Global Indemnity Group, LLC 10-Q

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes of the Company included elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to the Company’s plans and strategy, constitutes forward-looking statements that involve risks and uncertainties. Please see "Cautionary Note Regarding Forward-Looking Statements" at the end of this Item 2 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained herein. For more information regarding the Company’s business and operations, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 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 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 4.5% 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. 28 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 $1.7 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 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 following table summarizes the Company’s results for the quarters ended March 31, 2025 and 2024: Quarters Ended March 31, % (Dollars in thousands) 2025 2024 Change Gross written premiums $ 98,675 $ 93,488 5.5 % Net written premiums $ 95,864 $ 92,085 4.1 % Net earned premiums $ 93,316 $ 96,579 (3.4 %) Other income 417 345 20.9 % Total revenues 93,733 96,924 (3.3 %) Losses and expenses: Net losses and loss adjustment expenses 66,738 53,384 25.0 % Acquisition costs and other underwriting expenses 37,507 38,269 (2.0 %) Underwriting income (loss) (10,512 ) 5,271 NM Net investment income 14,782 14,520 1.8 % Net realized investment gains 136 847 (83.9 %) Corporate expenses (9,500 ) (6,373 ) 49.1 % Income (loss) before income taxes (5,094 ) 14,265 (135.7 %) Income tax benefit (expense) 1,105 (2,899 ) (138.1 %) Net income (loss) $ (3,989 ) $ 11,366 (135.1 %) Underwriting Ratios: Loss ratio (1) : 71.5 % 55.3 % Expense ratio (2) 40.2 % 39.6 % Combined ratio (3) 111.7 % 94.9 % 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. (2) The expense ratio is a GAAP financial measure that is calculated by dividing the sum of acquisition costs and other underwriting expenses by net earned premiums. (3) The combined ratio is a GAAP financial measure and is the sum of the Company’s loss and expense ratios. 29 Premiums The following table summarizes the change in premium volume by reportable segment: Quarters Ended March 31, Belmont Core Belmont Non-Core Total (Dollars in thousands) 2025 2024 2025 2024 2025 2024 Direct written premiums (1) $ 87,467 $ 91,132 $ 87 $ 92 $ 87,554 $ 91,224 Assumed written premiums (2) 10,922 2,916 199 (652 ) 11,121 2,264 Gross written premiums (3) $ 98,389 $ 94,048 $ 286 $ (560 ) $ 98,675 $ 93,488 Net written premiums (4) $ 95,634 $ 92,596 $ 230 $ (511 ) $ 95,864 $ 92,085 (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 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) 2025 2024 % Change Wholesale Commercial $ 64,884 $ 61,056 6.3 % InsurTech 15,020 12,508 20.1 % Direct written premiums excluding specialty products 79,904 73,564 8.6 % Specialty Products 7,563 17,568 (57.0 %) Total direct written premiums $ 87,467 $ 91,132 (4.0 %) • 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) 2025 2024 % Change Belmont Core $ 10,922 $ 2,916 274.6 % Belmont Non-Core 199 (652 ) 130.5 % Total assumed written premiums $ 11,121 $ 2,264 391.2 % • 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. 30 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 Core Belmont Non-Core Eliminations Total (Dollars in thousands) 2025 2024 2025 2024 2025 2024 2025 2024 2025 2024 Revenues: Net earned premiums $ — $ — $ 92,260 $ 89,132 $ 1,056 $ 7,447 $ — $ — $ 93,316 $ 96,579 Commission and service fee income (1) 14,049 — — — — — (14,049 ) — — — Policy and installment fee income 387 — — 339 30 6 — — 417 345 Total revenues 14,436 — 92,260 89,471 1,086 7,453 (14,049 ) — 93,733 96,924 Losses and expenses: Net losses and loss adjustment expenses — — 66,452 48,909 619 4,475 (333 ) — 66,738 53,384 Net commission expenses — — 32,404 20,891 501 2,532 (10,571 ) — 22,334 23,423 Other underwriting expenses 12,632 — 4,986 14,036 700 810 (3,145 ) — 15,173 14,846 Total losses and expenses 12,632 — 103,842 83,836 1,820 7,817 (14,049 ) — 104,245 91,653 Underwriting income (loss) $ 1,804 $ — $ (11,582 ) $ 5,635 $ (734 ) $ (364 ) $ — $ — $ (10,512 ) $ 5,271 Underwriting Ratios: Loss ratio: Current accident year 72.0 % 54.8 % 61.5 % 60.6 % 71.5 % 55.3 % Prior accident year — 0.1 % (2.9 %) (0.5 %) — — Calendar year loss ratio 72.0 % 54.9 % 58.6 % 60.1 % 71.5 % 55.3 % Expense ratio 40.6 % 39.2 % 113.7 % 44.9 % 40.2 % 39.6 % Combined ratio 112.6 % 94.1 % 172.3 % 105.0 % 111.7 % 94.9 % Accident year combined ratio 112.5 % 94.0 % 162.3 % 105.5 % 111.5 % 94.9 % (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 31 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 March 31, Quarters Ended March 31, (Dollars in thousands) 2025 2024 % Change 2025 2024 Point Change Property Non-catastrophe $ 16,968 $ 16,747 1.3 % 44.9 % 41.9 % 3.0 Catastrophe 17,867 3,273 445.9 % 47.4 % 8.2 % 39.2 Total property 34,835 20,020 74.0 % 92.3 % 50.1 % 42.2 Casualty 31,900 33,363 (4.4 %) 57.4 % 58.9 % (1.5 ) Total accident year $ 66,735 $ 53,383 25.0 % 71.5 % 55.3 % 16.2 • 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, Point 2025 2024 Change Net commission expenses 23.9 % 24.3 % (0.4 ) Other underwriting expenses 16.3 % 15.3 % 1.0 Expense Ratio 40.2 % 39.6 % 0.6 • The increase in the expense ratio is primarily due to decline in earned premiums within Belmont Non-Core and prior accident year commission adjustment. 32 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 March 31, (Dollars in thousands) 2025 2024 Change Fixed maturities $ 14,868 $ 13,923 945 Limited partnerships (86 ) 597 (683 ) Net investment income $ 14,782 $ 14,520 262 • 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) March 31, 2025 December 31, 2024 Structured bonds (1) $ 417,893 $ 259,915 Other fixed maturities 353,996 246,747 U.S. treasuries 543,510 875,246 Total fixed maturities $ 1,315,399 $ 1,381,908 (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 March 31, (Dollars in thousands) 2025 2024 Equity securities $ 123 $ 872 Fixed maturities 13 (25 ) Net realized investment gains (losses) $ 136 $ 847 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. 33 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. Reserves 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) Case IBNR (1) Total Case IBNR (1) Total Belmont Core $ 153,266 $ 300,132 $ 453,398 $ 150,145 $ 291,038 $ 441,183 Belmont Non-Core 108,269 233,181 341,450 73,378 217,556 290,934 Total $ 261,535 $ 533,313 $ 794,848 $ 223,523 $ 508,594 $ 732,117 December 31, 2024 Gross Reserves Net Reserves (2) (Dollars in thousands) Case IBNR (1) Total Case IBNR (1) Total Belmont Core $ 146,261 $ 298,925 $ 445,186 $ 146,197 $ 289,955 $ 436,152 Belmont Non-Core 104,145 251,060 355,205 67,055 236,430 303,485 Total $ 250,406 $ 549,985 $ 800,391 $ 213,252 $ 526,385 $ 739,637 (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 34 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) -10% -5% 0% 5% 10% Frequency Change -5% (9,677 ) (6,507 ) (3,337 ) (167 ) 3,003 -3% (8,475 ) (5,239 ) (2,002 ) 1,235 4,471 -2% (7,875 ) (4,605 ) (1,335 ) 1,935 5,205 -1% (7,274 ) (3,971 ) (667 ) 2,636 5,939 0% (6,674 ) (3,337 ) — 3,337 6,674 1% (6,073 ) (2,703 ) 667 4,037 7,408 2% (5,472 ) (2,069 ) 1,335 4,738 8,142 3% (4,872 ) (1,435 ) 2,002 5,439 8,876 5% (3,670 ) (167 ) 3,337 6,840 10,344 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. 35 Reconciliation of non-GAAP financial measures and ratios 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 March 31, 2025 2024 (Dollars in thousands) Net losses and loss adjustment expenses Loss Ratio Net losses and loss adjustment expenses Loss Ratio Property Non catastrophe property excluding the effect of prior accident year (1) $ 16,968 44.9 % $ 16,747 41.9 % Effect of prior accident year (560 ) (1.5 %) (136 ) (0.3 %) Non catastrophe property (2) $ 16,408 43.4 % $ 16,611 41.6 % Catastrophe excluding the effect of prior accident year (1) $ 17,867 47.4 % $ 3,273 8.2 % Effect of prior accident year (257 ) (0.7 %) (58 ) (0.1 %) Catastrophe (2) $ 17,610 46.7 % $ 3,215 8.1 % Total property excluding the effect of prior accident year (1) $ 34,835 92.3 % $ 20,020 50.1 % Effect of prior accident year (817 ) (2.2 %) (194 ) (0.4 %) Total property (2) $ 34,018 90.1 % $ 19,826 49.7 % Casualty Total casualty excluding the effect of prior accident year (1) $ 31,900 57.4 % $ 33,363 58.9 % Effect of prior accident year 820 1.5 % 195 0.3 % Total casualty (2) $ 32,720 58.9 % $ 33,558 59.2 % Total Total property and casualty excluding the effect of prior accident year (1) $ 66,735 71.5 % $ 53,383 55.3 % Effect of prior accident year 3 — 1 — Total property and casualty (2) $ 66,738 71.5 % $ 53,384 55.3 % (1) Non-GAAP financial measure / ratio (2) Most directly comparable GAAP measure / ratio 36 Reconciliation of non-GAAP financial measures and ratios continued Quarters Ended March 31, (Dollars in thousands) 2025 2024 Current accident year underwriting income excluding California Wildfires Underwriting income (loss) (1) $ (10,512 ) $ 5,271 Effect of prior accident year 184 1 Current accident year underwriting income (loss) (10,328 ) 5,272 California Wildfires net losses and loss adjustment expenses 15,600 — Current accident year underwriting income excluding California Wildfires (2) $ 5,272 $ 5,272 Net income excluding California Wildfires Net income (loss) (1) $ (3,989 ) $ 11,366 California Wildfires net losses and loss adjustment expenses (net of tax) (4) 12,216 — Net income excluding California Wildfires (2) $ 8,227 $ 11,366 Underwriting income excluding California Wildfires net losses and loss adjustment expenses Underwriting income (loss) (1) $ (10,512 ) $ 5,271 California Wildfires net losses and loss adjustment expenses 15,600 — Underwriting income excluding California Wildfires (2) $ 5,088 $ 5,271 Current accident year catastrophe net losses and loss adjustment expenses excluding California Wildfires Current accident year catastrophe net losses and loss adjustment expenses (3) $ 17,867 $ 3,273 California Wildfires net losses and loss adjustment expenses (15,600 ) — Current accident year catastrophe net losses and loss adjustment expenses excluding California Wildfires (2) $ 2,267 $ 3,273 Current accident year combined ratio excluding California Wildfires Combined ratio (1) 111.7 % 94.9 % Effect of prior accident year (0.2 %) — Current accident year combined ratio 111.5 % 94.9 % Impact of California Wildfires (16.7 %) — Current accident year combined ratio excluding California Wildfires (2) 94.8 % 94.9 % Current accident year catastrophe loss ratio excluding California Wildfires (2) Current accident year catastrophe loss ratio (3) 47.4 % 8.2 % Impact of California Wildfires (41.4 %) — Current accident year catastrophe loss ratio excluding California Wildfires (2) 6.0 % 8.2 % (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%. 37 Critical Accounting Estimates and Policies The Company’s consolidated financial statements are prepared in conformity with GAAP, which require it to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions. The most critical accounting policies involve significant estimates and include those used in determining the liability for unpaid losses and loss adjustment expenses, recoverability of reinsurance receivables, investments, fair value measurements, goodwill and intangible assets, deferred acquisition costs, and taxation. For a detailed discussion on each of these policies, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes to any of these policies or underlying methodologies during the current year. Liquidity and Capital Resources Sources and Uses of Funds Global Indemnity Group, LLC is a holding company. Its principal asset is its ownership 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. 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. See “Regulation - Statutory Accounting Principles” in Item 1 of Part I of the Company’s 2024 Annual Report on Form 10-K. Key differences relate to, among other items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes. 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 by the Company's insurance subsidiaries during the quarter ended March 31, 2025. 38 Cash Flows 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 March 31, (Dollars in thousands) 2025 2024 Change Net premiums collected $ 108,751 $ 101,493 $ 7,258 Net losses and loss adjustment expenses paid (80,851 ) (47,606 ) (33,245 ) Underwriting and corporate expenses (49,498 ) (43,187 ) (6,311 ) Net investment income 23,995 11,976 12,019 Net cash provided by operating activities $ 2,397 $ 22,676 $ (20,279 ) • 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; and • 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. Liquidity 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 $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. 39 Capital Resources 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. Off Balance Sheet Arrangements The Company has no off balance sheet arrangements. Cautionary Note Regarding Forward-Looking Statements Some of the statements under “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report 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 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. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. Item 3. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in interest rates, equity prices, credit risk, illiquidity, foreign exchange rates and commodity prices. The Company’s consolidated balance sheets includes the estimated fair values of assets that are subject to market risk. The Company’s primary market risks are interest rate risk and credit risks associated with investments in fixed maturities, equity price risk associated with investments in equity securities, and foreign exchange risk associated with premium received that is denominated in foreign currencies. The Company has no commodity risk. 40 There have been no material changes to the Company’s market risk since December 31, 2024. The Company’s investment grade fixed income portfolio continues to maintain high quality with an AA- average rating and a duration of 1.3 years. Please see Item 7A of Part II in the Company’s 2024 Annual Report on Form 10-K for information regarding the Company’s market risk.