Global Indemnity Group, LLC 10-K

Item 7. 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 Global Indemnity 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 7 and “Risk Factors” in Item 1A above for more information. You should review “Risk Factors” in Item 1A above 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. Financial Highlights 2023 Consolidated Results of Operations • Net income of $25.4 million, or $1.84 per share basic and $1.83 per share diluted • Net earned premium of $473.4 million; Property: 33% and Casualty: 67% • Penn-America accident year combined ratio of 95.1% for 2023 compared to 96.6% for 2022. • Net investment income of $55.4 million. Book yield on the fixed maturities portfolio was 4.0%. • Operating cash flows of $42.9 million 2023 Consolidated Financial Condition • Total investments of $1.3 billion; fixed maturities and short-term securities comprise 96% of total investments • Total assets of $1.7 billion • No debt • Since the Company's initial public offering in 2003, the total capital returned to shareholders was $609.5 million, comprising $522.2 million of share repurchases and $87.3 million of distributions / dividends. This includes $13.9 million of distributions during 2023. • Shareholders' equity of $648.8 million • Book value per common share of $47.53 Overview The Company operates and manages its business through two business segments: Penn-America and Non-Core Operations. The Company’s Penn-America products are distributed through approximately 360 wholesale general agents, 2,400 retail agents, and 20,000 direct-to-consumer policies. The Company’s wholesale general agents have limited quoting and binding authority. Penn-America operates in the excess and surplus lines marketplace. Penn-America offers specialty property and casualty products designed for GBLI's Wholesale Commercial, Programs, InsurTech, and Assumed Reinsurance product offerings. The Company’s Non-Core Operations segment represents lines of business that have been de-emphasized or are no longer being written. Non-Core Operations includes manufactured and dwelling home business, farm, ranch and equine business, specialty personal lines products such as motorcycle, watercraft, and certain homeowners, property brokerage, non-renewed retrocessional reinsurance treaties, several smaller casualty lines, and terminated commercial programs. The two key activities of Non-Core Operations are managing transition service agreements related to the sales of the Company’s renewal rights and handling claims activity and loss reserves on de-emphasized and terminated business. See Note 2 of the notes to consolidated financial statements in Item 8 of Part II of this report for additional information on the sales of the Company’s renewal rights. 40 The Company derives its revenues primarily from premiums paid on insurance policies that it writes and from income generated by its investment portfolio, net of fees paid for investment management services. The amount of insurance premiums that the Company receives is a function of the amount and type of policies it writes, as well as prevailing market prices. The Company’s expenses include losses and loss adjustment expenses, acquisition costs and other underwriting expenses, corporate and other operating expenses, interest, investment expenses, and income taxes. Losses and loss adjustment expenses are estimated by management and reflect the Company’s best estimate of ultimate losses and costs arising during the reporting period and revisions of prior period estimates. The Company records its best estimate of losses and loss adjustment expenses considering both internal and external actuarial analyses of the estimated losses the Company expects to incur on the insurance policies it writes. The ultimate losses and loss adjustment expenses will depend on the actual costs to resolve claims. Acquisition costs consist principally of commissions and premium taxes that are typically a percentage of the premiums on the insurance policies the Company writes, net of ceding commissions earned from reinsurers. Other underwriting expenses consist primarily of personnel expenses and general operating expenses related to underwriting activities. Corporate and other operating expenses are comprised primarily of outside legal fees, other professional and accounting fees, directors’ fees, management fees & advisory fees, and salaries and benefits for company personnel whose services relate to the support of corporate activities. Interest expense is primarily comprised of amounts due on outstanding debt. 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. See Note 4 of the notes to consolidated financial statements contained in Item 8 of Part II of this report. Actual results could differ from those estimates and assumptions. The Company believes that of the Company’s significant accounting policies, the following may involve a higher degree of judgment and estimation. Liability for Unpaid Losses and Loss Adjustment Expenses Although variability is inherent in estimates, the Company believes that the liability for unpaid losses and loss adjustment expenses reflects Management’s best estimate for future amounts needed to pay losses and related loss adjustment expenses and the impact of its reinsurance coverage with respect to insured events. In developing losses and loss adjustment expense ("loss" or "losses") reserve estimates, the Company’s actuaries perform detailed reserve analyses each quarter. To perform the analysis, the data is organized at a "reserve category" level. A reserve category can be a line of business such as commercial automobile liability, or it can be a particular type of claim such as construction defect. The reserves within a reserve category level are characterized as long-tail or short-tail. For long-tail business, it will generally be several years between the time the business is written and the time when all claims are settled. The Company’s long-tail exposures include general liability, professional liability, products liability, commercial automobile liability, and excess and umbrella. Short-tail exposures include property, commercial automobile physical damage, and equine mortality. The Company also reviews assumed reinsurance segments each quarter by treaty and treaty year which is comprised primarily of long-tailed business. To manage its Insurance Operations, the Company's insurance products target specific, defined groups of insureds with customized coverage to meet their needs. For further discussion about the Company’s business divisions, see “General – Business Segments – Insurance Operations” in Item 1 of Part I of this report. Each of the Company’s business divisions contain both long-tail and short-tail exposures. Every reserve category is analyzed by the Company’s actuaries each quarter. Management is responsible for the final determination of loss reserve selections. In addition to the Company’s internal reserve analysis, independent external actuaries perform a full, detailed review of the reserves annually. The Company reviews both the internal and external actuarial analyses in determining its reserve position. The actuarial methods used to project ultimate losses for both long-tail and short-tail reserve categories include, but are not limited to, the following: • Paid Development method; • Incurred Development method; • Expected Loss Ratio method; 41 • Bornhuetter-Ferguson method using premiums and paid loss; • Bornhuetter-Ferguson method using premiums and incurred loss; and • Average Loss method. The Paid Development method estimates ultimate losses by reviewing paid loss patterns and applying them to accident years with further expected changes in paid loss. Selection of the paid loss pattern requires analysis of several factors including the impact of inflation on claims costs, the rate at which claims professionals make claim payments and close claims, the impact of judicial decisions, the impact of underwriting changes, the impact of large claim payments, and other factors. Claim cost inflation requires evaluation of changes in the cost of repairing or replacing property, changes in the cost of medical care, changes in the cost of wage replacement, judicial decisions, legislative changes, and other factors. Because this method assumes that losses are paid at a consistent rate, changes in any of these factors can impact the results. Since the method does not rely on case reserves, it is not directly influenced by changes in the adequacy of case reserves. For many reserve categories, paid loss data for recent periods may be too immature or erratic for reliable loss projections. This situation often exists for long-tail exposures. In addition, changes in the factors described above may result in inconsistent payment patterns. Finally, estimating the paid loss pattern subsequent to the most mature point available in the data analyzed often involves considerable uncertainty for long-tail reserve categories. The Incurred Development method is similar to the Paid Development method, but it uses case incurred losses instead of paid losses. Since this method uses more data (case reserves in addition to paid losses) than the Paid Development method, the incurred development patterns may be less variable than paid development patterns. However, selection of the incurred loss pattern requires analysis of all of the factors listed in the description of the Paid Development method. In addition, the inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place and the use of case incurred losses may not eliminate the issues associated with estimating the incurred loss pattern subsequent to the most mature point available. The Expected Loss Ratio method multiplies premiums by an expected loss ratio to produce ultimate loss estimates for each accident year. This method may be useful if loss development patterns are inconsistent, losses emerge very slowly, or there is relatively little loss history from which to estimate future losses. The selection of the expected loss ratio requires analysis of loss ratios from earlier accident years or pricing studies and analysis of inflationary trends, frequency trends, rate changes, underwriting changes, and other applicable factors. The Bornhuetter-Ferguson method using premiums and paid losses is a combination of the Paid Development method and the Expected Loss Ratio method. This method normally determines expected loss ratios similar to the method used for the Expected Loss Ratio method and requires analysis of the same factors described above. The method assumes that only future losses will develop at the expected loss ratio level. The percent of paid loss to ultimate loss implied from the Paid Development method is used to determine what percentage of ultimate loss is yet to be paid. The use of the pattern from the Paid Development method requires consideration of all factors listed in the description of the Paid Development method. The estimate of losses yet to be paid is added to current paid losses to estimate the ultimate loss for each accident year. This method will react very slowly if actual ultimate loss ratios are different from expectations due to changes not accounted for by the Expected Loss Ratio calculation. The Bornhuetter-Ferguson method using premiums and incurred losses is similar to the Bornhuetter-Ferguson method using premiums and paid losses except that it uses case incurred losses. The use of case incurred losses instead of paid losses can result in development patterns that are less variable than paid development patterns. However, the inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place. The method requires analysis of all the factors that need to be reviewed for the Expected Loss Ratio and Incurred Development methods. 42 The Average Loss method multiplies a projected number of ultimate incurred claims by an estimated ultimate average loss for each accident year to produce ultimate loss estimates. Since projections of the ultimate number of claims are often less variable than projections of ultimate loss, this method can provide more reliable results for reserve categories where loss development patterns are inconsistent or too variable to be relied on exclusively. In addition, this method can more directly account for changes in coverage that impact the number and size of claims. However, this method can be difficult to apply to situations where very large claims or a substantial number of unusual claims result in volatile average claim sizes. Projecting the ultimate number of claims requires analysis of several factors including the rate at which policyholders report claims to the Company, the impact of judicial decisions, the impact of underwriting changes, and other factors. Estimating the ultimate average loss requires analysis of the impact of large losses and claim cost trends based on changes in the cost of repairing or replacing property, changes in the cost of medical care, changes in the cost of wage replacement, judicial decisions, legislative changes, and other factors. For many reserve categories, especially those that can be considered long-tail, a particular accident year may not have a sufficient volume of paid losses to produce a statistically reliable estimate of ultimate losses. In such a case, the Company’s actuaries typically assign more weight to the Incurred Development method than to the Paid Development method. As claims continue to settle and the volume of paid losses increases, the Company's actuaries may assign additional weight to the Paid Development method. For most of the Company’s reserve categories, even the case incurred losses for accident years that are early in the claim settlement process will not be of sufficient volume to produce a reliable estimate of ultimate losses. In these cases, the Company's actuaries will not assign any weight to the Paid and Incurred Development methods and will use the Bornhuetter-Ferguson and Expected Loss Ratio methods. For short-tail exposures, the Paid and Incurred Development methods can often be relied on sooner primarily because the Company’s history includes a sufficient number of accident years to cover the entire period over which paid and incurred losses are expected to change. However, the Company's actuaries may also assign weights to the Expected Loss Ratio, Bornhuetter-Ferguson, and Average Loss methods for short-tail exposures when developing estimates of ultimate losses. Generally, reserves for long-tail lines give more weight to the Expected Loss Ratio method in the more recent immature years. As the accident years mature, weight shifts to the Bornhuetter-Ferguson methods and eventually to the Incurred and/or Paid Development method. Claims related to umbrella business are usually reported later than claims for other long-tail lines. For umbrella business, the shift from the Expected Loss Ratio method to the Bornhuetter-Ferguson methods to the Loss Development method may be more protracted than for most long-tailed lines. Reserves for short-tail lines tend to make the shift across methods more quickly than the long-tail lines. For other more complex reserve categories where the above methods may not produce reliable indications, the Company's actuaries use additional methods tailored to the characteristics of the specific situation. Such reserve categories include losses from construction defect and A&E claims. For construction defect losses, the Company’s actuaries organize losses by the year in which they were reported to develop an IBNR provision for development on known cases. To estimate losses from claims that have occurred but have not yet been reported to the Company, various extrapolation techniques are applied to the pattern of claims that have been reported to estimate the number of claims yet to be reported which will ultimately pay positive loss amounts. This process requires analysis of several factors including the rate at which policyholders report claims to the Company, the rate at which reported claims close with payment, the impact of judicial decisions, the impact of underwriting changes, and other factors. An estimated average claim size is determined from past experience and applied to the estimated number of unreported claims to estimate reserves for these claims. Establishing reserves for A&E and other mass tort claims involves considerably more judgment than other types of claims due to factors including, but not limited to, inconsistent court decisions, bankruptcy filings as a result of asbestos-related liabilities, and judicial interpretations that often expand theories of recovery and broaden the scope of coverage. The insurance industry continues to receive a substantial number of asbestos-related bodily injury claims, with an increasing focus being directed toward other parties, including installers of products containing asbestos rather than against asbestos manufacturers. This shift has resulted in significant insurance coverage litigation implicating applicable coverage defenses or determinations, if any, including but not limited to, determinations as to whether or not an asbestos-related bodily injury claim is subject to aggregate limits of liability found in most comprehensive general liability policies. The Company continues to closely monitor its asbestos exposure and make adjustments where they are warranted. 43 Reserve analyses performed by the Company’s internal and external actuaries result in actuarial point estimates. The results of the detailed reserve reviews were summarized and discussed with the Company’s senior management to determine Management's best estimate of reserves. Management considered many factors in making this decision. The factors included, but were not limited to, the historical pattern and volatility of the actuarial indications, the sensitivity of the actuarial indications to changes in paid and incurred loss patterns, the consistency of claims handling processes, the consistency of case reserving practices, changes in the Company’s pricing and underwriting, and overall pricing and underwriting trends in the insurance market. Management’s best estimate at December 31, 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 $850.6 million and $777.8 million, respectively, as of December 31, 2023. A breakout of the Company’s gross and net reserves as of December 31, 2023 is as follows: Gross Reserves (Dollars in thousands) Case IBNR (1) Total Penn-America $ 128,404 $ 280,316 $ 408,720 Non-Core Operations 118,111 323,768 441,879 Total $ 246,515 $ 604,084 $ 850,599 Net Reserves (2) (Dollars in thousands) Case IBNR (1) Total Penn-America $ 127,267 $ 271,118 $ 398,385 Non-Core Operations 84,564 294,821 379,385 Total $ 211,831 $ 565,939 $ 777,770 (1) Losses incurred but not reported, including the expected future emergence of case reserves. (2) Does not include reinsurance receivables on paid losses. The Company regularly reviews these estimates and, based on new developments and information, includes adjustments of the estimated ultimate liability in the operating results for the periods in which the adjustments are made. The establishment of losses and loss adjustment expense reserves makes no provision for the possible broadening of coverage by legislative action or judicial interpretation, or the emergence of new types of losses not sufficiently represented in the Company’s historical experience or that cannot yet be quantified or estimated. The Company regularly analyzes its reserves and reviews reserving methodologies so that future adjustments to prior accident year reserves can be minimized. However, given the complexity of this process, reserves require continual updates and the ultimate liability may be higher or lower than previously indicated. Changes in estimates for losses and loss adjustment expense reserves are recorded in the period that the change in these estimates is made. See Note 12 to the consolidated financial statements in Item 8 of Part II of this report for details concerning the changes in the estimate for incurred losses and loss adjustment expenses related to prior accident years. The detailed reserve analyses that the Company’s internal and external actuaries complete use a variety of generally accepted actuarial methods and techniques to produce a number of estimates of ultimate loss. The Company determines its best estimate of ultimate loss by reviewing the various estimates provided by its actuaries and other relevant information. The reserve estimate is the difference between the estimated ultimate loss and the losses paid to date. The difference between the estimated ultimate loss and the case incurred loss (paid loss plus case reserve) is considered to be IBNR which includes a provision for development on known cases as well as a provision for claims that have occurred but have not yet been reported to the Company. In light of the many uncertainties associated with establishing the estimates and making the assumptions necessary to establish reserve levels, the Company reviews its reserve estimates on a regular basis and makes adjustments in the period that the need for such adjustments is determined. 44 The key assumptions fundamental to the reserving process are often different for various reserve categories and accident years. Some of these assumptions are explicit assumptions that are required of a particular method, but most of the assumptions are implicit and cannot be precisely quantified. An example of an explicit assumption is the pattern employed in the Paid Development method. However, the assumed pattern is itself based on several implicit assumptions such as the impact of inflation on medical costs and the rate at which claim professionals close claims. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Each reserve category has an implicit frequency and severity for each accident year as a result of the various assumptions made. Previous reserve analyses have resulted in the Company’s identification of information and trends that have caused it to increase or decrease frequency and severity assumptions in prior periods and could lead to the identification of a need for additional material changes in losses and loss adjustment expense reserves, which could materially affect results of operations, equity, business and insurer financial strength and debt ratings. Factors affecting loss frequency include, but are not limited to, the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns. Factors affecting loss severity include, but are not limited to, changes in policy limits and deductibles, rate of inflation, and judicial interpretations. Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects the Company’s ability to accurately predict loss frequency (loss frequencies are more predictable for short-tail lines) as well as the amount of reserves needed for IBNR. 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 $279.6 million for claims occurring during the year ended December 31, 2023: Severity Change (Dollars in thousands) -10% -5% 0% 5% 10% Frequency Change -5% (40,543 ) (27,262 ) (13,980 ) (699 ) 12,582 -3% (35,510 ) (21,949 ) (8,388 ) 5,173 18,734 -2% (32,994 ) (19,293 ) (5,592 ) 8,109 21,810 -1% (30,477 ) (16,637 ) (2,796 ) 11,045 24,885 0% (27,961 ) (13,980 ) — 13,980 27,961 1% (25,444 ) (11,324 ) 2,796 16,916 31,037 2% (22,928 ) (8,668 ) 5,592 19,852 34,112 3% (20,411 ) (6,012 ) 8,388 22,788 37,188 5% (15,378 ) (699 ) 13,980 28,660 43,339 The Company’s net reserves for losses and loss adjustment expenses of $777.8 million as of December 31, 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. Recoverability of Reinsurance Receivables The Company regularly reviews the collectability of its reinsurance receivables, and includes adjustments resulting from this review in earnings in the period in which the adjustment arises. An allowance for expected credit losses for reinsurance receivables is recognized based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, disputes, applicable coverage defenses, insolvent reinsurers, financial strength of solvent reinsurers based on AM Best Ratings and other relevant factors. Changes in loss reserves can also affect the valuation of reinsurance receivables if the change is related to loss reserves that are ceded to reinsurers. Certain amounts may be uncollectible if the Company’s reinsurers dispute a loss or if the reinsurer is unable to pay. If its reinsurers do not pay, the Company remains legally obligated to pay the loss. See Note 10 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s reinsurance receivable balances and collectability as of December 31, 2023 and 2022. For a listing of the ten reinsurers for which the Company has the largest reinsurance asset amounts as of December 31, 2023, see “Reinsurance of Underwriting Risk” in Item 1 of Part I of this report. 45 Investments The carrying amount of the Company’s investments approximates their fair value. The Company regularly performs various analytical valuation procedures with respect to investments, including reviewing each fixed maturity security in an unrealized loss position to determine whether the decline in fair value below amortized cost basis has resulted from a credit loss or other factors, such as changes in interest rates. In assessing whether a credit loss exists, the Company compares the present value of the cash flows expected to be collected from the security to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for expected credit losses is recorded. Subsequent changes in the allowances are recorded in the period of change as either credit loss expense or reversal of credit loss expense. Any impairments related to factors other than credit losses or the intent to sell are recorded through other comprehensive income, net of taxes. During its review, the Company considers credit rating, market price, and issuer specific financial information, among other factors, to assess the likelihood of collection of all principal and interest as contractually due. See Note 5 of the notes to consolidated financial statements in Item 8 of Part II of this report for the specific methodologies and significant assumptions used by asset class as well as an analysis of the Company’s securities with gross unrealized losses as of December 31, 2023 and 2022. Fair Value Measurements The Company categorizes its invested assets that are accounted for at fair value in the consolidated statements into a fair value hierarchy. The fair value hierarchy is directly related to the amount of subjectivity associated with the inputs utilized to determine the fair value of these assets. The reported value of financial instruments not carried at fair value, principally cash and cash equivalents, approximate fair value. See Note 7 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further information about the fair value hierarchy and the Company’s assets that are accounted for at fair value. Goodwill and Intangible Assets The Company tests for impairment of goodwill at least annually and more frequently as circumstances warrant in accordance with applicable accounting guidance. Accounting guidance allows for the testing of goodwill for impairment using both qualitative and quantitative factors. Impairment of goodwill is recognized only if the carrying amount of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. The amount of the impairment loss would be equal to the excess carrying value of the goodwill over the implied fair value of the reporting unit goodwill. Impairment of intangible assets with indefinite useful lives is tested at least annually and more frequently as circumstances warrant in accordance with applicable accounting guidance. Accounting guidance allows for the testing of intangible assets for impairment using both qualitative and quantitative factors. Impairment of indefinite lived intangible assets is recognized only if the carrying amount of the intangible assets exceeds the fair value of said assets. The amount of the impairment loss would be equal to the excess carrying value of the assets over the fair value of said assets. Intangible assets that are not deemed to have an indefinite useful life are amortized over their estimated useful lives. The carrying amounts of definite lived intangible assets are regularly reviewed for indicators of impairment in accordance with applicable accounting guidance. Impairment is recognized only if the carrying amount of the intangible asset is in excess of its undiscounted projected cash flows. The impairment is measured as the difference between the carrying amount and the estimated fair value of the asset. See Note 8 of the notes to the consolidated financial statements in Item 8 of Part II of this report for more details concerning the Company’s goodwill and intangible assets as well as the result of its impairment testing. Deferred Acquisition Costs The costs of acquiring new and renewal insurance and reinsurance contracts primarily include commissions, premium taxes and certain other costs that are directly related to the successful acquisition of new and renewal insurance and reinsurance contracts. The excess of the Company’s costs of acquiring new and renewal insurance and reinsurance contracts over the related ceding commissions earned from reinsurers is capitalized as deferred acquisition costs and amortized over the period in which the related premiums are earned. 46 In accordance with accounting guidance for insurance enterprises, the method followed in computing such amounts limits them to amounts recoverable from premium to be earned, related investment income, losses and loss adjustment expenses, and certain other costs expected to be incurred as the premium is earned. A premium deficiency is recognized if the sum of expected losses and loss adjustment expenses and unamortized acquisition costs exceeds related unearned premium. This evaluation is done at a distribution and product line/treaty level. Any future expected loss on the related unearned premium is recorded first by impairing the unamortized acquisition costs on the related unearned premium followed by an increase to losses and loss adjustment expense reserves on additional expected loss in excess of unamortized acquisition costs. The Company calculates deferred acquisition costs for Penn-America and Non-Core Operations separately by distribution lines. For reinsurance treaties, the Company calculates deferred acquisition costs separately for each treaty. Taxation The Company provides for income taxes in accordance with applicable accounting guidance. The Company’s deferred tax assets and liabilities primarily result from temporary differences between the amounts recorded in the consolidated financial statements and the tax basis of the Company’s assets and liabilities. At each balance sheet date, management assesses the need to establish a valuation allowance that reduces deferred tax assets when it is more likely than not that all, or some portion, of the deferred tax assets will not be realized. A valuation allowance would be based on all available information including the Company’s assessment of uncertain tax positions and projections of future taxable income from each tax-paying component in each jurisdiction, principally derived from business plans and available tax planning strategies. As of December 31, 2023, the Company had a deferred tax asset of approximately $5.6 million related to net unrealized losses on fixed maturity available for sale securities. In the assessment of the future realizability of this deferred tax asset, management considered tax planning strategies and concluded that unrealized losses were caused by factors other than credit loss, and the Company have the intent and ability to hold these securities to recovery and collect all of the contractual cash flows. There are no valuation allowances as of December 31, 2023 and 2022. The deferred tax asset balance is analyzed regularly by management. This assessment requires significant judgment and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of carryforward periods, and tax planning strategies and/or actions. Based on these analyses, the Company has determined that its deferred tax asset is recoverable. Projections of future taxable income incorporate several assumptions of future business and operations that are apt to differ from actual experience. If, in the future, the Company’s assumptions and estimates that resulted in the forecast of future taxable income for each tax-paying component prove to be incorrect, a valuation allowance may be required. This could have a material adverse effect on the Company’s financial condition, results of operations, and liquidity. The Company applies a more likely than not recognition threshold for all tax uncertainties, only allowing the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by relevant taxing authorities. Please see Note 11 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a discussion of the Company’s tax uncertainties. Leases The Company determines if an arrangement is a lease at inception. Leases with a term of 12 months or less are not recorded on the consolidated balance sheets. Lease right-of-use assets (“ROU”) and lease liabilities are included on the consolidated balance sheets. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company’s leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate at the commencement date in determining the present value of future payments. The ROU asset is calculated using the initial lease liability amount, plus any lease payments made at or before the commencement date, minus any lease incentives received, plus any initial direct costs incurred. Lease expenses for minimum lease payments are recognized on a straight-line basis over the lease term. 47 The Company’s lease agreements may contain both lease and non-lease components which are accounted separately. The Company elected the practical expedient on not separating lease components from non-lease components for its equipment leases. Rental income derived from subleases are recognized on a straight-line basis over the operating lease term. 48 Business Segments The Company manages the distribution of its core product offerings through its Penn-America segment (formerly known as Commercial Specialty). The Penn-America segment comprises the Company’s Insurance Operations, which currently includes the operations of United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, Penn-Patriot Insurance Company, American Insurance Adjustment Agency, Inc., Collectibles Insurance Services, LLC, Global Indemnity Insurance Agency, LLC, and J.H. Ferguson & Associates, LLC. The Company also has a Non-Core Operations segment that contains lines of business that have been de-emphasized or are no longer being written. The Company evaluates the performance of these segments based on gross and net written premiums, revenues in the form of net earned premiums, and expenses in the form of (1) net losses and loss adjustment expenses, (2) acquisition costs, and (3) other underwriting expenses. During the fourth quarter of 2023, the Company restructured its insurance operations to strengthen its market presence and enhance GBLI's focus on core products and made the decision to manage the business through two segments, Penn-America and Non-Core Operations. Management believes these segments allow users of the Company’s financial statements to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a whole. Segment results for prior years have been revised to reflect these changes. See “Business Segments” in Item 1 of Part I of this report for a description of the Company’s segments. Results of Operations The Company realized net income (loss) of $25.4 million, ($0.9) million, and $29.4 million during the years ended December 31, 2023, 2022, and 2021, respectively. Excluding the gain from the sale of the Manufactured Home and Dwelling renewal rights in 2021 and the sale of the Company’s Farm, Ranch, & Stable renewal rights, net loss (1) would have been $17.3 million in 2022 and net income would have been $12.9 million in 2021. Net investment income was $55.4 million, $27.6 million, and $37.0 million for the years ended December 31, 2023, 2022, and 2021, respectively. Excluding investment income from alternative investments, investment income was $51 . 0 million, $33.6 million and $26.2 million during the years ended December 31, 2023, 2022, and 2021, respectively. The increase in investment income in 2023 compared to 2022 is mainly due to increases in book yield and good performance from alternative investments. Book yield for the fixed income investment portfolio was 4.0% at December 31, 2023 compared to 2.2% at December 31, 2021. The Company's primary business, Penn-America, generated strong accident year results. Penn-America's accident year underwriting income(2) was $18.5 million, $13.5 million, and $14.1 million for the years ended December 31, 2023, 2022, and 2021, respectively, and the accident year combined ratio(2) was 95.2%, 96.5%, and 95.8% for the years ended December 31, 2023, 2022, and 2021, respectively. 49 The following table summarizes the Company’s results for the years ended December 31, 2023, 2022, and 2021: Years Ended December 31, % Years Ended December 31, % (Dollars in thousands) 2023 2022 Change 2022 2021 Change Gross written premiums $ 416,397 $ 727,603 (42.8 %) $ 727,603 $ 682,122 6.7 % Net written premiums $ 399,319 $ 591,331 (32.5 %) $ 591,331 $ 580,068 1.9 % Net earned premiums $ 473,357 $ 602,471 (21.4 %) $ 602,471 $ 595,610 1.2 % Other income 1,435 1,462 (1.8 %) 1,462 1,815 (19.4 %) Total revenues 474,792 603,933 (21.4 %) 603,933 597,425 1.1 % Losses and expenses: Net losses and loss adjustment expenses 289,153 359,228 (19.5 %) 359,228 384,964 (6.7 %) Acquisition costs and other underwriting expenses 182,617 236,381 (22.7 %) 236,381 222,841 6.1 % Underwriting income (loss) 3,022 8,324 (63.7 %) 8,324 (10,380 ) (180.2 %) Net investment income 55,444 27,627 100.7 % 27,627 37,020 (25.4 %) Net realized investment gains (losses) (2,107 ) (32,929 ) (93.6 %) (32,929 ) 15,887 NM Other income — 29,903 (100.0 %) 29,903 27,936 7.0 % Corporate and other operating expenses (23,383 ) (24,421 ) (4.3 %) (24,421 ) (27,179 ) (10.1 %) Interest expense — (3,004 ) (100.0 %) (3,004 ) (10,481 ) (71.3 %) Loss on extinguishment of debt — (3,529 ) (100.0 %) (3,529 ) — 100.0 % Income before income taxes 32,976 1,971 NM 1,971 32,803 (94.0 %) Income tax expense (7,547 ) (2,821 ) 167.5 % (2,821 ) (3,449 ) (18.2 %) Net income (loss) $ 25,429 $ (850 ) NM $ (850 ) $ 29,354 (102.9 %) Underwriting Ratios: Loss ratio (3) 61.1 % 59.6 % 59.6 % 64.7 % Expense ratio (4) 38.6 % 39.2 % 39.2 % 37.4 % Combined ratio (5) 99.7 % 98.8 % 98.8 % 102.1 % NM – not meaningful (1) Net income (loss) excluding the net gain on the sale of the Company’s Manufactured Home and Dwelling renewal rights and the Company's Farm, Ranch & Stable renewal rights of ($17.3) million and $12.9 million during the years ended December 31, 2022 and 2021, respectively, is a non-GAAP measure which excludes the impact of gross proceeds of $30.0 million, impairments and expenses of $9.2 million, and tax expense of $4.4 million related to sale of Farm, Ranch & Stable renewal rights in 2022 and excludes the impact of gross proceeds of $28.0 million, impairments and expenses of $7.2 million, and tax expense of $4.4 million related to the sale of Manufactured Home and Dwelling renewal rights in 2021. The Company’s most directly comparable GAAP measure is net income (loss) of ($0.9) million, and $29.4 million during the years ended December 31, 2022 and 2021, respectively. The Company believes the non-GAAP measure is useful to investors when evaluating the Company's performance as trends may be obscured by this one time transaction. This non-GAAP measure should not be considered as a substitute for its most directly comparable GAAP measure and does not reflect the overall profitability of the Company. (2) Penn-America's accident year underwriting income of $18.5 million, $13.5 million, and $14.1 million for the years ended December 31, 2023, 2022, and 2021, 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 $30.1 million, $2.9 million, and $1.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. The Company's most directly comparable GAAP measure is the Penn-America's underwriting income (loss) of ($11.6) million, $10.6 million, and $12.5 million for the years ended December 31, 2023, 2022, and 2021, respectively. Penn-America's accident year combined ratio of 95.2%, 96.5%, and 95.8% for the years ended December 31, 2023, 2022, and 2021, respectively, 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 8.4%, 0.8%, and 0.5% for the years ended December 31, 2023, 2022, and 2021, respectively. The Company's most directly comparable GAAP ratio is the Penn-America combined ratio of 103.6%, 97.4%, and 96.3% for the years ended December 31, 2023, 2022, and 2021, respectively. The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within Penn-America 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. (3) 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. (4) 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. (5) The combined ratio is a GAAP financial measure and is the sum of the Company’s loss and expense ratios. 50 Selected Financial Data by Business Segment Premiums The following table summarizes the change in premium volume by business segment: Years Ended December 31, % Years Ended December 31, % (Dollars in thousands) 2023 2022 Change 2022 2021 Change Gross written premiums (1) Penn-America $ 369,660 $ 387,967 (4.7 %) $ 387,967 $ 349,962 10.9 % Non-Core Operations 46,737 339,636 (86.2 %) 339,636 332,160 2.3 % Total gross written premiums $ 416,397 $ 727,603 (42.8 %) $ 727,603 $ 682,122 6.7 % Ceded premiums written Penn-America $ 12,864 $ 17,661 (27.2 %) $ 17,661 $ 21,303 (17.1 %) Non-Core Operations 4,214 118,611 (96.4 %) 118,611 80,751 46.9 % Total ceded premiums written $ 17,078 $ 136,272 (87.5 %) $ 136,272 $ 102,054 33.5 % Net written premiums (2) Penn-America $ 356,796 $ 370,306 (3.6 %) $ 370,306 $ 328,659 12.7 % Non-Core Operations 42,523 221,025 (80.8 %) 221,025 251,409 (12.1 %) Total net written premiums $ 399,319 $ 591,331 (32.5 %) $ 591,331 $ 580,068 1.9 % Net earned premiums Penn-America $ 354,518 $ 359,597 (1.4 %) $ 359,597 $ 308,676 16.5 % Non-Core Operations 118,839 242,874 (51.1 %) 242,874 286,934 (15.4 %) Total net earned premiums $ 473,357 $ 602,471 (21.4 %) $ 602,471 $ 595,610 1.2 % (1) Gross written premiums represent the amount received or to be received for insurance policies written without reduction for reinsurance costs or other deductions. (2) Net written premiums equal gross written premiums less ceded premiums written. (3) External business only, excluding business assumed from affiliates. Gross written premiums decreased by 42.8% for year ended December 31, 2023 as compared to 2022. The decrease in gross written premiums is mainly due to a reduction in premiums within Non-Core Operations for lines of business that have been de-emphasized or no longer written. In addition, within Penn-America, the gross written premiums for Programs decreased primarily due to actions taken to improve underwriting results through increased rates and form changes. These reductions in premiums were partially offset by continued growth in Penn-America's Wholesale Commercial, InsurTech, and Assumed Reinsurance divisions. The growth in Wholesale Commercial is driven by new agency appointments, strong rate increases as well as exposure growth in both property and general liability. The growth in InsurTech is primarily due to new agent appointments and focused marketing efforts. The growth in Assumed Reinsurance is primarily due to new treaties assumed in 2023. Gross written premiums increased by 6.7% for year ended December 31, 2022 as compared to 2021. The increase in gross written premiums is mainly due to the continued growth from existing wholesale agent relationships and increased pricing from both rate and exposure growth within Penn-America. The growth in Non-Core Operations' premiums is primarily due to organic growth of existing casualty treaties partially offset by a reduction in premiums due to lines of business that have been de-emphasized or no longer written. 51 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: Years Ended December 31, Years Ended December 31, (Dollars in thousands) 2023 2022 Change 2022 2021 Change Penn-America 96.5 % 95.4 % 1.1 95.4 % 93.9 % 1.5 Non-Core Operations 91.0 % 65.1 % 25.9 65.1 % 75.7 % (10.6 ) Total 95.9 % 81.3 % 14.6 81.3 % 85.0 % (3.7 ) The net premium retention for the year ended December 31, 2023 increased by 14.6 points as compared to 2022. Retention has increased due to less impact from cessions of the manufactured home and dwelling business which was sold in 2021 and the sale of the Farm, Ranch and Stable business in 2022. Quota share reinsurance agreements were in place. All of the Company's manufactured and dwelling homes policies, except for Florida and Louisiana which have been fully run-off, were ceded to American Family Mutual Insurance Company in 2022 and all policies written with an effective date of August 8, 2022 and later within the Company's Farm, Ranch & Stable business were ceded to Everett Cash Mutual Insurance Company. As a result, the net premium retention for the year ended December 31, 2022 decreased by 3.7 points as compared to 2021. See Note 2 of the notes to the consolidated financial statements in Item 8 of Part II of this report 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 Penn-America segment decreased by 1.4% for the year ended December 31, 2023 as compared to the same period in 2022. Penn-America experienced continued growth in earned premiums within its Wholesale Commercial, InsurTech, and Assumed Reinsurance divisions due to new agency appointments, strong rate increases, exposure growth, and focused marketing efforts as well as the assumption of several new treaties. This growth was offset by a decrease in net earned premiums for Programs as a result of actions taken to improve underwriting results through increased rates and form changes. Property net earned premiums were $140.5 million and $142.4 million for the years ended December 31, 2023 and 2022, respectively. Casualty net earned premiums were $214.0 million and $217.2 million for the years ended December 31, 2023 and 2022, respectively. Net earned premiums within the Penn-America segment increased by 16.5% for the year ended December 31, 2022 as compared to the same period in 2021. The increase in net earned premiums was primarily due to a growth in premiums written as a result of organic growth from existing agents and pricing increases. Property net earned premiums were $142.4 million and $138.6 million for the years ended December 31, 2022 and 2021, respectively. Casualty net earned premiums were $217.2 million and $170.1 million for the years ended December 31, 2022 and 2021, respectively. Net earned premiums within the Non-Core Operations segment decreased by 51.1% for the year ended December 31, 2023 as compared to the same period in 2022 primarily due to the sale of renewal rights related to the Company's Farm, Ranch & Stable business on August 8, 2022, non-renewal of a casualty treaty, and the reduction of premiums written for lines of business that have been de-emphasized or no longer written. Property net earned premiums were $14.2 million and $64.6 million for the years ended December 31, 2023 and 2022, respectively. Casualty net earned premiums were $104.6 million and $178.3 million for the years ended December 31, 2023 and 2022, respectively. Net earned premiums within the Non-Core Operations segment decreased by 15.4% for the year ended December 31, 2022 as compared to the same period in 2021 primarily due to the sale of the renewal rights related to the Company’s manufactured and dwelling homes business on October 26, 2021 and the reduction of premiums written for lines of business that have been de-emphasized or no longer written partially offset by organic growth of an existing casualty treaty. Property net earned premiums were $64.6 million and $164.4 million for the years ended December 31, 2022 and 2021, respectively. Casualty net earned premiums were $178.3 million and $122.6 million for the years ended December 31, 2022 and 2021, respectively. 52 Underwriting Results Penn-America Penn-America's accident year underwriting income (1) was $18.5 million, $13.5 million, and $14.1 million for the years ended December 31, 2023, 2022, and 2021, respectively. Results for 2023 include $29.9 million of strengthening of prior accident year reserves. Penn-America has taken actions to improve underwriting results through increased rates and form changes. The components of income (loss) from the Company’s Penn-America segment and corresponding underwriting ratios are as follows: Years Ended December 31, % Years Ended December 31, % (Dollars in thousands) 2023 2022 Change 2022 2021 Change Gross written premiums $ 369,660 $ 387,967 (4.7 %) $ 387,967 $ 349,962 10.9 % Net written premiums $ 356,796 $ 370,306 (3.6 %) $ 370,306 $ 328,659 12.7 % Net earned premiums $ 354,518 $ 359,597 (1.4 %) $ 359,597 $ 308,676 16.5 % Other income $ 1,257 $ 1,029 22.2 % $ 1,029 $ 1,028 0.1 % Total revenues 355,775 360,626 (1.3 %) 360,626 309,704 16.4 % Losses and expenses: Net losses and loss adjustment expenses 233,239 214,854 8.6 % 214,854 184,163 16.7 % Acquisition costs and other underwriting expenses 134,155 135,145 (0.7 %) 135,145 113,038 19.6 % Underwriting income (loss) $ (11,619 ) $ 10,627 (209.3 %) $ 10,627 $ 12,503 (15.0 %) Years Ended December 31, Point Years Ended December 31, Point 2023 2022 Change 2022 2021 Change Underwriting Ratios: Loss ratio: Current accident year 57.4 % 59.0 % (1.6 ) 59.0 % 59.1 % (0.1 ) Prior accident year 8.4 % 0.8 % 7.6 0.8 % 0.6 % 0.2 Calendar year loss ratio 65.8 % 59.8 % 6.0 59.8 % 59.7 % 0.1 Expense ratio 37.8 % 37.6 % 0.2 37.6 % 36.6 % 1.0 Combined ratio 103.6 % 97.4 % 6.2 97.4 % 96.3 % 1.1 Accident year combined ratio (2) 95.2 % 96.5 % 96.5 % 95.8 % (1) Penn-America's accident year underwriting income of $18.5 million, $13.5 million, and $14.1 million for the years ended December 31, 2023, 2022, and 2021, 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 $30.1 million, $2.9 million, and $1.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. The Company's most directly comparable GAAP measure is the Penn-America's underwriting income (loss) of ($11.6) million, $10.6 million, and $12.5 million for the years ended December 31, 2023, 2022, and 2021, respectively. The Company believes the non-GAAP measures are useful to investors when evaluating the Company's underwriting performance as trends within Penn-America 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. 53 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 in the Company's Penn-America segment 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. Years Ended December 31, 2023 2022 2021 Losses Loss Ratio Losses Loss Ratio Losses Loss Ratio Property Non catastrophe property losses and ratio excluding the effect of prior accident year (1) $ 61,231 43.6 % $ 71,907 50.5 % $ 64,409 46.5 % Effect of prior accident year (2,143 ) (1.5 %) (3,624 ) (2.5 %) 2,794 2.0 % Non catastrophe property losses and ratio (2) $ 59,088 42.1 % $ 68,283 48.0 % $ 67,203 48.5 % Catastrophe losses and ratio excluding the effect of prior accident year (1) $ 13,839 9.8 % $ 10,979 7.7 % $ 18,970 13.7 % Effect of prior accident year 3,400 2.4 % 431 0.3 % 254 0.2 % Catastrophe losses and ratio (2) $ 17,239 12.2 % $ 11,410 8.0 % $ 19,224 13.9 % Total property losses and ratio excluding the effect of prior accident year (1) $ 75,070 53.4 % $ 82,886 58.2 % $ 83,379 60.2 % Effect of prior accident year 1,257 0.9 % (3,193 ) (2.2 %) 3,048 2.2 % Total property losses and ratio (2) $ 76,327 54.3 % $ 79,693 56.0 % $ 86,427 62.4 % Casualty Total Casualty losses and ratio excluding the effect of prior accident year (1) $ 128,289 59.9 % $ 129,172 59.5 % $ 98,936 58.2 % Effect of prior accident year 28,623 13.4 % 5,989 2.8 % (1,200 ) (0.7 %) Total Casualty losses and ratio (2) $ 156,912 73.3 % $ 135,161 62.3 % $ 97,736 57.5 % Total Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1) $ 203,359 57.4 % $ 212,058 59.0 % $ 182,315 59.1 % Effect of prior accident year 29,880 8.4 % 2,796 0.8 % 1,848 0.6 % Total net losses and loss adjustment expense and total loss ratio (2) $ 233,239 65.8 % $ 214,854 59.8 % $ 184,163 59.7 % (1) Non-GAAP measure / ratio (2) Most directly comparable GAAP measure / ratio Premiums See “Result of Operations” above for a discussion on consolidated premiums. Other Income Other income was $1.3 million, $1.0 million, and $1.0 million for the years ended December 31, 2023, 2022, and 2021, respectively. Other income is primarily comprised of fee income. 54 Loss Ratio The current accident year losses and loss ratio is summarized as follows: Years Ended December 31, % Years Ended December 31, % (Dollars in thousands) 2023 2022 Change 2022 2021 Change Property losses Non-catastrophe $ 61,231 $ 71,907 (14.8 %) $ 71,907 $ 64,409 11.6 % Catastrophe 13,839 10,979 26.0 % 10,979 18,970 (42.1 %) Property losses 75,070 82,886 (9.4 %) 82,886 83,379 (0.6 %) Casualty losses 128,289 129,172 (0.7 %) 129,172 98,936 30.6 % Total accident year losses $ 203,359 $ 212,058 (4.1 %) $ 212,058 $ 182,315 16.3 % Years Ended December 31, Point Years Ended December 31, Point 2023 2022 Change 2022 2021 Change Current accident year loss ratio: Property Non-catastrophe 43.6 % 50.5 % (6.9 ) 50.5 % 46.5 % 4.0 Catastrophe 9.8 % 7.7 % 2.1 7.7 % 13.7 % (6.0 ) Property loss ratio 53.4 % 58.2 % (4.8 ) 58.2 % 60.2 % (2.0 ) Casualty loss ratio 59.9 % 59.5 % 0.4 59.5 % 58.2 % 1.3 Total accident year loss ratio 57.4 % 59.0 % (1.6 ) 59.0 % 59.1 % (0.1 ) The current accident year property non-catastrophe loss ratio for 2023 improved by 6.9 points compared to 2022 recognizing lower claims frequency and severity. The current accident year property non-catastrophe loss ratio for 2022 increased by 4.0 points compared to 2021 mainly due to higher claims severity. The current accident year property catastrophe loss ratio for 2023 increased by 2.1 points compared to 2022 reflecting higher claims frequency. The current accident year property catastrophe loss ratio for 2022 improved by 6.0 points compared to 2021 due to lower claims frequency and severity. The current accident year casualty loss ratio for 2023 increased by 0.4 points compared to 2022 recognizing higher claims severity. The current accident year casualty loss ratio for 2022 increased by 1.3 points compared to 2021 due to higher claims severity. The calendar year loss ratio for the years ended December 31, 2023, 2022, and 2021 includes an increase of $29.9 million, or 8.4%, an increase of $2.8 million or 0.8%, and an increase of $1.8 million or 0.6%, respectively, related to reserve development on prior accident years. Please see Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further discussion on prior accident year development. Expense Ratios The expense ratio increased 0.2 points from 37.6% for 2022 to 37.8% for 2023 primarily due to a change in the mix of business where Penn-America wrote a slightly higher amount of admitted business. The expense ratio increased 1.0 points from 36.6% for 2021 to 37.6% for 2022 primarily due to higher compensation and advertising costs. 55 Non-Core Operations The components of income (loss) from the Company’s Non-Core Operations segment and corresponding underwriting ratios are as follows: Years Ended December 31, % Years Ended December 31, % (Dollars in thousands) 2023 2022 Change 2022 2021 Change Gross written premiums $ 46,737 $ 339,636 (86.2 %) $ 339,636 $ 332,160 2.3 % Net written premiums $ 42,523 $ 221,025 (80.8 %) $ 221,025 $ 251,409 (12.1 %) Net earned premiums $ 118,839 $ 242,874 (51.1 %) $ 242,874 $ 286,934 (15.4 %) Other income 178 433 (58.9 %) 433 787 (45.0 %) Total revenues 119,017 243,307 (51.1 %) 243,307 287,721 (15.4 %) Losses and expenses: Net losses and loss adjustment expenses 55,914 144,374 (61.3 %) 144,374 200,801 (28.1 %) Acquisition costs and other underwriting expenses 48,462 101,236 (52.1 %) 101,236 109,803 (7.8 %) Underwriting income (loss) $ 14,641 $ (2,303 ) NM $ (2,303 ) $ (22,883 ) (89.9 %) Years Ended December 31, Point Years Ended December 31, Point 2023 2022 Change 2022 2021 Change Underwriting Ratios: Loss ratio: Current accident year 64.2 % 63.9 % 0.3 63.9 % 67.6 % (3.7 ) Prior accident year (17.1 %) (4.5 %) (12.6 ) (4.5 %) 2.4 % (6.9 ) Calendar year loss ratio 47.1 % 59.4 % (12.3 ) 59.4 % 70.0 % (10.6 ) Expense ratio 40.8 % 41.7 % (0.9 ) 41.7 % 38.3 % 3.4 Combined ratio 87.9 % 101.1 % (13.2 ) 101.1 % 108.3 % (7.2 ) Accident year combined ratio (1) 103.7 % 104.1 % 104.1 % 105.8 % (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 56 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 in the Company's Non-Core Operations segment 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. Years Ended December 31, 2023 2022 2021 Losses Loss Ratio Losses Loss Ratio Losses Loss Ratio Property Non catastrophe property losses and ratio excluding the effect of prior accident year (1) $ 6,588 46.3 % $ 33,713 52.2 % $ 80,214 48.8 % Effect of prior accident year (9,506 ) (66.8 %) (4,096 ) (6.3 %) 4,222 2.6 % Non catastrophe property losses and ratio (2) $ (2,918 ) (20.5 %) $ 29,617 45.9 % $ 84,436 51.4 % Catastrophe losses and ratio excluding the effect of prior accident year (1) $ 3,393 23.8 % $ 11,012 17.0 % $ 35,421 21.5 % Effect of prior accident year (7,416 ) (52.1 %) (868 ) (1.3 %) 5,392 3.3 % Catastrophe losses and ratio (2) $ (4,023 ) (28.3 %) $ 10,144 15.7 % $ 40,813 24.8 % Total property losses and ratio excluding the effect of prior accident year (1) $ 9,981 70.1 % $ 44,725 69.2 % $ 115,635 70.3 % Effect of prior accident year (16,922 ) (118.9 %) (4,964 ) (7.6 %) 9,614 5.9 % Total property losses and ratio (2) $ (6,941 ) (48.8 %) $ 39,761 61.6 % $ 125,249 76.2 % Casualty Total Casualty losses and ratio excluding the effect of prior accident year (1) $ 66,269 63.3 % $ 110,515 62.0 % $ 78,356 63.9 % Effect of prior accident year (3,414 ) (3.3 %) (5,902 ) (3.3 %) (2,804 ) (2.3 %) Total Casualty losses and ratio (2) $ 62,855 60.0 % $ 104,613 58.7 % $ 75,552 61.6 % Total Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1) $ 76,250 64.2 % $ 155,240 63.9 % $ 193,991 67.6 % Effect of prior accident year (20,336 ) (17.1 %) (10,866 ) (4.5 %) 6,810 2.4 % Total net losses and loss adjustment expense and total loss ratio (2) $ 55,914 47.1 % $ 144,374 59.4 % $ 200,801 70.0 % (1) Non-GAAP measure / ratio (2) Most directly comparable GAAP measure / ratio Premiums See “Result of Operations” above for a discussion on consolidated premiums for 2023. Other Income Other income was $0.2 million, $0.4 million, and $0.8 million for the years ended December 31, 2023, 2022, and 2021, respectively. Other income is primarily comprised of fee income. 57 Loss Ratio The current accident year losses and loss ratio is summarized as follows: Years Ended December 31, % Years Ended December 31, % (Dollars in thousands) 2023 2022 Change 2022 2021 Change Property losses Non-catastrophe $ 6,588 $ 33,713 (80.5 %) $ 33,713 $ 80,214 (58.0 %) Catastrophe 3,393 11,012 (69.2 %) 11,012 35,421 (68.9 %) Property losses 9,981 44,725 (77.7 %) 44,725 115,635 (61.3 %) Casualty losses 66,269 110,515 (40.0 %) 110,515 78,356 41.0 % Total accident year losses $ 76,250 $ 155,240 (50.9 %) $ 155,240 $ 193,991 (20.0 %) Years Ended December 31, Point Years Ended December 31, Point 2023 2022 Change 2022 2021 Change Current accident year loss ratio : Property Non-catastrophe 46.3 % 52.2 % (5.9 ) 52.2 % 48.8 % 3.4 Catastrophe 23.8 % 17.0 % 6.8 17.0 % 21.5 % (4.5 ) Property loss ratio 70.1 % 69.2 % 0.9 69.2 % 70.3 % (1.1 ) Casualty loss ratio 63.3 % 62.0 % 1.3 62.0 % 63.9 % (1.9 ) Total accident year loss ratio 64.2 % 63.9 % 0.3 63.9 % 67.6 % (3.7 ) The current accident year property non-catastrophe loss ratio for 2023 improved by 5.9 points compared to 2022 primarily due to lower claims frequency. The current accident year property non-catastrophe loss ratio for 2022 increased by 3.4 points compared to 2021 primarily reflecting higher claims frequency. The current accident year property catastrophe loss ratio for 2023 increased by 6.8 points compared to 2022 mainly recognizing higher claims frequency. The current accident year property catastrophe loss ratio for 2022 improved by 4.5 points compared to 2021 reflecting lower claims frequency. The current accident year casualty loss ratio for 2023 increased by 1.3 points compared to 2022 mainly due to higher claims severity in non-reinsurance lines of business and a higher mix of assumed reinsurance business that has a higher loss ratio. The current accident year casualty loss ratio for 2022 improved by 1.9 points compared to 2021 primarily due to lower claims severity in non-reinsurance lines of business as well as a mix of business change and growth in a treaty that has a lower expected loss ratio for the Company's reinsurance business. The calendar year loss ratio for the years ended December 31, 2023, 2022, and 2021 includes a decrease of $20.3 million, or 17.1%, a decrease of $10.9 million, or 4.5%, and an increase of $6.8 million, or 2.4%, respectively, related to reserve development on prior accident years. Please see Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further discussion on prior accident year development. Expense Ratios The expense ratio improved 0.9 points from 41.7% for 2022 to 40.8% for 2023 primarily due to a reduction in operating expenses due to the sale of renewal rights partially offset by an increase in commission expense. The expense ratio increased 3.4 points from 38.3% for 2021 to 41.7% for 2022 primarily due to a change in the mix of business where reinsurance, which has a higher commission rate, comprised a larger portion of Non-Core Operations in 2022. 58 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 1.1 years. Net Investment Income Years Ended December 31, % Years Ended December 31, % (Dollars in thousands) 2023 2022 Change 2022 2021 Change Gross investment income (1) $ 56,960 $ 29,776 91.3 % $ 29,776 $ 39,662 (24.9 %) Investment expenses (1,516 ) (2,149 ) (29.5 %) (2,149 ) (2,642 ) (18.7 %) Net investment income $ 55,444 $ 27,627 100.7 % $ 27,627 $ 37,020 (25.4 %) (1) Excludes realized gains and losses Gross investment income for 2023 increased by 91.3% and net investment income for 2023 increased by 100.7% compared to 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. Gross investment income for 2022 decreased by 24.9% and net investment income for 2022 decreased by 25.4% compared to 2021. The decrease was primarily due to decreased returns from alternative investments and lowered invested assets due to the liquidation of the Company’s common stock portfolio and a portion of the bond portfolio in order to raise funds to retire the 2047 Notes in April 2022. This decrease was partially offset by an increase in yield within the fixed maturities portfolio due to the rise in rates. At December 31, 2023, the Company held asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations with a market value of $341.0 million. Excluding the asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations, the average duration of the Company’s fixed maturities portfolio was 0.9 years as of December 31, 2023, compared with 1.5 years as of December 31, 2022. Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration. See Note 5 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on security classes held at December 31, 2023. At December 31, 2023, the Company’s embedded book yield on its fixed maturities, not including cash, was 4.0% compared with 3.5% at December 31, 2022. The embedded book yield on the $26.2 million of taxable municipal bonds in the Company’s portfolio was 3.0% at December 31, 2023, compared to an embedded book yield of 3.1% on the Company’s taxable municipal bonds of $31.6 million at December 31, 2022. At December 31, 2022, the Company held asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations with a market value of $350.2 million. Excluding the asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations, the average duration of the Company’s fixed maturities portfolio was 1.5 years as of December 31, 2022, compared with 4.0 years as of December 31, 2021. Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration. At December 31, 2022, the Company’s embedded book yield on its fixed maturities, not including cash, was 3.5% compared with 2.2% at December 31, 2021. The embedded book yield on the $31.6 million of taxable municipal bonds in the Company’s portfolio was 3.1% at December 31, 2022, compared to an embedded book yield of 2.8% on the Company’s taxable municipal bonds of $54.6 million at December 31, 2021. Net Realized Investment Gains (Losses) The components of net realized investment gains (losses) for the years ended December 31, 2023, 2022, and 2021 were as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Equity securities $ (453 ) $ (3,392 ) $ 13,440 Fixed maturities (1,654 ) (13,405 ) 342 Derivatives — 10,073 2,105 Other-than-temporary impairment losses — (26,205 ) — Net realized investment gains (losses) $ (2,107 ) $ (32,929 ) $ 15,887 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 59 weighted average life of five years or greater as having an intent to sell, 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 approximately 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 4.0% at December 31, 2023. See Note 5 of the notes to the consolidated financial statements in Item 8 of Part II of this report for an analysis of total investment return on a pre-tax basis for the years ended December 31, 2023, 2022, and 2021. Corporate and Other Operating Expenses Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Corporate expenses - nondisposition related $ 23,383 $ 13,959 $ 19,977 Impairments and expenses related to dispositions within Non-Core Operations — 10,462 7,202 Corporate and Other Operating Expenses $ 23,383 $ 24,421 $ 27,179 Corporate expenses - nondisposition related 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. The increase in corporate expenses - nondisposition related for 2023 as compared to 2022 was primarily due to incurring $2.0 million in restructuring expenses in first quarter of 2023 and incurring $1.6 million to settle an employment related matter in 2023. In addition, corporate expenses in 2022 were reduced by $5.5 million due to the Company receiving an employee retention credit under the CARES Act. The decrease in corporate expenses - nondisposition related for 2022 as compared to 2021 was primarily due to the Company receiving an employee retention credit under the CARES Act of $5.5 million. Impairments and expenses related to dispositions within Non-Core Operations represent impairments of goodwill, intangible assets, software, and lease costs as well as legal expenses and merger and acquisition fees related to the sale of renewal rights related to the Company's Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business. Impairments and expenses related to dispositions within Non-Core Operations were $10.5 million and $7.2 million during the years ended December 31, 2022 and 2021, respectively. There were no impairments and expenses related to dispositions within Non-Core Operations during the year ended December 31, 2023. See Note 2 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business. Interest Expense The Company had no interest expense for the year ended December 31, 2023. Interest expense was $3.0 million and $10.5 million during the years ended December 31, 2022 and 2021, respectively. The reduction in interest expense is primarily due to the redemption of the Company's 7.875% subordinated notes on April 15, 2022. See Note 13 of the notes to the consolidated financial statements in Item 8 of Part II of this report for details on the Company’s debt. Income Tax Benefit/ Expense The income tax expense was $7.5 million for the year ended December 31, 2023 compared with income tax expense of $2.8 million for the year ended December 31, 2022. The increase in income tax expense is primarily due to higher taxable income in the Company's U.S. subsidiaries. The income tax expense was $2.8 million for the year ended December 31, 2022 compared with income tax expense of $3.4 million for the year ended December 31, 2021. The decrease in income tax expense is primarily due to lower taxable income in the Company's U.S. subsidiaries. See Note 11 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a comparison of income tax between periods. 60 Net Income (Loss) The factors described above resulted in net income of $25.4 million, net loss of $0.9 million, and net income of $29.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. 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 current 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. See the contractual obligation table below for additional information on these commitments. In order to meet its current 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 intercompany debt payments, to purchase investments, and to pay dividends. 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 in order to meet its corporate expense obligations and intercompany financing obligations. The future liquidity of Global Indemnity Group, LLC is dependent on the ability of its subsidiaries to generate income to pay dividends and to pay intercompany debt due to Global Indemnity Group, LLC. The future liquidity of GBLI Holdings, LLC is dependent on the ability of its subsidiaries to generate income to pay dividends as well as receiving reimbursements from its subsidiaries for utilization of net operating losses. 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.” Key differences relate to, among other items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes. Under Virginia law, Penn-Patriot Insurance Company may not pay any dividend or make any distribution of cash or other property, the fair market value of which, together with that of any other dividends or distributions made within the preceding 12 consecutive months exceeds the greater of either (1) 10% of its surplus as of the 31 st day of December of the last preceding year, or (2) its net income, not including net realized capital gains, for the 12 month period ending on the 31 st day of December of the last preceding year, not including pro rata distributions of any class of its securities, unless the commissioner approves the proposed payment or fails to disapprove such payment within 30 days after receiving notice of such payment. In determining whether the dividend must be approved, undistributed net income from the second and third preceding years, not including net realized capital gains, may be carried forward. 61 Under Pennsylvania law, United National Insurance Company, Penn-America Insurance Company, and Penn-Star Insurance Company may not pay any dividend or make any distribution that, together with other dividends or distributions made within the preceding 12 consecutive months, exceeds the greater of (1) 10% of its surplus as shown on its last annual statement on file with the commissioner or (2) its net income for the period covered by such statement, not including pro rata distributions of any class of its own securities, unless the commissioner has received notice from the insurer of the declaration of the dividend and the commissioner approves the proposed payment or fails to disapprove such payment within 30 days after receiving notice of such payment. An additional limitation is that Pennsylvania does not permit a domestic insurer to declare or pay a dividend except out of unassigned funds (surplus) unless otherwise approved by the commissioner before the dividend is paid. Furthermore, no dividend or other distribution may be declared or paid by a Pennsylvania insurance company that would reduce its total capital and surplus to an amount that is less than the amount required by the Insurance Department for the kind or kinds of business that it is authorized to transact. Pennsylvania law allows loans to affiliates up to 10% of statutory surplus without prior regulatory approval. Under Indiana law, Diamond State Insurance Company may not pay any dividend or make any distribution of cash or other property, the fair market value of which, together with that of any other dividends or distributions made within the 12 consecutive months ending on the date on which the proposed dividend or distribution is scheduled to be made, exceeds the greater of (1) 10% of its surplus as of the 31 st day of December of the last preceding year, or (2) its net income for the 12 month period ending on the 31 st day of December of the last preceding year, unless the commissioner approves the proposed payment or fails to disapprove such payment within 30 days after receiving notice of such payment. An additional limitation is that Indiana does not permit a domestic insurer to declare or pay a dividend except out of unassigned surplus unless otherwise approved by the commissioner before the dividend is paid. The Company’s insurance subsidiaries did not declare or pay any dividends in 2023. See Note 21 of the notes to consolidated financial statements in Item 8 of Part II of this report for the maximum amount of distributions that U.S. insurance companies could pay as dividends in 2024. Surplus Levels Global Indemnity’s insurance companies are required by law to maintain a certain minimum level of policyholders’ surplus on a statutory basis. Policyholders’ surplus is calculated by subtracting total liabilities from total assets. The NAIC has risk-based capital standards that are designed to identify property and casualty insurers that may be inadequately capitalized based on the inherent risks of each insurer’s assets and liabilities and mix of net written premiums. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action. Based on the standards currently adopted, the policyholders’ surplus of each of the insurance companies is in excess of the prescribed minimum company action level risk-based capital requirements. 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 may also be 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. 62 Net cash provided by operating activities in 2023, 2022, and 2021 was $42.9 million, $44.2 million and $90.8 million, respectively. In 2023, the decrease in operating cash flows of approximately $1.4 million from the prior year was primarily a net result of the following items: (Dollars in thousands) 2023 2022 Change Net premiums collected $ 454,139 $ 541,087 $ (86,948 ) Net losses paid (265,676 ) (272,585 ) 6,909 Underwriting and corporate expenses (192,226 ) (251,031 ) 58,805 Net investment income 47,262 32,316 14,946 Net federal income taxes paid (613 ) (426 ) (187 ) Interest paid — (5,125 ) 5,125 Net cash provided by operating activities $ 42,886 $ 44,236 $ (1,350 ) In 2022, the decrease in operating cash flows of approximately $46.6 million from the prior year was primarily a net result of the following items: (Dollars in thousands) 2022 2021 Change Net premiums collected $ 541,087 $ 599,870 $ (58,783 ) Net losses paid (272,585 ) (299,027 ) 26,442 Underwriting and corporate expenses (251,031 ) (241,017 ) (10,014 ) Net investment income 32,316 41,367 (9,051 ) Net federal income taxes paid (426 ) (54 ) (372 ) Interest paid (5,125 ) (10,340 ) 5,215 Net cash provided by operating activities $ 44,236 $ 90,799 $ (46,563 ) See the consolidated statements of cash flows in the consolidated financial statements in Item 8 of Part II of this report for details concerning the Company’s investing and financing activities. Liquidity Currently, the Company believes each of its insurance companies maintains sufficient liquidity to pay claims through cash generated by operations and liquid investments. The holding companies also maintain sufficient liquidity to meet their obligations. The Company monitors its investment portfolios to assure liability and investment durations are closely matched. Prospectively, as fixed income investments mature and new cash is obtained, the cash available to invest will be invested in accordance with the Company’s investment policy. The Company’s investment policy allows the Company to invest in taxable and tax-exempt fixed income investments as well as publicly traded and private equity investments. With respect to bonds, the Company’s credit exposure limit for each issuer varies with the issuer’s credit quality. The allocation between taxable and tax-exempt bonds is determined based on market conditions and tax considerations. The fixed income portfolio currently has a duration of 1.1 years. As of December 31, 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 Company has access to various capital sources including dividends from insurance subsidiaries and access to the debt and equity capital markets. The Company believes it has sufficient liquidity to meet its capital needs. See Note 21 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a discussion of the Company’s dividend capacity. However, the Company’s future capital requirements depend on many factors, including the amount of premium it writes, the amount of loss reserves by lines of business, and catastrophe exposure. To the extent that the Company needs to raise additional funds, any equity or debt financing for this purpose, if available at all, may be on terms that are not favorable to the Company. If the Company cannot obtain adequate capital, its business, results of operations and financial condition could be adversely affected. 63 Stock Repurchase On October 21, 2022, Global Indemnity Group, LLC announced it commenced a stock repurchase program beginning in the fourth quarter of 2022. On January 3, 2023, Global Indemnity Group, LLC announced that it had authorized an increase in the aggregate stock purchase program from $32 million, which was authorized on October 21, 2022, to $60 million. On June 8, 2023, Global Indemnity Group, LLC's Board of Directors approved an additional increase in the existing share buyback authorization amount of $60 million to $135 million. The authorization to repurchase will expire on December 31, 2027. The timing and actual number of shares repurchased, if any, will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. Under the repurchase program, repurchases may be made from time to time using a variety of methods, including open market purchases or privately negotiated transactions, all in compliance with Global Indemnity Group, LLC’s Insider Trading Policy, the United States Securities and Exchange Commission, and other applicable legal requirements. The repurchase program does not obligate Global Indemnity Group, LLC to acquire any particular amount of class A common shares, and the repurchase program may be suspended or discontinued at any time at Global Indemnity Group, LLC’s discretion. From the time of the initial announcement on October 21, 2022, 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 in December 2022 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 repurchase program in October 2022. Restructuring The Company restructured its insurance operations to strengthen its market presence and enhance its focus on GBLI’s core products. The restructuring plan was initiated in the fourth quarter of 2022 and was completed in the first quarter of 2023. The Company incurred restructuring charges of $3.4 million in 2022 and $2.0 million in 2023 for a total of $5.4 million. The Company anticipates recurring annual expense savings of $16.0 million. Distributions On March 6, 2024, the Board of Directors approved a dividend rate of $0.35 per common share payable on March 28, 2024 to all shareholders of record as of the close of business on March 21, 2024, a 40% increase over the prior quarterly dividend rate of $0.25 per common share. Future dividends remain subject to the discretion of GBLI’s Board of Directors, including the Board of Director’s evaluation of the company’s financial performance, capital and reserve positions, liquidity, balance sheet, and other factors. As of December 31, 2023, there are currently 13,565,041 shares outstanding. During 2023, 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, June 23, 2023, October 9, 2023, and December 22, 2023. Distributions paid to common shareholders were $14.2 million during the year ended December 31, 2023. In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the year ended December 31, 2023. During 2022, 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 21, 2022, June 20, 2022, October 4, 2022, and December 23, 2022. Distributions paid to common shareholders were $14.4 million during the year ended December 31, 2022. In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the year ended December 31, 2022. During 2021, 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 22, 2021, June 21, 2021, September 23, 2021, and December 20, 2021. Distributions paid to common shareholders were $14.4 million during the year ended December 31, 2021. In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the year ended December 31, 2021. Investment Portfolio As a result of duration shortening, the Company significantly reduced its interest rate risk with more than 80% of the fixed maturity portfolio maturing over the next three years. With a shorter duration, the investment portfolio is well positioned to increase book yield by investing maturities in higher yielding bonds. At December 31, 2023, the Company's embedded book 64 yield on its fixed maturities, not including cash, was 4.0% compared with 3.5% at December 31, 2022 and 2.2% at December 31, 2021. On July 31, 2023, the Company provided the Global Debt Fund, LP with a formal withdrawal request in full. Withdrawal proceeds are expected to be received starting in 2024. The Global Debt Fund, LP had a fair market value of $26.0 million at December 31, 2023. On May 18, 2022, the Company provided the Credit Fund, LLC with formal withdrawal request in full. Proceeds of $99.6 million were received on July 29, 2022 and were invested in fixed income investments with maturities of two years and less. Sale of Renewal Rights related to Farm, Ranch & Stable and Sale of American Reliable Insurance Company On August 8, 2022, the Company sold the renewal rights related to its Farm, Ranch & Stable business for policies written on or after August 8, 2022 to Everett Cash Mutual Insurance Company for $30.0 million. The Company retained the unearned premium reserves for business written prior to August 8, 2022. Everett Cash Mutual Insurance Company also acquired the Company’s wholly-owned subsidiary, American Reliable Insurance Company, on December 31, 2022 for an amount equal to book value, which was $10.0 million, at the time of closing. Sale of Renewal Rights Related to Manufactured & Dwelling Homes Business On October 26, 2021, the Company sold the renewal rights related to its manufactured and dwelling homes business to K2 Insurance Services (“K2”) and American Family Mutual Insurance Company (“American Family”). Pursuant to the tripartite transaction, the Company received $28.0 million in cash in October 2021. The Company also retained the American Reliable 50-state licensed operating unit, $65 million of net capital supporting the business, and a related $42 million unearned premium reserve. The Company currently leases office space in Scottsdale, Arizona. As part of this sale, K2 is subleasing approximately one third of the Scottsdale, Arizona office space. Currently, the Company intends to exercise the early termination clause in its Scottsdale, Arizona lease. The Company expects it will receive $1.6 million in sublease payments from K2 between October 2021 and October 2026. To facilitate the transaction, American Reliable retained the specialty residential property business in Florida and Louisiana and also retained business that was previously placed in runoff. American Reliable commenced the non-renewal of manufactured home insurance in Florida beginning on March 11, 2022, for policies expiring on or after July 10, 2022. American Reliable and United National non-renewed manufactured home and dwelling insurance in Louisiana beginning on or about January 31, 2022, for policies renewing on or after March 7, 2022. American Family assumed 100% of the risks for all policies covered under the renewal rights agreement which are written or renewed after October 26, 2021, except for policies covering properties in the state of Florida. The Company also retained risk for business previously placed in runoff and policies in Louisiana. There were no specialty residential property policies in-force in Florida and Louisiana as of December 31, 2023. In addition, effective November 30, 2021, the Company and American Family reached an agreement where American Family agreed to reinsure 100% of the Company’s unearned premium reserves of the same types as the policies comprising the manufactured and dwelling homes business lines noted above that were in force as of November 30, 2021. The approximate amount of the unearned premium reserves at November 30, 2021 was $33.8 million. The Company received a 40% ceding commission which included a provision for a 4% claims administration fee to be paid by the Company directly to K2 Claims. Trust accounts The Company established trust accounts, which are held by Penn-Patriot Insurance Company, to collateralize exposure it had to certain third-party ceding companies. The Company believes that Penn-Patriot Insurance Company will have sufficient liquidity to pay claims prospectively. Capital Resources Investment Portfolio 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. 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 65 Company's book yield rose over time. Book yield was approximately 2.2% at December 31, 2021 and 4.0% at December 31, 2023. Redemption of Debt On April 15, 2022, the Company redeemed the entire $130 million in aggregate principal amount of the outstanding 2047 Notes plus accrued and unpaid interest on the 2047 Notes redeemed to, but not including the Redemption Date of April 15, 2022. The funds to redeem the debt were primarily obtained through the sale of the Company’s equity portfolio in the amount of $75.9 million, $32.0 million in dividends from insurance company subsidiaries, $18.4 million from distributions received from private equity investments, and the remainder from its subsidiary, GBLI Holdings, LLC. As a result of this redemption, the Company no longer has any outstanding debt with third parties. Intercompany Pooling Arrangement The Company’s U.S. insurance companies participate in an intercompany pooling arrangement whereby premiums, losses, and expenses are shared pro rata amongst the U.S. insurance companies. Prior to completion of the sale of American Reliable, American Reliable comprised 30% of the pool. Due to the sale of American Reliable on December 31, 2022, the intercompany pooling agreement was amended. American Reliable was removed from the pool and its 30% participation in the business and capital was allocated to the Company’s remaining five insurance companies. The intercompany reinsurance agreement was updated in 2022 to require each company in the reinsurance pool to fund its proportionate share of collateral required to fund certain third party ceding companies. For additional information on the Sale of American Reliable, please see the liquidity section above. Intercompany Loan On August 28, 2020, Global Indemnity Investments, Inc. entered into a promissory note with Global Indemnity Group, LLC for the principal amount of $11.3 million. This note was issued in conjunction with Global Indemnity Investment Inc.’s purchase of limited liability partnership interests from Global Indemnity Group, LLC. The note bears interest at a rate of 1.47% and is due on August 28, 2030. This loan was fully repaid at December 31, 2021. On December 15, 2021, Global Indemnity Investments, Inc. entered into a $10.0 million discretionary line of credit demand note with Global Indemnity Group, LLC, as borrower. Each advance outstanding under this note will bear interest at an annual interest rate equal to the short-term applicable federal rate in effect at the time the advance was granted and will reset once a month. The outstanding principal amount of each advance shall be payable on the last day of the applicable interest period of such advance and on demand. There is no balance outstanding on this note at December 31, 2023. On April 13, 2022, GBLI Holdings, LLC issued a promissory note to Global Indemnity Group, LLC for the principal amount of $69.4 million. This note bears interest at a rate equal to the short-term, annual compound Applicable Federal Rate ("AFR") in effect for April 2022 which was 1.26%. On each third anniversary of this Note, the interest rate shall reset to the then applicable short-term, annual compounded AFR for such month. The Note is due on April 13, 2031. The outstanding balance on this note was $69.4 million at December 31, 2023. On April 13, 2022, GBLI Holdings, LLC issued a promissory note to Global Indemnity Investment Inc. for the principal amount of $18.4 million. This note bears interest at a rate equal to the short-term, annual compound AFR in effect for April 2022 which was 1.26%. On each third anniversary of this Note, the interest rate shall reset to the then applicable short-term, annual compounded AFR for such month. The Note is due on April 13, 2031. The outstanding balance on this note was $18.4 million at December 31, 2023. Intercompany Dividends and Capital Contributions In addition to intercompany dividends that are paid in the ordinary course of business, American Reliable Insurance Company paid an extraordinary dividend in December 2022, which was approved by the Arizona Department of Insurance, in the amount of $102.3 million which was treated as one of a series of liquidating distributions of American Reliable Insurance Company. In conjunction with the liquidation of American Reliable Insurance Company, a series of capital contributions were made downstream within GBLI Holdings, LLC and subsidiaries in an effort to reallocate the capital from the sale of American Reliable Insurance Company. 66 All of the intercompany transactions discussed above eliminate in consolidation and have no impact on the consolidating financial statements. Derivative Instruments The Company entered into derivative instruments related to interest rate swaps. Due to fluctuations in interest rates, the Company received $12.7 million and $2.7 million in connection with these derivative instruments for the years ended December 31, 2022 and 2021, respectively. The Company terminated its outstanding interest rate swaps in the fourth quarter of 2022. No amounts related to the derivative instruments were received in 2023. The Company has no interest rate swap agreements as of December 31, 2023. 67 Contractual Obligations The Company has commitments in the form of operating leases, commitments to fund limited liability investments, and unpaid losses and loss expense obligations. As of December 31, 2023, contractual obligations related to Global Indemnity’s commitments were as follows: Payment Due by Period (Dollars in thousands) Total Less than 1 year 1 – 3 years 3 – 5 years More than 5 years Operating leases (1) $ 13,006 $ 2,729 $ 5,444 $ 3,202 $ 1,631 Commitments to fund limited partnership investment (2) 14,214 14,214 — — — Unpaid losses and loss adjustment expenses obligations (3) 850,599 291,756 299,410 130,992 128,441 Total $ 877,819 $ 308,699 $ 304,854 $ 134,194 $ 130,072 (1) The Company leases office space and equipment as part of its normal operations. The amounts shown above represent future commitments under such operating leases. (2) Represents future funding commitment of the Company’s participation in a limited partnership investment. See Note 17 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on this commitment. (3) These amounts represent the gross future amounts needed to pay losses and related loss adjustment expenses and do not reflect amounts that are expected to be recovered from the Company’s reinsurers. See discussion in “Liability for Unpaid Losses and Loss Adjustment Expenses” for more details. Inflation Property and casualty insurance premiums are established before the Company knows the amount of losses and loss adjustment expenses or the extent to which inflation may affect such amounts. The Company attempts to anticipate the potential impact of inflation in establishing its reserves. Future increases in inflation could result in future increases in interest rates, which in turn are likely to result in a decline in the market value of the investment portfolio and resulting in unrealized losses and reductions in shareholders' equity. Cautionary Note Regarding Forward-Looking Statements Some of the statements under “Business,” “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 of this report for risks, uncertainties and other factors that could cause actual results and experience to differ from those projected. The forward-looking statements contained in this report are primarily based on the Company’s current expectations and projections about future events and trends that it believes may affect the Company’s business, financial condition, results of operations, prospects, business strategy and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions and other factors described in the section captioned “Risk Factors” and elsewhere in this report. These risks are not exhaustive. Other sections of this report include additional factors that could adversely impact the Company’s business and financial performance. Moreover, the Company operates in a very competitive environment. New risks and uncertainties emerge from time to time and it is not possible for the Company to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. The Company cannot provide assurance that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. 68 In addition, statements that “the Company believes” and similar statements reflect the Company’s beliefs and opinions on the relevant subject. These statements are based upon information available to the Company as of the date of this report, and while the Company believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that the Company have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. This report and the documents that are referenced in this report and have filed as exhibits to this report should be read with the understanding that actual future results, levels of activity, performance and achievements may be materially different from what the Company expects. The Company qualifies all of its forward-looking statements by these cautionary statements. 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. 69 Item 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Market Risk Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in interest rates, equity prices, credit risk, illiquidity, foreign exchange rates and commodity prices. The Company’s consolidated balance sheets includes the estimated fair values of assets that are subject to market risk. The Company’s primary market risks are interest rate risk and credit risks associated with investments in fixed maturities, equity price risk associated with investments in equity securities, and foreign exchange risk associated with premium received that is denominated in foreign currencies. Each of these risks is discussed in more detail below. The Company has no commodity risk. Interest Rate Risk The Company’s primary market risk exposure is to changes in interest rates. The Company’s fixed income investments are exposed to interest rate risk. Fluctuations in interest rates have a direct impact on the market valuation of these securities. As interest rates rise, the market value of the Company’s fixed income investments fall, and the converse is also true. The Company seeks to manage interest rate risk through an active portfolio management strategy that involves the selection, by the Company’s managers, of investments with appropriate characteristics, such as duration, yield, currency, and liquidity that are tailored to the anticipated cash outflow characteristics of the Company’s liabilities. The Company’s strategy for managing interest rate risk also includes maintaining a high quality bond portfolio with a relatively short duration to reduce the effect of interest rate changes on book value. A significant portion of the Company’s investment portfolio matures each year, allowing for reinvestment at current market rates. As of December 31, 2023, assuming identical shifts in interest rates for securities of all maturities, the table below illustrates the sensitivity of market value in Global Indemnity’s bonds to selected hypothetical changes in basis point increases and decreases: (Dollars in thousands) Change in Market Value Basis Point Change Market Value % (200) $ 1,322,494 28,701 2.2 % (100) 1,308,143 14,350 1.1 % No change 1,293,793 — — 100 1,279,448 (14,345 ) (1.1 %) 200 1,265,106 (28,687 ) (2.2 %) Credit Risk The Company’s investment policy requires that its investments in debt instruments are of high credit quality issuers and limit the amount of credit exposure to any one issuer based upon the rating of the security. As of December 31, 2023, the Company had approximately $27.8 million worth of investment exposure to subprime and Alt-A investments. As of December 31, 2023, approximately $15.1 million of those investments have been rated BBB to AAA by Standard & Poor’s and $12.7 million were rated below investment grade. As of December 31, 2022, the Company had approximately $24.3 million worth of investment exposure to subprime and Alt-A investments. As of December 31, 2022, approximately $10.1 million of those investments have been rated BBB to AAA by Standard & Poor’s and $14.2 million were rated below investment grade. There was no credit loss recorded on these investments during the years ended December 31, 2023 or 2022. In addition, the Company has credit risk exposure to its general agencies and reinsurers. The Company seeks to mitigate and control its risks to producers by typically requiring its general agencies to render payments within no more than 45 days after the month in which a policy is effective and including provisions within the Company’s general agency contracts that allow it to terminate a general agency's authority in the event of non-payment. With respect to its credit exposure to reinsurers, the Company seeks to mitigate and control its risk by ceding business to only those reinsurers having adequate financial strength and sufficient capital to fund their obligation. In addition, the Company seeks to mitigate credit risk to reinsurers through the use of trusts and letters of credit for collateral. 70 Equity Price Risk The Company exited its investment in the stable dividend equity portfolio during the first quarter of 2022. The Company continues to hold a minimal amount of preferred stocks as of December 31, 2023, however, the positions do not pose a significant equity price risk. Foreign Currency Exchange Risk The Company has foreign currency exchange risk associated with a portion of the business previously written at Global Indemnity Reinsurance, as well as a small portion of expenses related to corporate overhead in its Ireland office. The Company also maintains cash accounts in foreign currencies in order to pay expenses in foreign countries. At period-end, the Company re-measures those non-U.S. currency financial assets to their current U.S. dollar equivalent. Financial liabilities, if any, are generally adjusted within the reserving process. However, for known losses on claims to be paid in foreign currencies, the Company re-measures the liabilities to their current U.S. dollar equivalent each period end. 71 Item 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA GLOBAL INDEMNITY GROUP, LLC Index to Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 73 Consolidated Balance Sheets 75 Consolidated Statements of Operations 76 Consolidated Statements of Comprehensive Income (Loss) 77 Consolidated Statements of Changes in Shareholders’ Equity 78 Consolidated Statements of Cash Flows 79 Notes to Consolidated Financial Statements 80 Index to Financial Statement Schedules Schedule I Summary of Investments – Other Than Investments in Related Parties S- 1 Schedule II Condensed Financial Information of Registrant S- 2 Schedule III Supplementary Insurance Information S- 5 Schedule IV Reinsurance Earned Premiums S- 6 Schedule V Valuation and Qualifying Accounts and Reserves S- 7 Schedule VI Supplementary Information for Property Casualty Underwriters S- 8 72 Report of Independ ent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Global Indemnity Group, LLC Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Global Indemnity Group, LLC (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 15, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. Valuation of Unpaid Losses and Loss Adjustment Expenses Description of the Matter At December 31, 2023, the Company’s liability for unpaid losses and loss adjustment expenses was $851 million, of which a significant portion represents incurred but not reported reserves. As described in Note 4 of the consolidated financial statements, the liability for unpaid losses and loss adjustment expenses represents the Company’s best estimate of future amounts needed to pay losses and related settlement expenses with respect to events insured by the Company. The difference between the estimated ultimate loss and loss adjustment expenses and the case incurred loss (paid loss plus case reserve) is considered to be incurred but not reported. There is significant uncertainty inherent in determining management’s best estimate of the ultimate loss and loss adjustment expenses, requiring the use of informed actuarially based estimates and management’s judgment. In particular, the Company’s long-tail reserve categories (such as general liability, construction defect and environmental exposures) are influenced by factors that are subject to significant variation over a long period of time or have high potential severities within the selection and weighting of actuarial methods and assumptions. Assumptions fundamental to the reserving process include claims frequency and severity as well as the review of historical payment and claim reporting patterns and expected loss ratios. 73 Auditing management’s best estimate of the liability for unpaid losses and loss adjustment expenses was complex and involved the use of our actuarial specialists due to the significant estimation uncertainty associated with evaluating management’s methods and assumptions in determining the Company’s recorded loss and loss adjustment expense reserves. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over management’s process for estimating loss and loss adjustment expense reserves. This included, among others, the review and approval processes management has in place for the methods and assumptions used in estimating the loss and loss adjustment expense reserves. To test the Company’s estimate of loss and loss adjustment expense reserves, our audit procedures included among others, the use of our actuarial specialists to evaluate the selection and the weighting of actuarial methods used by management with those methods used in prior periods and those used in the industry. In addition, we also used our actuarial specialists to evaluate the assumptions used in the actuarial methods, by comparing the significant assumptions, including claims frequency and severity, historical payment and claims reporting patterns and expected loss ratios to the Company’s historical experience. We developed a range of reserve estimates which included performing independent projections for a sample of lines of business and compared the range of reserve estimates to the Company’s recorded reserves. We also performed an analysis of historical results of the development of the loss and loss adjustment expense reserves related to prior years. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2015. Philadelphia, Pennsylvania March 15, 2024 74 GLOBAL INDEMNITY GROUP, LLC Consolidated B alance Sheets (In thousands, except share amounts) ASSETS December 31, 2023 December 31, 2022 Fixed maturities: Available for sale, at fair value (amortized cost: $ 1,322,092 and $ 1,301,723 ; net of allowance for expected credit losses of: $ 0 at December 31, 2023 and 2022 $ 1,293,793 $ 1,248,198 Equity securities, at fair value 16,508 17,520 Other invested assets 38,236 38,176 Total investments 1,348,537 1,303,894 Cash and cash equivalents 38,037 38,846 Premium receivables, net of allowance for expected credit losses of $ 4,796 and $ 3,322 at December 31, 2023 and 2022, respectively 102,158 168,743 Reinsurance receivables, net of allowance for expected credit losses of $ 8,992 at December 31, 2023 and 2022 80,439 85,721 Funds held by ceding insurers 16,989 19,191 Deferred federal income taxes 36,802 47,099 Deferred acquisition costs 42,445 64,894 Intangible assets 14,456 14,810 Goodwill 4,820 4,820 Prepaid reinsurance premiums 4,958 17,421 Receivable for securities sold 3,858 — Lease right of use assets 9,715 11,739 Other assets 26,362 23,597 Total assets $ 1,729,576 $ 1,800,775 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities: Unpaid losses and loss adjustment expenses $ 850,599 $ 832,404 Unearned premiums 182,852 269,353 Ceded balances payable 2,642 17,241 Payable for securities purchased — 66 Federal income tax payable 1,595 — Contingent commissions 5,632 8,816 Lease liabilities 12,733 15,701 Other liabilities 24,770 30,965 Total liabilities 1,080,823 1,174,546 Commitments and contingencies (Note 17) — — Shareholders’ equity: Series A cumulative fixed rate preferred shares, $ 1,000 par value; 100,000,000 shares authorized, shares issued and outstanding: 4,000 and 4,000 shares, respectively, liquidation preference: $ 1,000 per share and $ 1,000 per share, respectively 4,000 4,000 Common shares: no par value; 900,000,000 common shares authorized; class A common shares issued: 11,042,670 and 10,876,041 , respectively; class A common shares outstanding: 9,771,429 and 10,073,660 , respectively; class B common shares issued and outstanding: 3,793,612 and 3,793,612 , respectively — — Additional paid-in capital 454,791 451,305 Accumulated other comprehensive income (loss), net of tax ( 22,863 ) ( 43,058 ) Retained earnings 244,988 233,468 Class A common shares in treasury, at cost: 1,271,241 and 802,381 shares, respectively ( 32,163 ) ( 19,486 ) Total shareholders’ equity 648,753 626,229 Total liabilities and shareholders’ equity $ 1,729,576 $ 1,800,775 See accompanying notes to consolidated financial statements. 75 GLOBAL INDEMNITY GROUP, LLC Consolidated Statem ents of Operations (In thousands, except shares and per share data) Years Ended December 31, 2023 2022 2021 Revenues: Gross written premiums $ 416,397 $ 727,603 $ 682,122 Ceded written premiums ( 17,078 ) ( 136,272 ) ( 102,054 ) Net written premiums 399,319 591,331 580,068 Change in net unearned premiums 74,038 11,140 15,542 Net earned premiums 473,357 602,471 595,610 Net investment income 55,444 27,627 37,020 Net realized investment gains (losses) ( 2,107 ) ( 32,929 ) 15,887 Other income 1,435 31,365 29,751 Total revenues 528,129 628,534 678,268 Losses and Expenses: Net losses and loss adjustment expenses 289,153 359,228 384,964 Acquisition costs and other underwriting expenses 182,617 236,381 222,841 Corporate and other operating expenses 23,383 24,421 27,179 Interest expense — 3,004 10,481 Loss on extinguishment of debt — 3,529 — Income before income taxes 32,976 1,971 32,803 Income tax expense 7,547 2,821 3,449 Net income (loss) 25,429 ( 850 ) 29,354 Less: preferred stock distributions 440 440 440 Net income (loss) available to common shareholders $ 24,989 $ ( 1,290 ) $ 28,914 Per share data: Net income (loss) available to common shareholders (1) Basic $ 1.84 $ ( 0.09 ) $ 2.00 Diluted $ 1.83 $ ( 0.09 ) $ 1.97 Weighted-average number of shares outstanding Basic 13,553,168 14,482,164 14,426,739 Diluted 13,666,408 14,482,164 14,664,330 Cash distributions declared per common share $ 1.00 $ 1.00 $ 1.00 (1) For the year ended December 31, 2022, “weighted average shares outstanding - basic” was used to calculate “diluted earnings per share” due to a net loss for the period. See accompanying notes to consolidated financial statements. 76 GLOBAL INDEMNITY GROUP, LLC Consolidated Statements of Comprehensive Income (Loss) (In thousands) Years Ended December 31, 2023 2022 2021 Net income (loss) $ 25,429 $ ( 850 ) $ 29,354 Other comprehensive income (loss), net of tax: Unrealized holding gains (losses) 18,892 ( 81,729 ) ( 27,384 ) Reclassification adjustment for (gains) losses included in net income (loss) 1,350 32,253 ( 278 ) Unrealized foreign currency translation gains (losses) ( 47 ) 14 ( 242 ) Other comprehensive income (loss), net of tax 20,195 ( 49,462 ) ( 27,904 ) Comprehensive income (loss), net of tax $ 45,624 $ ( 50,312 ) $ 1,450 See accompanying notes to consolidated financial statements. 77 GLOBAL INDEMNITY GROUP, LLC Consolidated Statements of Ch anges in Shareholders’ Equity (In thousands, except share amounts) Years Ended December 31, 2023 2022 2021 Number of Series A Cumulative Fixed Rate Preferred Shares Number at beginning and end of period 4,000 4,000 4,000 Number of class A common shares issued: Number at beginning of period 10,876,041 10,574,589 10,263,722 Common shares issued under share incentive plans, net of forfeitures 75,541 50,598 41,508 Common shares issued to directors 91,088 97,260 83,199 Share conversion — 153,594 186,160 Number at end of period 11,042,670 10,876,041 10,574,589 Number of class B common shares issued: Number at beginning of period 3,793,612 3,947,206 4,133,366 Share conversion — ( 153,594 ) ( 186,160 ) Number at end of period 3,793,612 3,793,612 3,947,206 Par value of Series A Cumulative Fixed Rate Preferred Shares: Balance at beginning and end of period $ 4,000 $ 4,000 $ 4,000 Additional paid-in capital: Balance at beginning of period $ 451,305 $ 447,406 $ 445,051 Share compensation plans 3,486 3,899 2,355 Balance at end of period $ 454,791 $ 451,305 $ 447,406 Accumulated other comprehensive income (loss), net of deferred income tax: Balance at beginning of period $ ( 43,058 ) $ 6,404 $ 34,308 Other comprehensive income (loss): Change in unrealized holding gains (losses) 20,242 ( 49,476 ) ( 27,662 ) Unrealized foreign currency translation gains (losses) ( 47 ) 14 ( 242 ) Other comprehensive income (loss) 20,195 ( 49,462 ) ( 27,904 ) Balance at end of period $ ( 22,863 ) $ ( 43,058 ) $ 6,404 Retained earnings: Balance at beginning of period $ 233,468 $ 249,301 $ 234,965 Net income (loss) 25,429 ( 850 ) 29,354 Preferred share distributions ( 440 ) ( 440 ) ( 440 ) Distributions to shareholders ( 13,469 ) ( 14,543 ) ( 14,578 ) Balance at end of period $ 244,988 $ 233,468 $ 249,301 Number of treasury shares: Number at beginning of period 802,381 17,496 — Class A common shares purchased 468,860 923,036 17,318 Class A common shares purchased by GBLI director — ( 138,151 ) — Forfeited shares — — 178 Number at end of period 1,271,241 802,381 17,496 Treasury shares, at cost: Balance at beginning of period $ ( 19,486 ) $ ( 490 ) $ — Class A common shares purchased, at cost ( 12,677 ) ( 22,335 ) ( 490 ) Class A common shares purchased by GBLI director — 3,339 — Balance at end of period $ ( 32,163 ) $ ( 19,486 ) $ ( 490 ) Total shareholders’ equity $ 648,753 $ 626,229 $ 706,621 See accompanying notes to consolidated financial statements. 78 GLOBAL INDEMNITY GROUP, LLC Consolidated Statem ents of Cash Flows (In thousands) Years Ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income (loss) $ 25,429 $ ( 850 ) $ 29,354 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization and depreciation 6,199 8,398 10,414 Amortization of debt issuance costs — 41 142 Gross proceeds from sale of renewal rights — ( 30,000 ) ( 28,000 ) Impairment loss on right of use lease assets — 488 1,515 Impairment loss on software — 508 2,000 Impairment loss on goodwill and intangible assets — 5,657 1,295 Restricted stock and stock option expense 3,486 3,899 2,355 Deferred federal income taxes 5,326 2,395 3,395 Amortization of bond premium and discount, net ( 6,749 ) 1,267 6,509 Net realized investment (gains) losses 2,107 32,929 ( 15,887 ) Loss on extinguishment of debt — 3,529 — (Income) loss from equity method investments, net of distributions ( 2,369 ) 6,549 ( 2,716 ) Changes in: Premium receivables, net 66,585 ( 40,299 ) ( 19,013 ) Reinsurance receivables, net 5,282 14,143 ( 11,156 ) Funds held by ceding insurers 2,142 8,785 17,216 Unpaid losses and loss adjustment expenses 18,195 72,500 97,093 Unearned premiums ( 86,501 ) ( 47,213 ) 25,071 Ceded balances payable ( 14,599 ) ( 18,099 ) 26,397 Other assets and liabilities ( 14,970 ) ( 12,814 ) ( 16,507 ) Contingent commissions ( 3,184 ) 913 ( 2,929 ) Federal income tax payable 1,595 — — Deferred acquisition costs 22,449 ( 4,563 ) 4,864 Prepaid reinsurance premiums 12,463 36,073 ( 40,613 ) Net cash provided by operating activities 42,886 44,236 90,799 Cash flows from investing activities: Proceeds from sale of fixed maturities 148,164 933,554 1,065,398 Proceeds from sale of equity securities 1,158 88,726 54,691 Proceeds from maturity of fixed maturities 280,115 81,546 87,057 Proceeds from maturity of preferred stock 500 1,000 666 Proceeds from other invested assets 2,309 107,925 17,082 Amounts received (paid) in connection with derivatives — 12,726 2,723 Purchases of fixed maturities ( 448,465 ) ( 1,164,683 ) ( 1,207,231 ) Purchases of equity securities ( 111 ) ( 10,660 ) ( 42,905 ) Purchases of other invested assets — — ( 70,000 ) Gross proceeds from sale of renewal rights — 30,000 28,000 Net cash provided by (used for) investing activities ( 16,330 ) 80,134 ( 64,519 ) Cash flows from financing activities: Distributions paid to common shareholders ( 14,248 ) ( 14,366 ) ( 14,431 ) Distributions paid to preferred shareholders ( 440 ) ( 440 ) ( 440 ) Purchases of class A common shares ( 12,677 ) ( 22,335 ) ( 490 ) Issuance of class A common shares — 3,339 — Redemption of subordinated notes — ( 130,000 ) — Net cash used for financing activities ( 27,365 ) ( 163,802 ) ( 15,361 ) Net change in cash and cash equivalents ( 809 ) ( 39,432 ) 10,919 Cash and cash equivalents at beginning of period 38,846 78,278 67,359 Cash and cash equivalents at end of period $ 38,037 $ 38,846 $ 78,278 See accompanying notes to consolidated financial statements. 79 1. Principles of Consolidation and Basis of Presentation Global Indemnity Group, LLC (“Global Indemnity” or "the Company"), a Delaware limited liability company formed on June 23, 2020 , replaced Global Indemnity Limited, incorporated in the Cayman Islands as an exempted company with limited liability, as the ultimate parent company of the Global Indemnity group of companies as a result of a redomestication transaction completed on August 28, 2020 . This transaction resulted in the redomestication of the Company to the United States. Global Indemnity Group, LLC’s class A common shares are publicly traded on the New York Stock Exchange under the ticker symbol GBLI. Global Indemnity Group, LLC’s predecessors have been publicly traded since 2003. During the fourth quarter of 2023, the Company restructured its insurance operations to strengthen its market presence and enhance GBLI's focus on core products and made the decision to manage the business through two segments, Penn-America and Non-Core Operations. Management believes these segments allow users of the Company’s financial statements to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a whole. Segment results for prior years have been revised to reflect these changes. See Note 22 for additional information regarding segments. Global Indemnity Group, LLC is a holding company that is classified as a publicly traded partnership for U.S. federal income tax purposes and meets the qualifying income exception to maintain partnership status. Global Indemnity Group, LLC owns all 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. The insurance companies’ primary activity is providing insurance products across a distribution network that includes wholesale general agents, retail agents, and direct-to-consumer. The Company manages the distribution of its core product offerings through Penn-America (formerly known as Commercial Specialty). Penn-America offers specialty property and casualty products designed for GBLI's Wholesale Commercial, Programs, InsurTech, and Assumed Reinsurance product offerings. These product lines are offered in the excess and surplus lines marketplace. The Company also has a Non-Core Operations segment that contains lines of business that have been de-emphasized or are no longer being written. Collectively, the Company’s insurance subsidiaries are licensed in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The consolidated financial statements have been prepared in conformity with United States of America generally accepted accounting principles (“GAAP”), which differs in certain respects from those principles followed in reports to insurance regulatory authorities. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The consolidated financial statements include the accounts of Global Indemnity Group, LLC and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts not reported in the Consolidated Statements of Operations for 2021 have been reported to conform to the presentation adopted in 2022. Specifically, the Company reported ceded written premiums and change in net unearned premiums in the presentation for 2022 and 2023. This change had no effect on total revenues, total expenses, or net income (loss) reported for the prior years. 2. Sale of Renewal Rights Manufactured & Dwelling Homes Business On October 26, 2021, the Company sold the renewal rights related to its manufactured and dwelling homes business to K2 Insurance Services (“K2”) and American Family Mutual Insurance Company (“American Family”). Pursuant to the tripartite transaction, the Company received $ 28.0 million in cash in October 2021. The Company also retained the American Reliable 50-state licensed operating unit, $ 65 million of net capital supporting the business, and a related $ 42 million unearned premium reserve. The Company currently leases office space in Scottsdale, Arizona. As part of this sale, K2 is subleasing approximately one third of the Scottsdale, Arizona office space. Currently, the Company intends to exercise the early termination clause in its Scottsdale, Arizona lease. The Company expects it will receive $ 1.6 million in sublease payments from K2 between October 2021 and October 2026. 80 To facilitate the transaction, American Reliable retained the specialty residential property business in Florida and Louisiana and also retained business that was previously placed in runoff. American Reliable commenced the non-renewal of manufactured home insurance in Florida beginning on March 11, 2022, for policies expiring on or after July 10, 2022. American Reliable and United National non-renewed manufactured home and dwelling insurance in Louisiana beginning on or about January 31, 2022, for policies renewing on or after March 7, 2022. American Family assumed 100 % of the risks for all policies covered under the renewal rights agreement which are written or renewed after October 26, 2021, except for policies covering properties in the state of Florida. The Company also retained risk for business previously placed in runoff and policies in Louisiana. There were no specialty residential property policies in-force in Florida and Louisiana as of December 31, 2023. In addition, effective November 30, 2021, the Company and American Family reached an agreement where American Family agreed to reinsure 100 % of the Company’s unearned premium reserves of the same types as the policies comprising the manufactured and dwelling homes business lines noted above that were in force as of November 30, 2021. The approximate amount of the unearned premium reserves at November 30, 2021 was $ 33.8 million. The Company received a 40 % ceding commission which included a provision for a 4 % claims administration fee to be paid by the Company directly to K2 Claims. The gross proceeds from this sale of $ 28.0 million are included in other income on the Company’s consolidated statements of operations for the year ended December 31, 2021. Legal expenses and merger and acquisition fees related to the sale were $ 2.4 million for the year ended December 31, 2021. In addition, the Company recorded an impairment of goodwill, intangible assets, software, and lease costs in the amount of $ 1.1 million, $ 0.2 million, $ 2.0 million, and $ 1.5 million, respectively, for the year ended December 31, 2021. The Company also recorded an additional impairment of lease cost in the amount of $ 0.6 million for the year ended December 31, 2022. The impairments and expenses related to sale are included on the Company’s consolidated statements of operations as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Acquisition costs and other underwriting expenses $ — $ 644 $ — Corporate and other operating expenses — — 7,202 Total impairments and expenses related to sale $ — $ 644 $ 7,202 See Note 8 for additional information on the impairment of goodwill and intangible assets and Note 14 for additional information on impairment of leases. Farm, Ranch & Stable On August 8, 2022, the Company sold the renewal rights related to its Farm, Ranch & Stable business for policies written on or after August 8, 2022 to Everett Cash Mutual Insurance Company for $ 30.0 million. The Company retained the unearned premium reserves for business written prior to August 8, 2022. The gross proceeds from this sale of $ 30.0 million are included in other income on the Company’s consolidated statements of operations for the year ended December 31, 2022. In addition, the Company also recorded an impairment of goodwill, intangible assets, software, and lease costs in the amount of $ 0.6 million, $ 5.1 million, $ 0.5 million, and $ 0.5 million, respectively , for the year ended December 31, 2022 . Legal expenses and merger and acquisition fees related to the sale were $ 2.5 million for the year ended December 31, 2022. The impairments and expenses related to sale are included on the Company’s consolidated statements of operations as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Acquisition costs and other underwriting expenses $ — $ 1,034 $ — Corporate and other operating expenses — 8,142 — Total impairments and expenses related to sale $ — $ 9,176 $ — See Note 8 for additional information on the impairment of goodwill and intangible assets and Note 14 for additional information on impairment of leases. In conjunction with this sale, Everett Cash Mutual Insurance Company also acquired the Company’s wholly-owned subsidiary, American Reliable Insurance Company, on December 31, 2022 for an amount equal to book value, which was $ 10.0 million, at the time of closing. 81 3. Restructuring The Company restructured its insurance operations to strengthen its market presence and enhance its focus on GBLI’s core products. As a result, the Company exited its four brokerage divisions: Professional Liability, Excess Casualty, Environmental, and Middle Market Property. The Company ceased writing new business and non-renewed existing policies for these four divisions. The restructuring plan, which was initiated in the fourth quarter of 2022 , was completed in the first quarter of 2023 . In connection with the restructuring plan, the Company incurred restructuring costs of $ 3.4 million in 2022 and $ 2.0 million in 2023 for total restructuring costs of $ 5.4 million. The following table summarizes charges incurred by expense type and the remaining liability as of December 31, 2023 and 2022: (Dollars in thousands) Consolidated Statements of Operations Line Employee Termination Lease Right of Use Asset Impairment Total Charges incurred in 2022 Corporate and other operating expenses $ 2,635 $ — $ 2,635 Charges incurred in 2022 Acquisition costs and other underwriting expenses (1) — 812 812 Non-cash asset charges — ( 812 ) ( 812 ) Liability at December 31, 2022 2,635 — 2,635 Charges incurred in 2023 Corporate and other operating expenses 1,997 — 1,997 Cash payments in 2023 ( 4,554 ) — ( 4,554 ) Liability at December 31, 2023 $ 78 $ — $ 78 (1) These charges were recorded within the Company's Non-Core Operations segment. Any information technology development initiatives related to business lines within Non-Core Operations have been discontinued. 4. Summary of Significant Accounting Policies Investments The Company’s investments in fixed maturities, which are classified as available for sale, and equity securities are carried at their fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of the Company's fixed maturities and equity securities are determined on the basis of quoted market prices where available. If quoted market prices are not available, the Company uses third-party pricing services to assist in determining fair value. In many instances, these services examine the pricing of similar instruments to estimate fair value. The Company purchases bonds with the expectation of holding them to their maturity; however, changes to the portfolio are sometimes required to assure it is appropriately matched to liabilities. In addition, changes in financial market conditions and tax considerations may cause the Company to sell an investment before it matures. The difference between amortized cost and fair value of the Company’s fixed maturity portfolio, net of the effect of deferred income taxes, is reflected in accumulated other comprehensive income (loss) within shareholders’ equity and, accordingly, has no effect on net income (loss) other than for the credit loss component of impairments and losses recognized as a result of the intent to sell. Equity securities are measured at fair value with the changes in fair value recognized in net income (loss). For investments in limited partnerships and limited liability companies where the ownership interest is less than 3%, the Company carries these investments at fair value, and the change in the difference between cost and the fair value of these interests, net of the effect of deferred income taxes, is reflected in accumulated other comprehensive income (loss) wi thin shareholders' equity and, accordingly, has no effect on net income (loss). The Company uses the equity method to account for investments in limited partnerships and limited liability companies where its ownership interest exceeds 3 %. The equity method of accounting for an investment in a limited partnership and limited liability company requires that its cost basis be updated to account for the income or loss earned on the investment. The receipt of results for investments in limited partnerships and limited liability companies may vary. If results are received on a timely basis, they are included in current results. If they are not received on a timely basis, they are recorded on a one quarter lag. The recording of such results are applied consistently for each investment once the timing of receiving the results has been established. The income or loss associated with the limited partnerships and limited liability companies is reflected in the consolidated statements of operations, and the adjusted cost basis approximates fair value. The Company’s investments in other invested assets were valued at $ 38.2 million as of December 31, 2023 and 2022. These amounts relate to investments in limited partnerships and limited liability companies whose carrying value approximates fair value. 82 Net realized gains and losses on investments are determined based on the first-in, first-out method. The Company regularly performs various analytical valuation procedures with respect to its investments, including reviewing each available for sale debt security in an unrealized loss position to assess whether the decline in fair value below amortized cost basis has resulted from a credit loss or other factors. In assessing whether a credit loss exists, the Company compares the present value of the cash flows expected to be collected from the security to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for expected credit losses is recorded. Subsequent changes in the allowances are recorded in the period of change as either credit loss expense or reversal of credit loss expense. Any impairments related to factors other than credit losses and the intent to sell are recorded through other comprehensive income, net of taxes. For fixed maturities, the factors considered in reaching the conclusion that a credit loss exists include, among others, whether: (1) the extent to which the fair value is less than the amortized cost basis; (2) the issuer is in financial distress; (3) the investment is secured; (4) a significant credit rating action occurred; (5) scheduled interest payments were delayed or missed; (6) changes in laws or regulations have affected an issuer or industry; (7) the investment has an unrealized loss and was identified by the Company’s investment manager as an investment to be sold before recovery or maturity; (8) the investment failed cash flow projection testing to determine if anticipated principal and interest payments will be realized; and (9) changes in US Treasury rates and/or credit spreads since original purchase to identify whether the unrealized loss is simply due to interest rate movement. According to accounting guidance for debt securities in an unrealized loss position, the Company is required to assess whether it has the intent to sell the debt security or more likely than not will be required to sell the debt security before the anticipated recovery. If either of these conditions is met, any allowance for expected credit losses is written off and the amortized cost basis is written down to the fair value of the fixed maturity security with any incremental impairment reported in earnings. That new amortized cost basis shall not be adjusted for subsequent recoveries in fair value. The Company elected the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of the available for sale debt securities for the purposes of identifying and measuring an impairment and to not measure an allowance for expected credit losses for accrued interest receivables. Accrued interest receivable is written off through net realized investment gains (losses) at the time the issuer of the bond defaults or is expected to default on payment. The Company made an accounting policy election to present the accrued interest receivable balance with other assets on the Company’s consolidated statements of financial position. Accrued interest receivable related to fixed maturities was $ 7.5 million and $ 8.4 million as of December 31, 2023 and 2022 , respectively. Variable Interest Entities A Variable Interest Entity (“VIE”) refers to an investment in which an investor holds a controlling interest that is not based on the majority of voting rights. Under the VIE model, the party that has the power to exercise significant management influence and maintain a controlling financial interest in the entity’s economics is said to be the primary beneficiary, and is required to consolidate the entity within their results. Other entities that participate in a VIE, for which their financial interests fluctuate with changes in the fair value of the investment entity’s net assets but do not have significant management influence and the ability to direct the VIE’s significant economic activities are said to have a variable interest in the VIE but do not consolidate the VIE in their financial results. The Company has variable interests in two VIEs for which it is not the primary beneficiary. These investments are accounted for under the equity method of accounting as their ownership interest exceeds 3 % of their respective investments. 83 Cash and Cash Equivalents For the purpose of the statements of cash flows, the Company considers all liquid instruments with an original maturity of three months or less to be cash equivalents. The Company has a cash management program that provides for the investment of excess cash balances primarily in short-term money market instruments. Generally, bank balances exceed federally insured limits. The carrying amount of cash and cash equivalents approximates fair value. At December 31, 2023 and 2022 , the Company had approximately $ 36.9 million and $ 26.0 million, respectively, of cash and cash equivalents that was invested in a diversified portfolio of high quality short-term debt securities. Valuation of Premium Receivables The Company evaluates the collectability of premium receivables based on a combination of factors. In instances in which the Company is aware of a specific circumstance where a party may be unable to meet its financial obligations to the Company, a specific allowance for expected credit losses against amounts due is recorded to reduce the net receivable to the amount reasonably believed by management to be collectible. For all remaining balances, the allowance is based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, direct placement with collection agencies, solvency of insured or agent, terminated agents, and other relevant factors. The allowance for expected credit losses was $ 4.8 million and $ 3.3 million as of December 31, 2023 and 2022 , respectively. Goodwill and Intangible Assets The Company tests for impairment of goodwill at least annually and more frequently as circumstances warrant in accordance with applicable accounting guidance. Accounting guidance allows for the testing of goodwill for impairment using both qualitative and quantitative factors. Impairment of goodwill is recognized only if the carrying amount of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. The amount of the impairment loss would be equal to the excess carrying value of the goodwill over the implied fair value of the reporting unit goodwill. Impairment of intangible assets with an indefinite useful life is tested at least annually and more frequently as circumstances warrant in accordance with applicable accounting guidance. Accounting guidance allows for the testing of indefinite lived intangible assets for impairment using both qualitative and quantitative factors. Impairment of indefinite lived intangible assets is recognized only if the carrying amount of the intangible assets exceeds the fair value of said assets. The amount of the impairment loss would be equal to the excess carrying value of the assets over the fair value of said assets. Intangible assets that are not deemed to have an indefinite useful life are amortized over their estimated useful lives. The carrying amounts of definite lived intangible assets are regularly reviewed for indicators of impairment in accordance with applicable accounting guidance. Impairment is recognized only if the carrying amount of the intangible asset is in excess of its undiscounted projected cash flows. The impairment is measured as the difference between the carrying amount and the estimated fair value of the asset. See Note 8 for additional information on goodwill and intangible assets as well as the results of qualitative impairment assessments performed. Reinsurance In the normal course of business, the Company seeks to reduce the loss that may arise from events that cause unfavorable underwriting results by reinsuring certain levels of risk from various areas of exposure with reinsurers. Amounts receivable from reinsurers are estimated in a manner consistent with the reinsured policy and the reinsurance contract. The Company regularly reviews the collectability of reinsurance receivables. An allowance for uncollectible reinsurance receivables is recognized based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, disputes, applicable coverage defenses, insolvent reinsurers, financial strength of solvent reinsurers based on AM Best Ratings and other relevant factors. Any changes in the allowance resulting from this review are included in net losses and loss adjustment expenses on the consolidated statements of operations during the period in which the determination is made. The allowance for expected credit losses was $ 9.0 million as of December 31, 2023 and 2022,. The applicable accounting guidance requires that the reinsurer must assume significant insurance risk under the reinsured portions of the underlying insurance contracts and that there must be a reasonably possible chance that the reinsurer may realize a significant loss from the transaction. The Company has evaluated its reinsurance contracts and concluded that each contract qualifies for reinsurance accounting treatment pursuant to this guidance. 84 Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. The deferred tax asset balance is analyzed regularly by management. This assessment requires significant judgment and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of carryforward periods, and tax planning strategies and/or actions. Management believes that it is more likely than not that the results of future operations can generate sufficient taxable income to realize the remaining deferred income tax assets, and accordingly, the Company has not established any valuation allowances. Deferred Acquisition Costs The costs of acquiring new and renewal insurance and reinsurance contracts primarily include commissions, premium taxes and certain other costs that are directly related to the successful acquisition of new and renewal insurance and reinsurance contracts. The excess of the Company’s costs of acquiring new and renewal insurance and reinsurance contracts over the related ceding commissions earned from reinsurers is capitalized as deferred acquisition costs and amortized over the period in which the related premiums are earned. The amortization of deferred acquisition costs for the years ended December 31, 2023, 2022, and 2021 was $ 120.9 million , $ 150.9 million , and $ 144.9 million , respectively. Premium Deficiency A premium deficiency is recognized if the sum of expected loss and loss adjustment expenses and unamortized acquisition costs exceeds related unearned premium after consideration of investment income. This evaluation is done at a distribution and product line/treaty level. Any future expected loss on the related unearned premium is recorded first by impairing the unamortized acquisition costs on the related unearned premium followed by an increase to loss and loss adjustment expense reserves on additional expected loss in excess of unamortized acquisition costs. No premium deficiency reserve existed as of December 31, 2023 or 2022 . Derivative Instruments The Company used derivative instruments to manage its exposure to cash flow variability from interest rate risk and limit exposure to severe equity market changes. The derivative instruments were carried on the balance sheet at fair value and included in other assets and other liabilities. Changes in the fair value of the derivative instruments and the periodic net interest settlements under the derivatives instruments were recognized as net realized investment gains (losses) on t he consolidated statements of operations. Subordinated Notes The carrying amounts reported in the balance sheet, if any, represent the outstanding balances, net of deferred issuance cost. See Note 13 for details. Unpaid Losses and Loss Adjustment Expenses The liability for unpaid losses and loss adjustment expenses represents the Company’s best estimate of future amounts needed to pay losses and related settlement expenses with respect to events insured by the Company. This liability is based upon the accumulation of individual case estimates for losses reported prior to the close of the accounting period with respect to direct business, estimates received from ceding companies with respect to assumed reinsurance, and estimates of unreported losses. The process of establishing the liability for unpaid losses and loss adjustment is complex, requiring the use of informed actuarially based estimates and Management’s judgment. In some cases, significant periods of time, up to several years or more, may elapse between the occurrence of an insured loss and the reporting of that loss to the Company. To establish this liability, the Company regularly reviews and updates the methods of making such estimates and establishing the resulting liabilities. Any resulting adjustments are recorded in consolidated statements of operations during the period in which the determination is made. Share Repurchases Shares repurchased from employees or third parties by Global Indemnity Group, LLC are held as treasury stock and recorded at cost until formally retired by Global Indemnity Group, LLC. 85 Retirement of Treasury Stock Upon the formal retirement of treasury stock, Global Indemnity Group, LLC offsets the par value of the treasury stock that is being retired against common shares and reflects any excess of cost over par value as a deduction from Additional Paid-in Capital. Share Redemptions When shares are redeemed, Global Indemnity Group, LLC offsets the par value of the redeemed shares against common shares and reflects any excess of cost over par value as a deduction from Retained Earnings. Premiums Premiums are recognized as revenue ratably over the term of the respective policies and treaties. Unearned premiums are computed on a pro rata basis to the day of expiration. Mandatory reinstatement premiums assessed on reinsurance policies are earned in the period of the loss event that gave rise to the reinstatement premiums. Contingent Commissions Certain professional general agencies of GBLI are paid special incentives, referred to as contingent commissions, when results of business produced by these agencies are more favorable than predetermined thresholds. Similarly, in some circumstances, companies that cede business to GBLI are paid profit commissions based on the profitability of the ceded portfolio. These commissions are charged to other underwriting expenses when incurred. Share-Based Compensation The Company accounts for stock options and other equity based compensation using the modified prospective application of the fair value-based method permitted by the appropriate accounting guidance. See Note 18 for details. Earnings per Share Basic earnings per share have been calculated by dividing net income (loss) available to common shareholders by the weighted-average common shares outstanding. In periods of net income, diluted earnings per share have been calculated by dividing net income available to common shareholders by the sum of the weighted-average common shares outstanding and the weighted-average common share equivalents outstanding, which include options and other equity awards. In periods of net loss, diluted earnings per share is the same as basic earnings per share. See Note 20 for details. Foreign Currency At times, the Company maintains investments and cash accounts in foreign currencies related to the operations of its business. At period-end, the Company re-measures non-U.S. currency financial assets to their current U.S. dollar equivalent. The resulting gain or loss for foreign denominated fixed maturity investments, if any, is reflected in accumulated other comprehensive income (loss) within shareholders’ equity; whereas, the gain or loss on foreign denominated cash accounts and equity securities is reflected in income during the period. Financial liabilities, if any, are generally adjusted within the reserving process. However, for known losses on claims to be paid in foreign currencies, the Company re-measures the liabilities to their current U.S. dollar equivalent each period end with the resulting gain or loss reflected in income during the period. Net transaction gains and losses, primarily comprised of re-measurement of known losses on claims to be paid in foreign currencies, were a loss of $ 0.5 million, a gain of $ 0.3 million, and a gain of $ 0.5 million for the years ended December 31, 2023, 2022, and 2021 , respectively. Leases The Company determines if an arrangement is a lease at inception. Leases with a term of 12 months or less are not recorded on the consolidated balance sheets. For leases with a term of greater than 12 months, lease right-of-use assets (“ROU”) and lease liabilities are included on the consolidated balance sheets. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company’s leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate at the commencement date in determining the present value of future payments. The ROU asset is calculated using the initial lease liability amount, plus any lease payments made at or before the commencement date, minus any lease incentives received, plus any initial direct costs incurred. Lease expenses for minimum lease payments are recognized on a straight-line basis over the lease term. 86 The Company’s lease agreements may contain both lease and non-lease components which are accounted separately. The Company elected the practical expedient on not separating lease components from non-lease components for its equipment leases. Rental income derived from subleases are recognized on a straight-line basis over the operating lease term. Other Income Other income is primarily comprised of fee income, foreign exchange gains and losses, and gain on sale of the renewal rights. Capitalized Software Costs Capitalized software costs, which represent costs directly related to obtaining, developing or upgrading internal use software, are capitalized during the application development stage. These costs generally consist of internal personnel costs and external consulting fees. Capitalized software costs, which are included in other assets on the Company’s Consolidated Balance Sheets, are amortized using the straight-line method over its estimated useful life beginning when the software is put into production. Internal and external costs incurred during the preliminary project stage, training costs, most data conversion costs, and maintenance costs are charged to expense as incurred. Capitalized software costs were $ 4.0 million and $ 4.1 million at December 31, 2023 and 2022, respectively. Amortization expense related to capitalized software for the years ended December 31, 2023, 2022, and 2021 w as $ 4.9 million, $ 6.1 million, and $ 7.1 million, respectively. 5. Investments The amortized cost and estimated fair value of the Company’s fixed maturities securities were as follows as of December 31, 2023 and 2022 : (Dollars in thousands) Amortized Cost Allowance for Expected Credit Losses Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value As of December 31, 2023 Fixed maturities: U.S. treasuries $ 497,099 $ — $ 515 $ ( 3,391 ) $ 494,223 Obligations of states and political subdivisions 27,326 — — ( 1,176 ) 26,150 Mortgage-backed securities 63,173 — 229 ( 4,475 ) 58,927 Asset-backed securities 207,375 — 668 ( 5,091 ) 202,952 Commercial mortgage-backed securities 84,062 — 12 ( 4,994 ) 79,080 Corporate bonds 298,526 — 116 ( 6,929 ) 291,713 Foreign corporate bonds 144,531 — 40 ( 3,823 ) 140,748 Total fixed maturities $ 1,322,092 $ — $ 1,580 $ ( 29,879 ) $ 1,293,793 (Dollars in thousands) Amortized Cost Allowance for Expected Credit Losses Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value As of December 31, 2022 Fixed maturities: U.S. treasuries $ 352,533 $ — $ — $ ( 8,430 ) $ 344,103 Obligations of states and political subdivisions 33,471 — — ( 1,876 ) 31,595 Mortgage-backed securities 67,560 — 165 ( 5,609 ) 62,116 Asset-backed securities 198,161 — 390 ( 9,151 ) 189,400 Commercial mortgage-backed securities 104,777 — 20 ( 6,133 ) 98,664 Corporate bonds 353,622 — 16 ( 14,858 ) 338,780 Foreign corporate bonds 191,599 — — ( 8,059 ) 183,540 Total fixed maturities $ 1,301,723 $ — $ 591 $ ( 54,116 ) $ 1,248,198 As of December 31, 2023 and 2022, the Company’s investments in equity securities consist of the following: December 31, (Dollars in thousands) 2023 2022 Common stock $ — $ 1,271 Preferred stock 16,508 16,249 Total $ 16,508 $ 17,520 87 Excluding U.S. treasuries and limited partnerships, the Company did not hold any debt or equity investments in a single issuer in excess of 2.1 % and 2.4 % of shareholders' equity at December 31, 2023 and 2022, respectively. The amortized cost and estimated fair value of the Company’s fixed maturities portfolio classified as available for sale at December 31, 2023, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. (Dollars in thousands) Amortized Cost Estimated Fair Value Due in one year or less $ 663,046 $ 660,141 Due in one year through five years 279,876 270,667 Due in five years through ten years 13,018 11,619 Due after ten years 11,542 10,407 Mortgage-backed securities 63,173 58,927 Asset-backed securities 207,375 202,952 Commercial mortgage-backed securities 84,062 79,080 Total $ 1,322,092 $ 1,293,793 The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses that are not deemed to have credit losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2023. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 7. Less than 12 months 12 months or longer Total (Dollars in thousands) Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fixed maturities: U.S. treasuries 55,447 ( 342 ) 239,254 ( 3,049 ) 294,701 ( 3,391 ) Obligations of states and political subdivisions - - 26,150 ( 1,176 ) 26,150 ( 1,176 ) Mortgage-backed securities 12,432 ( 406 ) 39,734 ( 4,069 ) 52,166 ( 4,475 ) Asset-backed securities 38,828 ( 469 ) 108,947 ( 4,622 ) 147,775 ( 5,091 ) Commercial mortgage-backed securities 13 ( 2 ) 76,467 ( 4,992 ) 76,480 ( 4,994 ) Corporate bonds 34,658 ( 264 ) 231,816 ( 6,665 ) 266,474 ( 6,929 ) Foreign corporate bonds 7,096 ( 13 ) 111,750 ( 3,810 ) 118,846 ( 3,823 ) Total fixed maturities $ 148,474 $ ( 1,496 ) $ 834,118 $ ( 28,383 ) $ 982,592 $ ( 29,879 ) The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses that are not deemed to have credit losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2022. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 7. Less than 12 months 12 months or longer Total (Dollars in thousands) Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fixed maturities: U.S. treasuries $ 335,781 $ ( 7,518 ) $ 8,322 $ ( 912 ) $ 344,103 $ ( 8,430 ) Obligations of states and political subdivisions 27,772 ( 1,378 ) 3,778 ( 498 ) 31,550 ( 1,876 ) Mortgage-backed securities 51,517 ( 4,228 ) 7,860 ( 1,381 ) 59,377 ( 5,609 ) Asset-backed securities 97,857 ( 3,610 ) 62,689 ( 5,541 ) 160,546 ( 9,151 ) Commercial mortgage-backed securities 67,926 ( 4,072 ) 27,907 ( 2,061 ) 95,833 ( 6,133 ) Corporate bonds 261,123 ( 8,480 ) 71,192 ( 6,378 ) 332,315 ( 14,858 ) Foreign corporate bonds 150,308 ( 5,469 ) 31,232 ( 2,590 ) 181,540 ( 8,059 ) Total fixed maturities $ 992,284 $ ( 34,755 ) $ 212,980 $ ( 19,361 ) $ 1,205,264 $ ( 54,116 ) 88 Subject to the risks and uncertainties in evaluating the potential impairment of a security’s value, the impairment evaluation conducted by the Company as of December 31, 2023 concluded the unrealized losses discussed above are non-credit losses on securities where management does not intend to sell, and it is more likely than not that the Company will not be forced to sell the security before recovery. The impairment evaluation process is discussed in the “Investment” section of Note 4 (“Summary of Significant Accounting Policies”). The following is a description, by asset type, of the methodology and significant inputs that the Company used to measure the amount of credit loss recognized in earnings, if any: U.S. treasuries – As of December 31, 2023, gross unrealized losses related to U.S. treasuries were $ 3.391 million . To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, macroeconomic and market analysis is conducted in evaluating these securities. Consideration is given to the interest rate environment, duration and yield curve management of the portfolio, sector allocation and security selection. Based on the analysis performed, the Company did not recognize a credit loss on U.S. treasuries during the period. Obligations of states and political subdivisions – As of December 31, 2023, gross unrealized losses related to obligations of states and political subdivisions were $ 1.176 million . To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, elements that may influence the performance of the municipal bond market are considered in evaluating these securities such as investor expectations, supply and demand patterns, and current versus historical yield and spread relationships. The analysis relies on the output of fixed income credit analysts, as well as dedicated municipal bond analysts who perform extensive in-house fundamental analysis on each issuer, regardless of their rating by the major agencies. Based on the analysis performed, the Company did not recognize a credit loss on obligations of states and political subdivisions during the period. Mortgage-backed securities (“MBS”) – As of December 31, 2023, gross unrealized losses related to mortgage-backed securities were $ 4.475 million . To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, mortgage-backed securities are modeled to project principal losses under downside, base, and upside scenarios for the economy and home prices. The primary assumption that drives the security and loan level modeling is the Home Price Index (“HPI”) projection. These forecasts incorporate not just national macro-economic trends, but also regional impacts to arrive at the most granular and accurate projections. These assumptions are incorporated into the model as a basis to generate delinquency probabilities, default curves, loss severity curves, and voluntary prepayment curves at the loan level within each deal. The model utilizes HPI-adjusted current loan to value, payment history, loan terms, loan modification history, and borrower characteristics as inputs to generate expected cash flows and principal loss for each bond under various scenarios. Based on the analysis performed, the Company did not recognize a credit loss on mortgage-backed securities during the period. Asset backed securities (“ABS”) - As of December 31, 2023, gross unrealized losses related to asset backed securities were $ 5.091 million . The weighted average credit enhancement for the Company’s asset backed portfolio is 36.1 . This represents the percentage of pool losses that can occur before an asset backed security will incur its first dollar of principal losses. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, every ABS transaction is analyzed on a stand-alone basis. This analysis involves a thorough review of the collateral, prepayment, and structural risk in each transaction. Additionally, the analysis includes an in-depth credit analysis of the originator and servicer of the collateral. The analysis projects an expected loss for a deal given a set of assumptions specific to the asset type. These assumptions are used to calculate at what level of losses the deal will incur its first dollar of principal loss. The major assumptions used to calculate this ratio are loss severities, recovery lags, and no advances on principal and interest. Based on the analysis performed, the Company did not recognize a credit loss on asset backed securities during the period. Commercial mortgage-backed securities (“CMBS”) - As of December 31, 2023, gross unrealized losses related to the CMBS portfolio were $ 4.994 million . The weighted average credit enhancement for the Company’s CMBS portfolio is 47.3 . This represents the percentage of pool losses that can occur before a commercial mortgage-backed security will incur its first dollar of principal loss. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, a loan level analysis is utilized where every underlying CMBS loan is re-underwritten based on a set of assumptions reflecting expectations for the future path of the economy. Each loan is analyzed over time using a series of tests to determine if a credit event will occur during the life of the loan. Inherent in this process are several economic scenarios and their corresponding rent/vacancy and capital market states. The five primary credit events that frame the analysis include loan modifications, term default, balloon default, extension, and ability to pay off at balloon. The resulting output is the expected loss adjusted cash flows for each bond under the base case and distressed scenarios. Based on the analysis performed, the Company did not recognize a credit loss on commercial mortgage-backed securities during the period. Corporate bonds - As of December 31, 2023 , gross unrealized losses related to corporate bonds were $ 6.929 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, analysis f or this asset class includes maintaining detailed financial models that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its 89 vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default. Based on the analysis performed, the Company did not recognize a credit loss on corporate bonds during the period. Foreign bonds – As of December 31, 2023, gross unrealized losses related to foreign bonds were $ 3.823 million . To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, detailed financial models are maintained that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default. Based on the analysis performed, the Company did not recognize a credit loss on foreign bonds during the period. The Company has evaluated its investment portfolio and has determined that an allowance for expected credit losses on its investments is not required. The Company recorded the following impairments on its investment portfolio for the years ended December 31, 2023, 2022, and 2021 and are related to securities in an unrealized loss position where the Company had an intent to sell the securities: Years Ended December 31, (Dollars in thousands) 2023 2022 (1) 2021 Fixed maturities: Impairment related to intent to sell $ — $ ( 26,205 ) $ — Total $ — $ ( 26,205 ) $ — (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 4 .0 % at December 31, 2023 . Accumulated Other Comprehensive Income (Loss), Net of Tax Accumulated other comprehensive income (loss), net of tax, as of December 31, 2023 and 2022 was as follows: December 31, (Dollars in thousands) 2023 2022 Net unrealized gains (losses) from: Fixed maturities $ ( 28,299 ) $ ( 53,525 ) Foreign currency fluctuations ( 187 ) ( 127 ) Deferred taxes 5,623 10,594 Accumulated other comprehensive income (loss), net of tax $ ( 22,863 ) $ ( 43,058 ) The following tables present the changes in accumulated other comprehensive incom e (loss) by components, for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 (Dollars in thousands) Unrealized Gains and Losses on Available for Sale Securities Foreign Currency Items Accumulated Other Comprehensive Income (Loss) Beginning balance, net of tax $ ( 42,958 ) $ ( 100 ) $ ( 43,058 ) Other comprehensive income (loss) before reclassification, before tax 23,572 ( 60 ) 23,512 Amounts reclassified from accumulated other comprehensive income, before tax 1,654 — 1,654 Other comprehensive income (loss), before tax 25,226 ( 60 ) 25,166 Income tax benefit (expense) ( 4,983 ) 12 ( 4,971 ) Ending balance, net of tax $ ( 22,715 ) $ ( 148 ) $ ( 22,863 ) 90 Year Ended December 31, 2022 (Dollars in thousands) Unrealized Gains and Losses on Available for Sale Securities Foreign Currency Items Accumulated Other Comprehensive Income (Loss) Beginning balance, net of tax $ 6,519 $ ( 115 ) $ 6,404 Other comprehensive income (loss) before reclassification, before tax ( 101,255 ) 18 ( 101,237 ) Amounts reclassified from accumulated other comprehensive income, before tax 39,610 — 39,610 Other comprehensive income (loss), before tax ( 61,645 ) 18 ( 61,627 ) Income tax benefit (expense) 12,168 ( 3 ) 12,165 Ending balance, net of tax $ ( 42,958 ) $ ( 100 ) $ ( 43,058 ) The reclassifications out of accumulated other comprehensive income (loss) for the years ended December 31, 2023 and 2022 were as follows: (Dollars in thousands) Amounts Reclassified from Accumulated Other Comprehensive Income Years Ended December 31, Details about Accumulated Other Comprehensive Income Components Affected Line Item in the Consolidated Statements of Operations 2023 2022 Unrealized gains and losses on available for sale securities Other net realized investment (gains) losses $ 1,654 $ 13,405 Other than temporary impairment losses on investments — 26,205 Total before tax $ 1,654 $ 39,610 Income tax expense (benefit) ( 304 ) ( 7,357 ) Total reclassifications, net of tax $ 1,350 $ 32,253 Net Realized Investment Gains (Losses) The components of net realized investment gains (losses) for the years ended December 31, 2023, 2022, and 2021 were as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Fixed maturities: Gross realized gains $ 49 $ 688 $ 11,390 Gross realized losses ( 1,703 ) ( 40,298 ) ( 11,048 ) Net realized gains (losses) ( 1,654 ) ( 39,610 ) 342 Equity securities: Gross realized gains 1,061 2,289 15,350 Gross realized losses ( 1,514 ) ( 5,681 ) ( 1,910 ) Net realized gains (losses) ( 453 ) ( 3,392 ) 13,440 Derivatives: Gross realized gains — 12,844 8,035 Gross realized losses — ( 2,771 ) ( 5,930 ) Net realized gains (losses) (1) — 10,073 2,105 Total net realized investment gains (losses) $ ( 2,107 ) $ ( 32,929 ) $ 15,887 (1) Includes periodic net interest settlements related to the derivativ es of $ 3.0 million and $ 5.6 million for the years ended December 31, 2022 and 2021 , respectively. The following table shows the calculation of the portion of realized gains and losses related to equity securities held as of December 31, 2023, 2022, and 2021: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Net gains (losses) recognized during the period on equity securities $ ( 453 ) $ ( 3,392 ) $ 13,440 Less: net gains (losses) recognized during the period on equity securities sold during the period ( 36 ) 10,577 4,058 Unrealized gains (losses) recognized during the reporting period on equity securities $ ( 417 ) $ ( 13,969 ) $ 9,382 91 The proceeds from sales and redemptions of available for sale and equity securities resulting in net realized investme nt gains (losses) for the years ended December 31, 2023, 2022, and 2021 were as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Fixed maturities $ 148,164 $ 933,554 $ 1,065,398 Equity securities 1,158 88,726 54,691 Net Investment Income The sources of net investment income for the years ended December 31, 2023, 2022, and 2021 were as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Fixed maturities $ 49,987 $ 33,852 $ 25,751 Equity securities 917 1,100 2,692 Cash and cash equivalents 1,593 790 363 Other invested assets 4,463 ( 5,966 ) 10,856 Total investment income 56,960 29,776 39,662 Investment expense ( 1,516 ) ( 2,149 ) ( 2,642 ) Net investment income $ 55,444 $ 27,627 $ 37,020 As of December 31, 2023 and 2022, the Comp any did no t own any fixed maturity securities that were non-income producing for the preceding twelve months. The Company’s total investment return on a pre-tax basis for the years ended December 31, 2023, 2022, and 2021 were as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Net investment income $ 55,444 $ 27,627 $ 37,020 Net realized investment gains (losses) ( 2,107 ) ( 32,929 ) 15,887 Change in unrealized holding gains (losses) 25,166 ( 61,627 ) ( 34,363 ) Net realized and unrealized investment returns 23,059 ( 94,556 ) ( 18,476 ) Total investment return $ 78,503 $ ( 66,929 ) $ 18,544 Total investment return % 5.7 % ( 4.7 %) 1.2 % Average investment portfolio (1) $ 1,366,553 $ 1,437,327 $ 1,490,933 (1) Average of total cash and invested assets, net of receivable/payable for securities purchased and sold, as of the beginning and end of the period. Insurance Enhanced Asset-Backed and Credit Securities As of December 31, 2023, the Company held insurance enhanced municipal bonds with a market value of approximately $ 4.9 million , which represented 0.4 % of the Company’s total cash and invested assets, net of payable/receivable for securities purchased and sold. The financial guarantors of the Company’s $ 4.9 million municipal bonds include Assured Guaranty Corporation ($ 3.7 million) and Ambac Financial Group ( $ 1.2 million ). The Company had no direct investments in the entities that have provided financial guarantees or other credit support to any security held by the Company at December 31, 2023. Bonds Held on Deposit Certain cash and cash equivalents and bonds available for sale were deposited with various governmental authorities in accordance with statutory requirements, were held as collateral, or were held in trust. The fair values were as follows as of December 31, 2023 and 2022: Estimated Fair Value (Dollars in thousands) December 31, 2023 December 31, 2022 On deposit with governmental authorities $ 19,262 $ 19,290 Held in trust pursuant to third-party requirements 150,796 161,901 Total (1) $ 170,058 $ 181,191 92 (1) Includes cash and cash equivalents of $ 9.0 million and $ 3.7 million at December 31, 2023 and December 31, 2022 , respectively, with the remainder related to bonds available for sale. Variable Interest Entities A Variable Interest Entity (“VIE”) refers to an investment in which an investor holds a controlling interest that is not based on the majority of voting rights. Under the VIE model, the party that has the power to exercise significant management influence and maintain a controlling financial interest in the entity’s economics is said to be the primary beneficiary, and is required to consolidate the entity within their results. Other entities that participate in a VIE, for which their financial interests fluctuate with changes in the fair value of the investment entity’s net assets but do not have significant management influence and the ability to direct the VIE’s significant economic activities are said to have a variable interest in the VIE but do not consolidate the VIE in their financial results. The Company has variable interests in two VIE’s for which it is not the primary beneficiary. These investments are accounted for under the equity method of accounting as their ownership interest exceeds 3 % of their respective investments. The carrying value of one of the Company’s VIE’s, which invests in distressed securities and assets, was $ 4.0 million and $ 4.8 million as of December 31, 2023 and 2022 , respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $ 18.3 million and $19.0 million as of December 31, 2023 and 2022, respectively. The carrying value and maximum exposure to loss of a second VIE that invests in Real Estate Investment Trust (“REIT”) qualifying assets was $ 8.2 million and $ 9.8 million as of December 31, 2023 and 2022, respectively. The Company’s investment in VIEs is included in other invested assets on the consolidated balance sheets with changes in carrying value recorded in the consolidated statements of operations. 6. Derivative Instruments Derivatives were used by the Company to reduce risks from changes in interest rates and limit exposure to severe equity market changes. The Company used interest rate swaps with terms to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount. The Company has also used exchange-traded futures contracts, which gave the holder the right and obligation to participate in market movements at a future date, to allow the Company to react faster to market conditions. When using derivatives, the Company posted collateral and settled variation margin in cash on a daily basis equal to the amount of the derivatives’ change in value. The Company accounted for the interest rate swaps and futures as non-hedge instruments and recognized the fair value of the interest rate swaps in other assets or other liabilities on the consolidated balance sheets with the changes in fair value recognized as net realized investment gains or losses in the consolidated statements of operations. The Company was ultimately responsible for the valuation of the interest rate swaps. To aid in determining the estimated fair value of the interest rate swaps, the Company relied on the forward interest rate curve and information obtained from a third-party financial institution. The following table summarizes the net gains (losses) included in the consolidated statements of operations for changes in the fair value of the derivatives and the periodic net interest settlements under the derivatives for the years ended December 31, 2023, 2022, and 2021: Consolidated Statements of Years Ended December 31, (Dollars in thousands) Operations Line 2023 2022 2021 Interest rate swap agreements Net realized investment gains (losses) $ — $ 10,073 $ 2,424 Futures contracts on bonds Net realized investment gains (losses) — — ( 319 ) $ — $ 10,073 $ 2,105 The Company terminated its outstanding interest rate swaps in the fourth quarter of 2022 and was not utilizing interest rate swap agreements as of December 31, 2022. As of December 31, 2021, the Company was due $ 1.8 million for funds it needed to post to execute the swap transaction and $ 9.8 million for margin calls made in connection with the interest rate swaps. These amounts are included in other assets on the consolidated balance sheets. There are no outstanding amounts related to the interest rate swap agreements on the consolidated balance sheets as of December 31, 2023 or 2022 . 7. Fair Value Measurements The accounting standards related to fair value measurements define fair value, establish a framework for measuring fair value, outline a fair value hierarchy based on inputs used to measure fair value, and enhance disclosure requirements for fair value measurements. These standards do not change existing guidance as to whether or not an instrument is carried at fair value. The Company has determined that its fair value measurements are in accordance with the requirements of these accounting standards. 93 The Company’s invested assets are carried at their fair value and are categorized based upon a fair value hierarchy: • Level 1 – inputs utilize quoted prices (unadjusted) in active markets for identical assets that the Company has the ability to access at the measurement date. • Level 2 – inputs utilize other than quoted prices included in Level 1 that are observable for similar assets, either directly or indirectly. • Level 3 – inputs are unobservable for the asset, and include situations where there is little, if any, market activity for the asset. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset. The following table presents information about the Company’s invested assets measured at fair value on a recurring basis as of December 31, 2023 and 2022 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. As of December 31, 2023 Fair Value Measurements (Dollars in thousands) Level 1 Level 2 Level 3 Total Assets: Fixed maturities: U.S. treasuries $ 494,223 $ — $ — $ 494,223 Obligations of states and political subdivisions — 26,150 — 26,150 Mortgage-backed securities — 58,927 — 58,927 Commercial mortgage-backed securities — 79,080 — 79,080 Asset-backed securities — 202,952 — 202,952 Corporate bonds — 291,713 — 291,713 Foreign corporate bonds — 140,748 — 140,748 Total fixed maturities 494,223 799,570 — 1,293,793 Equity securities — 16,508 — 16,508 Total assets measured at fair value $ 494,223 $ 816,078 $ — $ 1,310,301 As of December 31, 2022 Fair Value Measurements (Dollars in thousands) Level 1 Level 2 Level 3 Total Assets: Fixed maturities: U.S. treasuries $ 344,103 $ — $ — $ 344,103 Obligations of states and political subdivisions — 31,595 — 31,595 Mortgage-backed securities — 61,156 960 62,116 Commercial mortgage-backed securities — 98,664 — 98,664 Asset-backed securities — 189,073 327 189,400 Corporate bonds — 336,767 2,013 338,780 Foreign corporate bonds — 183,540 — 183,540 Total fixed maturities 344,103 900,795 3,300 1,248,198 Equity securities — 16,249 1,271 17,520 Total assets measured at fair value $ 344,103 $ 917,044 $ 4,571 $ 1,265,718 The securities classified as Level 1 in the above tables consist of U.S. treasuries actively traded on an exchange. The securities classified as Level 2 in the above tables consist primarily of fixed maturities and preferred stocks. Based on the typical trading volumes and the lack of quoted market prices for fixed maturities and preferred stocks, security prices are derived through recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information. If there are no recent reported trades, matrix or model processes are used to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Included in the pricing of asset-backed securities, collateralized mortgage obligations, and mortgage-backed securities are estimates of the rate of future prepayments of principal over the remaining life of the securities. Such estimates are derived based on the characteristics of the underlying structure and prepayment speeds previously experienced at the interest rate levels projected for the underlying collateral. 94 The investments classified as Level 3 in the above table consist of fixed maturities and equity securities with unobservable inputs. The following table presents changes in Level 3 investments measured at fair value on a recurring basis for the years ended December 31, 2023, 2022, and 2021: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Beginning balance $ 4,571 $ 2,769 $ — Total gains (realized / unrealized): Included in accumulated other comprehensive income 30 ( 21 ) ( 35 ) Included in earnings attributable to realized gains / losses ( 290 ) ( 61 ) 60 Transfers into level 3 — 857 1,400 Transfers out of level 3 — — ( 1,815 ) Amortization of bond premium and discount, net 5 6 1 Purchases 332 2,304 3,286 Sales ( 4,648 ) ( 1,283 ) ( 128 ) Ending balance — 4,571 2,769 Gains (losses) included in earnings attributable to the change in unrealized gains (losses) related to assets still held at end of reporting period $ ( 155 ) $ 95 $ — Fair Value of Alternative Investments Other invested assets consist of limited partnerships whose carrying value approximates fair value. The following table provides the fair value and future funding commitments related to these investments at December 31, 2023 and 2022. December 31, 2023 December 31, 2022 (Dollars in thousands) Fair Value Future Funding Commitment Fair Value Future Funding Commitment European Non-Performing Loan Fund, LP (1) $ 4,048 $ 14,214 $ 4,832 $ 14,214 Mortgage Debt Fund, LP (2) 8,172 — 9,771 — Global Debt Fund, LP (3) 26,016 — 23,573 — Total $ 38,236 $ 14,214 $ 38,176 $ 14,214 (1) This limited partnership invests in distressed securities and assets through senior and subordinated, secured and unsecured debt and equity, in both public and private large-cap and middle-market companies. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. (2) This limited partnership invests in REIT qualifying assets such as mortgage loans, investor property loans, and commercial mortgage loans. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. (3) This limited partnership invests in performing, stressed or distressed securities and loans across the global fixed income markets. The Company does have the contractual option to withdraw all or a portion of its limited partnership interest by providing notice to the fund. Limited Liability Companies and Limited Partnerships with ownership interest exceeding 3% The Company uses the equity method to account for investments in limited liability companies and limited partnerships where its ownership interest exceeds 3 %. The equity method of accounting for an investment in limited liability companies and limited partnerships requires that its cost basis be updated to account for the income or loss earned on the investment. In the Fair Value of Alternative Investments table above, all of the investments are booked on a one quarter lag due to non-availability of data at the time the financial statements are prepared. The investment income (loss) associated with the limited liability companies and limited partnerships whose ownership interest exceeds 3 % is reflected in the consolidated statements of operations in the amount s of $ 0.8 million, ($ 5.0 ) million, and $ 10.0 million for the years ended December 31, 2023, 2022, and 2021, respectively. Pricing The Company’s pricing vendors provide prices for all investment categories except for investments in limited liability companies and limited partnerships. Two primary vendors are utilized to provide prices for equity and fixed maturity securities. 95 The following is a description of the valuation methodologies used by the Company’s pricing vendors for investment securities carried at fair value: • Equity security prices are received from primary and secondary exchanges. • Corporate and agency bonds, as well as preferred stock, are evaluated by utilizing a spread to a benchmark curve. Bonds with similar characteristics are grouped into specific sectors. Inputs for both asset classes consist of trade prices, broker quotes, the new issue market, and prices on comparable securities. • Data from commercial vendors is aggregated with market information, then converted into an option adjusted spread (“OAS”) matrix and prepayment model used for collateralized mortgage obligations (“CMO”). CMOs are categorized with mortgage-backed securities in the tables listed above. For asset-backed securities, spread data is derived from trade prices, dealer quotations, and research reports. For both asset classes, evaluations utilize standard inputs plus new issue data, and collateral performance. The evaluated pricing models incorporate cash flows, broker quotes, market trades, historical prepayment speeds, and dealer projected speeds. • For obligations of state and political subdivisions, an attribute-based modeling system is used. The pricing model incorporates trades, market clearing yields, market color, and fundamental credit research. • U.S. treasuries are evaluated by obtaining feeds from a number of live data sources including primary and secondary dealers as well as inter-dealer brokers. • For mortgage-backed securities, various external analytical products are utilized and purchased from commercial vendors. The Company performs certain procedures to validate whether the pricing information received from the pricing vendors is reasonable, to ensure that the fair value determination is consistent with accounting guidance, and to ensure that its assets are properly classified in the fair value hierarchy. The Company’s procedures include, but are not limited to: • Reviewing periodic reports provided by the Investment Manager that provides information regarding rating changes and securities placed on watch. This procedure allows the Company to understand why a particular security’s market value may have changed or may potentially change. • Understanding and periodically evaluating the various pricing methods and procedures used by the Company’s pricing vendors to ensure that investments are properly classified within the fair value hierarchy. • On a quarterly basis, the Company corroborates investment security prices received from its pricing vendors by obtaining pricing from a second pricing vendor for a sample of securities. During 2023 and 2022, the Company has not adjusted quotes or prices obtained from the pricing vendors. 8. Goodwill and Intangible Assets Goodwill As a result of an acquisition in 2010, the Company has goodwill of $ 4.8 million within the Penn-America segment. The goodwill represents the excess purchase price over the Company’s best estimate of the fair value of the assets acquired. As a result of an acquisition in 2015, the Company had goodwill of $ 1.7 million. Of this amount, $ 0.6 million was allocated to its Farm, Ranch & Stable business and $ 1.1 million was allocated to its specialty property business. This goodwill, which was part of the Non-Core Operations segment, was impaired due to the sale of the renewal rights related to Farm, Ranch & Stable business and manufactured and dwelling homes business. An impairment loss of $ 0.6 m illion and $ 1.1 million was included in corporate and other operating expenses on the Company’s consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively. Please see Note 2 for additional information on the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business. Impairment testing performed in 2023 did no t result in an impairment of goodwill acquired. 96 The changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022 are as follows: (Dollars in thousands) Penn-America Non-Core Operations Total Balance as of January 1, 2022 $ 4,820 $ 578 $ 5,398 Impairment — ( 578 ) ( 578 ) Balance as of December 31, 2022 4,820 — 4,820 Impairment — — — Balance as of December 31, 2023 $ 4,820 $ — $ 4,820 Accumulated impairment losses were $ 0.6 million at December 31, 2022. There were no accumulated impairment losses at December 31, 2023. Intangible assets The following table presents details of the Company’s intangible assets as of December 31, 2023: (Dollars in thousands) Description Weighted Average Amortization Period Cost Accumulated Amortization Impairment Net Value Trademarks Indefinite $ 4,800 $ — $ — $ 4,800 Tradenames Indefinite 4,200 — — 4,200 State insurance licenses Indefinite 5,000 — — 5,000 Customer relationships 15 years 5,300 4,844 — 456 $ 19,300 $ 4,844 $ — $ 14,456 The following table presents details of the Company’s intangible assets as of December 31, 2022: (Dollars in thousands) Description Weighted Average Amortization Period Cost Accumulated Amortization Impairment Net Value Trademarks Indefinite $ 4,800 $ — $ — $ 4,800 Tradenames Indefinite 4,200 — — 4,200 State insurance licenses Indefinite 10,000 — 5,000 5,000 Customer relationships 15 years 5,300 4,490 — 810 Agent relationships 10 years 900 649 251 — Tradenames 7 years 600 600 — — $ 25,800 $ 5,739 $ 5,251 $ 14,810 Amortization related to the Company’s definite lived intangible assets was $ 0.4 million, $ 0.4 million, and $ 0.5 million for the years ended December 31, 2023, 2022, and 2021 , respectively. The weighted average amortization period for total definite lived intangible assets was 15.0 years and 13.6 years at December 31, 2023 and 2022, respectively. The Company expects that amortization expense for the next five years will be as follows: (Dollars in thousands) 2024 $ 353 2025 103 2026 — 2027 — 2028 — Intangible assets with indefinite lives As of both December 31, 2023 and 2022, indefinite lived intangible assets, which are comprised of tradenames, trademarks, and state insurance licenses, was $ 14.0 million. State licenses with a net value of $ 5.0 million, within the Company’s Non-Core Operations segment, were impaired due to the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business. This impairment loss of $ 5.0 million was included in 97 corporate and other operating expenses on the Company’s consolidated statements of operations for the year ended December 31, 2022. Please see Note 2 for additional information on the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business. Other than the impairment of state insurance licenses due to the sale of the Farm, Ranch & Stable renewal rights, there was no impairment of intangible assets with indefinite lives in 2023, 2022, and 2021. Intangible assets with definite lives As of December 31, 2023 and 2022, definite lived intangible assets, net of accumulated amortization, were $ 0.5 million and $ 0.8 million, respectively, and were comprised of customer relationships, agent relationships, and tradenames. Agent relationships with a net value of $ 0.1 million were impaired due to the sale of the renewal rights related to the Company's Farm, Ranch & Stable business and agent relationships with a net value o f $ 0.2 million were impaired due to the sale of renewal rights related to the Company’s manufactured and dwelling homes business. Both of these impairments were within the Company’s Non-Core Operations segment. These impairment losses of $ 0.1 million and $ 0.2 million was included in corporate and other operating expenses on the Company’s consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively. Please see Note 2 for additional information on the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business. Other than the impairments of agent relationships due to the sales of renewal rights, there was no impairment of intangible assets with definite lives in 2023, 2022, and 2021 . 9. Allowance for Expected Credit Losses - Premium Receivables and Reinsurance Receivables For premium receivables, the allowance is based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, direct placement with collection agencies, solvency of insured or agent, terminated agents, and other relevant factors. The following table is an analysis of the allowance for expected credit losses related to the Company's premium receivables for the years ended December 31, 2023 and 2022: Years Ended December 31, (Dollars in thousands) 2023 2022 Beginning balance $ 3,322 $ 2,996 Current period provision for expected credit losses 1,636 1,796 Write-offs ( 162 ) ( 1,470 ) Ending balance $ 4,796 $ 3,322 For reinsurance receivables, the allowance is based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, disputes, applicable coverage defenses, insolvent reinsurers, financial strength of solvent reinsurers based on AM Best Ratings and other relevant factors. The Company's allowance for expected credit losses related to the reinsurance receivables was $ 9.0 million at December 31, 2023 and 2022 . 10. Reinsurance The Company cedes risk to unrelated reinsurers on a pro rata (“quota share”) and excess of loss basis in the ordinary course of business to limit its net loss exposure on insurance contracts. Reinsurance ceded arrangements do not discharge the Company of primary liability. Moreover, reinsurers may fail to pay the Company due to a lack of reinsurer liquidity, perceived improper underwriting, and losses for risks that are excluded from reinsurance coverage and other similar factors, all of which could adversely affect the Company’s financial results. The Company had the following reinsurance balances as of December 31, 2023 and 2022: (Dollars in thousands) December 31, 2023 December 31, 2022 Reinsurance receivables, net $ 80,439 $ 85,721 Collateral securing reinsurance receivables ( 8,752 ) ( 8,937 ) Reinsurance receivables, net of collateral $ 71,687 $ 76,784 Allowance for expected credit losses $ 8,992 $ 8,992 Prepaid reinsurance premiums 4,958 17,421 98 As of December 31, 2023, the Company had the following aggregated unsecured reinsurance receivables from one reinsurer that exceeded 3 % of shareholders’ equity. Unsecured reinsurance receivables include amounts receivable for paid and unpaid losses and loss adjustment expenses, less amounts secured by collateral. (Dollars in thousands) Reinsurance Receivables AM Best Ratings (As of December 31, 2023) Munich Re America Corporation $ 41,213 A+ The effect of reinsurance on premiums written and earned is as follows: (Dollars in thousands) Written Earned For the year ended December 31, 2023: Direct business $ 350,748 $ 376,288 Reinsurance assumed 65,649 126,611 Reinsurance ceded ( 17,078 ) ( 29,542 ) Net premiums $ 399,319 $ 473,357 For the year ended December 31, 2022: Direct business $ 573,412 $ 589,131 Reinsurance assumed 154,191 135,896 Reinsurance ceded ( 136,272 ) ( 122,556 ) Net premiums $ 591,331 $ 602,471 For the year ended December 31, 2021: Direct business $ 584,467 $ 578,171 Reinsurance assumed 97,655 78,880 Reinsurance ceded ( 102,054 ) ( 61,441 ) Net premiums $ 580,068 $ 595,610 Ceded losses and loss adjustment expenses incurred were $ 27.6 million, $ 48.7 million, and $ 34.9 million for the years ended December 31, 2023, 2022, and 2021 , respectively. 11. Income Taxes Global Indemnity Group, LLC is a publicly traded partnership for U.S. federal income tax purposes and meets the qualifying income exception to maintain partnership status. As a publicly traded partnership, Global Indemnity Group, LLC is generally not subject to federal income tax and most state income taxes. However, income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions. As of December 31, 2023 , the statutory income tax rates of the countries where the Company conducts or conducted business are 21 % in the United States, 0 % in Bermuda, and 25 % on non-trading income, 33 % on capital gains and 12.5 % on trading income in the Republic of Ireland. The statutory income tax rate of each country is applied against the expected annual taxable income of the Company in each country to estimate the annual income tax expense. The Company's income before income taxes is derived from its U.S. subsidiaries for the years ended December 31, 2023, 2022 and 2021. The following table summarizes the components of income tax expense: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Current income tax expense: Foreign $ 14 $ 4 $ 54 U.S. Federal 2,207 422 — Total current income tax expense 2,221 426 54 Deferred income tax expense: U.S. Federal 5,326 2,395 3,395 Total deferred income tax expense 5,326 2,395 3,395 Total income tax expense $ 7,547 $ 2,821 $ 3,449 The weighted average expected tax provision has been calculated using income before income taxes in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate. 99 The following table summarizes the differences between the tax provision for financial statement purposes and the expected tax provision at the weighted average tax rate: Years Ended December 31, 2023 2022 2021 (Dollars in thousands) Amount % of Pre- Tax Income Amount % of Pre- Tax Income Amount % of Pre- Tax Income Expected tax provision at weighted average tax rate $ 6,925 21.0 % $ 414 21.0 % $ 6,889 21.0 % Adjustments: Non-deductible executive compensation 1,753 5.3 — — — — Dividend exclusion ( 76 ) ( 0.2 ) ( 89 ) ( 4.5 ) ( 78 ) ( 0.2 ) Change in tax status — — 700 35.5 — — Parent income treated as partnership for tax ( 1,260 ) ( 3.8 ) 2,156 109.4 ( 4,057 ) ( 12.4 ) Other 205 0.6 ( 360 ) ( 18.3 ) 695 2.1 Effective income tax expense $ 7,547 22.9 % $ 2,821 143.1 % $ 3,449 10.5 % The effective income tax expense rate for 2023 was 22.9 % , compared with an effective income tax expense rate of 143.1 % for 2022 and an effective income tax expense rate of 10.5 % for 2021. The difference between years is primarily due to a change in income or loss at the parent company which is treated as a partnership for tax. The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets at December 31, 2023 and 2022 are presented below: (Dollars in thousands) 2023 2022 Deferred tax assets: Discounted unpaid losses and loss adjustment expenses $ 9,668 $ 9,522 Unearned premiums 7,472 10,581 Net operating loss carryforward 16,540 24,454 Partnership K1 basis differences 753 1,234 Capital loss carryforwards 4,241 2,338 Investment impairments 337 124 Stock options 416 1,465 Stat-to-GAAP reinsurance reserve 1,668 1,668 Unrealized loss on securities available-for-sale 5,583 10,568 Depreciation and amortization 1,368 1,211 Software 1,260 — Other 998 1,353 Total deferred tax assets 50,304 64,518 Deferred tax liabilities: Intangible assets 3,036 3,146 Deferred acquisition costs 8,914 13,628 Other 1,552 645 Total deferred tax liabilities 13,502 17,419 Total net deferred tax assets $ 36,802 $ 47,099 The deferred tax assets and deferred tax liabilities listed in the table above relate to temporary differences between the Company’s accounting and tax carrying values and carryforwards for its companies in the United States. Management believes it is more likely than not that the remaining deferred tax assets will be completely utilized in future years. As a result, the Company has not recorded a valuation allowance at December 31, 2023 and 2022. The Company has a net operating loss (“NOL”) carryforward o f $ 78.8 million as of December 31, 2023, which begins to expire in 2038 based on when the original NOL was generated. The Company’s NOL carryforward as of December 31, 2022 was $ 116.4 million. The Company did no t have any Section 163(j) ("163(j)") carryforward as December 31, 2023 or 2022. The 163(j) carryforward relates to the limitation on the deduction for business interest expense paid or accrued. The Company and some of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various U.S. states and certain foreign jurisdictions. The Company is no longer subject to U.S. federal tax examinations by tax authorities for tax years before 2020. 100 The Company applies a more-likely-than-not recognition threshold for all tax uncertainties whereby it only recognizes those tax benefits that have a greater than 50% likelihood of being sustained upon examination by relevant taxing authorities. All tax benefits recognized by the Company in 2023, 2022, and 2021 have a greater than 50% likelihood of being sustained upon examination by relevant taxing authorities. The Company classifies all interest and penalties related to uncertain tax positions as income tax expense. The Company did no t incur any interest and penalties related to uncertain tax positions during the years ended December 31, 2023, 2022 and 2021. As of December 31, 2023, the Company did no t record any significant liabilities for tax-related interest and penalties on its consolidated balance sheets. 12. Liability for Unpaid Losses and Loss Adjustment Expenses Consolidated Activity Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Balance at beginning of period $ 832,404 $ 759,904 $ 662,811 Less: Ceded reinsurance receivables 73,021 94,443 82,158 Net balance at beginning of period 759,383 665,461 580,653 Incurred losses and loss adjustment expenses related to: Current year 279,609 367,298 376,306 Prior years 9,544 ( 8,070 ) 8,658 Total incurred losses and loss adjustment expenses 289,153 359,228 384,964 Paid losses and loss adjustment expenses related to: Current year 72,717 103,442 149,092 Prior years 198,049 161,864 151,064 Total paid losses and loss adjustment expenses 270,766 265,306 300,156 Net balance at end of period 777,770 759,383 665,461 Plus: Ceded reinsurance receivables 72,829 73,021 94,443 Balance at end of period $ 850,599 $ 832,404 $ 759,904 When analyzing loss reserves and prior year development, the Company considers many factors, including the frequency and severity of claims, loss trends, case reserve settlements that may have resulted in significant development, and any other additional or pertinent factors that may impact reserve estimates. During 2023, the Company increased its prior accident year loss reserves by $ 9.5 million , which consisted of a $ 29.9 million increase related to Penn-America and a $ 20.3 million decrease related to Non-Core Operations. The $ 29.9 million increase in prior accident year loss reserves related to Penn-America primarily consisted of the following: • General Liability: A $ 28.6 million increase mainly reflects higher than expected claims severity in accident years 2018 through 2022, partially offset by decreases in the 1998, 2000 through 2010, 2012 and 2014 through 2017 accident years. • Property: A $ 1.3 million increase primarily recognizes higher than expected claims severity in the 2016, 2019, 2020 and 2022 accident years, partially offset by decreases in the 2015 and 2021 accident years. The $ 20.3 million decrease in prior accident year loss reserves related to Non-Core Operations primarily consisted of the following: • Property: A $ 0.8 million increase mainly recognizes higher than expected claims severity in the 2021 and 2022 accident years, partially offset by decreases in the 2016, 2018 and 2020 accident years. • General Liability: A $ 10.2 million increase primarily recognizes higher than expected claims severity in accident years prior to 1990 and 2019 through 2022, partially offset by decreases in the 1995, 2013, 2014 and 2016 through 2018 accident years. • Reinsurance: A $ 31.2 million decrease in total is comprised of a $ 17.7 million decrease in the property lines in the 2013 through 2021 accident years; a $ 7.2 million decrease was recognized in professional lines in the 2017 and 2019 through 2021 accident years, partially offset by increases in the 2016 and 2022 accident years; and a $ 6.3 million decrease in general liability mainly in the 2012 and 2019 through 2022 accident years. 101 During 2022, the Company decreased its prior accident year loss reserves by $ 8.1 million , which consisted of a $ 2.8 million increase related to Penn-America and a $ 10.9 million decrease related to Non-Core Operations. The $ 2.8 million increase in prior accident year loss reserves related to Penn-America primarily consisted of the following: • General Liability: A $ 6.0 million increase mainly reflects higher than expected claims severity in accident years prior to 1990, 1998, 2000, 2002, 2010 and 2016 through 2020 accident years, partially offset by decreases in the 2006, 2007, 2009 and 2011 through 2015 accident years. • Property: A $ 3.2 million decrease primarily recognizes lower than expected claims severity in the 2010, 2012, 2016, 2020 and 2021 accident years, partially offset by increases in the 2011, 2015 and 2018 accident years. The $ 10.9 million decrease in prior accident year loss reserves related to Non-Core Operations primarily consisted of the following: • Property: A $ 1.4 million increase mainly reflects higher than expected claims severity in the 2016 through 2018 and 2020 accident years, partially offset by decreases in the 2019 and 2021 accident years. • General Liability: A $ 2.4 million decrease primarily recognizes lower than expected claims severity in the 1992, 2001 through 2003, 2007 through 2012 and 2014 through 2017 accident years, partially offset by increases in accident years prior to 1990 and 2018 through 2021 accident years. • Professional: A $ 2.1 million decrease primarily in 2008 through 2010 and 2012 through 2015 accident years. • Reinsurance: A $ 7.6 million decrease in total is comprised of a $ 6.3 million decrease in the property lines primarily in the 2017 through 2021 accident years, partially offset by an increase in the 2016 accident year; a $ 3.6 million decrease was recognized in professional lines in the 2016 accident year; and a $ 2.3 million increase in general liability mainly in the 2019 through 2021 accident years. During 2021, the Company increased its prior accident year loss reserves by $ 8.7 million , which consisted of a $ 1.8 million increase related to Penn-America and a $ 6.8 million increase related to Non-Core Operations. The $ 1.8 million increase in prior accident year loss reserves related to Penn-America primarily consisted of the following: • General Liability: A $ 1.2 million reduction primarily reflects lower than expected claims severity in the 2004 through 2009, 2014 through 2016, 2018 and 2020 accident years, partially offset by increases in the 2017 and 2019 accident years. • Property: A $ 3.0 million increase primarily recognizes higher than expected claims severity mainly in the 2010, 2012, 2016, 2018 and 2020 accident years, partially offset by a decrease in the 2011, 2015, 2017, and 2019 accident years. • Professional Liability: A $ 0.1 million increase mainly in the 2018 accident years mainly reflecting higher than anticipated claims severity. The $ 6.8 million increase of prior accident year loss reserves related to Non-Core Operations primarily consisted of the following: • Property: A $ 11.3 million increase in total which is primarily due to case incurred emergence on a Property Brokerage claim in the 2018 accident year reflecting a higher estimated ultimate for Hurricane Michael. In addition, there were increases in the 2015, 2016, 2019 and 2020 accident years which reflects higher than expected claims severity; the increases were partially offset by a decrease in the 2017 accident year. • General Liability: A $ 1.6 million decrease primarily reflects lower than expected claims severity in accident years prior to 1990, 2000 through 2002, 2011, 2012 and 2014 through 2017 accident years, partially offset by increases in the 1992, 2007, 2009 and 2018 through 2020 accident years. • Professional Liability: A $ 0.1 million decrease primarily in the 2018 accident year. • Reinsurance: A $ 2.8 million decrease in total is comprised of a $ 1.7 million decrease in the property lines primarily in the 2015, 2017, 2018 and 2020 accident years, partially offset by an increase in the 2019 accident year and a $ 1.1 million decrease was recognized in professional lines mainly in the 2015 accident year, reflecting that the inception-to-date case incurred remained zero for this claims-made segment in this year. 102 Prior to 2001, the Company underwrote multi-peril business insuring general contractors, developers, and sub-contractors primarily involved in residential construction that has resulted in significant exposure to construction defect (“CD”) claims. The Company’s reserves for CD claims are established based upon Management’s best estimate in consideration of known facts, existing case law, and generally accepted actuarial methodologies. However, due to the inherent uncertainty concerning this type of business, the ultimate exposure for these claims may vary significantly from the amounts currently recorded. As of December 31, 2023 and 2022 , gross reserves for CD claims were $ 30.4 million and $ 34.8 million, respectively, and net reserves for CD claims were $ 28.8 million and $ 33.4 million, respectively. The Company has exposure to asbestos and environmental (“A&E”) claims. The asbestos exposure primarily arises from the sale of product liability insurance, and the environmental exposure arises from the sale of general liability and commercial multi-peril insurance. In establishing the liability for unpaid losses and loss adjustment expenses related to A&E exposures, management considers facts currently known and the current state of the law and coverage litigation. Liabilities are recognized for known claims (including the cost of related litigation) when sufficient information has been developed to indicate the involvement of a specific insurance policy, and management can reasonably estimate its liability. In addition, liabilities have been established to cover additional exposures on both known and unasserted claims. Estimates of the liabilities are reviewed and updated regularly. Case law continues to evolve for such claims, and uncertainty exists about the outcome of coverage litigation and whether past claim experience will be representative of future claim experience. Included in net unpaid losses and loss adjustment expenses as of December 31, 2023, 2022, and 2021 were IBNR reserves of $ 17.3 million, $ 18.9 million, and $ 20.1 million, respectively, and case reserves of approximately $ 3.8 million, $ 2.8 million, and $ 1.9 million, respectively, for known A&E-related claims. The following table shows the Company’s gross reserves for A&E losses: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Gross reserve for A&E losses and loss adjustment expenses – beginning of period $ 37,142 $ 39,153 $ 47,593 Plus: Change in incurred losses and loss adjustment expenses 1,419 2,658 ( 7,500 ) Less: Payments 1,730 4,669 940 Gross reserves for A&E losses and loss adjustment expenses – end of period $ 36,831 $ 37,142 $ 39,153 The following table shows the Company’s net reserves for A&E losses: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Net reserve for A&E losses and loss adjustment expenses – beginning of period $ 21,647 $ 21,985 $ 28,679 Plus: Change in incurred losses and loss adjustment expenses ( 1 ) 1,962 ( 6,500 ) Less: Payments 539 2,300 194 Net reserves for A&E losses and loss adjustment expenses – end of period $ 21,107 $ 21,647 $ 21,985 Establishing reserves for A&E and other mass tort claims involves more judgment than other types of claims due to factors including, but not limited to, inconsistent court decisions, an increase in bankruptcy filings as a result of asbestos-related liabilities, and judicial interpretations that often expand theories of recovery and broaden the scope of coverage. The insurance industry continues to receive a substantial number of asbestos-related bodily injury claims, with an increasing focus being directed toward other parties, including installers of products containing asbestos rather than against asbestos manufacturers. This shift has resulted in significant insurance coverage litigation implicating applicable coverage defenses or determinations, if any, including but not limited to, determinations as to whether or not an asbestos-related bodily injury claim is subject to aggregate limits of liability found in most comprehensive general liability policies. As of December 31, 2023, 2022, and 2021 , the survival ratio on a gross basis for the Company’s open A&E claims was 15.1 years, 16.9 years, and 33.3 years, respectively. As of December 31, 2023, 2022, and 2021 , the survival ratio on a net basis for the Company’s open A&E claims was 20.9 years, 22.8 years, and 63.5 years, respectively. The survival ratio, which is the ratio of gross or net reserves to the 3-year average of annual paid claims, is a financial measure that indicates how long the current amount of gross or net reserves are expected to last based on the current rate of paid claims. Line of Business Categories The following is information, presented by lines of business with similar characteristics including similar payout patterns, about incurred and paid claims development as of December 31, 2023, net of reinsurance, as well as cumulative claim frequency and the total of incurred-but-not-reported liabilities included within the net incurred claims amounts. The years included represent the number of years for which claims incurred typically remain outstanding but need not exceed 10 years including the most recent report period presented. 103 The information about incurred and paid claims development for the years ended December 31, 2014 to 2022, is presented as required supplementary unaudited information. Penn-America Property and Casualty Methodologies Penn-America’s internal actuarial reserve reviews were completed for loss and allocated loss adjustment expenses (“ALAE”) separately for property excluding catastrophe experience, property catastrophes, and casualty reserve categories. The internal actuarial reserve reviews were completed with data through December 2023. Actuarial methodologies, such as the Loss Development and Bornhuetter-Ferguson methods, were employed to develop estimates of ultimate loss & ALAE for most reserve categories. Additional actuarial methodologies were employed to develop estimates of ultimate loss & ALAE for mass tort and constructions defect reserve categories due to the unique characteristics of the exposures involved. Management’s ultimate selections considered the internal actuarial review and a third-party actuarial review completed during the fourth quarter of 2023. Case incurred is subtracted from the management selected ultimates to obtain the booked IBNR reserves. These methodologies are consistent with last year. Penn-America’s cumulative claim frequency has been calculated at the claim level and includes claims closed without payment. Penn-America – Property (Dollars in thousands) Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, As of December 31, 2023 Accident Year 2021 2022 2023 IBNR (1) Cumulative Number of Reported Claims (unaudited) (unaudited) 2021 $ 81,703 $ 80,477 $ 79,278 $ 2,476 3,599 2022 80,485 81,232 6,979 3,040 2023 72,862 12,067 2,339 Total $ 233,372 (1) Incurred-but-not-reported liabilities plus expected development on reported claims Penn-America – Property (Dollars in thousands) Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, Accident Year 2021 2022 2023 (unaudited) (unaudited) 2021 $ 49,041 $ 72,804 $ 74,982 2022 48,646 71,530 2023 50,543 Total 197,055 All outstanding liabilities before 2021, net of reinsurance 4,560 Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance $ 40,877 The following is required supplementary information about average historical claims duration as of December 31, 2023: Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited) Year 1 2 3 Penn-America - Property 63.7 % 29.1 % 2.7 % 104 Penn-America – Casualty (Dollars in thousands) Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, As of December 31, 2023 Accident Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 IBNR (1) Cumulative Number of Reported Claims (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2014 $ 43,587 $ 42,841 $ 41,817 $ 41,530 $ 41,038 $ 39,516 $ 37,336 $ 37,034 $ 35,944 $ 35,632 $ 747 1,744 2015 47,299 46,306 47,055 46,958 48,462 45,968 45,439 45,254 43,764 1,389 1,774 2016 45,684 45,230 44,758 43,055 42,798 42,237 42,291 42,166 1,505 1,630 2017 46,050 45,970 44,720 44,078 45,071 45,581 45,212 2,031 1,645 2018 48,830 48,450 47,783 47,175 47,726 47,721 2,812 1,993 2019 59,512 59,384 61,055 63,139 69,013 6,184 2,315 2020 72,149 71,693 75,412 86,132 12,837 2,429 2021 96,705 96,268 108,042 33,181 2,998 2022 123,985 129,796 72,604 2,947 2023 122,770 100,176 1,564 Total $ 730,248 (1) Incurred-but-not-reported liabilities plus expected development on reported claims Penn-America – Casualty (Dollars in thousands) Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, Accident Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2014 $ 2,103 $ 10,583 $ 17,457 $ 24,113 $ 29,152 $ 31,725 $ 33,669 $ 34,020 $ 34,255 $ 34,639 2015 2,903 11,999 20,459 28,579 34,932 37,850 39,078 40,596 41,655 2016 3,478 11,130 17,314 28,601 33,734 36,472 38,597 39,466 2017 4,412 10,286 19,818 26,834 31,766 36,672 39,833 2018 3,575 11,622 17,714 27,571 34,019 41,133 2019 4,818 12,015 24,082 38,153 51,672 2020 3,795 14,672 33,882 55,914 2021 5,639 20,405 44,663 2022 10,346 29,358 2023 7,378 Total 385,711 All outstanding liabilities before 2014, net of reinsurance 6,948 Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance $ 351,485 The following is required supplementary information about average historical claims duration as of December 31, 2023: Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited) Year 1 2 3 4 5 6 7 8 9 10 Penn-America - Casualty 6.9 % 16.0 % 18.7 % 20.9 % 14.1 % 9.2 % 5.1 % 2.2 % 1.5 % 1.1 % Non-Core Operations Property and Casualty Methodologies Non-Core Operations’ internal actuarial reserve reviews were completed for loss and allocated loss adjustment expenses (“ALAE”) separately for property excluding catastrophe experience, property catastrophes, and casualty reserve categories. The internal actuarial reserve reviews were completed with data through December 2023. Actuarial methodologies, such as the Loss Development and Bornhuetter-Ferguson methods, were employed to develop estimates of ultimate loss & ALAE. Management’s ultimate selections considered the internal actuarial review and a third-party actuarial review completed during the fourth quarter of 2023. Case incurred is subtracted from the management selected ultimates to obtain the booked IBNR reserves. These methodologies are consistent with last year. Non-Core Operations includes business acquired in the purchase of American Reliable, which occurred on January 1, 2015. The acquisition included the purchase of the business of the legal entity as well as additional books of business written by other Assurant entities. In addition, ceding arrangements subsequent to the date of the acquisition are not consistent with years prior to the 105 acquisition. As a result, it is not practical, nor would it be consistent, to include information for years prior to 2015 in the development tables for Non-Core Operations. It also includes experience for reinsurance contracts which the Company does not have direct access to claim frequency information, so claim frequency information will not be provided for Non-Core Operations as it is not available for all the experience contained within this category. Non-Core Operations – Property (Dollars in thousands) Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, As of December 31, 2023 Accident Year 2020 2021 2022 2023 IBNR (1) Cumulative Number of Reported Claims (unaudited) (unaudited) (unaudited) 2020 $ 161,353 $ 164,648 $ 166,076 $ 160,082 $ 4,502 — 2021 111,042 108,443 109,047 4,530 — 2022 44,668 47,558 1,689 — 2023 10,105 1,882 — Total $ 326,792 (1) Incurred-but-not-reported liabilities plus expected development on reported claims Non-Core Operations – Property (Dollars in thousands) Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, Accident Year 2020 2021 2022 2023 (unaudited) (unaudited) (unaudited) 2020 $ 125,136 $ 148,167 $ 153,421 $ 155,690 2021 84,333 100,865 102,420 2022 35,635 43,468 2023 7,802 Total 309,380 All outstanding liabilities before 2020, net of reinsurance 34,927 Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance $ 52,339 The following is required supplementary information about average historical claims duration as of December 31, 2023. Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited) Year 1 2 3 4 Non-Core Operations - Property 76.9 % 15.3 % 2.4 % 1.4 % 106 Non-Core Operations – Casualty (Dollars in thousands) Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, As of December 31, 2023 Accident Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 IBNR (1) Cumulative Number of Reported Claims (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2015 $ 31,802 $ 33,731 $ 35,350 $ 36,534 $ 35,081 $ 32,297 $ 30,885 $ 29,905 $ 29,820 $ 585 — 2016 33,548 33,246 32,042 29,685 30,308 30,047 26,130 29,460 1,374 — 2017 32,645 32,097 31,138 32,040 31,077 31,260 26,168 1,947 — 2018 29,798 30,168 31,126 34,749 35,067 34,131 2,701 — 2019 36,892 36,933 40,469 41,398 37,619 9,286 — 2020 55,088 56,041 57,890 53,765 19,119 — 2021 76,971 79,396 81,538 43,560 2022 109,182 114,189 83,462 — 2023 66,102 58,333 — Total $ 472,792 (1) Incurred-but-not-reported liabilities plus expected development on reported claims Non-Core Operations – Casualty (Dollars in thousands) Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, Accident Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2015 $ 3,979 $ 11,470 $ 17,615 $ 23,354 $ 26,144 $ 27,005 $ 28,231 $ 28,379 $ 28,445 2016 4,164 9,782 14,495 18,196 19,383 22,005 23,539 25,791 2017 2,633 7,230 11,915 18,263 20,183 21,912 22,904 2018 2,063 6,769 13,320 19,773 23,041 25,403 2019 2,406 7,814 15,271 21,877 25,553 2020 3,346 12,074 18,816 27,235 2021 4,820 11,121 23,355 2022 4,517 14,607 2023 4,000 Total 197,293 All outstanding liabilities before 2015, net of reinsurance 32,413 Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance $ 307,912 The following is required supplementary information about average historical claims duration as of December 31, 2023: Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited) Year 1 2 3 4 5 6 7 8 9 Non-Core Operations - Casualty 8.0 % 15.3 % 17.3 % 18.0 % 8.0 % 6.3 % 4.4 % 4.1 % 0.2 % 107 The reconciliation of the net incurred and paid claims development tables to the liability for unpaid losses and loss adjustment expenses in the consolidated balance sheets as of December 31, 2023 is as follows: Net outstanding liabilities Penn-America – Property $ 40,877 Penn-America – Casualty 351,485 Non-Core Operations – Property 52,339 Non-Core Operations – Casualty 307,912 Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance 752,613 Reinsurance recoverable on unpaid claims Penn-America – Property 3,592 Penn-America – Casualty 22,693 Non-Core Operations – Property 22,100 Non-Core Operations – Casualty 24,446 Total reinsurance recoverable on unpaid claims 72,831 Other outstanding liabilities Penn-America Ceded Allowance — Unallocated claims adjustment expenses 11,654 Loss Clearing ( 881 ) Non-Core Operations Ceded Allowance 8,992 Unallocated claims adjustment expenses 7,016 Other ( 1,626 ) Total other outstanding liabilities 25,155 Total gross liability for unpaid losses and loss adjustment expenses $ 850,599 13. Debt 7.875% Subordinated Notes due 2047 On April 15, 2022, the Company redeemed the entire $ 130.0 million in aggregate principal amount of the outstanding 2047 Notes plus accrued and unpaid interest on the 2047 Notes redeemed to, but not including the Redemption Date of April 15, 2022. In connection with the redemption, the Company wrote off deferred issuance costs of $ 3.5 million which was recognized as a loss on extinguishment of debt in its consolidated statements of operations for the year ended December 31, 2022. Interest expense, including amortization of deferred issuance costs through the date of redemption, recognized on the 2047 Notes was $ 3.0 million and $ 10.4 million for the years ended December 31, 2022, and 2021 , respectively. The Company did no t incur any interest expense related to the 2047 Notes for the year ended December 31, 2023. In connection with the redemption of the 2047 Notes, the Supplemental Indenture and the co-obligor transaction are no longer effective. Please see Note 13 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2021 Annual Report on Form 10-K for more information on the Supplemental Indenture and the co-obligor transaction. As a result of this redemption, the Company no longer has any outstanding debt with third parties. 14. Leases The Company leases office space and equipment under various operating lease arrangements. The Company’s leases have remaining lease terms ranging from 3 months to 6 years . Some building leases have options to extend , terminate , or retract the leased area. 108 In conjunction with the sale of the renewal rights related to both the Company's Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business as well as the Company's decision to terminate its lease in Cavan, Ireland due to employees in Ireland working remotely, the Company recognized the following impairment losses: Years Ended December 31, (Dollars in thousands) Consolidated Statements of Operations Line 2023 2022 2021 Scottsdale, Arizona Corporate and other operating expenses $ — $ — $ 1,515 Scottsdale, Arizona Acquisition costs and other underwriting expenses — 681 — Omaha, Nebraska Acquisition costs and other underwriting expenses — 488 — Cavan, Ireland Acquisition costs and other underwriting expenses — 168 — Total lease impairment $ — $ 1,337 $ 1,515 Please see Note 2 for additional information on the sale of the renewal rights. The components of lease expenses were as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Operating lease expenses $ 2,052 $ 2,372 $ 2,789 Short-term lease expenses 12 15 8 Sublease income (1) ( 331 ) ( 331 ) ( 55 ) Total lease expenses $ 1,733 $ 2,056 $ 2,742 (1) In connection with the sale of the renewal rights related to the Company's manufactured and dwelling homes business, K2 is subleasing approximately one third of the Company's Scottsdale, Arizona office. The Company intends to exercise its early termination clause in the Scottsdale, Arizona lease and expects to receive $ 1.6 million in sublease payments between October 2021 through October 2026. Supplemental cash flow information related to leases was as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Cash paid for amounts included in the measurement of liabilities: Operating leases $ 1,852 $ 2,056 $ 2,797 Right-of-use assets obtained in exchange for new lease obligations: Operating leases $ — $ — $ 783 109 Supplemental balance sheet information related to leases was as follows: The table below presents the lease-related assets and liabilities recorded on the consolidated balance sheets. December 31, (Dollars in thousands) Classification on the consolidated balance sheets 2023 2022 Assets: Operating lease assets Lease right of use assets $ 9,715 $ 11,739 Liabilities: Operating lease liabilities Lease liabilities $ 12,733 $ 15,701 Weighted-average remaining lease term Operating leases 5.0 years 6.6 years Weighted-average discount rate Operating leases (1) 0.8 % 0.9 % (1) Represents the Company’s incremental borrowing rate at the time the leases were contracted. At December 31, 2023, future minimum lease payments under non-cancelable operating leases were as follows. (Dollars in thousands) Operating Leases (1) Expected Sublease Income 2024 $ 2,729 $ 297 2025 2,794 388 2026 2,650 342 2027 1,591 — 2028 1,611 — Thereafter 1,631 — Total future minimum lease payments 13,006 1,027 Less: amount representing interest 273 — Present value of minimum lease payments $ 12,733 $ 1,027 (1) Includes future minimum lease payments of $ 3.2 million on leases that have been impaired because the property is no longer in use. 15. Shareholders’ Equity Distribution Restrictions The ability of Global Indemnity Group, LLC to pay distributions is subject to applicable federal and state laws and Global Indemnity Group, LLC’s LLCA. Distributions of cash or other assets of Global Indemnity Group, LLC may be paid to Global Indemnity Group, LLC’s shareholders out of Global Indemnity Group, LLC’s assets legally available therefor only when, and if determined by the Board. Each Series A Preferred Shareholder is entitled to a “Priority Return” (as defined in the applicable Share Designation). On each Distribution Date, Global Indemnity Group, LLC shall make a distribution to each holder of the Series A Preferred Shares out of, and subject to a determination by the Board that the Company has on the applicable Distribution Date, funds legally available therefor, payable in cash only, in an amount equal to the estimated amount necessary to reduce the Unpaid Priority Return of each Series A Preferred Share immediately after such Distribution Date to zero. All such distributions shall be made pro rata in relation to each such Series A Preferred Share’s Unpaid Priority Return. Since Global Indemnity Group, LLC is a holding company and has no direct operations, its ability to pay distributions depends, in part, on the ability of its subsidiaries to generate income to pay dividends. Penn-Patriot Insurance Company and its insurance subsidiaries are subject to significant regulatory restrictions limiting their ability to declare and pay dividends. Global Indemnity Investments, Inc. is dependent on generating investment income in order to pay a dividend to Global Indemnity Group, LLC. See Note 21 for additional information regarding dividend limitations imposed on Penn-Patriot Insurance Company and its subsidiaries. 110 Distributions Distribution payments of $ 0.25 per common share per quarter were declared during the year ended December 31, 2023 as follows: Approval Date Record Date Payment Date Total Distributions Declared (Dollars in thousands) March 2, 2023 March 24, 2023 March 31, 2023 $ 3,410 June 1, 2023 June 23, 2023 June 30, 2023 3,375 September 28, 2023 October 9, 2023 October 16, 2023 3,385 December 7, 2023 December 22, 2023 December 29, 2023 3,385 Various (1) Various Various ( 86 ) Total $ 13,469 (1) Represents distributions declared on unvested shares, net of forfeitures Distribution payments of $ 0.25 per common share per quarter were declared during the year ended December 31, 2022 as follows: Approval Date Record Date Payment Date Total Distributions Declared (Dollars in thousands) March 3, 2022 March 21, 2022 March 31, 2022 $ 3,597 June 2, 2022 June 20, 2022 June 30, 2022 3,602 September 23, 2022 October 4, 2022 October 11, 2022 3,616 December 8, 2022 December 23, 2022 December 30, 2022 3,389 Various (1) Various Various 339 Total $ 14,543 (1) Represents distributions declared on unvested shares, net of forfeitures Distribution payments of $ 0.25 per common share per quarter were declared during the year ended December 31, 2021 as follows: Approval Date Record Date Payment Date Total Distributions Declared (Dollars in thousands) February 14, 2021 March 22, 2021 March 31, 2021 $ 3,570 June 5, 2021 June 21, 2021 June 30, 2021 3,579 September 11, 2021 September 23, 2021 September 30, 2021 3,583 December 4, 2021 December 20, 2021 December 31, 2021 3,587 Various (1) Various Various 259 Total $ 14,578 (1) Represents distributions declared on unvested shares, net of forfeitures In addition, distributions of $ 0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during each of the years ended December 31, 2023, 2022, and 2021. As of December 31, 2023 and 2022 , accrued distributions on unvested common shares, which were included in other liabilities on the consolidated balance sheets, were $ 0.3 million and $ 1.1 million, respectively. Accrued preferred distributions were less than $ 0.1 million as of December 31, 2023 and 2022 and were also included in other liabilities on the consolidated balance sheets. Repurchases and Redemptions of Global Indemnity Group, LLC’s Common Shares Global Indemnity Group, LLC allows employees to surrender class A common shares as payment for the tax liability incurred upon the vesting of restricted stock that was issued under the Company’s share incentive plan in effect at the time of issuance. During 2023, 2022, and 2021 , Global Indemnity purchased an aggregate of 18,860 , 15,954 and 17,318 , respectively, of surrendered class A common shares from its employees for $ 0.6 million , $ 0.4 million, and $ 0.5 million , respectively. On October 21, 2022, Global Indemnity Group, LLC announced it commenced a stock repurchase program beginning in the fourth quarter of 2022. On January 3, 2023, Global Indemnity Group, LLC announced that it had authorized an increase in the aggregate stock repurchase program from $ 32 million, which was authorized on October 21, 2022, to $ 60 million. On June 8, 2023, Global Indemnity Group, LLC's Board of Directors approved an additional increase in the existing share buyback authorization amount of $ 60 million to $ 135 million. The authorization to repurchase will expire on December 31, 2027 . The timing and actual number of shares repurchased, if any, will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. 111 Under the repurchase program, repurchases may be made from time to time using a variety of methods, including open market purchases or privately negotiated transactions, all in compliance with Global Indemnity Group, LLC’s Insider Trading Policy, the United States Securities and Exchange Commission, and other applicable legal requirements. The repurchase program does not obligate Global Indemnity Group, LLC to acquire any particular amount of class A common shares, and the repurchase program may be suspended or discontinued at any time at Global Indemnity Group, LLC’s discretion. 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 in December 2022 to one of the Directors of Global Indemnity Group, LLC 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 repurchase program in October 202 2. Shares purchased from employees or third parties by Global Indemnity Group, LLC are held as treasury stock and recorded at cost until formally retired by Global Indemnity Group, LLC. The following table provides information with respect to the class A common shares that were surrendered, repurchased, or redeemed in 2023: Period (1) Total Number of Shares Purchased or Redeemed Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) Class A common shares: January 1-31, 2023 3,302 (3) $ 23.31 — — January 1-31, 2023 250,000 (4) $ 25.90 250,000 $ 106,604,066 April 1-30, 2023 200,000 (4) $ 28.00 200,000 $ 101,004,066 June 1-30, 2023 15,558 (3) $ 33.74 — $ 101,004,066 Total 468,860 $ 27.04 450,000 (1) Based on settlement date. (2) Based on the $ 135 million share repurchase authorization. (3) Surrendered by employees as payment of taxes withheld on the vesting of restricted stock and/or restricted stock units. (4) Purchased as part of the stock repurchase program which commenced in 4th quarter of 2022. The following table provides information with respect to the class A common shares that were surrendered, repurchased, or redeemed in 2022: Period (1) Total Number of Shares Purchased or Redeemed Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) Class A common shares: January 1-31, 2022 4,781 (3) $ 25.13 — — June 1-30, 2022 11,173 (3) $ 26.28 — — October 1-31, 2022 200,000 (4) $ 23.49 200,000 27,302,000 November 1-30, 2022 250,000 (4) $ 24.50 250,000 21,177,000 December 1-31, 2022 457,082 (4) $ 24.28 457,082 10,079,066 Total 923,036 $ 24.20 907,082 (1) Based on settlement date. (2) Based on the $ 32 million share repurchase authorization. (3) Surrendered by employees as payment of taxes withheld on the vesting of restricted stock and/or restricted stock units. (4) Purchased as part of the stock repurchase program which commenced in 4th quarter of 2022. Global Indemnity Group, LLC converted 153,594 of class B common shares to class A common shares on November 14, 2022. There were no other class B common shares that were surrendered, repurchased, or redeemed in 2023 or 2022. Each class A common share has one vote and each class B common share has ten vot es. As of December 31, 2023, Global Indemnity Group, LLC’s class A common shares were held by approximately 140 shareholders of record. The Fox Paine Entities comprise the two holders of record of Global Indemnity Group, LLC’s class B common shares as of December 31, 2023. Global Indemnity Group, LLC’s preferred shares were held by 1 holder of record, an affiliate of Fox Paine & Company, LLC, as of December 31, 2023 . 112 16. Related Party Transactions Fox Paine Entities Pursuant to Global Indemnity Group, LLC’s LLCA, Fox Paine Capital Fund II International, L.P. (the “Fox Paine Fund”), together with Fox Mercury Investments, L.P. and certain of its affiliates (the “FM Entities”), and Fox Paine & Company LLC (collectively, the “Fox Paine Entities”) currently constitute a Class B Majority Shareholder (as defined in the LLCA) and, as such, have the right to appoint a number of Global Indemnity Group, LLC’s directors equal in aggregate to the pro rata percentage of the voting power in Global Indemnity Group, LLC beneficially held by the Fox Paine Entities, rounded up to the nearest whole number of directors. The Fox Paine Entities beneficially own shares representing approximately 83.8 % of the voting power of Global Indemnity Group, LLC as of December 31, 2023. The Fox Paine Entities control the appointment or election of all of Global Indemnity Group, LLC’s Directors due to the LLCA and their controlling share ownership. Global Indemnity Group, LLC’s Chairman is the chief executive and founder of Fox Paine & Company, LLC. On August 27, 2020, Global Indemnity Group, LLC issued and sold to Wyncote LLC, an affiliate of Fox Paine & Company, LLC, 4,000 Series A Cumulative Fixed Rate Preferred Interests at a price of $ 1,000 per Series A Preferred Interest, for the aggregate purchase price of $ 4,000,000 . While these preferred interests are non-voting, the preferred shareholders are entitled to appoint two additional members to Global Indemnity Group, LLC’s Board of Directors whenever the “Unpaid Targeted Priority Return” with respect to the preferred interests exceed zero immediately following six or more “Distribution Dates”, whether or not such Distribution Dates occur consecutively. Global Indemnity Group, LLC’s Board of Directors is obligated to take, and cause Global Indemnity Group, LLC’s officers to take, any necessary actions to effectuate such appointments, including expanding the size of the Board of Directors, in connection with any exercise of the foregoing provisions. See Note 15 of the notes to consolidated financial statements in Item 8 of Part II of this report for additional information on the Series A Cumulative Fixed Rate Preferred Interests. Pursuant to the Third Amended and Restated Management Agreement, (“Management Agreement”) dated August 28, 2020 , between Global Indemnity Group, LLC and Fox Paine & Company, LLC, Global Indemnity Group, LLC agrees to pay, or to cause one of its affiliates to pay, an annual service fee (“Annual Service Fee”) as compensation for Fox Paine & Company, LLC’s ongoing provision of certain financial and strategic consulting, advisory and other services to Global Indemnity Group, LLC and its affiliates, and to reimburse all direct and indirect expenses paid or incurred in connection with such services upon request, excluding expenses for travel, lodging, meals, and other items relating to attendance at regularly scheduled meetings of the Board of Directors. The Annual Service Fee is adjusted annually to reflect the aggregate increase in the CPI-U. The current fee charged for the twelve month period beginning September 5, 2023 was $ 3.2 million. Should Global Indemnity Group, LLC and Fox Paine & Company, LLC agree that the Annual Service Fee will be deferred, the Annual Service Fee will become subject to an annual adjustment equal to the percentage rate of return the Company earns on its investment portfolio multiplied by the aggregate Annual Service Fees and adjustment amounts accumulated and unpaid through such date. Management fee expense of $ 3.1 million, $ 2.9 million, and $ 2.7 million was incurred during the years ended December 31, 2023, 2022, and 2021 , respectively. Prepaid management fees, which were included in other assets on the consolidated balance sheets, were $ 2.1 million as of December 31, 2023 and 2022. In addition, Fox Paine & Company, LLC may also propose and negotiate transaction fees with the Company subject to the provisions of the Company’s related party transaction and conflict matter policies, including approval of Global Indemnity Group, LLC’s Conflicts Committee of the Board of Directors, for those services from time to time. Each of the Company’s transactions with Fox Paine & Company, LLC are reviewed and approved by Global Indemnity Group, LLC’s Conflicts Committee, which is composed of independent directors, and the Board of Directors (other than Saul A. Fox, Chairman of the Board of Directors of Global Indemnity Group, LLC and Chief Executive of Fox Paine & Company, LLC, who is not a member of the Conflicts Committee and recuses himself from the Board of Directors’ deliberations related to fees paid to Fox Paine & Company, LLC or its affiliates). 17. Commitments and Contingencies Legal Proceedings The Company is, from time to time, involved in various legal proceedings in the ordinary course of business. The Company maintains insurance and reinsurance coverage for such risks in amounts that it considers adequate. However, there can be no assurance that the insurance and reinsurance coverage that the Company maintains is sufficient or will be available in adequate amounts or at a reasonable cost. The Company does not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on its business, results of operations, cash flows, or financial condition. There is a greater potential for disputes with reinsurers who are in runoff. Some of the Company’s reinsurers have operations that are in runoff, and therefore, the Company closely monitors those relationships. The Company anticipates that, similar to the rest of the 113 insurance and reinsurance industry, it will continue to be subject to litigation and arbitration proceedings in the ordinary course of business. Commitments In 2014, the Company entered into a $ 50 million commitment to purchase an alternative investment vehicle which is comprised of European non-performing loans. As of December 31, 2023, the Company has funded $ 35.8 million of this commitment leaving $ 14.2 million as unfunded. Since the investment period has concluded, the Company expects minimal capital calls will be made prospectively. Other Commitments The Company is party to a Management Agreement, as amended, with Fox Paine & Company, LLC, whereby in connection with certain management services provided to it by Fox Paine & Company, LLC, the Company agreed to pay an annual management fee to Fox Paine & Company, LLC. See Note 16 above for additional information pertaining to this management agreement. 18. Share-Based Compensation Plans The fair value method of accounting recognizes share-based compensation to employees and non-employee directors in the consolidated statements of operations using the grant-date fair value of the stock options and other equity-based compensation expensed over the requisite service and vesting period. For the purpose of determining the fair value of stock option awards, the Company uses the Black-Scholes option-pricing model. The Company elected a policy to accrue for compensation cost based on the number of awards that are expected to vest. An estimation of forfeitures is required when recognizing compensation expense which is then adjusted over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment to compensation in the period of change. Excess tax benefits and tax deficiencies associated with share-based payment awards are required to be recognized as an income tax benefit or expense in net income (loss) with the corresponding cash flows recognized as an operating activity in the Consolidated Statement of Cash Flow. Share Incentive Plan On June 14, 2023 , the Company’s Shareholders approved the Global Indemnity Group, LLC 2023 Share Incentive Plan (“the 2023 Plan”). The primary purpose of the 2023 Plan is to provide Global Indemnity a competitive advantage in attracting, retaining, and motivating officers, employees, consultants and non-employee directors, and to position Global Indemnity to offer incentives linked to the financial results of the Company’s business and increases in shareholder value. Under the 2023 Plan, the Company may issue up to 2.5 million class A common shares pursuant to awards granted under the Plan. The 2023 Plan replaced the Global Indemnity Group, LLC 2018 Share Incentive Plan, as amended and restated on August 28, 2020, which expired pursuant to its terms on March 4, 2023. 114 Options Award activity for stock options granted under the Plan and the weighted average exercise price per share are summarized as follows: Time-Based Options Performance- Based Options Total Options Weighted Average Exercise Price Per Share Options outstanding at January 1, 2021 900,000 100,000 1,000,000 40.04 Options issued — 140,000 140,000 28.70 Options forfeited ( 300,000 ) ( 146,667 ) ( 446,667 ) 47.06 Options exercised — — — — Options expired — — — — Options purchased by the Company — — — — Options outstanding at December 31, 2021 600,000 93,333 693,333 33.23 Options issued 200,000 — 200,000 20.77 Options forfeited — ( 46,666 ) ( 46,666 ) 28.70 Options exercised — — — — Options expired — — — — Options purchased by the Company — — — — Options outstanding at December 31, 2022 800,000 46,667 846,667 30.54 Options issued — — — — Options forfeited ( 600,000 ) ( 46,667 ) ( 646,667 ) 33.56 Options exercised — — — — Options expired — — — — Options purchased by the Company — — — — Options outstanding at December 31, 2023 (1) 200,000 — 200,000 $ 20.77 Options exercisable at December 31, 2023 (1) 200,000 — 200,000 $ 20.77 (1) Represents stock options granted to the Company's Chief Executive Officer. See note below under Chief Executive Officer for additional information. The Company recorded $ 0.2 million, $ 0.3 million, and ($ 1.1 ) million of compensation expense for stock options under the Plan during the years ended December 31, 2023, 2022, and 2021, respectively. The Company did no t receive any proceeds from the exercise of options during 2023, 2022 or 2021 under the Plan. The Company does not anticipate any additional compensation expense related to options outstanding under the Plan at December 31, 2023. Option intrinsic values, which are the differences between the fair value of $ 32.24 at December 31, 2023 and the weighted average strike price of the option, are as follows: Number of Shares Weighted Average Strike Price Intrinsic Value Outstanding 200,000 20.77 $ 2.3 Million Exercisable 200,000 20.77 $ 2.3 Million Exercised (1) — — — (1) The intrinsic value of the exercised options is the difference between the fair market value at time of exercise and the strike price of the option. There were no options granted under the Plan in 2023. The weighted average fair value of options granted under the Plan was $ 2.98 in 2022 and $ 6.95 in 2021 using a Black-Scholes option-pricing model and the following weighted average assumptions. 2022 2021 Dividend yield 2.0 % 2.0 % Expected volatility 22.56 % 38.64 % Risk-free interest rate 4.49 % 0.2 % Expected option life 2.0 years 3.5 years 115 The following tables summarize the range of exercise prices of options outstanding at December 31, 2023, 2022, and 2021: Ranges of Exercise Prices Outstanding at December 31, 2023 Weighted Average Per Share Exercise Price Weighted Average Remaining Life $ 20.00 - $ 24.99 200,000 $ 20.77 5.8 years Total 200,000 Ranges of Exercise Prices Outstanding at December 31, 2022 Weighted Average Per Share Exercise Price Weighted Average Remaining Life $ 15.00 - $ 19.99 300,000 $ 17.87 0.0 years $ 20.00 - $ 24.99 200,000 $ 20.77 6.8 years $ 25.00 - $ 39.99 46,667 $ 28.70 8.1 years $ 50.00 - $ 59.99 300,000 $ 50.00 5.0 years Total 846,667 Ranges of Exercise Prices Outstanding at December 31, 2021 Weighted Average Per Share Exercise Price Weighted Average Remaining Life $ 15.00 - $ 19.99 300,000 $ 17.87 0.0 years $ 25.00 - $ 39.99 93,333 $ 28.70 9.0 years $ 50.00 - $ 59.99 300,000 $ 50.00 6.0 years Total 693,333 Restricted Shares / Restricted Stock Units In addition to stock option grants, the Plan also provides for the granting of restricted shares and restricted stock units to employees and non-employee Directors. The Compan y recognized compensation expense for restricted stock of $ 2.7 million, $ 2.0 million, and $ 2.5 million for 2023, 2022, and 2021 , respectively. There is no unrecognized compensation expense for the non-vested restricted stock at December 31, 2023 . The Company recognized compensation expense for restricted stock units of $ 0.5 million, $ 1.5 million, and $ 0.9 million for 2023, 2022 and 2021 , respectively. The total unrecognized compensation expense for the non-vested restricted stock units is $ 0.1 million at December 31, 2023 , which will be recognized over a weighted average life of 0 .5 years. The following table summarizes the restricted stock grants since the 2003 inception of the original share incentive plan: Restricted Stock Awards Year Employees Directors Total Inception through 2020 1,171,576 747,601 1,919,177 2021 — 83,199 83,199 2022 — 97,260 97,260 2023 — 91,088 91,088 1,171,576 1,019,148 2,190,724 The following table summarizes the non-vested restricted shares activity for the years ended December 31, 2023, 2022, and 2021: Number of Shares Weighted Average Price Per Share Non-vested Restricted Shares at January 1, 2021 35,403 38.45 Shares issued 83,199 27.24 Shares vested ( 101,048 ) 29.59 Shares forfeited ( 2,915 ) 36.58 Non-vested Restricted Shares at December 31, 2021 14,639 36.23 Shares issued 97,260 25.08 Shares vested ( 100,975 ) 25.49 Shares forfeited ( 10,924 ) 36.23 Non-vested Restricted Shares at December 31, 2022 — — Shares issued 91,088 29.83 Shares vested ( 91,088 ) 29.83 Shares forfeited — — Non-vested Restricted Shares at December 31, 2023 — $ — 116 The following table summarizes the restricted stock unit grants since the 2003 inception of the original share incentive plan: Restricted Stock Unit Awards Year Employees Directors Total Inception through 2020 336,736 41,667 378,403 2021 — — — 2022 — — — 2023 — — — 336,736 41,667 378,403 The following table summarizes the non-vested restricted stock units activity for the years ended December 31, 2023, 2022, and 2021: Number of Restricted Stock Units Weighted Average Price Per Restricted Stock Unit Non-vested Restricted Stock Units at January 1, 2021 315,026 $ 30.26 Restricted Stock Units issued — — Restricted Stock Units vested ( 44,245 ) 30.08 Restricted Stock Units forfeited ( 43,425 ) 30.06 Non-vested Restricted Stock Units at December 31, 2021 227,356 $ 30.33 Restricted Stock Units issued — — Restricted Stock Units vested ( 47,633 ) 30.35 Restricted Stock Units forfeited ( 51,885 ) 29.82 Non-vested Restricted Stock Units at December 31, 2022 127,838 $ 30.53 Restricted Stock Units issued — — Restricted Stock Units vested ( 61,652 ) 30.43 Restricted Stock Units forfeited ( 14,893 ) 30.18 Non-vested Restricted Stock Units at December 31, 2023 51,293 $ 30.75 Upon vesting, the restricted stock units are converted to restricted class A common shares. Based on the terms of the restricted share and restricted stock unit grants, all forfeited shares revert back to the Company. During 2023, 2022, and 2021 , the Company granted 91,088 , 97,260 , and 83,199 class A common shares, respectively, at a weighted average grant date value of $ 29.83 , $ 25.08 , and $ 27.24 per share, respectively, to non-employee directors of the Company under the Plan. The Company previously granted 157,139 shares to a non-employee director with deferred vesting. These shares vested on January 13, 2023 . All other s hares granted to non-employee directors of the Company are fully vested but subject to certain restrictions. There were no restricted class A common shares or restricted stock units granted to key employees during the years ended December 31, 2023, 2022, or 2021. Book Value Appreciation Rights (“BVAR”) In 2021, the Company granted 2,500,000 Penn-Patriot BVARs with an aggregate initial notional value equal to approximately 5 % of Penn-Patriot’s book value, which entitled the holder to a payment based on the value of the per-BVAR appreciation in Penn-Patriot’s book value over the initial notional value. These BVARs were forfeited in 2022. In 2021, the Company also granted 400,000 Penn-Patriot BVARS with an aggregate initial notional value equal to approximately 0.8 % of Penn-Patriot’s book value, which entitled the holder to a payment based on the value of the per-BVAR appreciation in Penn-Patriot’s book value over the initial notional value. These BVARs were forfeited in 2022. There were no BVARs granted during the years ended December 31, 2023 and 2022. The Company recorded $ 2.3 million in compensation expense during the year ended December 31, 2021. This expense was reversed in 2022 when the BVARs were forfeited. There was no compensation expense related to BVARs during the year ended December 31, 2023. There were no accrued expenses rel ated to BVARs as of December 31, 2023 or 2022. 117 Book Value Rights ("BVR") Book Value Rights are awards issued to employees which are indexed to Penn-Patriot Insurance Company's equity. Penn-Patriot Insurance Company is a wholly owned subsidiary of the Company. The BVRs are payable in either cash or Global Indemnity Group, LLC's class A common shares at the discretion of Global Indemnity Group, LLC's Board of Directors. In 2023, the Comp any granted 177,045 Penn-Patriot Book Value Rights. These BVR will vest 50 % on March 3, 2025 and 50 % on March 3, 2026 . In 2022, the Comp any granted 179,096 Penn-Patriot Book Value Rights. Of these BVR, 69,034 BVR have a three year cliff vesting period. 34,463 BVR will vest on December 31, 2024 . 20,855 BVR will vest 50 % on April 18, 2025 and 50 % on April 18, 2027 . The remaining 54,745 BVR will vest as follows: • 16.5 % vested on January 1, 2023 , 16.5 % will vest on January 1, 2024 , and 17.0 % of the book value rights will vest on January 1, 2025 . • Subject to Board approval, 50 % of the book value rights will vest 100 %, no later than March 15, 2026 , following a re-measurement of 2022 results as of December 31, 2025. In 2021, the Company granted 131,438 Penn-Patriot Book Value Rights. Of these BVR, 97,432 BVR have a three year cliff vesting period. Of the remaining 34,006 BVR, 50 % vested on October 26, 2022 and 50 % will be paid in January 2024 . The Company recorded $ 0.6 million, $ 0.8 million, and $ 0.1 million in compensation expense during the years ended December 31, 2023, 2022, and 2021 , respectively, and had $ 1.3 million and $ 0.7 million accrued as of December 31, 2023, and 2022, respectively, related to the book value rights. Chief Executive Officer Effective October 21, 2022, Global Indemnity Group, LLC's Board of Directors appointed Joseph W. Brown as its Chief Executive Officer ("CEO"). The CEO Agreement provides for a grant of 200,000 stock options to acquire GBLI class A common shares with an exercise price equal to the closing price of GBLI’s class A common shares on the date of the grant. The options vested in four equal tranches as follows: 25 % on each of November 1, 2022 , February 1, 2023 , May 1, 2023 and August 1, 2023 and are exercisable within 7 years of the grant notwithstanding any earlier termination of employment. The stock options are subject to the terms and conditions for stock options as reflected in the Company’s 2018 Share Incentive Plan and written option agreement. See Note 26 for additional information on stock options granted in connection with new CEO Agreement entered into on January 18, 2024. Rule 10b5-1 Trading Plans The Company did not have any Rule 10b5-1 Trading Plans in place during the years ended December 31, 2023, 2022, and 2021 . 19. 401(k) Plan The Company maintains a 401(k) defined contribution plan that covers all eligible U.S. employees. Under this plan, the Company matches 100 % of the first 6 % contributed by an employee. Vesting on contributions made by the Company is immediate. Total expenses for the plan were $ 1.6 million, $ 2.0 million, and $ 1.9 million for the three years ended December 31, 2023, 2022, and 2021, respectively. 118 20. Earnings Per Share Earnings per share have been computed using the weighted average number of common shares and common share equivalents outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share: Years Ended December 31, (Dollars in thousands, except share and per share data) 2023 2022 2021 Numerator: Net income (loss) $ 25,429 $ ( 850 ) $ 29,354 Less: preferred stock distributions 440 440 440 Net income (loss) available to common shareholders $ 24,989 $ ( 1,290 ) $ 28,914 Denominator: Weighted average shares for basic earnings per share 13,553,168 14,482,164 14,426,739 Non-vested restricted stock — — 11,016 Non-vested restricted stock units 49,616 — 120,936 Options 63,624 — 105,639 Weighted average shares for diluted earnings per share (1) 13,666,408 14,482,164 14,664,330 Earnings per share - Basic $ 1.84 $ ( 0.09 ) $ 2.00 Earnings per share - Diluted $ 1.83 $ ( 0.09 ) $ 1.97 (1) For the year ended December 31, 2022, “weighted average shares outstanding – basic” was used to calculate “diluted earnings per share” due to a net loss for the period. If the Company had not incurr ed a loss during the year ended December 31, 2022, 14,644,274 weighted average shares would have been used to compute the diluted loss per share calculation. In addition to the basic shares, weighted average shares for the diluted calculation for the year ended December 31, 2022 would have included 74,987 restricted stock units and 87,124 share equivalents for options. The weighted average shares outstanding used to determine dilutive earnings per share for the years ended December 31, 2022 and 2021 does not include 346,667 and 393,333 options, respectively, which were deemed to be anti-dilutive. The year ended December 31, 2023 did no t have any options that were deemed to be anti-dilutive. 21. Statutory Financial Information GAAP differs in certain respects from Statutory Accounting Principles (“SAP”) as prescribed or permitted by the various U.S. state insurance departments. The principal differences between SAP and GAAP are as follows: • Under SAP, investments in debt securities are primarily carried at amortized cost, while under GAAP the Company records its debt securities at estimated fair value. • Under SAP, policy acquisition costs, such as commissions, premium taxes, fees and other costs of underwriting policies are charged to current operations as incurred, while under GAAP such costs are deferred and amortized on a pro rata basis over the period covered by the policy. • Under SAP, certain assets designated as "Non-admitted assets" (such as prepaid expenses) are charged against surplus. • Under SAP, net deferred income tax assets are admitted following the application of specified criteria, with the resulting admitted deferred tax amount being credited directly to surplus. • Under SAP, certain premium receivables are non-admitted and are charged against surplus based upon aging criteria. • Under SAP, the costs and related receivables for guaranty funds and other assessments are recorded based on Management's estimate of the ultimate liability and related receivable settlement, while under GAAP such costs are accrued when the 119 liability is probable and reasonably estimable and the related receivable amount is based on future premium collections or policy surcharges from in-force policies. • Under SAP, unpaid losses and loss adjustment expenses and unearned premiums are reported net of the effects of reinsurance transactions, whereas under GAAP, unpaid losses and loss adjustment expenses and unearned premiums are reported gross of reinsurance. • Under SAP, a provision for reinsurance is charged to surplus based on the authorized status of reinsurers, available collateral, and certain aging criteria, whereas under GAAP, an allowance for uncollectible reinsurance is established based on Management’s best estimate of the collectability of reinsurance receivables. • Under SAP, the tax impact of the Tax Cuts and Jobs Act enacted on December 22, 2017 is recorded through surplus, whereas under GAAP, the tax impact is recorded in the Consolidated Statements of Operations. The National Association of Insurance Commissioners (“NAIC”) issues model laws and regulations, many of which have been adopted by state insurance regulators, relating to: (a) risk-based capital ("RBC") standards; (b) codification of insurance accounting principles; (c) investment restrictions; and (d) restrictions on the ability of insurance companies to pay dividends. The Company’s insurance subsidiaries are required by law to maintain certain minimum surplus on a statutory basis, and are subject to regulations under which payment of a dividend from statutory surplus is restricted and may require prior approval of regulatory authorities. Applying the current regulatory restrictions as of December 31, 2023, the maximum amount of distributions that could be paid in 2024 by Penn-Patriot Insurance Company, the United National insurance companies, and the Penn-America insurance companies under applicable laws and regulations without regulatory approval is approximately $ 40.2 million, $ 29.8 million, and $ 12.6 million, respectively. The Penn-America insurance companies limitation includes $ 4.1 million that would be distributed to United National Insurance Company or its subsidiary, Penn Independent Corporation, based on the December 31, 2023 ownership percentages. The Company’s insurance subsidiaries did no t declare or pay any dividends in 2023. The NAIC's RBC model provides a tool for insurance regulators to determine the levels of statutory capital and surplus an insurer must maintain in relation to its insurance and investment risks, as well as its reinsurance exposures, to assess the potential need for regulatory attention. The model provides four levels of regulatory attention, varying with the ratio of an insurance company's total adjusted capital to its authorized control level RBC ("ACLRBC"). If a company’s total adjusted capital is: (a) less than or equal to 200%, but greater than 150% of its ACLRBC (the "Company Action Level"), the company must submit a comprehensive plan to the regulatory authority proposing corrective actions aimed at improving its capital position; (b) less than or equal to 150%, but greater than 100% of its ACLRBC (the "Regulatory Action Level"), the regulatory authority will perform a special examination of the company and issue an order specifying the corrective actions that must be followed; (c) less than or equal to 100%, but greater than 70% of its ACLRBC (the "Authorized Control Level"), the regulatory authority may take any action it deems necessary, including placing the company under regulatory control; and (d) less than or equal to 70% of its ACLRBC (the "Mandatory Control Level"), the regulatory authority must place the company under its control. Based on the standards currently adopted, the Company reported in its 2023 statutory filings that the capital and surplus of the insurance companies are above the prescribed Company Action Level RBC requirements. The following is selected information for the Company’s insurance companies, net of intercompany eliminations, where applicable, as determined in accordance with SAP: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Statutory capital and surplus, as of end of period $ 402,838 $ 367,275 $ 359,471 Statutory net income 60,976 23,044 29,696 120 22. Segment Information During the fourth quarter of 2023, the Company restructured its insurance operations to strengthen its market presence and enhance GBLI's focus on core products and made the decision to manage the business through two segments, Penn-America and Non-Core Operations. Management believes these segments allow users of the Company’s financial statements to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a whole. Segment results for prior years have been revised to reflect these changes. Both segments follow the same accounting policies used for the Company’s consolidated financial statements. For further disclosure regarding the Company’s accounting policies, please see Note 4. The Company manage the distribution of its core product offerings through its Penn-America segment (formerly known as Commercial Specialty). Penn-America offers specialty property and casualty products designed for GBLI's Wholesale Commercial, Programs, InsurTech, and Assumed Reinsurance product offerings. The Company also has a Non-Core Operations segment that contains lines of business that have been de-emphasized or are no longer being written. The following are tabulations of business segment information for the years ended December 31, 2023, 2022, and 2021. Corporate information is included to reconcile segment data to the consolidated financial statements. 2023: (Dollars in thousands) Penn- America Non-Core Operations Total Revenues: Gross written premiums $ 369,660 $ 46,737 $ 416,397 Net written premiums $ 356,796 $ 42,523 $ 399,319 Net earned premiums $ 354,518 $ 118,839 $ 473,357 Other income 1,257 178 1,435 Total revenues 355,775 119,017 474,792 Losses and Expenses: Net losses and loss adjustment expenses 233,239 55,914 289,153 Acquisition costs and other underwriting expenses 134,155 48,462 182,617 Income (loss) from segments $ ( 11,619 ) $ 14,641 3,022 Unallocated Items: Net investment income 55,444 Net realized investment losses ( 2,107 ) Corporate and other operating expenses ( 23,383 ) Income before income taxes 32,976 Income tax expense ( 7,547 ) Net income $ 25,429 Segment assets $ 982,083 $ 603,433 $ 1,585,516 Corporate assets 144,060 Total assets $ 1,729,576 121 2022: (Dollars in thousands) Penn- America Non-Core Operations Total Revenues: Gross written premiums $ 387,967 $ 339,636 $ 727,603 Net written premiums $ 370,306 $ 221,025 $ 591,331 Net earned premiums $ 359,597 $ 242,874 $ 602,471 Other income 1,029 433 1,462 Total revenues 360,626 243,307 603,933 Losses and Expenses: Net losses and loss adjustment expenses 214,854 144,374 359,228 Acquisition costs and other underwriting expenses 135,145 101,236 236,381 Income (loss) from segments $ 10,627 $ ( 2,303 ) 8,324 Unallocated Items: Net investment income 27,627 Net realized investment losses ( 32,929 ) Other income 29,903 Corporate and other operating expenses ( 24,421 ) Interest expense ( 3,004 ) Loss on extinguishment of debt ( 3,529 ) Income before income taxes 1,971 Income tax expense ( 2,821 ) Net loss $ ( 850 ) Segment assets $ 937,919 $ 824,256 $ 1,762,175 Corporate assets 38,600 Total assets $ 1,800,775 122 2021: (Dollars in thousands) Penn- America Non-Core Operations Total Revenues: Gross written premiums $ 349,962 $ 332,160 $ 682,122 Net written premiums $ 328,659 $ 251,409 $ 580,068 Net earned premiums $ 308,676 $ 286,934 $ 595,610 Other income 1,028 787 1,815 Total revenues 309,704 287,721 597,425 Losses and Expenses: Net losses and loss adjustment expenses 184,163 200,801 384,964 Acquisition costs and other underwriting expenses 113,038 109,803 222,841 Income (loss) from segments $ 12,503 $ ( 22,883 ) ( 10,380 ) Unallocated Items: Net investment income 37,020 Net realized investment gains 15,887 Other income 27,936 Corporate and other operating expenses ( 27,179 ) Interest expense ( 10,481 ) Income before income taxes 32,803 Income tax expense ( 3,449 ) Net income $ 29,354 Segment assets $ 837,108 $ 920,734 $ 1,757,842 Corporate assets 254,967 Total assets $ 2,012,809 23. Supplemental Cash Flow Information Taxes and Interest Paid The Company paid the following net federal income taxes and interest for 2023, 2022, and 2021: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Federal income taxes paid $ 613 $ 426 $ 54 Interest paid — 5,125 10,340 24. Government Assistance Enacted in March 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") provides tax relief and incentives to help in the recovery of businesses that partially or fully suspended operations during the coronavirus (“COVID-19”) pandemic in 2020. The CARES Act contains numerous benefits, one of which is the Employee Retention Credit for Employers Subject to Closure Due to COVID-19 (the “COVID-19 Employee Retention Credit” or “ERC”). The ERC was further enhanced with the passage of the Consolidated Appropriation Act (“CAA”) in December 2020. The Company qualified for a $ 5.3 million credit in 2021 by continuing to pay employees at locations that were fully or partially suspended as a result of a COVID-19 related government order. In 2021, qualified wages paid by employers with an average of 500 or less full time employees is defined as all wages paid during any quarter in which the employer is eligible for the ERC. In 2021, the credit was 70 % of qualified wages up to a maximum credit of $ 7,000 per employee per quarter. The Company receive d $ 5.5 million during the year ended December 31, 2022. Of this amount, $ 5.3 million was recorded as a reduction to compens ation cost, which is a component of corporate and other operating expenses, and $ 0.2 million was recorded as interest income on the Company’s consolidated statements of operations during the year ended December 31, 2022. The Company did no t receive any amounts during the years ended December 31, 2023 and 2021. 123 25. New Accounting Pronouncements Recently Issued Accounting Guidance Not Yet Adopted In December 2023, the FASB issued an accounting standard update to address improvements to income tax disclosures. The standard requires disaggregated information about a company’s effective tax rate reconciliation as well as information on income taxes paid. The standard is effective for public companies for annual periods beginning after December 15, 2024, with early adoption permitted. The standard will be applied on a prospective basis with the option to apply the standard retrospectively. The Company does not expect the adoption of this new accounting guidance to have a material impact on the Company's financial condition, results of operations, or cash flows. In November 2023, the FASB issued an accounting standard update to address improvements to reportable segment disclosures. The standard primarily requires the following disclosure on an annual and interim basis: (i) significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss; and (ii) other segment items and description of its composition. The standard also requires current annual disclosures about a reportable segment's profits or losses and assets to be disclosed in interim periods and the title and position of the CODM with an explanation of how the CODM uses the reported measure(s) of segment profits or losses in assessing segment performance and deciding how to allocate resources. The guidance is effective for public companies for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment is applied retrospectively to all prior periods presented. The Company does not expect the adoption of this new accounting guidance to have a material impact on the Company's financial condition, results of operations, or cash flows. 26. Subsequent Events Chief Executive Officer Agreement The Company entered into a new Chief Executive Officer Agreement ("2024 CEO Agreement") with Joseph W. Brown on J anuary 18, 2024. The 2024 CEO agreement provides for a grant of 200,000 stock options to acquire GBLI Class A common shares with an exercise price equal to the closing price of GBLI's Class A common shares on the date of the grant. The options vest in four equal tranches as follows: 25 % on each of the first business day of each quarter in 2024 (subject to Mr. Brown remaining employed with the Company through each vesting date), and to the extent vested, are exercisable within 7 years of the grant notwithstanding any earlier termination of employment. The 2024 CEO Agreement further provides that on the first business day of each year, beginning in 2025 through 2028, if Mr. Brown is employed by the Company, he shall be granted 50,000 stock options to acquire GBLI Class A common shares with an exercise price equal to the closing price of GBLI's Class A common shares on the date of the grant. The options, if granted, will vest on December 31, 2028 (subject to Mr. Brown remaining employed with the Company or serving on the Company's Board of Directors t hrough the vesting date), and to the extent vested, are exercisable within 7 years of the grant notwithstanding any earlier termination of employment. Distribution On March 6, 2024 , the Board of Directors approved a dividend rate of $ 0.35 per common share payable on March 28, 2024 to all shareholders of record as of the close of business on March 21, 2024 , a 40 % increase over the prior quarterly dividend rate of $ 0.25 per common share. Future dividends remain subject to the discretion of GBLI’s Board of Directors, including the Board of Director’s evaluation of the company’s financial performance, capital and reserve positions, liquidity, balance sheet, and other factors. 124 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None