What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-07 · 248 added, 312 removed, 109 unchanged (84% of the section changed)

4 unchanged sentences

For more information regarding the Company’s business and operations, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

In the first quarter of 2025, the Company realigned the composition of its reportable segments to reflect changes in how the Company now manages its operations.

The Company changed the level at which its chief operating decision maker (“CODM”), the Chief Executive Officer of Global Indemnity Group, LLC, regularly reviews operating results and allocate resources to now include Agency and Insurance Services.

As a result of these changes, the Company has three reportable segments:

• Agency and Insurance Services consists of (i) three agencies:

Penn-America Insurance Services, LLC, J.H.

Ferguson, LLC, which includes the Vacant Express division, and Collectibles Insurance Services, LLC that source, underwrite, and service policies and (ii) two strategic insurance product and service businesses:

Liberty Insurance Adjustment Agency, Inc.

a claims adjustment and claims service business and Kaleidoscope Insurance Technologies, Inc., a proprietary insurance software and services provider.

• Belmont Insurance Companies - Core (“Belmont Core”) , previously known as the Penn-America segment, consists of insurance company operations for ongoing direct insurance products and assumed reinsurance products, which are offered in the excess and surplus lines marketplace.

• Belmont Insurance Companies - Non-Core (“Belmont Non-Core”) , previously known as the Non-Core Operations segment, consists of insurance company operations for lines of business that have been de-emphasized or are no longer being written.

The primary activities of Belmont Non-Core are servicing the run-off of polices/treaties, adjusting claims and estimating loss reserves on de-emphasized and terminated business.

Segment results for the quarter ended March 31, 2024 have been recast to conform to the new reportable segments.

Financial Highlights

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.

• 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.

2025 First Quarter Results of Operations

• Gross written premiums increased 5.5% to $98.7 million.

• Net investment income of $14.8 million in 2025 was 1.8% better than the same period in 2024.

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.

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;

Book yield on the fixed maturities portfolio increased to 4.5% at March 31, 2025 from 4.3% at March 31, 2024.

• Current accident year underwriting loss of $10.3 million for 2025 includes net losses and loss adjustment expenses related to California Wildfire events in January 2025 (“California Wildfires”), totaling $15.6 million, compared to $5.3 million of underwriting income for the same period in 2024.

Excluding California Wildfires, the current accident year underwriting income would have been in line with 2024 at $5.3 million in 2025.

• Current accident year combined ratio was 111.5% in 2025 compared to 94.9% for the same period in 2024.

Excluding California Wildfires, the current accident year combined ratio would have been 94.8% in 2025 compared to 94.9% for the same period in 2024.

• Net loss of $4.0 million, or ($0.30) per share diluted, in 2025 compared to $11.4 million, or $0.82 per share diluted, for the same period in 2024.

Excluding California Wildfires, net income was $8.2 million or $0.58 per share in 2025.

2025 First Quarter Consolidated Financial Condition

• Total cash and investments of $1.4 billion at March 31, 2025 and December 31, 2024;

fixed maturities and cash comprise 97% of total investments.

• 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.

• Total assets of $1.7 billion at March 31, 2025 and December 31, 2024.

• No debt at March 31, 2025 and December 31, 2024.

• Since the Company's initial public offering in 2003, the total capital returned to shareholders was $634.2 million, comprising $522.2 million of share repurchases and $111.9 million of distributions / dividends.

This includes $5.1 million of distributions during 2025.

• 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 4.9% from December 31, 2023 to $49.88 at September 30, 2024.

• Shareholders' equity is $687.1 million at March 31, 2025 compared to $689.1 million at December 31, 2024.

• Book value per common share is $47.85 at March 31, 2025 compared to $49.98 at December 31 ,2024.

Results of Operations

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:

The following table summarizes the Company’s results for the quarters ended March 31, 2025 and 2024:

Quarters Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

6 unchanged sentences

Acquisition costs and other underwriting expenses

Underwriting income

Underwriting income (loss)

Net investment income

Net realized investment gains (losses)

Corporate and other operating expenses

Interest expense

Income before income taxes

Income tax expense

Net realized investment gains

Corporate expenses

Income (loss) before income taxes

Income tax benefit (expense)

Net income (loss)

Underwriting Ratios:

6 unchanged sentences

(3) The combined ratio is a GAAP financial measure and is the sum of the Company’s loss and expense ratios.

The following table summarizes the change in premium volume by business segment:

Quarters Ended

September 30,

Nine Months Ended

September 30,

The following table summarizes the change in premium volume by reportable segment:

Quarters Ended March 31,

Belmont Non-Core

(Dollars in thousands)

Direct written premiums (1)

Assumed written premiums (2)

Gross written premiums (3)

Non-Core Operations

Total gross written premiums

Ceded written premiums

Non-Core Operations

Total ceded written premiums

Net written premiums (4)

Non-Core Operations

Total net written premiums

Net earned premiums

Non-Core Operations

Total net earned premiums

(1) Gross written premiums represent the amount received or to be received for insurance policies written without reduction for reinsurance costs, ceded premiums or other deductions.

(1) Direct written premiums represent the amount received or to be received for insurance policies written, without reduction for reinsurance costs, ceded premiums or other deductions.

(2) Assumed written premiums represent the amount received or to be received for assumed reinsurance treaties, without reduction for reinsurance costs, ceded premiums or other deductions.

(3) Gross written premiums equal the sum of direct and assumed written premiums.

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

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 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 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 $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

(Dollars in thousands)

Non-Core Operations

Net Reserves (2)

Gross written premiums increased by 5.5% to $98.7 million in 2025 compared to $93.5 million for the same period in 2024.

Direct written premium produced by the Agency and Insurance Services segment for Belmont Core:

Quarters Ended March 31,

(Dollars in thousands)

Non-Core Operations

(1) Losses incurred but not reported, including the expected future emergence of case reserves.

(2) Does not include reinsurance receivables on paid losses.

Each reserve category has an implicit frequency and severity for each accident year as a result of the various assumptions made.

If the actual levels of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’s best estimate.

For most of its reserve categories, the Company believes that frequency can be predicted with greater accuracy than severity.

Therefore, the Company believes management’s best estimate is more likely influenced by changes in severity than frequency.

The following table, which the Company believes reflects a reasonable range of variability around its best estimate based on historical loss experience and management’s judgment, reflects the

impact of changes (which could be favorable or unfavorable) in frequency and severity on the Company’s current accident year net loss estimate of $159.6 million for claims occurring during the nine months ended September 30, 2024:

Severity Change

Wholesale Commercial

Direct written premiums excluding specialty products

Specialty Products

Total direct written premiums

• In the aggregate, direct written premiums for Wholesale Commercial and InsurTech grew by 8.6%.

This growth was driven by premium rate increases, new agency appointments, organic growth of existing agents, and new products.

• Direct written premiums for Specialty Products declined by 57.0% due to terminating products not meeting profitability expectations.

Excluding terminated business, growth in gross written premiums would have been 7.3%.

Assumed written premium produced by the Belmont segments:

Quarters Ended March 31,

(Dollars in thousands)

Frequency Change

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

Quarters Ended

September 30,

Nine Months Ended

September 30,

Belmont Non-Core

Total assumed written premiums

• Belmont Core's assumed business grew to $10.9 million in 2025 from $2.9 million for the same period in 2024 due to new treaties incepting during 2024 and 2025.

• Belmont Non-Core's business represents run-off premium from non-renewed treaties.

Underwriting Income

The components of income (loss) from the Company’s reportable segments and corresponding underwriting ratios are as follows:

Quarters Ended March 31,

Agency and Insurance Services

Belmont Non-Core

(Dollars in thousands)

Gross written premiums

Net written premiums

Net earned premiums

Commission and service fee income (1)

Policy and installment fee income

Total revenues

1 unchanged sentence

Net losses and loss adjustment expenses

Acquisition costs and other underwriting expenses

Net commission expenses

Other underwriting expenses

Total losses and expenses

Underwriting income (loss)

6 unchanged sentences

Accident year combined ratio

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 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 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 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:

(1) Consists of intersegment revenues, which are eliminated in consolidation.

Underwriting loss of $10.5 million for 2025 includes net losses and loss adjustment expenses related to California Wildfires in January 2025, totaling $15.6 million, compared to $5.3 million of underwriting income for the same period in 2024.

Excluding California Wildfires, the underwriting loss was $5.1 million in 2025.

The current accident year combined ratio, excluding the impact of the California Wildfires of 16.7 points, was 94.8% in 2025 compared to 94.9% for the same period in 2024.

• Net earned premiums within the Belmont Core segment increased by 3.5% to $92.3 million for 2025 compared to $89.1 million for the same period in 2024 due to growth in its gross written premiums.

Property net earned premiums were $37.7 million and $39.9 million for 2025 and 2024, respectively.

Casualty net earned premiums were $54.6 million and $49.2 million for 2025 and 2024, respectively.

• Agency and Insurance Services segment recorded $10.6 million of commission income on direct premiums produced for Belmont Core and $3.5 million of service fee income for technology and claims services provided

to Belmont Core and Non-Core segments in 2025.

There were no revenues for 2024 since these affiliated agreements incepted on January 1, 2025.

The commission and service fee income for the Agency and Insurance Services segment are eliminated in the Company's Consolidated Financial Statements.

• Policy and installment fee income was $0.4 million and $0.3 million in 2025 and 2024, respectively.

• Net losses and loss adjustment expenses related to prior accident years were less than $0.1 million in 2025 and 2024.

• The current accident year loss ratio increased by 16.2 points to 71.5% for 2025 compared to 55.3 for the same period in 2024 driven by the California Wildfires which impacted the current accident year loss ratio by 16.7 points.

The current accident year net losses and loss adjustment expenses and loss ratio are summarized as follows:

Quarters Ended

September 30,

Quarters Ended

September 30,

(Dollars in thousands)

Property losses

Non-catastrophe

Property losses

Casualty losses

Total accident year losses

• 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)

Property losses

Non-catastrophe

Property losses

Casualty losses

Total accident year losses

• 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 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

The table below reconciles the non-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio.

The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within 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.

Total property

Total accident year

• The current accident year non-catastrophe property loss ratio was 44.9% in 2025 compared to 41.9% for the same period in 2024, an increase of 3.0 points driven by higher claims frequency.

• The current accident year catastrophe net losses and loss adjustment expenses increased to $17.9 million compared to $3.3 million for the same period in 2024.

Excluding the California Wildfires, catastrophe net losses and loss adjustment expenses would have been $2.3 million or a loss ratio of 6.0% in 2025 compared to $3.3 million of catastrophe net losses and loss adjustment expenses or an 8.2% catastrophe loss ratio for the same period in 2024.

• The current accident year casualty loss ratio improved by 1.5 points in 2025 mainly driven by improved pricing from rate increases in 2024.

The following table summarizes the components of the expense ratio for the quarters ended March 31, 2025 and 2024:

Quarters Ended March 31,

Net commission expenses

Other underwriting expenses

Expense Ratio

• The increase in the expense ratio is primarily due to decline in earned premiums within Belmont Non-Core and prior accident year commission adjustment.

Net investment income

Net investment income increased 1.8% to $14.8 million in 2025 from $14.5 million for the same period in 2024 mainly driven by improved yield on the Company’s fixed maturities portfolio offset by performance of the Company’s investments in limited partnerships.

Quarters Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Non catastrophe property losses and ratio excluding the effect of prior accident year (1)

Effect of prior accident year

Non catastrophe property losses and ratio (2)

Catastrophe losses and ratio excluding the effect of prior accident year (1)

Effect of prior accident year

Catastrophe losses and ratio (2)

Total property losses and ratio excluding the effect of prior accident year (1)

Effect of prior accident year

Total property losses and ratio (2)

Total casualty losses and ratio excluding the effect of prior accident year (1)

Effect of prior accident year

Total casualty losses and ratio (2)

Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1)

Effect of prior accident year

Total net losses and loss adjustment expense and total loss ratio (2)

(1) Non-GAAP measure / ratio

(2) Most directly comparable GAAP measure / ratio

Non-Core Operations

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

Quarters Ended

September 30,

Nine Months Ended

September 30,

Fixed maturities

Limited partnerships

Net investment income

• Net investment income from the Company’s fixed maturities portfolio increased 7% due to an increase in book yield on the portfolio.

The book yield on the Company’s fixed maturities portfolio was 4.5% at March 31, 2025 compared to 4.3% at March 31, 2024.

During the quarter ended March 31, 2025, approximately $300 million of the fixed maturities portfolio was reinvested at 5.5%, consisting of high quality corporates and structured securities.

As a result of this strategy, duration increased to 1.3 as of March 31, 2025 compared to duration of 0.8 as of December 31, 2024.

• Income from limited partnerships declined to a loss of $0.1 million in 2025 compared to a gain of $0.6 million for the same period in 2024 mainly due to the decline in fair value in one of the Company's limited partnership investments resulting from change in market interest rates.

The Company's fixed maturities portfolio continues to maintain high quality with an AA- average rating and consist of the following:

(Dollars in thousands)

Gross written premiums

Net written premiums

Net earned premiums

Total revenues

Losses and expenses:

Net losses and loss adjustment expenses

Acquisition costs and other underwriting expenses

Underwriting income (loss)

Underwriting Ratios:

Current accident year

Prior accident year

Calendar year loss ratio

Expense ratio

Combined ratio

Accident year combined ratio (1)

(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 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 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 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,

Structured bonds (1)

Other fixed maturities

Total fixed maturities

(1) Structured bonds include asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations.

Excluding the structured bonds, the average duration of the Company’s fixed maturities portfolio was 0.7 years as of March 31, 2025, compared with 0.5 years as of December 31, 2024.

Structured bonds are subject to conditional prepayment rates whereas the remaining bonds have a set maturity date.

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

Net Realized Investment Gains

The components of net realized investment gains for the quarters ended March 31, 2025 and 2024 were as follows:

Quarters Ended

September 30,

(Dollars in thousands)

Property losses

Non-catastrophe

Property losses

Casualty losses

Total accident year losses

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Equity securities

Fixed maturities

Net realized investment gains (losses)

See Note 2 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 ended March 31, 2025 and 2024.

Corporate Expenses

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

Corporate expenses increased to $9.5 million in 2025 compared to $6.4 million for the same period in 2024 primarily driven by $2.9 million of advisory fees consisting mainly of stock compensation approved and granted by the Board of Directors in the 1 st quarter of 2025 related to the Company’s internal reorganization and employee costs related to investment in the Company’s newly formed agency and insurance services companies.

See Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for additional information on the advisory fee.

Income Tax Benefit / Expense

Income tax benefit was $1.1 million on net loss before tax of $5.1 million for the quarter ended March 31, 2025.

This compares to income tax expense of $2.9 million on net income before tax of $14.3 million for the same period in 2024.

See Note 5 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.

Net Income (Loss)

The Company had a net loss of $4.0 million during the quarter ended March 31, 2025.

Excluding the California Wildfires net losses and loss adjustment expenses of $12.2 million after tax, net income would have been $8.2 million compared to a net income of $11.4 million for the same period in 2024.

Amounts recorded for unpaid losses and loss adjustment expenses represent management’s best estimate at March 31, 2025.

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 reserves of $794.8 million and $800.4 million as of March 31, 2025 and December 31, 2024, respectively, and net reserves of $732.1 million and $739.6 million as of March 31, 2025 and December 31, 2024, respectively.

A breakout of the Company’s gross and net reserves is as follows:

March 31, 2025

Gross Reserves

Net Reserves (2)

(Dollars in thousands)

Property losses

Non-catastrophe

Property losses

Casualty losses

Total accident year losses

NM - not meaningful

Expense Ratio

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.

Belmont Non-Core

December 31, 2024

Gross Reserves

Net Reserves (2)

(Dollars in thousands)

Belmont Non-Core

(1) Net losses and loss adjustment expenses incurred but not reported, including the expected future emergence of case reserves.

(2) Does not include reinsurance receivables on paid net losses and loss adjustment expenses.

Gross and net reserves related to Belmont Non-Core are declining as it services the run-off of policies/treaties on de-emphasized and terminated business.

Each reserve category has an implicit frequency and severity for each accident year as a result of the various assumptions made.

If the actual levels of frequency and severity are higher or lower than expected, the ultimate net losses and loss adjustment expenses 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 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 losses and loss adjustment expenses estimate of $66.7 million for claims occurring during the quarter ended March 31, 2025:

Severity Change

(Dollars in thousands)

Frequency Change

The Company’s net reserves for losses and loss adjustment expenses of $732.1 million as of March 31, 2025 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.

Reconciliation of non-GAAP financial measures and ratios

The table below reconciles the non-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio.

The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within Non-Core Operations may be obscured by prior accident year adjustments.

The tables below reconcile the non-GAAP financial measures or ratios, which excludes the impact of prior accident year adjustments and the California Wildfires, to its most directly comparable GAAP measure or ratio.

The Company believes the non-GAAP financial measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends in the Company's segments may be obscured by prior accident year adjustments and the California Wildfires.

These non-GAAP financial measures or ratios should not be considered as a substitute for its most directly comparable GAAP measure or ratio and do not reflect the overall underwriting profitability of the Company.

Quarters Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Non catastrophe property losses and ratio excluding the effect of prior accident year (1)

Net losses and loss adjustment expenses

Non catastrophe property excluding the effect of prior accident year (1)

Effect of prior accident year

Non catastrophe property losses and ratio (2)

Catastrophe losses and ratio excluding the effect of prior accident year (1)

Non catastrophe property (2)

Catastrophe excluding the effect of prior accident year (1)

Effect of prior accident year

Catastrophe losses and ratio (2)

Total property losses and ratio excluding the effect of prior accident year (1)

Catastrophe (2)

Total property excluding the effect of prior accident year (1)

Effect of prior accident year

Total property losses and ratio (2)

Total casualty losses and ratio excluding the effect of prior accident year (1)

Total property (2)

Total casualty excluding the effect of prior accident year (1)

Effect of prior accident year

Total casualty losses and ratio (2)

Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1)

Total casualty (2)

Total property and casualty excluding the effect of prior accident year (1)

Effect of prior accident year

Total net losses and loss adjustment expense and total loss ratio (2)

NM - not meaningful

(1) Non-GAAP measure / ratio

Total property and casualty (2)

(1) Non-GAAP financial measure / ratio

(2) Most directly comparable GAAP measure / ratio

Unallocated Corporate Items

The Company’s fixed income portfolio, excluding cash, continues to maintain high quality with an AA- average rating and a duration of 0.8 years.

Net Investment Income

Quarters Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Gross investment income (1)

Investment expenses

Net investment income

(1) Excludes realized gains and losses

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 4.6% 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 nine months ended September 30, 2024 and 2023 were as follows:

Reconciliation of non-GAAP financial measures and ratios continued

Quarters Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Equity securities

Fixed maturities

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 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, 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 $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 $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.

Current accident year underwriting income excluding California Wildfires

Underwriting income (loss) (1)

Effect of prior accident year

Current accident year underwriting income (loss)

California Wildfires net losses and loss adjustment expenses

Current accident year underwriting income excluding California Wildfires (2)

Net income excluding California Wildfires

Net income (loss) (1)

California Wildfires net losses and loss adjustment expenses (net of tax) (4)

Net income excluding California Wildfires (2)

Underwriting income excluding California Wildfires net losses and loss adjustment expenses

Underwriting income (loss) (1)

California Wildfires net losses and loss adjustment expenses

Underwriting income excluding California Wildfires (2)

Current accident year catastrophe net losses and loss adjustment expenses excluding California Wildfires

Current accident year catastrophe net losses and loss adjustment expenses (3)

California Wildfires net losses and loss adjustment expenses

Current accident year catastrophe net losses and loss adjustment expenses excluding California Wildfires (2)

Current accident year combined ratio excluding California Wildfires

Combined ratio (1)

Effect of prior accident year

Current accident year combined ratio

Impact of California Wildfires

Current accident year combined ratio excluding California Wildfires (2)

Current accident year catastrophe loss ratio excluding California Wildfires (2)

Current accident year catastrophe loss ratio (3)

Impact of California Wildfires

Current accident year catastrophe loss ratio excluding California Wildfires (2)

(1) Most directly comparable GAAP measure / ratio

(2) Non-GAAP financial measure / ratio

(3) See previous table for reconciliation of non-GAAP financial measures or ratios for current accident year catastrophe net losses and loss adjustment expenses.

(4) Represents net losses and loss adjustment expenses of $15.6 million less tax benefit of $3.4 million which was calculated using the estimated annual effective tax rate of 21.7%.

Critical Accounting Estimates and Policies

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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.

Its principal asset is its ownership in the shares of Belmont Holdings GX, Inc., an insurance holding company that owns the insurance companies:

United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, and Penn-Patriot Insurance Company, and Penn-America Underwriters, LLC, an agency and specialized service holding 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.

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 make distribution payments.

In addition, the Company periodically reviews opportunities related to business acquisitions, and as a result, liquidity may be needed in the future.

GBLI Holdings, LLC is a holding company which is a wholly-owned subsidiary of Penn-Patriot Insurance Company.

GBLI Holdings, LLC’s principal asset is its ownership of the shares of its direct and indirect subsidiaries which include United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, and Penn-Star Insurance Company.

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

As of 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.

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.

In order to meet its current short-term and long-term needs, its principal sources of cash include investment income, interest and principal payments on intercompany debt with Belmont Holdings GX, Inc., reimbursement for equity awards granted to employees of Belmont Holdings GX, Inc.

and Penn-America Underwriters, LLC.

Penn-America Underwriters, LLC consists of three insurance agencies, two insurance service companies, and one service company whose current short-term and long-term liquidity needs include but are not limited to the payment of corporate expenses, operating expenses, and capital expenditures in developing information technology platforms.

In order to meet its current short-term and long-term needs, its principal sources of cash include fees from third parties, commissions / service fees from Belmont Holdings GX, Inc., and capital contributions from Global Indemnity Group, LLC.

Belmont Holdings GX, Inc.’s current short-term and long-term liquidity needs include but are not limited to the payment of corporate expenses, payment of interest and principal on intercompany debt, and payment for equity awards granted to its employees by Global Indemnity Group, LLC.

In order to meet its current short-term and long-term needs, its principal sources of cash include dividends from their insurance company subsidiaries and investment income.

The insurance companies’ current short-term and long-term liquidity needs include but are not limited to the payment of claims, commissions, operating expenses, federal taxes, and dividends.

Its principal sources of funds include cash from direct and assumed business written, investment income, and proceeds from sales and maturities of investments.

The Company continuously reviews and assesses the short-term and long-term needs of each of its holding companies, service companies, and insurance companies.

In addition, the Company periodically reviews opportunities related to business acquisitions and as a result, liquidity needs may arise in the future.

Belmont Holdings GX, Inc.

is dependent on dividends from its insurance subsidiaries which 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.

2 unchanged sentences

See Note 21 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2024 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 nine months ended September 30, 2024.

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 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;

• the timing of the Company’s loss payments.

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:

Nine Months Ended

September 30,

There were no dividends declared by the Company's insurance subsidiaries during the quarter ended March 31, 2025.

Sources of operating cash consist primarily of net written premiums and investment income which are used to pay claims, underwriting expenses and corporate expenses.

Operating cash flows are generally used for investing and financing activities.

In accordance with the Company’s distribution policy, funds may be used to pay distributions to the Company’s shareholders.

Net cash provided by operating activities was $2.4 million and $22.7 million for the quarters ended March 31, 2025 and 2024, respectively, consisting of the following:

Quarters Ended

(Dollars in thousands)

Net premiums collected

Net losses paid

Net losses and loss adjustment expenses paid

Underwriting and corporate expenses

Net investment income

Net federal income taxes paid

Interest paid

Net cash provided by operating activities

• The decline in cash flows of $20.3 million in 2025 compared to the same period in 2024 is primarily driven by an increase in current accident year catastrophe property net losses and loss adjustment expenses paid and increase in prior accident year casualty net losses and loss adjustment expenses paid from its Belmont Non-Core Casualty lines of business.

The reconciliation of net income to net cash provided by operating activities is generally influenced by the following:

• the timing of the Company’s collection of premiums and payment of commissions;

• the timing of the Company’s settlements with its reinsurers;

• the timing of the Company’s payments of net losses and loss adjustment expenses.

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, 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.

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, 2025.

Distributions paid to common shareholders were $5.0 million during the quarter ended March 31, 2025.

In addition, distributions of $0.1 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the quarter ended March 31, 2025.

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 $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.

Partial redemption proceeds of $4.4 million were received during the quarter ended March 31, 2025.

The Global Debt Fund, LP had a fair market value of $13.3 million at March 31, 2025.

Other than the items discussed in the preceding paragraphs, there have been no material changes to the Company’s liquidity during the quarter ended March 31, 2025.

Please see Item 7 of Part II in the Company’s 2024 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 nine months ended September 30, 2024.

There have been no material changes to the Company’s capital resources during the quarter ended March 31, 2025.

Please see Item 7 of Part II in the Company’s 2024 Annual Report on Form 10-K for information regarding the Company’s capital resources.

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Cautionary Note Regarding Forward-Looking Statements

Some of the statements under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report may include forward-looking statements within the meaning of Section 21E of the Security Exchange Act of 1934, as amended, that reflect the Company’s current views with respect to future events and financial performance.

Some of the statements under “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report are forward-looking statements within the meaning of Section 21E of the Security Exchange Act of 1934, as amended.

These forward-looking statements reflect the Company’s current views as of the date of this report.

Forward-looking statements are statements that are not historical facts.

These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend,” or “anticipate” or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, expectations or consequences of identified transactions or natural disasters, and statements about the future performance, operations, products and services of the companies.

The Company’s business and operations are and will be subject to a variety of risks, uncertainties and other factors.

Consequently, actual results and experience may materially differ from those contained in any forward-looking statements.

See “Risk Factors” in Item 1A of Part I in the Company’s 2023 Annual Report on Form 10-K for risks, uncertainties and other factors that could cause actual results and experience to differ from those projected.

The 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, including, but not limited to, the impact of legislative or regulatory actions, the impact of natural or man-made disasters, the sufficiency of the Company’s reserves, the impact of emerging claims issues, adverse capital market developments impacting investment performance, ability to effectively start-up or integrate new product opportunities, adverse effect of cyber-attacks, and other factors described in the section captioned “Risk Factors” in Item 1A of Part I in the Company’s 2024 Annual Report on Form 10-K.

These risks are not exhaustive, and new risks and uncertainties emerge from time to time.

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.

Forward-looking statements are inherently uncertain and investors are cautioned not to unduly rely upon such statements.

The Company’s forward-looking statements speak only as of the date of this report or as of the date they were made.

9 unchanged sentences

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