Global Indemnity Group, LLC

Good day, and welcome to Global Indemnity Group LLC's first quarter 2022 earnings conference call. I would now like to introduce Stephen W. Reese, Head of Investor Relations.

Thank you, Operator. Today's conference call is being recorded. GBLI's 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 a representation 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 our other filings made with the SEC for a description of the business environment in which we operate and the important factors that may mature and 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 is now my pleasure to turn the call over to Mr. David Charlton, Chief Executive of GBLI.

Good morning. Thank you for joining our earnings call. In addition to Steve Reese, Reiner Maurer, our COO, Jonathan Altman, President of Assurance Operations, and Tom McGeehan, our Chief Financial Officer, are also in attendance. I am very pleased with our underlying results in the first quarter as we execute our strategic plan to grow our existing core businesses, as well as substantially widen our small business commercial casualty product offerings. Gross rent premium grew by 16.8% compared to the first quarter of 2021. The gross rent premium of our continuing lines grew 27.3% compared to the first quarter of 2021. The increase is mainly due to organic growth and rate increases. Our commercial specialty segment grew by 16.7%, to 104.3 million, driven by growth in our PEN America binding small business, which grew 26.9%. We obtained a rate of 7.8% for this business in the first quarter, and we'll look to continue to push this higher as the year develops. Programs grew 9.8% on strong rate increases of 12.2%. Our new small commercial casualty businesses, environmental, excess casualty, and professional have built out their teams and have established solid market footholds. They are actively writing business. We receive strong support from our distribution partners and all are on track executing their plans. We continue to hire superior new talent. Most recently, we were very pleased to announce the hiring of Matt Carroll to lead our new InsurTech business that will be part of our commercial specialty segment. We have two existing profitable InsurTech businesses today, Collectibles and Vacant Express, that will serve as foundation for this new business that Matt has been charged with building and growing. Reinsurance has strong growth. Gross rent premiums in first quarter 22 were 41.4 million compared to 22 million prior. As noted on the prior earnings call, this is due to increasing participation in the casualty quota share treaty that Global has assumed for several years. This treaty continues to obtain strong rate in a hard casualty market. In addition, we wrote several smaller casualty treaties and grew our excess professional reinsurance business by 11%. Farm, ranch, and equine grew by 8%. The equine mortality book, which comprises about 15% of this book, grew by 39% compared to 2021. We continue to focus on driving profitability in this book and improving results from non-cap property, primarily fires. We have seen that over 25% of our non-CAT FHIR losses are coming from just 5% of our business. We have identified the specific risk characteristics driving these unprofitable accounts and have been actively non-renewing these risks. We expect this action will reduce our loss ratio by several points. The grocery premium of exit lines shrank from 31.3 million in 2021 at $22.6 million in 2022. Very little business is retained, as the net written premium was only $700,000. Global indemnity is fronting the mobile home and dwelling book while the policies transition to American family. Underwriting income also had good results. The combined ratio improved from 101.2% in 2021 to 95% in 2022. Catastrophes incurred in first quarter of 22 were 4.3 million compared to 16.9 million in 2021. Volatility is much less due to the lines we exited. The mix of business has now shifted to casualty. In 2021, 45% of net earned premium was casualty business compared to 64% in 2022. We will continue to push towards our goal of 70% casualty business, which will be supported by growth in our three new casualty businesses throughout the year. To support the company's long-term business plan that we unveiled at last year's investor conference beginning in May 2021, the company embarked on a program to enhance liquidity, investment flexibility, buffer market volatility, and balance sheet solidity. The first step in this regard was shortening the 4.5-year duration of the company's fixed income securities portfolio to three years, which was achieved by August of 2021. Then in August of 2022, the company liquidated the entirety of its 76 million publicly traded common stock portfolio. Finally, in April 2022, the company further shortened the duration of its investment portfolio to under two years and retired 100% of his outstanding indebtedness.