Global Indemnity Group, LLC

If you would like to ask a question during the call, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. We will also be taking questions via the webcast. If you would like to submit a question, please use the Q&A button located at the bottom right hand of your webcast screen. Thank you. It is now my pleasure to turn the call over to Evan Kasowitz, president of Belmont Holdings. You may begin.

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, believes, expectations, or estimates. We caution you that such forward looking statements should not be regarded as a representation by us that the future plan, 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 with the SEC for descriptions 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 is now my pleasure to turn the call over to Mr. Jay Brown, chief executive of Global Indemnity.

Thank you, Evan. Good morning and thank you for taking the time this morning to join us for the GBLI second quarter update on our financial and operational results. Following our usual format, I will first provide a few overview comments on my view of this quarter's results. Then our chief financial officer, Brian Riley, will offer a few key details on our insurance and investment operations. Following Brian's comments, we will then answer any questions you might have. This quarter's results are comparable to the underlying positive insurance operating investment trends that we have seen for the past several quarters. Our accident year combined ratio of .6% produced an underwriting profit of $5.6 million, a very nice increase over the $96.7 we recorded last year. Our short duration investment portfolio continued to deliver stable results at $14.7 million with an annualized investment return of 4.9%. The overall positive insurance and investment results were offset a bit by the planned higher corporate expenses as we continue to invest in our agency and insurance services segment. The resulting net income of $10.3 million remains consistent with the results from last year. Brian will provide a bit of insight on the areas where corporate expenses are increasing. Moving from the bottom line to the top line for insurance operations, excluding terminated contracts, gross premium grew 18% over the second quarter of 2024. As we noted in our results release, we saw a very solid, sustainable growth in vacant express collectibles, wholesale commercial, and assumed re-insurance. Premium rate changes are running in the mid single digits, which when coupled with exposure changes are tracking close to our current expectations for loss trends. Turning from the quarterly financials, our efforts to revamp our technology infrastructure, information management, and policy issuance systems continues to be on track. We will complete our design and coding of our kaleidoscope policy rating, coding, and issuance system for wholesale commercial package policies to begin testing by year end. We then expect to roll out the new environment to our agency partners in conjunction with an underwriting workbench early in 2026. On a parallel track, we have now migrated all our internal data to a modern data lake for both structured and unstructured data in the cloud. We are now migrating and syncing all of our internal reports to the new single unified data source. This effort is a very key foundational step needed to exploit artificial intelligence across the entire enterprise. I should also note that we've requested and received approval in July 2025 for a hundred million in aggregate dividends from our insurance subsidiaries. This will bolster our liquidity and position us to fund significant growth that we anticipate in our agency and insurance service operations under Praveen Rettig. Looking forward, we will continue our efforts to profitably grow our existing businesses. As we continue to invest in technology, expand our underwriting capabilities through organic growth and pursue selective add on acquisitions. We firmly believe our reorganized structure will yield substantial value to our owners in the next few years. At this point, I'll turn it over to Brian.

Thank you, Jay. My commentary will focus on results for the second quarter. Of course, we can answer any questions you may have for the six month results. With the combination of net income and a three million dollar increase in market value of the fixed income portfolio, book value per share increased from forty seven dollars and eighty five cents at March thirty first. To forty eight dollars and thirty five cents at June thirtieth, including dividends paid of thirty five cents per share returned shareholders was one point eight percent for the second quarter of twenty twenty five. Net income was ten point three million for the second quarter of twenty five compared to ten point one million for the same period last year. The key drivers include. Underwriting income improved by sixty one percent to five point six million in the second quarter of twenty five compared to three point five million for the same period last year. This was offset by an increase in corporate expenses of a million one point two million to seven point five million in the second quarter of twenty five resulting from recruiting fees and professional fees related to due diligence on business development opportunities. And last investment income of fourteen point seven million for the quarter was stable compared to fifteen point three million in the same period last year. Let me add a little color on investments and underwriting income starting with investments total investment return was seventeen point seven million for the second quarter of twenty five compared to seventeen point nine million for the same period last year. And as Jay mentioned annualized investor in terms of the second quarter of twenty five was four point nine percent. Investment income on our fixed income portfolio spot fifteen point three million for the second quarter of twenty five compared to fifteen million for the same period last year. Current book yield on the fixed income portfolio is now four point five percent with a duration of one point two years at June thirty twenty twenty five compared to December thirty one twenty twenty four of a four point four percent book yield and a duration of point eight years. For further comparison book yield was two point two percent with a duration of three point two years at December thirty one twenty twenty one before the company took action in early twenty twenty two to sell longer data securities and shorten duration. The average credit quality of the fixed income portfolio remains at double A minus. As for the current year underwriting performance current actual underwriting income was five point six million for the second quarter of twenty five and increased to sixty one percent compared to the same period in twenty twenty four due to growth due to growth and earn premium and an improved combined ratio. The combined ratio improved two point one points to ninety four point six in the second quarter of twenty five compared to ninety six point seven in the same period mainly driven by the loss ratio as the expense ratio is largely flat at thirty nine. The non cat loss ratio remains strong as we posted a fifty point one in twenty five compared to fifty four point one in twenty four. The cat loss ratio was five point five for the quarter compared to three point eight the same period last year. Expenses remain elevated here in the short run as we run off our non core businesses and invest in agency of insurance services operations. We continue to target the expense ratio longer term at thirty seven. Turning to premiums consolidated gross written premiums increased six percent to one hundred and six point eight million in the second quarter of twenty five compared to one hundred point seven million in the same period last year. As Jay mentioned, excluding terminated products, gross written premiums increased eighteen percent to one hundred and nine point nine million in the second quarter of twenty five compared to ninety three point four million in the same period last year. Let me add a little color at the divisional level. Wholesale commercial, which focuses on Main Street small business through eight percent to sixty nine point one million compared to sixty three point nine million in the same period last year and includes average rate increases of about four percent. In aggregate, they can express and collectibles through twenty percent to sixteen point six million in the second quarter of twenty five compared to thirteen point seven million in the same period last year. Let me break down those two products. They can express through twenty seven percent to twelve point four million driven by organic growth from existing agents and agency appointments. Collectibles grew four percent to four point two million compared to four million last year, predominantly driven by rate. Our assumed re-insurance gross premiums, excluding non-core business, grew eighty six percent to twelve million, resulting from eight new treaties we added during twenty twenty four and two new treaties added here in twenty twenty five. Specialty products, excluding the terminated products, was twelve point three million in the second quarter of twenty five compared to nine point three million in the same period last year. Overall, our outlook for twenty twenty five is very positive. For the first six months of twenty five, our underwriting income, X impact of California wildfires was ten point nine million compared to eight point seven million for the same period last year. Our underlying underwriting performance for the last half of twenty five is expected to improve compared to the same period in twenty four. We continue to expect premium growth of ten percent. Book reserves remain solidly above our current actual indications. We believe premium prices is continuing to track with loss inflation. Our discretionary capital, which we consider the amount of consolidated equity and excess of that, the amounts required to maintain the strongest levels with our rating agencies is two hundred sixty five million at June thirty twenty twenty five. And as Jay mentioned earlier, this will support the efforts to invest in the growth of our agency and insurance services segment. Lastly, our investment portfolio is well positioned to invest in longer duration maturities and higher yields. Thank you. We will now take your questions.

As a reminder to ask an audio question, press star one on your telephone keypad to ask your question via the web locate the. Question and answer tool at the bottom right hand corner of your screen. And our first audio question comes from the line of Tom Kerr with Zach's research. Please go ahead.

Good morning, guys. Quick question on the corporate expenses. I think you said business development fees to find new opportunities. What is that exactly?

We're looking to expand our agency operations with additional underwriting capabilities. And so we've been reviewing a number of different opportunities in the market. We've probably looked at a half a dozen to a dozen of some of which involved spending some money to do some due diligence. We haven't yet gotten any conclusions on those at this point in time.

Okay, thanks. Any comment on the overall market? Where do you see cycle weakness and that sort of stuff?

Yeah, it's a tricky question because it differs depending on which segment you're looking at. Our our vacant express segment, for example, continues to have real growth opportunities because of what's going on in the property market around the country. But in small commercial we're starting to see a little bit more headwinds than probably we saw the last two years. We continue to be pleased with the level of premium we're obtaining for the business we're writing, but we are seeing a little bit more price competition than we probably saw for the last two years.

What was the time frame on that just recently or?

Yeah, just in the past six months, it just you start to see it as a wobble first with a little bit lower hit ratio than we've been seeing. But not not significant yet. It's still we still believe strongly that we should see eight to 10% growth in that segment this year and perhaps the same next year.

Got it. Thanks. One quick one. Do you still have any substantial business in California across the portfolio?

Yeah, as mentioned in our last call is that we are we have business in California. Across all of our businesses, we were apparently moving some of that from an admitted product to a non admitted product.

Got it. Okay, I'll get back in the queue.

Thanks. Our next audio question comes from the line of Ross Habermas with RLH Investments. Please go ahead.

Morning, Jay. Thanks for taking the call. Quick question. Going back to the The administrative expenses. Do you see further growth from the level we saw this this quarter as as as you look for other lines of business.

Yeah, if you, you know, we've engaged a couple of outside contractors to help with our internal staff to review financials for different things we're looking at that expense would not create anything. But if we actually get to the point of closing on any transactions, you'll probably see a potential bump in expenses when that occurs. We're not we're not Sorry, sorry. No problem. We aren't we aren't planning on any big expenditures, but we're doing it incrementally. And if there's any substantial change in the current level, it probably will be a company bias actually closing on a transaction and we'll, we'll obviously discuss that at that time.

And just follow up to the California fire exposure. Was there any further allowances. That you came across. Besides the initial exposure you You expense, I guess, in March. Yeah, and and do you have any exposure to the new fires that are beginning to to come up in in California today.

Two part question on the first part, the initial reserves that were established at the end of the first quarter of maintained on there was very, very little movement less than one or 2% in terms of our final estimates. In terms of the newest fires, we haven't yet seen any significant exposure to our company. Thank you. I'll get back in queue. Thank you.

Yeah, our next question comes from Andrew. Been been big knee. Can you provide a tangible return on equity target a few years out. What kind of loss and expense ratios would that imply.

Sure, it's, it's a, it depends on what level you're looking at our return on equity. If we're looking at Belmont, which is our essentially our balance sheet company. And it's in its holding company, we would expect that the returns there will get into the 12% range in the next couple of years. That's kind of the insurance operation underwriting side. I would say when you then look at the other side. And the holding company expenses. We're probably going to continue to target at 8 to 9%. The loss ratio that we need for that. We're actually at the right loss ratio. What we really need to see is our expense ratio come down another two points and that should put us pretty close to those targets.

All right, with that, we will thank you all again for joining us. This will conclude our 2025 2nd quarter earnings call. We look forward to speaking with you about our 3rd quarter 2025 results. Thank you.