Q3 2024 Global Indemnity Group LLC Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Global Amenity Group Q3 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, press star followed by the number one on your telephone keypad.
Speaker Change: We will also be taking questions from the webcast. If you would like to submit a question, please use the Q&A button on the bottom right of your webcast screen. Thank you. I will now turn today's call over to Steve Ries, Head of Investor Relations. Please go ahead, sir.
Steve Ries: Thank you, Tameka. As a reminder, today's conference call is being recorded, as some remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including without limitation, beliefs, expectations, or estimates.
Speaker Change: We caution you that such forward-looking statements should not be regarded as representations by us, that the future plans, estimates, or expectations contemplated by us will in fact be achieved.
Speaker Change: Please refer to our annual report on Form 10-K and other filings with the SEC for description of the business environment in which we operate and the important factors that may materially affect our results.
Speaker Change: Global Indemnity Group LLC is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker Change: It's now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive Officer of GBLI.
Speaker Change: Good morning and thank you all for joining us for the GBLI nine-month update on our 2024 financial and operational results.
Speaker Change: Consistent with our past calls, I will first provide a few overview comments, and then our Chief Financial Officer, Brian Riley, will review the 2024 financial highlights for both our insurance operations and holding company.
Speaker Change: Let's start with the big picture. Through nine months, our team has continued to achieve results that are both consistent with our plan for 2024 and are building momentum to hit the long-term metrics I have established great value for our shareholders.
Speaker Change: I will again remind you that our overall goals remain. First, growing our insurance business at a compound annual growth rate of at least 10 percent.
Speaker Change: Second, achieve a combined ratio in the low 90s. And third, manage our insurance expenses to a competitive level of 36 to 37%.
Speaker Change: The results for nine months track very close to what we reported last quarter for the first six months of 2024.
Speaker Change: Insurance revenue momentum, as measured by gross premium, improved on the pattern we saw in the second quarter, with total premium, excluding terminated products, now up 12% for nine months.
Speaker Change: This is driven by the strong year-to-date 14% growth we saw in wholesale, commercial, insured tech, and assumed re-insurance.
Speaker Change: I should note that momentum continues to build as these operations grew by 23% in the year-over-year numbers for the third quarter.
Speaker Change: Our efforts to turn around our specialty products business remain a work in progress, as gross premiums, excluding terminated products, remain flat through nine months.
Turning to insurance underwriting performance.
Speaker Change: I am very delighted to report a nine month combined ratio of 93.9 for the PEN America segment.
Speaker Change: The good results continue for both our casualty and property coverages.
Speaker Change: Importantly, our rate increases continue to modestly exceed our estimates of inflation trends.
Speaker Change: Also, our estimates for the past year results remain stable with de minimis differences between calendar and accident year numbers.
Speaker Change: Our efforts to manage cap exposures for our property segments continues to be reflected in our modest losses from catastrophes in 2024.
Speaker Change: Total cap losses through nine months are down roughly 35% from 2023.
Speaker Change: As a point of reference, gross losses for both the two most recent hurricanes
Speaker Change: Elaine and Milton are both expected to each come in around one and a half million dollars.
Speaker Change: We continue to manage expenses a bit higher than our long-term targets to provide the best possible service to our customers.
Speaker Change: As noted in the past quarters, we are maintaining Penn America staff numbers just slightly below last year.
Speaker Change: Our Pan America expense ratio is starting to trend in the right direction with a nine month ratio of 38.2% but we still have work to do in order to get this down to 37% or lower.
I keep actor and growing our business.
Speaker Change: Achieving outstanding underwriting results and achieving competitive expense levels is utilizing technology as an effective competitive weapon across all dimensions.
Speaker Change: As noted in the last few quarters, we have embarked on a multi-year effort to transform our technology platforms.
transaction
and Information Software and Data Storage.
Speaker Change: These investments are well underway with about two-thirds of our servers moved to the cloud from on-site locations.
Speaker Change: and our data stores now move to a cloud-based lake house.
Speaker Change: Our first transactional replacement application went live in September, and we're now processing all aspects of our wholesale commercial excess liability policies in the new environment.
Speaker Change: We are targeting this year-end to add special events for wholesale commercial.
Speaker Change: and to add all the remaining products for wholesale mid-next year.
Speaker Change: An additional first quarter module is focused on our underwriters and operations staff who will be receiving an integrated underwriting workstation to both improve the time to handle referral business and to improve service for our agents.
As Brian will review in more detail.
Speaker Change: continue to pay off with additional favorable comparisons to prior year in both our investment returns and an improvement in the market value of our investments.
Speaker Change: Our board continues to canvas with outside investment advisors to plan our return to a more conventional insurance investment portfolio as we hope to see some clarity in the investment horizon as we move past the election.
Speaker Change: As we now approach the year-end and are updating our plans for next year, I will note that I just completed the end of my second year as the CEO of Global.
Speaker Change: as the smaller but much more focused E&F company. However, as the results for the subsequent six quarters have emerged, the decision to focus on areas where we can excel is really beginning to pay dividends.
Speaker Change: I am thankful that I had both the support of the board to affect these changes and more importantly the superb efforts of the managers and staff at JBLI.
Speaker Change: We are all looking forward to 2025 and beyond as we enhance and implement both our tactical and strategic plans.
Brian. Thank you Jay.
Thank you.
Speaker Change: As the first nine months are tracking similarly to the first half of the year, my commentary will focus on results for the first nine months.
Speaker Change: Of course, we can answer any questions you may have on the third quarter numbers.
Speaker Change: Net income was $34.2 million compared to $19.5 million in 2023.
Speaker Change: With a combination of net income and a $15 million increase in market value of the fixed income portfolio, bulk value per share increased from $47.53 at year end to $49.88 on September 30th.
Speaker Change: including dividends paid in 24 of a dollar five per share return to shareholders was eight point two percent for the first nine months of 24
Speaker Change: For the first nine months of 2024, both underwriting and investment income performance again contributed to the improvement in net income.
starting with investments.
Speaker Change: Investment income increased 18% to $46.3 million from a year ago.
Speaker Change: Actions taken since early 22 to sell longer dated securities in shorter and shortened duration have translated into much higher current book yields.
Speaker Change: Cash flows of $50 million plus $625 million of fixed income securities yielding 3.6 percent.
Speaker Change: that matured during the year were reinvested at an average yield of 5.1%.
Speaker Change: Current book yield on the fixed income portfolio is now 4.6%, with a duration of 0.8 years at September 30, 2024.
Speaker Change: Comparatively, at the end of 22 book yield was 3.5% with a duration of 1.7 years and at the end of 21 the book yield was 2.2% with a duration of 3.2 years.
Speaker Change: The average credit quality of the fixed income portfolio remains at double A minus.
Speaker Change: As a result of the low duration, we have a $480 million investment maturing in the fourth quarter of 2024. As Jay mentioned, we're actively looking at opportunities to invest in longer duration maturities to further increase investment returns.
Speaker Change: Now let's move to underwriting performance for the first nine months of the year.
Speaker Change: We continue to see excellent results as the current X year.
Speaker Change: Consolidated underwriting income was 15.3 million compared to 5 million a year ago. This was driven by a consolidated accident-year combined ratio of 95 in 24 compared to 98.9 in 23.
Speaker Change: The improvement in the current accident or underwriting income was due to strong performance in our core business, PetAmerica.
Speaker Change: PetAmerica's actual year underwriting income was $17.6 million in 24 compared to $9.7 million in 23.
Speaker Change: As Jay noted, PEN America's acts-to-year combined ratio is 93.9, an improvement of 2.8 points from 96.7 in the same period last year.
Speaker Change: The accident year loss ratio of 55.7 was 3.1 points better than 23, mainly due to our performance of our property business.
Speaker Change: Property loss ratio improved to 51.9 in 24 compared to 58.9 in 23.
due to both non-catastrophe and catastrophe performance.
Speaker Change: The non-catastrophe loss ratio improved to 43.5 in 24 compared to 47.2 in 23 due to the decline in the number of large fire losses experienced in 23.
Speaker Change: Cat loss ratio improved to 8.4% in 24 compared to 11.8 in 23.
Speaker Change: Cat losses declined to 10.3, including Hurricane Helene at 1.5 million, compared to 12.6 million in 2023.
Speaker Change: The casualty loss ratio of 58.8 remains in line with expectations.
Speaker Change: Unlike 23, our non-core operations are having a diminished effect on our overall performance.
Speaker Change: Our non-core operations net earned premium has dropped to $12.3 million in 2024 compared to $114.2 million in 2023, mainly from an assumed retrocession casualty treaty which was non-renewed at the end of 22.
Speaker Change: Further, the runoff of our Exit Specialty Property business resulted in no catastrophe losses in 24, compared to 3.2 million in the same period last year.
Speaker Change: The overall underwriting loss was $2.3 million for 24 compared to $4.7 million in 23 in the non-core segment.
Speaker Change: Additionally, the combined ratio was 118.9 and the loss ratio was in line with expectations at 62.6, but runoff expenses remain a bit high as we wind down the number of smaller underwriting portfolios.
Speaker Change: As for the calendar year, underwriting income was $14.6 million in 2024 compared to $3.9 million in 2023.
Speaker Change: And as for prior acts near losses, book reserves remain solidly above current actual indications.
Speaker Change: Loss in LAE related to prior action years was a modest reduction of 115,000 for the first nine months of the year.
Turning to premiums.
Speaker Change: Consolidated gross premiums was $294 million in 24 compared to $332 million in 23.
Speaker Change: This decrease is entirely due to the runoff business of our non-core segment, which declined 58 million year-over-year, offset partially by the growth of Penn America.
Speaker Change: Penn America's gross written premiums increased 7.4% to $297.8 million in 2024 compared to $277.4 million in 2023.
Speaker Change: Including terminated programs, Penn America's gross written premiums grew from $262.8 million in 2023 to $293 million in 2024, a 12% increase. This is in line with our plan.
Speaker Change: And as Jay mentioned earlier, growth of 14% was achieved in aggregate by our Wholesale Commercial, InsureTech, and Assumed Reinsurance divisions.
We had a little color on those divisions.
Speaker Change: Wholesale Commercial, which focuses on Main Street small business, grew seven percent to $186.9 million compared to $174.4 million in 2023.
Speaker Change: Excluding premium audit in these county year numbers, the underlying policy or premium trends are best indicator of growth, which is 12%, which includes rate increase of 9%.
Speaker Change: In SureTech, which consists of vacant expressing collectibles, grew 17% to 41.9 million in 2024, compared to 35.7 million in 2023.
Let me break down those two products for you.
Speaker Change: Bacon Express grew 26% to $29.8 million driven by organic growth from existing agents and agency appointments.
New technical automation implemented.
Speaker Change: in the third quarter of 2023 for our vacant dwelling products, including the expansion of monoline general liability product, contributed to the growth in premium our agents are producing.
Collectibles.
Speaker Change: Gross written premium of 12.1 million was slightly higher than 23 by 1 percent.
Speaker Change: We've implemented some underwriting actions on catastrophe-prone risk that has curtailed growth a bit, but it's expected to improve overall profitability.
Speaker Change: Our assumed reinsurance book of business continues to grow at a nice pace with our plan to see significant growth in 24.
who signed on seven new treaties this year.
Speaker Change: Gross written premiums grew to $19.3 million in 2024 compared to $8.4 million in 2023.
Speaker Change: And last, specialty products, including the terminated products mentioned earlier, was 44.9 million, slightly higher than 23 by 0.7 million.
Speaker Change: We signed on two new products in 2024 that contributed a million for the first nine months of the year.
Speaker Change: We expect to have four new products signed on over the next 6 to 12 months.
Speaker Change: In closing, we are pleased with the first nine months of the year.
Speaker Change: Further, our outlook for the full year 24 and 25 is very positive.
Speaker Change: PetAmerica continues to a strong current Axiom of the Year performance.
Booked reserves remain solidly above our current actuarial indications.
We believe premium pricing is tracking with lost inflation.
Speaker Change: Discretionary capital, which we consider to be the amount of consolidated equity in excess of that amount required to maintain the strongest levels of capital with our rating agencies increased to $240 million at September 30-24 compared to $200 million at the end of last year.
Speaker Change: due to growth in equity and reduced capital needed for the runoff of non-core business.
Speaker Change: This will support growth at PEN America as well as other corporate opportunities.
Speaker Change: Lastly, our investment portfolio is well-positioned to invest in longer-duration maturities and higher yields.
Thank you. We will now take your questions.
Thank you. Bye bye.
Speaker Change: At this time, if you would like to ask a question, press star 1 on your telephone keypad. And also, as a reminder, if you would like to submit a question through the webcast, please use the Q&A button at the bottom right of your webcast screen. We'll pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question from the audio lines come from the line of Ross Herbermann with RLH Investments.
Ross Herbermann: Good morning gentlemen, nice quarter, how are you? Could you talk about your, a little bit more about your discontinued lines, how much is left and what's the timing in terms of getting out of the rest of them? Thank you.
Speaker Change: Yeah, our discontinued lines at this stage we have about a little less than five million of unearned premium that needs to run off in the fourth quarter and it's in 25. So by the end of 25 we'd expect that to be fully earned and in full runoff on the lost reserve side.
And just one follow-up.
Speaker Change: Are you actively looking for more lines to purchase or get into, and if so, in sort of what categories? Thank you.
Speaker Change: We are constantly looking for new opportunities to expand our book of business. Right now, what we've done for the past two years is create stability in our existing business and get it kind of working.
Speaker Change: at its highest levels, and we're going to start in 25 and 26.
adding additional products within those lines and perhaps...
Speaker Change: expanding into lines we're not currently in. And it's an opportunistic look at the world. It's not something that we have decided in advance that we're going to go do a particular product, but we're looking at things that we can evolve that are consistent with the approaches we have right now. So.
Speaker Change: The answer is yes, we are looking, but you won't see anything probably for another six to nine months.
Speaker Change: I say that now and something will probably pop up next quarter but that's kind of the timeframes that we're going to start looking to expand upon what we're doing today.
Speaker Change: Sorry, and just one last one, I apologize. Did you fight back any shares in the quarter, and if so, how much?
No, we did not.
Speaker Change: As a reminder, to ask a question, press star 1 on your telephone keypad. You may also submit a question on the webcast using the Q&A button on the bottom right of your webcast screen.
Speaker Change: It doesn't look like there's any more questions. I guess the numbers speak for themselves this quarter, which is always a good thing. We look forward to talking to you again in three months.
Speaker Change: Thank you very much everybody. If you have any questions before then, please reach out to me.