Greenlight Capital

David Einhorn generated gains of almost 5% during the first quarter, recovering from a difficult year in 2008, according to the investment results of Greenlight Capital Re, a reinsurer that invests its premiums with the hedge fund manager. Einhorn runs hedge fund firm Greenlight Capital and is also chairman of Greenlight Capital which reinsures a variety of property and casualty risks.

Many reinsurers are stuffing premiums into bonds and other fixed-income securities, Greenlight Capital reinvests almost all its premiums with Einhorn, who specializes in long/short equity trading.

Greenlight Capital Re reported investment losses of almost 18% in 2008, partly because Einhorn’s strategy was disrupted by a temporary ban on shorting, or betting against more than 800 financial-services stocks.

Greenlight Capital Re said it generated investment returns of 5.5% in March, after fees and expenses. That left the reinsurer’s portfolio up 4.5% in the first quarter. The Standard & Poor’s 500 Index lost 12% in the first quarter.

Greenlight Capital Re’s investment returns so far this year have been better than the 2.5% gain forecast by UBS insurance analyst Brian Meredith.

“The latest monthly returns also show much lower volatility compared to prior year,” Meredith added in a note to investors on Thursday.

Still, Meredith said that Greenlight Capital Re shares probably won’t trade at much of a premium to book value, given the reinsurer’s “heavy dependence” on investment returns, which makes earnings “very volatile.”