o		~~For the quarterly period ended June 30, 2008.~~
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		~~For the transition period from to~~

For the transition period from to

Commission file number001-33493

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 ~~THE GRAND PAVILION~~ PO P.O. BOX 31110 GRAND CAYMAN CAYMAN ISLANDS	KY1-1205
(Address of Principal Executive Offices)		~~KY1-1205~~ (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 þx 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~~"large accelerated filer,~~” “accelerated filer”~~" "accelerated filer," and ~~“smaller~~"smaller reporting ~~company”~~company" inRule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o Accelerated filer x Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o	~~Accelerated filer~~ o	~~Non-accelerated filer~~ þ	~~Smaller reporting company~~ o
	~~(Do not check if a smaller reporting company)~~

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

Yes o No þx


Class A Ordinary Shares, ~~$.10~~$0.10 par value	30,021,393
Class B Ordinary Shares, $0.10 par value	~~30,010,636~~ 6,254,949
(Class)		(Outstanding as of ~~August 6, 2008)~~July 31, 2009)

GREENLIGHT CAPITAL RE, LTD.

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
			~~Page~~

~~PART I — FINANCIAL INFORMATION~~
	~~Item 1.~~		~~Financial Statements~~
			Condensed Consolidated Balance Sheets as of June 30, ~~2008~~2009 (unaudited) and December 31, ~~2007~~2008	3
			Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2009 and 2008 ~~and 2007~~ (unaudited)	4
			Condensed Consolidated Statements of ~~Shareholders’~~Shareholders' Equity for the Six Months Ended June 30, 2009 and 2008 ~~and 2007~~ (unaudited)	5
			Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008 ~~and 2007~~ (unaudited)	6
			Notes to the Condensed Consolidated Financial Statements (unaudited)	7
	~~Item 2.~~		7
Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations		18
	~~Item 3.~~		21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		29
	~~Item 4T.~~		~~Controls and Procedures~~ 32	30

~~PART II — OTHER INFORMATION~~ Item 4.
	~~Item 1.~~Controls and Procedures		~~Legal Proceedings~~ 33	31
PART II — OTHER INFORMATION
Item 1.	~~Item 1A.~~Legal Proceedings		~~Risk Factors~~ 34	31
Item 1A.	~~Item 2.~~Risk Factors		34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		31
	~~Item 3.~~		34
Item 3.	Defaults Upon Senior Securities		31
	~~Item 4.~~		34
Item 4.	Submission of Matters to a Vote of Security Holders		31
	~~Item 5.~~		~~Other Information~~ 34	32
Item 5.	~~Item 6.~~Other Information		35
Item 6.	Exhibits		33 35
SIGNATURES			36
~~EX-3.1: AMENDED AND RESTATED MEMORANDUM~~
~~EX-31.1: CERTIFICATION~~
~~EX-31.2: CERTIFICATION~~
~~EX-32.1: CERTIFICATION~~
~~EX-32.2: CERTIFICATION~~

2
Link to table of contents

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS


~~Item 1.~~	*~~FINANCIAL STATEMENTS~~*

GREENLIGHT CAPITAL RE, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, ~~2008~~2009 and December 31, ~~2007~~2008

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

June 30,

2008
December 31,

(Unaudited) 2007

Assets
Investments in securities
Debt securities, trading, at fair value $ 6,328 $ 1,520
Equity investments, trading, at fair value 588,604 570,440
Other investments, at fair value 11,013 18,576

Total investments in securities 605,945 590,536
Cash and cash equivalents 97,523 64,192
Restricted cash and cash equivalents 441,747 371,607
Financial contracts receivable, at fair value 4,620 222
Reinsurance balances receivable 69,654 43,856
Loss and loss adjustment expense recoverables 7,680 6,721
Deferred acquisition costs 15,251 7,302
Unearned premiums ceded 15,595 8,744
Other assets 2,006 965

Total assets
$ 1,260,021 $ 1,094,145

Liabilities and Shareholders’ Equity
Liabilities

Securities sold, not yet purchased, at fair value $ 409,218 $ 332,706
Financial contracts payable, at fair value 1,643 17,746
Loss and loss adjustment expense reserves 57,367 42,377
Unearned premium reserves 95,289 59,298
Reinsurance balances payable 33,172 19,140
Funds withheld 9,180 7,542
Other liabilities 4,983 2,869
Performance compensation payable to related party 6,145 6,885
Minority interest in joint venture 7,270 —

Total liabilities
624,267 488,563

Shareholders’ equity

Preferred 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 30,010,636, (2007: 29,847,787); Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,949 (2007: 6,254,949)) 3,627 3,610
Additional paid-in capital 478,228 476,861
Retained earnings 153,899 125,111

Total shareholders’ equity
635,754 605,582

Total liabilities and shareholders’ equity
$ 1,260,021 $ 1,094,145

	June 30, 2009 (unaudited)		December 31, 2008
Assets
Investments in securities
Debt instruments, trading, at fair value	$	134,347	$	70,214
Equity securities, trading, at fair value		401,139		409,329
Other investments, at fair value		60,144		14,423
Total investments in securities		595,630		493,966
Cash and cash equivalents		133,472		94,144
Restricted cash and cash equivalents		387,172		248,330
Financial contracts receivable, at fair value		19,156		21,419
Reinsurance balances receivable		105,727		59,573
Loss and loss adjustment expense recoverables		6,880		11,662
Deferred acquisition costs, net		34,117		17,629
Unearned premiums ceded		9,813		7,367
Notes receivable		16,952		1,769
Other assets		3,797		2,146
Total assets	$	1,312,716	$	958,005
Liabilities and shareholders’ equity
Liabilities
Securities sold, not yet purchased, at fair value	$	369,293	$	234,301
Financial contracts payable, at fair value		12,966		17,140
Loss and loss adjustment expense reserves		115,534		81,425
Unearned premium reserves		129,920		88,926
Reinsurance balances payable		45,097		34,963
Funds withheld		2,936		3,581
Other liabilities		9,726		6,229
Performance compensation payable to related party		12,698		—
Total liabilities		698,170		466,565
Shareholders’ equity
Preferred 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, 30,021,393 (2008: 29,781,736); Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,949 (2008: 6,254,949))		3,628		3,604
Additional paid-in capital		479,311		477,571
Non-controlling interest in joint venture		7,395		6,058
Retained earnings		124,212		4,207
Total shareholders’ equity		614,546		491,440
Total liabilities and shareholders’ equity	$	1,312,716	$	958,005

The accompanying Notes to the Condensed Consolidated Financial Statements are an

integral part of the Condensed Consolidated Financial Statements.

Link to table of contents

GREENLIGHT CAPITAL RE, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the three and six months ended June 30, ~~2008~~2009 and ~~2007~~
~~(Expressed~~2008

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

Three Months Ended
Six Months Ended

June 30, June 30,
2008 2007 2008 2007

Revenues

Gross premiums written $ 25,360 $ 65,445 $ 96,126 $ 103,509
Gross premiums ceded (5,615 ) (14,534 ) (14,887 ) (28,277 )

Net premiums written 19,745 50,911 81,239 75,232
Change in net unearned premium reserves 4,937 (25,939 ) (29,065 ) (29,339 )

Net premiums earned 24,682 24,972 52,174 45,893
Net investment income 31,025 19,924 25,263 5,543

Total revenues 55,707 44,896 77,437 51,436

Expenses

Loss and loss adjustment expenses incurred, net 9,337 11,138 21,461 20,126
Acquisition costs 9,228 9,515 19,157 17,227
General and administrative expenses 3,210 2,926 7,670 5,905

Total expenses 21,775 23,579 48,288 43,258

Net income before minority interest 33,932 21,317 29,149 8,178
Minority interest in income of joint venture (394 ) — (361 ) —

Net income
$ 33,538 $ 21,317 $ 28,788 $ 8,178

Earnings per share

Basic $ 0.93 $ 0.78 $ 0.80 $ 0.33
Diluted 0.92 0.76 0.79 0.33
Weighted average number of ordinary shares used in the determination of

Basic 35,981,386 27,472,993 35,981,349 24,515,973
Diluted 36,652,441 27,980,421 36,644,456 24,895,878

		Three months ended June 30,				Six months ended June 30,
		2009		2008		2009		2008
Revenues
Gross premiums written	$	70,047	$	25,360	$	141,918	$	96,126
Gross premiums ceded		(6,611	)	(5,615	)	(7,831	)	(14,887	)
Net premiums written		63,436		19,745		134,087		81,239
Change in net unearned premium reserves		(14,089	)	4,937		(38,547	)	(29,065	)
Net premiums earned		49,347		24,682		95,540		52,174
Net investment income		88,323		31,025		116,040		25,263
Other income (expense)		(70	)	—		2,054		—
Total revenues		137,600		55,707		213,634		77,437
Expenses
Loss and loss adjustment expenses incurred, net		23,547		9,337		53,743		21,461
Acquisition costs, net		15,578		9,228		28,823		19,157
General and administrative expenses		5,330		3,210		9,708		7,670
Total expenses		44,455		21,775		92,274		48,288
Net income before non-controlling interest and corporate income tax expense		93,145		33,932		121,360		29,149
Non-controlling interest in income of joint venture		(1,006	)	(394	)	(1,337	)	(361	)
Net income before corporate income tax expense		92,139		33,538		120,023		28,788
Corporate income tax benefit (expense)		57		—		(18	)	—
Net income	$	92,196	$	33,538	$	120,005	$	28,788
Earnings per share
Basic	$	2.54	$	0.93	$	3.32	$	0.80
Diluted	$	2.51	$	0.91	$	3.29	$	0.78
Weighted average number of ordinary shares used in the determination of
Basic		36,252,925		36,249,979		36,160,160		36,181,761
Diluted		36,689,711		36,841,029		36,503,890		36,771,949

The accompanying Notes to the Condensed Consolidated Financial Statements are an

integral part of the Condensed Consolidated Financial Statements.

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GREENLIGHT CAPITAL RE, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
For the six months ended June 30, ~~2008~~2009 and ~~2007~~
2008

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

Six Months
Six Months

Ended June 30,
Ended June 30,

2008 2007

Ordinary share capital

Balance — beginning of period $ 3,610 $ 2,156
Issue of Class A ordinary share capital 17 1,191
Issue of Class B ordinary share capital — 263

Balance — end of period $ 3,627 $ 3,610

Additional paid-in capital

Balance — beginning of period $ 476,861 $ 219,972
Issue of Class A ordinary share capital 9 207,094
Issue of Class B ordinary share capital — 49,737
IPO expenses — (2,629 )
Stock options and awards expense 1,358 1,512

Balance — end of period $ 478,228 $ 475,686

Retained earnings

Balance — beginning of period $ 125,111 $ 90,039
Net income 28,788 8,178

Balance — end of period $ 153,899 $ 98,217

Total shareholders’ equity
$ 635,754 $ 577,513

	Six months ended June 30, 2009		Six months ended June 30, 2008
Ordinary share capital
Balance – beginning of period	$	3,604	$	3,610
Issue of Class A ordinary share capital, net of forfeitures		24		17
Balance – end of period	$	3,628	$	3,627
Additional paid-in capital
Balance – beginning of period	$	477,571	$	476,861
Issue of Class A ordinary share capital		221		9
Share-based compensation expense, net of forfeitures		1,519		1,358
Balance – end of period	$	479,311	$	478,228
Non-controlling interest
Balance – beginning of period	$	6,058	$	—
Non-controlling interest contribution in joint venture		—		6,909
Non-controlling interest in income of joint venture		1,337		361
Balance – end of period	$	7,395	$	7,270
Retained earnings
Balance – beginning of period	$	4,207	$	125,111
Net income		120,005		28,788
Balance – end of period	$	124,212	$	153,899
Total shareholders’ equity	$	614,546	$	643,024

The accompanying Notes to the Condensed Consolidated Financial Statements are an

integral part of the Condensed Consolidated Financial Statements.

Link to table of contents

GREENLIGHT CAPITAL RE, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the six months ended June 30, ~~2008~~2009 and ~~2007~~
~~(Expressed~~2008

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

Six Months
Six Months

Ended June 30,
Ended June 30,

2008 2007

Cash provided by (used in)

Operating activities

Net income $ 28,788 $ 8,178
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Net change in unrealized losses (gains) on securities and financial contracts 40,177 (5,091 )
Net realized gains on securities and financial contracts (86,679 ) (14,185 )
Foreign exchange loss on restricted cash and cash equivalents 14,437 70
Minority interest in income of joint venture 361 —
Stock options and awards expense 1,375 1,512
Depreciation 20 20
Purchases of securities — (391,404 )
Sales of securities — 264,472
Change in

Restricted cash and cash equivalents — (148,620 )
Financial contracts receivable, at fair value — (1,151 )
Reinsurance balances receivable (25,798 ) (41,435 )
Loss and loss adjustment expense recoverables (959 ) (5,269 )
Deferred acquisition costs (7,949 ) 1,007
Unearned premiums ceded (6,851 ) (20,854 )
Other assets (1,061 ) (2,013 )
Financial contracts payable, at fair value — 18,939
Loss and loss adjustment expense reserves 14,990 23,651
Unearned premium reserves 35,991 50,212
Reinsurance balances payable 14,032 18,285
Funds withheld 1,638 2,753
Other liabilities 2,114 1,020
Performance compensation payable to related party (740 ) (13,275 )

Net cash provided by (used in) operating activities 23,886 (253,178 )

Investing activities

Purchases of securities and financial contracts (575,339 ) —
Sales of securities and financial contracts 662,443 —
Restricted cash and cash equivalents (84,577 ) —
Minority interest in joint venture 6,909 —

Net cash provided by investing activities 9,436 —

Financing activities

Net proceeds from share issue — 255,656
Net proceeds from exercise of stock options 9 —

Net cash provided by financing activities 9 255,656

Net increase in cash and cash equivalents
33,331 2,478
Cash and cash equivalents at beginning of the period 64,192 82,704

Cash and cash equivalents at end of the period
$ 97,523 $ 85,182

Supplementary information

Interest paid in cash $ 6,909 $ 153
Interest received in cash 6,906 1,328

dollars)

	2009			2008
Cash provided by (used in) Operating activities
Net income	$	120,005		$	28,788
Adjustments to reconcile net income to net cash provided by operating activities
Net change in unrealized gains and losses on securities and financial contracts		(112,668	)		40,177
Net realized gains on securities and financial contracts		(18,272	)		(86,679	)
Foreign exchange loss on restricted cash and cash equivalents		(258	)		14,437
Non-controlling interest in income of joint venture		1,337			361
Share-based compensation expense		1,543			1,375
Depreciation expense		20			20
Net change in
Reinsurance balances receivable		(46,154	)		(25,798	)
Loss and loss adjustment expense recoverables		4,782			(959	)
Deferred acquisition costs, net		(16,488	)		(7,949	)
Unearned premiums ceded		(2,446	)		(6,851	)
Other assets		(1,671	)		(1,061	)
Loss and loss adjustment expense reserves		34,109			14,990
Unearned premium reserves		40,994			35,991
Reinsurance balances payable		10,134			14,032
Funds withheld		(645	)		1,638
Other liabilities		3,497			2,114
Performance compensation payable to related party		12,698			(740	)
Net cash provided by operating activities	$	30,517		$	23,886
Investing activities
Purchases of securities and financial contracts		(618,825	)		(575,339	)
Sales of securities and financial contracts		781,182			662,443
Change in restricted cash and cash equivalents, net		(138,584	)		(84,577	)
Change in notes receivable, net		(15,183	)		—
Non-controlling interest in joint venture		—			6,909
Net cash provided by investing activities	$	8,590		$	9,436
Financing activities
Net proceeds from exercise of stock options		221			9
Net cash provided by financing activities	$	221		$	9
Net increase in cash and cash equivalents		39,328			33,331
Cash and cash equivalents at beginning of the period		94,144			64,192
Cash and cash equivalents at end of the period		133,472		$	97,523
Supplementary information
Interest paid in cash	$	2,610		$	6,909
Interest received in cash		3,548			6,906
Income tax paid in cash		—			—

The accompanying Notes to the Condensed Consolidated Financial Statements are an

integral part of the Condensed Consolidated Financial Statements.

Link to table of contents

GREENLIGHT CAPITAL RE, LTD.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~

(UNAUDITED)

June 30, ~~2008~~2009 and ~~2007~~2008

1.
1.	GENERAL

Greenlight Capital Re, Ltd. ~~(“GLRE”~~("GLRE") was incorporated as an exempted company under the Companies Law of the Cayman Islands on July 13, 2004. GLRE’s ~~wholly owned~~principal wholly-owned subsidiary, Greenlight Reinsurance, Ltd. (the ~~“Subsidiary”~~"Subsidiary"), provides global specialty property and casualty reinsurance. The Subsidiary has an unrestricted Class ~~“B”~~"B" insurance license under Section 4(2) of the Cayman Islands Insurance Law. The Subsidiary commenced underwriting in April 2006. ~~In August 2004, GLRE raised gross proceeds of $212.2 million from private placements of Class A and Class B ordinary shares. In~~Effective May 30, 2007, GLRE ~~raised proceeds of $208.3 million, net of underwriting fees, in~~completed an initial public offering of 11,787,500 Class A ordinary shares ~~as well as an additional $50.0 million from~~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 ~~Class B ordinary shares.~~GLRE, was incorporated in the state of Delaware principally for the purpose of making strategic investments in a select group of property and casualty insurers and general agents in the U.S.

The Class A ordinary shares of GLRE are listed on Nasdaq Global Select Market under the symbol ~~“GLRE.”~~"GLRE".

As used herein, the ~~“Company”~~"Company" refers collectively to GLRE and ~~the Subsidiary.~~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”~~GAAP") and in accordance with the instructions toForm 10-Q and Article 10 ofRegulation 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, ~~2007.~~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 six months ended June 30, ~~2008~~2009 are not necessarily indicative of the results expected for the full year.

2.
2.	SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements include the accounts of GLRE and the consolidated financial statements of ~~the Subsidiary.~~all of its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated onin consolidation. These condensed consolidated financial statements also include the accounts of the joint venture created between the Company and DME Advisors, LP (“DME”) effective January 1, 2008. Please refer to Note 6 for more details relating to the joint venture. DME’s share of interest in the joint venture is recorded as a minority interest.

Management has evaluated subsequent events through August 3, 2009, the issuance date of these financial statements.

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, as well as net cash from foreign currency transactions.~~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.

~~GREENLIGHT CAPITAL RE, LTD.~~
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~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

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, and historical experience, as well as the ~~Company’s~~Company's own actuarial estimates. These estimates are reviewed periodically and adjusted when deemed necessary. Since reserves are ~~based on~~ 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.

~~Financial Instruments~~Notes Receivable

~~Investments~~Notes receivable include promissory notes receivable from third party entities. These notes are recorded at cost along with accrued interest, if any, which approximates the fair value. The Company regularly reviews all notes receivable for impairment and records provisions for uncollectible notes and interest receivable for non-performing notes. For the six months ended June 30, 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 ~~Securities~~the notes receivable balance were accrued interest of $0.3 million at June 30, 2009 (December 31, 2008: $19,000) and ~~Securities Sold, Not Yet Purchased~~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 and recorded in the condensed consolidated statements of income as other expense. 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 condensed consolidated statements of income as other income. At June 30, 2009, included in the condensed consolidated balance sheets under reinsurance balances receivable and reinsurance balances payable were $2.4 million and $1.9 million of deposit assets and deposit liabilities, respectively. For the three and six months ended June 30, 2009, included in other income (expense) were $0.2 million and $0.2 million, respectively, relating to losses on deposit accounted contracts, and $0.1 million and $0.2 million, respectively, relating to gains on deposit accounted contracts. There were no deposit assets or deposit liabilities at December 31, 2008.

Financial Instruments

Investments in Securities and Securities Sold, Not Yet Purchased

Effective January 1, 2008, the Company adopted ~~Statement of Financial Accounting Standards (“SFAS’)~~SFAS No. 157, ~~“Fair~~"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 toon 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”~~"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~~instruments 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 ~~on inputs~~broker quotes which are considered to be binding. Where quotes are not available, debt instruments are valued using cash flow models using assumptions and estimates that ~~are unobservable~~may be subjective and non-observable (Level 3 inputs).

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The Company’s ~~“Other Investments”~~"other investments" may include investments in private ~~equities,~~equity securities, limited partnerships, futures, commodities, exchange traded options and over-the-counter ("OTC") options, ~~(“OTC”),~~ 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”.~~"other investments." For limited partnerships and private ~~equities,~~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 ~~market~~ 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~~"trading securities,”" and ~~“Other Investments,”~~"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 condensed consolidated statements of income.

~~Premiums and discounts on debt securities are amortized into net investment income over the life of the security.~~ Dividend income and expense are recorded on the ex-dividend date. The ex-dividend date is the date ~~as of when~~by which 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.

~~GREENLIGHT CAPITAL RE, LTD.~~
Derivative Financial Instruments

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~U.S GAAP 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.

~~Investments~~ Financial Contracts

The Company enters into financial contracts with counterparties as part of its investment strategy. Derivatives not designated as hedging instruments, 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 ~~Swap Agreements~~net investment income in the condensed consolidated statements of income. On the condensed 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 onin the condensed consolidated balance sheets as financial contracts receivable and financial contracts payable, are derivative financial instruments ~~entered into~~ 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 ~~market~~ value movements of the underlying security together with any other payments due. These contracts are carried at fair value, ~~derived~~ based on observable inputs (Level 2 inputs) with the resultant unrealized gains and losses reflected in net investment income in the condensed 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 condensed consolidated statements of income.

~~Earnings Per Share~~

~~Basic earnings per share~~Financial contracts may also include exchange traded futures or options contracts that are based on ~~weighted average ordinary shares outstanding during~~ the ~~three~~movement of a particular index or interest rate, and six month periods ended June 30, 2008 and 2007 and exclude dilutive effects of stock options and unvested stock awards. Diluted earnings per share assumes the exercise of all dilutive stock options and stock awards using the treasury stock method.

Three Months Ended
Six Months Ended

June 30, June 30,
2008 2007 2008 2007

Weighted average shares outstanding 35,981,386 27,472,993 35,981,349 24,515,973
Effect of dilutive service provider stock options 172,087 183,930 173,347 159,698
Effect of dilutive employee and director options and stock awards 498,968 323,498 489,760 220,207

36,652,441 27,980,421 36,644,456 24,895,878

Anti-dilutive stock options outstanding 50,000 — 50,000 233,000

~~Recently Adopted Accounting Standards~~

~~In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework~~are entered into for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements but applies whenever other standards require or permit assets or liabilities to be measured by fair value. The Company adopted SFAS No. 157 for its financial assets and financial liabilities effective January 1, 2008. The adoption of SFAS No. 157 did not have a material impact onnon-hedging purposes. Where such contracts are traded in an active market, the Company’s ~~condensed consolidated financial statements.~~

~~In February 2008, the FASB approved the issuance of FASB Staff Position (“FSP”)FAS 157-2.~~ ~~FSPFAS 157-2~~ ~~defers the effective date of SFAS No. 157 until January 1, 2009 for non-financial assets and non-financial liabilities except those items recognized~~obligations or ~~disclosed~~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 ~~annual~~active market (Level 1) or ~~more frequently recurring basis.~~on broker quotes which reflect market information based on actual transactions (Level 2).

~~In February 2007,~~The Company purchases and sells credit default swaps ("CDS") for the ~~FASB issued SFAS No. 159, “The Fair Value Option~~purposes of either managing its exposure to certain investments, or for ~~Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities~~other strategic investment purposes. A CDS is a derivative instrument that provides protection against an investment loss due to ~~choose~~specified credit or default events of a reference entity. The seller of a CDS guarantees to ~~measure eligible items~~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 ~~at specified election dates. For items~~based on broker or market maker quotes for ~~which~~identical instruments in an active market (Level 2) or based on the ~~fair value option has been elected,~~current credit spreads on identical contracts (Level 2) with any unrealized gains and losses are to be reported in earnings at each subsequent reporting date. The fair value option is irrevocable unless a new election date occurs, may be applied instrument by instrument, with a few exceptions, and applies only to entire instruments and not to portions of instruments. SFAS No. 159 provides an opportunity to mitigate volatility in reported earnings caused by

~~GREENLIGHT CAPITAL RE, LTD.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

measuring related assets and liabilities differently without having to apply complex hedge accounting. The Company adopted SFAS No. 159 effective January 1, 2008. As a result, the unrealized gains and losses on the Company’s investments in private equities and limited partnerships, are now includedreflected in net investment income in the condensed consolidated statements of income.

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Earnings Per Share

Basic earnings per share are 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 when stock options are exercised and are determined using the treasury stock method. As discussed below under the caption, "Recently Issued Accounting Standards," the Financial Accounting Standards Board ("FASB") Staff Position ("FSP") EITF 03-6-1 was adopted effective January 1, 2009. FSP EITF 03-6-1 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. The Company's unvested restricted stock is considered a participating security. All prior period earnings per share data presented are required to be adjusted retrospectively to conform to the provisions of FSP EITF 03-6-1. In the event of a net loss, the participating securities are excluded from the calculation of both basic and diluted earnings per share.

	Three months ended June 30,		Six months ended June 30,
	2009	2008	2009	2008
Weighted average shares outstanding	36,252,925	36,249,979	36,160,160	36,181,761
Effect of dilutive service provider share-based awards	135,474	172,087	116,400	173,347
Effect of dilutive employee and director share-based awards	301,312	418,963	227,330	416,841
	36,689,711	36,841,029	36,503,890	36,771,949
Anti-dilutive stock options outstanding	130,000	50,000	146,001	50,000

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 ~~opposed~~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.

Verdant is incorporated in Delaware, and therefore is subject to taxes in accordance with the U.S. federal rates and regulations prescribed by the Internal Revenue Service. Verdant’s taxable income is taxed at an effective rate of 35%. Any deferred tax asset is evaluated for recovery and a valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be realized in the future.

Recently Issued Accounting Standards

In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162." SFAS No. 168 establishes the FASB Accounting Standards Codification ("Codification") as the source of authoritative accounting principles recognized by the FASB and supersedes existing FASB, AICPA, EITF and related literature. The Codification does not change GAAP, but instead takes the hundreds of standards established by a variety of standard setters and reorganizes them into roughly 90 accounting topics using a consistent structure and a new method for citing particular content using unique numeric identifiers. The Codification is effective for financial statements for interim and annual reporting periods ending after September 15, 2009. The implementation of SFAS No. 168 will have no impact on the Company’s results of operations or financial position, but will impact all references to FASB literature cited in the Company’s notes of the condensed consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46R," which changes the way a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar) rights, should by consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other ~~comprehensive income.~~things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. SFAS No. 167 will require a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. SFAS No. 167 is effective for periods beginning after November 15, 2009. Management is evaluating the impact of SFAS No. 167 but does not anticipate its adoption will have a material impact on the Company’s results of operations or financial position.

In June 2009, the FASB issued SFAS No. 166, "Accounting for Transfers of Financial Assets." SFAS No. 166 revises SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities," and will require more information about transfers of financial assets, including securitization transactions, and where entities have continuing exposure to the risks related to transferred financial assets. SFAS No. 166 eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires additional disclosures. SFAS No. 166 is effective for periods beginning after November 15, 2009. Management is evaluating the impact of SFAS No. 166 but does not anticipate its adoption will have a material impact on the Company’s results of operations or financial position.

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In May 2009, the FASB issued SFAS No. 165, "Subsequent Events," which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The adoption of SFAS No. ~~159~~165 did not have a material impact on the Company’s ~~condensed consolidated~~results of operations or financial ~~statements except for the change in presentation of cash flows relating to investments in the condensed consolidated statement of cash flows as described below.~~position.

Additionally, SFAS No. 159 amends SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” such that cash flows relating to “trading securities” must be classified in the condensed consolidated statement of cash flows based on the nature and purpose for which the securities were acquired. Prior to adopting SFAS No. 159, the Company classified cash flows relating to investments as operating activities. The Company has determined that activities that generate investment income or loss should be classified under investing activities to reflect the underlying nature and purpose of the Company’s investing strategies. Therefore, upon adoption of SFAS No. 159, the Company has classified cash flows relating to investments in securities, restricted cash and cash equivalents, and financial contracts receivable and payable, as investing activities. Prior period comparatives have not been reclassified.

~~Recently Issued Accounting Standards~~

In ~~December 2007,~~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. ~~141 (Revised), “Business Combinations.” SFAS No. 141 (Revised)~~157 for determining the fair values of assets and liabilities in inactive markets and those transacted in distressed situations. FSP 157-4 is effective for ~~acquisitions during the fiscal years beginning~~periods ending after ~~December~~June 15, ~~2008 and~~2009 with early adoption ~~is prohibited. This statement establishes principles and requirements~~permitted for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Management is reviewing this guidance; however, the effect of the statement’s implementation will depend upon the extent and magnitude of acquisitions, if any,periods ending after ~~December 31, 2008.~~

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 DecemberMarch 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. Management is reviewing this guidance; however, the effect of the statement’s implementation2009. Retrospective application is not ~~expected to be~~permitted. The adoption of FSP 157-4 did not have a material toimpact 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. FSP FAS 115-2 and FAS 124-2 is effective for periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of FSP FAS 115-2 and FAS 124-2 during the quarter ended June 30, 2009, did not have any impact on the Company’s results of operations or financial position since its debt instruments are classified as trading and are currently carried at fair value.

In April 2009, the FASB issued FSP 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments." FSP 107-1 and APB 28-1 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. FSP 107-1 and APB 28-1 is effective for periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of FSP 107-1 and APB 28-1 during the quarter ended June 30, 2009 did not 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." FSP No. EITF 03-6-1 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"). FSP No. EITF 03-6-1 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 its inception and the number of unvested restricted shares is 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 FSP No. EITF 03-6-1.

In March 2008, the FASB issued SFAS No. 161, ~~“Disclosures~~"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~~2008. SFAS No. 161 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. ~~Management is reviewing this guidance; however, the effect~~The implementation of ~~the statement’s implementation is~~SFAS No. 161 did not ~~expected to be~~have a material toimpact on the Company’s derivative disclosures.

In ~~May~~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. ~~162, “The Hierarchy~~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 ~~Generally Accepted Accounting Principles.”~~the deferred guidance in SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. generally accepted accounting principles (GAAP). SFAS No. 162 directs the GAAP hierarchy to the Company,157 did not ~~the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS No. 162 is effective 60 days~~

~~GREENLIGHT CAPITAL RE, LTD.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to remove the GAAP hierarchy from the auditing standards. Management does not expect SFAS No. 162 to have a material ~~effect~~impact on the Company’s results of ~~operations~~operation or financial position.

In ~~March 2008,~~December 2007, the FASB issued SFAS No. ~~163, “Accounting for~~160, "Non-controlling Interests in Consolidated Financial ~~Guarantee Insurance Contracts —~~Statements – an ~~interpretation~~amendment of ~~FASB Statement~~ARB No. ~~60.”~~51." SFAS No. ~~163~~160 is effective ~~for financial statements issued~~ for fiscal years beginning on or after December 15, ~~2008,~~2008. SFAS No. 160 establishes accounting and ~~all interim periods within those fiscal years. Earlier application is not permitted except for disclosures about the risk-management activities of the insurance enterprise which is effective~~reporting standards for the ~~first interim period beginning after~~non-controlling interest in a subsidiary and for the ~~issuance~~deconsolidation of a subsidiary. Upon adoption of SFAS No. ~~163.~~160, 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 ~~statement requires an insurance enterprise to recognize a claim liability prior to an insured event when there is evidence that credit deterioration has occurred~~reclassification resulted in an ~~insured financial obligation. This statement also clarifies how FASB Statement~~increase in shareholders’ equity and a decrease in total liabilities. However, the implementation of SFAS No. 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Finally, this statement requires expanded disclosures about financial guarantee contracts focusing160 did not have any impact on the insurance enterprise’s risk-management activities in evaluating credit deterioration in its insured financial obligations. Management is reviewing this statement; however, the effect of the statement’s implementation is not expected to be material to the Company’sCompany's results of operations or ~~financial position. Also as of June 30, 2008, the Company had no financial guarantee contracts that required expanded disclosures under this statement.~~retained earnings.


3.	~~FINANCIAL INSTRUMENTS~~

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Reclassifications

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

3.	FINANCIAL INSTRUMENTS

Fair Value Hierarchy

~~Effective January 1, 2008, the Company adopted SFAS No. 157 and SFAS No. 159. As a result, all~~All of the Company’s ~~“trading securities” continue to be~~financial instruments are carried at fair value, and the net unrealized gains or losses ~~continue to be~~are included in net investment income in the condensed consolidated statements of income. For private equity securities, the unrealized gains and losses, if any, which would have been previously recorded in other comprehensive income, are included in net investment income in the condensed consolidated statements of income in order to apply a consistent treatment for the Company’s entire investment portfolio. The change in treatment resulted in no cumulative-effect adjustment to the opening balance of retained earnings. The fair values of the private equity securities, existing at the date the Company adopted SFAS No. 159, remained unchanged from the carrying values of those securities immediately prior to electing the fair value option.

The following table presents the Company’s investments, categorized by the level of the fair value hierarchy as of June 30, ~~2008:~~

Fair Value Measurements as of June 30, 2008
Significant

Other
Significant

Quoted Prices in
Observable
Unobservable

Total as of
Active Markets
Inputs
Inputs

Description
June 30, 2008 (Level 1) (Level 2) (Level 3)
($ in thousands)

Listed equity securities $ 588,604 $ 588,604 $ — $ —
Debt securities 6,328 — 3,261 3,067
Private equity securities 7,963 — 1,700 6,263
Options 3,050 1,215 1,835 —
Financial contracts receivable/payable, net 2,977 — 2,977 —

$ 608,922 $ 589,819 $ 9,773 $ 9,330

Listed equity securities, sold not yet purchased $ (409,218 ) $ (409,218 ) $ — $ —

$ (409,218 ) $ (409,218 ) $ — $ —

~~GREENLIGHT CAPITAL RE, LTD.~~
2009:

Fair value measurements as of June 30, 2009
Description Quoted prices in active markets (Level 1)
Significant other observable inputs
(Level 2)

Significant
unobservable inputs
(Level 3)
Total
($ in thousands)
Debt instruments

$
—

$
127,541

$
6,806

$
134,347

Listed equity securities

401,139

—

—

401,139

Commodities

44,409

—

—

44,409

Private equity securities

—

1,606

9,530

11,136

Put options

2,508

—

—

2,508

Call options

—

2,091

—

2,091

Financial contracts receivable (payable), net

—

6,190

—

6,190

$
448,056

$
137,428

$
16,336

$
601,820

Listed equity securities, sold not yet purchased

$
(369,293
)

$
—

$
—

$
(369,293
)

The following table presents the Company’s investments, categorized by the level of the fair value hierarchy as at December 31, 2008:

Fair value measurements as of December 31, 2008
Description Quoted prices in active markets (Level 1)
Significant other
observable inputs
(Level 2)

Significant
unobservable inputs (Level 3)
Total
($ in thousands)
Debt instruments

$
—

$
66,099

$
4,115

$
70,214

Listed equity securities

409,329

—

—

409,329

Private equity securities

—

121

11,776

11,897

Call options

2,526

—

—

2,526

Financial contracts receivable (payable), net

—

4,279

—

4,279

$
411,855

$
70,499

$
15,891

$
498,245

Listed equity securities, sold not yet purchased

$
(234,301
)
$
—

$
—

$
(234,301
)

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~Link to table of contents

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)
Three Months Ended June 30, 2008 Six Months Ended June 30, 2008
Private
Private

Debt
Equity
Debt
Equity

Securities Securities Total Securities Securities Total
($ in thousands)

Beginning balance $ 865 $ 10,943 $ 11,808 $ 865 $ 8,115 $ 8,980
Purchases, sales, issuance, and settlements 2,204 804 3,008 2,204 3,565 5,769
Total gains or losses (realized & unrealized) included in earnings (2 ) (279 ) (281 ) (2 ) (212 ) (214 )
Transfers in and/or out of Level 3 — (5,205 ) (5,205 ) — (5,205 ) (5,205 )

Ending balance $ 3,067 $ 6,263 $ 9,330 $ 3,067 $ 6,263 $ 9,330

for the three and six months ended June 30, 2009:

	Fair value measurements using significant unobservable inputs (Level 3) Three months ended June 30, 2009										Fair value measurements using significant unobservable inputs (Level 3) Six months ended June 30, 2009
	Debt instruments			Private equity securities			Total				Debt instruments			Private equity securities			Total
	($ in thousands)										($ in thousands)
Beginning balance	$	9,352		$	9,807		$	19,159		$	4,115		$	11,776		$	15,891
Purchases, sales, issuances, and settlements, net		20			200			220			1,751			118			1,869
Total gains (losses) realized and unrealized included in earnings, net		638			(477	)		161			(847	)		(2,364	)		(3,211	)
Transfers into (out of) Level 3		(3,204	)		—			(3,204	)		1,787			—			1,787
Ending balance, June 30, 2009	$	6,806		$	9,530		$	16,336		$	6,806		$	9,530		$	16,336

The following table presents the reconciliation of the balances for all investments measured at fair value using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2008:

	Fair value measurements using significant unobservable inputs (Level 3) Three months ended June 30, 2008										Fair value measurements using significant unobservable inputs (Level 3) Six months ended June 30, 2008
	Debt instruments			Private equity securities			Total				Debt instruments			Private equity securities			Total
	($ in thousands)										($ in thousands)
Beginning balance	$	865		$	10,943		$	11,808		$	865		$	8,115		$	8,980
Purchases, sales, issuances, and settlements, net		2,204			804			3,008			2,204			3,565			5,769
Total gains (losses) realized and unrealized included in earnings, net		(2	)		(279	)		(281	)		(2	)		(212	)		(214	)
Transfers into (out of) Level 3		—			(5,205	)		(5,205	)		—			(5,205	)		(5,205	)
Ending balance, June 30, 2008	$	3,067		$	6,263		$	9,330		$	3,067		$	6,263		$	9,330

For the three and six months ended June 30, 2009, transfers into Level 3 represent the fair value on the date of transfer of debt instruments for which multiple broker quotes were not available. The fair values of these debt instruments were estimated using the last available transaction price, adjusted for credit risk, expected cash flows, and other non-observable inputs. Transfers ~~from~~out of Level 3 represent the fair values on the dates of transfer of debt instruments for which multiple broker quotes became available. For the three and six months ended June 30, 2008, the transfers out of Level 3 represent the fair value of private equity securities of an entity that were transferred to Level 1 when the ~~entity’s~~entity's shares were publicly listed during the second quarter of fiscal 2008, resulting in fair value being based on the quoted price in an active market.

For the three and six months ended June 30, ~~2008,~~2009, realized gains of $0.3 million (2008: $0.0) and $0.3 million (2008: $ 0.0) respectively, and change in unrealized ~~losses~~gains of $(0.1) million (2008: $0.3 million) and $(3.5) million ~~and~~(2008: $0.2 ~~million~~million) respectively, on securities still held at the reporting date and valued using unobservable inputs are included as net investment income in the condensed consolidated statements of income. ~~There were no realized gains or losses for the three and six months ended~~

Link to table of contents

Debt instruments, trading

At June 30, ~~2008, relating to securities valued using unobservable inputs.~~2009, the following investments are included in debt instruments:

2009	Cost/amortized cost		Unrealized gains		Unrealized losses		Fair value
	($ in thousands)
Corporate debt – U.S.	$	84,700	$	41,676	$	(5,847)	$	120,529
Corporate debt – Non U.S.		9,593		4,225		—		13,818
Total debt instruments	$	94,293	$	45,901	$	(5,847)	$	134,347

~~Other Investments~~At December 31, 2008, the following investments are included in debt instruments:

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

“The maturity distribution for debt instruments held at June 30, 2009 is as follows:

	Cost/amortized cost		Fair value
	($ in thousands)
Within one year	$	14,436	$	16,604
From one to five years		50,864		86,866
From five to ten years		22,325		23,842
More than ten years		6,668		7,035
	$	94,293	$	134,347

Investment in Equity Securities, Trading

At June 30, 2009, the following long positions are included in investment securities, trading:

2009	Cost		Unrealized gains		Unrealized losses			Fair value
	($ in thousands)
Equities – listed	$	461,591	$	41,309	$	(116,705	)	$	386,195
Exchange traded funds		7,917		7,029		(2	)		14,944
	$	469,508	$	48,338	$	(116,707	)	$	401,139

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	)	$	348,590
Exchange traded funds		53,364		8,092		(717	)		60,739
	$	606,305	$	22,914	$	(219,890	)	$	409,329

Link to table of contents

Other ~~Investments”~~Investments

"Other investments" include options, ~~as well as~~commodities, and private ~~equities for which~~equity securities. For private equity securities, 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 ~~writer,~~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~~The Company may invest in commodities for non-hedging purposes through futures or options contracts or may purchase the ~~dealer acts as the counterparty and therefore the Company is exposed~~physical commodity to ~~credit risk to the extent the dealer is unable to meet its obligations. As of~~be held at a professional custodian facility.

At June 30, 2009, the following securities are included in other investments:

2009	Cost		Unrealized gains		Unrealized losses			Fair value
	($ in thousands)
Private equity securities	$	16,456	$	346	$	(5,666	)	$	11,136
Commodities		44,838		—		(429	)		44,409
Put options		2,162		616		(270	)		2,508
Call options		4,128		—		(2,037	)		2,091
	$	67,584	$	962	$	(8,402	)	$	60,144

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

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

Investments in Securities Sold, Not Yet Purchased

At June 30, 2009, the following securities are included in investments in securities sold, not ~~hold any OTC options.~~yet purchased:

2009		Proceeds	Unrealized gains			Unrealized losses			Fair value
		($ in thousands)
Equities – listed	$	418,817	$	(80,474	)	$	28,495	$	366,838
Warrants and rights on listed equities		—		—			825		825
Exchange traded funds		1,840		(221	)		11		1,630
	$	420,657	$	(80,695	)	$	29,331	$	369,293

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 June 30, 2009 and December 31, 2008, the ~~following securities were included~~Company had entered into total return swaps, CDS, and interest rate options contracts with various financial institutions to meet certain investment objectives. 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 ~~“Other Investments”:~~

Unrealized
Unrealized
Fair Market

Cost Gains Losses Value
($ in thousands)

Private equity securities $ 9,565 $ — $ (1,602 ) $ 7,963
Put options 2,477 594 (21 ) 3,050

$ 12,042 $ 594 $ (1,623 ) $ 11,013

~~GREENLIGHT CAPITAL RE, LTD.~~
the fair value of the underlying or reference instrument.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~Link to table of contents

The fair value of financial contracts outstanding at June 30, 2009 is as follows:

Financial contracts	Listing currency		Fair value of underlying instruments	Fair value of net assets/ (obligations) on financial contracts
			($ in thousands)
Financial contracts receivable
Interest rate options	USD	$	1,002,161	$	11,628
Credit default swaps, purchased – Sovereign debt	USD		302,699		3,725
Credit default swaps, purchased – Corporate debt	USD		44,597		2,679
Total return swaps – Equities	USD		17,248		1,124
Total financial contracts receivable, at fair value				$	19,156

Financial contracts payable
Credit default swaps, purchased – Sovereign debt	USD	$	73,149	$	(567	)
Credit default swaps, purchased – Corporate debt	USD		78,150		(2,656	)
Credit default swaps, issued – Corporate debt	USD		13,214		(9,180	)
Total return swaps – Equities	USD		2,668		(563	)
Total financial contracts payable, at fair value				$	(12,966	)

The fair value of financial contracts receivable and payable at December 31, 2008 was as follows:

Financial contracts	Listing currency		Fair value of underlying instruments	Fair value of net assets/ (obligations) on financial contracts
			($ in thousands)
Financial contracts receivable
Interest rate options	USD	$	85,935	$	2,564
Credit default swaps, purchased – Sovereign debt	USD		322,516		12,881
Credit default swaps, purchased – Corporate debt	USD		54,509		5,956
Total return swaps – Equities	USD		3,249		18
Total financial contracts receivable, at fair value				$	21,419

Financial contracts payable
Credit 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 ~~December 31, 2007, the following securities were~~June 30, 2009, included in ~~“Other Investments”:~~

Unrealized
Unrealized
Fair Market

Cost Gains Losses Value
($ in thousands)

Private equity securities $ 10,932 $ 150 $ (247 ) $ 10,835
Call options 1,943 776 (1,409 ) 1,310
Put options 2,821 3,266 (1,182 ) 4,905
Futures — 1,526 — 1,526

$ 15,696 $ 5,718 $ (2,838 ) $ 18,576

interest rate options are contracts on U.S. and Japanese interest rates. As of June 30, 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 a premium 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 June 30, 2009, the reference entity had a financial strength rating of (B3) and a surplus notes rating of (Caa3) from Moody’s Investors Service, Inc. Based on the ratings of the reference entity, there appears to be a high risk of default as of June 30, 2009. The fair value of the CDS at June 30, 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 and six months ended June 30, ~~2007, other-than-temporary impairment~~2009 and 2008, the Company reported gains and losses on ~~private equities of $0.3 million were reported and included in net realized gains on securities within net investment income, in the condensed consolidated statements of income.~~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 June 30,							Gain (loss) on derivatives recognized in income for the six months ended June 30,
		2009			2008				2009			2008
		($ in thousands)							($ in thousands)
Interest rate options	Net investment income	$	4,838		$	—		$	5,808		$	—
Credit default swaps, purchased – Corporate debt	Net investment income		(10,154	)		(30	)		(6,237	)		145
Credit default swaps, purchased – Sovereign debt	Net investment income		(7,559	)		687			(9,596	)		687
Total return swaps – Equities	Net investment income		12,488			770			1,902			5,459
Credit default swaps, issued – Corporate debt	Net investment income		176			—			(1,810	)		—
Total return swaps – Commodities	Net investment income		—			—			—			(7,292	)
Options, warrants, and rights	Net investment income		(4,525	)		2,019			(6,913	)		(479	)
Total		$	(4,736	)	$	3,446		$	(16,846	)	$	(1,480	)

Link to 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 and six months ended June 30, 2009, the Company’s volume of derivative activities (based on notional amounts) was as follows:

	Three months ended June 30, 2009					Six months ended June 30, 2009
Derivatives not designated as hedging instruments	Entered		Exited			Entered		Exited
	($ in thousands)					($ in thousands)
Credit default swaps	$	131,078	$	—	$	164,421	$	20,850
Total return swaps		—		9,635		—		12,144
Interest rate options		875,400		—		903,170		—
Options – equity		120,205		14,426		127,800		22,028
Rights – equity		3,743		1,599		7,870		4,211
Total	$	1,130,426	$	25,660	$	1,203,261	$	59,233

4.
4.	RETROCESSION

The Company utilizes retrocession agreements to reduce the risk of loss on business assumed. ~~At June 30, 2008, the~~The Company ~~had in place~~currently has coverages that provide for recovery of a portion of loss and loss expenses incurred on certain contracts. Loss and loss adjustment expense recoverables from ~~the~~ retrocessionaires are recorded as assets. For the six months ended June 30, 2009 and 2008, loss and loss adjustment expenses incurred are net of loss and loss expenses recovered and recoverable of $(2.5) million and $5.4 million, ~~(2007: $5.9 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 June 30, ~~2008,~~2009, the Company had loss ~~and loss adjustment expense~~ recoverables of ~~$0 (2007: $1.3~~$0.5 million (December 31, 2008: $0.2 million) with a retrocessionaire rated “A (excellent)” by A.M. Best Company. In addition, included in the reinsurance balances receivable on the balance sheet as of June 30, 2008 were $1.5 million (2007: $1.3 million) in losses reimbursable from a retrocessionaire rated “A (excellent)”"A+ (superior)" by A.M. Best Company. Additionally, at June 30, ~~2008,~~2009, the Company had loss ~~and loss adjustment expense~~ recoverables of ~~$7.7~~$6.4 million ~~(2007: $5.4~~(December 31, 2008: $11.5 million) with ~~two~~ unrated retrocessionaires. At June 30, ~~2008,~~2009, the Company retained funds and other collateral, including parental guarantees, from the unrated retrocessionaires, ~~for amounts in excess of the loss recoverable asset,~~ and the Company ~~has~~had recorded no provision for uncollectible losses recoverable.


5.	~~SHARE CAPITAL~~

5. SHARE CAPITAL

On January 10, 2007, 1,426,630 Class B ordinary shares were transferred from Greenlight Capital Investors, LLC (“GCI”) to its underlying owners and automatically converted into an equal number ofThe Class A ordinary shares ~~on a one-for-one basis, upon transfer. The remaining Class B ordinary shares were transferred from GCI to David Einhorn, the Chairman of the Company’s Board of Directors and a principal shareholder~~ of the Company are listed on Nasdaq Global Select Market under the symbol "GLRE". On July 10, 2009, the Securities and ~~remained as Class B ordinary shares.~~

~~On May 30, 2007,~~Exchange Commission ("SEC") declared effective the ~~Company completed the sale~~Company's Form S-3 registration statement for an aggregate principal amount of ~~11,787,500 Class A ordinary shares at $19.00 per share~~$200.0 million in an initial public offering. Included in the 11,787,500 shares sold were 1,537,500 shares purchased by the underwriters to cover over-allotments. Concurrently, 2,631,579 Class B ordinary shares were sold at $19.00 per share as part of a private placement. The net proceeds to the Company of the initial public offering and private placement were approximately $255.7 million after the deduction of underwriting fees and other offering expenses.securities.

During the six months ended June 30, ~~2008, 141,465 (2007: 108,160)~~2009, 198,956 (2008: 141,465) 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 ~~on March 24, 2011,~~after three years from date of issue, subject to the ~~grantee’s~~grantee's continued service with the Company.

~~GREENLIGHT CAPITAL RE, LTD.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

During the six months ended June 30, 2008, 660 stock options were exercised which had a weighted average exercise price of $13.85. For any options exercised, the Company issues new Class A ordinary shares from the shares authorized for issuance as part of the Company’s stock incentive plan. The intrinsic value of options exercised during the six months ended June 30, 2008, was $6,067. During the six months ended June 30, 2007, no stock options were exercised.

~~During the six months ended June 30, 2008,~~2009, the Company also issued to certain directors ~~20,724 (2007: 13,264)~~35,875 (2008: 20,724) restricted ~~shares of~~ Class A ordinary shares as part of the directors’ remuneration. Each of these restricted shares issued to the directors ~~contain~~contains similar restrictions to those issued to employees and these shares will vest on the earlier of the first anniversary of the share issuance or the Company’s next annual general meeting, subject to the grantee’s continued service with the Company.

The restricted share award activities during the six months ended June 30, 2009 were as follows:

	Number of non-vested restricted shares		Weighted average grant date fair value
Balance at December 31, 2008		270,349	$	17.80
Granted		234,831		15.25
Vested		(20,724)		18.65
Forfeited		(12,674)		18.09
Balance at June 30, 2009		471,782	$	16.49

During the six months ended June 30, 2009, 17,500 (2008: 660) stock options were exercised which had a weighted average exercise price of $12.72 (2008: $13.85) per share. The Company issued new Class A ordinary shares from the shares authorized for issuance under the Company’s stock incentive plan. The intrinsic value of options exercised during the six months ended June 30, 2009 was $39,900 (2008: $6,067). At June 30, 2009, 216,897 Class A ordinary shares were available for future issuance under the Company’s stock incentive plan.

Link to table of contents

Employee and director stock option activities during the six months ended June 30, 2009 were as follows:

	Number of options		Weighted average exercise price		Weighted average grant date fair value
Balance at December 31, 2008		1,258,340	$	13.27	$	6.35
Granted		—
Exercised		(17,500)		12.72		6.75
Forfeited		—		—		—
Expired		—		—		—
Balance at June 30, 2009		1,240,840	$	13.28	$	6.75

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

June 30, 2008 June 30, 2007
Class A Class B Class A Class B

Balance — beginning of period 29,847,787 6,254,949 16,507,228 5,050,000
Issue of ordinary shares 162,849 — 11,913,929 2,631,579
Transfer from Class B to Class A — — 1,426,630 (1,426,630 )

Balance — end of period 30,010,636 6,254,949 29,847,787 6,254,949

	Six months ended June 30, 2009				Six months ended June 30, 2008
	Class A		Class B		Class A		Class B
Balance – beginning of period		29,781,736		6,254,949		29,847,787		6,254,949
Issue of ordinary shares, net of forfeitures		239,657		—		162,849		—
Balance – end of period		30,021,393		6,254,949		30,010,636		6,254,949

6.
6.	RELATED PARTY TRANSACTIONS

Investment Advisory Agreement

The Company was party to an Investment Advisory Agreement (the ~~“Investment Agreement”~~"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 (the “Board”) and the beneficial owner of all of the issued and outstanding Class B ordinary shares.~~Directors. Effective January 1, 2008, the Company terminated the Investment Agreement and entered into an agreement (the ~~“Advisory Agreement”~~"Advisory Agreement") ~~wherein~~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, ~~there were no changes to~~ the monthly management ~~fee~~fees or performance compensation remained the same as those contained in the Investment Agreement.

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 ~~allocated,~~payable to DME Advisors, subject to a loss carry forward provision. The loss carry forward provision allows DME Advisors to ~~DME’s account. Included in~~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 investment 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 of $126.1 million and as a result no performance compensation was paid to DME Advisors. In addition, the performance compensation for ~~both~~fiscal 2009 and subsequent years will be reduced to 10% of net investment income until all the ~~three months~~investment losses have been recouped and an additional amount equal to 150% of the aggregate loss is earned. For the six months ended June 30, ~~2008 is a~~2009, performance compensation ~~expense~~ of ~~$6.1~~$12.7 million ~~(2007: $1.3 million). At~~was recorded at the reduced rate of 10%, and remained payable as of June 30, ~~2008 and December 31, 2007, $6.1 million and $6.9 million, respectively, remained payable.~~2009.

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 ~~is paid to DME.~~Advisors. Included in ~~the~~ net investment income for the three months ended June 30, ~~2008~~2009 are management fees of ~~$2.7~~$2.5 million ~~(2007: $1.7~~(June 30, 2008: $2.7 million). Included in net investment income for the six months ended June 30, ~~2008,~~2009 are management fees of ~~$5.1~~$4.8 million ~~(2007: $3.0~~(June 30, 2008: $5.1 million). The management fees were fully paid as of June 30, ~~2008,~~2009 and December 31, ~~2007.~~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 ~~per month (plus expenses).~~plus expenses. The agreement ~~had~~has an initial term of one year, and ~~continues~~will continue for ~~sequential~~subsequent one year periods until terminated by the Company or ~~DME.~~DME Advisors. Either party may terminate the agreement for any reason with 30 days prior written notice to the other party.

~~GREENLIGHT CAPITAL RE, LTD.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~Link to table of contents

7.
7.	COMMITMENTS AND CONTINGENCIES

~~Letters of Credit~~

At June 30, 2008, the Company had one letter of credit agreement for a total facility of $400 million of which the Company had issued $116.8 million (December 31, 2007: $76.5 million) letters of credit. In addition, a $25.0 million letter of credit agreement with another bank was terminated on June 6, 2008; although, letters of credit of $23.9 million issued under the agreement prior to June 6, 2008, remain outstanding until their respective expiration dates. At June 30, 2008, total investments and cash equivalents with a fair market value of $225.1 million (December 31, 2007: $148.9 million) have been pledged as security against the letters of credit issued. Each of the credit facilities requires that the Company comply with 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. The Company was in compliance with all the covenants of each of its letter of credit facilities as of June 30, 2008.

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 ~~charged~~relating to leased office spaces for the six months ended June 30, ~~2008,~~2009 was ~~$46,589 (2007: $44,370)~~$299,471 (2008: $46,589).

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 onrelating 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 ~~table~~schedule below, to ensure ~~any~~contracts to which the Company is bound ~~contracts~~ are adequately ~~run-off~~administered by the specialist service provider. Included in the schedule below are the minimum payment obligations relating to this agreement.

Private Equity

~~Private Equity~~

~~Periodically,~~From time to time the Company makes investments in private equity vehicles. As part of the ~~Company’s~~Company's participation in such private equity investments, the Company may make funding commitments. As of June 30, ~~2008,~~2009, the Company had commitments to invest an additional ~~$26.9~~$18.9 million in private ~~equities.~~equity investments.

~~Schedule of Commitments and Contingencies~~

~~As of June 30, 2008, the~~The following is a schedule of remaining future minimum payments required under the above commitments for the next five years:

2008 2009 2010 2011 2012 Total
($ in thousands)

Operating lease obligations $ 48 $ 99 $ 69 $ — $ — $ 216
Specialist service agreement 326 576 400 150 — 1,452
Private equity and limited partnerships⁽¹⁾
26,913 — — — — 26,913

$ 27,287 $ 675 $ 469 $ 150 $ — $ 28,581

	2009			2010		2011		2012		2013		Thereafter		Total
	($ in thousands)
Operating lease obligations	$	189		$	345	$	276	$	276	$	276	$	1,243	$	2,605
Specialist service agreement		250			400		150		—		—		—		800
Private equity and limited partnerships		18,499	(1)		450		—		—		—		—		18,949
	$	18,938		$	1,195	$	426	$	276	$	276	$	1,243	$	22,354


⁽¹⁾		Given the nature of these investments, the Company is unable to determine with any degree of accuracy when ~~the remaining~~these commitments will be called. Therefore, for purposes of the above table, the Company has assumed that all commitments with no fixed payment schedules will be ~~paid within one year.~~called during 2009.

~~GREENLIGHT CAPITAL RE, LTD.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~Letters of Credit

At June 30, 2009, the Company had a $400.0 million letter of credit facility with Citibank N.A. This facility terminates on October 11, 2010, 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 June 30, 2009, the Company had a $25.0 million letter of credit facility with Butterfield Bank (Cayman) Limited ("Butterfield Bank"). This facility terminates on June 6, 2010, 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. On July 21, 2009, the Company entered into a $50.0 million letter of credit facility with Bank of America, N.A. This facility terminates on July 20, 2010, although the termination date is automatically extended for an additional year unless notice is delivered to the other party at least 90 days prior to the termination date.

At June 30, 2009, an aggregate amount of $223.1 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 June 30, 2009, total equity securities and cash equivalents with a fair value of $230.3 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 June 30, 2009 and December 31, 2008.

19
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Litigation

In the normal course of business, the Company may become involved in various claims litigation and legal proceedings. As of June 30, ~~2008,~~2009, the Company was not a party to any litigation or arbitration proceedings.

8.
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~~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 June 30, 2008 Three Months Ended June 30, 2007 Six Months Ended June 30, 2008 Six Months Ended June 30, 2007
($ in millions)

Property

Commercial lines $ 1.6 6.3 % $ 5.3 8.1 % $ 6.1 6.3 % $ 10.0 9.6 %
Personal lines (4.2 ) (16.5 ) 15.8 24.2 (4.1 ) (4.3 ) 30.8 29.8
Casualty

General liability 8.7 34.2 16.5 25.2 10.3 10.7 17.0 16.4
Motor liability 12.1 47.6 — — 36.9 38.4 — —
Professional liability 2.2 8.7 27.3 41.7 2.2 2.3 27.3 26.4
Specialty

Health 2.5 9.8 0.5 0.8 28.5 29.7 14.8 14.3
Medical malpractice (0.9 ) (3.5 ) — — 6.9 7.2 3.6 3.5
Workers’ compensation 3.4 13.4 — — 9.3 9.7 — —

$ 25.4 100.0 % $ 65.4 100.0 % $ 96.1 100.0 % $ 103.5 100.0 %

		Three months ended June 30, 2009				Three months ended June 30, 2008				Six months ended June 30, 2009				Six months ended June 30, 2008
		($ in thousands)				($ in thousands)				($ in thousands)				($ in thousands)
Property
Commercial lines	$	3,000	4.3	%	$	1,600		6.3	%	$	22,413	15.8	%	$	6,091		6.3	%
Personal lines		17,671	25.2			(4,236	)	(16.7	)		17,682	12.5			(4,100	)	(4.3	)
Casualty
General liability		13,448	19.2			8,697		34.3			16,080	11.3			10,335		10.7
Motor liability		20,293	29.0			12,022		47.4			36,980	26.1			36,867		38.4
Professional liability		—	—			2,150		8.5			—	—			2,150		2.3
Specialty
Health		8,682	12.4			2,611		10.3			26,061	18.4			28,574		29.7
Medical malpractice		265	0.4			(918	)	(3.6	)		4,886	3.4			6,871		7.2
Workers’ compensation		6,688	9.5			3,434		13.5			17,816	12.5			9,338		9.7
	$	70,047	100.0	%	$	25,360		100.0	%	$	141,918	100.0	%	$	96,126		100.0	%

Gross Premiums Written by Geographic Area of Risks Insured

Three Months Ended June 30,

Three Months Ended June 30, 2008 2007 Six Months Ended June 30, 2008 Six Months Ended June 30, 2007
($ in millions)

USA $ 21.6 85.0 % $ 33.6 51.3 % $ 86.2 89.7 % $ 66.6 64.3 %
Worldwide⁽¹⁾
3.0 11.8 29.2 44.6 9.1 9.5 34.2 33.0
Europe — — 2.1 3.3 — — 2.1 2.1
Caribbean 0.8 3.2 0.5 0.8 0.8 0.8 0.6 0.6

$ 25.4 100.0 % $ 65.4 100.0 % $ 96.1 100.0 % $ 103.5 100.0 %

		Three months ended June 30, 2009			Three months ended June 30, 2008				Six months ended June 30, 2008				Six months ended June 30, 2008
		($ in thousands)			($ in thousands)				($ in thousands)				($ in thousands)
USA	$	68,547	97.9	%	$	21,601	85.2	%	$	119,814	84.4	%	$	86,238	89.7	%
Worldwide(1)		—	—			2,959	11.7			20,358	14.4			9,088	9.5
Caribbean		1,500	2.1			800	3.1			1,746	1.2			800	0.8
	$	70,047	100.0	%	$	25,360	100.0	%	$	141,918	100.0	%	$	96,126	100.0	%

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


⁽¹⁾		~~“Worldwide” risk comprise individual policies that insure risks on a worldwide basis.~~


9.	~~SUBSEQUENT EVENTS~~

9.	SUBSEQUENT EVENTS

On July ~~9, 2008,~~10, 2009, the SEC declared effective the Company's shelf registration statement for an aggregate principal amount of $200.0 million in securities.

On July 21, 2009, the Company entered into a ~~lease agreement~~$50.0 million letter of credit facility with Bank of America, N.A. This facility terminates on July 20, 2010, although the termination date is automatically extended for ~~new office space in~~an additional year unless notice is delivered to the ~~Cayman Islands. Under~~other party at least 90 days prior to the ~~terms of the lease agreement, the Company is committed to annual rent payments ranging from $253,539~~termination date.

~~GREENLIGHT CAPITAL RE, LTD.~~Link to table of contents

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~to $311,821 for ten years starting from the earlier of December 1, 2008 or when the premises are occupied. The Company also has the option to renew the lease for a further five year term.~~

In addition, on August 5, 2008, the Board adopted a share repurchase plan. Under the share repurchase plan, the Board authorized the Company to purchase up to two million of its Class A ordinary shares from time to time. Class A ordinary shares may be purchased in the open market or through privately negotiated transactions. The timing of such repurchases and actual number of shares repurchased will depend on a variety of factors including price, market conditions and applicable regulatory and corporate requirements. The share repurchase 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. As of the date of this filing, no Class A ordinary shares had been repurchased pursuant to the share repurchase plan.


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

References to ~~“we,” “us,” “our,” “our~~"we," "us," "our," "our company,~~” “Greenlight~~" "Greenlight Re,”" or ~~“the Company”~~"the Company" refer to Greenlight Capital Re, Ltd. and ~~our~~its wholly-owned ~~subsidiary,~~subsidiaries, Greenlight Reinsurance, Ltd. and Verdant Holding Company, Ltd., unless the context dictates otherwise. References to our ~~“Ordinary Shares”~~"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 and six months ended June 30, ~~2008~~2009 and ~~2007~~2008 and financial condition as of June 30, ~~2008~~2009 and December 31, ~~2007.~~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 onForm 10-K for the fiscal year ended December 31, ~~2007.~~2008.

Special Note About Forward-Looking Statements

Certain statements in Management’s Discussion and Analysis (“("MD~~&A”~~&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”~~"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.~~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~~"believe," "project," "predict," "expect," "anticipate," "estimate," "intend," "plan," "may," "should," "will," "would," "will be,~~” “will~~" "will continue,~~” “will~~" "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”~~"Risk Factors" (refer to Part I, Item 1A) contained in our annual report onForm 10-K for the fiscal year ended December 31, ~~2007.~~2008. We undertake no obligation to publicly update or revise ~~publicly~~ 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~~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 ~~Securities~~ Exchange Act, ~~of 1934, as amended,~~ we do not intend to make public announcements regarding reinsurance or ~~investment~~investments events that we do not believe, based on ~~management’s~~management's estimates and current information, will have a material adverse impact to the ~~Company’s~~Company's operations or financial position.

General

We are a Cayman Islands-based ~~specialty~~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, our wholly owned subsidiary, principally for the purpose of making strategic investments in a select group of property and casualty insurers and general agents in the U.S.

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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 ~~necessarily~~ be indicative of future performance. ~~In addition, due~~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~~"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; 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 ~~its~~ greater ~~predictability.~~predictability of the frequency business. We also expect that over time the profit margins and return on equity ~~for~~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

Due to our increasing market recognition and a stronger capital base, we continue to expect to see an increase in frequency business written in 2008 compared to 2007 and continued diversification of business by client, line of business, broker and geography. In the second quarter of 2008, our premium estimates on certain contracts were lower than initially expected mainly due to our clients writing less exposures in a softening pricing environment. This has caused second quarter premium to decline.

~~At the same time, we~~ We believe there currently is ~~an excess~~a lack of capacity in the property and casualty ~~reinsurance business as a whole, mainly~~industry due to ~~two consecutive years~~significant loss of ~~low natural catastrophe losses.~~capital from combined investment and underwriting losses in 2008. As a result, we expect to continue seeing significant opportunities to expand our business through the remainder of 2009 in both frequency and severity risks. We believe insurance pricing generally will continue to increase through 2010. Further, volatile lines of business may experience significant increases in pricing along with greater restrictions on the terms and conditions of insurance coverage. We believe that market conditions will harden during 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. In addition, competitive conditions could return if our competitors believe they now are able to raise additional capital to fund growth.

We believe that we are well positioned to compete for attractive opportunities in frequency business due to our increasing market recognition, and the ~~absence~~development of certain strategic relationships. 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 ~~market changing event in 2008,~~number of reinsurers. Further, we believe that ~~this excess capacity~~the financial and credit crisis in the U.S. and the rest of the world has the potential to cause significant losses in certain lines of business.

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

lines of business that experience significant loss experience;

lines of business where current market participants are experiencing financial distress or ~~wish~~uncertainty; and

business that is premium and capital intensive due to ~~sell~~regulatory and other requirements.

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 ~~near term. We intend~~Cayman Islands, enhancing our opportunity to ~~maintain our underwriting standards and discipline~~provide additional reinsurance to the Cayman Islands' captive market.

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Despite an increase in the ~~face~~S&P 500 index of ~~such potential~~37.9% from its low in March 2009 to the end of the quarter, we believe the economic outcome is highly uncertain which may prolong the current market ~~conditions.~~

~~Although current general market conditions in~~volatility. Our investment portfolio moved towards a more defensive position during the ~~reinsurance business may not be favorable,~~second quarter of 2009 ending with a net equity exposure of 7%. We will continue our defensive posture until security selection becomes the primary driver of performance. In the meantime, we continue to ~~believe that specific sectors within~~identify investment opportunities in the ~~reinsurance marketplace may provide attractive opportunities.~~current environment created by mispriced securities, both in equities and the distressed debt of corporate issuers.

In ~~particular,~~addition, we continue to anticipate that we will see attractive opportunities during the remainder of 2008 in certain casualty and property lines, including some property catastrophe coverages, motor liability, health and medical malpractice risks, for reasons set forth in our annual report on~~Form 10-K~~recently formed Verdant, a Delaware corporation, principally for the ~~fiscal year ended December 31, 2007.~~purpose of making strategic investments in a select group of property and casualty insurers and general agents in the U.S. 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 certain clients and create value for our shareholders through investment returns, fee income streams and underwriting profits.

We intend to continue monitoring market conditions to ~~be positioned~~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 ~~underwriting~~underlying results and product line concentrations in any given period may not be indicative of our future results of operations. Currently, we believe that market disruptions in some segments of the health markets have created some short-term opportunities, even as we are facing unfavorable general market conditions. In addition, we continue to develop business relating to the Cayman Islands’ captive market, which we believe can generate above average risk adjusted returns.

Critical Accounting Policies

Our condensed consolidated ~~financials~~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 onForm 10-K for the fiscal year ended December 31, ~~2007,~~2008 continue to

describe the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements. These accounting policies pertain to premium revenue recognition, investment valuations, loss and loss adjustment ~~expense reserves~~expenses, acquisition costs, and investment valuation. Effective January 1, 2008, as a result of adopting SFAS No. 157 and SFAS No. 159 we record unrealized gains and losses, if any, on private investments in net investment income in the condensed consolidated statements of income. There was no material impact to our results of operations or financial condition as a result of this change. We did not make any material changes to our valuation techniques or models during the period.

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.

Recently issued accounting standards and their impact to the Company have been presented under "Recently Issued Accounting Standards" in Note 2 of the accompanying condensed consolidated financial statements.

Results of Operations

~~For the~~ Three and Six Months Ended June 30, ~~2008,~~2009 and ~~2007~~2008

For the three months ended June 30, ~~2008, our~~2009, we reported net income ~~increased by $12.2~~of $92.2 million, as compared to $33.5 million reported for the same period in ~~2007 mainly~~2008. The increase in net income is principally due to ~~$11.1 million higher investment income compared to the same period in 2007. The~~our investment portfolio ~~reported~~reporting a net gain of $88.3 million, or a return of 13.9%, for the second quarter of 2009 as compared to a net investment income of $31.0 million, or a return of 4.5%, for the ~~second quarter of 2008 as compared to net investment~~same period in 2008. Underwriting income ~~of $19.9 million, a return of 6.8%, for the second quarter of 2007. The higher investment income~~ reported ~~in 2008 is primarily due to an increase in invested assets resulting from the net proceeds of our initial public offering in May 2007. Additionally, underwriting income increased to $6.1 million~~ for the three months ended June 30, ~~2008,~~2009 increased by $4.1 million to $10.2 million from ~~$4.3~~$6.1 million reported for the three months ended June 30, ~~2007. The increase in underwriting income for the three months ended June 30, 2008, was primarily due to lower loss and loss adjustment expenses, net of loss recoveries.~~2008.

For the six months ended June 30, ~~2008, our~~2009, we reported a net income ~~increased by $20.6~~of $120.0 million, as compared to net income of $28.8 million reported for the same period in ~~2007 mainly~~2008. The increase in net income is principally due to ~~$19.7 million higher investment income compared to the same period in 2007. The~~our investment portfolio ~~reported~~reporting a net ~~investment income~~gain of ~~$25.3~~$116.0 million, or a return of ~~3.6%~~19.1%, for the ~~first half of 2008~~six months ended June 30, 2009 as compared to a net investment income of ~~$5.5~~$25.3 million, or a return of ~~2.3%~~3.6%, for the ~~first half of 2007. Additionally, our underwriting~~same period in 2008. Underwriting income ~~accounted~~reported for ~~approximately $3.0~~the six months ended June 30, 2009 increased by $1.4 million ofto $13.0 million from $11.6 million reported for the ~~increase, while higher general and administrative expenses offset a portion of the increases in our underwriting and investment results.~~six months ended June 30, 2008.

~~One~~As a result of ~~our~~adopting SFAS No. 160, the non-controlling interest in joint venture was reclassified from liabilities into shareholders’ 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).

Our primary financial ~~goals~~goal is to increase the long-term value in fully diluted book value per share. ~~For~~During the three months ended June 30, ~~2008,~~2009, fully diluted book value increased by ~~$0.89~~$2.48 per share, or ~~5.4%~~17.4%, to ~~$17.29~~$16.73 per share from ~~$16.40~~$14.25 per share at March 31, ~~2008. For~~2009. During the six months ended June 30, ~~2008,~~2009, fully diluted book value increased by ~~$0.72~~$3.18 per share, or ~~4.3%~~23.5%, to ~~$17.29~~$16.73 per share from ~~$16.57~~$13.55 per share at December 31, ~~2007.~~2008. Fully diluted book value per share is a non-GAAP measure and represents basic book value per share combined with the impact from dilution of share based compensation including in-the-money stock options as of any period end. We believe that long term growth in fully diluted book value per share is the most relevant measure of our financial performance. In addition, fully diluted book value per share may be of benefit to our investors, shareholders, and other interested parties to form a basis of comparison with other companies within the reinsurance industry.

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Premiums Written

Details of gross premiums written are provided below:

Three Months Ended June 30, Six Months Ended June 30,
2008 2007 2008 2007
($ in thousands)

Frequency $ 20,801 82.0 % $ 30,943 47.3 % $ 77,646 80.8 % $ 63,801 61.6 %
Severity 4,559 18.0 34,502 52.7 18,480 19.2 39,708 38.4

Total $ 25,360 100.0 % $ 65,445 100.0 % $ 96,126 100.0 % $ 103,509 100.0 %

		Three months ended June 30,							Six months ended June 30,
		($ in thousands)							($ in thousands)
		2009			2008				2009				2008
Frequency	$	67,047	95.7	%	$	20,801	82.0	%	$	113,846	80.2	%		$	77,646	80.8	%
Severity		3,000	4.3			4,559	18.0			28,072	19.8				18,480	19.2
Total	$	70,047	100.0	%	$	25,360	100.0	%	$	141,918	100.0	%		$	96,126	100.0	%

We expect quarterly reporting of premiums written to beremain volatile as our underwriting portfolio continues to ~~develop and due to our strategy to insure a concentrated portfolio of significant risks.~~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 and six month periods ended June 30, ~~2008 to the same periods in 2007. The main contributing factor for the lower severity premiums written for~~2009 and 2008. For the three ~~and six month periods~~months ended June 30, ~~2008 is~~2009, the frequency premiums onincreased by $46.2 million. The largest contributor to the increase was a new multi-year ~~professional liability severity~~homeowners’ personal lines contract ~~written in~~entered into during the second quarter of ~~2007~~2009 accounting for $17.7 million of the increase. Increases in motor liability and health coverage premiums accounted for $8.3 million and $6.1 million of the increases respectively. In addition, frequency premiums written for general liability line were higher by $5.5 million. A contract entered into during July 2008 accounted for $12.5 million of the increase, offset by a $7.0 million reduction on another general liability contract which ~~were recognized~~was renewed in May 2009 as a quota share contract whereas the expiring contract was an excess of loss contract. Premiums written on quota share contracts are recorded over the period of coverage while premiums written on an excess of loss contract are recorded in full at ~~inception~~inception. Workers' compensation premiums written accounted for $3.3 million of the increase. The remaining increases in ~~accordance with our accounting policy~~frequency premiums resulted from premiums returned and premiums adjusted during the three months ended June 30, 2008.

~~for premium recognition.~~ For the six months ended June 30, ~~2008, approximately $44.1~~2009, the $36.2 million ~~or 45.9%,~~increase in frequency premiums written was largely attributable to a new multi-year homeowners’ personal lines contract which accounted for $17.7 million of the ~~gross~~increase. In addition, workers' compensation, and general liability lines contributed $8.5 million, and $6.8 million, respectively, to the increase in frequency premiums written. These increases in premiums written were ~~attributed to new contracts entered into~~offset by decreases in the specialty health premiums written of $2.5 million during the ~~first half~~six months ended June 30, 2009.

For the three months ended June 30, 2009, the decrease in severity premiums of ~~2008.~~$1.6 million was principally due to the fact that the comparative prior period included a multi-year professional liability contract for which the premiums were written in full at inception.

For the six months ended June 30, 2009, the increase in severity premiums of $9.6 million was principally due to an increase in commercial property lines, primarily from a new excess of loss contract written ($11.5 million) and additional premiums on an existing excess of loss contract ($2.5 million), offset by a decrease in medical malpractice lines ($4.5 million). A ~~more~~ detailed analysis of gross premiums written by line of business can be found in Note 8 to the condensed consolidated financial statements.

We entered into retrocessional contracts amounting to $5.6 million of ceded premiums for the three months ended June 30, 2008 compared to $14.5 million of ceded premiums for same period in 2007. This decrease is attributed mainly to the following two factors.


	•	A frequency contract was renewed during the three month period ended June 30, 2008 which had $5.9 million lower ceded premiums than the original contract entered into during the three months ended June 30, 2007. The lower ceded premiums on this contract were due to a combination of us retaining additional risk compared to the original contract, and due to lower estimated subject premiums on the assumed contract.

	•	~~Premium adjustments were recorded on two frequency contracts during the three month period ended June 30, 2008 which accounted for approximately $3.0 million of the decrease.~~

For the six months ended June 30, ~~2008,~~2009, our ceded premiums were $7.8 million compared to $14.9 million of ceded ~~decreased by $13.4 million, or 47.4%, mainly due to~~premiums for the ~~following factors.~~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 2009 and were not renewed.


	•	~~A frequency contract was renewed at lower estimated subject premiums.~~

	•	~~A frequency contract was restructured on renewal wherein we retained certain additional risks previously ceded to a third party.~~

	•	~~Premium adjustments were recorded on two frequency contracts during the six month period ended June 30, 2008.~~

Details of net premiums written are provided below:

Three Months Ended June 30, Six Months Ended June, 30
2008 2007 2008 2007
($ in thousands)

Frequency $ 15,186 76.9 % $ 16,409 32.2 % $ 62,758 77.3 % $ 35,524 47.2 %
Severity 4,559 23.1 34,502 67.8 18,481 22.7 39,708 52.8

Total $ 19,745 100.0 % $ 50,911 100.0 % $ 81,239 100.0 % $ 75,232 100.0 %

		Three months ended June 30,							Six months ended June 30,
		($ in thousands)							($ in thousands)
		2009				2008			2009				2008
Frequency	$	60,716	95.7	%	$	15,186	76.9	%	$	106,769	79.6	%	$	62,758	77.3	%
Severity		2,720	4.3			4,559	23.1			27,318	20.4			18,481	22.7
Total	$	63,436	100.0	%	$	19,745	100.0	%	$	134,087	100.0	%	$	81,239	100.0	%

~~Our severity business includes contracts that contain or may contain natural peril loss exposure. As~~

Link to table of August 1, 2008, our maximum aggregate loss exposure to any series of natural peril events was $69.5 million. For purposes of the preceding sentence, aggregate loss exposure is equal to the difference between the aggregate limits available in the contracts that contain natural peril exposure and 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:contents

Single Event
Aggregate

Zone
Loss Loss
($ in thousands)

USA⁽¹⁾
$ 51,750 $ 69,500
Europe 43,750 51,500
Japan 43,750 51,500
Rest of the world 23,750 31,500
Maximum Aggregate 51,750 69,500


⁽¹⁾		~~Includes the Caribbean~~

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 June 30, Six Months Ended June 30,
2008 2007 2008 2007
($ in thousands)

Frequency $ 15,341 62.2 % $ 20,476 82.0 % $ 33,295 63.8 % $ 36,417 79.4 %
Severity 9,341 37.8 4,496 18.0 18,879 36.2 9,476 20.6

Total $ 24,682 100.0 % $ 24,972 100.0 % $ 52,174 100.0 % $ 45,893 100.0 %

For the three months ended June 30, 2008, the earned premiums on the frequency business decreased $5.1 million compared to the same period in 2007. The decrease was mainly due to revised estimates of frequency premiums from certain 2008 contracts, and due to premiums returned on a 2007 personal lines contract. This decrease was offset by a $4.8 million increase in the severity business earned premiums for the same periods. The increase in severity earned premiums relates to the full three months of earned premiums for the three months ended June 30, 2008, on the multi-year professional liability contract written towards the end of the second quarter of 2007.

		Three months ended June 30,							Six months ended June 30,
		($ in thousands)							($ in thousands)
		2009				2008			2009				2008
Frequency	$	38,154	77.3	%	$	15,341	62.2	%	$	70,032	73.3	%	$	33,295	63.8	%
Severity		11,193	22.7			9,341	37.8			25,508	26.7			18,879	36.2
Total	$	49,347	100.0	%	$	24,682	100.0	%	$	95,540	100.0	%	$	52,174	100.0	%

~~For the six months ended June 30, 2008, the total earned premiums increased $6.3 million, or 13.7%.~~

The increase in net premiums earned is attributable principally to increased ~~net~~frequency premiums ~~written and~~being earned ~~from~~as a result of the frequency portfolio developing ~~underwriting portfolio for the six months ended June 30, 2008,~~further, as compared to the corresponding ~~2007~~2008 period. The increase in severity earned premiums relate to the full six months of earned premiums for the first half of fiscal 2008 on the multi-year excess of loss contract written towards the end of the second quarter of 2007.

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 June 30, Six Months Ended June 30,
2008 2007 2008 2007
($ in thousands)

Frequency $ 6,102 65.3 % $ 10,594 95.1 % $ 14,098 65.7 % $ 19,165 95.2 %
Severity 3,235 34.7 544 4.9 7,363 34.3 961 4.8

Total $ 9,337 100.0 % $ 11,138 100.0 % $ 21,461 100.0 % $ 20,126 100.0 %

		Three months ended June 30,								Six months ended June 30,
		($ in thousands)								($ in thousands)
		2009					2008			2009				2008
Frequency	$	23,800		101.0	%	$	6,102	65.3	%	$	40,777	75.9	%	$	14,098	65.7	%
Severity		(253	)	(1.0	)		3,235	34.7			12,966	24.1			7,363	34.3
Total	$	23,547		100.0	%	$	9,337	100.0	%	$	53,743	100.0	%	$	21,461	100.0	%

The loss ratios for our frequency business were ~~42.3%~~62.4% and ~~52.6%~~39.8% for the three months ended June 30, 2009 and 2008, respectively. The increase in frequency loss ratio is mostly the result of the mix of contracts, and a large reduction of estimated ultimate loss recorded on a personal property contract during the three months ended June 30, 2008. The increase in loss ratio also related to earning of premiums on motor, general liability and workers' compensation contracts. For the three months ended June 30, 2009, the incurred losses on severity contracts were $(0.3) million due to a $2.8 million reduction in the estimated reserves on an aggregate catastrophe excess of loss contract.

The loss ratios for our frequency business were 58.2% and 42.3% for the six ~~month periods~~months ended June 30, 2009 and 2008, respectively. The increase in frequency loss ratio is primarily due to the fact that the loss ratio for the six months ended June 30, 2008, ~~and 2007 respectively. The lower loss ratio for frequency business for 2008 primarily reflects~~was exceptionally low due to favorable loss development ~~compared to~~on a large personal lines contract. For the ~~corresponding 2007 period.~~

six months ended June 30, 2009, a more diverse mix of business, including motor liability and specialty health contracts which generally have higher expected loss ratios, resulted in our loss ratio being higher than the same period in 2008. We expect losses incurred on our severity business to be volatile from period to period. The loss ratios for our severity business were ~~39.0%~~50.8% and ~~10.1%~~39.0% for the six ~~month periods~~months ended June 30, ~~2008~~2009 and ~~2007~~2008, respectively. The increase in ~~the~~severity loss ratio ~~for severity business~~ during the six ~~month period~~months ended June 30, ~~2008~~2009 is primarily due to ~~the different composition~~losses incurred on an aggregate catastrophe excess of ~~the severity underwriting portfolio and partially due to losses developing on a non natural peril severity~~loss contract. During the ~~corresponding 2007 period, a majority of the severity underwriting portfolio related to natural peril and professional liability risks, while for the current~~ six ~~month period~~months ended June 30, ~~2008,~~2009, the ~~severity contracts are diversified between medical malpractice and professional and general liability as well as~~insured reported that the aggregation of several 2008 natural peril ~~risks.~~losses resulted in an estimated aggregate loss which exceeded its retention limits and permeated into the excess of loss limit insured by us. For the three months ended March 31, 2009, we had recorded an estimated reserve of $9.5 million relating to this contract which was adjusted at June 30, 2009, to $6.7 million based on updated information received from the insured.

Losses incurred in the three and six months ended June 30, 2009 can be further broken down into losses paid and changes in loss reserves. Losses incurred for the three and six months ended June 30, 2009 and 2008 were comprised as follows:

	Three months ended June 30, 2009							Three months ended June 30, 2008
	Gross		Ceded			Net		Gross		Ceded			Net
	($ in thousands)
Losses paid (recovered)	$	8,817	$	(1,156	)	$	7,661	$	6,456	$	(2,584	)	$	3,872
Change in reserves		15,766		120			15,886		5,229		236			5,465
Total	$	24,583	$	(1,036	)	$	23,547	$	11,685	$	(2,348	)	$	9,337

Link to table of contents

	Six months ended June 30, 2009							Six months ended June 30, 2008
	Gross		Ceded			Net		Gross		Ceded			Net
	($ in thousands)
Losses paid (recovered)	$	17,189	$	(2,312	)	$	14,877	$	11,840	$	(4,409	)	$	7,431
Movement in reserves		34,083		4,783			38,866		14,988		(958	)		14,030
Total	$	51,272	$	2,471		$	53,743	$	26,828	$	(5,367	)	$	21,461

The increase in gross losses incurred for the three and six months ended June 30, 2009, is principally due to higher premiums being earned on a more diverse mix of business and the underwriting portfolio continuing to develop. For the six months ended June 30, 2009, the decrease in ceded reserves of $4.8 million was principally due to favorable loss development on an inward contract and the reduction in reserves recoverable on the corresponding retroceded contract. During the six ~~month period~~months ended June 30, ~~2008,~~2009, the aggregate development of prior period reinsurance reserves ~~for frequency and severity businesses combined~~ was not significant.

~~Losses incurred in the three and six month periods ended June 30, 2008 and 2007 were comprised of losses paid and changes in loss reserves as follows:~~

Three Months Ended June 30, 2008 Three Months Ended June 30, 2007
Gross Ceded Net Gross Ceded Net
($ in thousands)

Losses paid $ 6,456 $ (2,584 ) $ 3,872 $ 2,394 $ (651 ) $ 1,743
Increase (decrease) in reserves 5,229 236 5,465 11,911 (2,516 ) 9,395

Total $ 11,685 $ (2,348 ) $ 9,337 $ 14,305 $ (3,167 ) $ 11,138

Six Months Ended June 30,
Six Months Ended June 30,

2008 2007
Gross Ceded Net Gross Ceded Net
($ in thousands)

Losses paid $ 11,840 $ (4,409 ) $ 7,431 $ 2,394 $ (651 ) $ 1,743
Increase (decrease) in reserves 14,988 (958 ) 14,030 23,652 (5,269 ) 18,383

Total $ 26,828 $ (5,367 ) $ 21,461 $ 26,046 $ (5,920 ) $ 20,126

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 June 30, Six Months Ended June 30,
2008 2007 2008 2007
($ in thousands)

Frequency $ 8,145 88.3 % $ 8,715 91.6 % $ 16,538 86.3 % $ 15,187 88.2 %
Severity 1,083 11.7 800 8.4 2,619 13.7 2,040 11.8

Total $ 9,228 100.0 % $ 9,515 100.0 % $ 19,157 100.0 % $ 17,227 100.0 %

		Three months ended June 30,							Six months ended June 30,
		($ in thousands)							($ in thousands)
		2009				2008		��	2009				2008
Frequency	$	14,124	90.7	%	$	8,145	88.3	%	$	27,616	95.8	%	$	16,538	86.3	%
Severity		1,454	9.3			1,083	11.7			1,207	4.2			2,619	13.7
Total	$	15,578	100.0	%	$	9,228	100.0	%	$	28.823	100.0	%	$	19,157	100.0	%

Increased acquisition costs for the three and six months ended June 30, 2009, compared to the corresponding 2008 periods, are a result of the increases in premiums earned during the periods. For the six ~~month period~~months ended June 30, ~~2008,~~2009, the acquisition cost ratio for frequency business was ~~49.7%~~39.4% compared to ~~41.7%~~49.7% for the corresponding ~~2007~~2008 period. The ~~increase~~lower ratio was ~~primarily the result of higher profit commissions accrued on a frequency contract~~ due to ~~favorable underwriting results. The~~the fact that the acquisition cost ratio for ~~severity business was 13.9% for~~ the six ~~month period~~months ended June 30, 2008 ~~compared~~was exceptionally high due to ~~21.5% for~~ the ~~corresponding 2007 period.~~accrual of profit commissions on a large personal lines contract as a result of favorable loss development. The decrease in ~~severity~~the acquisition ~~cost~~ ratio is attributed, to a ~~result of (a)~~lesser extent, to a downward swing in profit ~~commissions paid during the first half of fiscal 2007 on a contract which was not renewed~~commission rates for ~~the following year, (b) the non-renewal in 2008 of certain natural peril catastrophe severity~~specialty health contracts which had ~~higher acquisition cost ratios, and (c)~~adverse loss development during the ~~earning of premiums on certain multi-year professional liability contracts, incepted in the later part of the second quarter of 2007, which have no~~six months ended June 30, 2009. We expect acquisition costs ~~associated with them. We expect that acquisition costs will~~to be higher for frequency business than for severity business. The acquisition cost ratio for severity business was 4.7% for the six months ended June 30, 2009 compared to 13.9% for the corresponding 2008 period. The lower 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 six months ended June 30, 2009. Overall, the total acquisition cost ratio decreased to 30.2% for the six months ended June 30, 2009 from 36.7% for the ~~six month period ended June 30,~~corresponding 2008 ~~from 37.5% for the corresponding 2007~~ period.

General and Administrative Expenses

For the three ~~month periods~~months ended June 30, ~~2008 and 2007 our~~2009, we reported general and administrative expenses ~~were~~of $5.3 million compared to $3.2 million ~~and $2.9 million, respectively.~~reported during the same period in 2008. The increase ~~primarily relates~~is principally due to higher salaries and benefits ~~paid for additional staff hired subsequent~~expenses as a result of an increase in the deferred component of the employees’ performance bonus accrual relating to the ~~second quarter of fiscal 2007.~~2007 and 2008 underwriting years.

~~For the six month period ended June 30, 2008 the~~Our general and administrative expenses ~~increased $1.8~~of $9.7 million ~~or 29.9% compared to~~for the six months ended June 30, 2009 were higher than the $7.7 million reported for the same period in ~~2007. The increase primarily relates to higher employee bonuses approved by the Board of Directors during the first quarter of~~ 2008 ~~relating~~due to the ~~2007 fiscal year.~~

~~For the six month periods ended June 30, 2008~~higher salaries and ~~2007, the~~benefits expenses explained above. The general and administrative expenses for the six months ended June 30, 2009 and 2008 include ~~$1.4~~$1.5 million and ~~$1.5~~$1.4 million, respectively, for the expensing of the fair value of stock options and restricted stock granted to employees and directors.

Net Investment Income

A summary of our net investment income is as follows:

Three Months Ended
Six Months Ended

June 30, June 30,
2008 2007 2008 2007
($ in thousands)

Realized gains and change in unrealized gains, net $ 36,727 $ 17,462 $ 32,065 $ 1,418
Interest, dividend and other income 8,168 6,962 12,941 11,251
Interest, dividend and other expenses (5,099 ) (1,505 ) (8,501 ) (2,868 )
Investment advisor compensation (8,771 ) (2,995 ) (11,242 ) (4,258 )

Net investment income $ 31,025 $ 19,924 $ 25,263 $ 5,543

		Three months ended June 30,				Six months ended June 30,
		($ in thousands)				($ in thousands)
		2009		2008		2009		2008
Realized gains and movement in unrealized gains and losses, net	$	97,757	$	36,727	$	131,198	$	32,065
Interest, dividend and other investment income		6,683		8,168		9,729		12,941
Interest, dividend and other investment expenses		(3,902	)	(5,099	)	(7,436	)	(8,501	)
Investment advisor compensation		(12,215	)	(8,771	)	(17,451	)	(11,242	)
Net investment income	$	88,323	$	31,025	$	116,040	$	25,263

~~For the three months ended June 30, 2008, investment~~

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Investment income, net of all fees and expenses, resulted in a ~~return~~gain of ~~4.5%~~13.9% on our investment ~~portfolio. This compares~~portfolio for the three months ended June 30, 2009, compared to a ~~6.8% investment return reported~~gain of 4.5% for the corresponding ~~2007~~2008 period. ~~For~~Investment income, net of all fees and expenses, resulted in a gain of 19.1% on our investment portfolio for the six months ended June 30, 2009. This compares to a gain of 3.6% reported for the corresponding 2008 period. Although the ~~return on~~ investment ~~net of all fees and expenses, was 3.6% compared to 2.3%~~returns for the first ~~half~~quarter were generated mainly from our short investments, the returns for the second quarter were generated from our long investments, which gained 30% gross of ~~2007.~~all fees. This was offset by losses of 14% on the short investments. Approximately 75% of the long returns resulted from equities and 25% resulted from debt instruments. The returns on long equities was mainly due to the fair values of our larger long equities recovering which resulted in the reversal of unrealized losses previously recognized. The return on debt instruments was mainly due to our investment in Ford Motor Company’s secured debt.

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 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 investment loss is earned. For the year ended December 31, 2008, the portfolio reported an investment loss and as a result no performance compensation was paid to DME Advisors for fiscal 2008. 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 June 30, 2009, the loss carry forward balance was $178.2 million. Included in investment advisor compensation for the three and six months ended June 30, 2009 was performance compensation of $9.7 million and $12.7 million, respectively.

Our investment advisor, DME Advisors, and its affiliates manage and expect to manage ~~other~~ client accounts ~~besides~~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, ~~we also provide~~ 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 long 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~~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.

Verdant, a Delaware corporation, is subject to corporate income taxes on its taxable income. The effective federal income tax rate for Verdant is expected to be 35%. For the six months ended June 30, 2009, a current tax expense of $17,600 was recorded based on the pre-tax income earned by Verdant during the period. Included in other assets is a deferred tax asset of $74,200 resulting from the temporary differences between taxable income and reported net income of Verdant. An accrual had been recorded for taxes payable in other liabilities in the condensed consolidated balance sheet at June 30, 2009 for $91,800. We believe it is more likely than not that the deferred tax asset will be fully realized in the future and therefore no valuation allowance has been recorded.

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 six ~~month periods~~months ended June 30, ~~2008~~2009 and ~~2007:~~2008:

Six Months Ended June 30, 2008 Six Months Ended June 30, 2007
Frequency Severity Total Frequency Severity Total

Loss ratio 42.3 % 39.0 % 41.1 % 52.6 % 10.1 % 43.9 %
Acquisition cost ratio 49.7 % 13.9 % 36.7 % 41.7 % 21.5 % 37.5 %

Composite ratio 92.0 % 52.9 % 77.8 % 94.3 % 31.6 % 81.4 %
Internal expense ratio 14.7 % 12.9 %

Combined ratio 92.5 % 94.3 %

	Six months ended June 30, 2009									Six months ended June 30, 2008
	Frequency			Severity			Total			Frequency			Severity			Total
Loss ratio		58.2	%		50.8	%		56.3	%		42.3	%		39.0	%		41.1	%
Acquisition cost ratio		39.4	%		4.7	%		30.2	%		49.7	%		13.9	%		36.7	%
Composite ratio		97.6	%		55.5	%		86.5	%		92.0	%		52.9	%		77.8	%
Internal expense ratio								10.2	%								14.7	%
Combined ratio								96.7	%								92.5	%

The loss ratio is calculated by dividing loss and loss adjustment expenses incurred by net premiums earned. For the six months ended June 30, 2008, our frequency and severity businesses reported a loss ratio of 42.3%, and 39.0% respectively. A more diverse mix of lines of business in our severity business combined with losses developing on a severity contract, contributed to the higher loss ratio for our severity business during the six months ended June 30, 2008 than in the corresponding 2007 period. 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.

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. ~~However, the higher internal expense ratio reported for~~During the six ~~month period~~months ended June 30, 2008 was mainly due to higher general and administrative expenses as a result of additional bonus expensed during the period relating to the 2007 underwriting year and also reflects the cost of additional staff hired subsequent to the second quarter of 2007. During the six month period ended June 30, 2008,2009, our net earned premiums increased ~~13.7%~~83.1% while our general and administrative expenses increased ~~29.9%~~26.6% as compared to the corresponding ~~2007~~2008 period, resulting in a ~~higher~~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 six ~~month period~~months ended June 30, ~~2008~~2009 was ~~92.5% compared to 94.3% for the same period in 2007.~~96.7%. Given the nature of our opportunistic underwriting strategy, we expect that our combined ratio may be volatile from period to period.

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Financial Condition

Investment in Securities

As of June 30, 2009, our investments in securities reported in the condensed consolidated balance sheets were $595.6 million compared to $494.0 million as of December 31, 2008, an increase of 20.6%. The increase was principally due to investment income of $116.0 million for the six months ended June 30, 2009, and partly due to investments purchased from net positive cash flows generated from underwriting operations. As of June 30, 2009, our investment portfolio had a gross overall exposure of 76% long and 55% short. Our investment portfolio moved towards a more defensive position during the second quarter of 2009 with an ending net equity exposure of 7%. During the second quarter of 2009, we replaced our entire position in a gold exchange traded fund with physical gold which is being held at a professional custodian facility. Physical gold has been included in other investments, at fair value, on the condensed consolidated balance sheet as of June 30, 2009.

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 condensed consolidated statements of income. As of June 30, 2009, 82.0% 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% was comprised of securities valued based on observable inputs other than quoted prices (level 2) and 1.6% 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 June 30, 2009, $133.2 million of our investments in securities including derivatives were valued based on multiple broker quotes, all of which were based on observable market information and classified as level 2. During the six months ended June 30, 2009, debt instruments with a fair value of $5.0 million were transferred from level 2 to level 3, as there was no longer an active market for these instruments and we were unable to obtain multiple quotes for these instruments. 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. In addition, during the six months ended June 30, 2009, debt instruments with a fair value of $3.2 million were transferred out of level 3, as multiple broker quotes were obtained for determining fair values.

Non-observable inputs used by our investment advisor include discounted cash flow models for valuing certain corporate debt instruments. 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 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 ~~losses.~~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 ~~use~~rely on industry information, knowledge of the business written and management’s judgment.

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Reserves for loss and loss adjustment expenses as of June 30, ~~2008~~2009 and December 31, ~~2007~~2008 were comprised of the following:

June 30, 2008 December 31, 2007
Case
Case

Reserves IBNR Total Reserves IBNR Total
($ In thousands)

Frequency $ 1,055 $ 42,759 $ 43,814 $ 1,712 $ 34,477 $ 36,189
Severity — 13,553 13,553 — 6,188 6,188

Total $ 1,055 $ 56,312 $ 57,367 $ 1,712 $ 40,665 $ 42,377

	June 30, 2009						December 31, 2008
	Case Reserves		IBNR		Total		Case Reserves		IBNR		Total
	($ in thousands)
Frequency	$	9,600	$	66,939	$	76,539	$	6,666	$	49,127	$	55,793
Severity		8,950		30,045		38,995		—		25,632		25,632
Total	$	18,550	$	96,984	$	115,534	$	6,666	$	74,759	$	81,425

The ~~overall~~ increase in loss reserves is ~~almost entirely a function of~~principally due to the ~~additional exposure written~~increase in earned premiums during the six months ended June 30, ~~2008, changes in~~2009. As of June 30, 2009, the severity case reserves pertained to a catastrophe excess of loss ~~reserves~~contract ($6.7 million) and the balance relating to ~~the development of losses on certain severity contracts, and favorable loss development on certain frequency contracts mostly offsetting the increase in reserves.~~

a professional liability contract. For ~~substantially all~~most of the contracts written as of June 30, ~~2008,~~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 August 1, 2009, our maximum aggregate loss exposure to any series of natural peril events was $75.4 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)

$
60,350

$
75,350

Europe

48,800

48,800

Japan

48,800

48,800

Rest of the world

28,800

28,800

Maximum Aggregate

60,350

75,350

(1) Includes the Caribbean

Liquidity and Capital Resources

General

~~We are~~Greenlight Capital Re, Ltd. is organized as a holding company with no operations of ~~our~~its own. As a holding company ~~we have~~it has minimal continuing cash needs, ~~and~~ most of ~~such needs~~which are ~~principally related to the payment of~~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. ~~There are restrictions~~Restrictions on Greenlight ~~Reinsurance, Ltd.’s~~Reinsurance’s ability to pay dividends ~~which~~ 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.

As of June 30, 2008, the financial strength of our reinsurance subsidiary was rated “A-(Excellent)” by A.M. Best Company. This rating reflects the A.M. Best Company’s opinion of our financial strength, operating performance and ability to meet obligations and it is not an evaluation directed toward the protection of investors or a recommendation to buy, sell or hold our Class A ordinary shares.

Sources and Uses of Funds

Our sources of funds primarily consist of premium receipts (net of brokerage and ceding commissions) ~~and~~, investment income (net of advisory compensation and investment expenses), including realized ~~gains.~~gains, and other income from fees generated by Verdant. We use cash ~~from our operations~~ to pay losses and loss adjustment expenses, profit commissions and general and administrative expenses. In addition, during the six months ended June 30, 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 June 30, ~~2008,~~2009, approximately 96% of our ~~investment portfolio was primarily~~investments in securities were comprised of publicly-traded equity securities, actively traded debt instruments and gold bullion, which can be readily liquidated to meet current and future liabilities. We believe that we have ~~the~~sufficient flexibility to liquidate our long securities to generate ~~sufficient~~ 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 six ~~month period~~months ended June 30, ~~2008~~2009, we had a positive cash flow of ~~$33.3 million. We~~$39.3 million and we generated ~~$23.9~~$30.5 million in cash from operating activities primarily relating to net premiums collected and retained from underwriting operations. As of June 30, ~~2008,~~2009, we believe we ~~had~~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, orother 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 ~~from~~using operating cash flow. ~~However,~~We filed a Form S-3 registration statement for an aggregate principal amount of $200.0 million in securities, which was declared effective by the SEC on July 10, 2009, in order to provide us with additional flexibility and timely access to public capital markets should we ~~cannot provide assurances that in the future we will not issue equity or incur indebtedness to implement our business strategy, pay claims or make acquisitions.~~

We may also use available cash to repurchase our Class A ordinary shares from time to time. Currently the Board has authorized management to repurchase up to two million Class A ordinary shares from time to time.require additional capital for working capital, capital expenditures, acquisitions, and for other general corporate purposes.

Although ~~Greenlight Capital Re, Ltd. is~~we are not subject to any significant legal prohibitions on the payment of dividends, Greenlight Reinsurance ~~Ltd.~~ is subject to Cayman Islands regulatory constraints that affect its ability to pay dividends to ~~Greenlight Capital Re, Ltd.~~us and include a minimum net worth requirement. Currently, the statutory minimum net worth requirement for Greenlight Reinsurance ~~Ltd.~~ is $120,000. In addition, ~~to Greenlight Reinsurance, Ltd. being restricted from paying a dividend if such a dividend would cause its net worth to drop to less than the required minimum,~~ any dividend payment would have to be approved by the appropriate Cayman Islands regulatory authority prior to payment.

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Letters of Credit

Greenlight Reinsurance ~~Ltd.~~ 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 ~~for~~from reinsurance obtained from unlicensed or non-admitted insurers we anticipate that all of our U.S. clients and some of ournon-U.S. clients will require us to provide collateral through funds withheld, trust arrangements, letters of credit or a combination thereof.

As of June 30, 2009, Greenlight Reinsurance ~~Ltd. has~~had a letter of credit facility ~~as of June 30, 2008~~ of $400.0 million with Citibank, N.A. with a termination date of October 11, ~~2009.~~2010. 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.

~~An additional~~ In addition, at June 30, 2009, Greenlight Reinsurance had a $25.0 million letter of credit facility with ~~UniCredit~~Butterfield Bank ~~Cayman Islands Ltd. (formerly Bank Austria Cayman Islands Ltd.~~(Cayman) Limited ("Butterfield Bank") ~~was terminated on~~with a termination date of June 6, ~~2008. Any letters~~2010. The termination date is automatically extended for an additional year unless written notice of ~~credit issued~~cancellation is delivered to the other party at least 30 days prior to the termination ~~under this facility remain in effect until their respective expiry dates.~~date.

As of June 30, ~~2008,~~2009, an aggregate amount of $223.1 million (December 31, 2008: $167.3 million) in letters of credit ~~totaling $140.7~~was issued from the available $425.0 million ~~were outstanding under the above letters of credit~~ facilities. Under ~~these~~the letter of credit facilities, we ~~are required to~~ provide collateral that may consist of equity ~~securities.~~securities and cash equivalents. As of June 30, ~~2008,~~2009, we had pledged ~~$225.1~~$230.3 million (December 31, 2008: $220.2 million) of equity securities and cash equivalents as collateral for the above letter of credit facilities. ~~The~~

On July 21, 2009, Greenlight Reinsurance entered into a $50.0 million letter of credit facility ~~agreements contain~~with Bank of America, N.A. This facility terminates on July 20, 2010, although the termination date is automatically extended for an additional year unless notice is delivered to the other party at least 90 days prior to the termination date.

Each of the facilities contains various covenants that, in part, restrict Greenlight ~~Reinsurance, Ltd.’s~~Reinsurance's ability to place a lien or charge on the pledged assets ~~to effect transactions with affiliates, to enter into a merger or sell certain assets~~ and further restrict Greenlight ~~Reinsurance, Ltd.’s~~Reinsurance's ability to issue any debt without the consent of the letter of credit ~~providers.~~provider. Additionally, if an event of default exists, as defined in the letter of credit agreements, Greenlight Reinsurance ~~Ltd.~~ will be prohibited from paying ~~dividends.~~dividends to us. For the six ~~month period~~months ended June 30, ~~2008,~~2009, the Company was in compliance with all of the covenants under each of ~~the letter of credit facility agreements. In addition to the credit facilities described above, the Company is in the process of evaluating additional~~these facilities.

Capital

As of June 30, ~~2008,~~2009, total shareholders’ equity was ~~$635.8~~$614.5 million compared to ~~$605.6~~$491.4 million at December 31, ~~2007.~~2008. This increase in total shareholders’ equity is principally due to the net income of ~~$28.8~~$120.0 million reported during the six ~~month period~~months ended June 30, ~~2008.~~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.~~strategy for the foreseeable future. Consequently, we do not presently anticipate that we will incur any material indebtedness in the ordinary course of our business. ~~However,~~We filed a Form S-3 registration statement for an aggregate principal amount of $200.0 million in securities, which was declared effective by the SEC on July 10, 2009, in order to provide us with additional flexibility and timely access to public capital markets should we ~~cannot provide assurances that in the future we will not be required to raise~~require additional ~~equity or incur indebtedness to implement our business strategy, pay claims or make acquisitions.~~ capital for working capital, capital expenditures, acquisitions, and for other general corporate purposes. We did not make any significant capital expenditures during the ~~period from inception to~~three months ended June 30, ~~2008.~~2009.

On August 5, 2008, the Board adopted a share repurchase plan authorizing the Company to repurchase up to two million Class A ordinary shares. Management may from time to time repurchase these shares to optimize the Company’s capital structure. Shares may be purchased in the open market or through privately negotiated transactions. The timing of such repurchases and actual number of shares repurchased will depend on a variety of factors including price, market conditions and applicable regulatory and corporate requirements. 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. The Company has not repurchased any shares under its share repurchase plan as of the date of this filing.

Contractual Obligations and Commitments

The following table shows our aggregate contractual obligations by time period remaining to due date as of June 30, ~~2008:~~

Less Than
More Than

Total 1 Year 1-3 Years 3-5 Years 5 Years
($ in thousands)

Operating lease obligations $ 216 $ 97 $ 119 $ — $ —
Specialist service agreement 1,452 652 800 — —
Private equity investments⁽¹⁾
26,913 26,913 — — —
Loss and loss adjustment expense reserves⁽²⁾
57,367 28,682 15,437 4,948 8,300

$ 85,948 $ 56,344 $ 16,356 $ 4,948 $ 8,300

2009:

	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	($ in thousands)
Operating lease obligations(1)	$	378	$	570	$	552	$	1,105	$	2,605
Specialist service agreement		500		300		—		—		800
Private equity investments(2)		18,949		—		—		—		18,949
Loss and loss adjustment expense reserves(3)		40,517		42,780		17,872		14,365		115,534
	$	60,344	$	43,650	$	18,424	$	15,470	$	137,888

(1)

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

⁽¹⁾

(2)

As of June 30, ~~2008,~~2009, we had made commitments to invest a total of ~~$31.6~~$49.6 million in private investments. As of June 30, ~~2008,~~2009, we had invested ~~$4.7~~$30.7 million of this amount, and our remaining commitments to these ~~vehicles~~investments were ~~$26.9~~$18.9 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 with no fixed payment schedules 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.~~securities without specific approval from the Board of Directors.


⁽²⁾(3)		~~The~~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.

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

~~As discussed in Note 9 of the financial statements, on~~ 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 ~~the rental payments commence from the earlier of December 1, 2008 or when we occupy the premises. We currently do not anticipate occupying the premises prior to December 1, 2008.~~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 condensed consolidated financial statements.

Effective September 1, 2007, we entered into a service agreement with a specialist service provider ~~whereby~~for the ~~specialist service provider provides~~provision of administration and support in developing and maintaining business relationships, reviewing and recommending programs and managing risks onrelating 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 contracts to which the Company is bound ~~contracts~~ are adequately ~~run-off~~administered by the specialist service provider. The minimum payments are included in the above table under specialist service agreement and in Note 7 to the accompanying condensed consolidated financial statements.

As described above, we had one letter of credit facility as of June 30, 2008. This $400.0 million facility can be terminated by either party with effect from any October 11, the anniversary date, by providing written notification to the other party at least 120 days before the anniversary date. The earliest possible termination date of this agreement is October 11, 2009.

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 wethe Company or DME ~~terminate~~Advisors terminates the agreement by giving 90 days notice prior to the end of the three year term. Pursuant to this agreement, ~~we pay~~the Company pays a monthly management fee of 0.125% on ~~our~~the Company’s share of the assets managed by DME Advisors and performance compensation of 20% on the net investment income of ~~our~~the Company’s share of assets managed by DME Advisors subject to a loss ~~carryforward~~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 of June 30, 2009, the loss carry forward balance was $178.2 million. For the six months ended June 30, 2009, $12.7 million was accrued relating to performance compensation for DME Advisors at the reduced rate of 10% of profits.

In February 2007, wethe Company entered into a service agreement with DME Advisors pursuant to which DME Advisors will provide investor relations services to usthe Company for monthly compensation of $5,000 ~~per month (plus expenses).~~plus expenses. The agreement had an initial term of one year, and will continue for ~~sequential~~subsequent one year periods until terminated by us or ~~DME.~~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.

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Item 3.	*QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK*

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

• equity price risk;


	•	~~equity price risk;~~

	•	~~foreign currency risk;~~

	•	~~interest rate risk;~~

	•	~~credit risk; and~~

	•	~~effects of inflation.~~

• foreign currency risk;

• interest rate risk;

• credit risk;

• effects of inflation; and

• political risk.

~~EQUITY PRICE RISK.~~Equity price risk. As of June 30, ~~2008,~~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 ~~the~~their current reported value. This risk is partly mitigated by the presence of both long and short equity securities. As of June 30, ~~2008,~~2009, a 10% decline in the price of each of these listed equity securities and equity-based derivative instruments would result in a ~~$21.4~~$1.1 million, or ~~3.0%~~0.2%, decline in the fair value of ~~the~~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.~~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 June 30, ~~2008,~~2009, we ~~have~~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 June 30, ~~2008, our gross exposure to foreign denominated securities was approximately $209.0 million. However, as of June 30, 2008, the majority~~2009, some of our currency exposure resulting from ~~these~~ foreign denominated securities (longs and shorts) was ~~hedged,~~reduced by offsetting cash balances (shorts and longs) denominated in the corresponding foreign currencies including European Union euro, Canadian dollar, Japanese yen and British pound, leading to a net exposure to foreign currencies of ~~$24.6~~$152.0 million. As of June 30, ~~2008,~~2009, a 10% decrease in the value of the

United States dollar against select foreign currencies would result in a ~~$2.5~~$15.2 million, or ~~0.3%~~2.1%, decline in the value of ~~the~~our investment portfolio. ~~A summary of our total net exposure to foreign currencies as of June 30, 2008 is as follows:~~

US$ Equivalent

Original Currency
Fair Value
($ in thousands)

European Union euro $ (32,506 )
British pounds (20,969 )
South Korean won 7,165
Hong Kong dollar 8,569
Japanese yen 9,124
Other 3,974

$ (24,643 )

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 ~~related hedges, and~~ should not be relied on as indicative of future results.

~~INTEREST RATE RISK.~~Interest rate risk. Our investment portfolio ~~has historically held a very small portion of fixed-income~~includes interest rate sensitive securities, ~~which we classify~~such as ~~“trading securities” but may in the future include significant exposure to~~ corporate debt ~~securities, including debt securities of distressed companies.~~instruments, credit default swaps, and interest rate options. The primary market risk exposure for any ~~fixed-income security~~debt instrument 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 ~~converse is also true.~~market value of our long fixed-income portfolio rises. Additionally, some of our ~~equity~~derivative investments may also be credit sensitive and their value may indirectly fluctuate with changes in interest rates.

~~CREDIT RISK.~~

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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 rates
		Change 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 instruments	$	(1,350.1	)	(0.18	)	%	$	1,400.6		0.19		%
Credit default swaps		(203.5	)	(0.03	)			203.5		0.03
Interest rate options		4,559.5		0.61				(7,182.2	)	(0.96	)
Net exposure to interest rate risk	$	3,005.9		0.40		%	$	(5,578.1	)	(0.74	)	%

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, ~~we hold~~ the securities of our investment portfolio are held with several prime brokers, ~~and have~~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.~~ 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 ~~the~~assets values ~~of the assets~~ in our investment portfolio.


~~Item 4T.~~	*~~CONTROLS AND PROCEDURES~~*

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

~~Our management,~~Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the "Exchange Act"), the Company has evaluated, with the participation of ~~our~~management, including the Chief Executive Officer and the Chief Financial Officer, ~~has evaluated~~ the effectiveness of the design and operation of our disclosure controls and procedures (as defined in~~Rule 13a-15(e)~~ ~~of the Securities Exchange Act of 1934, as amended)~~ 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 ~~evaluation,~~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 our Chief Executive Officer and Chief Financial Officer, ~~have concluded~~does not expect that ~~our~~the Company’s disclosure controls and procedures ~~are effective to~~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 ~~material information relating~~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 ustheir costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and ~~our consolidated subsidiary required~~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 ~~disclosed~~detected.

Changes in our reports filed with or submitted to the SEC, under the Securities Act of 1934, as amended, is made known to such officers by others within these entities, particularly during the period this quarterly report was prepared, in order to allow timely decisions regarding required disclosure.Internal Control Over Financial Reporting

There have ~~not~~ been ~~any~~no significant changes in ~~our~~the Company’s internal control over financial reporting during the ~~six~~three months ended June 30, ~~2008,~~2009 that have materially affected, or are reasonably likely to materially affect, ~~our~~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.

~~Under the rules~~

Link to table of the SEC as currently in effect, compliance with the internal control reporting requirements mandated by Section 404 of the Sarbanes-Oxley Act of 2002 is delayed for newly public companies, such as Greenlight Capital Re, Ltd. We plan to be in full compliance with these internal control reporting requirements by the required compliance dates in order to provide the required certifications for our December 31, 2008 regulatory filings.contents

PART II — OTHER INFORMATION


~~Item 1.~~	*~~Legal Proceedings~~*

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~~

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”~~"Risk Factors" included in our Annual Report onForm 10-K for the fiscal year ended December 31, ~~2007,~~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 ~~August 6, 2008,~~July 31, 2009, there have been no material changes to the risk factors disclosed in Item 1A ~~“Risk Factors”~~"Risk Factors" included in our Annual Report onForm 10-K for the fiscal year ended December 31, ~~2007,~~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~~*

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

~~None.~~ 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 six months ended June 30, 2009, there were no repurchases of our Class A ordinary shares.


~~Item 3.~~	*~~Defaults Upon Senior Securities~~*

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.


~~Item 4.~~	*~~Submission of Matters to a Vote of Security Holders~~*

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

Annual General Meeting of Shareholders. The Company held its ~~2008~~2009 Annual General Meeting of Shareholders on ~~July 10, 2008.~~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 ~~2008~~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 ~~June 6, 2008.~~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 ~~2009.~~2010.

Director
Class A For Class A Against Class A Abstain Class B For Class B Against Class B Abstain

Alan Brooks 62,919,747 75,688 4,706 8,793,149 0 0
David Einhorn 62,919,747 75,688 4,706 8,793,149 0 0
Leonard Goldberg 62,919,747 75,688 4,706 8,793,149 0 0
Ian Isaacs 62,919,747 75,688 4,706 8,793,149 0 0
Frank Lackner 62,919,747 75,688 4,706 8,793,149 0 0
Bryan Murphy 62,919,747 75,688 4,706 8,793,149 0 0
Joseph Platt 62,919,747 75,688 4,706 8,793,149 0 0

Director	Class A For		Class A Against		Class A Abstain		Class A Withheld		Class B For		Class B Against		Class B Abstain		Class B Withheld
Alan Brooks		64,391,039		18,681		4,669		0		8,771,466		0		0		0
David Einhorn		64,376,020		67,383		3,774		0		8,771,466		0		0		0
Leonard Goldberg		64,411,622		30,883		4,672		0		8,771,466		0		0		0
Ian Isaacs		64,417,382		25,123		4,669		0		8,771,466		0		0		0
Frank Lackner		64,417,382		25,123		4,669		0		8,771,466		0		0		0
Bryan Murphy		64,423,824		18,681		4,669		0		8,771,466		0		0		0
Joseph Platt		63,400,187		1,042,318		4,669		0		8,771,466		0		0		0

Link to table of contents

(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 ~~2009~~2010.

��
Director
Class A For Class A Against Class A Abstain Class B For Class B Against Class B Abstain

Alan Brooks 62,899,583 77,360 23,198 8,793,149 0 0
David Einhorn 62,899,583 77,360 23,198 8,793,149 0 0
Leonard Goldberg 62,899,583 77,360 23,198 8,793,149 0 0
Ian Isaacs 62,899,583 77,360 23,198 8,793,149 0 0
Frank Lackner 62,899,583 77,360 23,198 8,793,149 0 0
Bryan Murphy 62,899,583 77,360 23,198 8,793,149 0 0
Joseph Platt 62,899,583 77,360 23,198 8,793,149 0 0

Director	Class A For		Class A Against		Class A Abstain		Class A Withheld		Class B For		Class B Against		Class B Abstain		Class B Withheld
Alan Brooks		64,423,824		18,681		4,669		0		8,771,466		0		0		0
David Einhorn		64,413,075		30,322		3,777		0		8,771,466		0		0		0
Leonard Goldberg		64,423,838		18,681		4,669		0		8,771,466		0		0		0
Ian Isaacs		64,417,382		25,123		4,669		0		8,771,466		0		0		0
Frank Lackner		63,983,374		25,123		4,669		0		8,771,466		0		0		0
Bryan Murphy		64,423,824		18,681		4,669		0		8,771,466		0		0		0
Joseph Platt		63,508,107		934,398		4,669		0		8,771,466		0		0		0

(3) ~~The shareholders approved the amendment to Article 11 of Greenlight Capital Re, Ltd.’s Third Amended and Restated Articles of Association by Special Resolution.~~

Class A Class B

For 53,628,006 8,793,149
Against 7,960,427 0
Abstain 1,411,708 0

~~(4)~~ The shareholders ratified the appointment of BDO Seidman, LLP to serve as the independent auditors of Greenlight Capital Re, Ltd. for ~~2008.~~2009.

Class A Class B

For 62,902,754 8,793,149
Against 82,159 0
Abstain 15,229 0

	Class A		Class B
For		64,444,127		8,771,466
Against		3,047		0
Abstain		0		0
Withheld		0		0

~~(5)~~ (4) The shareholders ratified the appointment of BDO Seidman, LLP to serve as the independent auditors of Greenlight Reinsurance, Ltd. for ~~2008.~~2009.

	Class A		Class B
For		64,444,127		8,771,466
Against		3,044		0
Abstain		0		0
Withheld		0		0

Class A Class B

For 62,886,338 8,793,149
Against 98,574 0
Abstain 15,229 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 are available free of charge through the corporate governance page of the Company’s website at www.greenlightre.ky.

Item 6. EXHIBITS

12.1	Ratio of Earnings to Fixed Charges and Preferred Share Dividends
~~Item 5.~~31.1	*~~Other Information~~*Certification of the Chief Executive Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31.2	Certification of the Chief Financial Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32.1	Certification of the Chief Executive Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32.2	Certification of the Chief Financial Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002

~~None.~~


~~Item 6.~~	*~~Exhibits~~*

3 .1 Third Amended and Restated Memorandum and Articles of Association, as revised by special resolution on July 10, 2008
31 .1 Certification of the Chief Executive Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31 .2 Certification of the Chief Financial Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32 .1 Certification of the Chief Executive Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32 .2 Certification of the Chief Financial Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002

Link to 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)~~

GREENLIGHT CAPITAL RE, LTD.

(Registrant)

/s/ ~~Leonard Goldberg~~

~~Name:~~ Leonard Goldberg

	Name:	Leonard Goldberg
	Title:	Chief Executive Officer
	Date:	August 3, 2009
	/s/ Tim Courtis
	Name:	Tim Courtis
	Title:	Chief Financial Officer
	Date:	August 3, 2009

~~Date: August 6, 2008~~

~~/s/ Tim Courtis~~

~~Name: Tim Courtis~~

~~Title: Chief Financial Officer~~

~~Date: August 6, 2008~~


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


	June 30,
	2008		December 31,
	(Unaudited)		2007

Assets
Investments in securities
Debt securities, trading, at fair value	$	6,328	$	1,520
Equity investments, trading, at fair value		588,604		570,440
Other investments, at fair value		11,013		18,576

Total investments in securities		605,945		590,536
Cash and cash equivalents		97,523		64,192
Restricted cash and cash equivalents		441,747		371,607
Financial contracts receivable, at fair value		4,620		222
Reinsurance balances receivable		69,654		43,856
Loss and loss adjustment expense recoverables		7,680		6,721
Deferred acquisition costs		15,251		7,302
Unearned premiums ceded		15,595		8,744
Other assets		2,006		965

Total assets	$	1,260,021	$	1,094,145


Liabilities and Shareholders’ Equity
Liabilities
Securities sold, not yet purchased, at fair value	$	409,218	$	332,706
Financial contracts payable, at fair value		1,643		17,746
Loss and loss adjustment expense reserves		57,367		42,377
Unearned premium reserves		95,289		59,298
Reinsurance balances payable		33,172		19,140
Funds withheld		9,180		7,542
Other liabilities		4,983		2,869
Performance compensation payable to related party		6,145		6,885
Minority interest in joint venture		7,270		—

Total liabilities		624,267		488,563

Shareholders’ equity
Preferred 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 30,010,636, (2007: 29,847,787); Class B: par value $0.10; authorized, 25,000,000; issued and outstanding, 6,254,949 (2007: 6,254,949))		3,627		3,610
Additional paid-in capital		478,228		476,861
Retained earnings		153,899		125,111

Total shareholders’ equity		635,754		605,582

Total liabilities and shareholders’ equity	$	1,260,021	$	1,094,145


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007

Revenues
Gross premiums written	$	25,360		$	65,445		$	96,126		$	103,509
Gross premiums ceded		(5,615	)		(14,534	)		(14,887	)		(28,277	)

Net premiums written		19,745			50,911			81,239			75,232
Change in net unearned premium reserves		4,937			(25,939	)		(29,065	)		(29,339	)

Net premiums earned		24,682			24,972			52,174			45,893
Net investment income		31,025			19,924			25,263			5,543

Total revenues		55,707			44,896			77,437			51,436

Expenses
Loss and loss adjustment expenses incurred, net		9,337			11,138			21,461			20,126
Acquisition costs		9,228			9,515			19,157			17,227
General and administrative expenses		3,210			2,926			7,670			5,905

Total expenses		21,775			23,579			48,288			43,258

Net income before minority interest		33,932			21,317			29,149			8,178
Minority interest in income of joint venture		(394	)		—			(361	)		—

Net income	$	33,538		$	21,317		$	28,788		$	8,178

Earnings per share
Basic	$	0.93		$	0.78		$	0.80		$	0.33
Diluted		0.92			0.76			0.79			0.33
Weighted average number of ordinary shares used in the determination of
Basic		35,981,386			27,472,993			35,981,349			24,515,973
Diluted		36,652,441			27,980,421			36,644,456			24,895,878


	Six Months		Six Months
	Ended June 30,		Ended June 30,
	2008		2007

Ordinary share capital
Balance — beginning of period	$	3,610	$	2,156
Issue of Class A ordinary share capital		17		1,191
Issue of Class B ordinary share capital		—		263

Balance — end of period	$	3,627	$	3,610

Additional paid-in capital
Balance — beginning of period	$	476,861	$	219,972
Issue of Class A ordinary share capital		9		207,094
Issue of Class B ordinary share capital		—		49,737
IPO expenses		—		(2,629	)
Stock options and awards expense		1,358		1,512

Balance — end of period	$	478,228	$	475,686

Retained earnings
Balance — beginning of period	$	125,111	$	90,039
Net income		28,788		8,178

Balance — end of period	$	153,899	$	98,217

Total shareholders’ equity	$	635,754	$	577,513


	Fair Value Measurements as of June 30, 2008
							Significant
							Other		Significant
				Quoted Prices in			Observable		Unobservable
	Total as of			Active Markets			Inputs		Inputs
Description	June 30, 2008			(Level 1)			(Level 2)		(Level 3)
	($ in thousands)

Listed equity securities	$	588,604		$	588,604		$	—	$	—
Debt securities		6,328			—			3,261		3,067
Private equity securities		7,963			—			1,700		6,263
Options		3,050			1,215			1,835		—
Financial contracts receivable/payable, net		2,977			—			2,977		—

	$	608,922		$	589,819		$	9,773	$	9,330

Listed equity securities, sold not yet purchased	$	(409,218	)	$	(409,218	)	$	—	$	—

	$	(409,218	)	$	(409,218	)	$	—	$	—

	Fair value measurements as of June 30, 2009
Description	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
	($ in thousands)
Debt instruments	$	—		$	127,541	$	6,806	$	134,347
Listed equity securities		401,139			—		—		401,139
Commodities		44,409			—		—		44,409
Private equity securities		—			1,606		9,530		11,136
Put options		2,508			—		—		2,508
Call options		—			2,091		—		2,091
Financial contracts receivable (payable), net		—			6,190		—		6,190
	$	448,056		$	137,428	$	16,336	$	601,820

Listed equity securities, sold not yet purchased	$	(369,293	)	$	—	$	—	$	(369,293	)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended June 30, 2008									Six Months Ended June 30, 2008
				Private									Private
	Debt			Equity						Debt			Equity
	Securities			Securities			Total			Securities			Securities			Total
	($ in thousands)

Beginning balance	$	865		$	10,943		$	11,808		$	865		$	8,115		$	8,980
Purchases, sales, issuance, and settlements		2,204			804			3,008			2,204			3,565			5,769
Total gains or losses (realized & unrealized) included in earnings		(2	)		(279	)		(281	)		(2	)		(212	)		(214	)
Transfers in and/or out of Level 3		—			(5,205	)		(5,205	)		—			(5,205	)		(5,205	)

Ending balance	$	3,067		$	6,263		$	9,330		$	3,067		$	6,263		$	9,330


			Unrealized		Unrealized			Fair Market
	Cost		Gains		Losses			Value
	($ in thousands)

Private equity securities	$	9,565	$	—	$	(1,602	)	$	7,963
Put options		2,477		594		(21	)		3,050

	$	12,042	$	594	$	(1,623	)	$	11,013


	June 30, 2008				June 30, 2007
	Class A		Class B		Class A		Class B

Balance — beginning of period		29,847,787		6,254,949		16,507,228		5,050,000
Issue of ordinary shares		162,849		—		11,913,929		2,631,579
Transfer from Class B to Class A		—		—		1,426,630		(1,426,630	)

Balance — end of period		30,010,636		6,254,949		29,847,787		6,254,949


	Three Months Ended June 30, 2008					Three Months Ended June 30, 2007				Six Months Ended June 30, 2008					Six Months Ended June 30, 2007
	($ in millions)

Property
Commercial lines	$	1.6		6.3	%	$	5.3	8.1	%	$	6.1		6.3	%	$	10.0	9.6	%
Personal lines		(4.2	)	(16.5	)		15.8	24.2			(4.1	)	(4.3	)		30.8	29.8
Casualty
General liability		8.7		34.2			16.5	25.2			10.3		10.7			17.0	16.4
Motor liability		12.1		47.6			—	—			36.9		38.4			—	—
Professional liability		2.2		8.7			27.3	41.7			2.2		2.3			27.3	26.4
Specialty
Health		2.5		9.8			0.5	0.8			28.5		29.7			14.8	14.3
Medical malpractice		(0.9	)	(3.5	)		—	—			6.9		7.2			3.6	3.5
Workers’ compensation		3.4		13.4			—	—			9.3		9.7			—	—

	$	25.4		100.0	%	$	65.4	100.0	%	$	96.1		100.0	%	$	103.5	100.0	%


					Three Months Ended June 30,
	Three Months Ended June 30, 2008				2007				Six Months Ended June 30, 2008				Six Months Ended June 30, 2007
	($ in millions)

USA	$	21.6	85.0	%	$	33.6	51.3	%	$	86.2	89.7	%	$	66.6	64.3	%
Worldwide⁽¹⁾		3.0	11.8			29.2	44.6			9.1	9.5			34.2	33.0
Europe		—	—			2.1	3.3			—	—			2.1	2.1
Caribbean		0.8	3.2			0.5	0.8			0.8	0.8			0.6	0.6

	$	25.4	100.0	%	$	65.4	100.0	%	$	96.1	100.0	%	$	103.5	100.0	%


	Three Months Ended June 30,								Six Months Ended June, 30
	2008				2007				2008				2007
	($ in thousands)

Frequency	$	15,186	76.9	%	$	16,409	32.2	%	$	62,758	77.3	%	$	35,524	47.2	%
Severity		4,559	23.1			34,502	67.8			18,481	22.7			39,708	52.8

Total	$	19,745	100.0	%	$	50,911	100.0	%	$	81,239	100.0	%	$	75,232	100.0	%


	Single Event		Aggregate
Zone	Loss		Loss
	($ in thousands)

USA⁽¹⁾	$	51,750	$	69,500
Europe		43,750		51,500
Japan		43,750		51,500
Rest of the world		23,750		31,500
Maximum Aggregate		51,750		69,500


	Six Months Ended June 30,							Six Months Ended June 30,
	2008							2007
	Gross		Ceded			Net		Gross		Ceded			Net
	($ in thousands)

Losses paid	$	11,840	$	(4,409	)	$	7,431	$	2,394	$	(651	)	$	1,743
Increase (decrease) in reserves		14,988		(958	)		14,030		23,652		(5,269	)		18,383

Total	$	26,828	$	(5,367	)	$	21,461	$	26,046	$	(5,920	)	$	20,126


	June 30, 2008						December 31, 2007
	Case						Case
	Reserves		IBNR		Total		Reserves		IBNR		Total
	($ In thousands)

Frequency	$	1,055	$	42,759	$	43,814	$	1,712	$	34,477	$	36,189
Severity		—		13,553		13,553		—		6,188		6,188

Total	$	1,055	$	56,312	$	57,367	$	1,712	$	40,665	$	42,377

Zone	Single Event Loss		Aggregate Loss
	($ in thousands)
USA(1)	$	60,350	$	75,350
Europe		48,800		48,800
Japan		48,800		48,800
Rest of the world		28,800		28,800
Maximum Aggregate		60,350		75,350


			Less Than						More Than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
	($ in thousands)

Operating lease obligations	$	216	$	97	$	119	$	—	$	—
Specialist service agreement		1,452		652		800		—		—
Private equity investments⁽¹⁾		26,913		26,913		—		—		—
Loss and loss adjustment expense reserves⁽²⁾		57,367		28,682		15,437		4,948		8,300

	$	85,948	$	56,344	$	16,356	$	4,948	$	8,300


	US$ Equivalent
Original Currency	Fair Value
	($ in thousands)

European Union euro	$	(32,506	)
British pounds		(20,969	)
South Korean won		7,165
Hong Kong dollar		8,569
Japanese yen		9,124
Other		3,974

	$	(24,643	)


Director	Class A For		Class A Against		Class A Abstain		Class B For		Class B Against		Class B Abstain

Alan Brooks		62,919,747		75,688		4,706		8,793,149		0		0
David Einhorn		62,919,747		75,688		4,706		8,793,149		0		0
Leonard Goldberg		62,919,747		75,688		4,706		8,793,149		0		0
Ian Isaacs		62,919,747		75,688		4,706		8,793,149		0		0
Frank Lackner		62,919,747		75,688		4,706		8,793,149		0		0
Bryan Murphy		62,919,747		75,688		4,706		8,793,149		0		0
Joseph Platt		62,919,747		75,688		4,706		8,793,149		0		0


	Class A		Class B

For		53,628,006		8,793,149
Against		7,960,427		0
Abstain		1,411,708		0


	Class A		Class B

For		62,902,754		8,793,149
Against		82,159		0
Abstain		15,229		0


	Class A		Class B

For		62,886,338		8,793,149
Against		98,574		0
Abstain		15,229		0


3	.1	Third Amended and Restated Memorandum and Articles of Association, as revised by special resolution on July 10, 2008
31	.1	Certification of the Chief Executive Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31	.2	Certification of the Chief Financial Officer filed hereunder pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32	.1	Certification of the Chief Executive Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32	.2	Certification of the Chief Financial Officer filed hereunder pursuant to Section 906 of the Sarbanes Oxley Act of 2002