Q1 2022 Global Indemnity Group LLC Earnings Call

Speaker 1: mcagainan, our Chief Financial Officer, are also in attendance. I am very pleased with our underwriting results in the first quarter as we execute our strategic plan to grow our existing core businesses.

Speaker 1: As well as substantially widened our small business commercial casualty product offerings.

Speaker 1: Gross written premium grew by 17% compared to the first quarter of 2021.

Speaker 1: The grocery and premium of our continuing lines grew 27%.

Speaker 1: Compared to the first quarter of 2021.

Speaker 1: The increase is mainly due to organic growth and rate increases.

Speaker 1: Commercial specialty segment near by 17%. one or one hundred four point three million.

Speaker 1: Driven by growth in our pent- America binding small business.

Speaker 1: Grew 27%.

Speaker 1: We obtained rate of 8% for this business in the first quarter and we look to continue to push it as higher as the year develops.

Speaker 1: Programs grew 10%.

Speaker 1: A strong rate increases of 12%.

Speaker 1: Our new small commercial casualty businesses- environmental excess casualty and professional- have built out their teams in established solid market footholds.

Speaker 1: They are actively writing business. We received strong support from our distribution partners and all are on track, executing their plans.

Speaker 1: We continue to hire superior new talent.

Speaker 1: Most recently, we were very pleased to announce the hiring Mac carroll to lead our new and shotetech business will be part of our commercial specialty segment.

Speaker 1: We have two existing profitable and shoortetech business today- collectibles and vaccan express- though service foundation for this new business that Matt has been charged with building and growing.

Speaker 1: Reinsurance had strong growth. Gross R premiums in the firstth quarter 22 were 41.4 million compared to 22 millionprior.

Speaker 1: As noted on the prior earning's call, this is due to increasing participation with casualty quota share treaty that global has assumed for several years.

Speaker 1: This treaty continues to obtain strong rate in a hard casualty market.

Speaker 1: In addition, we wrote several smaller casualty treaties and grew our excess professional reinsurance business by 11%.

Speaker 1: Farm ranks in equwine grew by 8%.

Speaker 1: The equine mortality book, which comprises about 15% in this book, greved by 39% compared to 2021.

Speaker 1: We continue to focus on driving profitability in this book.

Speaker 1: And improving results from non-GAAP property.

Speaker 1: Primarily fires.

Speaker 2: We have seen it over 25% of our noncash fire losses.

Speaker 2: Are coming from just 5% of our business.

Speaker 2: We have identified as specific risk characteristics driving these unprofitable accounts.

Speaker 2: And have an actively non-renewing these risks.

Speaker 2: We expect this action to reduce our loss ratio by several points.

Speaker 3: The gthcer y and premium ested in lineines shrankth was 31.3 million in 2021. The twotwentthousandy 18.6 million in 2020 -two.

Speaker 2: Very little businesses retain, as the net Rim premium was only seven hundred thousand.

Speaker 2: Global enindedemiis runting the mobile home and dwelling book.

Speaker 2: Of the policies. Transition to American familyunder an income also had good results. The combined ratio improved from 101% in 2021 to 95% in 2020. -two and.

Speaker 2: catacastrophis incurred in the first quarter of 22 were four point three million, compared to 16.9 million in 2021.

Speaker 2: Volatility is much less due to the lines we exited. The miss of business has now shifted to casualtyin 2021, 45% of net earned premium was casualty business.

Speaker 2: Compared to 64% in 2020 two.

Speaker 2: We will continue to push towards our goal of 70% casualty business.

Speaker 2: Which will be supported by grows in our three new casualty businesses throughout the year.

Speaker 2: To support the company's long-term business plan that we availed at last year's Investor conference, beginning in May 2021 and.

Speaker 2: The company embarked on the program D end liquidity.

Speaker 2: Investment flexibility- buffer market volatility.

Speaker 1: Balance sheet validity.

Speaker 2: The first step in this regard.

Speaker 2: Was shorting the four point five year duration.

Speaker 2: Company's fixed income securities portfolio, the three years which was achieved by August of 2021.

Speaker 2: And in August of 2022, the company liquidated the utirety of a 76 million publicly traded common stock portfolio.

Speaker 2: Finally in April 2022, the company further short in the duration.

Speaker 2: Of its investment portfolio under two years.

Speaker 2: Have retire 100%. That was outstanding indebtedness.

Speaker 3: We will now take the questions.

Speaker 4: At this time. I'd like to remind everyone: if you'd like to ask a question, please press star than one on your telephone. Keep ad.

Speaker 5: Our first question is from Julia ferguson. With doling and partners, your line is open.

Speaker 6: Good morning UH, Thank you for taking my questions. My first question is about UH, your significant rededuction and the duration of your fix incom portfolio. So can you tell us what's the difference right now between your liabilities and assetid duration?

Speaker 7: Yes our liabilities have a duration. Right now that's about two point three years. Our fixed income portfolio today has a duration of one point eight years.

Speaker 8: Right okay, So it's not done different and what's kind of a what?

Speaker 8: Under what conditions would you consider lengthening the duration again, going forward?

Speaker 7: Well again we when the interest rate environment becomes more stable and we have more certainty on.

Speaker 9: How we perceive inflation and interest rates to perform a going forward basis. At that point we would be a little more comfortable extensing- now we are seeing juli- some rate opportunity. It doesn't mean that we have to keep our portfolio completely su as it is today. You are working closely with our investment managers So, but you know at the moment we we do not have plans to go, you know, very far out on the curve until we have a little more certaintyknow. That doesn't make sense. And what is the impact of your on? What is the impact of this action on your net investment income going forward? So if you look what the yield mentioned you're getting on those new securities, new money your purchased in the process of purchasing. It looks like it's still above your current fixed income portfolio yield.

Speaker 8: Just good.

Speaker 6: Right am staywood was with your investments.

Speaker 6: As a investmentas, investments or other invested assets which kind of more debt related understand funds, limited partnerships. There were a significant contributors to your N I I in 2021 and I understand there is a at Le partially. They reported than one qutter lag. So how should we think about kind of expected or normalized the returns on those investments going forward? I understand you increase the balance there and I understand that you know you haven't sold any of that right, So would you kind of for our planning purposes or modeling purposes, what's kind of expected return on those investments? How should you think about it? What reason were were in those investments is that we do want to get select. Your would are now all the alternative investments.

Speaker 9: We have $1 million of the alternatives on the balance sheet. We were showing 147 million in total, but a little more than one million of that is in a in a floating loan fund. Approximately 97% of what that fund invest in are are our mainly first slileen loans. Not all 97%, but that's what they invest in our loans. The loans are, as I said, 97% are floating rate. Right now those yields are in about the four and a half to 5% range. As interest rates go up we would expect the returnms on that fund to go up now. In the first quarter that fund was not immune to the Geo political events that were happening throughout the world. So you know supply chain- supply chain problem.

Speaker 1: However you want to talk about it.

Speaker 2: Yes we see as being material business. 'm not ready to put a number on them at this point as far as for religions, but believe they'll be. We really see the first year we're building the business off. The second year, on any new business, we see it as a breakeven type business. In the third year is what? When we start to see them really making the impact on profitabilityokay yes, it makes sense.

Speaker 1: And very pleased with the undering results. In the first quarter we execute teening plan the grow existing courar businesses as well. stally one small business commercial casualty proct offer grow premium by 17% compared toin the first quarter 2020. onethe those premium our continuing lines 27% ared to first arter 2020 one the increasees mainly do to organ growth and rate increases our commercial peci segment by 17%. one hundred one hundred four point three million by TH in our 10 americ bing small business, which 26.9 percenttswe have teen R 8% for this business. The first quarter look to continue to pushion higher as the year. thousandts program 10% strong rate increases of wel 0%. New small commercial counualually businesses inviron ment casualty professional B out their teen in a thousand saw market foot holdts actively ING business the Re strong Court from our disribution partners and all or on track sixcuting their planwe continue to higher su perior new coun. Most recent we were very pleased to a noun the highiring that care the lead. Our new insureort business be part of a commercial pecity segment. We have two existing proofable or business today collectes V address the serve found ation for this new business that has chargars bing grow reinsurance strong grow grow premiums. The first courarter 20: two forty one point four mill compared to 20, two million prior. As noted on the prioron call the the do to increas puripation. The casualually Court year three that global has a su per sevenver yearsthe three continue to teen strong rate the hard casualty marketand addition we were sevenveral smaller casualty trees and grew our ex cess professional ion insurance business a ele percent far R 8: one grou by 8%. The qupoint County book which comprises about 15% in this book pro by 39% compared to thousand 20: one we continue to focus riving proofitability this book and improving results from non property primmarly fiveyears we have seen that over 25% of our nine on higher loes comp from just 5% of our business 10 iffive. The risk care RIS six driving these prof counts and have actively non mill risks. Say this action were U our law ratio several point: ints: grow three premium invested lineines TR thirtyy one we three million 2020: one the 20 teen point six million 2020: two very little business teen as the that premi was only seven thousand global M running the mobile home twentlling book of the policy transition to American family under income also. That resul the comb ration pro from one hundred 1, 0% 2020 one to nineinety 5%. two thousand twent two has cur courar 20 2, four point three million compared to 16 point nine million 2020 one volatility is much less do to the line we exced the M the business now ship to casualty 2020 1, forty 5%. That premium casualty business ared to 64% 2020, two we continue to questionush towards our go 70% casualty business will be pported by growth and three new casualty businesses throughout the year. Support the companyies long TER business plan. We ill the last years invest conference beging may 2020 one the company parts on the the liquidility investment foxability but market all ability Bal idilitythe first that this guard sureorting the four point five year duration companyies six income secureities portfolio. The three years was a IE by G 2020 one and G the two thousand y two the company liquidated tiorty 70, six million. We three com portfolio. Finally, eightril 2020 two the company further sure the duration investment portfolio under two years TI one hundred percent was thousand stand and were. Now take the questions the time if you to the question ase P ST than one on year Le first question from twentill thirg with thousandlling partners the money think fiftateen my questionions. The first question: the year se uctction in the dur of FIF six income fourlio. So continue TE what the? The first TR between Li, ability and duration are ability have duration right now that about two point three years are 16 income Court fourlio today has duration of what 4, eight years not, and what kind of be what and the what condaddition L the duration G point 4, hundred or again we when when the ininteresttr viror were stable and we have were 30 3, how we see FL and TR the 4, four hundred illion, four bases, that point we would be a little four for ex sent. Now we are see J some rate O ortity thousand mean the have to fourlio complete sureort is today the are workking close with our investment managers. So what the moment we we do not plan two 30, four out the cur? Il we have a little four certainteen and that percent. And what is impacted? What is the pacted of the action on year that inestment income 1, four So you Court the vention getting on those 16 secureity new nine year proches in the prot of purchasing looks like a still curren six income fourfor year, my correct year our we courorted all 2, 0%. We we that 5, three hundred ninein 4, three hundred ninein million seal. So most we regigion put the money in 2, two year treasur partket. The three year treasury were getting just about to a have percent sent the four some of that money a little more two hundred million dollars. We mainly ion the courporates a little B two secure five the overall the ration of what we current the buying by MO out the treasury buy in the duration range. What point three years weresee year were get year that money right now approximately 3, zero percentthe point to ok. So the get like about the hundred basis point right and sting was year investment investment investment inested ases kind one that the sent fund the part ship they were to two year and I 20 20, one and there is the Ally they courort one Court land. So question: think kind of expected normal Li turns on those investment going four I incre the aboutll and stand that know hundred se that right. So what kind of four our plan? First a one purpos. What kind of expected 30 turn on those investment CI think about it. three were four those investment that we do one to get some now the all TER investment we one hundred million dollars the all TER one the val we were showing hundred 47 million total but a little more a hundred million that in a a fing LO fund proximately nine, in 7%. What that fund invest are are mainly first's, not ninein percent but that's the. They vested our Los. The LO are are, as I said 9, 7% are are fourty rate right now year about the four a have the 5% range TR we would that the or that fund. Now in the first courarter that fund was not year courllit four vest that were happening out the world. So our supply supply pro R three 5, PR the flation general and in that proteular were market the was a want call five the qualty for the one market but But eight change in the market where people company were were ship investment lower gr loans to higher gr LO and CA in for that proteular were fund tempor ary what we believe the be temporary, the C in the market value up that fund. So for the one of hundred million dollars that we invested inthat fund in courarter 1, we actually again saw because the market value, the FS, we actually had negative income that fund the, the proxim, the four hundred thousand dollars, four the quarter. Now that all TER that we do not. Or were we actually get the date timely we book today? What year see four that fund, what I just said exactcuru, the other three fund they are: one invest real, stateate that one invest in the ST that and the other one that off. We been for years that when year BAs three and the B said loans loans, all of their Bal.