What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 167 added, 98 removed, 259 unchanged (51% of the section changed)

9 unchanged sentences

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.

Ferguson and Associates, 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.

1 unchanged sentence

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.

Segment results for the quarter and six months ended June 30, 2024 have been recast to conform to the new reportable segments.

Financial Highlights

2025 First Quarter Results of Operations

2025 Second Quarter Results of Operations

• Gross written premiums increased 6.1% to $106.8 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 underwriting income increased 61% to $5.6 million for 2025 compared to $3.5 million of underwriting income for the same period in 2024.

• Net investment income of $14.7 million in 2025 was 3.9% lower than the same period in 2024 due to loss from investment in limited partnerships of $0.6 million.

Net investment income from the Company's fixed maturities portfolio increased 2.3% to $15.3 million.

Book yield on the fixed maturities portfolio increased to 4.54% at June 30, 2025 from 4.49% at March 31, 2025.

• Current accident year combined ratio was 94.6% in 2025 compared to 96.7% 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;

• Net income of $10.3 million, or $0.71 per share diluted, in 2025 compared to $10.1 million, or $0.73 per share diluted, for the same period in 2024.

2025 Second Quarter Consolidated Financial Condition

• Total cash and investments of $1.4 billion at June 30, 2025 and December 31, 2024;

fixed maturities and cash comprise 98% 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.

• Total assets of $1.7 billion at June 30, 2025 and December 31, 2024.

• No debt at June 30, 2025 and December 31, 2024.

• Since the Company's initial public offering in 2003, the total capital returned to shareholders was $639.3 million, comprising $522.2 million of share repurchases and $117.1 million of distributions / dividends.

This includes $10.2 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.

• Shareholders' equity increased by $6.1 million to $695.3 million at June 30, 2025 from $687.1 million at March 31, 2025.

• Book value per common share increased to $48.35 at June 30, 2025 from $47.85 at March 31, 2025.

Results of Operations

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

The following table summarizes the Company’s results for the quarters and six months ended June 30, 2025 and 2024:

Quarters Ended

Six Months Ended

(Dollars in thousands)

10 unchanged sentences

Corporate expenses

Income (loss) before income taxes

Income tax benefit (expense)

Net income (loss)

Income before income taxes

Income tax expense

Underwriting Ratios:

2 unchanged sentences

Combined ratio (3)

NM - not meaningful

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

2 unchanged sentences

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

Quarters Ended March 31,

Quarters Ended June 30,

Belmont Non-Core

4 unchanged sentences

Net written premiums (4)

Six Months Ended June 30,

Belmont Non-Core

(Dollars in thousands)

Direct written premiums (1)

Assumed written premiums (2)

Gross written premiums (3)

Net written premiums (4)

(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 unchanged sentences

(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.

Gross written premiums increased by 6.1% to $106.8 million for the quarter ended June 30, 2025 compared to $100.7 million for the same period in 2024 and increased 5.8% to $205.5 million for the six months ended June 30, 2025 compared to $194.2 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,

Quarters Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

Wholesale Commercial

Vacant Express

Direct written premiums excluding specialty products

1 unchanged sentence

Total direct written premiums

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

• In the aggregate, direct written premiums for Wholesale Commercial, Vacant Express, and Collectibles grew by 10.3% and 9.5% for the quarter and six months ended June 30, 2025, respectively, as compared to same periods in 2024.

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%.

• Direct written premiums for Specialty Products declined by 26.1% and 42.0% for the quarter and six months ended June 30, 2025, respectively, as compared to same periods in 2024 due to terminating products not meeting profitability expectations.

Excluding terminated business, growth in direct written premiums would have been 32.4% and 20.4% for the quarter and six months ended June 30, 2025, respectively.

Assumed written premium produced by the Belmont segments:

Quarters Ended March 31,

Quarters Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

1 unchanged sentence

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.

NM - not meaningful

• Belmont Core's assumed business grew to $12.0 million and $23.0 million for the quarter and six months ended June 30, 2025, respectively, from $6.5 million and $9.4 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

Underwriting Income (Loss)

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

Quarters Ended March 31,

Quarters Ended June 30,

Agency and Insurance Services

19 unchanged sentences

(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.

The Company generated underwriting income of $5.8 million for the quarter ended June 30, 2025 compared to $3.5 million of underwriting income for the same period in 2024.

The current accident year combined ratio improved 2.1 points to 94.6% for the quarter ended June 30, 2025 from 96.7% for the same period in 2024.

• Net earned premiums within the Belmont Core segment increased by 9.1% to $97.5 million for the quarter ended June 30, 2025 compared to $89.4 million for the same period in 2024 due to growth in its gross written premiums.

Property net earned premiums were $40.4 million and $39.1 million for the quarters ended June 30, 2025 and 2024, respectively.

Casualty net earned premiums were $57.1 million and $50.2 million for the quarters ended June 30, 2025 and 2024, respectively.

• Agency and Insurance Services segment recorded $11.5 million of commission income on direct premiums produced for Belmont Core and $3.4 million of service fee income for technology and claims services provided to Belmont Core and Non-Core segments during the quarter ended June 30, 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 $0.5 million and $0.4 million for the quarters ended June 30, 2025 and 2024, respectively.

• The current accident year loss ratio improved by 2.3 points to 55.6% for the quarter ended June 30, 2025 compared to 57.9% for the same period in 2024 primarily driven by an improvement in the non-catastrophe property loss ratio.

• Net losses and loss adjustment expenses related to prior accident years were less than $0.1 million for the quarters ended June 30, 2025 and 2024.

Please see Note 6 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.

Six Months Ended June 30,

Agency and Insurance Services

Belmont Non-Core

(Dollars in thousands)

Net earned premiums

Commission and service fee income (1)

Policy and installment fee income

Total revenues

Losses and expenses:

Net losses and loss adjustment expenses

Net commission expenses

Other underwriting expenses

Total losses and 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) Consists of intersegment revenues, which are eliminated in consolidation.

Underwriting loss of $4.7 million for the six months ended June 30, 2025 includes net losses and loss adjustment expenses related to California Wildfires in January 2025 ("California Wildfires"), totaling $15.7 million, compared to $8.8 million of underwriting income for the same period in 2024.

Excluding California Wildfires, the underwriting income was $11.0 million for the six months ended June 30, 2025.

The current accident year combined ratio, excluding the impact of the

California Wildfires of 8.3 points, was 94.7% for the six months ended June 30, 2025 compared to 95.8% for the same period in 2024.

• Net earned premiums within the Belmont Core segment increased by 6.3% to $189.8 million for the six months ended June 30, 2025 compared to $178.5 million for the same period in 2024 due to growth in its gross written premiums.

Property net earned premiums were $78.1 million and $79.0 million for the six months ended June 30, 2025 and 2024, respectively.

Casualty net earned premiums were $111.7 million and $99.5 million for the six months ended June 30, 2025 and 2024, respectively.

• Agency and Insurance Services segment recorded $22.0 million of commission income on direct premiums produced for Belmont Core and $6.9 million of service fee income for technology and claims services provided to Belmont Core and Non-Core segments for the six months ended June 30, 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.

• Policy and installment fee income was $1.0 million and $0.7 million for the six months ended June 30, 2025 and 2024, respectively.

• The current accident year loss ratio increased by 6.9 points to 63.5% for the six months ended June 30, 2025 compared to 56.6% for the same period in 2024 driven by the California Wildfires which impacted the current accident year loss ratio by 8.3 points.

• Net losses and loss adjustment expenses related to prior accident years were less than $0.1 million for the six months ended June 30, 2025 and 2024.

Please see Note 6 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 net losses and loss adjustment expenses and loss ratio are summarized as follows:

5 unchanged sentences

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,

• The current accident year non-catastrophe property loss ratio improved by 7.4 points during the quarter ended June 30, 2025 as compared to the same period in 2024 driven by lower claims frequency.

• The current accident year catastrophe loss ratio increased by 3.9 points during the quarter ended June 30, 2025 as compared to the same period in 2024 recognizing higher claims severity.

• The current accident year casualty loss ratio improved by 1.3 points during the quarter ended June 30, 2025 mainly driven by improved pricing from rate increases in 2024.

Six Months Ended

(Dollars in thousands)

Property losses

Non-catastrophe

Property losses

Casualty losses

Total accident year losses

• The current accident year non-catastrophe property loss ratio was 42.4% for the six months ended June 30, 2025 compared to 44.6% for the same period in 2024, an improvement of 2.2 points driven by lower claims frequency.

• The current accident year catastrophe net losses and loss adjustment expenses increased to $23.1 million for the six months ended June 30, 2025 compared to $6.8 million for the same period in 2024.

Excluding the California Wildfires, catastrophe net losses and loss adjustment expenses would have been $7.4 million or a loss ratio of 9.4% for the six months ended June 30, 2025 compared to $6.8 million of catastrophe net losses and loss adjustment expenses or an 8.6% catastrophe loss ratio for the same period in 2024.

• The current accident year casualty loss ratio improved by 1.5 points for the six months ended June 30, 2025 mainly driven by improved pricing from rate increases in 2024.

The following table summarizes the components of the expense ratio for the quarters and six months ended June 30, 2025 and 2024:

Quarters Ended June 30,

Six Months Ended June 30,

Net commission expenses

1 unchanged sentence

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.

• The increase in the expense ratio for the six months ended June 30, 2025 is primarily due to decline in earned premiums within Belmont Non-Core partially offset by a decrease in the commission expense ratio due to mix of business.

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.

Net investment income decreased 3.9% to $14.7 million for the quarter ended June 30, 2025 from $15.3 million for the same period in 2024 and decreased 1.1% to $29.5 million for the six months ended June 30, 2025 from $29.8 million for the same period in 2024 mainly driven by performance in limited partnerships offset by improved yield on fixed maturities.

Quarters Ended

Six Months Ended

(Dollars in thousands)

2 unchanged sentences

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.

• Net investment income from the Company’s fixed maturities portfolio increased 2.3% and 4.4% for the quarter and six months ended June 30, 2025, respectively, as compared to the same periods in 2024 due to an improved yield.

The book yield on the Company’s fixed maturities portfolio was 4.54% and 4.47% as of June 30, 2025 and June 30, 2024, respectively.

During the six months ended June 30, 2025, approximately $400 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 1.2 as of June 30, 2025 compared to duration of 0.8 as of December 31, 2024.

• Income from limited partnerships declined to a loss of $0.7 million for the six months ended June 30, 2025 compared to a gain of $0.9 million for the same period in 2024 mainly due to the decline in fair value in one of the Company's limited partnership investments.

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

4 unchanged sentences

(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.

Excluding the structured bonds, the average duration of the Company’s fixed maturities portfolio was 0.6 years as of June 30, 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.

1 unchanged sentence

Net Realized Investment Gains

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

The components of net realized investment gains for the quarters and six months ended June 30, 2025 and 2024 were as follows:

Quarters Ended

Six Months Ended

(Dollars in thousands)

1 unchanged sentence

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.

Net realized investment gains

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 and six months ended June 30, 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.

Corporate expenses increased $1.1 million to $7.5 million for the quarter ended June 30, 2025 from $6.4 million for the same period in 2024 primarily due to an increase in professional fees related to Company’s newly formed agency and insurance services companies.

Corporate expenses increased $4.3 million to $17.0 million for the six months ended June 30, 2025 compared to $12.8 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 to Fox Paine & Company, LLC in the first quarter of 2025 related to the Company’s internal reorganization and employee costs and professional fees 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.

Income Tax Expense

Income tax expense was $2.8 million on net income before tax of $13.1 million for the quarter ended June 30, 2025.

This compares to income tax expense of $2.6 million on net income before tax of $12.7 million for the same period in 2024.

Income tax expense was $1.7 million on net income before tax of $8.0 million for the six months ended June 30, 2025.

This compares to income tax expense of $5.5 million on net income before tax of $26.9 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.

The Company had net income of $10.3 million during the quarter ended June 30, 2025 compared to net income of $10.1 million for the same period in 2024.

The Company had net income of $6.4 million during the six months ended June 30, 2025.

Excluding the California Wildfires net losses and loss adjustment expenses of $12.2 million after tax, net income would have been $18.8 million for the six months ended June 30, 2025 compared to net income of $21.5 million for the same period in 2024.

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

This resulted in carried gross reserves of $776.1 million and $800.4 million as of June 30, 2025 and December 31, 2024, respectively, and net reserves of $716.6 million and $739.6 million as of June 30, 2025 and December 31, 2024, respectively.

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

March 31, 2025

June 30, 2025

Gross Reserves

12 unchanged sentences

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.

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:

on the Company’s current accident year net losses and loss adjustment expenses estimate of $119.7 million for claims occurring during the six months ended June 30, 2025:

Severity Change

1 unchanged sentence

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.

The Company’s net reserves for losses and loss adjustment expenses of $716.6 million as of June 30, 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.

2 unchanged sentences

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

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

Quarters Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

1 unchanged sentence

Net losses and loss adjustment expenses

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

16 unchanged sentences

Reconciliation of non-GAAP financial measures and ratios continued

Quarters Ended

Six Months Ended

(Dollars in thousands)

29 unchanged sentences

(2) Non-GAAP financial measure / ratio.

(3) Represents net losses and loss adjustment expenses of $15.7 million less tax benefit of $3.3 million.

(4) 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

7 unchanged sentences

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.

Its principal assets are its ownership in the shares of (i) Belmont Holdings GX, Inc., an insurance holding company that owns the following insurance companies:

United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, and Penn-Patriot Insurance Company, and (ii) 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.

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., and 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.

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, capital expenditures in developing information technology platforms, 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 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.

In order to meet its current short-term and long-term needs, its principal sources of cash include dividends from 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.

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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.

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.

Extraordinary dividends of $100.0 million, in aggregate, were declared by the Company's insurance subsidiaries for distribution to Belmont Holdings GX, Inc.

in June 2025.

The dividends by the Company’s insurance subsidiaries were approved by the respective departments of insurance in Pennsylvania, Indiana and Virginia in July 2025.

These dividends will be paid in the third quarter of 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

Funds may be used to pay distributions to the Company’s shareholders.

Net cash provided by operating activities was $9.4 million and $36.9 million for the six months ended June 30, 2025 and 2024, respectively, consisting of the following:

Six Months Ended

(Dollars in thousands)

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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 decline in cash flows of $27.5 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 the 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:

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

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

The Board of Directors approved quarterly distribution payments of $0.35 per common share to all shareholders of record on the close of business on March 21, 2025 and June 20, 2025.

Distributions paid to common shareholders were $10.0 million during the six months ended June 30, 2025.

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

Partial redemption proceeds of $4.4 million were received during the quarter and six months ended June 30, 2025.

The Global Debt Fund, LP had a fair market value of $12.5 million at June 30, 2025.

Other than the items discussed in the preceding paragraphs, there have been no material changes to the Company’s liquidity during the quarter and six months ended June 30, 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 ended March 31, 2025.

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

Some of the statements under “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.

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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 consolidated balance sheets include 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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis