Global Indemnity Group Q3 2024 Earnings Report

Global Indemnity Group EPS Results

• Actual EPS: $0.95
• Consensus EPS: $0.54
• Beat/Miss: Beat by +$0.41
• One Year Ago EPS: -$0.05

Global Indemnity Group Revenue Results

• Actual Revenue: $111.76 million
• Expected Revenue: $123.00 million
• Beat/Miss: Missed by -$11.24 million
• YoY Revenue Growth: N/A

Global Indemnity Group Announcement Details

• Quarter: Q3 2024
• Date: 11/7/2024
• Time: Before Market Opens
• Conference Call Date: Thursday, November 7, 2024
• Conference Call Time: 11:00AM ET

Global Indemnity Group (NASDAQ:GBLI) (NASDAQ: GBLI) is a specialty property and casualty insurance holding company headquartered in Princeton, New Jersey. Through its subsidiaries, the company focuses on underwriting commercial niche insurance products designed to meet the needs of small to mid-sized businesses and select specialty markets. Its approach centers on disciplined underwriting, customized policy structures and targeted distribution channels to address coverage gaps often underserved by standard carriers.

The company’s product portfolio encompasses surety and fidelity bonds, workers’ compensation, general liability, commercial auto, professional liability and environmental liability. In addition to standard lines, Global Indemnity offers excess and surplus (E&S) insurance for risks that fall outside the appetite of admitted carriers. Its suite of surety products supports contractors, service firms and public entities with bid, performance and payment bonds. Workers’ compensation and liability solutions are tailored to industries ranging from construction and manufacturing to wholesale and distribution.

Founded in 1940, Global Indemnity has expanded its footprint through a combination of organic growth and strategic acquisitions, including specialty carriers in North America, Europe and Australia. The company maintains a network of independent agents and brokers who serve as its primary distribution partners. Leadership is headed by Chief Executive Officer John E. Skvarla, who brings over two decades of industry experience, supported by a senior management team with deep underwriting and risk-management expertise. Global Indemnity’s long-term strategy emphasizes disciplined risk selection, loss control services and the development of niche products aligned with evolving customer needs.

Global Indemnity Group Q3 2024 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Penn‑America's premium momentum strengthened — gross written premiums were up about 12% through nine months excluding terminated products, with Wholesale Commercial, InsurTech and assumed reinsurance growing 14% YTD and those operations up 23% YoY in Q3.
• Positive Sentiment: Underwriting improved — Penn‑America reported a nine‑month combined ratio of 93.9% and the consolidated accident‑year combined ratio improved to 95%, helped by better property and casualty loss ratios and roughly 35% lower catastrophe losses year‑over‑year.
• Positive Sentiment: Investments contributed meaningfully — investment income rose 18%, current book yield on fixed income increased to 4.6% (duration 0.8 years), a $15M increase in market value boosted book value per share to $49.88, and management plans to deploy capital into longer-duration, higher-yield securities.
• Negative Sentiment: Expense targets not yet met — Penn‑America's nine‑month expense ratio is 38.2%, above the firm's 36–37% target, and runoff-related costs in non‑core operations remain a drag.
• Neutral Sentiment: Runoff and capital position — non‑core premium dropped materially as runoff continues (management expects discontinued lines fully earned/run off by end of 2025), which reduced consolidated premiums but increased discretionary capital to about $240M to support growth initiatives.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Global Indemnity Group Q3 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, press star followed by the number one on your telephone keypad. We will also be taking questions from the webcast. If you would like to submit a question, please use the Q&A button on the bottom right of your webcast screen. Thank you. I will now turn today's call over to Stephen Ries, Head of Investor Relations. Please go ahead, sir.

[Stephen Ries, Head of Investor Relations at Global Indemnity Group]

Thank you, Tamika. As a reminder, today's conference call is being recorded, as some remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including without limitation, beliefs, expectations, or estimates. We caution you that such forward-looking statements should not be regarded as representations by us, that the future plans, estimates, or expectations contemplated by us will, in fact, be achieved. Please refer to our annual report on Form 10-K and other filings with the SEC for description of the business environment in which we operate and the important factors that may materially affect our results. Global Indemnity Group, LLC is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise. It's now my pleasure to turn the call over to Mr.

[Stephen Ries, Head of Investor Relations at Global Indemnity Group]

Jay Brown, Chief Executive Officer of GBLI.

[Jay Brown, CEO at Global Indemnity Group]

Thank you, Stephen. Good morning, and thank you all for joining us for the GBLI nine-month update on our 2024 financial and operational results. Consistent with our past calls, I will first provide a few overview comments, and then our Chief Financial Officer, Brian Riley, will review the 2024 financial highlights for both our insurance operations and holding company. Let's start with the big picture. Through nine months, our team has continued to achieve results that are both consistent with our plan for 2024 and are building momentum to hit the long-term metrics I have established great value for our shareholders. I will again remind you that our overall goals remain: first, growing our insurance business at a compound annual growth rate of at least 10%; second, achieve a combined ratio in the low 90s; and third, manage our insurance expenses to a competitive level of 36%-37%.

[Jay Brown, CEO at Global Indemnity Group]

The results for nine months track very close to what we reported last quarter for the first six months of 2024. Insurance revenue momentum, as measured by gross premium, improved on the pattern we saw in the second quarter, with total premium, excluding terminated products, now up 12% through nine months. This is driven by the strong year-to-date 14% growth we saw in wholesale commercial, InsurTech, and assumed reinsurance. I should note that momentum continues to build as these operations grew by 23% in the year-over-year numbers for the third quarter. Our efforts to turn around our specialty products business remains a work in progress, as gross premium, excluding terminated products, remained flat through nine months. Turning to insurance underwriting performance, I am very delighted to report a nine-month combined ratio of 93.9 for the Penn-America segment. The good results continue for both our casualty and property coverages.

[Jay Brown, CEO at Global Indemnity Group]

Importantly, our rate increases continue to modestly exceed our estimates of inflation trends. Also, our estimates for the past year results remain stable, with de minimis differences between calendar and accident year numbers. Our efforts to manage cap exposures for our property segments continue to be reflected in our modest losses from catastrophes in 2024. Total cap losses through nine months are down roughly 35% from 2023. As a point of reference, gross losses for both the two most recent hurricanes, Helene and Milton, are both expected to each come in around $1.5 million. We continue to manage expenses a bit higher than our long-term targets to provide the best possible service to our customers. As noted in the past quarters, we are maintaining Penn-America staff numbers just slightly below last year as we grow our business at double-digit levels and keep expense growth at half of that growth rate.

[Jay Brown, CEO at Global Indemnity Group]

Our Penn-America expense ratio is starting to trend in the right direction, with a nine-month ratio of 38.2%, but we still have work to do in order to get this down to 37% or lower. A key factor in growing our business, achieving outstanding underwriting results, and achieving competitive expense levels is utilizing technology as an effective competitive weapon across all dimensions. As noted in the last few quarters, we have embarked on a multi-year effort to transform our technology platforms, transaction, excuse me, and information software and data storage. These investments are well underway, with about two-thirds of our servers moved to the cloud from on-site locations, and our data stores now moved to a cloud-based lakehouse. Our first transactional replacement application went live in September, and we are now processing all aspects of our wholesale commercial excess liability policies in the new environment.

[Jay Brown, CEO at Global Indemnity Group]

We are targeting this year into add special events for wholesale commercial and to add all the remaining products for wholesale mid-next year. An additional first-quarter module is focused on our underwriters and operations staff, who will be receiving an integrated underwriting workstation to both improve the time to handle referral business and to improve service for our agents. As Brian will review in more detail, our decision to go very short and high quality in our bond investment continued to pay off with additional favorable comparisons to prior year in both our investment returns and an improvement in the market value of our investments. Our board continues to canvass with outside investment advisors to plan our return to a more conventional insurance investment portfolio, as we hope to see some clarity in the investment horizon as we move past the election.

[Jay Brown, CEO at Global Indemnity Group]

As we now approach the year-end and are updating our plans for next year, I will note that I just completed the end of my second year as the CEO of Global. The first six months of my tenure were very choppy as we repositioned the company as a smaller but much more focused E&S company. However, as the results for the subsequent six quarters have emerged, the decision to focus on areas where we can excel is really beginning to pay dividends. I am thankful that I had both the support of the board to effect these changes and, more importantly, the superb efforts of the managers and staff at GBLI. We are all looking forward to 2025 and beyond as we enhance and implement both our tactical and strategic plans. Brian?

[Brian Riley, CFO at Global Indemnity Group]

Thank you, Jay. As the first nine months are tracking similarly to the first half of the year, my commentary will focus on results for the first nine months. Of course, we can answer any questions you may have on the third-quarter numbers. Net income was $34.2 million compared to $19.5 million in 2023. With a combination of net income and a $15 million increase in market value of the fixed income portfolio, book value per share increased from $47.53 at year-end to $49.88 at September 30th. Including dividends paid in 2024 of $1.05 per share, return to shareholders was 8.2% for the first nine months of 2024. For the first nine months of 2024, both underwriting and investment income performance again contributed to the improvement in net income, starting with investments. Investment income increased 18% to $46.3 million from a year ago.

[Brian Riley, CFO at Global Indemnity Group]

Actions taken since early 2022 to sell longer-dated securities and shortened duration have translated into much higher current book yields. Cash flows of $50 million plus $625 million of fixed income securities yielding 3.6% that matured during the year were reinvested at an average yield of 5.1%. Current book yield on the fixed income portfolio is now 4.6%, with a duration of 0.8 years at September 30, 2024. Comparatively, at the end of 2022, book yield was 3.5% with a duration of 1.7 years, and at the end of 2021, the book yield was 2.2% with a duration of 3.2 years. The average credit quality of the fixed income portfolio remains at double A minus. As a result of the low duration, we have a $480 million investment maturing in the fourth quarter of 2024.

[Brian Riley, CFO at Global Indemnity Group]

As Jay mentioned, we're actively looking at opportunities to invest in longer-duration maturities to further increase investment returns. Now, let's move to underwriting performance for the first nine months of the year. We continue to see excellent results as the current accident year consolidated underwriting income was $15.3 million compared to $5 million a year ago. This was driven by a consolidated accident year combined ratio of 95% in 2024 compared to 98.9% in 2023. The improvement in the current accident year underwriting income was due to strong performance in our core business, Penn-America. Penn-America's accident year underwriting income was $17.6 million in 2024 compared to $9.7 million in 2023. As Jay noted, Penn-America's accident year combined ratio was 93.9%, an improvement of 2.8 points from 96.7% in the same period last year.

[Brian Riley, CFO at Global Indemnity Group]

The accident year loss ratio of 55.7% was 3.1 points better than 2023, mainly due to our performance of our property business. Property loss ratio improved to 51.9% in 2024 compared to 58.9% in 2023 due to both non-catastrophe and catastrophe performance. The non-catastrophe loss ratio improved to 43.5% in 2024 compared to 47.2% in 2023 due to the decline in the number of large fire losses experienced in 2023. Catastrophe loss ratio improved to 8.4% in 2024 compared to 11.8% in 2023. Catastrophe losses declined to $10.3 million, including Hurricane Helene at $1.5 million compared to $12.6 million in 2023. The casualty loss ratio of 58.8% remains in line with expectations. Unlike 2023, our non-core operations are having a diminished effect on our overall performance.

[Brian Riley, CFO at Global Indemnity Group]

Our non-core operations net earned premium has dropped to $12.3 million in 2024 compared to $114.2 million in 2023, mainly from an assumed retrocession casualty treaty, which was non-renewed at the end of 2022. Further, the runoff of our exited specialty property business resulted in no catastrophe losses in 2024 compared to $3.2 million in the same period last year. The overall underwriting loss was $2.3 million for 2024 compared to $4.7 million in 2023 in the non-core segment. Additionally, the combined ratio was 118.9, and the loss ratio was in line with expectations at 62.6, but runoff expenses remain a bit high as we wind down the number of smaller underwriting portfolios. As for the calendar year, underwriting income was $14.6 million in 2024 compared to $3.9 million in 2023. As for prior accident year losses, book reserves remain solidly above current actual indications.

[Brian Riley, CFO at Global Indemnity Group]

Losses and LAE related to prior accident years was a modest reduction of $115,000 for the first nine months of the year. Turning to premiums, consolidated gross premiums was $294 million in 2024 compared to $332 million in 2023. This decrease is entirely due to the runoff business of our non-core segment, which declined $58 million year over year, offset partially by the growth of Penn-America. Penn-America's gross written premiums increased 7.4% to $297.8 million in 2024 compared to $277.4 million in 2023. Excluding terminated programs, Penn-America's gross written premiums grew from $262.8 million in 2023 to $293 million in 2024, a 12% increase. This is in line with our plan. As Jay mentioned earlier, growth of 14% was achieved in aggregate by our Wholesale Commercial and InsurTech and Assumed Reinsurance divisions. We add a little color on those divisions.

[Brian Riley, CFO at Global Indemnity Group]

Wholesale Commercial, which focuses on Main Street small business, grew 7% to $186.9 million compared to $174.4 million in 2023. Excluding premium audit in these calendar year numbers, the underlying policy or premium trends, our best indicator of growth was 12%, which includes rate increase of 9%. In InsurTech, which consists of Vacant Express and Collectibles, grew 17% to $41.9 million in 2024 compared to $35.7 million in 2023. Let me break down those two products for you. Vacant Express grew 26% to $29.8 million, driven by organic growth from existing agents and agency appointments. New technical automation implemented in the third quarter of 2023 for our vacant dwelling products, including the expansion of Monoline General Liability product, contributed to the growth in premium our agents are producing. Collectibles, gross written premium of $12.1 million was slightly higher than 2023 by 1%.

[Brian Riley, CFO at Global Indemnity Group]

We've implemented some underwriting actions on catastrophe-prone risk that has curtailed growth a bit, but it's expected to improve overall profitability. Our assumed reinsurance book of business continues to grow at a nice pace with our plan to see significant growth in 2024. We signed on seven new treaties this year. Gross written premiums grew to $19.3 million in 2024 compared to $8.4 million in 2023. And lastly, specialty products, including the terminated products mentioned earlier, was $44.9 million, slightly higher than 2023 by $0.7 million. We signed on two new products in 2024 that contributed $1 million for the first nine months of the year. We expect to have four new products signed on over the next six to 12 months. In closing, we are pleased with the first nine months of the year. Further, our outlook for the full year 2024 and 2025 is very positive.

[Brian Riley, CFO at Global Indemnity Group]

Penn-America continues to show strong current accident year performance. Booked reserves remain solidly above our current actual indications. We believe premium pricing is tracking with loss inflation. Discretionary capital, which we consider to be the amount of consolidated equity in excess of that amount required to maintain the strongest levels of capital with our rating agencies, increased to $240 million at September 30, 2024 compared to $200 million at the end of last year due to growth in equity and reduced capital needed for the runoff of non-core business. This will support growth at Penn-America as well as other corporate opportunities. Lastly, our investment portfolio is well-positioned to invest in longer-duration maturities at higher yields. Thank you. We will now take your questions.

[Operator]

At this time, if you'd like to ask a question, press star 1 on your telephone keypad. And also, as a reminder, if you'd like to submit a question through the webcast, please use the Q&A button at the bottom right of your webcast screen. We'll pause for just a moment to compile the Q&A roster. Your first question from the audio lines comes from the line of Ross Haberman with RLH Investments.

[Ross Haberman, Principal and Analyst at RLH Investments]

Good morning, gentlemen. Nice quarter. How are you? Could you talk a little bit more about your discontinued lines? How much is left, and what's the timing in terms of getting out of the rest of them? Thank you.

[Brian Riley, CFO at Global Indemnity Group]

Yeah. Our discontinued lines, at this stage, we have about a little less than $5 million of our earned premium that needs to run off in the fourth quarter, and it's in 2025. So by the end of 2025, we'd expect that to be fully earned and full runoff on the loss reserve side.

[Ross Haberman, Principal and Analyst at RLH Investments]

And just one follow-up. Are you actively looking for more lines to purchase or get into? And if so, in sort of what categories? Thank you.

[Jay Brown, CEO at Global Indemnity Group]

We are constantly looking for new opportunities to expand our book of business. Right now, what we've done for the past two years is create stability in our existing business and get it kind of working at its highest levels, and we're going to start in 2025 and 2026 adding additional products within those lines and perhaps expanding into lines we're not currently in, and it's an opportunistic look at the world. It's not something that we have decided in advance that we're going to go do a particular product, but we're looking at things that we can evolve that are consistent with the approaches we have right now, so the answer is yes, we are looking, but you won't see anything probably for another six to nine months.

[Jay Brown, CEO at Global Indemnity Group]

I say that now, and something will probably pop up next quarter, but that's kind of the timeframes that we're going to start looking to expand upon what we're doing today.

[Ross Haberman, Principal and Analyst at RLH Investments]

Sorry. And just one last one. I apologize. Did you buy back any shares in the quarter? And if so, how much?

[Brian Riley, CFO at Global Indemnity Group]

No, we did not.

[Ross Haberman, Principal and Analyst at RLH Investments]

Thank you.

[Operator]

As a reminder, to ask a question, press star 1 on your telephone keypad. You may also submit a question on the webcast using the Q&A button on the bottom right of your webcast screen.

[Jay Brown, CEO at Global Indemnity Group]

It doesn't look like there's any more questions. I guess the numbers speak for themselves this quarter, which is always a good thing. We look forward to talking to you again in three months.

[Stephen Ries, Head of Investor Relations at Global Indemnity Group]

Thank you very much, everybody. If you have any questions before then, please reach out to me.

[Operator]

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Participants

Executives

• Brian Riley, CFO
• Stephen Ries, Head of Investor Relations
• Jay Brown, CEO

Analysts

• Ross Haberman, Principal and Analyst at RLH Investments