Q2 2026 Global Indemnity Group LLC Earnings Call

August 5, 2026

Speaker #1: Good morning, ladies and gentlemen, and thank you for standing by, and welcome to the Global Indemnity Group, second quarter 2026 earnings call. My name is Franz, and I will be the conference operator today.

Operator: Good morning, ladies and gentlemen, and thank you for standing by, and welcome to the Global Indemnity Group Q2 2026 Earnings Call. My name is Franz, and I will be the conference operator today. 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 would like to ask a question during this time, simply press star one on your telephone keypad.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press *1 on your telephone keypad.

Speaker #1: If you would like to withdraw your question, please press *1 again. Thank you. I would now like to turn the call over to Evan Kasowitz, Chief Operating Officer of Global Indemnity Group.

Operator: If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Evan Kasowitz, Chief Operating Officer of Global Indemnity Group. Please go ahead.

Speaker #1: Please go ahead.

Speaker #2: 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," "believes," "expectations," or "estimates." 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.

Evan Kasowitz: 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, believes, expectations, or estimates. 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. Please refer to our annual report on Form 10-K and our other filings with the SEC for descriptions of the business environment in which we operate and the important factors that may materially affect our results. 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 #2: Please refer to our annual report on Form 10-K and our other filings with the SEC for descriptions of the business environment in which we operate in the important factors that may materially affect our results.

Speaker #2: 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 #2: It is now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive of Global Indemnity.

Evan Kasowitz: It is now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive of Global Indemnity.

Speaker #3: Thank you, Evan. Good morning, and thanks for joining us for GBLI's second quarter 2026 results conference call. Joining me today are Evan Kasowitz, our Chief Operating Officer of GBLI, and President of Belmont Holdings, and Brian Riley, our Chief Financial Officer.

Jay Brown: Thank you, Evan. Good morning, and thanks for joining us for GBLI's Q2 2026 results conference call. Joining me today are Evan Kasowitz, our Chief Operating Officer of GBLI and President of Belmont Holdings, and Brian Riley, our Chief Financial Officer. As usual, I'll start with a short overview of the quarter, including what stood out to me in the results and what we're seeing in our longer-term trends. Brian will then walk through the key financial highlights, after which we'll open the call for questions. Let me start with the headline. Our underlying insurance operating trends remain strong and consistent with the results we have delivered over the past several years. Our accident year combined ratio was 94.7 for the quarter, producing an underwriting income of $5.8 million.

Speaker #3: As usual, I'll start with a short overview of the quarter. Including what stood out to me in the results, and what we're seeing in our longer-term trends.

Speaker #3: Brian will then walk through the key financial highlights, after which we'll open the call for questions. Let me start with the headline. Our underlying insurance operating trends remain strong and consistent with the results we have delivered over the past several years.

Speaker #3: Our accident year combined ratio was 94.7 for the quarter, producing an underwriting income of $5.8 million. Through June, our accident year combined ratio was 94.8 percent, with underwriting income of $11.2 million, modestly ahead of last year.

Jay Brown: Through June, our accident year combined ratio was 94.8%, with underwriting income of $11.2 million, modestly ahead of last year. Loss performance remains the strongest part of the story. Catastrophe experience was favorable, and non-catastrophe experience and results remained strong and consistent. Expenses remained well above our long-term target levels by approximately 4.5 points as we continue investing in Katalyx, Kaleidoscope, and related technology platform capabilities. While these investments are elevating current expense levels, operating expense dollars have remained exactly in line with our 2026 plan. We will achieve significantly improved operating leverage as these initiatives drive efficiency, AI-assisted decision-making, and support future growth. Turning to insurance revenue growth. Belmont Core gross written premium was $117 million for the quarter, up 7% year-over-year.

Speaker #3: Loss performance remains the strongest part of the story. Catastrophe experience was favorable, and non-catastrophe experience and results remain strong and consistent. Expenses remained well above our long-term target levels, by approximately 4.5 points.

Speaker #3: As we continue investing in catalysts, kaleidoscope, and related technology platform capabilities. While these investments are elevating current expense levels, operating expense dollars have remained exactly in line with our 2026 plan.

Speaker #3: We will achieve significantly improved operating leverage as these initiatives drive efficiency, AI-assisted decision-making, and support future growth. Turning to insurance revenue growth. Belmont Core Gross Written Premium was $117 million for the quarter, up 7 percent year over year.

Speaker #3: Through the first half, Belmont Core Gross Written Premium was 214 million, up 3 percent versus last year. Still well below our rolling growth targets.

Jay Brown: Through the H1, Belmont Core gross written premium was $214 million, up 3% versus last year, still well below our rolling growth targets. Growth was led by Valian Re, which was up 79%, and Collectibles, which was up 14%. Penn-America also returned to growth, increasing 2% during the quarter after two consecutive quarters of declines, an encouraging result against a more competitive E&S market backdrop. The broader E&S market is becoming more competitive as admitted capacity expands and rate momentum moderates. We are extremely focused on not chasing volume at the expense of profitability. Instead, we are staying disciplined and leaning for growth into those areas of the portfolio, including Valian Re, Collectibles, and our new venture pipeline that are less exposed to cyclical competitive pressures. Excellent future results are dependent on making sure this is an execution reality versus not just words.

Speaker #3: Growth was led by value and rate, which was up 79 percent, and collectibles, which was up 14 percent. Pan America, also returned to growth, increasing 2 percent during the quarter, after two consecutive quarters of declines.

Speaker #3: An encouraging result against a more competitive E&S market backdrop. The broader E&S market is becoming more competitive. As admitted capacity expands, and rate momentum moderates.

Speaker #3: We are extremely focused on not chasing volume at the expense of profitability. Instead, we are staying disciplined and leaning for growth into those areas of the portfolio including value and rate, collectibles, and our new venture pipeline, that are less exposed to cyclical competitive pressures.

Speaker #3: Excellent future results, our dependent on making sure this is an execution reality versus not just words. Within specially products, legacy programs, are also pressured by admitted carriers and MGAs.

Jay Brown: Within specialty products, legacy programs are also pressured by admitted carriers and MGAs. We continue to see opportunity in the programs we want to retain and new programs expected to launch later this year. Our retail and consumer-focused businesses continue to expand distribution with more than 700 retail agent appointments year-to-date. Collectibles grew 14% while continuing to deliver excellent underwriting results. Vacant Express delivered 5% growth despite challenging property market conditions and are no longer offering a California admitted property product. Our new venture initiatives continue to advance, including aging services and specialty casualty. We have recruited very talented leaders for our team to establish these new offerings. Both will be important medium-term growth opportunities with product formation work progressing through the end of this year. Valian Re remains on track for the year following strong growth in the H1.

Speaker #3: But we continue to see opportunity in the programs we want to retain and new programs expected to launch later this year. Our retail and consumer-focused businesses continue to expand distribution.

Speaker #3: With more than 700 retail agent appointments year to grew 14 percent, while continuing to deliver excellent underwriting results, and they can express delivered 5 percent growth, despite challenging property market conditions and are no longer offering a California admitted property product.

Speaker #3: Our new venture initiatives continue to advance, including aging services and specially casually. We have recruited very talented leaders for our team to establish these new offerings.

Speaker #3: Both will be important medium-term growth opportunities with product formation work progressing through the end of this year. Valiant Re remains on track for the year following strong growth in the first half.

Speaker #3: We continue to expand the portfolio thoughtfully, including the addition of new property quota share relationships. While maintaining underwriting discipline and exiting underperforming treaties where appropriate.

Jay Brown: We continue to expand the portfolio thoughtfully, including the addition of new property quota share relationships, while maintaining underwriting discipline and exiting underperforming treaties where appropriate. Sayata is our digital distribution platform connecting agents and carriers in small commercial insurance and continued to make progress in H1, with submissions increasing 8.5%, expanded carrier participation, and the launch of Excess Cyber. Just as importantly, operational efficiency continues to improve with automation initiatives reducing average daily tickets volume by more than 22%. These productivity gains, combined with enhancements to their leadership team, position the platform for improved operating leverage over time. On the technology front, the Penn-America Pro build is nearing launch, with testing substantially complete and deployment still targeted for a September go live.

Speaker #3: Saada is our digital distribution platform, connecting agents and carriers in small commercial insurance, and continue to make progress in the first half. With submissions increasing 8.5 percent, expanded carrier participation, and the launch of XS Cyber.

Speaker #3: Jess's importantly operational efficiency continues to improve, with automation initiatives reducing average daily ticket value by more than 22 percent. These productivity gains combined with enhancements to their leadership team position the platform for improved operating leverage over time.

Speaker #3: On the technology front, the Pan America Pro build is nearing launch, with testing substantially complete and deployment still targeted for September go-live. More broadly, the kaleidoscope platform continues to be prepared to expand across our portfolio, and remains a key driver of future scalability, efficiency, and robust partner connectivity.

Jay Brown: More broadly, the Kaleidoscope platform continues to be prepared to expand across our portfolio and remains a key driver of future scalability, efficiency, and robust partner connectivity. The next phase of Kaleidoscope work will focus on Vacant Express and collectibles, with broader application to new ventures and partner API connectivity in 2027. This remains a significant near-term lift for the teams, but it is foundational to our operating model and future scalability. Stepping back, we continue to remain very confident in the underlying quality of our business. Loss ratio performance remains strong. Our portfolio continues to diversify, and we are navigating a more competitive market, E&S market, with discipline. We continue to expect Belmont Core gross premium for the full year to finish approximately 15% above 2025 levels, while investment income should benefit from rising portfolio yields approaching 4.9% by year-end.

Speaker #3: The next phase of kaleidoscope work will focus on vacant express and collectibles, with broader application to new ventures and partner API connectivity in 2027.

Speaker #3: This remains a significant near-term lift for the teams, but it is foundational to our operating model and future scalability. Stepping back, we continue to remain very confident in the underlying quality of our business.

Speaker #3: Loss ratio performance remains strong. Our portfolio continues to diversify and we are navigating a more competitive market, E&S market, with discipline. We continue to expect Belmont Core Gross Premium for the full year to finish approximately 15 percent above 2025 levels.

Speaker #3: While investment income should benefit from rising portfolio yields, approaching 4.9 percent by year-end. With that, I'll turn it over to Brian to walk through the key financial details.

Jay Brown: With that, I'll turn it over to Brian to walk through the key financial details.

Speaker #2: Thank you, Jay. Net income was 11.1 million for the second quarter, up 8 percent compared to 10.3 million in 2025. For the year, net income is at 15.3 million, compared to 6.4 million in '25.

Brian Riley: Thank you, Jay. Net income was $11.1 million for Q2, up 8% compared to $10.3 million in 2025. For the year, net income is at $15.3 million, compared to $6.4 million in 2025. Starting with investments. Investment income for Q2 was $16.4 million, compared to $14.7 million in 2025. For 2026, this includes income on a mark-to-market adjustment of $2.3 million on limited partnership interests. Excluding income of limited partnerships, investment income was $14.1 million in Q2, compared to $15.3 million in 2025, driven by a higher allocation of the fixed income portfolio to US Treasuries. As for H1, net income was $28.6 million, compared to $29.5 million in 2025. Excluding the impact of income related to limited partnerships, investment income was $28.3 million compared to $30.2 million, also driven by an increased allocation to US Treasuries.

Speaker #2: Starting with investments, investment income for the second quarter was 16.4 million, compared to 14.7 million in '25. For '26, this includes income on a mark-to-market adjustment of 2.3 million on limited partnership interest.

Speaker #2: Excluding income of limited partnerships, investment income was 14.1 million, in the second quarter, compared to 15.3 in '25. Driven by a higher allocation of the fixed income portfolio to U.S.

Speaker #2: Treasuries. As for the first six months, net income was 28.6 million, compared to 29.5 million in 2025. Excluding the impact of income related to limited partnerships, investment income was 28.3, compared to 30.2 million, also driven by an increased allocation to U.S.

Speaker #2: Treasuries. The current book yield on the fixed income portfolio increased to 4.42 percent, with an average duration of 1.0 years, 1.08 years, as of June 30, 2026, compared to 4.27 percent book yield and duration of 1.01 years as of December 31, 2025, resulting from reinvestment of 177 million of maturities at 5.45 percent that had an average yield of 4.26 percent.

Brian Riley: The current book yield on the fixed income portfolio increased to 4.42%, with an average duration of 1.08 years as of 30 June 2026, compared to 4.27% book yield and duration of 1.01 years as of 31 December 2025, resulting from reinvestment of $177 million of maturities at 5.45% that had an average yield of 4.26%. As Jay noted, we expect this reinvestment trend to continue, targeting book yield of 4.9% by 31 December 2026. The average credit quality of the fixed income portfolio remains at double-A minus. Moving to underwriting income. For Q2, our underwriting income increased by 3% to $5.8 million, driven by 4% growth in earned premiums and a combined ratio of 94.7%. Our loss ratio for the quarter remains strong at 53.8%, a 1.8 percentage point improvement over 2025, driven by catastrophe loss ratio performance.

Speaker #2: As Jay noted, we expect this reinvestment trend to continue, targeting a book yield of 4.9% by December 31, 2026. The average credit quality of the fixed income portfolio remains at AA-.

Speaker #2: Moving to underwriting income, for the second quarter, Axmire underwriting income increased by 3 percent to 5.8 million, driven by 4 percent growth in our premiums and a combined ratio of 94.7.

Speaker #2: Our loss ratio for the quarter remains strong, at 53.8, a 1.8-point improvement over '25, driven by catastrophe loss ratio performance. As Jay noted, the elevated expense ratio of 40.9 percent is driven by personnel costs related to the build-out of products on the Catalyst platform.

Brian Riley: As Jay noted, the elevated expense ratio of 40.9% is driven by personnel costs related to build-out of products on the Katalyx platform. Similar to Q2, our underwriting income increased by 3% to $11.2 million, driven by 4% growth in earned premiums and a combined ratio of 94.8%. Note that that comparison excludes the impact of California wildfires from the 2025 figures. Turning to premiums. Belmont Core's gross written premiums increased 7% to $117 million for Q2, and 3% to $214 million for the year. At the divisional level, starting with wholesale commercial business, Penn-America, which focuses on Main Street small business, was up 2% for the quarter, an improvement over Q1, which was down 5%.

Speaker #2: As for the year, in similar to the second quarter, Axmire underwriting income increased by 3 percent to 11.2 million, driven by 4 percent growth in our premiums and a combined ratio of 94.8.

Speaker #2: Note that comparison excludes the impact of California wildfires from the 2025 figures. Turning to premiums, Belmont Core's gross written premiums increased 7 percent to $117 million for the second quarter, and 3 percent to $214 million for the year.

Speaker #2: At the divisional level, starting with wholesale commercial, business Pan America, which focuses on Main Street, Small Business, was up 2 percent for the quarter, an improvement over first quarter.

Speaker #2: Which was down 5 percent. These trends continue to reflect maintaining pricing and return standards amidst the competitive market, as Jay mentioned. Demonstrated by an overall flat rate change for the first half of the year, and continued strong loss ratios.

Brian Riley: These trends continue to reflect maintaining pricing and return standards amidst the competitive market, as Jay mentioned, demonstrated by an overall flat rate change for H1 and continued strong loss ratios. We continue to adjust our products to grow the business with the goal of maintaining our loss ratio. Valian Re, our assumed reinsurance business, is up 79% to $21.5 million for Q2 and 43% to $32.7 million for H1 2026, as three new treaties were added during the quarter. The number of in-force treaties has increased to 22 at 30 June 2026. Vacant Express is up 6% to $13.1 million for Q2 and 5% to $24.5 million for H1 2026. Collectibles is up 14% to $4.8 million for Q2 and 13% to $9.4 million for the year.

Speaker #2: We continue to adjust our products to grow the business, with the goal of maintaining our loss ratio. Val and Ray, our assumed reinsurance business, is up 79 percent to 21.5 million for the second quarter, and 43 percent to 32.7 million for the first six months of 2026, as three new treaties were added during the quarter.

Speaker #2: The number of enforced treaties has increased to 22 at June 30, 2026. Vacant express is up 6 percent to 13.1 million for the second quarter, and 5 percent to 24.5 million for the first six months of '26.

Speaker #2: Collectibles is up 14 percent to 4.8 million for the second quarter, and 13 percent to 9.4 million for the year. And last, specialty products, did experience a decline of 36 percent to 7.8 million during the second quarter, and 21 percent to 15.5 million for the year, driven primarily by terminated products.

Brian Riley: Last, specialty products did experience a decline of 36% to $7.8 million during Q2, and 21% to $15.5 million for the year, primarily driven by terminated products. Excluding the terminated business, gross written premiums on the 11 ongoing programs is only down 1%. In closing, I have five takeaways. One, we are on track to achieve growth of 15% in gross written premiums. Two, although we are seeing increased competition in the marketplace, we are optimistic about our future underwriting performance, given the positioning of our current products and our loss ratio performance for the last three and a half accident years. Three, our investment portfolio remains positioned to invest in longer duration maturities at higher yields. Four, our book reserves remain solidly above our current actuarial indications.

Speaker #2: Excluding terminated business, gross written premiums only down 1 percent. In closing, I have five takeaways. One, we are on track to achieve growth of 15 percent and gross written premiums.

Speaker #2: Two, although we are seeing increased competition in the marketplace, we are optimistic about our future underwriting performance. Given the positioning of our current products, and our loss ratio performance, for the last three and a half Axmire years.

Speaker #2: Three, our investment portfolio remains positioned to invest in longer duration maturities at higher yields, four, our book reserves remain solidly above our current actual indications, and five, discretionary capital, which we consider to be the amount of consolidated equity in excess of that required to maintain the strongest levels for the rating agencies is 302 million, at June 30, 2026.

Brian Riley: Five, discretionary capital, which we consider to be the amount of consolidated equity in excess of that required to maintain the strongest levels for the rating agencies, is $302 million at 30 June 2026. Thank you. We will now take your questions.

Speaker #2: Thank you. We will now take your questions.

Speaker #1: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to join the queue.

Operator: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to join the queue. If you would like to withdraw your questions, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Tom Kerr from Zacks', SCR. Please go ahead.

Speaker #1: If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker #1: And your first question comes from the line of Tom Kerr, from Zach's. SCR, please go ahead.

Speaker #3: Good morning, guys. Several quick ones. On the expense ratio, you know, I think we all know why it's elevated, all the spending, but what is the timing or has the timing changed and when that gets back to normal?

Tom Kerr: Good morning, guys. Several quick ones. On the expense ratio, I think we all know why it's elevated, all the spending, but what is the timing, or has the timing changed in when that gets back to normal? Is that a gradual occurrence in 2027, or does it happen like a cliff? How do we look about when it gets back to what you think is normal?

Speaker #3: Is that a gradual occurrence in 2027 or does it happen like a cliff or how do we look about when it gets back to what you think is normal?

Speaker #4: It will accelerate rapidly during 2027, and I would expect by the latter half of 2028 we'll be back to more normal levels.

Jay Brown: It will accelerate rapidly during 2027, and I would expect by the latter half of 2028, we'll be back to more normal levels.

Speaker #3: Okay, so to 2028 issue, the normal levels. Okay.

Tom Kerr: Okay. It's a 2028 issue, the normal levels? Okay.

Jay Brown: At the end of the year, it'll be kind of an eight-quarter rollout change that you'll see very clearly as we go through the year.

Speaker #4: At the end of the year, it'll be kind of an eight-quarter rollout change that you'll see very clearly as we go through the year.

Speaker #3: Got it. And did you guys provide a new level of discretionary capital? I'm sorry if I missed that.

Tom Kerr: Got it. Did you guys give a new level of discretionary capital? Sorry if I missed that.

Speaker #4: Yeah.

Brian Riley: Yep. $302 million, Tom.

Speaker #2: 302 million, Tom.

Speaker #3: Okay. And one more kind of big picture question about AI. Are you guys using, you know, traditional or new AI in any areas of the business?

Tom Kerr: Okay. One more kind of big picture question about AI. Are you guys using traditional or new AI in any areas of the business? Is it claims or fraud detection or underwriting, or have you even started using AI in some form?

Speaker #3: Is it claims, or fraud detection, or underwriting, or have you even started using AI in some form?

Speaker #4: That's a broad question. We have the entire employee population being brought up the curve, individually and collectively. With AI skills, that's a process that we began at the beginning of the year.

Jay Brown: That's a broad question. We have the entire employee population is being brought up the curve individually and collectively with AI skills. That's a process that we began at the beginning of the year. We're starting to see isolated examples of significant efficiencies that are being gained. The larger programs in terms of AI assisting our underwriters in making better decisions and our claims officers in establishing more accurate settlement levels are in development, have yet to be fully deployed, though we're testing them in different aspects at this point in time. The underwriting will follow very shortly after the end of the year when Kaleidoscope is fully deployed across our existing direct product capabilities for Collectibles assumed and Penn-America wholesale business, all of which have AI developments underway that will affect their business fairly significantly as we start to move through 2027.

Speaker #4: We're starting to see isolated examples of significant efficiencies that are being gained. The larger programs in terms of AI assisting our underwriters in making better decisions and our claims officers in establishing more accurate settlement levels are in development, have yet to be fully deployed, though we're testing them in different aspects at this point in time.

Speaker #4: The underwriting will follow very shortly after the end of the year, when kaleidoscope is fully deployed across our existing direct product capabilities for collectibles assumed and pan-America wholesale business, all of which have AI developments underway that will affect their business fairly significantly as we start to move through '27.

Speaker #4: It is early to declare any kind of significant victories, but I would say that from a are incredibly optimistic of the wide range of places that will impact the company and it's just it's too early.

Jay Brown: It is early to declare any kind of significant victories. I would say that from our viewpoint of looking forward is we are incredibly optimistic of the wide range of places that will impact the company and it's too early. It'll become so integrated with the company probably in a year or two, we won't be talking about it because it'll have overtaken our entire company during that time period.

Speaker #4: It'll become so integrated with the company probably in a year or two we won't be talking about it because it'll have overtaken our entire company during that time period.

Speaker #3: Got it. All right, thanks. I will jump back in the queue.

Tom Kerr: Got it. All right, thanks. I will jump back in the queue.

Speaker #1: And your next question comes from Ross, Haberman, from RLH Investors. Please go ahead.

Operator: Your next question comes from Ross Haberman from RLH Investments. Please go ahead.

Ross Haberman: Morning, Jay. How are you? I just wanted to go back to this earlier question. Was he referring to what you call your acquisition costs and other operating expenses, that $41 million in the quarter? If I understand it right, that number is going to ramp up, you said, through 2027. Is that correct?

Speaker #2: Morning, Jane. How are you? I just wanted to go back to this earlier question. Was he referring to what you call your acquisition cost and other operating expenses, that 41 million in the quarter, and if I understand it right, you're that number is going to ramp up.

Speaker #2: You said through '27, is that correct?

Speaker #4: No, it's he was actually trying to get the point that it's risen over the last 24 months as we've increased our expenses in development.

Jay Brown: No. He was actually trying to get the point that it's risen over the last 24 months as we've increased our expenses in development. What I view right now is we're kind of at the pivot point where our expenses have started to level off and will start coming down as a percentage. It affects both acquisition costs and operating expenses. Our acquisition cost is a function of the different lines of business we're in. As we write more Valian Re business, our commission percentage will be going up as a percentage as you look at the total, while our operating expense, personnel-related expenses, will be coming down as a percentage of the total. The goal is to get back

Speaker #4: And what I view right now is we're kind of at we're kind of at the pivot point where our expenses of started to level off and we'll start coming down is a percentage.

Speaker #4: And it affects both acquisition costs and operating expenses. Our acquisition cost is a function of the different lines of business we're in. As we write more value and read business, our commission percentage will be going up as the percentage as you look at the total, while our expenses our operating expense personnel related expenses will be coming down as the percentage of the total.

Speaker #4: But the goal is to get back roughly into the 36 range within a two-year period. That hasn't changed.

Brian Riley: The goal is to get back roughly into the 36 range within a two-year period. That hasn't changed.

Ross Haberman: Temporary loss and you recovered it. Could you explain what happened there?

Speaker #2: Very lost. And you recovered it. Could you explain what happened there?

Speaker #4: I'm sorry, Ross. We lost you for a minute. Could you repeat the question?

Jay Brown: I'm sorry, Ross, we lost you for a minute. Could you repeat the question?

Speaker #2: You talked about a 2.3 million dollar limited partnership. I think it was a loss or a temporary loss. Could you explain what happened there?

Ross Haberman: You talked about a $2.3 million limited partnership, I think it was a loss or a temporary loss. Could you explain what happened there?

Speaker #5: Yeah. So fair value mark to market adjustment loss in the first quarter of 2.3 million. That reversed in the second quarter fully. So for the year the fair value change on the partnership was zero.

Brian Riley: It's a fair value mark-to-market adjustment loss in Q1 of $2.3 million that reversed in Q2 fully. For the year, the fair value change on the limited partnership was 0.

Speaker #2: Can I ask what kind of investments that includes?

Ross Haberman: Can I ask what kind of investments that includes?

Brian Riley: It's our limited partnership funds that we disclose in our 10-Q. It's a global international fund. It's really down to about $1 million at this point.

Speaker #5: It's our limited partnership funds that we disclosed in our 10Q, the global international fund. It's really down to about a million dollars at this point.

Speaker #2: Do you plan to stay in it? Yeah, is that equity or debt, or a combination, or what?

Ross Haberman: Do you plan to stay in it?

Brian Riley: Limited partnership.

Ross Haberman: Is that equity or debt or a combination, or what?

Speaker #5: The underlying securities and equity.

Brian Riley: The underlying security is in equity.

Speaker #2: Okay. And do you plan to stay in it or reduce it or what?

Ross Haberman: Okay. Do you plan to stay in it or reduce it, or what?

Brian Riley: We expect to be out of it by the end of the year.

Speaker #5: We expect it we expect to be out of it by the end of the year.

Ross Haberman: Got it. Just one last question. I know it's not your direct lines of business, but do you have any indirect or direct experience to the Middle East risks or reinsurance exposure there to the Middle East conflict?

Speaker #2: Got it. And just one last question. Do you have any I know it's not your direct lines of business, but do you have any indirect or direct experience to the Middle East risk or gen re exposure there to the Middle East conflict?

Speaker #4: No, we're, to the best of our knowledge, we're 100 percent domestic in the United States at this point in time.

Jay Brown: No. To the best of our knowledge, we're 100% domestic in the United States at this point in time.

Speaker #2: Okay. And just one final question. I know I ask every quarter: Has your board changed their mind and decided to use some of your excess capital to buy back shares yet?

Ross Haberman: Okay. Just one final question I know I ask every quarter. Has your board changed their mind and decided to use some of your excess capital to buy back shares yet?

Speaker #4: Not that I'm aware of.

Jay Brown: Not that I'm aware of.

Speaker #2: Okay, thank you, guys. Enjoy the rest of the summer.

Ross Haberman: Okay. Thank you, guys. Enjoy the rest of the summer.

Speaker #1: And your next question comes from Tom Kerr with Zacks. Please go ahead.

Operator: Your next question comes from Tom Kerr from Zacks. Please go ahead.

Tom Kerr: Just a quick follow-up. I think you said it's possible to get 15% gross premium growth on an annual basis in 2026 compared to 2025.

Speaker #3: Just a quick follow-up. I think you said it's possible to get 15 percent gross premium growth on an annual basis in 2026. Compared to 2025.

Speaker #4: That is still our belief that we'll have a pretty good shot at getting there by the end of the year. And I know it's hard it's hard it's hard to believe given we only have modest growth in the first half.

Jay Brown: That is still our belief that we'll have a pretty good shot at getting there by the end of the year.

Tom Kerr: that would-

Jay Brown: it's hard to believe given we only have modest growth in H1, but because of the composition of the different products growing at very different rates, we still think that's a reasonable target for the year.

Speaker #4: But because of the composition of the different products growing at very different rates, we still think that's a reasonable target for the year.

Speaker #3: Okay, just confirming, because that implies super strong double-digit premium growth in the second half of the year.

Tom Kerr: Okay. I was just confirming because that implies super strong double-digit premium growth in H2 of the year.

Speaker #4: Yep, your math tracks with mine.

Jay Brown: Yep. Your math tracks with mine.

Speaker #5: Correct.

Brian Riley: Correct.

Tom Kerr: Okay. All right. Thanks. That's all I have. I'll jump back.

Speaker #3: Okay. All right. Thanks. That's all I have. I'll jump back.

Brian Riley: Yeah.

Speaker #5: Yeah.

Speaker #1: We will now move to our web questions. Please go ahead.

Operator: We will now move to our web questions. Please go ahead.

Speaker #4: Thank you, operator. The first web question is from Ashok Mehta. What are the updated plans and timeline for use of the significant excess capital?

Evan Kasowitz: Thank you, operator. The first web question is from Ashok Mehta. What are the updated plans and timeline for use of the significant excess capital? What type of ROE can the company as a whole generate when this excess capital is fully deployed?

Speaker #4: What type of ROE can the company as a whole generate when this excess capital is fully deployed? If you look at our current book of business, what we've tried to do is produce some supplementary statistics to gap where we remove both the excess capital and the investment earnings on excess capital Brian wants you to give the update of where those numbers are currently.

Jay Brown: If you look at our current book of business, what we've tried to do is produce some supplementary statistics to GAAP, where we remove both the excess capital and the investment earnings on excess capital. Brian, why don't you give the update of where those numbers are currently?

Speaker #5: Yeah. Yeah. So on the adjusted ROEs, when you take out invested capital and really focus on pre-tax after-tax operating income, is nearing 13 percent.

Brian Riley: Yeah. On the adjusted ROEs, when you take out invested capital and really focus on after-tax operating income, is nearing 13%.

Speaker #4: And the goal is question and the second part of your question really is when does that occur? We have internal plans to utilize that capital through additional products and expansion of the products we're currently offering.

Jay Brown: The second part of your question really is when does that occur? We have internal plans to utilize that capital through additional products and expansion of the products we're currently offering. I would expect it would be probably a two and a half year ramp up to fully utilize all the excess capital with our current plans.

Speaker #4: I would expect it would be probably a two, two and a half year ramp up to fully utilize all the excess capital with our current plans.

Speaker #4: Thank you. The next question is from Joel Straka. For the portion of your investment portfolio funded with shareholders' equity, do you expect one-year duration fixed income to be at actual, not reported, inflation?

Evan Kasowitz: Thank you. The next question is from Joel Straka. For the portion of your investment portfolio funded with shareholders' equity, do you expect one-year duration fixed income to be actual, not reported inflation? Would it make sense to own some energy or precious metal companies that would hedge inflation? What's your investment plan if the government represses short-term interest rates?

Speaker #4: Would it make sense to own some energy or precious metal companies that would hedge inflation? What's your investment plan if the government represses short-term interest rates?

Speaker #2: That's a pretty complex question.

Jay Brown: That's a pretty complex question. We are ideally positioned to reallocate in almost any direction, given the short duration of our portfolio. Our investment committee is driven by three of our board members and outside advisors. They are continuing to be very opportunistic in the short term. I think I would agree with you. As we're looking out over the future for the next 18 to 24 months, adding in some hedges against pure inflation pressures is probably called for. Certainly, I will make sure that's relayed to our investment committee.

Speaker #4: We're ideally positioned to reallocate in almost any direction, given the short duration of our portfolio. Our investment committee is driven by three of our board members and outside advisors.

Speaker #4: And they are continuing to be very opportunistic in the short term. I think I would agree with you as we're looking out over the future, for the next 18 to 24 months.

Speaker #4: Adding in some inflation excuse me, hedges against pure inflation and pressures is probably called for. And certainly I will make sure that's related to our investment committee.

Evan Kasowitz: How is this on the website?

Speaker #4: That is it from the webcast.

Operator: No further questions. There are no further questions at this time. I will now turn the call back over to Evan Kasowitz for the closing remarks. Please go ahead.

Speaker #1: No further questions. There are no further questions at this time. I will now turn the call back over to Evan Kasowitz for the closing remarks.

Speaker #1: Please go ahead.

Speaker #4: Thank you, operator. This concludes our 2026 second quarter earnings call. We look forward to speaking with you about our third quarter 2026 results. Thank you.

Evan Kasowitz: Thank you, operator. This concludes our 2026 Q2 earnings call. We look forward to speaking with you about our Q3 2026 results. Thank you.

Operator: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect.

Q2 2026 Global Indemnity Group LLC Earnings Call

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