What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 130 added, 105 removed, 291 unchanged (45% of the section changed)

5 unchanged sentences

Financial Highlights

Results of Operations for Six Months

Results of Operations for Nine Months

• Net income of $34.2 million, or $2.48 per share diluted, in 2024 is $14.7 million higher than the same period in 2023.

• Net earned premiums of $189.4 million (Property:

42% and Casualty:

58%) in 2024 is lower than net earned premiums of $269.2 million (Property 32% and Casualty 68%) in 2023 primarily due to the run off of Non-Core business.

• Underwriting income was $8.8 million in 2024 which is higher than $3.2 million in underwriting income for the same period in 2023 due to strong underwriting results for the Company's Penn-America segment.

• Underwriting income was $14.6 million in 2024 compared to $3.9 million for the same period in 2023 due to strong underwriting results for the Company's Penn-America segment.

• Penn-America accident year combined ratio was 93.9% in 2024 compared to 96.7% for the same period in 2023.

Consolidated accident year combined ratio was 95.0% in 2024 compared to 98.9% for the same period in 2023.

• Penn-America gross written premiums increased 7.4% to $297.8 million.

• Net investment income of $46.3 million in 2024 was 17.5% better than the same period in 2023.

Book yield on the fixed maturities portfolio increased to 4.5% at June 30, 2024 from 3.8% at June 30, 2023.

• Operating cash flows was $36.9 million in 2024 compared to $14.2 million for the same period in 2023.

2024 Second Quarter Consolidated Financial Condition

Book yield on the fixed maturities portfolio increased to 4.6% at September 30, 2024 from 4.0% at September 30, 2023.

• Operating cash flows were $52.3 million in 2024 compared to $36.8 million for the same period in 2023.

• On August 1, 2024, AM Best affirmed the Financial Strength Rating of A (Excellent) for the U.S.

operating subsidiaries of Global Indemnity Group, LLC.

• Total cash and investments of $1.4 billion at June 30, 2024 increased 3.2% compared to December 31, 2023;

2024 Third Quarter Consolidated Financial Condition

• Total cash and investments of $1.5 billion at September 30, 2024 increased 5.6% compared to December 31, 2023;

fixed maturities and cash comprise 97% of total investments.

• Total assets of $1.7 billion at June 30, 2024 and December 31, 2023.

• No debt at June 30, 2024 and December 31, 2023.

• Total assets of $1.8 billion at September 30, 2024 compared to $1.7 billion at December 31, 2023.

• No debt at September 30, 2024 and December 31, 2023.

• Since the Company's initial public offering in 2003, the total capital returned to shareholders was $624.2 million, comprising $522.2 million of share repurchases and $101.9 million of distributions / dividends.

This includes $14.7 million of distributions during 2024.

• Shareholders' equity increased 2.9% from December 31, 2023 to $667.5 million at June 30, 2024.

• Shareholders' equity increased 5.9% from December 31, 2023 to $686.7 million at September 30, 2024.

• Dividends paid per share increased 40% to $1.05 in 2024 compared to the same period in 2023.

• Book value per common share increased 2.2% from December 31, 2023 to $48.56 at June 30, 2024.

• Book value per common share increased 4.9% from December 31, 2023 to $49.88 at September 30, 2024.

Results of Operations

The Company realized net income of $10.1 million and $9.3 million during the quarters ended June 30, 2024 and 2023, respectively, and realized net income of $21.5 million and $11.8 million during the six months ended June 30, 2024 and 2023, respectively.

Net investment income increased by $2.1 million and $4.6 million during the quarter and six months ended June 30, 2024 as compared to the same periods in 2023.

This increase in net investment income was primarily due to strategies employed by the Company to take advantage of rising interest rates which resulted in a 18% increase in book yield on the fixed maturities portfolio to 4.5% at June 30, 2024 from 3.8% at June 30, 2023.

The weighted average duration of the fixed maturities portfolio was 1.0 years as of June 30, 2024.

The Company generated underwriting income of $8.8 million for the six months ended June 30, 2024 compared to underwriting income of $3.2 million for the same period in 2023.

This increase in underwriting income is driven by strong underwriting results within the Company's Penn-America segment mainly due to a 3.0 point improvement in its current accident year loss ratio.

Underwriting income for the quarter was $3.5 million in 2024 compared to $4.3 million in 2023.

This decrease was predominantly due to a decline in earned premium volume related to Non-Core Operations.

Overall, the combined ratio for the quarter improved to 96.6 in 2024 from 96.9 in 2023.

The following table summarizes the Company’s results for the quarters and six months ended June 30, 2024 and 2023:

The Company's net income was $12.8 million and $7.7 million during the quarters ended September 30, 2024 and 2023, respectively, and $34.2 million and $19.5 million during the nine months ended September 30, 2024 and 2023, respectively.

Net investment income increased by $2.3 million and $6.9 million during the quarter and nine months ended September 30, 2024 as compared to the same periods in 2023.

This increase in net investment income was primarily due to strategies employed by the Company to take advantage of rising interest rates which resulted in a 15% increase in book yield on the fixed maturities portfolio to 4.6% at September 30, 2024 from 4.0% at September 30, 2023.

The weighted average duration of the fixed maturities portfolio was 0.8 years as of September 30, 2024.

The Company generated underwriting income of $5.8 million for the quarter ended September 30, 2024 compared to $0.7 million for the same period in 2023 and generated underwriting income of $14.6 million for the nine months ended September 30, 2024 compared to $3.9 million for the same period in 2023.

This increase in underwriting income is driven by strong underwriting results within the Company's Penn-America segment due to growth in gross written premiums and improved current accident year combined ratios compared to the same period in 2023.

Penn-America’s gross written premiums increased 18.7% for the quarter and 7.4% for the nine months ended September 30, 2024.

Penn-America’s accident year combined ratio improved to 92.1% for the quarter compared to 96.3% in the same period in 2023 and improved to 93.9% for the nine months ended September 30, 2024 compared to 96.7% in same period in 2023.

The following table summarizes the Company’s results for the quarters and nine months ended September 30, 2024 and 2023:

Quarters Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

17 unchanged sentences

Combined ratio (3)

NM - not meaningful

(1) The loss ratio is a GAAP financial measure that is generally viewed in the insurance industry as an indicator of underwriting profitability and is calculated by dividing net losses and loss adjustment expenses by net earned premiums.

3 unchanged sentences

Quarters Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

13 unchanged sentences

(2) Net written premiums equal gross written premiums less ceded written premiums.

Gross written premiums decreased by 8.5% and 16.7% for the quarter and six months ended June 30, 2024 as compared to same periods in 2023.

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 in 2023 to improve underwriting results through increased rates and form changes.

These reductions in premiums were partially offset by continued growth of 10.5% and 8.8% in aggregate for Penn-America's Wholesale Commercial, InsurTech, and Assumed Reinsurance divisions during the quarter and six months ended June 30, 2024, respectively.

Gross written premiums increased by 0.9% for the quarter ended September 30, 2024 as compared to the same period in 2023.

Penn-America’s growth of 18.7% driven by its Wholesale Commercial, InsurTech, and Assumed Reinsurance divisions more than offset the decline in premiums resulting from its Non-Core segment.

Gross written premiums decreased by 11.5% for the nine months ended September 30, 2024 as compared to the same period in 2023.

Penn-America’s growth of 7.4% driven by its Wholesale Commerical, InsurTech and Assumed Reinsurance divisions partially offset the decline in premiums resulting from its Non-Core segment.

In aggregate, Penn-America's Wholesale Commercial, InsurTech, and Assumed Reinsurance divisions grew by 23.3% for the quarter and 13.5% for the nine months ended September 30, 2024 as compared to the same periods in 2023.

The growth in Wholesale Commercial and InsurTech is driven by premium rate increases, new agency appointments, organic growth of existing agents, and new products.

The growth in Assumed Reinsurance is primarily due to new treaties entered into during 2023 and 2024 and increased participation or organic growth from existing treaties.

The decline in premiums in Non-Core Operations is due to lines of business that have been de-emphasized or no longer written.

Net Retention

The ratio of net written premiums to gross written premiums is referred to as the Company’s net premium retention.

The Company’s net premium retention is summarized by segments as follows:

Quarters Ended

Six Months Ended

(Dollars in thousands)

Non-Core Operations

The net premium retention for the quarter and six months ended June 30, 2024 increased by 0.8 points and 2.6 points, respectively, as compared to the same periods in 2023.

Penn-America's retention increased by 0.7 points and 1.7 points for the quarter and six months ended June 30, 2024, respectively, primarily due to the termination of two quota share agreements and lower cost on the Company's catastrophe reinsurance treaty.

Cessions on Non-Core Operations were significantly reduced due to sale of manufactured home and dwelling business in 2021 and the Farm, Ranch and Stable business in 2022.

See Note 2 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2023 Annual Report on Form 10-K for additional information on the sale of renewal rights related to the Company’s manufactured and dwelling homes business and the Company's Farm, Ranch & Stable business.

The Company's net premium retention increased 0.7 points to 97.4% for the quarter ended September 30, 2024 from 96.7% for the quarter ended September 30, 2023 and increased 2.0 points to 97.6% for the nine months ended September 30, 2024

from 95.6% for the nine months ended September 30, 2023 primarily due to the termination of two quota share agreements and lower cost on the Company's catastrophe reinsurance treaty.

Net Earned Premiums

Net earned premiums within the Penn-America segment decreased by 3.6% and 2.6% for the quarter and six months ended June 30, 2024, respectively, as compared to the same periods in 2023 primarily due to the reduction in premiums written for Programs as a result of underwriting actions taken in 2023 to improve underwriting profitability partially offset by continued premium growth in Penn-America's InsurTech and Assumed Reinsurance divisions.

Property net earned premiums were $39.1 million and $35.4 million for the quarters ended June 30, 2024 and 2023, respectively, and $79.0 million and $73.0 million for the six months ended June 30, 2024 and 2023, respectively.

Casualty net earned premiums were $50.2 million and $57.2 million for the quarters ended June 30, 2024 and 2023, respectively, and $99.5 million and $110.3 million for the six months ended June 30, 2024 and 2023, respectively.

Net earned premiums within the Non-Core Operations segment decreased by 90.5% and 87.3% for the quarter and six months ended June 30, 2024, respectively, as compared to the same periods in 2023 primarily due to the non-renewal of a casualty treaty as well as a reduction in earned premiums due to the sale of Farm, Ranch & Stable renewal rights on August 8, 2022.

There were no property earned premiums for the quarter and six months ended June 30, 2024.

Property earned premiums were $4.4 million and $13.2 million for the quarter and six months ended June 30, 2023, respectively.

Casualty net earned premiums were $3.6 million and $32.1 million for the quarters ended June 30, 2024 and 2023, respectively, and $10.9 million and $72.8 million for the six months ended June 30, 2024 and 2023, respectively.

Amounts recorded for unpaid losses and loss adjustment expenses represent management’s best estimate at June 30, 2024.

Net earned premiums within the Penn-America segment increased by 12.6% for the quarter ended September 30, 2024 as compared to the same period in 2023 primarily due to continued premium growth in Penn-America's Wholesale Commercial, InsurTech, and Assumed Reinsurance divisions.

Property net earned premiums were $43.0 million and $33.7 million for the quarters ended September 30, 2024 and 2023, respectively.

Casualty net earned premiums were $50.9 million and $49.7 million for the quarters ended September 30, 2024 and 2023, respectively.

Net earned premiums within the Penn-America segment increased by 2.1% for the nine months ended September 30, 2024 as compared to the same period in 2023.

The premium growth in Penn-America's Wholesale Commercial, InsurTech, and Assumed Reinsurance divisions was partially offset by a reduction in premiums written for Specialty Products as a result of underwriting actions taken in 2023 to improve underwriting profitability.

Property net earned premiums were $122.1 million and $106.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Casualty net earned premiums were $150.4 million and $160.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Net earned premiums within the Non-Core Operations segment decreased by 94.9% and 89.2% for the quarter and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 primarily due to the non-renewal of a casualty treaty and a reduction in earned premiums due to the sale of Farm, Ranch & Stable renewal rights on August 8, 2022.

There were no property earned premiums for the quarter and nine months ended September 30, 2024.

Property earned premiums were $0.9 million and $14.1 million for the quarter and nine months ended September 30, 2023, respectively.

Casualty net earned premiums were $1.5 million and $27.3 million for the quarters ended September 30, 2024 and 2023, respectively, and $12.4 million and $100.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Amounts recorded for unpaid losses and loss adjustment expenses represent management’s best estimate at September 30, 2024.

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 $844.2 million and $773.8 million, respectively, as of June 30, 2024.

A breakout of the Company’s gross and net reserves, as of June 30, 2024, is as follows:

This resulted in carried gross and net reserves of $840.2 million and $769.3 million, respectively, as of September 30, 2024.

A breakout of the Company’s gross and net reserves, as of September 30, 2024, is as follows:

Gross Reserves

10 unchanged sentences

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 $107.1 million for claims occurring during the six months ended June 30, 2024:

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 $159.6 million for claims occurring during the nine months ended September 30, 2024:

Severity Change

1 unchanged sentence

Frequency Change

The Company’s net reserves for losses and loss adjustment expenses of $773.8 million as of June 30, 2024 relate to multiple accident years.

The Company’s net reserves for losses and loss adjustment expenses of $769.3 million as of September 30, 2024 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.

Underwriting Results

The components of income from the Company’s Penn-America segment and corresponding underwriting ratios are as follows:

The components of income (loss) from the Company’s Penn-America segment and corresponding underwriting ratios are as follows:

Quarters Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

14 unchanged sentences

Accident year combined ratio (1)

NM - not meaningful

(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.

See “Results of Operations” above for a discussion on consolidated premiums.

Other income was $0.3 million for each of the quarters ended June 30, 2024 and 2023 and $0.7 million and $0.5 million for six months ended June 30, 2024 and 2023, respectively.

Other income was $0.3 million for each of the quarters ended September 30, 2024 and 2023 and $1.0 million and $0.8 million for nine months ended September 30, 2024 and 2023, respectively.

Other income is primarily comprised of fee income.

The calendar year loss ratio for the quarter and six months ended June 30, 2024 was 57.2% (includes a decrease of $0.5 million, or 0.5 percentage points), and was 56.0% (includes a decrease of $0.4 million, or 0.3 percentage points), respectively, related to reserve development on prior accident years.

The calendar year loss ratio for the quarter and six months ended June 30, 2023 was 56.6% (includes an increase of $0.9 million, or 1.0 percentage points), and was 60.9% (includes an increase of $3.1 million, or 1.6 percentage points), respectively, related to reserve development on prior accident years.

The calendar year loss ratio for the quarter ended September 30, 2024 was 54.7% (includes an increase of $9 thousand related to prior accident years) compared to 67.1% (includes an increase of $7.8 million, or 9.3 percentage points related to prior accident years) for the quarter ended September 30, 2023.

Please see Note 7 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.

The current accident year loss ratio increased by 2.1 points from 55.6% for the quarter ended June 30, 2023 to 57.7% for the quarter ended June 30, 2024 and improved by 3.0 points from 59.3% for the six months ended June 30, 2023 to 56.3% for the six months ended June 30, 2024.

The current accident year loss ratio improved by 3.1 points to 54.7% for the quarter ended September 30, 2024 compared to 57.8% for the quarter ended September 30, 2023.

The current accident year losses and loss ratio is summarized as follows:

Quarters Ended

September 30,

Quarters Ended

September 30,

(Dollars in thousands)

4 unchanged sentences

Total accident year losses

• The current accident year non-catastrophe property loss ratio increased by 1.7 points during the quarter ended June 30, 2024 as compared to the same period in 2023 reflecting higher claims severity in the calendar quarter compared to last year.

• The current accident year catastrophe loss ratio improved by 2.5 points during the quarter ended June 30, 2024 as compared to the same period in 2023 recognizing lower claims frequency in the calendar quarter compared to last year.

• The current accident year casualty loss ratio increased by 4.3 points during the quarter ended June 30, 2024 as compared to the same period in 2023 primarily due to higher claims severity in the calendar quarter compared to last year.

Six Months Ended

• The current accident year non-catastrophe property loss ratio increased by 7.0 points during the quarter ended September 30, 2024 as compared to the same period in 2023 reflecting higher claims severity in the calendar quarter compared to last year.

• The current accident year catastrophe loss ratio improved by 7.2 points during the quarter ended September 30, 2024 as compared to the same period in 2023 recognizing lower claims frequency in the calendar quarter compared to last year.

• The current accident year casualty loss ratio improved by 4.3 points during the quarter ended September 30, 2024 as compared to the same period in 2023 mainly reflecting high case incurred emergence in the habitational class of business which led to a higher selected loss ratio in the third quarter of 2023.

The calendar year loss ratio for the nine months ended September 30, 2024 was 55.6% (includes a decrease of $0.4 million, or 0.1 percentage points related to prior accident years) compared to 62.9% (includes an increase of $10.9 million, or 4.1 percentage points related to prior accident years).

Please see Note 7 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.

The current accident year loss ratio improved by 3.1 points to 55.7% for the nine months ended September 30, 2024 from 58.8% for the nine months ended September 30, 2023.

The current accident year losses and loss ratio is summarized as follows:

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

4 unchanged sentences

Total accident year losses

• The current accident year non-catastrophe property loss ratio improved by 8.4 points during the six months ended June 30, 2024 as compared to the same period in 2023 reflecting lower claims frequency and severity in the first six months compared to last year.

• The current accident year catastrophe loss ratio improved by 1.5 points during the six months ended June 30, 2024 as compared to the same period in 2023 recognizing lower claims frequency in the first six months compared to last year.

• The current accident year casualty loss ratio increased by 2.0 points during the six months ended June 30, 2024 as compared to the same period in 2023 due to higher claims severity in the first six months compared to last year.

• The current accident year non-catastrophe property loss ratio improved by 3.6 points during the nine months ended September 30, 2024 as compared to the same period in 2023 reflecting lower claims severity in the first nine months compared to last year.

• The current accident year catastrophe loss ratio improved by 3.4 points during the nine months ended September 30, 2024 as compared to the same period in 2023 recognizing lower claims frequency in the first nine months compared to last year.

• The current accident year casualty loss ratio increased by 0.1 points during the nine months ended September 30, 2024 as compared to the same period in 2023.

Expense Ratios

The expense ratio for the Company’s Penn-America segment increased by 0.9 points from 37.1% for the quarter ended June 30, 2023 to 38.0% for the quarter ended June 30, 2024 and increased by 0.9 points from 37.7% for the six months ended June 30, 2023 to 38.6% for the six months ended June 30, 2024.

The increase in the expense ratio is predominantly due to a reduction of earned premiums in 2024 as well as a one time recovery of expenses related to employee medical benefits in 2023 which did not repeat.

The expense ratio for the Company’s Penn-America segment improved by 0.7 points from 38.6% for the quarter ended September 30, 2023 to 37.9% for the quarter ended September 30, 2024 and increased by 0.3 points from 38.0% for the nine months ended September 30, 2023 to 38.3% for the nine months ended September 30, 2024.

Reconciliation of non-GAAP financial measures and ratios

3 unchanged sentences

Quarters Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

19 unchanged sentences

Quarters Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

14 unchanged sentences

Accident year combined ratio (1)

NM - not meaningful

(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.

See “Results of Operations” above for a discussion on consolidated premiums.

The Company recognized income of less than $0.1 million for each of the quarters ended June 30, 2024 and 2023 and income of less than $0.1 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively.

The Company recognized income of less than $0.1 million for each of the quarters ended September 30, 2024 and 2023 and income of $0.1 million for each of the nine months ended September 30, 2024 and 2023.

Other income is primarily comprised of fee income net of bank fees.

The calendar year loss ratio for the quarter and six months ended June 30, 2024 was 73.3% (includes an increase of $0.4 million, or 11.1 percentage points), and was 64.3% (includes an increase of $0.3 million, or 3.2 percentage points), respectively, related to reserve development on prior accident years.

The calendar year loss ratio for the quarter and six months ended June 30, 2023 was 70.3% (includes a decrease of $0.8 million, or 2.3 percentage points), and was 63.3% (includes a decrease of $3.0 million, or 3.5 percentage points), respectively, related to reserve development on prior accident years.

The calendar year loss ratio for the quarter and nine months ended September 30, 2024 was 71.1% (includes a decrease of less than $0.1 million, or 3.0 percentage points related to prior accident years), and was 65.1% (includes an increase of $0.3 million, or 2.5 percentage points related to prior accident years), respectively.

The calendar year loss ratio for the quarter and nine months ended September 30, 2023 was 32.2% (includes a decrease of $7.8 million, or 27.7 percentage points related to prior accident years), and was 55.6% (includes a decrease of $10.9 million, or 9.5 percentage points related to prior accident years), respectively.

Please see Note 7 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.

The current accident year loss ratio improved by 10.4 points from 72.6% for the quarter ended June 30, 2023 to 62.2 for the quarter ended June 30, 2024 and improved by 5.7 points from 66.8% for the six months ended June 30, 2023 to 61.1% for the six months ended June 30, 2024.

The current accident year loss ratio increased by 14.2 points from 59.9% for the quarter ended September 30, 2023 to 74.1% for the quarter ended September 30, 2024 and improved by 2.5 points from 65.1% for the nine months ended September 30, 2023 to 62.6% for the nine months ended September 30, 2024.

The current accident year losses and loss ratio is summarized as follows:

Quarters Ended

September 30,

Quarters Ended

September 30,

(Dollars in thousands)

4 unchanged sentences

Total accident year losses

Six Months Ended

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

4 unchanged sentences

Total accident year losses

• The current accident year casualty loss ratio improved by 9.4 points and 4.4 points during the quarter and six months ended June 30, 2024, respectively, as compared to the same periods in 2023 reflecting mix of business changes.

NM - not meaningful

Expense Ratio

The expense ratio for the Company’s Non-Core Operations increased by 24.9 points from 34.9% for the quarter ended June 30, 2023 to 59.8% for the quarter ended June 30, 2024 and increased by 13.0 points from 36.6% for the six months ended June 30, 2023 to 49.6% for the six months ended June 30, 2024 primarily due to lower earned premiums as a result of exiting various lines of business.

The expense ratio for the Company’s Non-Core Operations increased by 84.9 points from 49.6% for the quarter ended September 30, 2023 to 134.5% for the quarter ended September 30, 2024 and increased by 19.6 points from 39.8% for the nine months ended September 30, 2023 to 59.4% for the nine months ended September 30, 2024 primarily due to lower earned premiums as a result of exiting various lines of business.

Reconciliation of non-GAAP financial measures and ratios

3 unchanged sentences

Quarters Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

21 unchanged sentences

Quarters Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

3 unchanged sentences

(1) Excludes realized gains and losses

Net investment income increased by 15.9% and 18.3% for the quarter and six months ended June 30, 2024, respectively, as compared to the same periods in 2023.

At June 30, 2024, the Company held asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations with a market value of $303.7 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 0.8 years as of June 30, 2024, compared with 1.2 years as of June 30, 2023.

Net investment income increased by 16.1% and 17.5% for the quarter and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023.

At September 30, 2024, the Company held asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations with a market value of $279.4 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 0.6 years as of September 30, 2024, compared with 1.0 years as of September 30, 2023.

Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration.

The Company’s embedded book yield on its fixed maturities, not including cash, was 4.5% as of June 30, 2024, compared to 3.8% as of June 30, 2023.

The embedded book yield on the $19.4 million of taxable municipal bonds in the Company’s portfolio was 2.9% at June 30, 2024, compared to an embedded book yield of 3.0% on the Company’s taxable municipal bonds of $30.6 million at June 30, 2023.

The Company’s embedded book yield on its fixed maturities, not including cash, was 4.6% as of September 30, 2024, compared to 4.0% as of September 30, 2023.

The embedded book yield on the $17.2 million of taxable municipal bonds in the Company’s portfolio was 2.8% at September 30, 2024, compared to an embedded book yield of 3.0% on the Company’s taxable municipal bonds of $26.2 million at September 30, 2023.

Net Realized Investment Gains (Losses)

The components of net realized investment gains (losses) for the quarters and six months ended June 30, 2024 and 2023 were as follows:

The components of net realized investment gains (losses) for the quarters and nine months ended September 30, 2024 and 2023 were as follows:

Quarters Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

2 unchanged sentences

Net realized investment gains (losses)

See Note 3 of the notes to the consolidated financial statements in Item 1 of Part I of this report for an analysis of total investment return on a pre-tax basis for the quarters and six months ended June 30, 2024 and 2023.

See Note 3 of the notes to the consolidated financial statements in Item 1 of Part I of this report for an analysis of total investment return on a pre-tax basis for the quarters and nine months ended September 30, 2024 and 2023.

Corporate and Other Operating Expenses

Corporate and other operating expenses consist of outside legal fees, other professional fees, directors’ fees, management fees and advisory fees, salaries and benefits for holding company personnel, development costs for new products, impairment losses, and taxes incurred which are not directly related to operations.

Corporate and other operating expenses were $6.4 million and $5.0 million during the quarters ended June 30, 2024 and 2023, respectively, and $12.7 million and $11.4 million during the six months ended June 30, 2024 and 2023, respectively.

This increase was primarily due to an increase in professional fees.

Corporate and other operating expenses consist of outside legal fees, other professional fees, directors’ fees, management fees and advisory fees, and salaries and benefits for holding company personnel.

Corporate and other operating expenses were $5.9 million and $5.3 million during the quarters ended September 30, 2024 and 2023, respectively, and $18.7 million and $16.6 million during the nine months ended September 30, 2024 and 2023, respectively.

The increase in corporate and other operating expenses was primarily due to an increase in professional fees.

Income Tax Expense

Income tax expense was $2.6 million and $2.4 million for the quarters ended June 30, 2024 and 2023, respectively, and $5.5 million and $2.9 million for the six months ended June 30, 2024 and 2023, respectively.

The increase in income tax expense is primarily due to higher taxable income during the quarter and six months ended June 30, 2024 as compared to the same periods in 2023.

Income tax expense was $3.1 million and $1.8 million for the quarters ended September 30, 2024 and 2023, respectively, and $8.6 million and $4.7 million for the nine months ended September 30, 2024 and 2023, respectively.

The increase in income tax expense is primarily due to higher taxable income during the quarter and nine months ended September 30, 2024 as compared to the same periods in 2023.

See Note 6 of the notes to the consolidated financial statements in Item 1 of Part I of this report for a comparison of income tax between periods.

The factors described above resulted in net income of $10.1 million and $9.3 million for the quarters ended June 30, 2024 and 2023, respectively, and net income of $21.5 million and $11.8 million for the six months ended June 30, 2024 and 2023, respectively.

The factors described above resulted in net income of $12.8 million and $7.7 million for the quarters ended September 30, 2024 and 2023, respectively, and net income of $34.2 million and $19.5 million for the nine months ended September 30, 2024 and 2023, respectively.

Critical Accounting Estimates and Policies

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GBLI Holdings, LLC is dependent on dividends from its subsidiaries as well as reimbursements from its subsidiaries for utilization of net operating losses and other tax attributes in order to meet its corporate expense obligations and intercompany financing obligations.

As of June 30, 2024, the Company also had future funding commitments of $14.2 million related to one of the Company's investments in a limited partnership.

As of September 30, 2024, the Company also had future funding commitments of $14.2 million related to one of the Company's investments in a limited partnership.

Since the investment period has concluded, the Company does not expect any capital calls will be made prospectively.

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See Note 21 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2023 Annual Report on Form 10-K for further information on dividend limitations related to the Insurance Companies.

There were no dividends declared or paid by the Company's insurance subsidiaries during the quarter and six months ended June 30, 2024.

There were no dividends declared or paid by the Company's insurance subsidiaries during the quarter and nine months ended September 30, 2024.

Sources of operating funds consist primarily of net written premiums and investment income.

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• the timing of the Company’s loss payments.

Net cash provided by operating activities was $36.9 million and $14.2 million for the six months ended June 30, 2024 and 2023, respectively.

Net cash provided by operating activities was $52.3 million and $36.8 million for the nine months ended September 30, 2024 and 2023, respectively.

The increase in operating cash flows of approximately $15.5 million from the prior year was primarily a net result of the following items:

Six Months Ended

Nine Months Ended

September 30,

(Dollars in thousands)

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See the consolidated statements of cash flows in the consolidated financial statements in Item 1 of Part I of this report for details concerning the Company’s investing and financing activities.

The Board of Directors approved a distribution payment of $0.35 per common share to all shareholders of record on the close of business on March 21, 2024 and June 21, 2024.

Distributions paid to common shareholders were $9.8 million during the six months ended June 30, 2024.

In addition, distributions of $0.2 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the six months ended June 30, 2024.

The Board of Directors approved a distribution payment of $0.35 per common share to all shareholders of record on the close of business on March 21, 2024, June 21, 2024 and September 30, 2024.

Distributions paid to common shareholders were $9.8 million during the nine months ended September 30, 2024.

In addition, distributions of $0.3 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the nine months ended September 30, 2024.

Investment Portfolio

On July 31, 2023, the Company provided the Global Debt Fund, LP with a formal withdrawal request to fully redeem the partnership interest.

Partial redemption proceeds of $4.3 million were received during the six months ended June 30, 2024.

The Global Debt Fund, LP had a fair market value of $21.6 million at June 30, 2024.

Other than the items discussed in the preceding paragraphs, there have been no material changes to the Company’s liquidity during the quarter and six months ended June 30, 2024.

Partial redemption proceeds of $8.7 million were received during the nine months ended September 30, 2024.

The Global Debt Fund, LP had a fair market value of $17.5 million at September 30, 2024.

Other than the item discussed in the preceding paragraph, there have been no material changes to the Company’s liquidity during the quarter and nine months ended September 30, 2024.

Please see Item 7 of Part II in the Company’s 2023 Annual Report on Form 10-K for information regarding the Company’s liquidity.

Capital Resources

There have been no material changes to the Company’s capital resources during the quarter and six months ended June 30, 2024.

There have been no material changes to the Company’s capital resources during the quarter and nine months ended September 30, 2024.

Please see Item 7 of Part II in the Company’s 2023 Annual Report on Form 10-K for information regarding the Company’s capital resources.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis