could result in losses
to the Company. The Company regularly evaluates the financial condition of its
retrocessionaires. At March 31, 2009, the Company had loss recoverables of $0.3
million (December 31, 2008: $0.2 million) with a retrocessionaire rated ‘‘A+
(superior)’’ by A.M. Best Company. Additionally, at March 31, 2009, the Company
had loss recoverables of $6.7 million (December 31, 2008: $11.5 million) with
unrated retrocessionaires. At March 31, 2009, the Company retained funds and
other collateral from the unrated retrocessionaires for amounts in excess of the
loss recoverable asset, and the Company had no provision for uncollectible
losses recoverable.




5.
 SHARE CAPITAL




The Class
A ordinary shares of the Company are listed on Nasdaq Global Select Market under
the symbol ‘‘GLRE.’’




During
the three months ended March 31, 2009, 186,956 (2008: 131,465) restricted
shares of Class A ordinary shares were issued to employees pursuant to the
Company’s stock incentive plan. These shares contain certain restrictions
relating to, among other things, vesting, forfeiture in the event of termination
of employment and transferability. Each of these restricted shares will cliff
vest after three years from issue date, subject to the grantee's continued
service with the Company.




17
 Table of contents





The
restricted share award activities during the three months ended March 31, 2009
were as follows:




Number
      ofnon-vested
                      restrictedshares
                    
                    
                    Weightedaverage
                      grant
      datefair
      valueBalance
      at December 31, 2008
                    
                    
                    270,349
                    
                    
                    $
                    17.80Granted
                    
                    
                    186,956
                    
                    
                    
                    15.00Vested
                    
                    
                    —
                    
                    
                    
                    —Forfeited
                    
                    
                    —
                    
                    
                    
                    —Balance
      at March 31, 2009
                    
                    
                    457,305
                    
                    
                    $
                    16.66




During
the three months ended March 31, 2009, 17,500 stock options were exercised which
had a weighted average exercise price of $12.72 per share.  The
Company issued new Class A ordinary shares from the shares authorized for
issuance under the Company’s stock incentive plan.  At March 31, 2009,
252,098 Class A ordinary shares were available for future issuance under the
Company’s stock incentive plan. The intrinsic value of options exercised during
the three months ended March 31, 2009 was $39,900.  No stock options
were exercised during the three months ended March 31, 2008.




Employee
and director stock option activities during the three months ended March 31,
2009 were as follows:





Number
      ofoptions
                    
                    
                    Weightedaverage
                      exerciseprice
                    
                    
                    Weightedaverage
                      grant
      datefair
      valueBalance
      at December 31, 2008
                    
                    
                    1,258,340
                    
                    
                    $
                    13.27
                    
                    
                    $
                    6.35Granted
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Exercised
                    
                    
                    (17,500)
                    
                    
                    
                    12.72
                    
                    
                    
                    6.75Forfeited
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Expired
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Balance
      at March 31, 2009
                    
                    
                    1,240,840
                    
                    
                    $
                    13.28
                    
                    
                    $
                    6.34




The
following table is a summary of voting ordinary shares issued and
outstanding:




March
      31, 2009
              
              
              March
      31, 2008Class
      A
              
              
              Class
      B
              
              
              Class
      A
              
              
              Class
      BBalance
      – beginning of period
              
              
              29,781,736
              
              
              
              6,254,949
              
              
              
              29,847,787
              
              
              
              6,254,949Issue
      of ordinary shares
              
              
              204,456
              
              
              
              —
              
              
              
              131,465
              
              
              
              —Balance
      – end of period
              
              
              29,986,192
              
              
              
              6,254,949
              
              
              
              29,979,252
              
              
              
              6,254,949




6.
            RELATED
      PARTY TRANSACTIONS




Investment
Advisory Agreement




The
Company was party to an Investment Advisory Agreement (the ‘‘Investment
Agreement’’) with DME Advisors, LP (“DME Advisors”) until December 31, 2007. DME
Advisors is a related party and an affiliate of David Einhorn, Chairman of the
Company’s Board of Directors. Effective January 1, 2008, the Company terminated
the Investment Agreement and entered into an agreement (the ‘‘Advisory
Agreement’’) under which the Company and DME Advisors agreed to create a joint
venture for the purposes of managing certain jointly held assets. Pursuant to
this agreement, the monthly management fees or performance compensation remained
the same as those contained in the Investment Agreement.




18
 Table of contents





Pursuant to the Advisory
Agreement, performance compensation equal to 20% of the net income of the
Company’s share of the account managed by DME Advisors is payable to DME
Advisors, subject to a loss carry forward provision. The loss carryforward provision allows DME Advisors
to earn reduced incentive compensation of 10% on net investment income in any
year subsequent to the
year in which theinvestment account incurs a loss, until all the losses are recouped and an
additional amount equal to 150% of the aggregate investment loss is earned.
DME Advisors is not entitled to earn performance compensation in ayear in which theinvestment portfolio incurs a loss.
For the year ended December 31, 2008, theportfolio reported a net investment
loss of $126.1 million and as a result no performance compensation was paid to
DME Advisors. In addition,
the performance compensation for fiscal 2009 and subsequent years will be
reduced to 10% of net investment income until all the investment losses have
been recouped and an additional amount equal to 150% of the aggregate loss is
earned.For the three
months ended March 31, 2009, performance compensation of $3.0 million was
recorded at the reduced rate of 10%.




Additionally,
pursuant to the Advisory Agreement, DME Advisors is entitled to
receive a monthly management fee equal to 0.125% (1.5% on an annual basis)
of the Company’s share of the account managed by DME Advisors. Included in net
investment income for the three months ended March 31, 2009, are management fees
of $2.2 million (March 31, 2008: $2.5 million). The management fees were fully
paid as of March 31, 2009 and December 31, 2008.




Service
Agreement




In
February 2007, the Company entered into a service agreement with DME Advisors,
pursuant to which DME Advisors will provide investor relations services to the
Company for a monthly compensation of $5,000 plus expenses. The agreement
has an initial term of one year, and will continue for sequential one year
periods until terminated by the Company or DME Advisors. Either party may
terminate the agreement for any reason with 30 days prior written notice to the
other party.




7.
            COMMITMENTS
      AND CONTINGENCIES




Operating
Lease




Effective
September 1, 2005, the Company entered into a five-year non-cancelable lease
agreement to rent office space.




On
July 9, 2008, the Company entered into an additional lease agreement for
new office space in the Cayman Islands. Under the terms of the lease agreement,
the Company is committed to annual rent payments ranging from $253,539 to
$311,821.  The lease expires on June 30, 2018 and
the Company has the option to renew the lease for a further five year
term. Included in the schedule below are the minimum lease payment obligations
relating to these leases.




The total
rent expense relating to leased office spaces for the three months ended March
31, 2009 was $212,374 (2008: $23,000).




Specialist
Service Agreement




Effective
September 1, 2007, the Company entered into a service agreement with a
specialist whereby the specialist service provider provides administration and
support in developing and maintaining business relationships, reviewing and
recommending programs and managing risks relating to certain specialty lines of
business.  The service provider does not have any authority to bind the
Company to any reinsurance contracts. Under the terms of the agreement, the
Company has committed to quarterly payments to the service provider. If the
agreement is terminated after two years, the Company is obligated to make
minimum payments for another two years, as presented in the schedule below, to
ensure any bound contracts are adequately run-off by the service provider.
Included in the schedule below are the minimum payment obligations relating
to this agreement.






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 Table of contents


Private
Equity




Periodically,
the Company makes investments in private equity vehicles. As part of the
Company's participation in such private equity investments, the Company may make
funding commitments. As of March 31, 2009, the Company had commitments to invest
an additional $17.2 million in private equity investments.




The
following is a schedule of future minimum payments required under the above
commitments for the next five years:




2009
                
                
                2010
                
                
                2011
                
                
                2012
                
                
                2013
                
                
                Thereafter
                
                
                Total($
      in thousands)Operating
      lease obligations
                
                $
                282
                
                
                $
                345
                
                
                $
                276
                
                
                $
                276
                
                
                $
                276
                
                
                $
                1,243
                
                
                $
                2,698Specialist
      service agreement
                
                
                430
                
                
                
                400
                
                
                
                150
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                980Private
      equity and limited partnerships(1)
                
                
                17,236
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                17,236$
                17,948
                
                
                $
                745
                
                
                $
                426
                
                
                $
                276
                
                
                $
                276
                
                
                $
                1,243
                
                
                $
                20,914




(1)
            Given
      the nature of these investments, the Company is unable to determine with
      any degree of accuracy when the remaining commitments will be called.
      Therefore, for purposes of the above table, the Company has assumed that
      all commitments will be called within one
year.




Letters
of Credit




At March 31, 2009,
the Company had a $400 million letter of credit facility with Citibank N.A. This
facility will terminate on October 11, 2009, although the termination date is
automatically extended for an additional year unless written notice of
cancellation is delivered to the other party at least 120 days prior to the
termination date.In addition, at
March 31, 2009, the Company had a $25 million letter of credit facility with
Butterfield Bank (Cayman) Limited (“Butterfield Bank”). This facility will
terminate on June 6, 2009, although the termination date is automatically
extended for an additional year unless written notice of cancellation is
delivered to the other party at least 30 days prior to the termination
date.




At March 31,
2009, an aggregate amount of $203.3 million (December 31, 2008: $167.3
million) in letters of credit was issued under the above facilities. Under
these facilities, the Company provides collateral that may consist of
equity securities and cash equivalents. At March 31, 2009, total equity
securities and cash equivalents with a fair value of $272.2 million (December
31, 2008: $220.2 million) were pledged as security against the letters of
credit issued. Each of the facilities requires that the Company comply with
certain covenants, including restrictions on the Company’s ability to place a
lien or charge on the pledged assets, and restricts issuance of any debt without
the consent of the letter of credit provider. Additionally, if an event of
default exists, as defined in the letter of credit facilities, Greenlight Re
will be prohibited from paying dividends to its parent company. The Company was
in compliance with all the covenants of each of these facilities as of March 31,
2009 and December 31, 2008.




Litigation




In the
normal course of business, the Company may become involved in various claims
litigation and legal proceedings. As of March 31, 2009, the Company was not a
party to any litigation or arbitration proceedings.




20
 Table of contents




8.
            SEGMENT
      REPORTING




The
Company manages its business on the basis of one operating segment, Property
& Casualty Reinsurance.




The
following tables provide a breakdown of the Company's gross premiums written by
line of business and by geographic area of risks insured for the periods
indicated:




Gross
Premiums Written by Line of Business




Three
      months ended
                  March
      31, 2009
              
              
              Three
      months ended
                  March
      31, 2008($
      in thousands)
              
              
              ($
      in thousands)PropertyCommercial
      lines
              
              $
              19,413
              
              
              
              27.0
              %
              
              $
              4,491
              
              
              
              6.4
              %Personal
      lines
              
              
              11
              
              
              
              0.0
              
              
              
              136
              
              
              
              0.2CasualtyGeneral
      liability
              
              
              2,632
              
              
              
              3.7
              
              
              
              1,638
              
              
              
              2.3Motor
      liability
              
              
              16,688
              
              
              
              23.2
              
              
              
              24,845
              
              
              
              35.1SpecialtyHealth
              
              
              17,379
              
              
              
              24.2
              
              
              
              25,963
              
              
              
              36.7Medical
      malpractice
              
              
              4,620
              
              
              
              6.4
              
              
              
              7,789
              
              
              
              11.0Workers’
      compensation
              
              
              11,128
              
              
              
              15.5
              
              
              
              5,904
              
              
              
              8.3$
              71,871
              
              
              
              100.0
              %
              
              $
              70,766
              
              
              
              100.0
              %






Gross
Premiums Written by Geographic Area of Risks Insured




Three
      months ended
                  March
      31, 2009
              
              
              Three
      months ended
                  March
      31, 2008($
      in thousands)
              
              
              ($
      in thousands)USA
              
              $
              51,267
              
              
              
              71.3
              %
              
              $
              64,637
              
              
              
              91.3
              %Worldwide(1)
              
              
              20,358
              
              
              
              28.3
              
              
              
              6,129
              
              
              
              8.7Caribbean
              
              
              246
              
              
              
              0.4
              
              
              
              —
              
              
              
              —$
              71,871
              
              
              
              100.0
              %
              
              $
              70,766
              
              
              
              100.0
              %




(1)
            ‘‘Worldwide’’
      risk is comprised of individual policies that insure risks on a
      worldwide basis.






21
 Table of contents




Item
      2.
            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS




References
to ‘‘we,’’ ‘‘us,’’ ‘‘our,’’ ‘‘our company,’’ ‘‘Greenlight Re,’’ or ‘‘the
Company’’ refer to Greenlight Capital Re, Ltd. and its wholly-owned
subsidiaries, Greenlight Reinsurance, Ltd. and Verdant Holding Company,
Ltd.,  unless the context dictates otherwise. References to our
‘‘Ordinary Shares’’ refers collectively to our Class A Ordinary Shares and Class
B Ordinary Shares.




The
following is a discussion and analysis of our results of operations for the
three months ended March 31, 2009 and 2008 and financial condition as of March
31, 2009 and December 31, 2008. This discussion and analysis should be read in
conjunction with our audited consolidated financial statements and related notes
thereto contained in our annual report on Form 10-K for the fiscal year ended
December 31, 2008.




Special
Note About Forward-Looking Statements




Certain
statements in Management’s Discussion and Analysis (‘‘MD&A’’), other than
purely historical information, including estimates, projections, statements
relating to our business plans, objectives and expected operating results, and
the assumptions upon which those statements are based, are ‘‘forward-looking
statements’’ within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These
forward-looking statements generally are identified by the words ‘‘believe,’’
‘‘project,’’ ‘‘predict,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘intend,’’
‘‘plan,’’ ‘‘may,’’ ‘‘should,’’ ‘‘will,’’ ‘‘would,’’ ‘‘will be,’’ ‘‘will
continue,’’ ‘‘will likely result,’’ and similar expressions. Forward-looking
statements are based on current expectations and assumptions that are subject to
risks and uncertainties which may cause actual results to differ materially from
the forward-looking statements. A detailed discussion of risks and uncertainties
that could cause actual results and events to differ materially from such
forward-looking statements is included in the section entitled ‘‘Risk Factors’’
(refer to Part I, Item 1A) contained in our annual report on Form 10-K for
the fiscal year ended December 31, 2008. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise. Readers are cautioned not to place
undue reliance on the forward looking statements which speak only to the dates
on which they were made.




We intend
to communicate certain events that we believe may have a material adverse impact
on the Company's operations or financial position, including property and
casualty catastrophic events and material losses in our investment portfolio, in
a timely manner through a public announcement. Other than as required by the
Exchange Act, we do not intend to make public announcements regarding
reinsurance or investments events that we do not believe, based on management's
estimates and current information, will have a material adverse impact to the
Company's operations or financial position.




General




We are a
Cayman Islands-based specialist property and casualty reinsurer with a
reinsurance and investment strategy that we believe differentiates us from our
competitors. Our goal is to build long-term shareholder value by selectively
offering customized reinsurance solutions in markets where capacity and
alternatives are limited, which we believe will provide us with favorable
long-term returns on equity.




We aim to
complement our underwriting results with a non-traditional investment approach
in order to achieve higher rates of return over the long term than reinsurance
companies that employ more traditional, fixed-income investment strategies. We
manage our investment portfolio according to a value-oriented philosophy, in
which we take long positions in perceived undervalued securities and short
positions in perceived overvalued securities.




In
addition, we seek to form strategic alliances with insurance companies and
general agents to complement our property and casualty reinsurance business and
our non-traditional investment approach. To facilitate such strategic alliances,
we formed Verdant Holding Company, Ltd. (“Verdant”), our wholly owned subsidiary
which, among other activities, will make strategic investments in a select group
of property and casualty insurers and general agents.


22
 Table of contents




Because
we have a limited operating history and employ an opportunistic underwriting
philosophy, period-to-period comparisons of our underwriting results may not be
meaningful. In addition, our historical investment results may not be indicative
of future performance. In addition, due to the nature of our reinsurance and
investment strategies, our operating results will likely fluctuate from period
to period.




Segments




We manage
our business on the basis of one operating segment, property and casualty
reinsurance, in accordance with the qualitative and quantitative criteria
established by SFAS 131, ‘‘Disclosure about Segments of an Enterprise and
Related Information.’’ Within the property and casualty reinsurance segment, we
analyze our underwriting operations using two categories:




•
            frequency
      business; and




•
            severity
      business.




Frequency
business is characterized by contracts containing a potentially large number of
relatively smaller losses emanating from multiple events. Clients generally buy
this protection to increase their own underwriting capacity and typically select
a reinsurer based upon the reinsurer’s financial strength and expertise. We
expect the results of frequency business to be less volatile than those of
severity business from period to period due to greater predictability of
the frequency business. We also expect that over time the profit margins and
return on equity of our frequency business will be lower than those of our
severity business.




Severity
business is typically characterized by contracts with the potential for
significant losses emanating from one event or multiple events. Clients
generally buy this protection to remove volatility from their balance sheets,
and accordingly, we expect the results of severity business to be volatile from
period to period. However, over the long term, we also expect that our severity
business will generate higher profit margins and return on equity than those of
our frequency business.




Outlook
and Trends




We
believe there currently is a lack of capacity in the property and casualty
industry due to significant loss of capital from combined investment and
underwriting losses in 2008.  As a result, we expect to see
significant opportunities to expand our business in 2009 in both frequency and
severity risks. We believe insurance pricing generally will
increase.  Further, volatile lines of business may experience
significant increases in pricing along with greater restrictions on the terms
and conditions of their insurance.  We believe that these “hardened”
market conditions will persist until at least 2010 due to worldwide economic
conditions and limited available capital expected to enter the industry.
Countering these developments, we also believe that a slowdown in worldwide
economic activity may lead to reduced insurable risk exposures, which in turn
may decrease the demand for insurance, perhaps significantly.


We
believe that we are well positioned to compete for attractive opportunities in
frequency business due to our increasing market recognition, and the
development of certain strategic relationships in 2007 and 2008. In the second
quarter of 2008, we believed there was an excess of capacity in the property and
casualty reinsurance business, primarily due to two consecutive years of
below-average natural peril losses. During the third quarter of 2008, there were
two hurricanes (Gustav and Ike) that made landfall in the U.S; preliminary
estimates indicate total industry-wide insured losses range from $20 to $25
billion. We do not expect to experience any direct losses from these hurricanes.
However, when combined with other natural peril events that occurred
worldwide during 2008 and 2009, certain of our contracts with aggregate
catastrophe excess of loss coverage may be negatively impacted. In addition,
there are a number of insurers and reinsurers that have had significant
investment-related issues that have created uncertainty in their businesses. We
expect write downs of certain asset classes from 2008 to continue to reduce the
capital positions of a number of reinsurers. Finally, we believe that the
financial and credit crisis currently underway in the U.S. and the rest of the
world has the potential to cause significant losses in certain lines of
business.





23
 Table of contents





If
the current challenges facing the insurance industry create significant
dislocations, we believe we will be well positioned to capitalize on resulting
opportunities. In early 2009, we have seen pricing of property catastrophe
retrocession business increase substantially. While it is unclear what other
businesses could be most affected by the current financial and credit issues, we
believe that opportunities are likely to arise in a number of possible
areas, including the following:


- lines
  of business that experience poor loss experience;
- lines
  of business where current market participants are experiencing financial
  distress or uncertainty; and
- business
  (such as quota share) that is premium and capital intensive due to regulatory
  and other requirements.

Lines of
business that are likely to be affected by either of these areas include
property catastrophe reinsurance, marine reinsurance, marine retrocession ,
general liability, surety, directors and officers liability and errors and
omissions liability reinsurance. In addition, we believe that attractive
opportunities will likely arise in motor liability, workers compensation,
health and medical malpractice risks.





Significant market dislocations that increase the pricing of
certain insurance coverages could create the need for insureds to retain risks
and therefore fuel the opportunity or need to form new captives. If this
happens, a number of these captives could form in the Cayman Islands, enhancing
our opportunity to provide additional reinsurance to the Cayman Islands' captive
market.





During 2008, our investment strategy had
been affected by the difficulties faced by the overall financial markets. During
the three months ended March 31, 2009, we believe the market has increased the
risk premium on most asset classes as a result of headline news events,
including corporate failures, recent government interventions, current economic
slowdown and the ever-widening credit crisis. We believe that when macro
economic and political uncertainties eventually subside, security selection will
again be the primary driver of performance. This is a basic premise of our value
oriented investment strategy. While our investment results for 2008 were
disappointing, we believe that long-term opportunities for us have been
created due to a significant number of mispriced securities, including
distressed debt of corporate issuers.




In
addition, we recently formed Verdant, a Delaware corporation, which has
made and is expected to make strategic debt and equity investments from
time to time in a select group of property and casualty insurers and general
agents to complement our property and casualty reinsurance business and our
non-traditional investment approach. These strategic investments further
differentiate us from our competition, provide capital and capacity to our
clients and create value for our shareholders through investment returns, fee
income streams and underwriting profits.




We
intend to continue monitoring market conditions to position
ourselves to participate in future underserved or capacity-constrained
markets as they arise and intend to offer products that we believe will generate
favorable returns on equity over the long term. Accordingly, our underlying
results and product line concentrations in any given period may not be
indicative of our future results of operations.




24
 Table of contents




Critical Accounting
Policies




Our
consolidated financial statements are prepared in accordance with U.S. GAAP,
which requires management to make estimates and assumptions that affect reported
and disclosed amounts of assets and liabilities and the reported amounts of
revenues and expenses during the reporting period. We believe that the critical
accounting policies set forth in our annual report on Form 10-K for the fiscal
year ended December 31, 2008, continue to describe the more significant
judgments and estimates used in the preparation of our consolidated financial
statements. These accounting policies pertain to premium revenue recognition,
investment valuations, loss and loss adjustment expenses, acquisition costs, and
share-based payments. If actual events differ significantly from the underlying
judgments or estimates used by management in the application of these accounting
policies, there could be a material effect on our results of operations and
financial condition.








Results
of Operations




Three
Months Ended March 31, 2009, and 2008




For the
three months ended March 31, 2009, we reported net income of $27.8 million, as
compared to a net loss of $4.8 million reported for the same period in 2008. The
increase in net income is principally due to our investment
portfolio reporting a net gain of $27.7 million, or a return of 4.6%,
for the first quarter of 2009 as compared to a net investment loss of $5.8
million, or a loss of 0.9%, for the same period in 2008. In addition,
through our wholly owned subsidiary, Verdant, we generated other income of $2.0
million from fees earned relating to strategic investments in property and
casualty insurance companies and general agents.




As a
result of adopting SFAS No. 160, the non-controlling interest in joint venture
was reclassified from liabilities into shareholder’s equity for all periods
presented. As a result of this reclassification, the recalculated fully diluted
book value per share at December 31, 2008 was $13.55 per share (compared to
$13.39 per share at December 31, 2008 prior to adopting SFAS No.
160).




One of
our primary financial goals is to increase the long-term value in fully diluted
book value per share. During the three months ended March 31, 2009, fully
diluted book value increased by $0.70 per share, or 5.2%, to $14.25 per share
from $13.55 per share at December 31, 2008.




Premiums
Written




Details
of gross premiums written are provided below:




Three
      months ended
                      March
      31,($
      in thousands)2009
                  
                  
                  2008Frequency
                  
                  $
                  46,799
                  
                  
                  
                  65.1
                  %
                  
                  $
                  56,845
                  
                  
                  
                  80.3
                  %Severity
                  
                  
                  25,072
                  
                  
                  
                  34.9
                  
                  
                  
                  13,921
                  
                  
                  
                  19.7Total
                  
                  $
                  71,871
                  
                  
                  
                  100.0
                  %
                  
                  $
                  70,766
                  
                  
                  
                  100.0
                  %




We expect
quarterly reporting of premiums written to remain volatile as our underwriting
portfolio continues to develop. Additionally, the composition of premiums
written between frequency and severity business will vary from quarter to
quarter depending on the specific market opportunities that we pursue. The
volatility in premiums is reflected in the premiums written for both frequency
business and severity business when comparing the three month periods ended
March 31, 2009 and 2008. The decrease in frequency premiums written was
primarily attributable to the non-renewal of a 2008 specialty health excess of
loss contract ($13.4 million). In addition, the motor liability line contributed
to the decrease in frequency premiums written ($8.2 million). These decreases in
premiums written were offset by increases in the workers compensation line ($5.2
million) and a new specialty health excess of loss contract written ($5.7
million) during the three months ended March 31, 2009.




25
 Table of contents




The
increase in severity premiums are mainly attributable to increase in commercial
property lines ($14.9 million), primarily from one new excess of loss
contract written ($11.5 million) and additional premium on an existing excess of
loss contract ($2.5 million), offset by a decrease in medical malpractice lines
($3.4 million). A detailed analysis of gross premiums written by line of
business can be found in Note 8 to the condensed consolidated financial
statements.




For the
three months ended March 31, 2009, our ceded premiums were $1.2 million compared
to $9.3 million of ceded premiums for same period in 2008. The decrease in ceded
premiums is primarily the result of a specialty health frequency contract and
its corresponding retroceded contracts which expired during the first
quarter of 2009 and were not renewed.




Details
of net premiums written are provided below:




Three
      months ended
                    March
      31,2009
                
                
                2008($
      in thousands)Frequency
                
                $
                46,053
                
                
                
                65.2
                %
                
                $
                47,573
                
                
                
                77.4
                %Severity
                
                
                24,598
                
                
                
                34.8
                
                
                
                13,921
                
                
                
                22.6Total
                
                $
                70,651
                
                
                
                100.0
                %
                
                $
                61,494
                
                
                
                100.0
                %




Net Premiums Earned




Net
premiums earned reflect the pro rata inclusion into income of net premiums
written over the life of the reinsurance contracts. Details of net premiums
earned are provided below:




Three
      months ended
                    March
      31,2009
                
                
                2008($
      in thousands)Frequency
                
                $
                31,877
                
                
                
                69.0
                %
                
                $
                17,954
                
                
                
                65.3
                %Severity
                
                
                14,316
                
                
                
                31.0
                
                
                
                9,538
                
                
                
                34.7Total
                
                $
                46,193
                
                
                
                100.0
                %
                
                $
                27,492
                
                
                
                100.0
                %




The
increase in net premiums earned is attributable principally to increased
premiums earned from the growing underwriting portfolio, as compared to the
corresponding 2008 period.




Losses Incurred




Losses
incurred include losses paid and changes in loss reserves, including reserves
for losses incurred but not reported, or IBNR, net of actual and estimated loss
recoverables. Details of losses incurred are provided below:




Three
      months ended
                    March
      31,2009
                
                
                2008($
      in thousands)Frequency
                
                $
                16,978
                
                
                
                56.2
                %
                
                $
                7,996
                
                
                
                66.0
                %Severity
                
                
                13,218
                
                
                
                43.8
                
                
                
                4,128
                
                
                
                34.0Total
                
                $
                30,196
                
                
                
                100.0
                %
                
                $
                12,124
                
                
                
                100.0
                %






26
 Table of contents




The loss
ratios for our frequency business were 53.3% and 44.5% for the three months
ended March 31, 2009 and 2008, respectively. The increase in frequency loss
ratio is due to a combination of developing losses on specialty health
contracts, offset by favorable loss development on a personal lines contract. We
expect losses incurred on our severity business to be volatile from period to
period. The loss ratios for our severity business were 92.3% and 43.3% for the
three months ended March 31, 2009 and 2008, respectively. The increase in the
loss ratio for our severity business during the three months ended March 31,
2009 is primarily due to losses incurred on an aggregate catastrophe excess of
loss contract. During the three months ended March 31, 2009, the insured
reported that the aggregation of several 2008 natural peril losses resulted in
an estimated aggregate loss which exceeded their retention limits and permeated
into the excess of loss limit insured by us. At March 31, 2009, we recorded an
estimated reserve of $9.5 million relating to this
contract.  Losses incurred in the three months ended March 31, 2009
can be further broken down into losses paid and changes in loss reserves. Losses
incurred for the three months ended March 31, 2009 and 2008 were comprised as
follows:




Three
      months ended
                  March
      31, 2009
              
              
              Three
      months ended
                  March
      31, 2008Gross
              
              
              Ceded
              
              
              Net
              
              
              Gross
              
              
              Ceded
              
              
              Net($
      in thousands)Losses
      paid (recovered)
              
              $
              8,372
              
              
              $
              (1,155
              )
              
              $
              7,217
              
              
              $
              5,383
              
              
              $
              (1,824
              )
              
              $
              3,559Increase
      (decrease) in reserves
              
              
              18,317
              
              
              
              4,662
              
              
              
              22,979
              
              
              
              9,760
              
              
              
              (1,195
              )
              
              
              8,565Total
              
              $
              26,689
              
              
              $
              3,507
              
              
              $
              30,196
              
              
              $
              15,143
              
              
              $
              (3,019
              )
              
              $
              12,124




The decrease in ceded reserves of $4.7 million was mainly due to favorable
loss development on an inward contract and the reduction in reserves
recoverable on the corresponding retroceded contract. During the three
months ended March 31, 2009, the aggregate development of prior period
reinsurance reserves was not significant.




Acquisition Costs




Acquisition
costs represent the amortization of commission and brokerage expenses incurred
on contracts written as well as profit commissions and other underwriting
expenses which are expensed when incurred. Deferred acquisition costs are
limited to the amount of commission and brokerage expenses that are expected to
be recovered from future earned premiums and anticipated investment income.
Details of acquisition costs are provided below:




Three
      months ended
                    March
      31,2009
                
                
                2008($
      in thousands)
                
                
                ($
      in thousands)Frequency
                
                $
                13,493
                
                
                
                101.9
                %
                
                $
                8,392
                
                
                
                84.5
                %Severity
                
                
                (248
                )
                
                
                (1.9
                )
                
                
                1,537
                
                
                
                15.5Total
                
                $
                13,245
                
                
                
                100.0
                %
                
                $
                9,929
                
                
                
                100.0
                %




Increased
acquisition costs for the three months ended March 31, 2009, compared to the
corresponding 2008 period are a result of the increases in premiums earned
during the period. For the three months ended March 31, 2009, the acquisition
cost ratio for frequency business was 42.3% compared to 46.7% for the
corresponding 2008 period. The lower ratio was due to a downward swing in profit
commission rates for specialty health contracts which had adverse loss
development during the period, partially offset by increase in profit
commission on a personal lines contract which had favorable loss
development. We expect acquisition costs to be higher for frequency
business than for severity business. The acquisition cost ratio for severity
business was (1.7)% for the three months ended March 31, 2009 compared to 16.1%
for the corresponding 2008 period. The negative acquisition cost ratio is a
result of reversal of profit commissions previously accrued relating to an
aggregate catastrophe severity contract which reported a large loss during the
three months ended March 31, 2009. Overall, the total acquisition cost ratio
decreased to 28.7% for the three months ended March 31, 2009 from 36.1% for the
corresponding 2008 period.




27
 Table of contents




General and Administrative Expenses




Our
general and administrative expenses of $4.4 million for the three months ended
March 31, 2009 remained consistent with the general and administrative expenses
of $4.5 million for the same period in 2008. The general and administrative
expenses for the three months ended March 31, 2009 and 2008 include $0.7 million
and $0.6 million, respectively, for the expensing of the fair value of stock
options and restricted stock granted to employees and directors.




Net Investment Income (Loss)




A summary
of our net investment income (loss) is as follows:




Three
      months ended
                  March
      31,2009
              
              
              2008($
      in thousands)Realized
      gains (losses) and movement in unrealized gains (losses)
              
              $
              33,441
              
              
              $
              (4,663
              )Interest,
      dividend and other investment income
              
              
              3,234
              
              
              
              3,749Interest,
      dividend and other investment expenses
              
              
              (3,722
              )
              
              
              (2,377
              )Investment
      advisor compensation
              
              
              (5,236
              )
              
              
              (2,471
              )Net
      investment income (loss)
              
              $
              27,717
              
              
              $
              (5,762
              )




Investment
income, net of all fees and expenses, resulted in a gain of 4.6% on our
investment portfolio for the three months ended March 31, 2009. This compares to
a 0.9% investment loss reported for the corresponding 2008 period. Pursuant
to the Advisory Agreement, performance compensation equal to 20% of the net
income of the Company’s share of the account managed by DME Advisors is payable
to DME Advisors, subject to a loss carry forward provision. The loss carryforward provision allows DME Advisors
to earn reduced incentive compensation of 10% on net investment income in any
year subsequent to the
year in which theinvestment account incurs a loss, until all the losses are recouped and an
additional amount equal to 150% of the aggregate investment loss is earned.For the year ended
December 31, 2008,
theportfolio reported an
investment loss and as a result no performance compensation was paid to DME
Advisors. The performance
compensation for fiscal 2009 and subsequent years will be reduced to 10% of net
investment income until the total loss carry forward balance is
recovered.As
of March 31, 2009, the loss carry
forward balance was $282.9 million.




Our
investment advisor, DME Advisors, LP ("DME Advisors"), and its affiliates
manage and expect to manage client accounts other than ours, some of which have
investment objectives similar to ours. To comply with Regulation FD, our
investment returns are posted on our website on a monthly basis. Additionally,
on our website we provide the names of the largest disclosed long positions in
our investment portfolio as of the last trading day of each month. DME
Advisors may choose not to disclose certain positions to its other clients in
order to protect its investment strategy.  Therefore, our website
presents the largest positions held by us that are disclosed by DME Advisors or
its affiliates to their other clients.




Taxes




We are
not obligated to pay any taxes in the Cayman Islands on either income or capital
gains. We have been granted an exemption by the Governor-In-Cabinet from any
taxes that may be imposed in the Cayman Islands for a period of 20 years,
expiring on February 1, 2025.




Our
wholly owned subsidiary, Verdant, is a Delaware corporation and is subject to
corporate income taxes on its taxable income. The effective tax rate for Verdant
is expected to be 35%. At March 31, 2009, a current tax expense of $75,000 was
recorded based on the pre-tax income earned by Verdant during the period. There
are no deferred tax assets or liabilities relating to Verdant, and therefore no
amounts have been recorded for deferred taxes. An accrual had been recorded for
taxes payable in other liabilities in the condensed consolidated balance sheet
at March 31, 2009 for $75,000.




Ratio Analysis




Due to
the opportunistic and customized nature of our underwriting operations, we
expect to report different loss and expense ratios in both our frequency and
severity businesses from period to period. The following table provides the
ratios for the three months ended March 31, 2009 and 2008:




Three
      months ended
                  March
      31, 2009
              
              
              Three
      months ended
                  March
      31, 2008Frequency
              
              
              Severity
              
              
              Total
              
              
              Frequency
              
              
              Severity
              
              
              TotalLoss
      ratio
              
              
              53.3
              %
              
              
              92.3
              %
              
              
              65.4
              %
              
              
              44.5
              %
              
              
              43.3
              %
              
              
              44.1
              %Acquisition
      cost ratio
              
              
              42.3
              %
              
              
              (1.7
              )%
              
              
              28.7
              %
              
              
              46.7
              %
              
              
              16.1
              %
              
              
              36.1
              %Composite
      ratio
              
              
              95.6
              %
              
              
              90.6
              %
              
              
              94.1
              %
              
              
              91.2
              %
              
              
              59.4
              %
              
              
              80.2
              %Internal
      expense ratio
              
              
              
              
              
              
              
              
              
              
              9.5
              %
              
              
              
              
              
              
              
              
              
              
              16.2
              %Combined
      ratio
              
              
              
              
              
              
              
              
              
              
              103.6
              %
              
              
              
              
              
              
              
              
              
              
              96.4
              %




The loss
ratio is calculated by dividing loss and loss adjustment expenses incurred by
net premiums earned. We expect that our loss ratio will be volatile for our
severity business and may exceed that of our frequency business in certain
periods.
  The
acquisition cost ratio is calculated by dividing acquisition costs by net
premiums earned. This ratio demonstrates the higher acquisition costs incurred
for our frequency business than for our severity business.
  The
composite ratio is the ratio of underwriting losses incurred, loss adjustment
expenses and acquisition costs, excluding general and administrative expenses,
to net premiums earned. Similar to the loss ratio, we expect that this ratio
will be more volatile for our severity business depending on loss activity in
any particular period.


28
 Table of contents




The
internal expense ratio is the ratio of all general and administrative expenses
to net premiums earned. We expect our internal expense ratio to decrease as we
continue to expand our underwriting operations. During the three months ended
March 31, 2009, our net earned premiums increased 68.0% while our general and
administrative expenses decreased 1.8% as compared to the corresponding 2008
period, resulting in a lower internal expense ratio.




The
combined ratio is the sum of the composite ratio and the internal expense ratio.
It measures the total profitability of our underwriting operations. This ratio
does not take net investment income or other income into account. The reported
combined ratio for the three months ended March 31, 2009 was 103.6%. The
increase in the combined ratio during the first quarter of 2009 is primarily
attributable to a $9.5 million loss reserve booked on a natural catastrophe
aggregate excess of loss contract, offset partially by a $1.5 million
reduction in the corresponding profit commission on the
contract.  Given the nature of our opportunistic underwriting
strategy, we expect that our combined ratio may be volatile from period to
period.




Financial
Condition




Investment
in Securities




As of
March 31, 2009, our investments in securities reported in the consolidated
balance sheets were $557.3 million compared to $494.0 million as of December 31,
2008, an increase of 12.8%. The increase was partly due to deployment of
available cash into investments, partly due
to investments purchased from net positive cash
flows generated from underwriting operations and partly due to
investment income of $27.7 million for the three months ended March 31,
2009.
  Consistent
with SFAS No. 157, our entire investment portfolio, including any derivatives,
is valued at fair value and any unrealized gains or losses are reflected in net
investment income in the consolidated statements of income. As of March 31,
2009, 81.5% of our investment portfolio (excluding restricted and
unrestricted cash and cash equivalents) was comprised of securities valued
based on quoted prices in actively traded markets (level 1), 16.4% comprised of
securities valued based on observable inputs other than quoted prices (level 2)
and 2.1% was comprised of securities valued based on non-observable inputs
(level 3).
 
 In
determining whether a market for a financial instrument is active or inactive,
we obtain information from our investment advisor who makes the determination
based on feedback from executing brokers, market makers, and in-house traders to
assess the level of market activity and available liquidity for any given
financial instrument. Where a financial instrument is valued based on broker
quotes, our investment advisor generally requests multiple quotes. The
ultimate value is based on an average of the quotes obtained. Broker quoted
prices are generally not adjusted in determining the ultimate values and are
obtained with the expectation of the quotes being binding. As of March 31,
2009, $97.6 million of our investments in securities were valued based on
broker quotes, all of which were based on observable market information and
classified as level 2. During the three months ended March 31, 2009, debt
securities with fair value of $5.0 million were transferred from level 2 to
level 3, as there was no longer an active market for these securities and we
were unable to obtain multiple quotes for these securities. The fair values of
these securities were estimated using the last available transaction price,
adjusted for credit risk, expectation of future cash flows, and other
non-observable inputs.
  Non-observable
inputs used by our investment advisor include discounted cash flow models for
valuing certain corporate debt securities. In addition, other non-observable
inputs used for valuing private equity investments include investment manager
statements and management estimates based on third party appraisals of
underlying assets.




Loss
and Loss Adjustment Expense Reserves




We
establish reserves for contracts based on estimates of the ultimate cost of all
losses including incurred but not reported reserves (“IBNR”) as well as
allocated and unallocated loss expenses. These estimated ultimate reserves are
based on reports received from ceding companies, historical experience and
actuarial estimates. These estimates are reviewed quarterly on a contract by
contract basis and adjusted when appropriate. Since reserves are based on
estimates, the setting of appropriate reserves is an inherently uncertain
process. Our estimates are based upon actuarial and statistical projections and
on our assessment of currently available data, predictions of future
developments and estimates of future trends and other factors. The final
settlement of losses may vary, perhaps materially, from the reserves initially
established and any adjustments to the estimates are recorded in the period in
which they are determined. Under U.S. GAAP, we are not permitted to establish
loss reserves, which include case reserves and IBNR, until the occurrence of an
event which may give rise to a claim. As a result, only loss reserves applicable
to losses incurred up to the reporting date are established, with no allowance
for the establishment of loss reserves to account for expected future
occurrences.




For
natural peril risk exposed business, once an event has occurred that may give
rise to a claim, we establish loss reserves based on loss payments and case
reserves reported by our clients. We then add to these case reserves our
estimates for IBNR. To establish our IBNR loss estimates, in addition to the
loss information and estimates communicated by ceding companies, we rely on
industry information, knowledge of the business written and management’s
judgment.




29
 Table of contents




Reserves
for loss and loss adjustment expenses as of March 31, 2009 and December 31, 2008
were comprised of the following:




March
      31, 2009
                
                
                December
      31, 2008Case
                    Reserves
                
                
                IBNR
                
                
                Total
                
                
                Case
                    Reserves
                
                
                IBNR
                
                
                Total($
      in thousands)Frequency
                
                $
                8,886
                
                
                $
                51,866
                
                
                $
                60,752
                
                
                $
                6,666
                
                
                $
                49,127
                
                
                $
                55,793Severity
                
                
                —
                
                
                
                38,982
                
                
                
                38,982
                
                
                
                —
                
                
                
                25,632
                
                
                
                25,632Total
                
                $
                8,886
                
                
                $
                90,848
                
                
                $
                99,734
                
                
                $
                6,666
                
                
                $
                74,759
                
                
                $
                81,425




The
increase in loss reserves is mainly a result of the increase in earned premiums
during the three months ended March 31, 2009. In addition, the increase in
severity IBNR was due to $9.5
million in reserves accrued relating to a catastrophe excess
of loss contract. For most of the contracts written as of March 31, 2009, our
risk exposure is limited by the fact that the contracts have defined limits of
liability. Once the loss limit for a contract has been reached, we have no
further exposure to additional losses from that contract. However, certain
contracts, particularly quota share contracts which relate to first dollar
exposure, may not contain aggregate limits.




Our
severity business includes contracts that contain or may contain natural peril
loss exposure. As of May 1, 2009, our maximum aggregate loss exposure to any
series of natural peril events was $106.9 million. For purposes of the preceding
sentence, aggregate loss exposure is equal to the sum of all the aggregate
limits available in the contracts that contain natural peril exposure minus
reinstatement premiums for the same contracts. We categorize peak zones as:
United States, Europe, Japan and the rest of the world. The following table
provides single event loss exposure and aggregate loss exposure information for
the peak zones of our natural peril coverage as of the date of this
filing:




Zone
              
              Single
      Event
                  Loss
              
              
              Aggregate
                  Loss($
      in thousands)USA(1)
              
              $
              84,350
              
              
              $
              106,850Europe
              
              
              72,800
              
              
              
              80,300Japan
              
              
              72,800
              
              
              
              80,300Rest
      of the world
              
              
              52,800
              
              
              
              60,300Maximum
      Aggregate
              
              
              84,350
              
              
              
              106,850





(1)
            Includes
      the Caribbean




Liquidity
and Capital Resources




General




We are
organized as a holding company with no operations of our own. As a holding
company we have minimal continuing cash needs, most of which are for
administrative expenses. All of our underwriting operations are conducted
through our sole reinsurance subsidiary, Greenlight Reinsurance, Ltd.,
("Greenlight Reinsurance"), which underwrites risks associated with our
property and casualty reinsurance programs. Restrictions on Greenlight
Reinsurance’s ability to pay dividends are described in more detail below. It is
our current policy to retain earnings to support the growth of our business. We
currently do not expect to pay dividends on our ordinary shares.




30
 Table of contents




Sources
and Uses of Funds




Our
sources of funds primarily consist of premium receipts (net of brokerage and
ceding commissions), investment income (net of advisory fees and investment
expenses), including realized gains, and other income from fees generated by
Verdant. We use cash to pay losses and loss adjustment expenses, profit
commissions and general and administrative expenses. In addition, during the
three months ended March 31, 2009, we used $15.0 million to purchase promissory
notes as part of our strategic alliance with insurance companies and general
agents. Substantially all of our funds, including shareholders’ capital, net of
funds required for cash liquidity purposes, are invested by our investment
advisor in accordance with our investment guidelines. As of March 31, 2009,
approximately 96% of our investments in securities were comprised of
publicly-traded equity securities and actively traded debt
securities which can be readily liquidated to meet current and future
liabilities. We believe that we have sufficient flexibility to liquidate our
long securities to generate liquidity. Similarly, we can generate liquidity from
our short portfolio by covering securities and by freeing up restricted cash no
longer required for collateral.




For the
three months ended March 31, 2009, we had a negative cash flow of $37.8 million
and we generated $11.0 million in cash from operating activities primarily
relating to net premiums collected and retained from underwriting operations. As
of March 31, 2009, we believe we have sufficient projected cash flow from
operations to meet our liquidity requirements. We expect that our operational
needs for liquidity will be met by cash, funds generated from underwriting
activities, other income from Verdant’s operations and net investment income. We
have no current plans to issue equity or debt and expect to fund our operations
for the foreseeable future using operating cash flow. We
have recently filed a Form S-3 registration statement with the Securities and
Exchange Commission (the "SEC"), which has not yet been declared effective,
in order to provide us with additional flexibility and timely access to public
capital markets should we require additional capital for a future business
opportunity.




Although
we are not subject to any significant legal prohibitions on the payment of
dividends, Greenlight Reinsurance is subject to Cayman Islands regulatory
constraints that affect its ability to pay dividends to us and include a minimum
net worth requirement. Currently, the statutory minimum net worth requirement
for Greenlight Reinsurance is $120,000. In addition, any dividend payment
would have to be approved by the appropriate Cayman Islands regulatory authority
prior to payment.




Letters
of Credit




Greenlight Reinsurance is not licensed or admitted as a
reinsurer in any jurisdiction other than the Cayman Islands. Because many
jurisdictions do not permit domestic insurance companies to take credit on their
statutory financial statements unless appropriate measures are in place from
reinsurance obtained from unlicensed or non-admitted insurers we anticipate that
all of our U.S. clients and some of our non-U.S. clients will require us to
provide collateral through funds withheld, trust arrangements, letters of credit
or a combination
thereof.





As of March 31, 2009, Greenlight Reinsurance had a letter of
credit facility of $400.0 million with Citibank, N.A. with a termination date of
October 11, 2009. The termination date is automatically extended for an
additional year unless written notice of cancellation is delivered to the other
party at least 120 days prior to the termination date.





In addition, at March 31, 2009, the Company had a $25.0 million letter of
credit facility with Butterfield Bank (Cayman) Limited (“Butterfield Bank”) with
a termination date of June 6, 2009. The termination date is automatically
extended for an additional year unless written notice of cancellation is
delivered to the other party at least 30 days prior to the termination
date.





As of March 31, 2009, an aggregate amount of $203.3 million (December 31,
2008: $167.3 million) in letters of credit was issued from the available $425.0
million facilities. Under the letter of credit facilities, we provide collateral
that may consist of equity securities and cash equivalents. As of March 31,
2009, we had pledged $272.2 million (December 31, 2008: $220.2 million) of
equity securities and cash equivalents as collateral for the above letter of
credit facilities. Each of the facilities contains various covenants
that, in part, restrict Greenlight Reinsurance's ability to place a lien or
charge on the pledged assets and further restrict Greenlight Reinsurance's
ability to issue any debt without the consent of the letter of credit provider.
Additionally, if an event of default exists, as defined in the letter of credit
agreements, Greenlight Reinsurance will be prohibited from paying dividends to
us. For the three months ended March 31, 2009, the Company was in compliance
with all of the covenants under each of these facilities.




31
 Table of contents




Capital




As of
March 31, 2009, total shareholders’ equity was $520.5 million compared to $491.4
million at December 31, 2008. This increase in total shareholders’ equity is
principally due to the net income of $27.8 million reported during the three
months ended March 31, 2009.




Our
capital structure currently consists entirely of equity issued in two separate
classes of ordinary shares. We expect that the existing capital base and
internally generated funds will be sufficient to implement our business
strategy. Consequently, we do not presently anticipate that we will incur any
material indebtedness in the ordinary course of our business. We
have recently filed a Form S-3 registration statement with
the SEC,
which has not yet been declared effective, in order to provide us with
additional flexibility and timely access to public capital markets should we
require additional capital for a future business
opportunity.We did not make any significant capital
expenditures during the three months ended March 31, 2009.




Contractual
Obligations and Commitments




The
following table shows our aggregate contractual obligations by time period
remaining to due date as of March 31, 2009:




Less
      than
                    1
      year
                
                
                1-3
      years
                
                
                3-5
      years
                
                
                More
      than
                    5
      years
                
                
                Total($
      in thousands)Operating
      lease obligations(1)
                
                $
                377
                
                
                $
                595
                
                
                $
                552
                
                
                $
                1,174
                
                
                $
                2,698Specialist
      service agreement
                
                
                555
                
                
                
                425
                
                
                
                —
                
                
                
                —
                
                
                
                980Private
      equity investments(2)
                
                
                17,236
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                17,236Loss
      and loss adjustment expense reserves(3)
                
                
                35,849
                
                
                
                36,309
                
                
                
                14,846
                
                
                
                12,730
                
                
                
                99,734$
                54,017
                
                
                $
                37,329
                
                
                $
                15,398
                
                
                $
                13,904
                
                
                $
                120,648





(1)
            Reflects
      our contractual obligations pursuant to the September 1, 2005 lease
      agreement and the July 9, 2008 lease agreement as described
      below.




(2)
            As
      of March 31, 2009, we had made commitments to invest a total of $27.1
      million in private investments. As of March 31, 2009, we had invested $9.9
      million of this amount, and our remaining commitments to these investments
      were $17.2 million. Given the nature of these investments, we are unable
      to determine with any degree of accuracy when the remaining commitment
      will be called. Therefore, for purposes of the above table, we have
      assumed that all commitments will be made within one year. Under our
      investment guidelines, in effect as of the date hereof, no more than 10%
      of the assets in the investment portfolio may be held in private equity
      securities without specific approval from the Board of
      Directors.




(3)
            Due
      to the nature of our reinsurance operations the amount and timing of the
      cash flows associated with our reinsurance contractual liabilities will
      fluctuate, perhaps materially, and, therefore, are highly
      uncertain.




On
September 1, 2005, we entered into a five-year lease agreement for office
premises in the Cayman Islands. The lease repayment schedule is included under
operating lease obligations in the above table and in note 7 to the accompanying
condensed consolidated financial statements.




32
 Table of contents





On
July 9, 2008, we signed a ten year lease agreement for new office space in the
Cayman Islands with the option to renew for an additional five year term. The
lease term is effective from July 1, 2008 and ends on June 30, 2018. Under
the terms of the lease agreement, our minimum annual rent payments will be
$253,539 for the first three years, increasing by 3% thereafter each year
to reach $311,821 by the tenth year. The minimum lease payments are included in
the above table under operating lease obligations and in note 7 to the
accompanying consolidated financial statements.





Effective September 1, 2007, we entered into a service agreement
with a specialist service provider for the provision of administration and
support in developing and maintaining business relationships, reviewing and
recommending programs and managing risks relating to certain specialty lines of
business. The specialist service provider does not have any authority to bind
the Company to any reinsurance contracts. Under the terms of the agreement, the
Company has committed to quarterly payments
to the specialist service provider. If the agreement is terminated after two
years, the Company is obligated to make minimum payments for another two years
to ensure any bound contracts are adequately run-off by the specialist service
provider. The minimum payments are included in the above table under specialist
service agreement and in the accompanying consolidated financial
statements.




On January 1, 2008, we entered into an agreement wherein the Company and DME
Advisors agreed to create a joint venture for the purposes of managing certain
jointly held assets. The term of the agreement is January 1, 2008, through
December 31, 2010, with automatic three-year renewals unless either the Company
or DME Advisors terminate the agreement by giving 90 days notice prior to the
end of the three year term. Pursuant to this agreement, the Company pays a
monthly management fee of 0.125% on the Company’s share of the assets managed by
DME Advisors and performance compensation of 20% on the net
investment income of the Company’s share of assets managed by DME Advisors
subject to a loss carry forward provision. The loss carry forward provision
allows DME Advisors to earn reduced incentive compensation of 10% on net
investment income in any year subsequent to the year in which the investment
account incurs a loss, until all the losses are recouped and an additional
amount equal to 150% of the aggregate loss is earned. DME Advisors is not
entitled to earn performance compensation in a year in which the investment
portfolio incurs a loss. For the year ended December 31, 2008 the portfolio
reported a net investment loss and as a result no performance compensation was
paid to DME Advisors. The performance compensation for fiscal 2009 and
subsequent years will be reduced to 10% of net investment income until the
total loss carry forward balance is recovered.As ofMarch 31, 2009, the loss carry
forward balance was $282.9 million.For the three months
ended March 31, 2009, $3.0 million was accrued relating to performance
compensation for DME Advisors at the reduced rate of 10% of profits.




In February 2007, the Company entered into a service agreement with DME Advisors
pursuant to which DME Advisors will provide investor relations services to the
Company for monthly compensation of $5,000 plus expenses. The agreement has an
initial term of one year, and will continue for sequential one year periods
until terminated by us or DME Advisors. Either party may terminate the agreement
for any reason with 30 days prior written notice to the other
party.




Off-Balance
Sheet Financing Arrangements




We
have no obligations, assets or liabilities, other than those derivatives in our
investment portfolio that are disclosed in the condensed consolidated financial
statements, which would be considered off-balance sheet arrangements. We do not
participate in transactions that create relationships with unconsolidated
entities or financial partnerships, often referred to as variable interest
entities, which would have been established for the purpose of facilitating
off-balance sheet arrangements.




33
 Table of contents




Item
      3.
            QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK




We
believe we are principally exposed to the following types of market
risk:


• equity
price risk;


• foreign
currency risk;


• interest
rate risk;


• credit
risk;


• effects
of inflation; and


• political
risk.






Equity price risk.As of March 31, 2009, our
investment portfolio consisted primarily of long and short equity securities,
along with certain equity-based derivative instruments, the carrying values of
which are primarily based on quoted market prices. Generally, market prices of
common equity securities are subject to fluctuation, which could cause the
amount to be realized upon the closing of the position to differ significantly
from their current reported value. This risk is partly mitigated by the presence
of both long and short equity securities. As of March 31, 2009, a 10% decline in
the price of each of these listed equity securities and equity-based derivative
instruments would result in a $8.6 million, or 1.4%, decline in the fair value
of our total investment portfolio.




Computations
of the prospective effects of hypothetical equity price changes are based on
numerous assumptions, including the maintenance of the existing level and
composition of investment securities and should not be relied on as indicative
of future results.




Foreign currency risk.Certain of our
reinsurance contracts provide that ultimate losses may be payable in foreign
currencies depending on the country of original loss. Foreign currency exchange
rate risk exists to the extent that there is an increase in the exchange rate of
the foreign currency in which losses are ultimately owed. As of March 31, 2009,
we had no known losses payable in foreign currencies.




While we
do not seek to specifically match our liabilities under reinsurance policies
that are payable in foreign currencies with investments denominated in such
currencies, we continually monitor our exposure to potential foreign currency
losses and will consider the use of forward foreign currency exchange contracts
in an effort to hedge against adverse foreign currency movements.




Through
cash and investments in securities denominated in foreign currencies, we are
exposed to foreign currency risk. Foreign currency exchange rate risk is the
potential for loss in the U.S. dollar value of investments and speculative
foreign cash positions due to a decline in the exchange rate of the foreign
currency in which the cash and investments are denominated. As of March 31,
2009, some of our currency exposure resulting from foreign denominated
securities (longs and shorts) was reduced by offsetting cash balances (shorts
and longs) denominated in the corresponding foreign currencies, leading to a net
exposure to foreign currencies of $162.4 million. As of March 31, 2009, a 10%
decrease in the value of the United States dollar against select foreign
currencies would result in a $16.2 million, or 2.6%, decline in the value of our
investment portfolio. A summary of our total net exposure to foreign currencies
as of March 31, 2009 is as follows:




Original
      Currency
              
              US$
      equivalent fair value
                  ($
      in thousands)European
      Union euro
              
              $
              115,838Canadian
      dollar
              
              
              17,381Japanese
      yen
              
              
              14,382Great
      Britain pound
              
              
              10,657Other
              
              
              4,132$
              162,390




Computations
of the prospective effects of hypothetical currency price changes are based on
numerous assumptions, including the maintenance of the existing level and
composition of investment in securities denominated in foreign currencies and
should not be relied on as indicative of future results.




34
 Table of contents




Interest rate
risk.Our
investment portfolio includes interest rate sensitive securities, such as
corporate debt securities, credit default swaps, and interest rate options. The
primary market risk exposure for any debt security is interest rate risk. As
interest rates rise, the market value of our long fixed-income portfolio falls,
and conversely, as interest rates fall, the market value of our long
fixed-income portfolio rises. Additionally, some of our derivative investments
may also be credit sensitive and their value may indirectly fluctuate with
changes in
interest rates. The following table summarizes the impact that a 100 basis point
increase or decrease in interest rates would have on the value of our
investment portfolio.





100
      basis point increase
                                                                        in
      interest rates
                                                                      
                                                                      
                                                                      
                                                                      100
      basis point decrease
                                                                        in
      interest ratesChange
      in
                                                                        fair
      value
                                                                      
                                                                      Change
      in fair value as  % of investment portfolio
                                                                      
                                                                      
                                                                      
                                                                      Change
      in
                                                                        fair
      value
                                                                      
                                                                      
                                                                      Change
      in fair value as % of investment portfolio($
      in thousands)Debt
      securities
                                                                      $
                                                                      (920
                                                                      )
                                                                      (0.15
                                                                      )
                                                                      %
                                                                      
                                                                      $
                                                                      964
                                                                      
                                                                      
                                                                      
                                                                      0.15
                                                                      
                                                                      %Credit
      default swaps
                                                                      
                                                                      (446
                                                                      )
                                                                      (0.07
                                                                      )
                                                                      
                                                                      
                                                                      
                                                                      238
                                                                      
                                                                      
                                                                      
                                                                      0.04Interest
      rate options
                                                                      
                                                                      2,841
                                                                      
                                                                      0.45
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      (1,867
                                                                      )
                                                                      
                                                                      
                                                                      (0.30
                                                                      )Net
      exposure to interest rate risk
                                                                      $
                                                                      1,475
                                                                      
                                                                      0.23
                                                                      
                                                                      %
                                                                      
                                                                      $
                                                                      (665
                                                                      )
                                                                      
                                                                      
                                                                      (0.11
                                                                      )
                                                                      %




Credit risk.We are exposed to credit risk
primarily from the possibility that counterparties may default on their
obligations to us. The amount of the maximum exposure to credit risk is
indicated by the carrying value of our financial assets. In addition, the
securities of our investment portfolio are held with several prime brokers,
subjecting us to the related credit risk from the possibility that one or more
of them may default on their obligations to us. Other than our investment in
derivative contracts and corporate debt, if any, and the fact that our
investments and majority of cash balances are held by prime brokers on our
behalf, we have no significant concentrations of credit risk.




Effects of inflation.We do not believe that
inflation has had or will have a material effect on our combined results of
operations, except insofar as inflation may affect interest rates and assets
values in our investment portfolio.




Political
risk.We are
exposed to political risk to the extent that our investment advisor, on our
behalf and subject to our investment guidelines, trades securities that are
listed on various U.S. and foreign exchanges and markets. The governments in any
of these jurisdictions could impose restrictions, regulations or other measures,
which may have a material adverse impact on our investment
strategy.





Item
4.CONTROLS AND PROCEDURES




Disclosure
Controls and Procedures
  As
required by Rule 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the
“Exchange Act”), the Company has evaluated, with the participation of
management, including the Chief Executive Officer and the Chief Financial
Officer, the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in such rules) as of the end of the period
covered under this quarterly report. Based on such evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in reports prepared in accordance with
the rules and regulations of the SEC is recorded, processed, summarized and
reported within the time periods specified by the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the issuer’s management, including its principal
executive officer and principal financial officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.
  Our
management, including the Company’s Chief Executive Officer and Chief Financial
Officer, does not expect that the Company’s disclosure controls and procedures
will prevent all errors and all frauds. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake.
  Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the control. The
design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions; over time, controls may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected.
 
 Changes
in Internal Control Over Financial Reporting




There
have been no significant changes in the Company’s internal control over
financial reporting during the three months ended March 31, 2009 that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.  The Company
continues to review its disclosure controls and procedures, including its
internal controls over financial reporting, and may from time to time make
changes aimed at enhancing their effectiveness and to ensure that the Company’s
systems evolve with its business.





35
 Table of contents




PART
II — OTHER INFORMATION




Item 1. LEGAL PROCEEDINGS




We are
not party to any pending or threatened material litigation and are not currently
aware of any pending or threatened litigation. We may become involved in various
claims and legal proceedings in the normal course of business, as a reinsurer or
insurer.




Item 1A. RISK FACTORS




Factors that could cause our actual results to differ materially from those in
this report are any of the risks described in Item 1A ‘‘Risk Factors’’ included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008,
as filed with the SEC. Any of these factors could result in a significant or
material adverse effect on our results of operations or financial condition.
Additional risk factors not presently known to us or that we currently deem
immaterial may also impair our business or results of operations.




As of April 30, 2009, there have been no material changes to the risk
factors disclosed in Item 1A ‘‘Risk Factors’’ included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2008, as filed with the SEC,
except we may disclose changes to such factors or disclose additional factors
from time to time in our future filings with the SEC.




Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS





On August
5, 2008, the Company’s Board of Directors adopted a share repurchase plan
authorizing the Company to purchase up to two million of its Class A
ordinary shares. Shares may be purchased in the open market or
through privately negotiated transactions under the plan. The plan, which
expires on June 30, 2011, does not require the Company to repurchase any
specific number of shares and may be modified, suspended or terminated at any
time without prior notice.During the three months ended March 31, 2009,there were no repurchases of
our Class A ordinary shares were made.




Item 3. DEFAULTS UPON SENIOR
SECURITIES




None.




Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS




Annual General Meeting of
Shareholders. The Company held its 2009 Annual General Meeting
of Shareholders on April 28, 2009. Pursuant to the Company’s Third Amended and
Restated Articles of Association, each Class A ordinary share is entitled
to one vote per share and each Class B ordinary share is entitled to ten
votes per share; provided, however, that the total voting power of the issued
and outstanding Class B ordinary shares shall not exceed 9.5% of the total
voting power of all issued and outstanding ordinary shares. Since, on the record
date of the 2009 Annual Meeting of Shareholders, the total voting power of the
issued and outstanding Class B ordinary shares exceeded 9.5% of the total
voting power, the voting power of the Class B ordinary shares was reduced
with the excess being allocated to the Class A ordinary shares in
accordance with Article 53 of the Company’s Third Amended and Restated
Articles of Association.


The
following tables summarize the voting results after adjustment of voting power.
For more information on the following proposals, see the Company’s definitive
proxy statement dated March 3, 2009.
 
 (1) The following persons were elected Directors of Greenlight Capital Re,
Ltd. by shareholders to serve for the term expiring at the Annual General
Meeting of Shareholders in 2010.
  Director
                  
                  Class
      A
                    For
                  
                  
                  Class
      A Against
                  
                  
                  Class
      A Abstain
                  
                  
                  Class
      A Withheld
                  
                  
                  Class
      B
                    For
                  
                  
                  Class
      B Against
                  
                  
                  Class
      B Abstain
                  
                  
                  Class
      B
                    WithheldAlan
      Brooks
                  
                  
                  64,391,039
                  
                  
                  
                  18,681
                  
                  
                  
                  4,669
                  
                  
                  
                  0
                  
                  
                  
                  8,771,466
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0David
      Einhorn
                  
                  
                  64,376,020
                  
                  
                  
                  67,383
                  
                  
                  
                  3,774
                  
                  
                  
                  0
                  
                  
                  
                  8,771,466
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Leonard
      Goldberg
                  
                  
                  64,411,622
                  
                  
                  
                  30,883
                  
                  
                  
                  4,672
                  
                  
                  
                  0
                  
                  
                  
                  8,771,466
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Ian
      Isaacs
                  
                  
                  64,417,382
                  
                  
                  
                  25,123
                  
                  
                  
                  4,669
                  
                  
                  
                  0
                  
                  
                  
                  8,771,466
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Frank
      Lackner
                  
                  
                  64,417,382
                  
                  
                  
                  25,123
                  
                  
                  
                  4,669
                  
                  
                  
                  0
                  
                  
                  
                  8,771,466
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Bryan
      Murphy
                  
                  
                  64,423,824
                  
                  
                  
                  18,681
                  
                  
                  
                  4,669
                  
                  
                  
                  0
                  
                  
                  
                  8,771,466
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0Joseph
      Platt
                  
                  
                  63,400,187
                  
                  
                  
                  1,042,318
                  
                  
                  
                  4,669
                  
                  
                  
                  0
                  
                  
                  
                  8,771,466
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
  (2) The following persons
were elected Directors of Greenlight Reinsurance, Ltd. by shareholders to serve
for the term expiring at the Annual General Meeting of Shareholders in
2010.
 
 Director
                
                Class
      A
                  For
                
                
                Class
      A
                  Against
                
                
                Class
      A
                  Abstain
                
                
                Class
      A Withheld
                
                
                Class
      B
                  For
                
                
                Class
      B
                  Against
                
                
                Class
      B
                  Abstain
                
                
                Class
      B
                  WithheldAlan
      Brooks
                
                
                64,423,824
                
                
                
                18,681
                
                
                
                4,669
                
                
                
                0
                
                
                
                8,771,466
                
                
                
                0
                
                
                
                0
                
                
                
                0David
      Einhorn
                
                
                64,413,075
                
                
                
                30,322
                
                
                
                3,777
                
                
                
                0
                
                
                
                8,771,466
                
                
                
                0
                
                
                
                0
                
                
                
                0Leonard
      Goldberg
                
                
                64,423,838
                
                
                
                18,681
                
                
                
                4,669
                
                
                
                0
                
                
                
                8,771,466
                
                
                
                0
                
                
                
                0
                
                
                
                0Ian
      Isaacs
                
                
                64,417,382
                
                
                
                25,123
                
                
                
                4,669
                
                
                
                0
                
                
                
                8,771,466
                
                
                
                0
                
                
                
                0
                
                
                
                0Frank
      Lackner
                
                
                63,983,374
                
                
                
                25,123
                
                
                
                4,669
                
                
                
                0
                
                
                
                8,771,466
                
                
                
                0
                
                
                
                0
                
                
                
                0Bryan
      Murphy
                
                
                64,423,824
                
                
                
                18,681
                
                
                
                4,669
                
                
                
                0
                
                
                
                8,771,466
                
                
                
                0
                
                
                
                0
                
                
                
                0Joseph
      Platt
                
                
                63,508,107
                
                
                
                934,398
                
                
                
                4,669
                
                
                
                0
                
                
                
                8,771,466
                
                
                
                0
                
                
                
                0
                
                
                
                0


36
 Table of contents
 (3) The shareholders ratified the appointment of BDO Seidman, LLP to serve as
the independent auditors of Greenlight Capital Re, Ltd. for 2009.
 
 Class
      A
                  
                  
                  Class
      BFor
                  
                  
                  64,444,127
                  
                  
                  
                  8,771,466Against
                  
                  
                  3,047
                  
                  
                  
                  0Abstain
                  
                  
                  0
                  
                  
                  
                  0Withheld
                  
                  
                  0
                  
                  
                  
                  0
 
 (4) The shareholders ratified the appointment of BDO Seidman, LLP to serve
as the independent auditors of Greenlight Reinsurance, Ltd. for
2009.
 
 Class
      A
                          
                          
                          Class
      BFor
                          
                          
                          64,444,127
                          
                          
                          
                          8,771,466Against
                          
                          
                          3,044
                          
                          
                          
                          0Abstain
                          
                          
                          0
                          
                          
                          
                          0Withheld
                          
                          
                          0
                          
                          
                          
                          0




Item 5. OTHER INFORMATION




On
April 28, 2009, the Company adopted revisions to its Code of Business Conduct
and Ethics.  The revisions include, among other things, a new section
regarding the requirements of and penalties under the Foreign Corrupt Practices
Act.  In addition, on April 28, 2009, the Company amended and restated
each of its Audit Committee charter, Nominating and Corporate Governance
Committee charter and Compensation Committee Charter as part of its annual
review of each of these charters.  The full text of the Amended and
Restated Code of Business Conduct and Ethics and each of the amended and
restated committee charters will be made available free of charge through the
corporate governance page of the Company’s website at www.greenlightre.ky.




Item 6. EXHIBITS




31.1
            Certification
      of the Chief Executive Officer filed hereunder pursuant to Section 302 of
      the Sarbanes Oxley Act of 200231.2
            Certification
      of the Chief Financial Officer filed hereunder pursuant to Section 302 of
      the Sarbanes Oxley Act of 200232.1
            Certification
      of the Chief Executive Officer filed hereunder pursuant to Section 906 of
      the Sarbanes Oxley Act of 200232.2
            Certification
      of the Chief Financial Officer filed hereunder pursuant to Section 906 of
      the Sarbanes Oxley Act of 2002







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 Table of contents






SIGNATURES






Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




GREENLIGHT
      CAPITAL RE, LTD.(Registrant)/s/
      Leonard GoldbergName:
            Leonard
      GoldbergTitle:
            Chief
      Executive OfficerDate:
            May 4,
      2009/s/
      Tim CourtisName:
            Tim
      CourtisTitle:
            Chief
      Financial OfficerDate:
            May
      4, 2009










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