What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 195 added, 251 removed, 397 unchanged (53% of the section changed)

5 unchanged sentences

Recent Developments

Sale of Renewal Rights related to Farm, Ranch & Stable and Sale of American Reliable Insurance Company.

On August 8, 2022 , the Company sold the renewal rights related to all business lines within its Farm, Ranch & Stable segment for business written on or after August 8, 2022 to Everett Cash Mutual Insurance Company.

The Company will retain the unearned premium reserves for business written prior to August 8, 2022.

Everett Cash Mutual Insurance Company is also acquiring the Company’s wholly owned subsidiary, American Reliable Insurance Company, for book value which is expected to be $10.0 million at the time of closing.

The transaction is subject to receiving regulatory approval which is expected to be received during the 4 th quarter of 2022.

Under the agreements, total consideration to be paid by Everett Cash Mutual Insurance Company is $40 million.

Distributions

The Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 21, 2022.

Distributions paid to common shareholders were $3.7 million during the quarter ended March 31, 2022.

In addition, distributions of $0.1 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the quarter ended March 31, 2022.

Board of Directors

Effective January 1, 2022, Bruce R.

Lederman ceased to be a Fox Paine Entities’ appointed member of the Company’s Board of Directors.

Effective January 22, 2022, Jason B.

Hurwitz ceased to be a Fox Paine Entities’ appointed member of the Company’s Board of Directors.

Effective February 9, 2022, James R.

became a Fox Paine Entities’ appointed member of the Company’s Board of Directors.

Holt is a member of the Audit Committee, the Nomination, Compensation & Governance Committee, the Enterprise Risk Management Committee, and the Technology Committee.

Effective April 13, 2022, James D.

Wehr is no longer a Designated Director of the Company’s Board of Directors and his service to the Company’s Board of Directors ended on the same date.

The Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 21, 2022 and June 20, 2022.

Distributions paid to common shareholders were $7.3 million during the six months ended June 30, 2022.

In addition, distributions of $0.2 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the six months ended June 30, 2022.

AM Best Rating

AM Best has seven Rating Categories in the AM Best Financial Strength Rating Scale.

The categories ranging from best to worst are Superior, Excellent, Good, Fair, Marginal, Weak and Poor.

Within each rating category, there are rating notches of plus or minus to show additional gradation of the ratings.

On May 19, 2022, AM Best affirmed the financial strength rating of "A" (Excellent) for the U.S.

operating subsidiaries of Global Indemnity Group, LLC.

Redemption of Debt

9 unchanged sentences

Commercial Specialty operates predominantly in the excess and surplus lines marketplace.

Commercial Specialty also offers several specialty admitted property and casualty products.

The Company manages its Commercial Specialty segment via product classifications.

7 unchanged sentences

It uses its capital capacity to write niche and casualty-focused treaties and business which meet the Company’s risk tolerance and return thresholds.

The Company’s Farm, Ranch & Stable segment, primarily via American Reliable, provides specialized property and casualty coverage including Commercial Farm Auto and Excess/Umbrella Coverage for the agriculture industry as well as specialized insurance products for the equine mortality and equine major medical industry.

These insurance products are sold through a group of approximately 240 agents, primarily comprised of wholesalers and retail agents, with a selected number having specific binding authority.

The Company’s Exited Lines segment represents lines of business that are no longer being written or are in runoff.

These insurance products were distributed through a group of approximately 205 wholesale general agents, wholesale insurance brokers, program administrators, and retail agents.

Exited Lines includes specialty personal lines property and casualty products such as manufactured home, dwelling, motorcycle, watercraft and certain homeowners business, certain business within Property Brokerage, property and catastrophe reinsurance treaties, Farm, Ranch, & Stable business, and specialized insurance products for the equine mortality and equine major medical industry.

These insurance products were distributed through wholesale general agents, wholesale insurance brokers, program administrators, and retail agents.

The Company derives its revenues primarily from premiums paid on insurance policies that it writes and from income generated by its investment portfolio, net of fees paid for investment management services.

11 unchanged sentences

Actual results could differ from those estimates and assumptions.

GLOBAL INDEMNITY GROUP, LLC

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, 2021.

There have been no significant changes to any of these policies or underlying methodologies during the current year.

For a detailed discussion on each of these policies,

GLOBAL INDEMNITY GROUP, LLC

please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 .

There have been no significant changes to any of these policies or underlying methodologies during the curre n t year .

Results of Operations

The following table summarizes the Company’s results for the quarters ended March 31, 2022 and 2021:

The following table summarizes the Company’s results for the quarters and six months ended June 30, 2022 and 2021:

Quarters Ended

Six Months Ended

(Dollars in thousands)

6 unchanged sentences

Acquisition costs and other underwriting expenses

Underwriting income (loss)

Underwriting income

Net investment income

Net realized investment gains (losses)

Other income (loss)

Corporate and other operating expenses

Interest expense

Loss on extinguishment of debt

Income (loss) before income taxes

Income tax benefit

Income tax expense (benefit)

Net income (loss)

10 unchanged sentences

Quarters Ended

Six Months Ended

(Dollars in thousands)

2 unchanged sentences

Reinsurance Operations (3)

Farm, Ranch & Stable

Continuing Lines

3 unchanged sentences

Reinsurance Operations (3)

Farm, Ranch & Stable

Continuing Lines

3 unchanged sentences

Reinsurance Operations (3)

Farm, Ranch & Stable

Continuing Lines

3 unchanged sentences

Reinsurance Operations (3)

Farm, Ranch & Stable

Continuing Lines

Total net earned premiums

NM – not meaningful

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 unchanged sentence

External business only, excluding business assumed from affiliates.

Gross written premiums increased by 16.8% for the quarter ended March 31, 2022 as compared to same period in 2021.

The increase in gross written premiums is mainly due to the continued growth of existing programs, increased pricing, and several new programs within Commercial Specialty, the organic growth of existing casualty treaties within Reinsurance Operations, and growth of mortality business and increased pricing within Farm, Ranch & Stable partially offset by a reduction in premiums within Exited Lines.

Gross written premiums increased by 12.3% and 14.5% for the quarter and six months ended June 30, 2022, respectively, as compared to same periods in 2021.

The increase in gross written premiums is mainly due to the continued growth of existing programs, increased pricing, and several new programs within Commercial Specialty, the organic growth of existing casualty treaties within Reinsurance Operations, partially offset by a reduction in premiums within Exited Lines.

GLOBAL INDEMNITY GROUP, LLC

1 unchanged sentence

Quarters Ended

Six Months Ended

Commercial Specialty

Reinsurance Operations

Farm, Ranch & Stable

Continuing Lines

3 unchanged sentences

Reinsurance Operations

Farm, Ranch & Stable

Continuing Lines

3 unchanged sentences

Reinsurance Operations

Farm, Ranch & Stable

Continuing Lines

4 unchanged sentences

Quarters Ended

Six Months Ended

(Dollars in thousands)

1 unchanged sentence

Reinsurance Operations

Farm, Ranch & Stable

Continuing Lines

The net premium retention for the quarter ended March 31, 2022 decreased by 6.8 points as compared to the same period in 2021.

The net premium retention for both the quarter and six months ended June 30, 2022 decreased by 6.8 points as compared to the same periods in 2021.

The reduction in retention is primarily driven by the Company entering into an agreement effective November 30, 2021 where American Family Mutual Insurance Company agreed to reinsure 100% of the Company’s unearned premium reserves of the same types as the policies included in the sale of the renewal rights of the Company’s manufactured and dwelling homes products that were in force as of November 30, 2021.

1 unchanged sentence

Net Earned Premiums

Net earned premiums within the Commercial Specialty segment increased by 16.6% for the quarter ended March 31, 2022 as compared to the same period in 2021.

The increase in net earned premiums was primarily due to a growth in premiums

Net earned premiums within the Commercial Specialty segment increased by 16.1% and 16.4% for the quarter and six months ended June 30, 2022, respectively, as compared to the same periods in 2021.

The increase in net earned premiums was primarily due to a growth in premiums written as a result of organic growth from existing agents, pricing increases, and several new programs.

Property net earned premiums were $36.8 million and $34.7 million for the quarters ended June 30, 2022 and 2021, respectively, and $72.3 million and $71.9 million for the six months ended June 30, 2022 and 2021,

GLOBAL INDEMNITY GROUP, LLC

written as a result of organic growth from existing agents, pricing increases, and several new programs.

Property net earned premiums were $ 3 5.5 million and $ 37.1 million for the quarter s ended March 31, 2022 and 2021 , respectively .

Casualty net earned premiums were $ 56.3 million and $ 41.6 million for the quarters ended March 31, 2022 and 2021 , respectively.

Net earned premiums within the Reinsurance Operations segment increased by 108.1% for the quarter ended March 31, 2022 as compared to the same period in 2021 primarily due to organic growth of existing casualty treaties.

Property net earned premiums were less than $0.1 million for the quarter ended March 31, 2022.

There was no property net earned premiums for the quarter ended March 31, 2021.

Casualty net earned premiums were $34.9 million and $16.8 million for the quarters ended March 31, 2022 and 2021, respectively.

Net earned premiums within the Farm, Ranch & Stable segment decreased by 2.7% for the quarter ended March 31, 2022 as compared to the same periods in 2021.

The decrease in net earned premiums was primarily due to the continued reduction of catastrophe exposed business in prior periods.

Property net earned premiums were $13.3 million and $13.6 million for the quarters ended March 31, 2022 and 2021, respectively.

Casualty net earned premiums were $4.3 million and $4.6 million for the quarters ended March 31, 2022 and 2021, respectively.

Net earned premiums within the Exited Lines segment decreased by 85.2% for the quarter ended March 31, 2022 as compared to the same periods in 2021 primarily due to the sale of the renewal rights related to the Company’s manufactured and dwelling home products on October 26, 2021.

respectively .

Casualty net earned premiums were $ 5 8.3 million and $ 4 7.2 million for the quarters ended June 30, 2022 and 2021 , respectively , and $ 114.6 million and $ 88.

8 million for the six months ended June 30, 2022 and 2021 , respectively .

Net earned premiums within the Reinsurance Operations segment increased by 113.7% and 111.0% for the quarter and six months ended June 30, 2022, respectively, as compared to the same periods in 2021 primarily due to organic growth of existing casualty treaties.

There was no property net earned premiums for the quarters and six months ended June 30, 2022 and 2021.

Casualty net earned premiums were $38.6 million and $18.1 million for the quarters ended June 30, 2022 and 2021, respectively, and $73.6 million and $34.9 million for the six months ended June 30, 2022 and 2021, respectively.

Net earned premiums within the Exited Lines segment decreased by 55.5% and 54.8% for the quarter and six months ended June 30, 2022, respectively, as compared to the same periods in 2021 primarily due to the sale of the renewal rights related to the Company’s manufactured and dwelling home products on October 26, 2021.

The decrease in net earned premiums is also due to exiting lines of business unrelated to the company’s continuing businesses.

Property net earned premiums were $4.3 million and $28.3 million for the quarters ended March 31, 2022 and 2021, respectively.

Casualty net earned premiums were $0.1 million and $1.7 million for the quarters ended March 31, 2022 and 2021, respectively.

Management’s best estimate at March 31, 2022 was recorded as the loss reserve.

Property net earned premiums were $16.6 million and $43.1 million for the quarters ended June 30, 2022 and 2021, respectively, and $34.2 million and $85.0 million for the six months ended June 30, 2022 and 2021, respectively.

Casualty net earned premiums were $5.4 million and $6.2 million for the quarters ended June 30, 2022 and 2021, respectively, and $9.8 million and $12.6 million for the six months ended June 30, 2022 and 2021, respectively.

Management’s best estimate at June 30, 2022 was recorded as the loss reserve.

Management’s best estimate is as of a particular point in time and is based upon known facts, the Company’s actuarial analyses, current law, and the Company’s judgment.

This resulted in carried gross and net reserves of $770.3 million and $677.1 million, respectively, as of March 31, 2022.

A breakout of the Company’s gross and net reserves, as of March 31, 2022, is as follows:

This resulted in carried gross and net reserves of $804.7 million and $710.5 million, respectively, as of June 30, 2022.

A breakout of the Company’s gross and net reserves, as of June 30, 2022, is as follows:

Gross Reserves

2 unchanged sentences

Reinsurance Operations

Farm, Ranch & Stable

Continuing Lines

3 unchanged sentences

Reinsurance Operations

Farm, Ranch & Stable

Continuing Lines

4 unchanged sentences

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

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

GLOBAL INDEMNITY GROUP, LLC

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 $87.8 million for claims occurring during the quarter ended March 31, 2022 :

impact of changes (which could be favorable or unfavorable) in frequency and severity on the Company’s current accident year net loss estimate of $183.9 million for claims occurring during the six months ended June 30, 2022 :

Severity Change

1 unchanged sentence

Frequency Change

The Company’s net reserves for losses and loss adjustment expenses of $677.1 million as of March 31, 2022 relate to multiple accident years.

The Company’s net reserves for losses and loss adjustment expenses of $710.5 million as of June 30, 2022 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.

GLOBAL INDEMNITY GROUP, LLC

Underwriting Results

Commercial Specialty

The components of income and loss from the Company’s Commercial Specialty segment and corresponding underwriting ratios are as follows:

The components of income from the Company’s Commercial Specialty segment and corresponding underwriting ratios are as follows:

Quarters Ended

Six Months Ended

(Dollars in thousands)

6 unchanged sentences

Acquisition costs and other underwriting expenses

Underwriting income (loss)

Underwriting income

Quarters Ended

Six Months Ended

Underwriting Ratios:

4 unchanged sentences

Combined ratio

NM – not meaningful

GLOBAL INDEMNITY GROUP, LLC

3 unchanged sentences

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.

Quarters Ended March 31,

Quarters Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

17 unchanged sentences

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

Other income was $0.3 million and $0.2 million for the quarters ended March 31, 2022 and 2021, respectively.

Other income was $0.3 million and $0.2 million for the quarters ended June 30, 2022 and 2021, respectively, and $0.5 million and $0.5 million for the six months ended June 30, 2022 and 2021, respectively.

Other income is primarily comprised of fee income.

2 unchanged sentences

Quarters Ended

Six Months Ended

(Dollars in thousands)

5 unchanged sentences

Quarters Ended

Six Months Ended

Current accident year loss ratio:

3 unchanged sentences

Total accident year loss ratio

The current accident year non-catastrophe property loss ratio improved by 5.9 points during the quarter ended March 31, 2022 as compared to the same period in 2021 reflecting lower claims frequency in the first accident quarter compared to last year.

The current accident year catastrophe loss ratio improved by 17.2 points during the quarter ended March 31, 2022 as compared to the same period in 2021 recognizing much lower claims frequency in the first accident quarter compared to last year.

The current accident year casualty loss ratio increased by 1.2 points during the quarter ended March 31, 2022 as compared to the same period in 2021 reflecting slightly higher claims frequency in the first accident quarter compared to last year.

The calendar year loss ratio for the quarter ended March 31, 2022 includes an increase of $0.3 million, or 0.3 percentage points related to reserve development on prior accident years.

The calendar year loss ratio for the quarter ended March 31, 2021 includes an decrease of $2.6 million, or 3.3 percentage points related to reserve development on prior accident years.

The current accident year non-catastrophe property loss ratio increased by 11.2 points during the quarter ended June 30, 2022 as compared to the same period in 2021 reflecting higher claims severity in the second accident quarter compared to last year.

The current accident year non-catastrophe property loss ratio increased by 2.4 points during the six months ended June 30, 2022 as compared to the same period in 2021 due to higher claims severity in the first six months compared to last year.

The current accident year catastrophe loss ratio increased by 0.5 points during the quarter ended June 30, 2022 as compared to the same period in 2021 recognizing higher claims frequency in the calendar quarter compared to last year.

The current accident year catastrophe loss ratio improved by 8.6 points during the six months ended June 30, 2022 as compared to the same period in 2021 due to lower claims frequency and severity in the first six months compared to last year.

The current accident year casualty loss ratio increased by 1.7 points during the quarter ended June 30, 2022 as compared to the same period in 2021 reflecting higher claims severity in the calendar quarter compared to last year.

The current accident year casualty loss ratio increased by 1.4 points during the six months ended June 30, 2022 as compared to the same period in 2021 due to higher claims severity in the first six months compared to last year.

The calendar year loss ratio for the quarter and six months ended June 30, 2022 includes a increase of $0.3 million, or 0.3 percentage points, and a increase of $0.5 million, or 0.3 percentage points, respectively, related to reserve development on prior accident years.

The calendar year loss ratio for the quarter and six months ended June 30, 2021 includes a decrease of $0.5 million, or 0.6 percentage points, and a decrease of $3.1 million, or 1.9 percentage points, respectively, related to reserve development on 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.

Expense Ratios

The expense ratio for the Company’s Commercial Specialty segment improved by 0.2 points from 36.9% for the quarter ended March 31, 2021 to 36.7% for the quarter ended March 31, 2022.

The improvement in the expense ratio is primarily due to higher earned premiums.

The expense ratio for the Company’s Commercial Specialty segment increased by 0.8 points from 37.3% for the quarter ended June 30, 2021 to 38.1% for the quarter ended June 30, 2022 and increased by 0.3 points from 37.1% for the six months ended June 30, 2021 to 37.4% for the six months ended June 30, 2022.

The increase in the expense ratio is primarily due to higher compensation cost resulting from the start-up business lines partially offset by a reduction in the expense ratio due to growth in net earned premiums.

GLOBAL INDEMNITY GROUP, LLC

COVID-19’s lasting impacts could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect Commercial Specialty’s business, financial condition, and results of operation.

There is continued risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Commercial Specialty policies, or other conditions included in these policies that would otherwise preclude coverage.

GLOBAL INDEMNITY GROUP, LLC

Reinsurance Operations

1 unchanged sentence

Quarters Ended

Six Months Ended

(Dollars in thousands)

2 unchanged sentences

Net earned premiums

Other income (loss)

Total revenues

4 unchanged sentences

Quarters Ended

Six Months Ended

Underwriting Ratios:

14 unchanged sentences

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

Other loss was less than $0.1 million and $0.1 million for the quarters ended March 31, 2022 and 2021, respectively.

Other income is primarily comprised of foreign exchange gains and losses.

The current accident year loss ratio improved by 3.3 points during the quarter ended March 31, 2022 as compared to the same period in 2021 reflecting a mix of business change and growth in a treaty that has a lower expected loss ratio than last year.

The calendar year loss ratios for the quarters ended March 31, 2022 and 2021 does not include any adjustment related to reserve development on prior accident years.

Other Income (Loss)

The Company recognized a loss of $0.1 million for each of the quarters ended June 30, 2022 and 2021 and recognized income of less than $0.1 million and a loss of less than $0.1 million for the six months ended June 30, 2022 and 2021, respectively.

Other income (loss) is primarily comprised of foreign exchange gains and losses.

The current accident year loss ratio improved by 2.9 points during the quarter ended June 30, 2022 as compared to the same period in 2021 reflecting a mix of business change and growth in a treaty that has a lower expected loss ratio than last year.

The current accident year loss ratio improved by 3.2 points during six months ended June 30, 2022 as compared to the same period in 2021 reflecting a mix of business change and growth in a treaty that has a lower expected loss ratio than last year.

The calendar year loss ratios for the quarter and six months ended June 30, 2022 includes a decrease of $1.2 million or 3.1 percentage points, and a decrease of $1.2 million, or 1.6 percentage points, respectively, related to reserve development on prior accident years.

The calendar year loss ratios for both the quarter and six months ended June 30, 2021 includes a decrease of less than $0.1 million or 0.1 percentage point, related to reserve development on 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.

Expense Ratios

The expense ratio for the Company’s Reinsurance Operations segment increased 0.4 points from 34.4% for the quarter ended March 31, 2021 to 34.8% for the quarter ended March 31, 2022 primarily due to an increase in commission expense which was partially offset by a reduction in the expense ratio as a result of a growth in net earned premiums.

The expense ratio for the Company’s Reinsurance Operations segment increased 2.9 points from 34.3% for the quarter ended June 30, 2021 to 37.2% for the quarter ended June 30, 2022 and increased 1.7 points from 34.4% for the six months ended June 30, 2021 to 36.1% for the six months ended June 30, 2022.

This increase in the expense ratio was primarily due to an increase in commission expense which was partially offset by a reduction in the expense ratio as a result of a growth in net earned premiums.

COVID-19’s lasting impacts could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect Reinsurance Operations’ business, financial condition, and results of operation.

GLOBAL INDEMNITY GROUP, LLC

Farm, Ranch & Stable

The components of loss from the Company’s Farm, Ranch & Stable segment and corresponding underwriting ratios are as follows:

The components of loss from the Company’s Exited Lines segment and corresponding underwriting ratios are as follows:

Quarters Ended

Six Months Ended

(Dollars in thousands)

2 unchanged sentences

Net earned premiums

Other income (loss)

Total revenues

4 unchanged sentences

Quarters Ended

Underwriting Ratios:

Current accident year

Prior accident year

Calendar year loss ratio

Expense ratio

Combined ratio

GLOBAL INDEMNITY GROUP, LLC

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 Farm, Ranch & Stable may be obscured by prior accident year adjustments.

Quarters Ended March 31,

(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)

Non-GAAP measure / ratio

Most directly comparable GAAP measure / ratio

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

Other income was less than $0.1 million in each of the quarters ended March 31, 2022 and 2021.

Other income is primarily comprised of fee income.

GLOBAL INDEMNITY GROUP, LLC

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

Quarters Ended

(Dollars in thousands)

Property losses

Non-catastrophe

Property losses

Casualty losses

Total accident year losses

Quarters Ended

Current accident year loss ratio:

Non-catastrophe

Property loss ratio

Casualty loss ratio

Total accident year loss ratio

The current accident year non-catastrophe property loss ratio increased by 11.8 points during the quarter ended March 31, 2022 as compared to the same period in 2021 due to higher claims frequency and severity in the first accident quarter compared to last year.

The current accident year catastrophe loss ratio improved by 16.6 points during the quarter ended March 31, 2022 as compared to the same period in 2021 recognizing much lower claims frequency in the first accident quarter compared to last year.

The current accident year casualty loss ratio improved by 6.1 points during the quarter ended March 31, 2022 as compared to the same period in 2021 reflecting lower claims severity in the first accident quarter compared to last year.

The calendar year loss ratio for the quarter ended March 31, 2022 includes a decrease of $0.4 million, or 2.0 percentage points related to reserve development on prior accident years.

The calendar year loss ratio for the quarter ended March 31, 2021 includes a decrease of $0.7 million, or 4.1 percentage points related to reserve development on 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.

Expense Ratios

The expense ratio for the Company’s Farm, Ranch & Stable Segment increased by 0.1 points from 38.5% for the quarter ended March 31, 2021 to 38.6% for the quarter ended March 31, 2022.

There is continued risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Farm, Ranch & Stable policies, or other conditions included in these policies that would otherwise preclude coverage.

COVID-19’s lasting impacts could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect Farm, Ranch & Stable’s business, financial condition, and results of operation.

GLOBAL INDEMNITY GROUP, LLC

The components of income from the Company’s Exited Lines segment and corresponding underwriting ratios are as follows:

Quarters Ended

(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

Quarters Ended

Six Months Ended

Underwriting Ratios:

4 unchanged sentences

Combined ratio

NM – not meaningful

GLOBAL INDEMNITY GROUP, LLC

3 unchanged sentences

Quarters Ended March 31,

Quarters Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

17 unchanged sentences

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

Other income was $0.2 million for each of the quarters ended March 31, 2022 and 2021.

Other income is primarily comprised of fee income.

GLOBAL INDEMNITY GROUP, LLC

Other Income (Loss)

The Company recognized a loss of less than $0.1 million and income of $0.3 million for the quarters ended June 30, 2022 and 2021, respectively, and income of $0.2 million and income of $0.5 million for the six months ended June 30, 2022 and 2021, respectively.

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

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

Quarters Ended

Six Months Ended

(Dollars in thousands)

5 unchanged sentences

Quarters Ended

Six Months Ended

Current accident year loss ratio:

3 unchanged sentences

Total accident year loss ratio

The current accident year non-catastrophe property loss ratio increased by 13.0 points during the quarter ended March 31, 2022 as compared to the same period in 2021 recognizing higher claims frequency in the specialty property lines and higher claims severity in the property brokerage lines.

The current accident year catastrophe loss ratio improved by 8.9 points during the quarter ended March 31, 2022 as compared to the same period in 2021 recognizing lower claims frequency in the specialty property lines and lower claims frequency and severity in the property brokerage lines.

The current accident year casualty loss ratio increased by 201.5 points during the quarter ended March 31, 2022 as compared to the same period in 2021 which reflects that the premium has been running off and is down to $0.1 million in net earned premiums in the quarter.

The calendar year loss ratio for the quarter ended March 31, 2022 includes a decrease of $3.0 million, or 67.0 percentage points related to reserve development on prior accident years.

The calendar year loss ratio for the quarter ended March 31, 2021 includes a decrease of $0.1 million, or 0.2 percentage points related to reserve development on prior accident years.

The current accident year non-catastrophe property loss ratio increased by 3.9 points during the quarter ended June 30, 2022 as compared to the same period in 2021 recognizing higher claims frequency in Farm, Ranch & Stable business lines partially offset by lower claims frequency in the specialty property lines and lower claims severity in the property brokerage lines.

The current accident year non-catastrophe property loss ratio increased by 6.9 points during six months ended June 30, 2022 as compared to the same period in 2021 due to a higher loss ratio in the specialty property lines as well as higher claims frequency and severity in the Farm, Ranch & Stable business lines.

The current accident year catastrophe loss ratio increased by 19.7 points during the quarter ended June 30, 2022 as compared to the same period in 2021 recognizing higher claims frequency and severity in the specialty property lines and Farm, Ranch & Stable business lines.

The current accident year catastrophe loss ratio increased by 5.7 points during the six months ended June 30, 2022 as compared to the same period in 2021 reflecting higher claims severity in the Farm, Ranch & Stable business lines partially offset by lower claims frequency and severity in the property brokerage lines.

The current accident year casualty loss ratio improved by 10.8 points during the quarter ended June 30, 2022 as compared to the same period in 2021 which reflects that the premium has been running off and is down to $0.9 million in net earned premiums for the specialty property lines, property brokerage, and property and catastrophe reinsurance treaties in the quarter as well as lower claims frequency in Farm, Ranch & Stable business lines.

The current accident year casualty loss ratio improved by 4.3 points during the six months ended June 30, 2022 as compared to the same period in 2021 primarily due to lower claims severity in the Farm, Ranch & Stable business lines partially offset by higher claims severity in the specialty property lines.

GLOBAL INDEMNITY GROUP, LLC

The calendar year loss ratio for the quarter and six months ended June 30, 2022 includes a decrease of $2.6 million, or 12.0 percentage points, and a decrease of $6.0 million, or 13.5 percentage points, respectively related to reserve development on prior accident years.

The calendar year loss ratio for the quarter and six months ended June 30, 2021 includes an increase of $6.1 million, or 12.3 percentage points, and an increase of $5.3 million, or 5.4 percentage points, respectively, related to reserve development on 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.

Expense Ratio

The expense ratio for the Company’s Exited Lines increased by 47.0 points from 43.1% for the quarter ended March 31, 2021 to 90.1% for the quarter ended March 31, 2022 primarily due to the reduction in earned premiums resulting from the runoff of lines of business that the Company is no longer writing.

The expense ratio for the Company’s Exited Lines increased by 6.4 points from 41.4% for the quarter ended June 30, 2021 to 47.8% for the quarter ended June 30, 2022.

The expense ratio for the Company’s Exited Lines increased by 7.0 points from 41.4% for the six months ended June 30, 2021 to 48.4% for the six months ended June 30, 2022.

The increase in the expense ratio is primarily due to the reduction in earned premiums resulting from the runoff of lines of business that the Company is no longer writing.

There is continued risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Exited Lines’ policies, or other conditions included in these policies that would otherwise preclude coverage

COVID-19’s lasting impacts could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect the Exited Lines’ business, financial condition, and results of operation.

GLOBAL INDEMNITY GROUP, LLC

Unallocated Corporate Items

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Quarters Ended

Six Months Ended

(Dollars in thousands)

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Excludes realized gains and losses

Gross investment income decreased by 31.8% for the quarter ended March 31, 2022 as compared to the same period in 2021 primarily due to decreased returns from alternative investments and a decrease in dividend income as a result of the liquidation of the Company’s common stock portfolio during the quarter.

Investment expenses decreased by 15.3% for the quarter ended March 31, 2022 as compared to the same period in 2021 due to decreased investment management expenses as a result of the liquidation of the Company’s common stock portfolio during the quarter.

At March 31, 2022, the Company held agency mortgage-backed securities with a market value of $129.2 million.

Excluding the agency mortgage-backed securities, the average duration of the Company’s fixed maturities portfolio was 3.2 years as of March 31, 2022, compared with 4.9 years as of March 31, 2021.

Including cash and short-term investments, the average duration of the Company’s fixed maturities portfolio, excluding agency mortgage-backed securities, was 2.8 years and 4.7 years as of March 31, 2022 and March 31, 2021, respectively.

Gross investment income decreased by 77.4% and 55.4% for the quarter and six months ended June 30, 2022 as compared to the same periods in 2021 primarily due to decreased returns from alternative investments and a decrease in dividend income as a result of the liquidation of the Company’s common stock portfolio during the first quarter of 2022.

The proceeds from the sale of the common stock portfolio as well as other proceeds were used to retire the 2047 Notes in April 2022.

Investment expenses decreased by 3.8% and 9.9% for the quarter and six months ended June 30, 2022 as compared to the same periods in 2021 due to decreased investment management expenses as a result of the liquidation of the Company’s common stock portfolio during the year.

At June 30, 2022, the Company held agency mortgage-backed securities with a market value of $3.8 million.

Excluding the agency mortgage-backed securities, the average duration of the Company’s fixed maturities portfolio was 1.8 years as of June 30, 2022, compared with 4.7 years as of June 30, 2021.

Including cash and short-term investments, the average duration of the Company’s fixed maturities portfolio, excluding agency mortgage-backed securities, was 1.7 years and 4.5 years as of June 30, 2022 and June 30, 2021, respectively.

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 2.6% as of March 31, 2022, compared to 2.3% as of March 31, 2021.

The embedded book yield on the $47.0 million of taxable municipal bonds in the Company’s portfolio, was 3.2% at March 31, 2022, compared to an embedded book yield of 3.0% on the Company’s taxable municipal bonds of $63.7 million at March 31, 2021.

The Company’s embedded book yield on its fixed maturities, not including cash, was 2.7% as of June 30, 2022, compared to 2.3% as of June 30, 2021.

The embedded book yield on the $32.4 million of

GLOBAL INDEMNITY GROUP, LLC

taxable municipal bonds in the Company’s portfolio , was 3.1% at June 30, 2022 , compared to an embedded book yie ld of 3.

0 % on the Company’s taxable municipal bond s of $ 64.5 million at June 30, 2021 .

Net Realized Investment Gains (Losses)

The components of net realized investment gains (losses) for the quarters ended March 31, 2022 and 2021 were as follows:

The components of net realized investment gains (losses) for the quarters and six months ended June 30, 2022 and 2021 were as follows:

Quarters Ended

Six Months Ended

(Dollars in thousands)

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The Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell.

These securities had a fair market value of $365.3 million and a book value of $390.8 million at March 31, 2022 prior to impairment.

Most of the proceeds from the sale of these securities are being reinvested into fixed income investments with maturities of two years and less.

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, 2022 and 2021.

GLOBAL INDEMNITY GROUP, LLC

Most of the proceeds from the sale of these securities were reinvested into fixed income investments with maturities of two years and less.

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, 2022 and 2021.

Corporate and Other Operating Expenses

Corporate and other operating 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, and taxes incurred which are not directly related to operations.

Corporate and other operating expenses were $4.7 million and $4.3 million during the quarters ended March 31, 2022 and 2021, respectively.

The increase in corporate expenses was primarily due to an increase in compensation cost.

Corporate and other operating expenses were $3.0 million and $6.3 million during the quarters ended June 30, 2022 and 2021, respectively, and $7.7 million and $10.6 million during the six months ended June 30, 2022 and 2021, respectively.

The decrease in corporate expenses was primarily due to the Company receiving an employee retention credit under the CARES Act of $2.7 million.

This credit, which reduced compensation cost, was received in May 2022.

Interest Expense

Interest expense was $2.6 million during each of the quarters ended March 31, 2022 and 2021.

Interest expense was $0.4 million and $2.7 million during the quarters ended June 30, 2022 and 2021, respectively, $3.0 million and $5.3 million during the six months ended June 30, 2022 and 2021, respectively.

The reduction in interest expense was due to the redemption of the 2047 Notes on April 15, 2022.

Income Tax Benefit

Income tax benefit was $3.4 million and $0.2 million for the quarters ended March 31, 2022 and 2021, respectively.

The increase in the income tax benefit is primarily due to the net realized investment losses recognized due to the impairment of the investment portfolio as discussed above in the net realized investment gains (losses) section.

Income tax benefit was $0.6 million for the quarter ended June 30, 2022 compared with income tax expense of $0.8 million for the quarter ended June 30, 2021.

The increase in the income tax benefit is primarily due to investment losses incurred by the Company’s U.S.

subsidiaries during the quarter ended June 30, 2022.

Income tax benefit was $4.0 million for the six months ended June 30, 2022 compared with an income tax expense of $0.6 million for the six months ended June 30, 2021.

The increase in the income tax benefit is primarily due to investment losses incurred by the Company’s U.S.

subsidiaries during the six months ended June 30, 2021.

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.

GLOBAL INDEMNITY GROUP, LLC

Net Income (Loss)

The factors described above resulted in a net loss of $14.8 million and net income of $5.5 million for the quarters ended March 31, 2022 and 2021, respectively.

The factors described above resulted in a net loss of $12.2 million and net income of $6.4 million for the quarters ended June 30, 2022 and 2021, respectively and a net loss of $26.9 million and net income of $11.9 million for the six months ended June 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

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Global Indemnity Group, LLC’s short term and long term liquidity needs include but are not limited to the payment of corporate expenses, debt service payments, distributions to shareholders, and share repurchases.

The Company also has commitments in the form of operating leases, commitments to fund limited liability investments, subordinated notes, and unpaid losses and loss expense obligations.

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 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.

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GBLI Holdings, LLC is dependent on dividends from its subsidiaries to meet its debt obligations as well as corporate expense obligations.

As of March 31, 2022, the Company also had future funding commitments of $31.2 million related to investments that are currently in their harvest period and it is unlikely that a capital call will be made.

GLOBAL INDEMNITY GROUP, LLC

As of June 30, 2022, the Company also had future funding commitments of $31.2 million related to investments that are currently in their harvest period and it is unlikely that a capital call will be made.

The future liquidity of both Global Indemnity Group, LLC and GBLI Holdings, LLC is dependent on the ability of its subsidiaries to pay dividends.

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See Note 21 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2021 Annual Report on Form 10-K for further information on dividend limitations related to the Insurance Companies.

During the quarter ended March 31, 2022, the United National insurance companies, Penn-America insurance companies, and American Reliable Insurance Company declared dividends in the amount of $4.5 million, $7.5 million, and $22.5 million, respectively.

These dividends were in April, 2022.

In April, 2022, the United National insurance companies, Penn-America insurance companies, and American Reliable Insurance Company paid dividends in the amount of $4.5 million, $7.5 million, and $22.5 million, respectively.

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

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As a result of the distribution policy, funds may also be used to pay distributions to shareholders of the Company.

The Company’s reconciliation of net income (loss) to net cash provided by (used for) operations is generally influenced by the following:

GLOBAL INDEMNITY GROUP, LLC

The Company’s reconciliation of net income (loss) to net cash provided by operations is generally influenced by the following:

the fact that the Company collects premiums, net of commissions, in advance of losses paid;

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the timing of the Company’s loss payments.

Net cash provided by (used for) operating activities was ($10.1) million and $11.4 million for the quarters ended March 31, 2022 and 2021, respectively.

Net cash provided by operating activities was $18.5 million and $47.5 million for the six months ended June 30, 2022 and 2021, respectively.

The decrease in operating cash flows of approximately $29.0 million from the prior year was primarily a net result of the following items:

Quarters Ended March 31,

Six Months Ended June 30,

(Dollars in thousands)

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Interest paid

Net cash provided by (used for) operating activities

Net cash provided by operating activities

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.

Sale of Renewal Rights related to Farm, Ranch & Stable and Sale of American Reliable Insurance Company

The Company will retain the unearned premium reserves for business written prior to August 8, 2022.

The transaction is subject to receiving regulatory approval which is expected to be received during the 4 th quarter of 2022.

Under the agreements, total consideration to be paid by Everett Cash Mutual Insurance Company is $40 million.

The Company’s liquidity could be negatively impacted by the cancellation, delays, or non-payment of premiums related to the ongoing COVID-19 pandemic and its lasting impacts.

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In addition, the liquidity of the Company’s investment portfolio could be negatively impacted by disruption experienced in global financial markets.

Management is taking actions it considers prudent to minimize the impact on the

GLOBAL INDEMNITY GROUP, LLC

Company’s liquidity.

Management is taking actions it considers prudent to minimize the impact on the Company’s liquidity.

However, given the ongoing uncertainty surrounding the duration, magnitude and geographic reach of COVID-19, the Company is regularly evaluating the impact of COVID-19 on its liquidity.

Distributions

The Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 21, 2022.

Distributions paid to common shareholders were $3.7 million during the quarter ended March 31, 2022.

In addition, distributions of $0.1 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the quarter ended March 31, 2022.

Redemption of Debt

On April 15, 2022, the Company redeemed the entire $130 million in aggregate principal amount of the outstanding 2047 Notes plus accrued and unpaid interest on the 2047 Notes redeemed to, but not including the Redemption Date of April 15, 2022.

The funds to redeem the debt were primarily obtained through the sale of the Company’s equity portfolio in the amount of $75.9 million, $32.0 million in dividends from insurance company subsidiaries, $18.4 million from distributions received from private equity investments, and the remainder from its subsidiary, GBLI Holdings, LLC.

The Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 21, 2022 and June 20, 2022.

Distributions paid to common shareholders were $7.3 million during the six months ended June 30, 2022.

In addition, distributions of $0.2 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the six months ended June 30, 2022.

GLOBAL INDEMNITY GROUP, LLC

Investment Portfolio

Due to shortening duration, significantly more of the investment portfolio will mature annually.

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, 2022.

On May 18th, 2022, the Company provided the Credit Fund, LLC with formal withdrawal requests in full.

As outlined in the fund’s offering documents, redemption proceeds are wired to the account of record within 30 days of June 30, 2022.

Proceeds of $99.6 million are expected to be invested into fixed income investments with maturities of two years and less.

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, 2022.

Please see Item 7 of Part II in the Company’s 2021 Annual Report on Form 10-K for information regarding the Company’s liquidity.

Capital Resources

Investment Portfolio

In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio.

The Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell.

These securities had a fair market value of $365.3 million and a book value of $390.8 million at March 31, 2022 prior to impairment.

Most of the proceeds from the sale of these securities are being reinvested into fixed income investments with maturities of two years and less.

Other than the item discussed in the preceding paragraph, there have been no material changes to the Company’s capital resources during the quarter ended March 31, 2022.

Redemption of Debt

Intercompany Pooling Arrangement

The Company’s U.S.

insurance company participate in an intercompany pooling arrangement whereby premiums, losses, and expenses are shared pro rata amongst the U.S.

insurance companies.

American Reliable currently comprises 30% of the pool.

Prior to the sale of American Reliable, the intercompany pooling agreement will be amended.

American Reliable will be removed from the pool and its 30% participation in the business and capital will be allocated to the Company’s remaining five insurance companies.

For additional information on the Sale of American Reliable, please see the liquidity section above.

Other than the item discussed in the preceding paragraphs, there have been no material changes to the Company’s capital resources during the quarter and six months ended June 30, 2022.

Please see Item 7 of Part II in the Company’s 2021 Annual Report on Form 10-K for information regarding the Company’s capital resources.

Co-obligor Financial Information

The Company is providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” with respect to the Company’s 7.875% Subordinated Notes due in 204 7 (“2047 Notes”).

Global Indemnity Group, LLC (parent co-obligor) and GBLI Holdings, LLC (subsidiary co-obligor) are co-obligors of the 2047 Notes.

GBLI Holdings, LLC is a wholly-owned indirect subsidiary of Global Indemnity Group, LLC.

The 2047 Notes are subordinated unsecured obligations and rank (i) senior to the companies’ existing and future capital stock, (ii) senior in right of payment to the companies’ future junior subordinated debt, (iii) equally in right of payment with any existing unsecured, subordinated debt that the companies have issued or may issue in the future that ranks equally with the 2047 Notes, and (iv) subordinate in right of payment to any of the companies’ future senior debt.

In addition, the 2047 Notes are structurally subordinated to all existing and future indebtedness, liabilities and other obligations of Global Indemnity Group, LLC’s subsidiaries, except for GBLI Holdings, LLC.

GBLI Holdings, LLC is a subordinated co-obligor with respect to the 2047 Notes with the same obligations and duties as Global Indemnity Group, LLC under the Indenture (including the due and punctual performance and observance of all of the covenants and conditions to be performed by Global Indemnity Group, LLC, including, without limitation, the obligation to pay the principal of, and interest on, the 2047 Notes when due whether at maturity, by acceleration, redemption or otherwise), and with the same rights, benefits and privileges of Global Indemnity Group, LLC thereunder.

Notwithstanding the

GLOBAL INDEMNITY GROUP, LLC

foregoing, GBLI Holdings, LLC's obligations (including the obligation to pay the principal of and interest in respect of the 2047 Notes) are subject to subordination to all monetary obligations or liabilities of GBLI Holdings, LLC owing to any regulated reinsurance or insurance company that is a direct or indirect subsidiary of Global Indemnity Group, LLC , in addition to indebtedness of GBLI Holdings, LLC for borrowed money.

If Global Indemnity Group, LLC pays any amount with respect to the subordinated note obligations, Global Indemnity Group, LLC is entitled to be reimbursed by GBLI Holdings, LLC within 10 business days after a demand is made to GBLI Holding, LLC by Global Indemnity Group, LLC .

The following tables present summarized financial information for Global Indemnity Group, LLC (Parent co-obligor) and GBLI Holdings, LLC (Subsidiary co-obligor) on a combined basis after transactions and balances within the combined entities have been eliminated.

Parent and Subsidiary Co-obligors

The following table presents the summarized balance sheet information as of March 31, 2022 and December 31, 2021.

(Dollars in thousands)

March 31, 2022

December 31, 2021

Intercompany note receivable

Intercompany receivables

Total assets excluding investment in subsidiaries

Intercompany note payable

Intercompany payables

Total liabilities

The following table presents the summarized statement of operations information for the quarter ended March 31, 2022.

(Dollars in thousands)

Total revenue

Intercompany interest income

Intercompany interest expense

Loss before income taxes (1)

excludes equity in the earnings of a subsidiary

Off Balance Sheet Arrangements

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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.

GLOBAL INDEMNITY GROUP, LLC

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 2021 Annual Report on Form 10-K for risks, uncertainties and

GLOBAL INDEMNITY GROUP, LLC

other factors that could cause actual results and experience to differ from those projected.

See “Risk Factors” in Item 1A of Part I in the Company’s 2021 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 Company’s forward-looking statements speak only as of the date of this report or as of the date they were made.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For the quarter ending March 31, 2022, global equities fell approximately 5.0% with U.S.

equities outperforming, losing approximately 4.6%.

Most assets experienced elevated volatility over the quarter as Russia’s invasion of Ukraine and the subsequent imposition of financial sanctions added stress to already fragile global supply chains and raised concerns over commodity supplies.

This amplified inflationary fears and contributed to more hawkish stances from central banks, higher global yields and flattening curves.

fixed income lost approximately 5.9% with the average spread moving wider during the quarter.

In the U.S., yields rose and the curve inverted along several key tenors as the Federal Reserve hiked interest rates by approximately 25 basis points and signaled larger hikes going forward.

Unemployment remains at very low levels and the consumer balance sheet is strong, two factors that should help mitigate the stresses of higher inflation and rising rates.

During the 1 st quarter of 2022, portfolio purchases were focused within US Treasury, agency, and investment grade credit securities.

These purchases were funded primarily through cash inflows, sales of US Treasury, agency, and investment grade credit securities, as well as maturities and paydowns.

During the first quarter, the portfolio’s allocation to investment grade credit increased, while the portfolio’s exposure to Asset Backed, MBS, and US Treasuries decreased.

During the 2 nd quarter of 2022, in response to a rising interest rate environment, the Company took action to shorten the duration of its fixed maturities portfolio.

The Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell.

Most of the proceeds from the sale of these securities are being reinvested into fixed income investments with maturities of two years and less.

For the quarter ended June 30, 2022, risk assets were challenged with both equities and bonds moving significantly lower.

Global equities fell approximately 15.4% with U.S.

equities underperforming, losing approximately 16.1%.

fixed income lost approximately 4.7% with average spreads moving wider during the quarter.

Heightened volatility in all markets remained the theme in June as ten-year treasury yields rose significantly during the month only to end slightly higher at the end of June.

The increase in rates was triggered by an upside surprise in inflation data, but the combination of decreasing consumer confidence and rising growth concerns ultimately resulted in interest rates falling and spreads across all sectors widening.

While the 75-basis-point increase by the Federal Reserve was anticipated, there is growing concern that an aggressive rate rise will result in a recession.

Chair Powell continues to point to the strength of the labor market as support for the economy that will allow the Federal Reserve to focus on regaining price stability.

The Company’s investment grade fixed income portfolio continues to maintain high quality with an A average rating and a duration of 1.7 years.

Portfolio purchases were focused within US Treasury, and investment grade credit securities.

These purchases were funded primarily through cash inflows, sales of US Treasury, MBS, and investment grade credit securities, as well as maturities and paydowns.

During the second quarter, the portfolio’s allocation to US Treasuries and investment grade credit increased, while the portfolio’s exposure to MBS securities decreased.

Other than the changes described in the preceding paragraph, there have been no other material changes to the Company’s market risk since December 31, 2021.

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Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2022.

Based upon that evaluation, and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2022, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Based upon that evaluation, and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

There have been no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

GLOBAL INDEMNITY GROUP, LLC

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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