Global Indemnity Group, LLC

Good day and welcome to the Global Indemnity Group LLC's second 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 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. David Charlton, Chief Executive of GDLI.

Thank you, Steve. Well, good morning. Thank you for joining our earnings call. In addition to Stephen Reese, Tom McGeehan, our Chief Financial Officer, and Jonathan Altman, President of Insurance Operations, are also in attendance. Yesterday, we announced the sale of our farm renewal rights for $30 million. and the sale of American Reliable Insurance Company for amount equal to surplus to Everett Cash Mutual. These transactions will free up over 45 million of capital supporting the farm business and further GBI strategy to focus on our profitable and growing small and middle market commercial specialty casualty businesses. I am pleased that we found such a great company to acquire this business. Everett Cash is very focused on providing insurance solutions to the farm industry. Now let's discuss our results. For our continuing business lines, Glist's written premium grew by 28.4% compared to the first six months of 2021. The increase is due to organic growth and rate increases in our commercial specialty and reinsurance lines. Unrearing income also had good results. The combined ratio of our continuing lines was 95.4%. Our strategy to reduce volatility is working. Catastrophes incurred for our entire book were 12.7 million compared to 24.5 million in 2021. Commercial specialty lines cat losses are down significantly. Cats were 5.4 million in 2022 compared to 11.6 million in 2021. The mix of business has now shifted to casualty. I am very pleased to note that casualty earned premium in our continuing lines was 72.2% for the first six months of 2022. Our commercial specialty segment grew by 13.4% to 214.1 million, driven by growth in our PEN America binding small business, which grew 22% to 109.5 million. PEN America obtained rate increases of 8.3%. This is just rate. Exposure change adds another 5%. Our program division also realized growth of 8 percent, generating $72.6 million in gross-ridden premium on strong rate increases of 10.6 percent. When we include exposure change, rate was up 21.6 percent on programs. The market remains strong for ENS commercial business, and we will continue to push rate. Our insurtech business grew by 10 percent, generating gross-ridden premium of $19.7 million. Our insurtech solution allows agents, as well as insurance directly to obtain insurance online quickly. We are excited about the leadership we have brought to this business and see it as one of our most significant opportunities for continued growth and profitability. We are committed to investing in state-of-the-art technology, embedding online solutions into the sales process, and expanding distribution to drive this business. Our three other new businesses, XS Casualty, Environmental, and Professional, are steadily growing and together now exceed over $5 million of premium. We are building out the three teams of key hires across the country and continue to receive strong support from our distribution partners. All are on track executing their plans, and while still early days, I am very pleased with the quality of business each team is riding. Our reinsurance operations primarily focus on casualty reinsurance. Closed-run premiums were $87.8 million compared to $46.4 million in 2021. The growth is coming from our largest casualty quota share treaty, as well as our excess professional business and several smaller casualty treaties we've recently written. It's a great time to be in this part of the market where premium rate increases continue to be strong. Running longer tail business helps our investment portfolio grow, and we can invest these funds at higher interest rates. Exit lines now include the results of the farm business. It also includes a specialty property book that was sold in the fourth quarter of 2021, as well as other business we have exited. Now that farm is sold, net premiums written prospectively will be very low. Everett Cash Mutual will assume 100% of the risk for any farm policy written on or after August 8, 2022. In 2022, significant efforts were taken to enhance liquidity, provide investment flexibility, and buffer market volatility. During the second quarter, we continue to de-risk the investment portfolio by selling less liquid investments and investments that had greater exposure to spread widening. The duration of our fixed income portfolio is currently 1.8 years. One quarter of the portfolio is invested in floating rate securities, securities with rate resets. Cash and treasuries with a duration of approximately 1.9 years comprise almost one-third of the portfolio. We are well positioned to deploy funds into higher yielding investments. Book yield was 2.34% at the end of March 22. It is currently 2.81%. We've been deploying the proceeds from sales back into shorter-term investments with durations that are less than two years. The average yields on the funds that have been redeployed are greater than 4%. We will now take your questions.