Q1 2025 Global Indemnity Group LLC Earnings Call
Kayla: Thank you for standing by. My name is Kayla and I will be your conference operator today. At this time I'd like to welcome everyone to the Global Indemnity Group first quarter 2025 earnings call. All lines been placed on mute to prevent any background noise.
Kayla: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, again press the star and 1.
Kayla: We will also be taking questions from the webcast. If you would like to submit a question, please use the Q&A button located at the bottom right of your webcast screen.
Speaker Change: I would now like to turn the call over to Evan Kasowitz, President of Bill Mott Holdings, you may begin.
Speaker Change: Thank you operator. Today's conference call is being recorded. GBLI's 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 a representation 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 10K and our other filings with the SEC for descriptions of the business environment in which we operate and the importance factors that may materially affect our results.
Speaker Change: 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
Speaker Change: It is now my pleasure to turn the call over to Mr. J. Brown, Chief Executive of Global Indemnity Mr. J. Brown, Chief Executive of Global Indemnity Ltd
Thank you, Evan.
Speaker Change: Good morning and thank you all for joining us for the GBLI First Quarter Update on our 2025 financial and operational results.
Speaker Change: Consistent with our past calls, I will first provide a few overview comments to put this reporter in the context.
Speaker Change: Then our Chief Financial Officer, Brian Riley, will expand on this quarter's financial numbers for our insurance and investment operations.
Speaker Change: When I joined the company 2.5 years ago, we established a tactical plan to maximize long-term value for our shareholders.
Speaker Change: First, we assessed our product offerings and then spent a few months refocusing our insurance business around those core products that had consistently been underwritten profitably.
Speaker Change: 2023 was a realignment and transition year as we underwent the expense restructuring to match our slim down product offerings and design a long-term competitive IT architecture.
Speaker Change: These efforts started to pay off in 2024 as we grew our core business consistent with our long-term goals.
Speaker Change: Get our underwriting targets and deploy the first components of our proprietary underwriting and policy management software.
Speaker Change: Our insurance operations have been building momentum to consistently achieve both long-term growth and profitability metrics to create value for our shareholders.
Speaker Change: This momentum continued in the first quarter as our underlying core growth excluding terminate products with 16 percent and our underwriting results excluding the California wildfires slightly out past last year at a combined ratio of 94.8.
Speaker Change: I will come back to the wildfires in a few moments which obviously depressed
First quarter completely.
Speaker Change: Having stabilized our operations to achieve appropriate growth and underwriting results for existing products, we completed our project manifest strategic restructuring at the end of 2024.
to facilitate efficient and controlled rapid product expansion.
Speaker Change: We anticipate that this expansion will occur over the next few years.
Fueled by a mixture of both organic growths
Speaker Change: Incubated new teams and coupled with some focus purchases of existing distribution operations.
Speaker Change: As noted in our last call, we have begun to build out our agency and insurance services group with a hiring of Pervine Ready and he has now started to recruit a few key additional members to facilitate execution of this next stage of growth for GBLI GBLI.
Speaker Change: Given the completion of the legal restructuring at the end of last year, this quarter marks the first time we will start to report on our numbers consistent with the new structure.
Speaker Change: As we have not yet added any new products or established new carrier relationships, the results in the short term will not show any meaningful benefits from our new structure.
Speaker Change: Brian will provide more detailed comments on both overall insurance operations and the first breakdown by the new segments.
Turning to a couple of key performance indicators.
Speaker Change: Our rate increases and exposure growth continued to modestly exceed our estimates of social and price inflation trends.
Speaker Change: This will continue to be a key objective for 2025, given the ongoing uncertainty on the National Price
Speaker Change: Also, our estimates for the prior year's loss results remain stable.
Speaker Change: Our Reserve margins also remain solid, with no change in margin estimated quarter end from last year end.
Speaker Change: Our ongoing efforts to manage catastrophe exposures for our property segments experience a bit of a disappointment with a 15 million catastrophic loss from the recent Los Angeles wildfires.
Speaker Change: Virtually all of our loss occurred in the palisades fire with almost no loss in the eaten fire.
Speaker Change: Given the industry impact of the LA fires, our result was modestly below our property sharing California. I'll be at still very significant for a company of our size in a calendar quarter.
Speaker Change: Although we expect an annual average of $17 million from all catastrophic losses given our current book of business in a calendar year, the sheer magnitude of this catastrophic loss in the Palisades fire exceeded the different models we have used for wildfires in the more moderate wildfire risk locations like the Palisades and the LA Basin.
Speaker Change: Like most industry players, we are rethinking the validity of past severity model estimates for wildfire cat exposures and have already taken steps to further reduce our property exposures to wildfires.
Speaker Change: We continue to manage internal expenses a bit higher than our long-term targets in order to provide the best service for our customers [inaudible]
Speaker Change: As noted in the past quarters, we have maintained staff numbers just slightly below 2023 as we grow our business at double-digit levels and keep expense growth at half of those growth rates [inaudible]
Speaker Change: While the expense ratio for the existing business is trending in the right direction with a 2024 ratio of approximately 38%.
Speaker Change: Corporate Expenses, Associate with Project Manifest, and the build-out of our agency and insurance services staff escalated that ratio by a couple of points in the first quarter.
Okay.
Speaker Change: Although we expect to make additional investments in people over the next couple of years, we still have not lost sight of our long-term expense objective and will continue to work to get expense ratios down to 37% or lower.
Speaker Change: In conclusion, our reported numbers clearly fell short of our targets, but the underlying trends remain strong and point to significant shareholder value growth going forward.
I'm now trying to call over to Brian .
Thank you, Jay.
Brian Riley: The net loss of 4 million for the first quarter includes losses from California wildfires of 15.6 million pre-tax or 12.2 million aftertax.
Brian Riley: Excluding the California wildfire losses, net income would have been $8.2 million for the first quarter compared to $11.4 million in the same period last year
Brian Riley: including a $3.5 million of unrealized gains on the bond portfolio, comprehensive loss is $500,000 for the quarter.
Brian Riley: Book value for share decreased from $49.98 a year end to $47.85 at March 31st, driven by
Brian Riley: $500,000 is a comprehensive loss, which equates to about $4.5 million of dividends at $0.35 per share with the remainder from stock compensation for the successful completion of project manifest.
Brian Riley: Let me add a little color on investments and under running performance.
Brian Riley: Starting with investments, investment income increased 2% to 14.8 million from a year ago.
Brian Riley: Cash close and majority of bonds totaling $685 million, yielding 4.75% for reinvested an average yield of 4.86%.
Brian Riley: Current book yield on the fixed income portfolio is now 4.5% with a duration of 1.3 years at March 31st, compared to 4.4% in a duration of 0.8 years at December 31, 2024.
Brian Riley: For further comparison, the book yield was 2.2% with a duration of 3.2 years at December 31, 2021, before the company took action in early 22 to sell longer dated securities and shortened duration.
Thank you.
Brian Riley: The average credit quality of the 16.4 portfolio remains at AA-minus [inaudible]
Brian Riley: As a result of that low duration, we have 700 million of investments maturing in the remainder of 2025
Brian Riley: Overall, we are well positioned to take advance further opportunities to improve yield on the fixed income portfolio.
Brian Riley: As for underwriting performance, in the first quarter of 25, we changed how we manage our segments [inaudible]
and we now have three segments [inaudible]
Brian Riley: One agency and its short services, two Galmont Corps, and three Galmont Non-Courte.
Brian Riley: Our new segment, Agency and Insurance Services, consists of our three agencies to produce direct business.
Our Technology Company and our Claim Services Company
Brian Riley: The Agency and the Insurance Services segments generate an income on affiliated agreements of 1.8 million before tax for the quarter The Agency and the Insurance Services, Global Indemnity Ltd
Brian Riley: Belmont Corps previously referred to as PenAmerica and Belmont Non-Cour previously referred to as Simply Non-Cour makes up our insurance governing operations.
Brian Riley: Since the Belmont non-core business is having a diminishing impact on overall results, I will comment on consolidated underwriting results.
. . . . . .
Thank you.
Speaker Change: Current accident-year loss was 10.3 million for the first quarter due to the previously matching California wildfire losses of 15.6 million.
Speaker Change: excluding California wildfires, underwriting income would have been in line with 24 at 5.3 million in 25.
Speaker Change: The consolidated Accenture Combined Ratio was 111.5 in 25, excluding the wildfires, it was 94.8 compared to 94.9 in 24.
Thank you. Bye.
Speaker Change: The current action or expense ratio was 40 for 25 compared to 39.6 and 2024. Expenses remain elevated as Jay mentioned here in the short run as we run off our non-core businesses and invest in our new agency operations.
. . .
Longer term, we expect improvement in the expense ratio targeting 37 of the
Speaker Change: As Jay mentioned, our county results are virtually the same as our accident results Looking at prior your losses, book preserves remain solvably above current act wearer indications
Turning to Premiers
Speaker Change: Consolidated gross premiums increased 6% to 98.7 million in 25 compared to 93.5 million in 24.
Speaker Change: Excluding terminated products, Groceratin premiums increased 16% to 98.4 million in 25 compared to 85 million in 2024.
Speaker Change: Let me add a little color at the divisional level, starting with wholesale commercial, which focuses on Main Street Small Business through 6% to 64.9 million compared to 61.1 million in 24.
Speaker Change: Excluding premium on it and these count your numbers the underlying policy or premium trends are best indicator of growth was 14% and Incluses rate increases of five
Speaker Change: In short, which consists of vacant expressing collectibles screwed 20% to 15 million in 25 compared to 12.5 million in 24
Speaker Change: First, vacant express through 23% and 10.9 million driven by organic growth from existing agents and agency appointments.
Speaker Change: Collectibles through 12% to $4.1 million compared to $3.6 million and includes rating increases of 4%.
Speaker Change: Our assumed business, gross written premiums, grew to 10.9 million in 25 compared to 2.9 million in 24 resulting from eight new treaties added during 24 and one new treaty added here in 25.
Specialty Products
Speaker Change: Excluding terminated products was $7.6 million, compared to $8.6 million and $24
Speaker Change: We signed on three new products in 25 that are expected to contribute premium starting in the second quarter of 25.
Speaker Change: Despite the impacts of the California wildfires, our outlook for 2025 is very positive. We can need you to expect premium growth of at least 10%.
Speaker Change: Our underwriting performance for the last three quarters of 25 is expected to improve compared to the same period in 24 [inaudible]
Speaker Change: Book Reserves remains solidly above our actual indications. We believe premium pricing is continuing to track the loss inflation.
Speaker Change: Disgressionary Capital, which we can serve the amount of consolidated equity in excess of that required to maintain the strongest levels of the world.
Speaker Change: With R.A. Rating Agencies is 251 million at March 31st.
Speaker Change: and Ms. J. Knownit. This will support the efforts to invest in the growth of an American underwriters.
Speaker Change: Lastly, our investment portfolio is well positioned to invest in longer term, longer duration and higher yields. Thank you, we will now take your questions.
Thank you.
Speaker Change: At this time, I'd like to remind everyone in order to ask a question, press star than the number one on your telephone keypad. You may also submit questions via the webcast.
Speaker Change: And our first question comes from the line of Ross Haberman with RLH investments. Your line is open. Morning, gentlemen. Thanks for taking the call. Could you go back to the expense ratio you said?
Speaker Change: Do you think we can get down below 40 in the next two or three quarters or is that going to be a
2026 event.
Speaker Change: Thank you. Let's see. I would say longer long term that 37 we targeted is is end of that 26 27 range. I would expect this year to be in that 39 to 40 range this year.
Speaker Change: And just one one technical question. I thought the shares were up by roughly half a million shares. I guess you call it a two. Could you explain that what where to? How did that go come about and where were those issued? Thank you.
Speaker Change: There was 550,000 A2 shares issued to Fox Payne as a fee for their advice and console and implementation of Project Manifest at the end of last year Those shares were issued in the first quarter, which is why they're preparing for the first time this quarter.
And they're
and the voting rights to that are...
Similar to the more, just give us a little bit.
Speaker Change: Why were they characterized as a two as opposed to just a regular rate? They have a different form in terms of they have voting rights and dividend rights similar to A shares but the difference is they only have value in the event.
Speaker Change: There is a value creation greater than the existing book value at the time they were issued.
Speaker Change: and it's a little complicated but essentially if a company were to be sold you have to achieve everybody else has to get paid the amount first and then A2 gets paid after that.
Speaker Change: So it's a form of it's kind of a combination of a restricted stock and an option and that you have to hit a certain target in order for the value to be created.
Thank you.
Wonderful.
Speaker Change: And our next question comes from the webcast from Joel Starka.
Sure, there's really, you're buried two different questions there.
Speaker Change: The decision to issue shares to Fox Payne was a result of a request under the contract that Fox Payne has with Global that a fee be paid for the creation and implementation of Project Manifest.
are
Speaker Change: Conflicts Committee of the Board evaluated that request and made a determination based with the assistance of outside legal and financial advice that that compensation for that advice would be paid in terms of the shares that are described in our [inaudible]
Speaker Change: in our 10K and in our 10Q, which are the 82 shares of the 550,000.
in terms of the second part of the question.
Speaker Change: Which is why aren't we buying back shares at 60% of book value? I think the reason for that as we've said in the past is our board currently feels [inaudible]
that we can create more long-term value by investing.
in our operations, particularly in...
Speaker Change: The new Pan America Underwriter Operation which is designed to create additional growth and profits for Global Indemnity and that's a decision our Board has made and has continued to reinforce at this point in time that that's where we're going to be investing funds going forward.
Speaker Change: In a follow-up for Joel's question, also can you explain why you're retaining 251 million of excess capital when you're shrinking book value per share, earning an inadequate return on equity and trading at 60% of book value?
Speaker Change: By retaining that $251 million, you're turning it into $151 million of market value. Wouldn't it be smarter to return that excess capital to shareholders through share repurchases or dividends?
Speaker Change: and wouldn't do that improve your return on equity and your price to book value multiple. I assumed that the board chairman's private equity firm came up with a plan to deploy that access capital or that access capital to generate a double-digit return on equity.
and to think carefully about...
A short term boost to shareholder value
Speaker Change: but our board has made the decision that they are focused on long-term growth and not looking to pop the stock price in the short term. So they believe that that capital will be invested and will generate double digit returns over the long term.
Speaker Change: And our next question is from Stefano Latapai. Can we expect more or can we expect any more losses from the LA fire or has all been paid?
Speaker Change: It hasn't all been paid, but the majority of it has been paid out, but our estimates are very solid at this point time, so we don't expect any material change in the numbers that we reported in the first quarter results.
Speaker Change: I think there's two parts of the impact of the economics on our company, the first impact, which is really on the fluctuating.
Speaker Change: interest rates that are dramatically fluctuating from from day to day in some cases but certainly from quarter to quarter and it's the reason we we have chosen as a company to remain extremely short duration and fixed income. We're definitely playing a defensive strategy waiting for...
Speaker Change: the horizon to be clearer in terms of making long-term investments and that's that's kind of on the investment side.
Turns of the short-term impact on claims
Speaker Change: The biggest thing that we worry about in economic when economics turn down for the country is probably more watching carefully for fraud claims.
People making their premium payments that are due to us but-
Speaker Change: Pretty much the same way over a long term and we have to be able to handle the ups and downs of short-term economic fluctuations .
Speaker Change: And our next question comes from Michael O'Brien. What was the tangible book valued delusion for the 550,000 shares issued to Fox Payne on March 6th of 2025?
Speaker Change: Our next question is going to come from the line of Tom Kerr with Zach's research. Your line is open.
Speaker Change: Good morning guys, just a couple quick financials. Most of my questions have been answered. On the S-G-N-A, you said that was high because of the project manifest. Does that maintain those levels throughout the years you invested in that project?
Now, the first time the first quarter includes
Speaker Change: 2.7 million dollars related to the A2 shares that's not going to repeat.
Speaker Change: You know as we relate it to those advisor fees so so no I don't expect those to repeat at the same levels but as Jay mentioned we are we will be investing so there will be some elevated cost compared to last year.
Speaker Change: Does the investment and project manifest happen in the other line ID version? It's only a It's in that that's in the corporate expense line item
Okay, for the expense ratio, right? Okay.
Speaker Change: Terminated Business Anniversaries, and you have apples to apples comparison. When will that happen?
[inaudible]
Speaker Change: We had a very large program, was terminated at year end and it was instantaneous and so essentially it will be a full 12 month rollout and the apples and apples comparison will occur starting January next year.
Speaker Change: Got it. I thought it was early than it served at that. I think that's all I have to do that I think you are you are correct There were some earlier terminated programs that that go back a few years and then we're running off, but we did have the most significant one was one that got terminated at the end of last year.
Speaker Change: Got it. That's what I was thinking about. Okay. Thank you. That's all I have.
Speaker Change: And your next question comes from the line of Chris Acoranda. If the shares issued to Fox Pain are some combination of restricted stock and the option in the event of a sale of the business, why is the book value calculated, including all of the A2 Fox Pain shares? Doesn't that understate the current book value?
That's a very good question, um, Brian .
Brian Riley: I feel really an accounting question in terms of how it gets included in the book value. Yeah, in the numerator of the book value is only the dividend portion of the value, which is 2.6 million.
Brian Riley: The additional 8.3 million is the option value so that from an accounting perspective is not recognized as an expense with the reciprocating increased equity and still there's a change
Brian Riley: And as Jay mentioned, the only way that ultimately that V8 2 is liquidated is upon a change in control of that, which is sell the company or substantial part of the company.
Speaker Change: And your next question comes from the line of Justin Sanders. Should we expect corporate expenses to trend back towards prior year levels post-Q1 and the expense impact of project manifest, or should we model it higher for the mentioned growth initiatives?
Speaker Change: I think in terms of a run rate, he will trend back towards what we have spent historically, but to the extent we actually...
Speaker Change: which we expect we will make potentially purchasing some target operations. There will be expenses associated with those those transactions and so and they would be identified and separated out at the time of the transaction, but we we'd be able to. Thank you very much.
Speaker Change: and essentially give you that number as it occurs. But as of right now there's nothing in our forecast that's planned for so we will essentially trend back to our historical numbers for corporate expenses.
Speaker Change: And there are no further questions at this time. Evan Kasowitz, I'll turn the call back over to you.
Speaker Change: Thank you again. This concludes our 2025 first quarter earning call. We look forward to to speak with you again.
This concludes today's conference call. You may now disconnect.
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