Global Indemnity Group, LLC 10-Q

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes of the Company included elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to the Company’s plans and strategy, constitutes forward-looking statements that involve risks and uncertainties. Please see "Cautionary Note Regarding Forward-Looking Statements" at the end of this Item 2 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained herein. For more information regarding the Company’s business and operations, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Financial Highlights 2023 Second Quarter Results of Operations • Net income of $9.3 million, or $0.68 per share basic and $0.67 per share diluted • Net earned premium of $129.2 million; Property: 31% and Casualty: 69% • Continuing Lines accident year combined ratio of 94.9% for the quarter ended June 30, 2023 compared to 96.8% for the same period in 2022. Continuing Lines' accident year combined ratio is comprised of the accident year ratios of the Company's Commercial Specialty and Reinsurance Operations segments. o The accident year combined ratio was 93.7% for Commercial Specialty's and 98.9% for Reinsurance Operations during the quarter ended June 30, 2023. o The accident year combined ratio was 96.4% for Commercial Specialty's and 97.9% for Reinsurance Operations during the quarter ended June 30, 2022. • Net investment income of $13.2 million. Book yield on the fixed maturities portfolio was 3.8%. • Net realized investment losses of $0.8 million • Operating cash flows of $14.2 million 2023 Second Quarter Consolidated Financial Condition • Total investments of $1.3 billion; fixed maturities and short-term securities comprise 96% of total investments • Total assets of $1.8 billion • No third party debt • Total capital returned to shareholders of $602.6 million, comprising $522.2 million of share repurchases and $80.4 million of distributions / dividends. This includes $9.1 million of capital returned in the second quarter of 2023 which is comprised of $5.6 million of share repurchases and $3.5 million of distributions. • Shareholders' equity of $626.4 million • Book value per common share of $46.03 Results of Operations During the quarter ended June 30, 2023, net income of $9.3 million was realized. The $9.3 million of net income is significantly better than the $12.2 million net loss realized in the same period in 2022 and net income of $2.5 million from the quarter ended March 31, 2023. Post March 31, 2023, actions have been taken to reduce exposures at commercial vacant properties. The Continuing Lines accident year underwriting income (1) for the quarter ended June 30, 2023 was $6.5 million and the accident year combined ratio (1) was 94.9%. Net investment income significantly increased in the second quarter of 2023 compared to the same period in 2022. Book yield of the fixed income investment portfolio was 3.8% at June 30, 2023 35 compared to 2.2% at December 31, 2021. Actions taken to focus on Continuing Lines and to reposition the investment portfolio in early 2022 are improving results. The following table summarizes the Company’s results for the quarters and six months ended June 30, 2023 and 2022: Quarters Ended June 30, % Six Months Ended June 30, % (Dollars in thousands) 2023 2022 Change 2023 2022 Change Gross written premiums $ 110,100 $ 196,823 (44.1 %) $ 233,085 $ 387,806 (39.9 %) Net written premiums $ 105,996 $ 167,158 (36.6 %) $ 221,857 $ 326,640 (32.1 %) Net earned premiums $ 129,156 $ 155,749 (17.1 %) $ 269,228 $ 304,572 (11.6 %) Other income 301 84 258.3 % 636 523 21.6 % Total revenues 129,457 155,833 (16.9 %) 269,864 305,095 (11.5 %) Losses and expenses: Net losses and loss adjustment expenses 78,082 92,618 (15.7 %) 166,083 177,313 (6.3 %) Acquisition costs and other underwriting expenses 47,101 61,098 (22.9 %) 100,579 117,790 (14.6 %) Underwriting income 4,274 2,117 101.9 % 3,202 9,992 (68.0 %) Net investment income 13,216 1,930 NM 25,224 8,522 196.0 % Net realized investment losses (761 ) (9,916 ) (92.3 %) (2,281 ) (35,301 ) (93.5 %) Other income (loss) (19 ) 13 (246.2 %) — — — Corporate and other operating expenses (4,990 ) (2,993 ) 66.7 % (11,358 ) (7,653 ) 48.4 % Interest expense (12 ) (410 ) (97.1 %) (12 ) (3,005 ) (99.6 %) Loss on extinguishment of debt — (3,529 ) (100.0 %) — (3,529 ) (100.0 %) Income (loss) before income taxes 11,708 (12,788 ) (191.6 %) 14,775 (30,974 ) (147.7 %) Income tax expense (benefit) 2,371 (626 ) NM 2,944 (4,039 ) (172.9 %) Net income (loss) $ 9,337 $ (12,162 ) (176.8 %) $ 11,831 $ (26,935 ) (143.9 %) Underwriting Ratios: Loss ratio (2) : 60.5 % 59.5 % 61.7 % 58.2 % Expense ratio (3) 36.5 % 39.2 % 37.4 % 38.7 % Combined ratio (4) 97.0 % 98.7 % 99.1 % 96.9 % (1) The Continuing Lines accident year underwriting income of $6.5 million is a non-GAAP measure which excludes the impact of prior accident year losses and loss adjustment expenses and prior accident year contingent commission expenses totaling $6.1 million. The Company's most directly comparable GAAP measure is the Continuing Lines underwriting income of $0.4 million. The Continuing Lines accident year combined ratio of 94.9% is a non-GAAP ratio which excludes the impact of prior accident year losses and loss adjustment expenses and prior accident year contingent commission expenses totaling 5.1%. The Company's most directly comparable GAAP ratio is the Continuing Lines combined ratio of 100.0%. The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within Continuing Lines may be obscured by prior accident year adjustments. These non-GAAP measures or ratios should not be considered as a substitute for its most directly comparable GAAP measure or ratio and does not reflect the overall underwriting profitability of the Company. (2) The loss ratio is a GAAP financial measure that is generally viewed in the insurance industry as an indicator of underwriting profitability and is calculated by dividing net losses and loss adjustment expenses by net earned premiums. (3) The expense ratio is a GAAP financial measure that is calculated by dividing the sum of acquisition costs and other underwriting expenses by net earned premiums. (4) The combined ratio is a GAAP financial measure and is the sum of the Company’s loss and expense ratios. NM – not meaningful 36 Premiums The following table summarizes the change in premium volume by business segment: Quarters Ended June 30, Six Months Ended June 30, (Dollars in thousands) 2023 2022 % Change 2023 2022 % Change Gross written premiums (1) Commercial Specialty $ 95,347 $ 105,010 (9.2 %) $ 190,855 $ 207,858 (8.2 %) Reinsurance Operations (3) 14,844 46,524 (68.1 %) 38,260 87,520 (56.3 %) Continuing Lines 110,191 151,534 (27.3 %) 229,115 295,378 (22.4 %) Exited Lines (91 ) 45,289 (100.2 %) 3,970 92,428 (95.7 %) Total gross written premiums $ 110,100 $ 196,823 (44.1 %) $ 233,085 $ 387,806 (39.9 %) Ceded written premiums Commercial Specialty $ 3,451 $ 5,343 (35.4 %) $ 7,725 $ 10,028 (23.0 %) Reinsurance Operations (3) — — — — — — Continuing Lines 3,451 5,343 (35.4 %) 7,725 10,028 (23.0 %) Exited Lines 653 24,322 (97.3 %) 3,503 51,138 (93.1 %) Total ceded written premiums $ 4,104 $ 29,665 (86.2 %) $ 11,228 $ 61,166 (81.6 %) Net written premiums (2) Commercial Specialty $ 91,896 $ 99,667 (7.8 %) $ 183,130 $ 197,830 (7.4 %) Reinsurance Operations (3) 14,844 46,524 (68.1 %) 38,260 87,520 (56.3 %) Continuing Lines 106,740 146,191 (27.0 %) 221,390 285,350 (22.4 %) Exited Lines (744 ) 20,967 (103.5 %) 467 41,290 (98.9 %) Total net written premiums $ 105,996 $ 167,158 (36.6 %) $ 221,857 $ 326,640 (32.1 %) Net earned premiums Commercial Specialty $ 93,408 $ 93,997 (0.6 %) $ 186,590 $ 185,194 0.8 % Reinsurance Operations (3) 29,585 39,162 (24.5 %) 64,432 73,460 (12.3 %) Continuing Lines 122,993 133,159 (7.6 %) 251,022 258,654 (3.0 %) Exited Lines 6,163 22,590 (72.7 %) 18,206 45,918 (60.4 %) Total net earned premiums $ 129,156 $ 155,749 (17.1 %) $ 269,228 $ 304,572 (11.6 %) (1) Gross written premiums represent the amount received or to be received for insurance policies written without reduction for reinsurance costs, ceded premiums, or other deductions. (2) Net written premiums equal gross written premiums less ceded written premiums. (3) External business only, excluding business assumed from affiliates. Gross written premiums decreased by 44.1% and 39.9% for the quarter and six months ended June 30, 2023 as compared to same periods in 2022. The decrease in gross written premiums is being driven by a reduction in premiums in both Continuing Lines as well as Exited Lines. The reduction in Continuing Lines is primarily due to the non-renewal of a casualty treaty within Reinsurance Operations, the non-renewal of a restaurant book of business within Commercial Specialty, and actions taken within Commercial Specialty to improve underwriting results by not renewing underperforming business. These decreases were partially offset by increased pricing within Commercial Specialty. To support future growth in the Company's Commercial Specialty segment and provide capital for business initiatives including share repurchases, a decision was made to reduce writings in its Reinsurance Operations. The Company anticipates that its Reinsurance Operations will comprise a smaller percentage of the Company's overall business prospectively. 37 Net Retention The ratio of net written premiums to gross written premiums is referred to as the Company’s net premium retention. The Company’s net premium retention is summarized by segments as follows: Quarters Ended June 30, Point Six Months Ended June 30, Point (Dollars in thousands) 2023 2022 Change 2023 2022 Change Commercial Specialty 96.4 % 94.9 % 1.5 96.0 % 95.2 % 0.8 Reinsurance Operations 100.0 % 100.0 % — 100.0 % 100.0 % — Continuing Lines 96.9 % 96.5 % 0.4 96.6 % 96.6 % 0.0 Exited Lines 817.6 % 46.3 % 771.3 11.8 % 44.7 % (32.9 ) Total 96.3 % 84.9 % 11.4 95.2 % 84.2 % 11.1 The net premium retention for the quarter and six months ended June 30, 2023 increased by 11.4 points and 11.1 points, respectively, as compared to the same periods in 2022. While the Company still has ceding arrangements in place related to the sale of renewal rights, the Company's overall net retention is not significantly impacted in 2023 as Exited Lines' gross written premiums comprise a much smaller percentage of the Company's consolidated gross written premiums. See Note 3 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2022 Annual Report on Form 10-K for additional information on the sale of renewal rights related to the Company’s manufactured and dwelling homes business and the Company's Farm, Ranch & Stable business. Net Earned Premiums Net earned premiums within the Commercial Specialty segment decreased by 0.6% for the quarter ended June 30, 2023 as compared to the same period in 2022 primarily due to the reduction in premiums written in 2023 as a result of actions taken within Commercial Specialty to improve underwriting results by not renewing underperforming business as well as the non-renewal of a restaurant book of business. Net earned premiums within the Commercial Specialty segment increased by 0.8% for the six months ended June 30, 2023 as compared to the same period in 2022. This increase in net earned premiums was primarily due to the growth in premiums written in the prior year as a result of organic growth from existing agents and pricing increases. Property net earned premiums were $35.8 million and $36.5 million for the quarters ended June 30, 2023 and 2022, respectively, and $73.5 million and $70.9 million for the six months ended June 30, 2023 and 2022, respectively. Casualty net earned premiums were $57.6 million and $57.5 million for the quarters ended June 30, 2023 and 2022, respectively, and $113.1 million and $114.3 million for the six months ended June 30, 2023 and 2022, respectively. Net earned premiums within the Reinsurance Operations segment decreased by 24.5% and 12.3% for the quarter and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 primarily due to the non-renewal of a casualty treaty. There were no property net earned premiums for the quarters and six months ended June 30, 2023 and 2022. Casualty net earned premiums were $29.6 million and $39.2 million for the quarters ended June 30, 2023 and 2022, respectively, and $64.4 million and $73.5 million for the six months ended June 30, 2023 and 2022, respectively. Net earned premiums within the Exited Lines segment decreased by 72.7% and 60.4% for the quarter and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 primarily due to the sale of renewal rights related to the Company's Farm, Ranch & Stable business on August 8, 2022. The decrease in net earned premiums is also due to exiting lines of business unrelated to the Company’s continuing businesses. Property net earned premiums were $4.0 million and $17.6 million for the quarters ended June 30, 2023 and 2022, respectively, and $12.7 million and $36.4 million for the six months ended June 30, 2023 and 2022, respectively. Casualty net earned premiums were $2.2 million and $5.0 million for the quarters ended June 30, 2023 and 2022, respectively, and $5.5 million and $9.5 million for the six months ended June 30, 2023 and 2022, respectively. 38 Reserves Management’s best estimate at June 30, 2023 was recorded as the loss reserve. Management’s best estimate is as of a particular point in time and is based upon known facts, the Company’s actuarial analyses, current law, and the Company’s judgment. This resulted in carried gross and net reserves of $867.0 million and $793.0 million, respectively, as of June 30, 2023. A breakout of the Company’s gross and net reserves, as of June 30, 2023, is as follows: Gross Reserves (Dollars in thousands) Case IBNR (1) Total Commercial Specialty $ 173,460 $ 333,469 $ 506,929 Reinsurance Operations 22,866 195,507 218,373 Continuing Lines 196,326 528,976 725,302 Exited Lines 63,052 78,597 141,649 Total $ 259,378 $ 607,573 $ 866,951 Net Reserves (2) (Dollars in thousands) Case IBNR (1) Total Commercial Specialty $ 157,512 $ 301,260 $ 458,772 Reinsurance Operations 22,866 195,507 218,373 Continuing Lines 180,378 496,767 677,145 Exited Lines 44,876 70,997 115,873 Total $ 225,254 $ 567,764 $ 793,018 (1) Losses incurred but not reported, including the expected future emergence of case reserves. (2) Does not include reinsurance receivables on paid losses. Each reserve category has an implicit frequency and severity for each accident year as a result of the various assumptions made. If the actual levels of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’s best estimate. For most of its reserve categories, the Company believes that frequency can be predicted with greater accuracy than severity. Therefore, the Company believes management’s best estimate is more likely influenced by changes in severity than frequency. The following table, which the Company believes reflects a reasonable range of variability around its best estimate based on historical loss experience and management’s judgment, reflects the impact of changes (which could be favorable or unfavorable) in frequency and severity on the Company’s current accident year net loss estimate of $166.0 million for claims occurring during the six months ended June 30, 2023: Severity Change (Dollars in thousands) -10% -5% 0% 5% 10% Frequency Change -5% (24,075 ) (16,188 ) (8,302 ) (415 ) 7,471 -3% (21,086 ) (13,034 ) (4,981 ) 3,072 11,124 -2% (19,592 ) (11,456 ) (3,321 ) 4,815 12,950 -1% (18,097 ) (9,879 ) (1,660 ) 6,558 14,777 0% (16,603 ) (8,302 ) — 8,302 16,603 1% (15,109 ) (6,724 ) 1,660 10,045 18,430 2% (13,615 ) (5,147 ) 3,321 11,788 20,256 3% (12,120 ) (3,570 ) 4,981 13,532 22,082 5% (9,132 ) (415 ) 8,302 17,018 25,735 The Company’s net reserves for losses and loss adjustment expenses of $793.0 million as of June 30, 2023 relate to multiple accident years. Therefore, the impact of changes in frequency and severity for more than one accident year could be higher or lower than the amounts reflected above. 39 Underwriting Results Commercial Specialty Commercial Specialty's results for the quarter ended June 30, 2023 are reflective of actions taken to improve profitabilty. Actions were taken to cease writing business which was not providing an acceptable return on capital. As a result, accident year underwriting income (1) improved to $6.1 million for the quarter ended June 30, 2023 from an accident year underwriting loss (1) of $0.6 million for the quarter ended March 31, 2023. The components of income (loss) from the Company’s Commercial Specialty segment and corresponding underwriting ratios are as follows: Quarters Ended June 30, % Six Months Ended June 30, % (Dollars in thousands) 2023 2022 Change 2023 2022 Change Gross written premiums $ 95,347 $ 105,010 (9.2 %) $ 190,855 $ 207,858 (8.2 %) Net written premiums $ 91,896 $ 99,667 (7.8 %) $ 183,130 $ 197,830 (7.4 %) Net earned premiums $ 93,408 $ 93,997 (0.6 %) $ 186,590 $ 185,194 0.8 % Other income 266 260 2.3 % 533 $ 519 2.7 % Total revenues 93,674 94,257 (0.6 %) 187,123 185,713 0.8 % Losses and expenses: Net losses and loss adjustment expenses 58,662 52,804 11.1 % 118,781 106,463 11.6 % Acquisition costs and other underwriting expenses 33,972 35,543 (4.4 %) 69,498 69,069 0.6 % Underwriting income (loss) $ 1,040 $ 5,910 (82.4 %) $ (1,156 ) $ 10,181 (111.4 %) Quarters Ended June 30, Point Six Months Ended June 30, Point 2023 2022 Change 2023 2022 Change Underwriting Ratios: Loss ratio: Current accident year 57.5 % 58.6 % (1.1 ) 60.2 % 57.7 % 2.5 Prior accident year 5.3 % (2.4 %) 7.7 3.5 % (0.2 %) 3.7 Calendar year loss ratio 62.8 % 56.2 % 6.6 63.7 % 57.5 % 6.2 Expense ratio 36.4 % 37.8 % (1.4 ) 37.2 % 37.3 % (0.1 ) Combined ratio 99.2 % 94.0 % 5.2 100.9 % 94.8 % 6.1 Accident year combined ratio (2) 93.7 % 96.4 % 97.3 % 95.0 % (1) The Commercial Specialty accident year underwriting income (loss) of $6.1 million and ($0.6) million for the quarters ended June 30, 2023 and March 31, 2023, respectively, is a non-GAAP measure which excludes the impact of prior accident year losses and loss adjustment expenses and prior accident year contingent commission expenses totaling $5.1 million and $1.6 million for the quarters ended June 30, 2023 and March 31, 2023, respectively. The Company's most directly comparable GAAP measure is the Commercial Specialty underwriting income (loss) of $1.0 million and ($2.2) million for the quarters ended June 30, 2023 and March 31, 2023, respectively. The Company believes the non-GAAP measures are useful to investors when evaluating the Company's underwriting performance as trends within Commercial Specialty may be obscured by prior accident year adjustments. These non-GAAP measures should not be considered as a substitute for its most directly comparable GAAP measure and does not reflect the overall underwriting profitability of the Company. (2) The accident year combined ratio excludes the impact of prior accident year losses and loss adjustment expenses and prior accident year contingent commission expenses. 40 Reconciliation of non-GAAP financial measures and ratios The table below reconciles the non-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio. The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within Commercial Specialty may be obscured by prior accident year adjustments. These non-GAAP measures or ratios should not be considered as a substitute for its most directly comparable GAAP measure or ratio and does not reflect the overall underwriting profitability of the Company. Quarters Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in thousands) Losses Loss Ratio Losses Loss Ratio Losses Loss Ratio Losses Loss Ratio Property Non catastrophe property losses and ratio excluding the effect of prior accident year (1) $ 16,100 44.9 % $ 18,159 49.7 % $ 38,676 52.6 % $ 35,493 50.1 % Effect of prior accident year (1,436 ) (4.0 %) (3,130 ) (8.6 %) (2,695 ) (3.7 %) (1,307 ) (1.9 %) Non catastrophe property losses and ratio (2) $ 14,664 40.9 % $ 15,029 41.1 % $ 35,981 48.9 % $ 34,186 48.2 % Catastrophe losses and ratio excluding the effect of prior accident year (1) $ 4,087 11.4 % $ 3,054 8.4 % $ 7,415 10.1 % $ 5,206 7.3 % Effect of prior accident year 429 1.2 % (302 ) (0.8 %) 1,851 2.6 % (228 ) (0.3 %) Catastrophe losses and ratio (2) $ 4,516 12.6 % $ 2,752 7.6 % $ 9,266 12.7 % $ 4,978 7.0 % Total property losses and ratio excluding the effect of prior accident year (1) $ 20,187 56.3 % $ 21,213 58.1 % $ 46,091 62.7 % $ 40,699 57.4 % Effect of prior accident year (1,007 ) (2.8 %) (3,432 ) (9.4 %) (844 ) (1.1 %) (1,535 ) (2.2 %) Total property losses and ratio (2) $ 19,180 53.5 % $ 17,781 48.7 % $ 45,247 61.6 % $ 39,164 55.2 % Casualty Total casualty losses and ratio excluding the effect of prior accident year (1) $ 33,496 58.2 % $ 33,881 59.0 % $ 66,233 58.6 % $ 66,168 57.9 % Effect of prior accident year 5,986 10.4 % 1,142 2.0 % 7,301 6.5 % 1,131 1.0 % Total casualty losses and ratio (2) $ 39,482 68.6 % $ 35,023 61.0 % $ 73,534 65.1 % $ 67,299 58.9 % Total Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1) $ 53,683 57.5 % $ 55,094 58.6 % $ 112,324 60.2 % $ 106,867 57.7 % Effect of prior accident year 4,979 5.3 % (2,290 ) (2.4 %) 6,457 3.5 % (404 ) (0.2 %) Total net losses and loss adjustment expense and total loss ratio (2) $ 58,662 62.8 % $ 52,804 56.2 % $ 118,781 63.7 % $ 106,463 57.5 % (1) Non-GAAP measure / ratio (2) Most directly comparable GAAP measure / ratio Premiums See “Results of Operations” above for a discussion on consolidated premiums. Other Income Other income was $0.3 million for each of the quarters ended June 30, 2023 and 2022 and $0.5 million for each of the six months ended June 30, 2023 and 2022. Other income is primarily comprised of fee income. 41 Loss Ratio The current accident year losses and loss ratio is summarized as follows: Quarters Ended June 30, % Six Months Ended June 30, % (Dollars in thousands) 2023 2022 Change 2023 2022 Change Property losses Non-catastrophe $ 16,100 $ 18,159 (11.3 %) $ 38,676 $ 35,493 9.0 % Catastrophe 4,087 3,054 33.8 % 7,415 5,206 42.4 % Property losses 20,187 21,213 (4.8 %) 46,091 40,699 13.2 % Casualty losses 33,496 33,881 (1.1 %) 66,233 66,168 0.1 % Total accident year losses $ 53,683 $ 55,094 (2.6 %) $ 112,324 $ 106,867 5.1 % Quarters Ended June 30, Point Six Months Ended June 30, Point 2023 2022 Change 2023 2022 Change Current accident year loss ratio: Property Non-catastrophe 44.9 % 49.7 % (4.8 ) 52.6 % 50.1 % 2.5 Catastrophe 11.4 % 8.4 % 3.0 10.1 % 7.3 % 2.8 Property loss ratio 56.3 % 58.1 % (1.8 ) 62.7 % 57.4 % 5.3 Casualty loss ratio 58.2 % 59.0 % (0.8 ) 58.6 % 57.9 % 0.7 Total accident year loss ratio 57.5 % 58.6 % (1.1 ) 60.2 % 57.7 % 2.5 The current accident year non-catastrophe property loss ratio improved by 4.8 points during the quarter ended June 30, 2023 as compared to the same period in 2022 reflecting lower claims frequency in the second accident quarter compared to last year. The current accident year non-catastrophe property loss ratio increased by 2.5 points during the six months ended June 30, 2023 as compared to the same period in 2022 reflecting higher claims severity mainly due to fire losses in the first accident quarter compared to last year. The current accident year catastrophe loss ratio increased by 3.0 points during the quarter ended June 30, 2023 as compared to the same period in 2022 recognizing higher claims severity in the calendar quarter compared to last year. The current accident year catastrophe loss ratio increased by 2.8 points during the six months ended June 30, 2023 as compared to the same period in 2022 recognizing higher claims frequency and severity in the first six months compared to last year. The current accident year casualty loss ratio improved by 0.8 points during the quarter ended June 30, 2023 as compared to the same period in 2022 reflecting lower claims frequency in the calendar quarter compared to last year. The current accident year casualty loss ratio increased by 0.7 points during the six months ended June 30, 2023 as compared to the same period in 2022 recognizing higher claims severity in the first six months compared to last year. The calendar year loss ratio for the quarter and six months ended June 30, 2023 includes an increase of $5.0 million, or 5.3 percentage points, and an increase of $6.5 million, or 3.5 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratio for the quarter and six months ended June 30, 2022 includes a decrease of $2.3 million, or 2.4 percentage points, and a decrease of $0.4 million, or 0.2 percentage points, respectively, related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development. Expense Ratios The expense ratio for the Company’s Commercial Specialty segment improved by 1.4 points from 37.8% for the quarter ended June 30, 2022 to 36.4% for the quarter ended June 30, 2023 primarily due to a reduction in commission expenses and the recovery of medical premiums in 2023 due to lower than expected medical costs in 2022. 42 The expense ratio for the Company’s Commercial Specialty segment improved by 0.1 points from 37.3% for the six months ended June 30, 2022 to 37.2% for the six months ended June 30, 2023. Reinsurance Operations The components of income (loss) from the Company’s Reinsurance Operations segment and corresponding underwriting ratios are as follows: Quarters Ended June 30, % Six Months Ended June 30, % (Dollars in thousands) 2023 (1) 2022 (1) Change 2023 (1) 2022 (1) Change Gross written premiums $ 14,844 $ 46,524 (68.1 %) $ 38,260 $ 87,520 (56.3 %) Net written premiums $ 14,844 $ 46,524 (68.1 %) $ 38,260 $ 87,520 (56.3 %) Net earned premiums $ 29,585 $ 39,162 (24.5 %) $ 64,432 $ 73,460 (12.3 %) Other income 9 20 (55.0 %) — — — Total revenues 29,594 39,182 (24.5 %) 64,432 73,460 (12.3 %) Losses and expenses: Net losses and loss adjustment expenses 19,512 22,793 (14.4 %) 40,775 43,852 (7.0 %) Acquisition costs and other underwriting expenses 10,737 14,553 (26.2 %) 23,553 26,514 (11.2 %) Underwriting income (loss) $ (655 ) $ 1,836 (135.7 %) $ 104 $ 3,094 (96.6 %) Quarters Ended June 30, Point Six Months Ended June 30, Point 2023 2022 Change 2023 2022 Change Underwriting Ratios: Loss ratio: Current accident year (2) 62.6 % 61.3 % 1.3 61.7 % 61.4 % 0.3 Prior accident year 3.4 % (3.1 %) 6.5 1.6 % (1.7 %) 3.3 Calendar year loss ratio (3) 66.0 % 58.2 % 7.8 63.3 % 59.7 % 3.6 Expense ratio 36.3 % 37.2 % (0.9 ) 36.6 % 36.1 % 0.5 Combined ratio 102.3 % 95.4 % 6.9 99.9 % 95.8 % 4.1 Accident year combined ratio (4) 98.9 % 97.9 % 98.3 % 97.2 % (1) External business only, excluding business assumed from affiliates (2) Non-GAAP ratio (3) Most directly comparable GAAP ratio (4) The accident year combined ratio excludes the impact of prior accident year losses and loss adjustment expenses and prior accident year contingent commission expenses. Reconciliation of non-GAAP financial ratios The table above reconciles the non-GAAP ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP ratio. The Company believes the non-GAAP ratios are useful to investors when evaluating the Company's underwriting performance as trends within Reinsurance Operations may be obscured by prior accident year adjustments. These non-GAAP ratios should not be considered as a substitute for its most directly comparable GAAP ratio and does not reflect the overall underwriting profitability of the Company. Premiums See “Results of Operations” above for a discussion on consolidated premiums. 43 Other Income The Company recognized other income of less than $0.1 million during each of the quarters ended June 30, 2023 and 2022. There was no other income recognized during the six months ended June 30, 2023 and 2022. Other income is primarily comprised of foreign exchange gains and losses. Loss Ratio The current accident year loss ratio increased by 1.3 points during the quarter ended June 30, 2023 as compared to the same period in 2022 primarily reflecting an increase in the excess professional liability expected loss ratio. The current accident year loss ratio increased by 0.3 points during the six months ended June 30, 2023 as compared to the same period in 2022 primarily reflecting an increase in the excess professional liability expected loss ratio. The calendar year loss ratios for the quarter and six months ended June 30, 2023 includes an increase of $1.0 million, or 3.4 percentage points, and an increase of $1.0 million, or 1.6 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratios for the quarter and six months ended June 30, 2022 includes a decrease of $1.2 million, or 3.1 percentage, and a decrease of $1.2 million, or 1.7 point percentage, respectively, related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development. Expense Ratios The expense ratio for the Company’s Reinsurance Operations segment improved 0.9 points from 37.2% for the quarter ended June 30, 2022 to 36.3% for the quarter ended June 30, 2023 primarily due to a reduction in staff and professional services to align expenses with business being written. The expense ratio for the Company’s Reinsurance Operations segment increased 0.5 points from 36.1% for the six months ended June 30, 2022 to 36.6% for the six months ended June 30, 2023 primarily due to an increase in commission expense. 44 Exited Lines The components of income (loss) from the Company’s Exited Lines segment and corresponding underwriting ratios are as follows: Quarters Ended June 30, % Six Months Ended June 30, % (Dollars in thousands) 2023 2022 Change 2023 2022 Change Gross written premiums $ (91 ) $ 45,289 (100.2 %) $ 3,970 $ 92,428 (95.7 %) Net written premiums $ (744 ) $ 20,967 (103.5 %) $ 467 $ 41,290 (98.9 %) Net earned premiums $ 6,163 $ 22,590 (72.7 %) $ 18,206 $ 45,918 (60.4 %) Other income (loss) 26 (196 ) (113.3 %) 103 4 NM Total revenues 6,189 22,394 (72.4 %) 18,309 45,922 (60.1 %) Losses and expenses: Net losses and loss adjustment expenses (92 ) 17,021 (100.5 %) 6,527 26,998 (75.8 %) Acquisition costs and other underwriting expenses 2,392 11,002 (78.3 %) 7,528 22,207 (66.1 %) Underwriting income (loss) $ 3,889 $ (5,629 ) (169.1 %) $ 4,254 $ (3,283 ) 229.6 % Quarters Ended June 30, Point Six Months Ended June 30, Point 2023 2022 Change 2023 2022 Change Underwriting Ratios: Loss ratio: Current accident year 94.7 % 75.6 % 19.1 76.5 % 69.7 % 6.8 Prior accident year (96.2 %) (0.3 %) (95.9 ) (40.6 %) (10.9 %) (29.7 ) Calendar year loss ratio (1.5 %) 75.3 % (76.8 ) 35.9 % 58.8 % (22.9 ) Expense ratio 38.8 % 48.7 % (9.9 ) 41.3 % 48.4 % (7.1 ) Combined ratio 37.3 % 124.0 % (86.7 ) 77.2 % 107.2 % (30.0 ) Accident year combined ratio (1) 144.6 % 119.1 % 119.4 % 111.3 % (1) The accident year combined ratio excludes the impact of prior accident year losses and loss adjustment expenses and prior accident year contingent commission expenses. NM – not meaningful 45 Reconciliation of non-GAAP financial measures and ratios The table below reconciles the non-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio. The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within Exited Lines may be obscured by prior accident year adjustments. These non-GAAP measures or ratios should not be considered as a substitute for its most directly comparable GAAP measure or ratio and does not reflect the overall underwriting profitability of the Company. Quarters Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 (Dollars in thousands) Losses Loss Ratio Losses Loss Ratio Losses Loss Ratio Losses Loss Ratio Property Non catastrophe property losses and ratio excluding the effect of prior accident year (1) $ 3,421 85.8 % $ 9,335 52.9 % $ 7,073 55.8 % $ 19,596 53.8 % Effect of prior accident year (472 ) (11.8 %) 615 3.5 % (1,637 ) (12.9 %) (3,252 ) (8.9 %) Non catastrophe property losses and ratio (2) $ 2,949 74.0 % $ 9,950 56.4 % $ 5,436 42.9 % $ 16,344 44.9 % Catastrophe losses and ratio excluding the effect of prior accident year (1) $ 1,013 25.4 % $ 5,327 30.2 % $ 3,155 24.9 % $ 7,479 20.5 % Effect of prior accident year (4,324 ) (108.4 %) (648 ) (3.7 %) (4,175 ) (32.9 %) (1,119 ) (3.1 %) Catastrophe losses and ratio (2) $ (3,311 ) (83.0 %) $ 4,679 26.5 % $ (1,020 ) (8.0 %) $ 6,360 17.4 % Total property losses and ratio excluding the effect of prior accident year (1) $ 4,434 111.2 % $ 14,662 83.1 % $ 10,228 80.7 % $ 27,075 74.3 % Effect of prior accident year (4,796 ) (120.2 %) (33 ) (0.2 %) (5,812 ) (45.8 %) (4,371 ) (12.0 %) Total property losses and ratio (2) $ (362 ) (9.0 %) $ 14,629 82.9 % $ 4,416 34.9 % $ 22,704 62.3 % Casualty Total casualty losses and ratio excluding the effect of prior accident year (1) $ 1,400 64.3 % $ 2,420 48.9 % $ 3,703 67.0 % $ 4,913 51.8 % Effect of prior accident year (1,130 ) (51.9 %) (28 ) (0.6 %) (1,592 ) (28.8 %) (619 ) (6.5 %) Total casualty losses and ratio (2) $ 270 12.4 % $ 2,392 48.3 % $ 2,111 38.2 % $ 4,294 45.3 % Total Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1) $ 5,834 94.7 % $ 17,082 75.6 % $ 13,931 76.5 % $ 31,988 69.7 % Effect of prior accident year (5,926 ) (96.2 %) (61 ) (0.3 %) (7,404 ) (40.6 %) (4,990 ) (10.9 %) Total net losses and loss adjustment expense and total loss ratio (2) $ (92 ) (1.5 %) $ 17,021 75.3 % $ 6,527 35.9 % $ 26,998 58.8 % (1) Non-GAAP measure / ratio (2) Most directly comparable GAAP measure / ratio Premiums See “Results of Operations” above for a discussion on consolidated premiums. 46 Other Income (Loss) The Company recognized income of less than $0.1 million and a loss of $0.2 million for the quarters ended June 30, 2023 and 2022, respectively, and income of $0.1 million and income of less than $0.1 million for the six months ended June 30, 2023 and 2022, respectively. Other income (loss) is primarily comprised of fee income net of bank fees. Loss Ratio The current accident year losses and loss ratio is summarized as follows: Quarters Ended June 30, % Six Months Ended June 30, % (Dollars in thousands) 2023 2022 Change 2023 2022 Change Property losses Non-catastrophe $ 3,421 $ 9,335 (63.4 %) $ 7,073 $ 19,596 (63.9 %) Catastrophe 1,013 5,327 (81.0 %) 3,155 7,479 (57.8 %) Property losses 4,434 14,662 (69.8 %) 10,228 27,075 (62.2 %) Casualty losses 1,400 2,420 (42.1 %) 3,703 4,913 (24.6 %) Total accident year losses $ 5,834 $ 17,082 (65.8 %) $ 13,931 $ 31,988 (56.4 %) Quarters Ended June 30, Point Six Months Ended June 30, Point 2023 2022 Change 2023 2022 Change Current accident year loss ratio: Property Non-catastrophe 85.8 % 52.9 % 32.9 55.8 % 53.8 % 2.0 Catastrophe 25.4 % 30.2 % (4.8 ) 24.9 % 20.5 % 4.4 Property loss ratio 111.2 % 83.1 % 28.1 80.7 % 74.3 % 6.4 Casualty loss ratio 64.3 % 48.9 % 15.4 67.0 % 51.8 % 15.2 Total accident year loss ratio 94.7 % 75.6 % 19.1 76.5 % 69.7 % 6.8 The current accident year non-catastrophe property loss ratio increased by 32.9 points during the quarter ended June 30, 2023 as compared to the same period in 2022 reflecting higher claims severity in the calendar quarter compared to last year. The current accident year non-catastrophe property loss ratio increased by 2.0 points during the six months ended June 30, 2023 as compared to the same period in 2022 primarily reflecting higher claims severity in the first six months compared to last year. The current accident year catastrophe loss ratio improved by 4.8 points during the quarter ended June 30, 2023 as compared to the same period in 2022 primarily recognizing lower claims severity in the calendar quarter compared to last year. The current accident year catastrophe loss ratio increased by 4.4 points during the six months ended June 30, 2023 as compared to the same period in 2022 primarily recognizing higher claims frequency and severity in the first six months compared to last year. The current accident year casualty loss ratio increased by 15.4 points during the quarter ended June 30, 2023 as compared to the same period in 2022 primarily reflecting higher claims severity in the calendar quarter compared to last year and growth in the brokerage divisions which had higher expected loss ratios. The current accident year casualty loss ratio increased by 15.2 points during the six months ended June 30, 2023 as compared to the same period in 2022 primarily reflecting higher claims severity in the first six months compared to last year and growth in the brokerage divisions which had higher expected loss ratios. The calendar year loss ratio for the quarter and six months ended June 30, 2023 includes a decrease of $5.9 million, or 96.2 percentage points, and a decrease of $7.4 million, or 40.6 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratio for the quarter and six months ended June 30, 2022 includes a decrease of 47 $0.1 million, or 0.3 percentage points, and an decrease of $5.0 million, or 10.9 percentage points, respectively, related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development. Expense Ratio The expense ratio for the Company’s Exited Lines improved by 9.9 points from 48.7% for the quarter ended June 30, 2022 to 38.8% for the quarter ended June 30, 2023 and improved by 7.1 points from 48.4% for the six months ended June 30, 2022 to 41.3% for the six months ended June 30, 2023 due to restructuring actions which reduced expenses. Unallocated Corporate Items The Company’s fixed income portfolio, excluding cash, continues to maintain high quality with an A average rating and a duration of 1.4 years. Net Investment Income Quarters Ended June 30, % Six Months Ended June 30, % (Dollars in thousands) 2023 2022 Change 2023 2022 Change Gross investment income (1) $ 13,567 $ 2,541 433.9 % $ 25,947 $ 9,737 166.5 % Investment expenses (351 ) (611 ) (42.6 %) (723 ) (1,215 ) (40.5 %) Net investment income $ 13,216 $ 1,930 584.8 % $ 25,224 $ 8,522 196.0 % (1) Excludes realized gains and losses Gross investment income increased by 433.9% and 166.5% for the quarter and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The increase was primarily due to an increase in yield within the fixed maturities portfolio due to the rise in rates and increased returns from alternative investments. Investment expenses decreased by 42.6% and 40.5% for the quarter and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 due to decreased investment management expenses. At June 30, 2023, the Company held agency mortgage-backed securities with a market value of $3.0 million. Excluding the agency mortgage-backed securities, the average duration of the Company’s fixed maturities portfolio was 1.4 years as of June 30, 2023, compared with 1.8 years as of June 30, 2022. Including cash and short-term investments, the average duration of the Company’s fixed maturities portfolio, excluding agency mortgage-backed securities was 1.3 years and 1.7 years as of June 30, 2023 and June 30, 2022, respectively. Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration. The Company’s embedded book yield on its fixed maturities, not including cash, was 3.8% as of June 30, 2023, compared to 2.7% as of June 30, 2022. The embedded book yield on the $30.6 million of taxable municipal bonds in the Company’s portfolio was 3.0% at June 30, 2023, compared to an embedded book yield of 3.1% on the Company’s taxable municipal bonds of $32.4 million at June 30, 2022. 48 Net Realized Investment Gains (Losses) The components of net realized investment gains (losses) for the quarters and six months ended June 30, 2023 and 2022 were as follows: Quarters Ended June 30, Six Months Ended June 30, (Dollars in thousands) 2023 2022 2023 2022 Equity securities $ (174 ) $ (2,415 ) $ (1,088 ) $ (3,760 ) Fixed maturities (587 ) (8,637 ) (1,193 ) (11,876 ) Derivatives — 1,816 — 6,540 Other-than-temporary impairment losses (1) — (680 ) — (26,205 ) Net realized investment gains (losses) $ (761 ) $ (9,916 ) $ (2,281 ) $ (35,301 ) (1) In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio. In connection with these actions, the Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell resulting in other-than-temporary impairment losses. The majority of which were sold in the 2nd quarter of 2022. Most of the proceeds from the sale of these securities were reinvested into fixed income investments with maturities of two years. As a result of these actions, the Company's book yield rose over time. Book yield was approximately 2.2% at December 31, 2021 and 3.8% at June 30, 2023. See Note 3 of the notes to the consolidated financial statements in Item 1 of Part I of this report for an analysis of total investment return on a pre-tax basis for the quarters and six months ended June 30, 2023 and 2022. Corporate and Other Operating Expenses Corporate and other operating expenses consist of outside legal fees, other professional fees, directors’ fees, management fees & advisory fees, salaries and benefits for holding company personnel, development costs for new products, impairment losses, and taxes incurred which are not directly related to operations. Corporate and other operating expenses were $5.0 million and $3.0 million during the quarters ended June 30, 2023 and 2022, respectively. Corporate and other operating expenses for the quarter ended June 30, 2022 were lower than normal due to the Company receiving an employee retention credit under the CARES Act of $2.7 million in May 2022. Corporate and other operating expenses were $11.4 million and $7.7 million during the six months ended June 30, 2023 and 2022, respectively. The increase in corporate and other operating expenses is primarily due to restructuring costs incurred in the first quarter of 2023. In addition, corporate and other operating expenses for 2022 were lower than normal due to the Company receiving an employee retention credit under the CARES Act of $2.7 million in May 2022. Interest Expense Interest expense was $0.4 million and $3.0 million during the quarter and six months ended June 30, 2022. There was less than $0.1 million of interest expense during the quarter and six months ended June 30, 2023. The reduction in interest expense was due to the redemption of the 7.875% Subordinated Notes due 2047 on April 15, 2022. Income Tax Expense / Benefit Income tax expense was $2.4 million for the quarter ended June 30, 2023 compared with income tax benefit of $0.6 million for the quarter ended June 30, 2022. The increase in income tax expense is primarily due to higher taxable income in the Company's U.S. Subsidiaries in 2023. Income tax expense was $2.9 million for the six months ended June 30, 2023 compared with an income tax benefit of $4.0 million for the six months ended June 30, 2022. The increase in income tax expense is primarily due to higher taxable income in the Company's U.S. Subsidiaries in 2023. See Note 7 of the notes to the consolidated financial statements in Item 1 of Part I of this report for a comparison of income tax between periods. 49 Net Income (Loss) The factors described above resulted in net income of $9.3 million and a net loss of $12.2 million for the quarters ended June 30, 2023 and 2022, respectively, and net income of $11.8 million and a net loss of $26.9 million for the six months ended June 30, 2023 and 2022, respectively. Critical Accounting Estimates and Policies The Company’s consolidated financial statements are prepared in conformity with GAAP, which require it to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. The most critical accounting policies involve significant estimates and include those used in determining the liability for unpaid losses and loss adjustment expenses, recoverability of reinsurance receivables, investments, fair value measurements, goodwill and intangible assets, deferred acquisition costs, and taxation. For a detailed discussion on each of these policies, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes to any of these policies or underlying methodologies during the current year. Liquidity and Capital Resources Sources and Uses of Funds Global Indemnity Group, LLC is a holding company. Its principal asset is its ownership of the shares of its direct and indirect subsidiaries, including those of its insurance companies: United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, and Penn-Patriot Insurance Company. Global Indemnity Group, LLC’s short term and long term liquidity needs include but are not limited to the payment of corporate expenses, distributions to shareholders, and share repurchases. The Company also has commitments in the form of operating leases, commitments to fund limited liability investments, and unpaid losses and loss expense obligations. In order to meet its short term and long term needs, Global Indemnity Group, LLC’s principal sources of cash includes investment income, dividends from subsidiaries, other permitted disbursements from its direct and indirect subsidiaries, reimbursement for equity awards granted to employees and intercompany borrowings. The principal sources of funds at these direct and indirect subsidiaries include underwriting operations, investment income, proceeds from sales and redemptions of investments, capital contributions, intercompany borrowings, and dividends from subsidiaries. Funds are used principally by these operating subsidiaries to pay claims and operating expenses, to make debt payments, to purchase investments, and to make distribution payments. In addition, the Company periodically reviews opportunities related to business acquisitions, and as a result, liquidity may be needed in the future. GBLI Holdings, LLC is a holding company which is a wholly-owned subsidiary of Penn-Patriot Insurance Company. GBLI Holdings, LLC’s principal asset is its ownership of the shares of its direct and indirect subsidiaries which include United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, and Penn-Star Insurance Company. GBLI Holdings, LLC is dependent on dividends from its subsidiaries as well as reimbursements from its subsidiaries for utilization of net operating losses and other tax attributes in order to meet its corporate expense obligations and intercompany financing obligations. As of June 30, 2023, the Company also had future funding commitments of $14.2 million related to investments that are currently in their harvest period and it is unlikely that a capital call will be made. The future liquidity of both Global Indemnity Group, LLC and GBLI Holdings, LLC is dependent on the ability of its subsidiaries to generate income to pay dividends. Global Indemnity Group, LLC and GBLI Holdings, LLC’s insurance companies are restricted by statute as to the amount of dividends that they may pay without the prior approval of regulatory authorities. The dividend limitations imposed by state laws are based on the statutory financial results of each insurance company that are determined by using statutory accounting practices that differ in various respects from accounting principles used in financial statements prepared in conformity with GAAP. See “Regulation - Statutory Accounting Principles” in Item 1 of Part I of the Company’s 2022 Annual Report on Form 10-K. Key differences relate to, among other 50 items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes. See Note 22 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2022 Annual Report on Form 10-K for further information on dividend limitations related to the Insurance Companies. There were no dividend declared or paid during the quarter and six months ended June 30, 2023. Cash Flows Sources of operating funds consist primarily of net written premiums and investment income. Funds are used primarily to pay claims and operating expenses and to purchase investments. As a result of the distribution policy, funds are also used to pay distributions to shareholders of the Company. The Company’s reconciliation of net income (loss) to net cash provided by operations is generally influenced by the following: • the fact that the Company collects premiums, net of commissions, in advance of losses paid; • the timing of the Company’s settlements with its reinsurers; and • the timing of the Company’s loss payments. Net cash provided by operating activities was $14.2 million and $18.5 million for the six months ended June 30, 2023 and 2022, respectively. The decrease in operating cash flows of approximately $4.3 million from the prior year was primarily a net result of the following items: Six Months Ended June 30, (Dollars in thousands) 2023 2022 Change Net premiums collected $ 237,847 $ 276,206 $ (38,359 ) Net losses paid (141,431 ) (136,756 ) (4,675 ) Underwriting and corporate expenses (105,981 ) (130,981 ) 25,000 Net investment income 23,748 15,116 8,632 Interest paid (12 ) (5,126 ) 5,114 Net cash provided by operating activities $ 14,171 $ 18,459 $ (4,288 ) See the consolidated statements of cash flows in the consolidated financial statements in Item 1 of Part I of this report for details concerning the Company’s investing and financing activities. Liquidity Stock Repurchase On October 21, 2022, Global Indemnity Group, LLC announced that up to $32 million of share repurchases were authorized. On January 3, 2023, Global Indemnity Group, LLC announced that it authorized an increase in the aggregate stock purchases from $32 million to $60 million. On June 8, 2023, the Company’s Board of Directors approved an additional increase in the existing share buyback authorization amount of $60 million to $135 million. During the six months ended June 30, 2023, 450,000 shares were repurchased for approximately $12.1 million at an average purchase price of $26.83 per share. As a result of these transactions, book value per share increased by $0.60 per share since December 31, 2022. From the time of the initial announcement, a total of 1,357,082 shares were repurchased for approximately $34.0 million at an average purchase price of $25.05 per share. 138,151 shares that were acquired were reissued at an average price per share of $24.17. As a result of these transactions, book value per share increased by $1.69 per share since inception of the stock purchase program in October 2022. 51 Restructuring The Company restructured its insurance operations to strengthen its market presence and enhance its focus on GBLI’s core Package Specialty and Targeted Specialty products. The restructuring plan, which was initiated in the fourth quarter of 2022, was completed in the first quarter of 2023. The Company incurred restructuring costs of $3.4 million during the fourth quarter of 2022 and $2.1 million during the six months ended June 30, 2023 for total restructuring costs of $5.5 million. Post completion of the restructuring, the Company anticipates recurring annual expense savings of $16.0 million. Distributions The Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 24, 2023 and June 23, 2023. Distributions paid to common shareholders were $7.5 million during the six months ended June 30, 2023. In addition, distributions of $0.2 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the six months ended June 30, 2023. Other than the items discussed in the preceding paragraphs, there have been no material changes to the Company’s liquidity during the quarter and six months ended June 30, 2023. Please see Item 7 of Part II in the Company’s 2022 Annual Report on Form 10-K for information regarding the Company’s liquidity. Capital Resources There have been no material changes to the Company’s capital resources during the quarter and six months ended June 30, 2023. Please see Item 7 of Part II in the Company’s 2022 Annual Report on Form 10-K for information regarding the Company’s capital resources. Off Balance Sheet Arrangements The Company has no off balance sheet arrangements. Cautionary Note Regarding Forward-Looking Statements Some of the statements under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report may include forward-looking statements within the meaning of Section 21E of the Security Exchange Act of 1934, as amended, that reflect the Company’s current views with respect to future events and financial performance. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, expectations or consequences of identified transactions or natural disasters, and statements about the future performance, operations, products and services of the companies. The Company’s business and operations are and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. See “Risk Factors” in Item 1A of Part I in the Company’s 2022 Annual Report on Form 10-K for risks, uncertainties and other factors that could cause actual results and experience to differ from those projected. The Company’s forward-looking statements speak only as of the date of this report or as of the date they were made. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. 52 Item 3. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK For the quarter ended June 30, 2023, global equities rose approximately 6.9% with U.S. equities outperforming, gaining approximately 8.7%. U.S. fixed income lost approximately 0.8% with the average spread moving tighter during the quarter. Market expectations were met in June as the FOMC voted to pause the current tightening cycle, but volatility quickly resumed as the revised dot plots and Federal Reserve Chair Jerome Powell’s hawkish comments demonstrated that this meeting was not the end of this cycle. The combination of challenges that still exist in the banking industry, the Treasury’s need to replenish its General Account and the desire to observe additional economic data likely contributed to the more measured approach. Short-dated Treasury yields have been on the rise, leading to the steepest curve inversion since the Fed began raising rates in March of 2022 and fueling concerns that the U.S. will enter a recession later this year. The Company’s investment grade fixed income portfolio continues to maintain high quality with an A average rating and a duration of 1.3 years. Portfolio purchases were focused within US Treasury and asset backed securities. These purchases were funded primarily through cash inflows, sales of US Treasury securities and CMBS, as well as maturities and paydowns. During the second quarter, the portfolio’s allocation to US Treasury securities increased, while the portfolio’s exposure to investment grade credit and CMBS securities decreased. Other than the changes described in the preceding paragraphs, there have been no other material changes to the Company’s market risk since December 31, 2022. Please see Item 7A of Part II in the Company’s 2022 Annual Report on Form 10-K for information regarding the Company’s market risk.