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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive office including zip code)
Registrant's telephone number, including area code: (
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit such files.).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
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Large accelerated filer |
☐; |
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☒; |
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Non-accelerated filer |
☐; |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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As of July 28, 2022, the registrant had outstanding
TABLE OF CONTENTS
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Page |
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Item 1. |
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3 |
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Consolidated Balance Sheets |
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3 |
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4 |
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7 |
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8 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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38 |
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Item 3. |
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57 |
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Item 4. |
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57 |
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Item 1. |
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58 |
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Item 1A. |
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58 |
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Item 2. |
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58 |
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Item 3. |
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58 |
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Item 4. |
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58 |
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Item 5. |
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58 |
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Item 6. |
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59 |
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60 |
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2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
GLOBAL INDEMNITY GROUP, LLC
Consolidated Balance Sheets
(In thousands, except share amounts)
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(Unaudited) June 30, 2022 |
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December 31, 2021 |
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ASSETS |
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Fixed maturities: |
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Available for sale, at fair value (amortized cost: $ |
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$ |
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$ |
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Equity securities, at fair value |
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Other invested assets |
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Total investments |
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Cash and cash equivalents |
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Premium receivables, net of allowance for expected credit losses of $ |
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Reinsurance receivables, net of allowance for expected credit losses of $ |
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Funds held by ceding insurers |
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Deferred federal income taxes |
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Deferred acquisition costs |
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Intangible assets |
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Goodwill |
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Prepaid reinsurance premiums |
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Lease right of use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Liabilities: |
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Unpaid losses and loss adjustment expenses |
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$ |
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$ |
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Unearned premiums |
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Ceded balances payable |
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Payable for securities purchased |
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Contingent commissions |
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Debt |
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Lease liabilities |
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Other liabilities |
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Total liabilities |
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$ |
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$ |
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Commitments and contingencies (Note 11) |
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Shareholders’ equity: |
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Series A cumulative fixed rate preferred shares, $ |
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Common shares: no par value; |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss), net of tax |
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( |
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Retained earnings |
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Class A common shares in treasury, at cost: |
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( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
3
GLOBAL INDEMNITY GROUP, LLC
Consolidated Statements of Operations
(In thousands, except shares and per share data)
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(Unaudited) Quarters Ended June 30, |
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(Unaudited) Six Months Ended June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenues: |
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Gross written premiums |
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$ |
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$ |
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$ |
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$ |
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Ceded written premiums |
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( |
) |
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( |
) |
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( |
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( |
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Net written premiums |
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Change in net unearned premiums |
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( |
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( |
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( |
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( |
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Net earned premiums |
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Net investment income |
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Net realized investment gains (losses) |
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( |
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( |
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Other income |
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Total revenues |
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Losses and Expenses: |
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Net losses and loss adjustment expenses |
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Acquisition costs and other underwriting expenses |
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Corporate and other operating expenses |
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Interest expense |
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Loss on extinguishment of debt |
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— |
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— |
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Income (loss) before income taxes |
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( |
) |
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( |
) |
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Income tax expense (benefit) |
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( |
) |
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( |
) |
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Net income (loss) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Less: preferred stock distributions |
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Net income (loss) available to common shareholders |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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Per share data: |
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Net income (loss) available to common shareholders (1) |
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Basic |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Diluted |
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$ |
( |
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$ |
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$ |
( |
) |
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$ |
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Weighted-average number of shares outstanding |
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Basic |
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Diluted |
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Cash distributions declared per common share |
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$ |
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$ |
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$ |
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$ |
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(1) |
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See accompanying notes to consolidated financial statements.
4
GLOBAL INDEMNITY GROUP, LLC
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
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(Unaudited) Quarters Ended June 30, |
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(Unaudited) Six Months Ended June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Net income (loss) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Other comprehensive income (loss), net of tax: |
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Unrealized holding gains (losses) |
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( |
) |
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( |
) |
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( |
) |
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Reclassification adjustment for losses included in net income (loss) |
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( |
) |
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Unrealized foreign currency translation gains (losses) |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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Other comprehensive income (loss), net of tax |
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( |
) |
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( |
) |
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( |
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Comprehensive income (loss), net of tax |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
See accompanying notes to consolidated financial statements.
5
GLOBAL INDEMNITY GROUP, LLC
Consolidated Statements of Changes in Shareholders’ Equity
(In thousands, except share amounts)
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(Unaudited) Quarters Ended June 30, |
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(Unaudited) Six Months Ended June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Number of Series A Cumulative Fixed Rate Preferred Shares |
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Number at beginning and end of period |
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Number of class A common shares issued: |
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Number at beginning of period |
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Common shares issued under share incentive plans, net of forfeitures |
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Common shares issued to directors |
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Share conversion |
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Number at end of period |
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Number of class B common shares issued: |
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Number at beginning of period |
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Share conversion |
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( |
) |
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( |
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Number at end of period |
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Par value of Series A Cumulative Fixed Rate Preferred Shares |
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Balance at beginning and end of period |
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$ |
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$ |
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$ |
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$ |
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Additional paid-in capital: |
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Balance at beginning of period |
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$ |
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$ |
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$ |
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$ |
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Share compensation plans |
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Balance at end of period |
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$ |
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$ |
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$ |
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$ |
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|
Accumulated other comprehensive income (loss), net of deferred income tax: |
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Balance at beginning of period |
|
$ |
( |
) |
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$ |
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$ |
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$ |
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|
Other comprehensive income (loss): |
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Change in unrealized holding gains (losses) |
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|
( |
) |
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( |
) |
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|
( |
) |
|
Unrealized foreign currency translation gains (losses) |
|
|
( |
) |
|
|
( |
) |
|
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( |
) |
|
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( |
) |
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Other comprehensive income (loss) |
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( |
) |
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|
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( |
) |
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( |
) |
|
Balance at end of period |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
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|
Retained earnings: |
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|
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Balance at beginning of period |
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$ |
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$ |
|
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|
$ |
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$ |
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|
Net income (loss) |
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|
( |
) |
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( |
) |
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Preferred share distributions |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
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( |
) |
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Distributions to shareholders ($ |
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( |
) |
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|
( |
) |
|
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( |
) |
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( |
) |
|
Balance at end of period |
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$ |
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|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Number of treasury shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number at beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common shares purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury shares, at cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
Class A common shares purchased, at cost |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Total shareholders’ equity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements.
6
GLOBAL INDEMNITY GROUP, LLC
Consolidated Statements of Cash Flows
(In thousands)
|
|
|
(Unaudited) Six Months Ended June 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
( |
) |
|
$ |
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Amortization and depreciation |
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
Restricted stock and stock option expense |
|
|
|
|
|
|
|
|
|
Deferred federal income taxes |
|
|
( |
) |
|
|
|
|
|
Amortization of bond premium and discount, net |
|
|
|
|
|
|
|
|
|
Net realized investment (gains) losses |
|
|
|
|
|
|
( |
) |
|
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
(Income) loss from equity method investments, net of distributions |
|
|
|
|
|
|
( |
) |
|
Changes in: |
|
|
|
|
|
|
|
|
|
Premium receivables, net |
|
|
( |
) |
|
|
( |
) |
|
Reinsurance receivables, net |
|
|
( |
) |
|
|
( |
) |
|
Funds held by ceding insurers |
|
|
|
|
|
|
|
|
|
Unpaid losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
Unearned premiums |
|
|
|
|
|
|
|
|
|
Ceded balances payable |
|
|
( |
) |
|
|
|
|
|
Other assets and liabilities |
|
|
( |
) |
|
|
( |
) |
|
Contingent commissions |
|
|
( |
) |
|
|
( |
) |
|
Deferred acquisition costs |
|
|
( |
) |
|
|
( |
) |
|
Prepaid reinsurance premiums |
|
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from sale of fixed maturities |
|
|
|
|
|
|
|
|
|
Proceeds from sale of equity securities |
|
|
|
|
|
|
|
|
|
Proceeds from maturity of fixed maturities |
|
|
|
|
|
|
|
|
|
Proceeds from maturity of preferred stock |
|
|
|
|
|
|
|
|
|
Proceeds from other invested assets |
|
|
|
|
|
|
|
|
|
Amounts received (paid) in connection with derivatives |
|
|
|
|
|
|
( |
) |
|
Purchases of fixed maturities |
|
|
( |
) |
|
|
( |
) |
|
Purchases of equity securities |
|
|
( |
) |
|
|
( |
) |
|
Purchases of other invested assets |
|
|
|
|
|
|
( |
) |
|
Net cash provided by (used for) investing activities |
|
|
|
|
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Distributions paid to common shareholders |
|
|
( |
) |
|
|
( |
) |
|
Distributions paid to preferred shareholders |
|
|
( |
) |
|
|
( |
) |
|
Purchases of class A common shares |
|
|
( |
) |
|
|
( |
) |
|
Redemption of subordinated notes |
|
|
( |
) |
|
|
|
|
|
Net cash used for financing activities |
|
|
( |
) |
|
|
( |
) |
|
Net change in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements.
7
GLOBAL INDEMNITY GROUP, LLC
|
1. |
Principles of Consolidation and Basis of Presentation |
Global Indemnity Group, LLC (“Global Indemnity” or “the Company”), a
On August 8, 2022, the Company sold the renewal rights related to all business lines within its Farm, Ranch & Stable segment for business written on or after August 8, 2022 to Everett Cash Mutual Insurance Company. During the 2nd quarter of 2022, the Company decided that Farm, Ranch & Stable would not be a core business and a decision was made to not allocate additional resources to this segment. Previously, on October 26, 2021, the Company sold the renewal rights related to its manufactured and dwelling homes products which were part of the Specialty Property segment. In 2021, the Company decided to cease writing certain Property Brokerage business which was part of the Commercial Specialty segment, as well as exit certain property and catastrophe lines within the Reinsurance Operations segment. Based on the decisions to exit these lines of business, the Company changed the way it manages and analyzes its operating results. The chief operating decision makers, the Chief Executive as well as the Chief Operating Officer, decided they will be reviewing the specific results of the exited lines in a separate segment. The chief operating decision makers also determined that the small amount of specialty property business that remained from the Specialty Property segment would be included as programs in the Commercial Specialty segment for purpose of reviewing results and allocating resources. The Reinsurance Operations segment will continue to write casualty and professional treaties as well as individual excess policies. Accordingly, the Company has three reportable segments: Commercial Specialty, Reinsurance Operations, and Exited Lines. Management believes these segments allow users of the Company’s financial statements to better understand the Company's performance, better assess prospects for future net cash flows and to make more informed judgments about the Company as a whole. The segment results for the quarters and six months ended June 30, 2021 have been revised to reflect these changes. See Note 14 for additional information regarding segments.
Global Indemnity Group, LLC is a holding company that is classified as a publicly traded partnership for U.S. federal income tax purposes and meets the qualifying income exception to maintain partnership status.
Global Indemnity Group, LLC owns all shares of its direct and indirect subsidiaries, including those of its insurance companies: United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, Penn-Patriot Insurance Company, and American Reliable Insurance Company.
The insurance companies’ primary activity is providing insurance products across a distribution network that includes binding authority, program, brokerage and reinsurance. The insurance companies are managed through
8
GLOBAL INDEMNITY GROUP, LLC
business, certain business within Property Brokerage, property and catastrophe reinsurance treaties, Farm, Ranch, & Stable business, and specialized insurance products for the equine mortality and equine major medical industry. Collectively, the Company’s insurance subsidiaries are licensed in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
The Commercial Specialty segment comprises the Company’s Insurance Operations (“Insurance Operations”).
The interim consolidated financial statements are unaudited, but have been prepared in conformity with United States of America generally accepted accounting principles (“GAAP”), which differs in certain respects from those principles followed in reports to insurance regulatory authorities. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The unaudited consolidated financial statements include all adjustments that are, in the opinion of management, of a normal recurring nature and are necessary for a fair statement of results for the interim periods. Results of operations for the quarters and six months ended June 30, 2022 and 2021 are not necessarily indicative of the results of a full year. The accompanying notes to the unaudited consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s 2021 Annual Report on Form 10-K.
The consolidated financial statements include the accounts of Global Indemnity Group, LLC and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
|
2. |
Investments |
The amortized cost and estimated fair value of the Company’s fixed maturities securities were as follows as of June 30, 2022 and December 31, 2021:
|
(Dollars in thousands) |
|
Amortized Cost |
|
|
Allowance for Expected Credit Losses |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
|||||
|
As of June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Foreign corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total fixed maturities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
9
GLOBAL INDEMNITY GROUP, LLC
|
(Dollars in thousands) |
|
Amortized Cost |
|
|
Allowance for Expected Credit Losses |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Estimated Fair Value |
|
|||||
|
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Foreign corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total fixed maturities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
As of June 30, 2022 and December 31, 2021, the Company’s investments in equity securities consist of the following:
|
(Dollars in thousands) |
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
Common stock |
|
$ |
|
|
|
$ |
|
|
|
Preferred stock |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
Excluding U.S. treasuries, limited liability companies, and limited partnerships, the Company did not hold any debt or equity investments in a single issuer in excess of
The amortized cost and estimated fair value of the Company’s fixed maturities portfolio classified as available for sale at June 30, 2022, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
(Dollars in thousands) |
|
Amortized Cost |
|
|
Estimated Fair Value |
|
||
|
Due in one year or less |
|
$ |
|
|
|
$ |
|
|
|
Due in one year through five years |
|
|
|
|
|
|
|
|
|
Due in five years through ten years |
|
|
|
|
|
|
|
|
|
Due in ten years through fifteen years |
|
|
|
|
|
|
|
|
|
Due after fifteen years |
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
Asset-backed securities |
|
|
|
|
|
|
|
|
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
10
GLOBAL INDEMNITY GROUP, LLC
The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses that are not deemed to have credit losses, categorized by the period that the securities were in a continuous loss position as of June 30, 2022. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 4.
|
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
|||||||||||||||
|
(Dollars in thousands) |
|
Fair Value |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
|
Gross Unrealized Losses |
|
||||||
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Mortgage-backed securities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Asset-backed securities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Corporate bonds |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Foreign corporate bonds |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Total fixed maturities |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses that are not deemed to have credit losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2021. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 4.
|
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
|||||||||||||||
|
(Dollars in thousands) |
|
Fair Value |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
|
Gross Unrealized Losses |
|
||||||
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Agency obligations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Mortgage-backed securities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Asset-backed securities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Corporate bonds |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Foreign corporate bonds |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Total fixed maturities |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
The Company regularly performs various analytical valuation procedures with respect to its investments, including reviewing each available for sale debt security in an unrealized loss position to assess whether the decline in fair value below amortized cost basis has resulted from a credit loss or other factors. In assessing whether a credit loss exists, the Company compares the present value of the cash flows expected to be collected from the security to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for expected credit losses is recorded. Subsequent changes in the allowances are recorded in the period of change as either credit loss expense or reversal of credit loss expense. Any impairments related to factors other than credit losses and the intent to sell are recorded through other comprehensive income, net of taxes.
11
GLOBAL INDEMNITY GROUP, LLC
For fixed maturities, the factors considered in reaching the conclusion that a credit loss exists include, among others, whether:
|
|
(1) |
the extent to which the fair value is less than the amortized cost basis; |
|
|
(2) |
the issuer is in financial distress; |
|
|
(3) |
the investment is secured; |
|
|
(4) |
a significant credit rating action occurred; |
|
|
(5) |
scheduled interest payments were delayed or missed; |
|
|
(6) |
changes in laws or regulations have affected an issuer or industry; |
|
|
(7) |
the investment has an unrealized loss and was identified by the Company’s investment manager as an investment to be sold before recovery or maturity; |
|
|
(8) |
the investment failed cash flow projection testing to determine if anticipated principal and interest payments will be realized; and |
|
|
(9) |
changes in US Treasury rates and/or credit spreads since original purchase to identify whether the unrealized loss is simply due to interest rate movement. |
According to accounting guidance for debt securities in an unrealized loss position, the Company is required to assess whether it has the intent to sell the debt security or more likely than not will be required to sell the debt security before the anticipated recovery. If either of these conditions is met, any allowance for expected credit losses is written off and the amortized cost basis is written down to the fair value of the fixed maturity security with any incremental impairment reported in earnings. That new amortized cost basis shall not be adjusted for subsequent recoveries in fair value.
The Company elected the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of the available for sale debt securities for the purposes of identifying and measuring an impairment and to not measure an allowance for expected credit losses for accrued interest receivables. Accrued interest receivable is written off through net realized investment gains (losses) at the time the issuer of the bond defaults or is expected to default on payment. The Company made an accounting policy election to present the accrued interest receivable balance with other assets on the Company’s consolidated statements of financial position. Accrued interest receivable related to fixed maturities was $
The following is a description, by asset type, of the methodology and significant inputs that the Company used to measure the amount of credit loss recognized in earnings, if any:
U.S. treasuries – As of June 30, 2022, gross unrealized losses related to U.S. treasuries were $
Obligations of states and political subdivisions – As of June 30, 2022, gross unrealized losses related to obligations of states and political subdivisions were $
12
GLOBAL INDEMNITY GROUP, LLC
Mortgage-backed securities (“MBS”) – As of June 30, 2022, gross unrealized losses related to mortgage-backed securities were $
Asset backed securities (“ABS”) - As of June 30, 2022, gross unrealized losses related to asset backed securities were $
Commercial mortgage-backed securities (“CMBS”) - As of June 30, 2022, gross unrealized losses related to the CMBS portfolio were $
Corporate bonds - As of June 30, 2022, gross unrealized losses related to corporate bonds were $
Foreign bonds – As of June 30, 2022, gross unrealized losses related to foreign bonds were $
13
GLOBAL INDEMNITY GROUP, LLC
The Company has evaluated its investment portfolio and has determined that an allowance for expected credit losses on its investments is not required.
The Company recorded the following impairments on its investment portfolio for the quarters and six months ended June 30, 2022 and 2021 and are related to securities in an unrealized loss position where the Company had an intent to sell the securities:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment related to intent to sell |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio. The Company identified fixed maturities securities with a weighted average life of
Accumulated Other Comprehensive Income (Loss), Net of Tax
Accumulated other comprehensive income, net of tax, as of June 30, 2022 and December 31, 2021 was as follows:
|
(Dollars in thousands) |
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
Net unrealized gains (losses) from: |
|
|
|
|
|
|
|
|
|
Fixed maturities |
|
$ |
( |
) |
|
$ |
|
|
|
Foreign currency fluctuations |
|
|
( |
) |
|
|
( |
) |
|
Deferred taxes |
|
|
|
|
|
|
( |
) |
|
Accumulated other comprehensive income (loss), net of tax |
|
$ |
( |
) |
|
$ |
|
|
The following tables present the changes in accumulated other comprehensive income, net of tax, by components, for the quarters and six months ended June 30, 2022 and 2021:
|
Quarter Ended June 30, 2022 (Dollars In Thousands) |
|
Unrealized Gains and Losses on Available for Sale Securities |
|
|
Foreign Currency Items |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|||
|
Beginning balance, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive income (loss) before reclassification, before tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive income, before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), before tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
14
GLOBAL INDEMNITY GROUP, LLC
|
Quarter Ended June 30, 2021 (Dollars In Thousands) |
|
Unrealized Gains and Losses on Available for Sale Securities |
|
|
Foreign Currency Items |
|
|
Accumulated Other Comprehensive Income |
|
|||
|
Beginning balance, net of tax |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other comprehensive income before reclassification, before tax |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income, before tax |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Other comprehensive income, before tax |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Income tax (expense) benefit |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Ending balance, net of tax |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Six Months Ended June 30, 2022 (Dollars In Thousands) |
|
Unrealized Gains and Losses on Available for Sale Securities |
|
|
Foreign Currency Items |
|
|
Accumulated Other Comprehensive Income |
|
|||
|
Beginning balance, net of tax |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Other comprehensive income before reclassification, before tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive income, before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, before tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net of tax |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Six Months Ended June 30, 2021 (Dollars In Thousands) |
|
Unrealized Gains and Losses on Available for Sale Securities |
|
|
Foreign Currency Items |
|
|
Accumulated Other Comprehensive Income |
|
|||
|
Beginning balance, net of tax |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other comprehensive income before reclassification, before tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive income, before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, before tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net of tax |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The reclassifications out of accumulated other comprehensive income for the quarters and six months ended June 30, 2022 and 2021 were as follows:
|
|
|
|
|
Amounts Reclassified from Accumulated Other Comprehensive Income |
|
|||||
|
(Dollars in thousands) |
|
|
|
Quarters Ended June 30, |
|
|||||
|
Details about Accumulated Other Comprehensive Income Components |
|
Affected Line Item in the Consolidated Statements of Operations |
|
2022 |
|
|
2021 |
|
||
|
Unrealized gains and losses on available for sale securities |
|
Other net realized investment (gains) losses |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
Income tax expense (benefit) |
|
|
( |
) |
|
|
|
|
|
|
|
Total reclassifications, net of tax |
|
$ |
|
|
|
$ |
( |
) |
15
GLOBAL INDEMNITY GROUP, LLC
|
|
|
|
|
Amounts Reclassified from Accumulated Other Comprehensive Income |
|
|||||
|
(Dollars in thousands) |
|
|
|
Six Months Ended June 30, |
|
|||||
|
Details about Accumulated Other Comprehensive Income Components |
|
Affected Line Item in the Consolidated Statements of Operations |
|
2022 |
|
|
2021 |
|
||
|
Unrealized gains and losses on available for sale securities |
|
Other net realized investment (gains) losses |
|
$ |
|
|
|
$ |
|
|
|
|
|
Income tax expense (benefit) |
|
|
( |
) |
|
|
( |
) |
|
|
|
Total reclassifications, net of tax |
|
$ |
|
|
|
$ |
|
|
Net Realized Investment Gains (Losses)
The components of net realized investment gains (losses) for the quarters and six months ended June 30, 2022 and 2021 were as follows:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Gross realized losses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net realized gains (losses) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized losses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net realized gains (losses) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized losses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net realized gains (losses) (1) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total net realized investment gains (losses) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
(1) |
|
The following table shows the calculation of the portion of realized gains and losses related to equity securities held as of June 30, 2022 and 2021:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Net gains (losses) recognized during the period on equity securities |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Less: net gains (losses) recognized during the period on equity securities sold during the period |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) recognized during the reporting period on equity securities |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The proceeds from sales and redemptions of available for sale and equity securities resulting in net realized investment gains (losses) for the six months ended June 30, 2022 and 2021 were as follows:
|
|
|
Six Months Ended June 30, |
|
|||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
||
|
Fixed maturities |
|
$ |
|
|
|
$ |
|
|
|
Equity securities |
|
|
|
|
|
|
|
|
16
GLOBAL INDEMNITY GROUP, LLC
Net Investment Income
The sources of net investment income for the quarters and six months ended June 30, 2022 and 2021 were as follows:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Fixed maturities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other invested assets |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net investment income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The Company’s total investment return on a pre-tax basis for the quarters and six months ended June 30, 2022 and 2021 were as follows:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Net investment income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net realized investment gains (losses) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Change in unrealized holding gains (losses) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net realized and unrealized investment returns |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total investment return |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Total investment return % (1) |
|
|
( |
%) |
|
|
|
% |
|
|
( |
%) |
|
|
|
% |
|
Average investment portfolio (2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
As of June 30, 2022 and December 31, 2021, the Company did
Insurance Enhanced Asset-Backed and Credit Securities
As of June 30, 2022, the Company held insurance enhanced bonds with a market value of approximately $
The insurance enhanced bonds are comprised of $
The Company had no direct investments in the entities that have provided financial guarantees or other credit support to any security held by the Company at June 30, 2022.
17
GLOBAL INDEMNITY GROUP, LLC
Bonds Held on Deposit
Certain cash balances, cash equivalents, and bonds available for sale were deposited with various governmental authorities in accordance with statutory requirements, were held as collateral, or were held in trust.
|
|
|
Estimated Fair Value |
|
|||||
|
(Dollars in thousands) |
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
On deposit with governmental authorities |
|
$ |
|
|
|
$ |
|
|
|
Held in trust pursuant to third party requirements |
|
|
|
|
|
|
|
|
|
Letter of credit held for third party requirements |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
Variable Interest Entities
A Variable Interest Entity (“VIE”) refers to an investment in which an investor holds a controlling interest that is not based on the majority of voting rights. Under the VIE model, the party that has the power to exercise significant management influence and maintain a controlling financial interest in the entity’s economics is said to be the primary beneficiary, and is required to consolidate the entity within their results. Other entities that participate in a VIE, for which their financial interests fluctuate with changes in the fair value of the investment entity’s net assets but do not have significant management influence and the ability to direct the VIE’s significant economic activities are said to have a variable interest in the VIE but do not consolidate the VIE in their financial results.
The Company has variable interests in
The carrying value of one of the Company’s VIE’s, which invests in distressed securities and assets, was $
|
3. |
Derivative Instruments |
Derivatives are used by the Company to reduce risks from changes in interest rates and limit exposure to severe equity market changes. The Company has interest rate swaps with terms to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount. The Company has also used exchange-traded futures contracts, which give the holder the right and obligation to participate in market movements at a future date, to allow the Company to react faster to market conditions. When using derivatives, the Company posts collateral and settles variation margin in cash on a daily basis equal to the amount of the derivatives’ change in value.
The Company accounts for the interest rate swaps and futures as non-hedge instruments and recognizes the fair value of the interest rate swaps in other assets or other liabilities on the consolidated balance sheets with the changes in fair value recognized as net realized investment gains or losses in the consolidated statements of operations. The Company is ultimately responsible for the valuation of the interest rate swaps. To aid in determining the estimated fair value of the interest rate swaps, the Company relies on the forward interest rate curve and information obtained from a third party financial institution.
18
GLOBAL INDEMNITY GROUP, LLC
The following table summarizes information on the location and the gross amount of the derivatives on the consolidated balance sheets as of June 30, 2022 and December 31, 2021:
|
(Dollars in thousands) |
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
Derivatives Not Designated as Hedging Instruments under ASC 815 |
|
Balance Sheet Location |
|
Notional Amount |
|
|
Fair Value |
|
|
Notional Amount |
|
|
Fair Value |
|
||||
|
Interest rate swap agreements |
|
Other assets/liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
Total (1) |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
(1) |
The derivatives are held by GBLI Holdings, LLC and are guaranteed by Global Indemnity Group, LLC |
The following table summarizes the net gains (losses) included in the consolidated statements of operations for changes in the fair value of the derivatives and the periodic net interest settlements under the derivatives for the quarters and six months ended June 30, 2022 and 2021:
|
|
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
Consolidated Statements of Operations Line |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Interest rate swap agreements |
|
Net realized investment gains (losses) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Futures contracts on bonds |
|
Net realized investment gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Total |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
As of June 30, 2022 and December 31, 2021, the Company is due $
|
4. |
Fair Value Measurements |
The accounting standards related to fair value measurements define fair value, establish a framework for measuring fair value, outline a fair value hierarchy based on inputs used to measure fair value, and enhance disclosure requirements for fair value measurements. These standards do not change existing guidance as to whether or not an instrument is carried at fair value. The Company has determined that its fair value measurements are in accordance with the requirements of these accounting standards.
The Company’s invested assets and derivative instruments are carried at their fair value and are categorized based upon a fair value hierarchy:
|
|
• |
Level 1 – inputs utilize quoted prices (unadjusted) in active markets for identical assets that the Company has the ability to access at the measurement date. |
|
|
• |
Level 2 – inputs utilize other than quoted prices included in Level 1 that are observable for similar assets, either directly or indirectly. |
|
|
• |
Level 3 – inputs are unobservable for the asset, and include situations where there is little, if any, market activity for the asset. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset.
19
GLOBAL INDEMNITY GROUP, LLC
The following table presents information about the Company’s invested assets and derivative instruments measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.
|
|
|
Fair Value Measurements |
|
|||||||||||||
|
As of June 30, 2022 (Dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Fair Value Measurements |
|
|||||||||||||
|
As of December 31, 2021 (Dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Agency obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total liabilities measured at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The securities classified as Level 1 in the above table consist of U.S. treasuries and equity securities actively traded on an exchange.
The securities classified as Level 2 in the above table consist of fixed maturities, equity securities, and derivative instruments. Based on the typical trading volumes and the lack of quoted market prices for fixed maturities, security prices are derived through recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information. If there are no recent reported trades, matrix or model processes are used to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Included in the pricing of asset-backed securities, collateralized mortgage obligations, and mortgage-backed securities are estimates of the rate of future prepayments of principal over the remaining life of the securities. Such estimates are derived based on the characteristics of the underlying structure and prepayment speeds previously experienced at the interest rate levels projected for the underlying collateral. The estimated fair value of
20
GLOBAL INDEMNITY GROUP, LLC
the derivative instruments, consisting of interest rate swaps, is obtained from a third party financial institution that utilizes observable inputs such as the forward interest rate curve.
The investments classified as Level 3 in the above table consist of fixed maturities and equity securities with unobservable inputs.
The following table presents changes in Level 3 investments measured at fair value on a recurring basis for the quarters and six months ended June 30, 2022 and 2021:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total gains (realized / unrealized): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in accumulated other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Included in earnings attributable to realized |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Transfers into level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers out of level 3 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Amortization of bond premium and discount, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Gains (losses) included in earnings attributable to the change in unrealized gains (losses) related to assets still held at end of reporting period |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
For the Company’s material debt arrangements, the current fair value of the Company’s debt at June 30, 2022 and December 31, 2021 was as follows:
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
(Dollars in thousands) |
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
|
7.875% Subordinated Notes due 2047 (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
The subordinated notes due
Fair Value of Alternative Investments
Other invested assets consist of limited liability companies and limited partnerships whose carrying value approximates fair value.
|
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
(Dollars in thousands) |
|
Fair Value |
|
|
Future Funding Commitment |
|
|
Fair Value |
|
|
Future Funding Commitment |
|
||||
|
European Non-Performing Loan Fund, LP (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Distressed Debt Fund, LP (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Debt Fund, LP (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Fund, LLC (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Debt Fund, LP (5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
21
GLOBAL INDEMNITY GROUP, LLC
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
(5) |
|
Limited Liability Companies and Limited Partnerships with ownership interest exceeding 3%
The Company uses the equity method to account for investments in limited liability companies and limited partnerships where its ownership interest exceeds
Pricing
The Company’s pricing vendors provide prices for all investment categories except for investments in limited liability companies and limited partnerships. Two primary vendors are utilized to provide prices for equity and fixed maturity securities.
The following is a description of the valuation methodologies used by the Company’s pricing vendors for investment securities carried at fair value:
|
|
• |
Equity security prices are received from primary and secondary exchanges. |
|
|
• |
Corporate and agency bonds are evaluated by utilizing a spread to a benchmark curve. Bonds with similar characteristics are grouped into specific sectors. Inputs for both asset classes consist of trade prices, broker quotes, the new issue market, and prices on comparable securities. |
|
|
• |
Data from commercial vendors is aggregated with market information, then converted into an option adjusted spread (“OAS”) matrix and prepayment model used for collateralized mortgage obligations (“CMO”). CMOs are categorized with mortgage-backed securities in the tables listed above. For asset-backed securities, spread data is derived from trade prices, dealer quotations, and research reports. For both asset classes, evaluations utilize standard inputs plus new issue data, and collateral performance. The evaluated pricing models incorporate cash flows, broker quotes, market trades, historical prepayment speeds, and dealer projected speeds. |
|
|
• |
For obligations of state and political subdivisions, an attribute-based modeling system is used. The pricing model incorporates trades, market clearing yields, market color, and fundamental credit research. |
|
|
• |
U.S. treasuries are evaluated by obtaining feeds from a number of live data sources including primary and secondary dealers as well as inter-dealer brokers. |
|
|
• |
For mortgage-backed securities, various external analytical products are utilized and purchased from commercial vendors. |
22
GLOBAL INDEMNITY GROUP, LLC
The Company performs certain procedures to validate whether the pricing information received from the pricing vendors is reasonable, to ensure that the fair value determination is consistent with accounting guidance, and to ensure that its assets are properly classified in the fair value hierarchy. The Company’s procedures include, but are not limited to:
|
|
• |
Reviewing periodic reports provided by the Investment Manager that provides information regarding rating changes and securities placed on watch. This procedure allows the Company to understand why a particular security’s market value may have changed or may potentially change. |
|
|
• |
Understanding and periodically evaluating the various pricing methods and procedures used by the Company’s pricing vendors to ensure that investments are properly classified within the fair value hierarchy. |
|
|
• |
On a quarterly basis, the Company corroborates investment security prices received from its pricing vendors by obtaining pricing from a second pricing vendor for a sample of securities. |
During the quarters and six months ended June 30, 2022 and 2021, the Company has not adjusted quotes or prices obtained from the pricing vendors.
|
5. |
Allowance for Expected Credit Losses - Premium Receivables and Reinsurance Receivables |
For premium receivables, the allowance is based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, direct placement with collection agencies, solvency of insured or agent, terminated agents, and other relevant factors.
The following table is an analysis of the allowance for expected credit losses related to the Company's premium receivables for the quarters and six months ended June 30, 2022 and 2021:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Current period provision for expected credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-offs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
For reinsurance receivables, the allowance is based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, disputes, applicable coverage defenses, insolvent reinsurers, financial strength of solvent reinsurers based on AM Best Ratings and other relevant factors.
The following table is an analysis of the allowance for expected credit losses related to the Company's reinsurance receivables for the quarters and six months ended June 30, 2022 and 2021:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Current period provision for expected credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries of amounts previously written off |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
23
GLOBAL INDEMNITY GROUP, LLC
|
6. |
Income Taxes |
Global Indemnity Group, LLC is a publicly traded partnership for U.S. federal income tax purposes and meets the qualifying income exception to maintain partnership status. As a publicly traded partnership, Global Indemnity Group, LLC is generally not subject to federal income tax and most state income taxes. However, income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions.
As of June 30, 2022, the statutory income tax rates of the countries where the Company conducts or conducted business are
The Company’s income (loss) before income taxes is derived from its U.S. subsidiaries for the quarters and six months ended June 30, 2022 and 2021.
The following table summarizes the components of income tax expense (benefit):
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Deferred income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Total deferred income tax expense (benefit) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total income tax expense (benefit) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The weighted average expected tax provision has been calculated using income (loss) before income taxes in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate.
The following table summarizes the differences between the tax provision for financial statement purposes and the expected tax provision at the weighted average tax rate:
|
|
|
Quarters Ended June 30, |
|
|||||||||||||
|
|
|
2022 |
|
|
2021 |
|
||||||||||
|
(Dollars in thousands) |
|
Amount |
|
|
% of Pre- Tax Income |
|
|
Amount |
|
|
% of Pre- Tax Income |
|
||||
|
Expected tax provision at weighted average tax rate |
|
$ |
( |
) |
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend exclusion |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Parent (income) loss treated as partnership for tax |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Effective income tax expense (benefit) |
|
$ |
( |
) |
|
|
|
% |
|
$ |
|
|
|
|
|
% |
The effective income tax benefit rate for the quarter ended June 30, 2022 was
|
|
|
Six Months Ended June 30, |
|
|||||||||||||
|
|
|
2022 |
|
|
2021 |
|
||||||||||
|
(Dollars in thousands) |
|
Amount |
|
|
% of Pre- Tax Income |
|
|
Amount |
|
|
% of Pre- Tax Income |
|
||||
|
Expected tax provision at weighted average tax rate |
|
$ |
( |
) |
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend exclusion |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Parent (income) loss treated as partnership for tax |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Effective income tax expense (benefit) |
|
$ |
( |
) |
|
|
|
% |
|
$ |
|
|
|
|
|
% |
24
GLOBAL INDEMNITY GROUP, LLC
The effective income tax benefit rate for the six months ended June 30, 2022 was
The Company has a net operating loss (“NOL”) carryforward of $
As of June 30, 2022, the Company has a Section 163(j) (“163(j)”) carryforward of $
|
7. |
Liability for Unpaid Losses and Loss Adjustment Expenses |
Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Balance at beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Less: Ceded reinsurance receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred losses and loss adjustment expenses related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior years |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total incurred losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid losses and loss adjustment expenses related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total paid losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net balance at end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Ceded reinsurance receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
When analyzing loss reserves and prior year development, the Company considers many factors, including the frequency and severity of claims, loss trends, case reserve settlements that may have resulted in significant development, and any other additional or pertinent factors that may impact reserve estimates.
During the second quarter of 2022, the Company decreased its prior accident year loss reserves by $
The $
|
|
• |
Property: A $ |
|
|
• |
General Liability: A $ |
|
|
• |
Professional: A $ |
The $
25
GLOBAL INDEMNITY GROUP, LLC
|
|
• |
Professional: A $ |
The $
|
|
• |
Property: A $ |
|
|
• |
Reinsurance: A $ |
During the second quarter of 2021, the Company increased its prior accident year loss reserves by $
The $
|
|
• |
Property: A $ |
|
|
• |
General Liability: A $ |
|
|
• |
Professional: A $ |
The $
|
|
• |
Property: A $ |
|
|
• |
General Liability: A $ |
|
|
• |
Reinsurance: A $ |
During the first six months of 2022, the Company decreased its prior accident year loss reserves by $
The $
|
|
• |
Property: A $ |
|
|
• |
General Liability: A $ |
26
GLOBAL INDEMNITY GROUP, LLC
|
|
• |
Professional: A $ |
The $
|
|
• |
Professional: A $ |
The $
|
|
• |
Property: A $ |
|
|
• |
Reinsurance: A $ |
|
|
• |
General Liability: A $ |
During the first six months of 2021, the Company increased its prior accident year loss reserves by $
The $
|
|
• |
Property: A $ |
|
|
• |
General Liability: A $ |
|
|
• |
Professional: A $ |
The $
|
|
• |
General Liability: A $ |
|
|
• |
Property: A $ |
|
|
• |
Reinsurance: A $ |
27
GLOBAL INDEMNITY GROUP, LLC
|
8. |
Debt |
The Company’s outstanding debt consisted of the following at June 30, 2022 and December 31, 2021:
|
(Dollars in thousands) |
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
$ |
|
|
|
$ |
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
Margin Borrowing Facility
The Company has available a margin borrowing facility. The borrowing rate for this facility is tied to the Fed Funds Effective rate and was approximately
The Company did
7.875% Subordinated Notes due 2047 (the “2047 Notes”)
Interest expense, including amortization of deferred issuance costs through the date of redemption, recognized on the 2047 Notes was $
In connection with the redemption of the 2047 Notes, the Supplemental Indenture and the co-obligor transaction are no longer effective. Please see Note 13 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2021 Annual Report on Form 10-K for more information on the Supplemental Indenture and the co-obligor transaction.
28
GLOBAL INDEMNITY GROUP, LLC
|
9. |
Shareholders’ Equity |
During the quarters ended June 30, 2022 and 2021, there were
The following table provides information with respect to the class A common shares that were surrendered or repurchased during the six months ended June 30, 2022:
|
Period (1) |
|
Total Number of Shares Purchased |
|
|
Average Price Paid Per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plan or Program |
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
|
||||
|
January 1-31, 2022 |
|
|
|
|
(2) |
$ |
|
|
|
|
|
|
|
|
|
|
|
June 1-30, 2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
(2) |
|
The following table provides information with respect to the class A common shares that were surrendered or repurchased during the six months ended June 30, 2021:
|
Period (1) |
|
Total Number of Shares Purchased |
|
|
Average Price Paid Per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plan or Program |
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
|
||||
|
January 1-31, 2021 |
|
|
|
|
(2) |
$ |
|
|
|
|
|
|
|
|
|
|
|
March 1-31, 2021 |
|
|
|
|
(2) |
$ |
|
|
|
|
|
|
|
|
|
|
|
June 1-30, 2021 |
|
|
|
|
(2) |
$ |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
||
|
(1) |
Based on settlement date. |
|
(2) |
Surrendered by employees as payment of taxes withheld on the vesting of restricted stock and/or restricted stock units. |
On April 5, 2021, Global Indemnity Group, LLC converted
As of June 30, 2022, Global Indemnity Group, LLC’s class A common shares were held by approximately
Please see Note 15 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2021 Annual Report on Form 10-K for more information on the Company’s repurchase program.
29
GLOBAL INDEMNITY GROUP, LLC
Distributions
Distribution payments of $
|
Approval Date |
|
Record Date |
|
Payment Date |
|
Total Distributions Declared (Dollars in thousands) |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
|
(1) |
Represents distributions declared on unvested shares, net of forfeitures. |
Distribution payments of $
|
Approval Date |
|
Record Date |
|
Payment Date |
|
Total Distributions Declared (Dollars in thousands) |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
|
(1) |
Represents distributions declared on unvested shares, net of forfeitures. |
Accrued distributions on unvested shares, which were included in other liabilities on the consolidated balance sheets, were $
Please see Note 15 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2021 Annual Report on Form 10-K for more information on the Company’s distribution program.
|
10. |
Related Party Transactions |
Fox Paine Entities
Pursuant to Global Indemnity Group, LLC’s Limited Liability Company Agreement (“LLCA”), Fox Paine Capital Fund II International, L.P. and certain of its affiliates (the “Fox Paine Funds”), together with Fox Mercury Investments, L.P. and certain of its affiliates (the “FM Entities”), and Fox Paine & Company LLC (collectively, the “Fox Paine Entities”) currently constitute a Class B Majority Shareholder (as defined in the LLCA) and, as such, have the right to appoint a number of Global Indemnity Group, LLC’s directors equal in aggregate to the pro rata percentage of the voting power in Global Indemnity Group, LLC beneficially held by the Fox Paine Entities, rounded up to the nearest whole number of directors. The Fox Paine Entities beneficially own shares representing approximately
On August 27, 2020, Global Indemnity Group, LLC issued and sold to Wyncote LLC, an affiliate of Fox Paine & Company, LLC,
30
GLOBAL INDEMNITY GROUP, LLC
Management fee expense of $
In addition, Fox Paine & Company, LLC may also propose and negotiate transaction fees with the Company subject to the provisions of the Company’s related party transaction and conflict matter policies, including approval of Global Indemnity Group, LLC’s Conflicts Committee of the Board of Directors, for those services from time to time. Each of the Company’s transactions with Fox Paine & Company, LLC are reviewed and approved by Global Indemnity Group, LLC’s Conflicts Committee, which is composed of independent directors, and the Board of Directors (other than Saul A. Fox, Chairman of the Board of Directors of Global Indemnity Group, LLC and Chief Executive of Fox Paine & Company, LLC, who is not a member of the Conflicts Committee and recused himself from the Board of Directors’ deliberations related to fees paid to Fox Paine & Company, LLC or its affiliates).
|
11. |
Commitments and Contingencies |
Legal Proceedings
The Company is, from time to time, involved in various legal proceedings in the ordinary course of business. The Company maintains insurance and reinsurance coverage for such risks in amounts that it considers adequate. However, there can be no assurance that the insurance and reinsurance coverage that the Company maintains is sufficient or will be available in adequate amounts or at a reasonable cost. The Company does not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on its business, results of operations, cash flows, or financial condition.
There is a greater potential for disputes with reinsurers who are in runoff. Some of the Company’s reinsurers’ have operations that are in runoff, and therefore, the Company closely monitors those relationships. The Company anticipates that, similar to the rest of the insurance and reinsurance industry, it will continue to be subject to litigation and arbitration proceedings in the ordinary course of business.
Commitments
In 2014, the Company entered into a $
In 2017, the Company entered into a $
In 2021, the Company entered into a $
Other Commitments
The Company is party to a Management Agreement, as amended, with Fox Paine & Company, LLC, whereby in connection with certain management services provided to it by Fox Paine & Company, LLC, the Company agreed to pay an annual management fee to Fox Paine & Company, LLC. See Note 10 above for additional information pertaining to this management agreement.
31
GLOBAL INDEMNITY GROUP, LLC
COVID-19
There is risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Commercial Specialty and Exited Lines policies, or other conditions included in policies that would otherwise preclude coverage.
|
12. |
Share-Based Compensation Plans |
Options
During the first quarter of 2021, the Company granted
Restricted Shares / Restricted Stock Units
There were
There were
During the quarters ended June 30, 2022 and 2021, the Company granted
During the six months ended June 30, 2022 and 2021, the Company granted
|
13. |
Earnings Per Share |
Earnings per share have been computed using the weighted average number of common shares and common share equivalents outstanding during the period.
32
GLOBAL INDEMNITY GROUP, LLC
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands, except share and per share data) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Less: preferred stock distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares for basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares for diluted earnings per share (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - Basic |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Earnings per share - Diluted |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
(1) |
|
If the Company had not incurred a loss in the quarter ended June 30, 2022,
If the Company had not incurred a loss in the six months ended June 30, 2022,
The weighted average shares outstanding used to determine dilutive earnings per share does not include
|
14. |
Segment Information |
On August 8, 2022, the Company sold the renewal rights related to all business lines within its Farm, Ranch & Stable segment for business written on or after August 8, 2022 to Everett Cash Mutual Insurance Company. During the 2nd quarter of 2022, the Company decided that Farm, Ranch & Stable would not be a core business and a decision was made to not allocate additional resources to this segment. Previously, on October 26, 2021, the Company sold the renewal rights related to its manufactured and dwelling homes products which were part of the Specialty Property segment. In 2021, the Company decided to cease writing certain Property Brokerage business which was part of the Commercial Specialty segment, as well as exit certain property and catastrophe lines within the Reinsurance Operations segment. Based on the decisions to exit these lines of business, the Company changed the way it manages and analyzes its operating results. The chief operating decision makers, the Chief Executive as well as the Chief Operating Officer, decided they will be reviewing the specific results of the Exited Lines in a separate segment. The chief operating decision makers also determined that the small amount of specialty property business that remained from the Specialty Property segment would be included as programs in the Commercial Specialty segment for purpose of reviewing results and allocating resources. The Reinsurance Operations segment will continue to write casualty and professional treaties as well as individual excess policies. Accordingly, the Company has
33
GLOBAL INDEMNITY GROUP, LLC
The Company manages its business through
The following are tabulations of business segment information for the quarters and six months ended June 30, 2022 and 2021:
|
Quarter Ended June 30, 2022 (Dollars in thousands) |
|
Commercial Specialty |
|
|
Reinsurance Operations |
|
(1) |
Exited Lines |
|
|
Total |
|
||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net written premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net earned premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other income (loss) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs and other underwriting expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from segments |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Unallocated Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized investment losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Other loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Corporate and other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
(1) |
|
34
GLOBAL INDEMNITY GROUP, LLC
|
Quarter Ended June 30, 2021 (Dollars in thousands) |
|
Commercial Specialty |
|
|
Reinsurance Operations |
|
(1) |
Exited Lines |
|
|
Total |
|
||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net written premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net earned premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs and other underwriting expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from segments |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Unallocated Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized investment gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
(1) |
External business only, excluding business assumed from affiliates. |
35
GLOBAL INDEMNITY GROUP, LLC
|
Six Months Ended June 30, 2022 (Dollars in thousands) |
|
Commercial Specialty |
|
|
Reinsurance Operations |
|
(1) |
Exited Lines |
|
|
Total |
|
||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net written premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net earned premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs and other underwriting expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from segments |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Unallocated Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized investment losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Other loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Corporate and other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
(1) |
External business only, excluding business assumed from affiliates. |
36
GLOBAL INDEMNITY GROUP, LLC
|
Six Months Ended June 30, 2021 (Dollars in thousands) |
|
Commercial Specialty |
|
|
Reinsurance Operations |
|
(1) |
Exited Lines |
|
|
Total |
|
||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net written premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net earned premiums |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs and other underwriting expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from segments |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Unallocated Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized investment gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Corporate and other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
(1) |
External business only, excluding business assumed from affiliates. |
|
15. |
New Accounting Pronouncements |
The Company did not adopt any new accounting pronouncements during the six months ended June 30, 2022.
Please see Note 24 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2021 Annual Report on Form 10-K for more information on accounting pronouncements issued but not yet adopted.
|
16. |
Subsequent Events |
On August 8, 2022, the Company sold the renewal rights related to all business lines within its Farm, Ranch & Stable segment for business written on or after August 8, 2022 to Everett Cash Mutual Insurance Company. The Company will retain the unearned premium reserves for business written prior to August 8, 2022.
Everett Cash Mutual Insurance Company is also acquiring the Company’s wholly owned subsidiary, American Reliable Insurance Company, for book value which is expected to be $
37
GLOBAL INDEMNITY GROUP, LLC
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes of the Company included elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to the Company’s plans and strategy, constitutes forward-looking statements that involve risks and uncertainties. Please see "Cautionary Note Regarding Forward-Looking Statements" at the end of this Item 2 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained herein. For more information regarding the Company’s business and operations, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Recent Developments
Sale of Renewal Rights related to Farm, Ranch & Stable and Sale of American Reliable Insurance Company.
On August 8, 2022, the Company sold the renewal rights related to all business lines within its Farm, Ranch & Stable segment for business written on or after August 8, 2022 to Everett Cash Mutual Insurance Company. The Company will retain the unearned premium reserves for business written prior to August 8, 2022.
Everett Cash Mutual Insurance Company is also acquiring the Company’s wholly owned subsidiary, American Reliable Insurance Company, for book value which is expected to be $10.0 million at the time of closing. The transaction is subject to receiving regulatory approval which is expected to be received during the 4th quarter of 2022. Under the agreements, total consideration to be paid by Everett Cash Mutual Insurance Company is $40 million.
Distributions
The Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 21, 2022 and June 20, 2022. Distributions paid to common shareholders were $7.3 million during the six months ended June 30, 2022. In addition, distributions of $0.2 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the six months ended June 30, 2022.
AM Best Rating
AM Best has seven Rating Categories in the AM Best Financial Strength Rating Scale. The categories ranging from best to worst are Superior, Excellent, Good, Fair, Marginal, Weak and Poor. Within each rating category, there are rating notches of plus or minus to show additional gradation of the ratings. On May 19, 2022, AM Best affirmed the financial strength rating of "A" (Excellent) for the U.S. operating subsidiaries of Global Indemnity Group, LLC.
Redemption of Debt
On April 15, 2022, the Company redeemed the entire $130 million in aggregate principal amount of the outstanding 2047 Notes plus accrued and unpaid interest on the 2047 Notes redeemed to, but not including the Redemption Date of April 15, 2022.
COVID-19
The global outbreak of COVID-19 continues to present significant risks to the Company. The COVID-19 pandemic may affect the Company’s operations indefinitely. The Company may experience reductions in premium volume, delays in the collection of premiums, and increases in COVID-19 related claims. Any resulting volatility in the global financial markets may negatively impact the market value of the Company’s investment portfolio and may result in net realized investment losses as well as a decline in the liquidity of the investment portfolio. All of these factors may have far reaching impacts on the Company’s business, operations, and financial results and conditions, directly and indirectly, including without limitation impacts on the health of the Company’s management and employees, distribution, marketing, customers and agents, and on the overall economy. The scope and nature of these impacts, most of which are beyond the Company’s control, continue to evolve and such effects could exist for an extended period of time even after the pandemic ends.
38
GLOBAL INDEMNITY GROUP, LLC
Overview
The Company’s Commercial Specialty segment sells its property and casualty insurance products through a group of approximately 205 professional general agencies that have limited quoting and binding authority, as well as a number of wholesale insurance brokers who in turn sell the Company’s insurance products to insureds through retail insurance brokers. Commercial Specialty operates predominantly in the excess and surplus lines marketplace. Commercial Specialty also offers several specialty admitted property and casualty products. The Company manages its Commercial Specialty segment via product classifications. These product classifications are: 1) Penn-America, which includes property and general liability products for small commercial businesses sold through a select network of wholesale general agents with specific binding authority; 2) United National, which includes property, general liability, and professional lines products sold through program administrators with specific binding authority; 3) Diamond State, which includes property, casualty, and professional lines products sold through wholesale brokers and program administrators with specific binding authority; and 4) Vacant Express, which primarily insures dwellings which are currently vacant, undergoing renovation, or are under construction and is sold through aggregators, brokers, and retail agents. The Company has also created several start-up business lines which distribute professional, environmental, and excess casualty products.
The Company’s Reinsurance Operations provides reinsurance solutions through brokers and primary writers including insurance and reinsurance companies. It uses its capital capacity to write niche and casualty-focused treaties and business which meet the Company’s risk tolerance and return thresholds.
The Company’s Exited Lines segment represents lines of business that are no longer being written or are in runoff. Exited Lines includes specialty personal lines property and casualty products such as manufactured home, dwelling, motorcycle, watercraft and certain homeowners business, certain business within Property Brokerage, property and catastrophe reinsurance treaties, Farm, Ranch, & Stable business, and specialized insurance products for the equine mortality and equine major medical industry. These insurance products were distributed through wholesale general agents, wholesale insurance brokers, program administrators, and retail agents.
The Company derives its revenues primarily from premiums paid on insurance policies that it writes and from income generated by its investment portfolio, net of fees paid for investment management services. The amount of insurance premiums that the Company receives is a function of the amount and type of policies it writes, as well as prevailing market prices.
The Company’s expenses include losses and loss adjustment expenses, acquisition costs and other underwriting expenses, corporate and other operating expenses, interest, investment expenses, and income taxes. Losses and loss adjustment expenses are estimated by management and reflect the Company’s best estimate of ultimate losses and costs arising during the reporting period and revisions of prior period estimates. The Company records its best estimate of losses and loss adjustment expenses considering both internal and external actuarial analyses of the estimated losses the Company expects to incur on the insurance policies it writes. The ultimate losses and loss adjustment expenses will depend on the actual costs to resolve claims. Acquisition costs consist principally of commissions and premium taxes that are typically a percentage of the premiums on the insurance policies the Company writes, net of ceding commissions earned from reinsurers. Other underwriting expenses consist primarily of personnel expenses and general operating expenses related to underwriting activities. Corporate and other operating expenses are comprised primarily of outside legal fees, other professional and accounting fees, directors’ fees, management fees & advisory fees, and salaries and benefits for company personnel whose services relate to the support of corporate activities. Interest expense is primarily comprised of amounts due on outstanding debt.
Critical Accounting Estimates and Policies
The Company’s consolidated financial statements are prepared in conformity with GAAP, which require it to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.
The most critical accounting policies involve significant estimates and include those used in determining the liability for unpaid losses and loss adjustment expenses, recoverability of reinsurance receivables, investments, fair value measurements, goodwill and intangible assets, deferred acquisition costs, and taxation. For a detailed discussion on each of these policies,
39
GLOBAL INDEMNITY GROUP, LLC
please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes to any of these policies or underlying methodologies during the current year.
Results of Operations
The following table summarizes the Company’s results for the quarters and six months ended June 30, 2022 and 2021:
|
|
|
Quarters Ended June 30, |
|
|
% |
|
|
Six Months Ended June 30, |
|
|
% |
|
||||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Gross written premiums |
|
$ |
196,823 |
|
|
$ |
175,236 |
|
|
|
12.3 |
% |
|
$ |
387,806 |
|
|
$ |
338,794 |
|
|
|
14.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums |
|
$ |
167,158 |
|
|
$ |
160,653 |
|
|
|
4.0 |
% |
|
$ |
326,640 |
|
|
$ |
308,336 |
|
|
|
5.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
|
$ |
155,749 |
|
|
$ |
149,408 |
|
|
|
4.2 |
% |
|
$ |
304,572 |
|
|
$ |
293,108 |
|
|
|
3.9 |
% |
|
Other income |
|
|
174 |
|
|
|
512 |
|
|
|
(66.0 |
%) |
|
|
613 |
|
|
|
920 |
|
|
|
(33.4 |
%) |
|
Total revenues |
|
|
155,923 |
|
|
|
149,920 |
|
|
|
4.0 |
% |
|
|
305,185 |
|
|
|
294,028 |
|
|
|
3.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
|
92,618 |
|
|
|
90,938 |
|
|
|
1.8 |
% |
|
|
177,313 |
|
|
|
181,721 |
|
|
|
(2.4 |
%) |
|
Acquisition costs and other underwriting expenses |
|
|
61,098 |
|
|
|
57,213 |
|
|
|
6.8 |
% |
|
|
117,790 |
|
|
|
111,977 |
|
|
|
5.2 |
% |
|
Underwriting income |
|
|
2,207 |
|
|
|
1,769 |
|
|
|
24.8 |
% |
|
|
10,082 |
|
|
|
330 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
1,930 |
|
|
|
10,633 |
|
|
|
(81.8 |
%) |
|
|
8,522 |
|
|
|
20,469 |
|
|
|
(58.4 |
%) |
|
Net realized investment gains (losses) |
|
|
(9,916 |
) |
|
|
3,833 |
|
|
NM |
|
|
|
(35,301 |
) |
|
|
7,652 |
|
|
NM |
|
||
|
Other income (loss) |
|
|
(77 |
) |
|
|
9 |
|
|
NM |
|
|
|
(90 |
) |
|
|
(22 |
) |
|
NM |
|
||
|
Corporate and other operating expenses |
|
|
(2,993 |
) |
|
|
(6,329 |
) |
|
|
(52.7 |
%) |
|
|
(7,653 |
) |
|
|
(10,605 |
) |
|
|
(27.8 |
%) |
|
Interest expense |
|
|
(410 |
) |
|
|
(2,696 |
) |
|
|
(84.8 |
%) |
|
|
(3,005 |
) |
|
|
(5,291 |
) |
|
|
(43.2 |
%) |
|
Loss on extinguishment of debt |
|
|
(3,529 |
) |
|
|
— |
|
|
NM |
|
|
|
(3,529 |
) |
|
|
— |
|
|
NM |
|
||
|
Income (loss) before income taxes |
|
|
(12,788 |
) |
|
|
7,219 |
|
|
NM |
|
|
|
(30,974 |
) |
|
|
12,533 |
|
|
NM |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
|
(626 |
) |
|
|
844 |
|
|
|
(174.2 |
%) |
|
|
(4,039 |
) |
|
|
641 |
|
|
NM |
|
|
|
Net income (loss) |
|
$ |
(12,162 |
) |
|
$ |
6,375 |
|
|
NM |
|
|
$ |
(26,935 |
) |
|
$ |
11,892 |
|
|
NM |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio (1): |
|
|
59.5 |
% |
|
|
60.9 |
% |
|
|
|
|
|
|
58.2 |
% |
|
|
62.0 |
% |
|
|
|
|
|
Expense ratio (2) |
|
|
39.2 |
% |
|
|
38.3 |
% |
|
|
|
|
|
|
38.7 |
% |
|
|
38.2 |
% |
|
|
|
|
|
Combined ratio (3) |
|
|
98.7 |
% |
|
|
99.2 |
% |
|
|
|
|
|
|
96.9 |
% |
|
|
100.2 |
% |
|
|
|
|
NM – not meaningful
|
(1) |
The loss ratio is a GAAP financial measure that is generally viewed in the insurance industry as an indicator of underwriting profitability and is calculated by dividing net losses and loss adjustment expenses by net earned premiums. |
|
(2) |
The expense ratio is a GAAP financial measure that is calculated by dividing the sum of acquisition costs and other underwriting expenses by net earned premiums. |
|
(3) |
The combined ratio is a GAAP financial measure and is the sum of the Company’s loss and expense ratios. |
40
GLOBAL INDEMNITY GROUP, LLC
Premiums
The following table summarizes the change in premium volume by business segment:
|
|
|
Quarters Ended June 30, |
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
||||||
|
Gross written premiums (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
|
$ |
109,797 |
|
|
$ |
99,406 |
|
|
|
10.5 |
% |
|
$ |
214,063 |
|
|
$ |
188,740 |
|
|
|
13.4 |
% |
|
Reinsurance Operations (3) |
|
|
46,394 |
|
|
|
24,487 |
|
|
|
89.5 |
% |
|
|
87,839 |
|
|
|
46,438 |
|
|
|
89.2 |
% |
|
Continuing Lines |
|
|
156,191 |
|
|
|
123,893 |
|
|
|
26.1 |
% |
|
|
301,902 |
|
|
|
235,178 |
|
|
|
28.4 |
% |
|
Exited Lines |
|
|
40,632 |
|
|
|
51,343 |
|
|
|
(20.9 |
%) |
|
|
85,904 |
|
|
|
103,616 |
|
|
|
(17.1 |
%) |
|
Total gross written premiums |
|
$ |
196,823 |
|
|
$ |
175,236 |
|
|
|
12.3 |
% |
|
$ |
387,806 |
|
|
$ |
338,794 |
|
|
|
14.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceded written premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
|
$ |
8,626 |
|
|
$ |
7,759 |
|
|
|
11.2 |
% |
|
$ |
14,579 |
|
|
$ |
14,921 |
|
|
|
(2.3 |
%) |
|
Reinsurance Operations (3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Continuing Lines |
|
|
8,626 |
|
|
|
7,759 |
|
|
|
11.2 |
% |
|
|
14,579 |
|
|
|
14,921 |
|
|
|
(2.3 |
%) |
|
Exited Lines |
|
|
21,039 |
|
|
|
6,824 |
|
|
NM |
|
|
|
46,587 |
|
|
|
15,537 |
|
|
|
199.8 |
% |
|
|
Total ceded written premiums |
|
$ |
29,665 |
|
|
$ |
14,583 |
|
|
|
103.4 |
% |
|
$ |
61,166 |
|
|
$ |
30,458 |
|
|
|
100.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
|
$ |
101,171 |
|
|
$ |
91,647 |
|
|
|
10.4 |
% |
|
$ |
199,484 |
|
|
$ |
173,819 |
|
|
|
14.8 |
% |
|
Reinsurance Operations (3) |
|
|
46,394 |
|
|
|
24,487 |
|
|
|
89.5 |
% |
|
|
87,839 |
|
|
|
46,438 |
|
|
|
89.2 |
% |
|
Continuing Lines |
|
|
147,565 |
|
|
|
116,134 |
|
|
|
27.1 |
% |
|
|
287,323 |
|
|
|
220,257 |
|
|
|
30.4 |
% |
|
Exited Lines |
|
|
19,593 |
|
|
|
44,519 |
|
|
|
(56.0 |
%) |
|
|
39,317 |
|
|
|
88,079 |
|
|
|
(55.4 |
%) |
|
Total net written premiums |
|
$ |
167,158 |
|
|
$ |
160,653 |
|
|
|
4.0 |
% |
|
$ |
326,640 |
|
|
$ |
308,336 |
|
|
|
5.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
|
$ |
95,172 |
|
|
$ |
81,965 |
|
|
|
16.1 |
% |
|
$ |
186,935 |
|
|
$ |
160,657 |
|
|
|
16.4 |
% |
|
Reinsurance Operations (3) |
|
|
38,596 |
|
|
|
18,061 |
|
|
|
113.7 |
% |
|
|
73,559 |
|
|
|
34,859 |
|
|
|
111.0 |
% |
|
Continuing Lines |
|
|
133,768 |
|
|
|
100,026 |
|
|
|
33.7 |
% |
|
|
260,494 |
|
|
|
195,516 |
|
|
|
33.2 |
% |
|
Exited Lines |
|
|
21,981 |
|
|
|
49,382 |
|
|
|
(55.5 |
%) |
|
|
44,078 |
|
|
|
97,592 |
|
|
|
(54.8 |
%) |
|
Total net earned premiums |
|
$ |
155,749 |
|
|
$ |
149,408 |
|
|
|
4.2 |
% |
|
$ |
304,572 |
|
|
$ |
293,108 |
|
|
|
3.9 |
% |
NM – not meaningful
|
(1) |
Gross written premiums represent the amount received or to be received for insurance policies written without reduction for reinsurance costs, ceded premiums, or other deductions. |
|
(2) |
Net written premiums equal gross written premiums less ceded written premiums. |
|
(3) |
External business only, excluding business assumed from affiliates. |
Gross written premiums increased by 12.3% and 14.5% for the quarter and six months ended June 30, 2022, respectively, as compared to same periods in 2021. The increase in gross written premiums is mainly due to the continued growth of existing programs, increased pricing, and several new programs within Commercial Specialty, the organic growth of existing casualty treaties within Reinsurance Operations, partially offset by a reduction in premiums within Exited Lines.
41
GLOBAL INDEMNITY GROUP, LLC
Underwriting Ratios
|
|
|
Quarters Ended June 30, |
|
|
Point |
|
|
Six Months Ended June 30, |
|
|
Point |
|
||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Loss ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
|
|
58.9 |
% |
|
|
52.1 |
% |
|
|
6.8 |
|
|
|
57.8 |
% |
|
|
57.6 |
% |
|
|
0.2 |
|
|
Reinsurance Operations |
|
|
58.3 |
% |
|
|
64.2 |
% |
|
|
(5.9 |
) |
|
|
59.7 |
% |
|
|
64.4 |
% |
|
|
(4.7 |
) |
|
Continuing Lines |
|
|
58.7 |
% |
|
|
54.3 |
% |
|
|
4.4 |
|
|
|
58.4 |
% |
|
|
58.8 |
% |
|
|
(0.4 |
) |
|
Exited Lines |
|
|
64.1 |
% |
|
|
74.2 |
% |
|
|
(10.1 |
) |
|
|
57.4 |
% |
|
|
68.4 |
% |
|
|
(11.0 |
) |
|
Total loss ratio |
|
|
59.5 |
% |
|
|
60.9 |
% |
|
|
(1.4 |
) |
|
|
58.2 |
% |
|
|
62.0 |
% |
|
|
(3.8 |
) |
|
Expense ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
|
|
38.1 |
% |
|
|
37.3 |
% |
|
|
0.8 |
|
|
|
37.4 |
% |
|
|
37.1 |
% |
|
|
0.3 |
|
|
Reinsurance Operations |
|
|
37.2 |
% |
|
|
34.3 |
% |
|
|
2.9 |
|
|
|
36.1 |
% |
|
|
34.4 |
% |
|
|
1.7 |
|
|
Continuing Lines |
|
|
37.8 |
% |
|
|
36.8 |
% |
|
|
1.0 |
|
|
|
37.0 |
% |
|
|
36.6 |
% |
|
|
0.4 |
|
|
Exited Lines |
|
|
47.8 |
% |
|
|
41.4 |
% |
|
|
6.4 |
|
|
|
48.4 |
% |
|
|
41.4 |
% |
|
|
7.0 |
|
|
Total expense ratio |
|
|
39.2 |
% |
|
|
38.3 |
% |
|
|
0.9 |
|
|
|
38.7 |
% |
|
|
38.2 |
% |
|
|
0.5 |
|
|
Combined ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
|
|
97.0 |
% |
|
|
89.4 |
% |
|
|
7.6 |
|
|
|
95.2 |
% |
|
|
94.7 |
% |
|
|
0.5 |
|
|
Reinsurance Operations |
|
|
95.5 |
% |
|
|
98.5 |
% |
|
|
(3.0 |
) |
|
|
95.8 |
% |
|
|
98.8 |
% |
|
|
(3.0 |
) |
|
Continuing Lines |
|
|
96.5 |
% |
|
|
91.1 |
% |
|
|
5.4 |
|
|
|
95.4 |
% |
|
|
95.4 |
% |
|
|
(0.0 |
) |
|
Exited Lines |
|
|
111.9 |
% |
|
|
115.6 |
% |
|
|
(3.7 |
) |
|
|
105.8 |
% |
|
|
109.8 |
% |
|
|
(4.0 |
) |
|
Total combined ratio |
|
|
98.7 |
% |
|
|
99.2 |
% |
|
|
(0.5 |
) |
|
|
96.9 |
% |
|
|
100.2 |
% |
|
|
(3.3 |
) |
Net Retention
The ratio of net written premiums to gross written premiums is referred to as the Company’s net premium retention. The Company’s net premium retention is summarized by segments as follows:
|
|
|
Quarters Ended June 30, |
|
|
Point |
|
|
Six Months Ended June 30, |
|
|
Point |
|
||||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Commercial Specialty |
|
|
92.1 |
% |
|
|
92.2 |
% |
|
|
(0.1 |
) |
|
|
93.2 |
% |
|
|
92.1 |
% |
|
|
1.1 |
|
|
Reinsurance Operations |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
|
|
Continuing Lines |
|
|
94.5 |
% |
|
|
93.7 |
% |
|
|
0.8 |
|
|
|
95.2 |
% |
|
|
93.7 |
% |
|
|
1.5 |
|
|
Exited Lines |
|
|
48.2 |
% |
|
|
86.7 |
% |
|
|
(38.5 |
) |
|
|
45.8 |
% |
|
|
100.0 |
% |
|
|
(54.2 |
) |
|
Total |
|
|
84.9 |
% |
|
|
91.7 |
% |
|
|
(6.8 |
) |
|
|
84.2 |
% |
|
|
91.0 |
% |
|
|
(6.8 |
) |
The net premium retention for both the quarter and six months ended June 30, 2022 decreased by 6.8 points as compared to the same periods in 2021. The reduction in retention is primarily driven by the Company entering into an agreement effective November 30, 2021 where American Family Mutual Insurance Company agreed to reinsure 100% of the Company’s unearned premium reserves of the same types as the policies included in the sale of the renewal rights of the Company’s manufactured and dwelling homes products that were in force as of November 30, 2021. See Note 3 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2021 Annual Report on Form 10-K for additional information on this reinsurance agreement as well as the sale of renewal rights related to the Company’s manufactured and dwelling home products.
Net Earned Premiums
Net earned premiums within the Commercial Specialty segment increased by 16.1% and 16.4% for the quarter and six months ended June 30, 2022, respectively, as compared to the same periods in 2021. The increase in net earned premiums was primarily due to a growth in premiums written as a result of organic growth from existing agents, pricing increases, and several new programs. Property net earned premiums were $36.8 million and $34.7 million for the quarters ended June 30, 2022 and 2021, respectively, and $72.3 million and $71.9 million for the six months ended June 30, 2022 and 2021,
42
GLOBAL INDEMNITY GROUP, LLC
respectively. Casualty net earned premiums were $58.3 million and $47.2 million for the quarters ended June 30, 2022 and 2021, respectively, and $114.6 million and $88.8 million for the six months ended June 30, 2022 and 2021, respectively.
Net earned premiums within the Reinsurance Operations segment increased by 113.7% and 111.0% for the quarter and six months ended June 30, 2022, respectively, as compared to the same periods in 2021 primarily due to organic growth of existing casualty treaties. There was no property net earned premiums for the quarters and six months ended June 30, 2022 and 2021. Casualty net earned premiums were $38.6 million and $18.1 million for the quarters ended June 30, 2022 and 2021, respectively, and $73.6 million and $34.9 million for the six months ended June 30, 2022 and 2021, respectively.
Net earned premiums within the Exited Lines segment decreased by 55.5% and 54.8% for the quarter and six months ended June 30, 2022, respectively, as compared to the same periods in 2021 primarily due to the sale of the renewal rights related to the Company’s manufactured and dwelling home products on October 26, 2021. The decrease in net earned premiums is also due to exiting lines of business unrelated to the company’s continuing businesses. Property net earned premiums were $16.6 million and $43.1 million for the quarters ended June 30, 2022 and 2021, respectively, and $34.2 million and $85.0 million for the six months ended June 30, 2022 and 2021, respectively. Casualty net earned premiums were $5.4 million and $6.2 million for the quarters ended June 30, 2022 and 2021, respectively, and $9.8 million and $12.6 million for the six months ended June 30, 2022 and 2021, respectively.
Reserves
Management’s best estimate at June 30, 2022 was recorded as the loss reserve. Management’s best estimate is as of a particular point in time and is based upon known facts, the Company’s actuarial analyses, current law, and the Company’s judgment. This resulted in carried gross and net reserves of $804.7 million and $710.5 million, respectively, as of June 30, 2022. A breakout of the Company’s gross and net reserves, as of June 30, 2022, is as follows:
|
|
|
Gross Reserves |
|
|||||||||
|
(Dollars in thousands) |
|
Case |
|
|
IBNR (1) |
|
|
Total |
|
|||
|
Commercial Specialty |
|
$ |
163,650 |
|
|
$ |
316,635 |
|
|
$ |
480,285 |
|
|
Reinsurance Operations |
|
|
6,249 |
|
|
|
138,272 |
|
|
|
144,521 |
|
|
Continuing Lines |
|
|
169,899 |
|
|
|
454,907 |
|
|
|
624,806 |
|
|
Exited Lines |
|
|
83,667 |
|
|
|
96,188 |
|
|
|
179,855 |
|
|
Total |
|
$ |
253,566 |
|
|
$ |
551,095 |
|
|
$ |
804,661 |
|
|
|
|
Net Reserves (2) |
|
|||||||||
|
(Dollars in thousands) |
|
Case |
|
|
IBNR (1) |
|
|
Total |
|
|||
|
Commercial Specialty |
|
$ |
140,566 |
|
|
$ |
284,090 |
|
|
$ |
424,656 |
|
|
Reinsurance Operations |
|
|
6,249 |
|
|
|
138,272 |
|
|
|
144,521 |
|
|
Continuing Lines |
|
|
146,815 |
|
|
|
422,362 |
|
|
|
569,177 |
|
|
Exited Lines |
|
|
63,867 |
|
|
|
77,432 |
|
|
|
141,299 |
|
|
Total |
|
$ |
210,682 |
|
|
$ |
499,794 |
|
|
$ |
710,476 |
|
|
(1) |
Losses incurred but not reported, including the expected future emergence of case reserves. |
|
(2) |
Does not include reinsurance receivable on paid losses. |
Each reserve category has an implicit frequency and severity for each accident year as a result of the various assumptions made. If the actual levels of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’s best estimate. For most of its reserve categories, the Company believes that frequency can be predicted with greater accuracy than severity. Therefore, the Company believes management’s best estimate is more likely influenced by changes in severity than frequency. The following table, which the Company believes reflects a reasonable range of variability around its best estimate based on historical loss experience and management’s judgment, reflects the
43
GLOBAL INDEMNITY GROUP, LLC
impact of changes (which could be favorable or unfavorable) in frequency and severity on the Company’s current accident year net loss estimate of $183.9 million for claims occurring during the six months ended June 30, 2022:
|
|
|
|
|
|
|
Severity Change |
|
|||||||||||||||||
|
(Dollars in thousands) |
|
|
-10% |
|
|
-5% |
|
|
0% |
|
|
5% |
|
|
10% |
|
||||||||
|
Frequency Change |
|
-5% |
|
|
|
(26,672 |
) |
|
|
(17,935 |
) |
|
|
(9,197 |
) |
|
|
(460 |
) |
|
|
8,278 |
|
|
|
|
|
-3% |
|
|
|
(23,361 |
) |
|
|
(14,440 |
) |
|
|
(5,518 |
) |
|
|
3,403 |
|
|
|
12,324 |
|
|
|
|
|
-2% |
|
|
|
(21,706 |
) |
|
|
(12,692 |
) |
|
|
(3,679 |
) |
|
|
5,334 |
|
|
|
14,348 |
|
|
|
|
|
-1% |
|
|
|
(20,050 |
) |
|
|
(10,945 |
) |
|
|
(1,839 |
) |
|
|
7,266 |
|
|
|
16,371 |
|
|
|
|
|
0% |
|
|
|
(18,395 |
) |
|
|
(9,197 |
) |
|
|
— |
|
|
|
9,197 |
|
|
|
18,395 |
|
|
|
|
|
1% |
|
|
|
(16,739 |
) |
|
|
(7,450 |
) |
|
|
1,839 |
|
|
|
11,129 |
|
|
|
20,418 |
|
|
|
|
|
2% |
|
|
|
(15,084 |
) |
|
|
(5,702 |
) |
|
|
3,679 |
|
|
|
13,060 |
|
|
|
22,442 |
|
|
|
|
|
3% |
|
|
|
(13,428 |
) |
|
|
(3,955 |
) |
|
|
5,518 |
|
|
|
14,992 |
|
|
|
24,465 |
|
|
|
|
|
5% |
|
|
|
(10,117 |
) |
|
|
(460 |
) |
|
|
9,197 |
|
|
|
18,855 |
|
|
|
28,512 |
|
|
The Company’s net reserves for losses and loss adjustment expenses of $710.5 million as of June 30, 2022 relate to multiple accident years. Therefore, the impact of changes in frequency and severity for more than one accident year could be higher or lower than the amounts reflected above.
Underwriting Results
Commercial Specialty
The components of income from the Company’s Commercial Specialty segment and corresponding underwriting ratios are as follows:
|
|
|
Quarters Ended June 30, |
|
|
% |
|
|
Six Months Ended June 30, |
|
|
% |
|
||||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Gross written premiums |
|
$ |
109,797 |
|
|
$ |
99,406 |
|
|
|
10.5 |
% |
|
$ |
214,063 |
|
|
$ |
188,740 |
|
|
|
13.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums |
|
$ |
101,171 |
|
|
$ |
91,647 |
|
|
|
10.4 |
% |
|
$ |
199,484 |
|
|
$ |
173,819 |
|
|
|
14.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
|
$ |
95,172 |
|
|
$ |
81,965 |
|
|
|
16.1 |
% |
|
$ |
186,935 |
|
|
$ |
160,657 |
|
|
|
16.4 |
% |
|
Other income |
|
|
260 |
|
|
$ |
208 |
|
|
|
25.0 |
% |
|
$ |
519 |
|
|
$ |
452 |
|
|
|
14.8 |
% |
|
Total revenues |
|
|
95,432 |
|
|
|
82,173 |
|
|
|
16.1 |
% |
|
|
187,454 |
|
|
|
161,109 |
|
|
|
16.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
|
56,042 |
|
|
|
42,669 |
|
|
|
31.3 |
% |
|
|
108,095 |
|
|
|
92,459 |
|
|
|
16.9 |
% |
|
Acquisition costs and other underwriting expenses |
|
|
36,222 |
|
|
|
30,577 |
|
|
|
18.5 |
% |
|
|
69,911 |
|
|
|
59,629 |
|
|
|
17.2 |
% |
|
Underwriting income |
|
$ |
3,168 |
|
|
$ |
8,927 |
|
|
|
(64.5 |
%) |
|
$ |
9,448 |
|
|
$ |
9,021 |
|
|
|
4.7 |
% |
|
|
|
Quarters Ended June 30, |
|
|
Point |
|
|
Six Months Ended June 30, |
|
|
Point |
|
||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
|
|
58.6 |
% |
|
|
52.7 |
% |
|
|
5.9 |
|
|
|
57.5 |
% |
|
|
59.5 |
% |
|
|
(2.0 |
) |
|
Prior accident year |
|
|
0.3 |
% |
|
|
(0.6 |
%) |
|
|
0.9 |
|
|
|
0.3 |
% |
|
|
(1.9 |
%) |
|
|
2.2 |
|
|
Calendar year loss ratio |
|
|
58.9 |
% |
|
|
52.1 |
% |
|
|
6.8 |
|
|
|
57.8 |
% |
|
|
57.6 |
% |
|
|
0.2 |
|
|
Expense ratio |
|
|
38.1 |
% |
|
|
37.3 |
% |
|
|
0.8 |
|
|
|
37.4 |
% |
|
|
37.1 |
% |
|
|
0.3 |
|
|
Combined ratio |
|
|
97.0 |
% |
|
|
89.4 |
% |
|
|
7.6 |
|
|
|
95.2 |
% |
|
|
94.7 |
% |
|
|
0.5 |
|
44
GLOBAL INDEMNITY GROUP, LLC
Reconciliation of non-GAAP financial measures and ratios
The table below reconciles the non-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio. The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within Commercial Specialty may be obscured by prior accident year adjustments. These non-GAAP measures or ratios should not be considered as a substitute for its most directly comparable GAAP measure or ratio and does not reflect the overall underwriting profitability of the Company.
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||||
|
(Dollars in thousands) |
|
Losses |
|
|
Loss Ratio |
|
|
Losses |
|
|
Loss Ratio |
|
|
Losses |
|
|
Loss Ratio |
|
|
Losses |
|
|
Loss Ratio |
|
||||||||
|
Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non catastrophe property losses and ratio excluding the effect of prior accident year (1) |
|
$ |
18,125 |
|
|
|
49.2 |
% |
|
$ |
13,218 |
|
|
|
38.0 |
% |
|
$ |
35,707 |
|
|
|
49.4 |
% |
|
$ |
33,790 |
|
|
|
47.0 |
% |
|
Effect of prior accident year |
|
|
383 |
|
|
|
1.0 |
% |
|
|
(6 |
) |
|
|
(0.0 |
%) |
|
|
(374 |
) |
|
|
(0.5 |
%) |
|
|
(1,534 |
) |
|
|
(2.1 |
%) |
|
Non catastrophe property losses and ratio (2) |
|
$ |
18,508 |
|
|
|
50.2 |
% |
|
$ |
13,212 |
|
|
|
38.0 |
% |
|
$ |
35,333 |
|
|
|
48.9 |
% |
|
$ |
32,256 |
|
|
|
44.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catastrophe losses and ratio excluding the effect of prior accident year (1) |
|
$ |
3,189 |
|
|
|
8.7 |
% |
|
$ |
2,855 |
|
|
|
8.2 |
% |
|
$ |
5,423 |
|
|
|
7.5 |
% |
|
$ |
11,573 |
|
|
|
16.1 |
% |
|
Effect of prior accident year |
|
|
(1,334 |
) |
|
|
(3.6 |
%) |
|
|
514 |
|
|
|
1.5 |
% |
|
|
(353 |
) |
|
|
(0.5 |
%) |
|
|
(392 |
) |
|
|
(0.6 |
%) |
|
Catastrophe losses and ratio (2) |
|
$ |
1,855 |
|
|
|
5.1 |
% |
|
$ |
3,369 |
|
|
|
9.7 |
% |
|
$ |
5,070 |
|
|
|
7.0 |
% |
|
$ |
11,181 |
|
|
|
15.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property losses and ratio excluding the effect of prior accident year (1) |
|
$ |
21,314 |
|
|
|
57.9 |
% |
|
$ |
16,073 |
|
|
|
46.2 |
% |
|
$ |
41,130 |
|
|
|
56.9 |
% |
|
$ |
45,363 |
|
|
|
63.1 |
% |
|
Effect of prior accident year |
|
|
(951 |
) |
|
|
(2.6 |
%) |
|
|
508 |
|
|
|
1.5 |
% |
|
|
(727 |
) |
|
|
(1.0 |
%) |
|
|
(1,926 |
) |
|
|
(2.7 |
%) |
|
Total property losses and ratio (2) |
|
$ |
20,363 |
|
|
|
55.3 |
% |
|
$ |
16,581 |
|
|
|
47.7 |
% |
|
$ |
40,403 |
|
|
|
55.9 |
% |
|
$ |
43,437 |
|
|
|
60.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total casualty losses and ratio excluding the effect of prior accident year (1) |
|
$ |
34,460 |
|
|
|
59.1 |
% |
|
$ |
27,126 |
|
|
|
57.4 |
% |
|
$ |
66,420 |
|
|
|
58.0 |
% |
|
$ |
50,220 |
|
|
|
56.6 |
% |
|
Effect of prior accident year |
|
|
1,219 |
|
|
|
2.1 |
% |
|
|
(1,038 |
) |
|
|
(2.2 |
%) |
|
|
1,272 |
|
|
|
1.1 |
% |
|
|
(1,198 |
) |
|
|
(1.3 |
%) |
|
Total casualty losses and ratio (2) |
|
$ |
35,679 |
|
|
|
61.2 |
% |
|
$ |
26,088 |
|
|
|
55.2 |
% |
|
$ |
67,692 |
|
|
|
59.1 |
% |
|
$ |
49,022 |
|
|
|
55.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1) |
|
$ |
55,774 |
|
|
|
58.6 |
% |
|
$ |
43,199 |
|
|
|
52.7 |
% |
|
$ |
107,550 |
|
|
|
57.5 |
% |
|
$ |
95,583 |
|
|
|
59.5 |
% |
|
Effect of prior accident year |
|
|
268 |
|
|
|
0.3 |
% |
|
|
(530 |
) |
|
|
(0.6 |
%) |
|
|
545 |
|
|
|
0.3 |
% |
|
|
(3,124 |
) |
|
|
(1.9 |
%) |
|
Total net losses and loss adjustment expense and total loss ratio (2) |
|
$ |
56,042 |
|
|
|
58.9 |
% |
|
$ |
42,669 |
|
|
|
52.1 |
% |
|
$ |
108,095 |
|
|
|
57.8 |
% |
|
$ |
92,459 |
|
|
|
57.6 |
% |
|
(1) |
Non-GAAP measure / ratio |
|
(2) |
Most directly comparable GAAP measure / ratio |
Premiums
See “Result of Operations” above for a discussion on consolidated premiums.
Other Income
Other income was $0.3 million and $0.2 million for the quarters ended June 30, 2022 and 2021, respectively, and $0.5 million and $0.5 million for the six months ended June 30, 2022 and 2021, respectively. Other income is primarily comprised of fee income.
45
GLOBAL INDEMNITY GROUP, LLC
Loss Ratio
The current accident year losses and loss ratio is summarized as follows:
|
|
|
Quarters Ended June 30, |
|
|
% |
|
|
Six Months Ended June 30, |
|
|
% |
|
||||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Property losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
|
$ |
18,125 |
|
|
$ |
13,218 |
|
|
|
37.1 |
% |
|
$ |
35,707 |
|
|
$ |
33,790 |
|
|
|
5.7 |
% |
|
Catastrophe |
|
|
3,189 |
|
|
|
2,855 |
|
|
|
11.7 |
% |
|
|
5,423 |
|
|
|
11,573 |
|
|
|
(53.1 |
%) |
|
Property losses |
|
|
21,314 |
|
|
|
16,073 |
|
|
|
32.6 |
% |
|
|
41,130 |
|
|
|
45,363 |
|
|
|
(9.3 |
%) |
|
Casualty losses |
|
|
34,460 |
|
|
|
27,126 |
|
|
|
27.0 |
% |
|
|
66,420 |
|
|
|
50,220 |
|
|
|
32.3 |
% |
|
Total accident year losses |
|
$ |
55,774 |
|
|
$ |
43,199 |
|
|
|
29.1 |
% |
|
$ |
107,550 |
|
|
$ |
95,583 |
|
|
|
12.5 |
% |
|
|
|
Quarters Ended June 30, |
|
|
Point |
|
|
Six Months Ended June 30, |
|
|
Point |
|
||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Current accident year loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
|
|
49.2 |
% |
|
|
38.0 |
% |
|
|
11.2 |
|
|
|
49.4 |
% |
|
|
47.0 |
% |
|
|
2.4 |
|
|
Catastrophe |
|
|
8.7 |
% |
|
|
8.2 |
% |
|
|
0.5 |
|
|
|
7.5 |
% |
|
|
16.1 |
% |
|
|
(8.6 |
) |
|
Property loss ratio |
|
|
57.9 |
% |
|
|
46.2 |
% |
|
|
11.7 |
|
|
|
56.9 |
% |
|
|
63.1 |
% |
|
|
(6.2 |
) |
|
Casualty loss ratio |
|
|
59.1 |
% |
|
|
57.4 |
% |
|
|
1.7 |
|
|
|
58.0 |
% |
|
|
56.6 |
% |
|
|
1.4 |
|
|
Total accident year loss ratio |
|
|
58.6 |
% |
|
|
52.7 |
% |
|
|
5.9 |
|
|
|
57.5 |
% |
|
|
59.5 |
% |
|
|
(2.0 |
) |
The current accident year non-catastrophe property loss ratio increased by 11.2 points during the quarter ended June 30, 2022 as compared to the same period in 2021 reflecting higher claims severity in the second accident quarter compared to last year.
The current accident year non-catastrophe property loss ratio increased by 2.4 points during the six months ended June 30, 2022 as compared to the same period in 2021 due to higher claims severity in the first six months compared to last year.
The current accident year catastrophe loss ratio increased by 0.5 points during the quarter ended June 30, 2022 as compared to the same period in 2021 recognizing higher claims frequency in the calendar quarter compared to last year.
The current accident year catastrophe loss ratio improved by 8.6 points during the six months ended June 30, 2022 as compared to the same period in 2021 due to lower claims frequency and severity in the first six months compared to last year.
The current accident year casualty loss ratio increased by 1.7 points during the quarter ended June 30, 2022 as compared to the same period in 2021 reflecting higher claims severity in the calendar quarter compared to last year.
The current accident year casualty loss ratio increased by 1.4 points during the six months ended June 30, 2022 as compared to the same period in 2021 due to higher claims severity in the first six months compared to last year.
The calendar year loss ratio for the quarter and six months ended June 30, 2022 includes a increase of $0.3 million, or 0.3 percentage points, and a increase of $0.5 million, or 0.3 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratio for the quarter and six months ended June 30, 2021 includes a decrease of $0.5 million, or 0.6 percentage points, and a decrease of $3.1 million, or 1.9 percentage points, respectively, related to reserve development on prior accident years. Please see Note 7 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.
Expense Ratios
The expense ratio for the Company’s Commercial Specialty segment increased by 0.8 points from 37.3% for the quarter ended June 30, 2021 to 38.1% for the quarter ended June 30, 2022 and increased by 0.3 points from 37.1% for the six months ended June 30, 2021 to 37.4% for the six months ended June 30, 2022. The increase in the expense ratio is primarily due to higher compensation cost resulting from the start-up business lines partially offset by a reduction in the expense ratio due to growth in net earned premiums.
46
GLOBAL INDEMNITY GROUP, LLC
COVID-19
COVID-19’s lasting impacts could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect Commercial Specialty’s business, financial condition, and results of operation.
There is continued risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Commercial Specialty policies, or other conditions included in these policies that would otherwise preclude coverage.
Reinsurance Operations
The components of income from the Company’s Reinsurance Operations segment and corresponding underwriting ratios are as follows:
|
|
|
Quarters Ended June 30, |
|
|
% |
|
|
Six Months Ended June 30, |
|
|
% |
|
||||||||||||
|
(Dollars in thousands) |
|
2022 (1) |
|
|
2021 (1) |
|
|
Change |
|
|
2022 (1) |
|
|
2021 (1) |
|
|
Change |
|
||||||
|
Gross written premiums |
|
$ |
46,394 |
|
|
$ |
24,487 |
|
|
|
89.5 |
% |
|
$ |
87,839 |
|
|
$ |
46,438 |
|
|
|
89.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums |
|
$ |
46,394 |
|
|
$ |
24,487 |
|
|
|
89.5 |
% |
|
$ |
87,839 |
|
|
$ |
46,438 |
|
|
|
89.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
|
$ |
38,596 |
|
|
$ |
18,061 |
|
|
|
113.7 |
% |
|
$ |
73,559 |
|
|
$ |
34,859 |
|
|
|
111.0 |
% |
|
Other income (loss) |
|
|
(61 |
) |
|
|
14 |
|
|
NM |
|
|
|
(81 |
) |
|
|
(42 |
) |
|
|
92.9 |
% |
|
|
Total revenues |
|
|
38,535 |
|
|
|
18,075 |
|
|
|
113.2 |
% |
|
|
73,478 |
|
|
|
34,817 |
|
|
|
111.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
|
22,481 |
|
|
|
11,600 |
|
|
|
93.8 |
% |
|
|
43,938 |
|
|
|
22,475 |
|
|
|
95.5 |
% |
|
Acquisition costs and other underwriting expenses |
|
|
14,369 |
|
|
|
6,198 |
|
|
|
131.8 |
% |
|
|
26,546 |
|
|
|
11,977 |
|
|
|
121.6 |
% |
|
Underwriting income |
|
$ |
1,685 |
|
|
$ |
277 |
|
|
NM |
|
|
$ |
2,994 |
|
|
$ |
365 |
|
|
NM |
|
||
|
|
|
Quarters Ended June 30, |
|
|
Point |
|
|
Six Months Ended June 30, |
|
|
Point |
|
||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year (2) |
|
|
61.4 |
% |
|
|
64.3 |
% |
|
|
(2.9 |
) |
|
|
61.3 |
% |
|
|
64.5 |
% |
|
|
(3.2 |
) |
|
Prior accident year |
|
|
(3.1 |
%) |
|
|
(0.1 |
%) |
|
|
(3.0 |
) |
|
|
(1.6 |
%) |
|
|
(0.1 |
%) |
|
|
(1.5 |
) |
|
Calendar year loss ratio (3) |
|
|
58.3 |
% |
|
|
64.2 |
% |
|
|
(5.9 |
) |
|
|
59.7 |
% |
|
|
64.4 |
% |
|
|
(4.7 |
) |
|
Expense ratio |
|
|
37.2 |
% |
|
|
34.3 |
% |
|
|
2.9 |
|
|
|
36.1 |
% |
|
|
34.4 |
% |
|
|
1.7 |
|
|
Combined ratio |
|
|
95.5 |
% |
|
|
98.5 |
% |
|
|
(3.0 |
) |
|
|
95.8 |
% |
|
|
98.8 |
% |
|
|
(3.0 |
) |
|
(1) |
External business only, excluding business assumed from affiliates |
|
(2) |
Non-GAAP ratio |
|
(3) |
Most directly comparable GAAP ratio |
NM – not meaningful
47
GLOBAL INDEMNITY GROUP, LLC
Reconciliation of non-GAAP financial ratios
The table above reconciles the non-GAAP ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP ratio. The Company believes the non-GAAP ratios are useful to investors when evaluating the Company's underwriting performance as trends within Reinsurance Operations may be obscured by prior accident year adjustments. These non-GAAP ratios should not be considered as a substitute for its most directly comparable GAAP ratio and does not reflect the overall underwriting profitability of the Company.
Premiums
See “Result of Operations” above for a discussion on consolidated premiums.
Other Income (Loss)
The Company recognized a loss of $0.1 million for each of the quarters ended June 30, 2022 and 2021 and recognized income of less than $0.1 million and a loss of less than $0.1 million for the six months ended June 30, 2022 and 2021, respectively. Other income (loss) is primarily comprised of foreign exchange gains and losses.
Loss Ratio
The current accident year loss ratio improved by 2.9 points during the quarter ended June 30, 2022 as compared to the same period in 2021 reflecting a mix of business change and growth in a treaty that has a lower expected loss ratio than last year.
The current accident year loss ratio improved by 3.2 points during six months ended June 30, 2022 as compared to the same period in 2021 reflecting a mix of business change and growth in a treaty that has a lower expected loss ratio than last year.
The calendar year loss ratios for the quarter and six months ended June 30, 2022 includes a decrease of $1.2 million or 3.1 percentage points, and a decrease of $1.2 million, or 1.6 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratios for both the quarter and six months ended June 30, 2021 includes a decrease of less than $0.1 million or 0.1 percentage point, related to reserve development on prior accident years. Please see Note 7 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.
Expense Ratios
The expense ratio for the Company’s Reinsurance Operations segment increased 2.9 points from 34.3% for the quarter ended June 30, 2021 to 37.2% for the quarter ended June 30, 2022 and increased 1.7 points from 34.4% for the six months ended June 30, 2021 to 36.1% for the six months ended June 30, 2022. This increase in the expense ratio was primarily due to an increase in commission expense which was partially offset by a reduction in the expense ratio as a result of a growth in net earned premiums.
COVID-19
COVID-19’s lasting impacts could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect Reinsurance Operations’ business, financial condition, and results of operation.
48
GLOBAL INDEMNITY GROUP, LLC
Exited Lines
The components of loss from the Company’s Exited Lines segment and corresponding underwriting ratios are as follows:
|
|
|
Quarters Ended June 30, |
|
|
% |
|
|
Six Months Ended June 30, |
|
|
% |
|
||||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Gross written premiums |
|
$ |
40,632 |
|
|
$ |
51,343 |
|
|
|
(20.9 |
%) |
|
$ |
85,904 |
|
|
$ |
103,616 |
|
|
|
(17.1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums |
|
$ |
19,593 |
|
|
$ |
44,519 |
|
|
|
(56.0 |
%) |
|
$ |
39,317 |
|
|
$ |
88,079 |
|
|
|
(55.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
|
$ |
21,981 |
|
|
$ |
49,382 |
|
|
|
(55.5 |
%) |
|
$ |
44,078 |
|
|
$ |
97,592 |
|
|
|
(54.8 |
%) |
|
Other income (loss) |
|
|
(25 |
) |
|
|
290 |
|
|
|
(108.6 |
%) |
|
|
175 |
|
|
|
510 |
|
|
|
(65.7 |
%) |
|
Total revenues |
|
|
21,956 |
|
|
|
49,672 |
|
|
|
(55.8 |
%) |
|
|
44,253 |
|
|
|
98,102 |
|
|
|
(54.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
|
14,095 |
|
|
|
36,669 |
|
|
|
(61.6 |
%) |
|
|
25,280 |
|
|
|
66,787 |
|
|
|
(62.1 |
%) |
|
Acquisition costs and other underwriting expenses |
|
|
10,507 |
|
|
|
20,438 |
|
|
|
(48.6 |
%) |
|
|
21,333 |
|
|
|
40,371 |
|
|
|
(47.2 |
%) |
|
Underwriting loss |
|
$ |
(2,646 |
) |
|
$ |
(7,435 |
) |
|
|
(64.4 |
%) |
|
$ |
(2,360 |
) |
|
$ |
(9,056 |
) |
|
|
(73.9 |
%) |
|
|
|
Quarters Ended June 30, |
|
|
Point |
|
|
Six Months Ended June 30, |
|
|
Point |
|
||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
|
|
76.1 |
% |
|
|
61.9 |
% |
|
|
14.2 |
|
|
|
70.9 |
% |
|
|
63.0 |
% |
|
|
7.9 |
|
|
Prior accident year |
|
|
(12.0 |
%) |
|
|
12.3 |
% |
|
|
(24.3 |
) |
|
|
(13.5 |
%) |
|
|
5.4 |
% |
|
|
(18.9 |
) |
|
Calendar year loss ratio |
|
|
64.1 |
% |
|
|
74.2 |
% |
|
|
(10.1 |
) |
|
|
57.4 |
% |
|
|
68.4 |
% |
|
|
(11.0 |
) |
|
Expense ratio |
|
|
47.8 |
% |
|
|
41.4 |
% |
|
|
6.4 |
|
|
|
48.4 |
% |
|
|
41.4 |
% |
|
|
7.0 |
|
|
Combined ratio |
|
|
111.9 |
% |
|
|
115.6 |
% |
|
|
(3.7 |
) |
|
|
105.8 |
% |
|
|
109.8 |
% |
|
|
(4.0 |
) |
49
GLOBAL INDEMNITY GROUP, LLC
Reconciliation of non-GAAP financial ratios
The table below reconciles the non-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio. The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within Exited Lines may be obscured by prior accident year adjustments. These non-GAAP measures or ratios should not be considered as a substitute for its most directly comparable GAAP measure or ratio and does not reflect the overall underwriting profitability of the Company.
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||||
|
(Dollars in thousands) |
|
Losses |
|
|
Loss Ratio |
|
|
Losses |
|
|
Loss Ratio |
|
|
Losses |
|
|
Loss Ratio |
|
|
Losses |
|
|
Loss Ratio |
|
||||||||
|
Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non catastrophe property losses and ratio excluding the effect of prior accident year (1) |
|
$ |
9,229 |
|
|
|
55.5 |
% |
|
$ |
22,271 |
|
|
|
51.6 |
% |
|
$ |
19,108 |
|
|
|
55.8 |
% |
|
$ |
41,608 |
|
|
|
48.9 |
% |
|
Effect of prior accident year |
|
|
(2,754 |
) |
|
|
(16.6 |
%) |
|
|
(277 |
) |
|
|
(0.6 |
%) |
|
|
(4,291 |
) |
|
|
(12.5 |
%) |
|
|
1,764 |
|
|
|
2.1 |
% |
|
Non catastrophe property losses and ratio (2) |
|
$ |
6,475 |
|
|
|
39.0 |
% |
|
$ |
21,994 |
|
|
|
51.0 |
% |
|
$ |
14,817 |
|
|
|
43.3 |
% |
|
$ |
43,372 |
|
|
|
51.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catastrophe losses and ratio excluding the effect of prior accident year (1) |
|
$ |
5,189 |
|
|
|
31.2 |
% |
|
$ |
4,958 |
|
|
|
11.5 |
% |
|
$ |
7,262 |
|
|
|
21.2 |
% |
|
$ |
13,150 |
|
|
|
15.5 |
% |
|
Effect of prior accident year |
|
|
191 |
|
|
|
1.1 |
% |
|
|
6,298 |
|
|
|
14.6 |
% |
|
|
(1,165 |
) |
|
|
(3.4 |
%) |
|
|
4,691 |
|
|
|
5.5 |
% |
|
Catastrophe losses and ratio (2) |
|
$ |
5,380 |
|
|
|
32.3 |
% |
|
$ |
11,256 |
|
|
|
26.1 |
% |
|
$ |
6,097 |
|
|
|
17.8 |
% |
|
$ |
17,841 |
|
|
|
21.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property losses and ratio excluding the effect of prior accident year (1) |
|
$ |
14,418 |
|
|
|
86.7 |
% |
|
$ |
27,229 |
|
|
|
63.1 |
% |
|
$ |
26,370 |
|
|
|
77.0 |
% |
|
$ |
54,758 |
|
|
|
64.4 |
% |
|
Effect of prior accident year |
|
|
(2,563 |
) |
|
|
(15.4 |
%) |
|
|
6,021 |
|
|
|
14.0 |
% |
|
|
(5,456 |
) |
|
|
(15.9 |
%) |
|
|
6,455 |
|
|
|
7.6 |
% |
|
Total property losses and ratio (2) |
|
$ |
11,855 |
|
|
|
71.3 |
% |
|
$ |
33,250 |
|
|
|
77.1 |
% |
|
$ |
20,914 |
|
|
|
61.1 |
% |
|
$ |
61,213 |
|
|
|
72.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total casualty losses and ratio excluding the effect of prior accident year (1) |
|
$ |
2,307 |
|
|
|
43.0 |
% |
|
$ |
3,358 |
|
|
|
53.8 |
% |
|
$ |
4,880 |
|
|
|
49.6 |
% |
|
$ |
6,764 |
|
|
|
53.9 |
% |
|
Effect of prior accident year |
|
|
(67 |
) |
|
|
(1.3 |
%) |
|
|
61 |
|
|
|
1.0 |
% |
|
|
(514 |
) |
|
|
(5.2 |
%) |
|
|
(1,190 |
) |
|
|
(9.5 |
%) |
|
Total casualty losses and ratio (2) |
|
$ |
2,240 |
|
|
|
41.8 |
% |
|
$ |
3,419 |
|
|
|
54.7 |
% |
|
$ |
4,366 |
|
|
|
44.4 |
% |
|
$ |
5,574 |
|
|
|
44.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1) |
|
$ |
16,725 |
|
|
|
76.1 |
% |
|
$ |
30,587 |
|
|
|
61.9 |
% |
|
$ |
31,250 |
|
|
|
70.9 |
% |
|
$ |
61,522 |
|
|
|
63.0 |
% |
|
Effect of prior accident year |
|
|
(2,630 |
) |
|
|
(12.0 |
%) |
|
|
6,082 |
|
|
|
12.3 |
% |
|
$ |
(5,970 |
) |
|
|
(13.5 |
%) |
|
|
5,265 |
|
|
|
5.4 |
% |
|
Total net losses and loss adjustment expense and total loss ratio (2) |
|
$ |
14,095 |
|
|
|
64.1 |
% |
|
$ |
36,669 |
|
|
|
74.2 |
% |
|
$ |
25,280 |
|
|
|
57.4 |
% |
|
$ |
66,787 |
|
|
|
68.4 |
% |
|
(1) |
Non-GAAP measure / ratio |
|
(2) |
Most directly comparable GAAP measure / ratio |
Premiums
See “Result of Operations” above for a discussion on consolidated premiums.
50
GLOBAL INDEMNITY GROUP, LLC
Other Income (Loss)
The Company recognized a loss of less than $0.1 million and income of $0.3 million for the quarters ended June 30, 2022 and 2021, respectively, and income of $0.2 million and income of $0.5 million for the six months ended June 30, 2022 and 2021, respectively. Other income is primarily comprised of fee income net of bank fees.
Loss Ratio
The current accident year losses and loss ratio is summarized as follows:
|
|
|
Quarters Ended June 30, |
|
|
% |
|
|
Six Months Ended June 30, |
|
|
% |
|
||||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Property losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
|
$ |
9,229 |
|
|
$ |
22,271 |
|
|
|
(58.6 |
%) |
|
$ |
19,108 |
|
|
$ |
41,608 |
|
|
|
(54.1 |
%) |
|
Catastrophe |
|
|
5,189 |
|
|
|
4,958 |
|
|
|
4.7 |
% |
|
|
7,262 |
|
|
|
13,150 |
|
|
|
(44.8 |
%) |
|
Property losses |
|
|
14,418 |
|
|
|
27,229 |
|
|
|
(47.0 |
%) |
|
|
26,370 |
|
|
|
54,758 |
|
|
|
(51.8 |
%) |
|
Casualty losses |
|
|
2,307 |
|
|
|
3,358 |
|
|
|
(31.3 |
%) |
|
|
4,880 |
|
|
|
6,764 |
|
|
|
(27.9 |
%) |
|
Total accident year losses |
|
$ |
16,725 |
|
|
$ |
30,587 |
|
|
|
(45.3 |
%) |
|
$ |
31,250 |
|
|
$ |
61,522 |
|
|
|
(49.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended June 30, |
|
|
Point |
|
|
Six Months Ended June 30, |
|
|
Point |
|
||||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Current accident year loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
|
|
55.5 |
% |
|
|
51.6 |
% |
|
|
3.9 |
|
|
|
55.8 |
% |
|
|
48.9 |
% |
|
|
6.9 |
|
|
Catastrophe |
|
|
31.2 |
% |
|
|
11.5 |
% |
|
|
19.7 |
|
|
|
21.2 |
% |
|
|
15.5 |
% |
|
|
5.7 |
|
|
Property loss ratio |
|
|
86.7 |
% |
|
|
63.1 |
% |
|
|
23.6 |
|
|
|
77.0 |
% |
|
|
64.4 |
% |
|
|
12.6 |
|
|
Casualty loss ratio |
|
|
43.0 |
% |
|
|
53.8 |
% |
|
|
(10.8 |
) |
|
|
49.6 |
% |
|
|
53.9 |
% |
|
|
(4.3 |
) |
|
Total accident year loss ratio |
|
|
76.1 |
% |
|
|
61.9 |
% |
|
|
14.2 |
|
|
|
70.9 |
% |
|
|
63.0 |
% |
|
|
7.9 |
|
The current accident year non-catastrophe property loss ratio increased by 3.9 points during the quarter ended June 30, 2022 as compared to the same period in 2021 recognizing higher claims frequency in Farm, Ranch & Stable business lines partially offset by lower claims frequency in the specialty property lines and lower claims severity in the property brokerage lines.
The current accident year non-catastrophe property loss ratio increased by 6.9 points during six months ended June 30, 2022 as compared to the same period in 2021 due to a higher loss ratio in the specialty property lines as well as higher claims frequency and severity in the Farm, Ranch & Stable business lines.
The current accident year catastrophe loss ratio increased by 19.7 points during the quarter ended June 30, 2022 as compared to the same period in 2021 recognizing higher claims frequency and severity in the specialty property lines and Farm, Ranch & Stable business lines.
The current accident year catastrophe loss ratio increased by 5.7 points during the six months ended June 30, 2022 as compared to the same period in 2021 reflecting higher claims severity in the Farm, Ranch & Stable business lines partially offset by lower claims frequency and severity in the property brokerage lines.
The current accident year casualty loss ratio improved by 10.8 points during the quarter ended June 30, 2022 as compared to the same period in 2021 which reflects that the premium has been running off and is down to $0.9 million in net earned premiums for the specialty property lines, property brokerage, and property and catastrophe reinsurance treaties in the quarter as well as lower claims frequency in Farm, Ranch & Stable business lines.
The current accident year casualty loss ratio improved by 4.3 points during the six months ended June 30, 2022 as compared to the same period in 2021 primarily due to lower claims severity in the Farm, Ranch & Stable business lines partially offset by higher claims severity in the specialty property lines.
51
GLOBAL INDEMNITY GROUP, LLC
The calendar year loss ratio for the quarter and six months ended June 30, 2022 includes a decrease of $2.6 million, or 12.0 percentage points, and a decrease of $6.0 million, or 13.5 percentage points, respectively related to reserve development on prior accident years. The calendar year loss ratio for the quarter and six months ended June 30, 2021 includes an increase of $6.1 million, or 12.3 percentage points, and an increase of $5.3 million, or 5.4 percentage points, respectively, related to reserve development on prior accident years. Please see Note 7 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.
Expense Ratio
The expense ratio for the Company’s Exited Lines increased by 6.4 points from 41.4% for the quarter ended June 30, 2021 to 47.8% for the quarter ended June 30, 2022. The expense ratio for the Company’s Exited Lines increased by 7.0 points from 41.4% for the six months ended June 30, 2021 to 48.4% for the six months ended June 30, 2022. The increase in the expense ratio is primarily due to the reduction in earned premiums resulting from the runoff of lines of business that the Company is no longer writing.
COVID-19
There is continued risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Exited Lines’ policies, or other conditions included in these policies that would otherwise preclude coverage
COVID-19’s lasting impacts could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect the Exited Lines’ business, financial condition, and results of operation.
Unallocated Corporate Items
The Company’s fixed income portfolio, excluding cash, continues to maintain high quality with an A average rating and a duration of 1.7 years.
Net Investment Income
|
|
|
Quarters Ended June 30, |
|
|
% |
|
|
Six Months Ended June 30, |
|
|
% |
|
||||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Gross investment income (1) |
|
$ |
2,541 |
|
|
$ |
11,268 |
|
|
|
(77.4 |
%) |
|
$ |
9,737 |
|
|
$ |
21,817 |
|
|
|
(55.4 |
%) |
|
Investment expenses |
|
|
(611 |
) |
|
|
(635 |
) |
|
|
(3.8 |
%) |
|
|
(1,215 |
) |
|
|
(1,348 |
) |
|
|
(9.9 |
%) |
|
Net investment income |
|
$ |
1,930 |
|
|
$ |
10,633 |
|
|
|
(81.8 |
%) |
|
$ |
8,522 |
|
|
$ |
20,469 |
|
|
|
(58.4 |
%) |
|
(1) |
Excludes realized gains and losses |
Gross investment income decreased by 77.4% and 55.4% for the quarter and six months ended June 30, 2022 as compared to the same periods in 2021 primarily due to decreased returns from alternative investments and a decrease in dividend income as a result of the liquidation of the Company’s common stock portfolio during the first quarter of 2022. The proceeds from the sale of the common stock portfolio as well as other proceeds were used to retire the 2047 Notes in April 2022.
Investment expenses decreased by 3.8% and 9.9% for the quarter and six months ended June 30, 2022 as compared to the same periods in 2021 due to decreased investment management expenses as a result of the liquidation of the Company’s common stock portfolio during the year.
At June 30, 2022, the Company held agency mortgage-backed securities with a market value of $3.8 million. Excluding the agency mortgage-backed securities, the average duration of the Company’s fixed maturities portfolio was 1.8 years as of June 30, 2022, compared with 4.7 years as of June 30, 2021. Including cash and short-term investments, the average duration of the Company’s fixed maturities portfolio, excluding agency mortgage-backed securities, was 1.7 years and 4.5 years as of June 30, 2022 and June 30, 2021, respectively. Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration. The Company’s embedded book yield on its fixed maturities, not including cash, was 2.7% as of June 30, 2022, compared to 2.3% as of June 30, 2021. The embedded book yield on the $32.4 million of
52
GLOBAL INDEMNITY GROUP, LLC
taxable municipal bonds in the Company’s portfolio, was 3.1% at June 30, 2022, compared to an embedded book yield of 3.0% on the Company’s taxable municipal bonds of $64.5 million at June 30, 2021.
Net Realized Investment Gains (Losses)
The components of net realized investment gains (losses) for the quarters and six months ended June 30, 2022 and 2021 were as follows:
|
|
|
Quarters Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Equity securities |
|
$ |
(2,415 |
) |
|
$ |
3,395 |
|
|
$ |
(3,760 |
) |
|
$ |
7,763 |
|
|
Fixed maturities |
|
|
(8,637 |
) |
|
|
453 |
|
|
|
(11,876 |
) |
|
|
(706 |
) |
|
Derivatives |
|
|
1,816 |
|
|
|
(15 |
) |
|
|
6,540 |
|
|
|
595 |
|
|
Other-than-temporary impairment losses |
|
|
(680 |
) |
|
|
— |
|
|
|
(26,205 |
) |
|
|
— |
|
|
Net realized investment gains (losses) |
|
$ |
(9,916 |
) |
|
$ |
3,833 |
|
|
$ |
(35,301 |
) |
|
$ |
7,652 |
|
In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio. The Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell. Most of the proceeds from the sale of these securities were reinvested into fixed income investments with maturities of two years and less.
See Note 2 of the notes to the consolidated financial statements in Item 1 of Part I of this report for an analysis of total investment return on a pre-tax basis for the quarters and six months ended June 30, 2022 and 2021.
Corporate and Other Operating Expenses
Corporate and other operating expenses consist of outside legal fees, other professional fees, directors’ fees, management fees & advisory fees, salaries and benefits for holding company personnel, development costs for new products, and taxes incurred which are not directly related to operations. Corporate and other operating expenses were $3.0 million and $6.3 million during the quarters ended June 30, 2022 and 2021, respectively, and $7.7 million and $10.6 million during the six months ended June 30, 2022 and 2021, respectively. The decrease in corporate expenses was primarily due to the Company receiving an employee retention credit under the CARES Act of $2.7 million. This credit, which reduced compensation cost, was received in May 2022.
Interest Expense
Interest expense was $0.4 million and $2.7 million during the quarters ended June 30, 2022 and 2021, respectively, $3.0 million and $5.3 million during the six months ended June 30, 2022 and 2021, respectively. The reduction in interest expense was due to the redemption of the 2047 Notes on April 15, 2022.
Income Tax Benefit
Income tax benefit was $0.6 million for the quarter ended June 30, 2022 compared with income tax expense of $0.8 million for the quarter ended June 30, 2021. The increase in the income tax benefit is primarily due to investment losses incurred by the Company’s U.S. subsidiaries during the quarter ended June 30, 2022.
Income tax benefit was $4.0 million for the six months ended June 30, 2022 compared with an income tax expense of $0.6 million for the six months ended June 30, 2021. The increase in the income tax benefit is primarily due to investment losses incurred by the Company’s U.S. subsidiaries during the six months ended June 30, 2021.
See Note 6 of the notes to the consolidated financial statements in Item 1 of Part I of this report for a comparison of income tax between periods.
53
GLOBAL INDEMNITY GROUP, LLC
Net Income (Loss)
The factors described above resulted in a net loss of $12.2 million and net income of $6.4 million for the quarters ended June 30, 2022 and 2021, respectively and a net loss of $26.9 million and net income of $11.9 million for the six months ended June 30, 2022 and 2021, respectively.
Liquidity and Capital Resources
Sources and Uses of Funds
Global Indemnity Group, LLC is a holding company. Its principal asset is its ownership of the shares of its direct and indirect subsidiaries, including those of its insurance companies: United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, Penn-Patriot Insurance Company, and American Reliable Insurance Company.
Global Indemnity Group, LLC’s short term and long term liquidity needs include but are not limited to the payment of corporate expenses, debt service payments, distributions to shareholders, and share repurchases. The Company also has commitments in the form of operating leases, commitments to fund limited liability investments, and unpaid losses and loss expense obligations. In order to meet its short term and long term needs, Global Indemnity Group, LLC’s principal sources of cash includes investment income, dividends from subsidiaries, other permitted disbursements from its direct and indirect subsidiaries, reimbursement for equity awards granted to employees and intercompany borrowings. The principal sources of funds at these direct and indirect subsidiaries include underwriting operations, investment income, proceeds from sales and redemptions of investments, capital contributions, intercompany borrowings, and dividends from subsidiaries. Funds are used principally by these operating subsidiaries to pay claims and operating expenses, to make debt payments, fund margin requirements on interest rate swap agreements, to purchase investments, and to make distribution payments. In addition, the Company periodically reviews opportunities related to business acquisitions and as a result, liquidity may be needed in the future.
GBLI Holdings, LLC is a holding company which is a wholly-owned subsidiary of Penn-Patriot Insurance Company. GBLI Holdings, LLC’s principal asset is its ownership of the shares of its direct and indirect subsidiaries which include United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, and American Reliable Insurance Company. GBLI Holdings, LLC is dependent on dividends from its subsidiaries to meet its debt obligations as well as corporate expense obligations.
As of June 30, 2022, the Company also had future funding commitments of $31.2 million related to investments that are currently in their harvest period and it is unlikely that a capital call will be made.
The future liquidity of both Global Indemnity Group, LLC and GBLI Holdings, LLC is dependent on the ability of its subsidiaries to pay dividends. Global Indemnity Group, LLC and GBLI Holdings, LLC’s insurance companies are restricted by statute as to the amount of dividends that they may pay without the prior approval of regulatory authorities. The dividend limitations imposed by state laws are based on the statutory financial results of each insurance company that are determined by using statutory accounting practices that differ in various respects from accounting principles used in financial statements prepared in conformity with GAAP. See “Regulation - Statutory Accounting Principles” in Item 1 of Part I of the Company’s 2021 Annual Report on Form 10-K. Key differences relate to, among other items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes. See Note 21 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2021 Annual Report on Form 10-K for further information on dividend limitations related to the Insurance Companies. In April, 2022, the United National insurance companies, Penn-America insurance companies, and American Reliable Insurance Company paid dividends in the amount of $4.5 million, $7.5 million, and $22.5 million, respectively.
Cash Flows
Sources of operating funds consist primarily of net written premiums and investment income. Funds are used primarily to pay claims and operating expenses and to purchase investments. As a result of the distribution policy, funds may also be used to pay distributions to shareholders of the Company.
54
GLOBAL INDEMNITY GROUP, LLC
The Company’s reconciliation of net income (loss) to net cash provided by operations is generally influenced by the following:
|
|
• |
the fact that the Company collects premiums, net of commissions, in advance of losses paid; |
|
|
• |
the timing of the Company’s settlements with its reinsurers; and |
|
|
• |
the timing of the Company’s loss payments. |
Net cash provided by operating activities was $18.5 million and $47.5 million for the six months ended June 30, 2022 and 2021, respectively. The decrease in operating cash flows of approximately $29.0 million from the prior year was primarily a net result of the following items:
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|||||
|
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
|
Net premiums collected |
|
$ |
276,206 |
|
|
$ |
308,353 |
|
|
$ |
(32,147 |
) |
|
Net losses paid |
|
|
(136,756 |
) |
|
|
(148,453 |
) |
|
|
11,697 |
|
|
Underwriting and corporate expenses |
|
|
(130,981 |
) |
|
|
(126,144 |
) |
|
|
(4,837 |
) |
|
Net investment income |
|
|
15,116 |
|
|
|
18,952 |
|
|
|
(3,836 |
) |
|
Interest paid |
|
|
(5,126 |
) |
|
|
(5,220 |
) |
|
|
94 |
|
|
Net cash provided by operating activities |
|
$ |
18,459 |
|
|
$ |
47,488 |
|
|
$ |
(29,029 |
) |
See the consolidated statements of cash flows in the consolidated financial statements in Item 1 of Part I of this report for details concerning the Company’s investing and financing activities.
Liquidity
Sale of Renewal Rights related to Farm, Ranch & Stable and Sale of American Reliable Insurance Company
On August 8, 2022, the Company sold the renewal rights related to all business lines within its Farm, Ranch & Stable segment for business written on or after August 8, 2022 to Everett Cash Mutual Insurance Company. The Company will retain the unearned premium reserves for business written prior to August 8, 2022.
Everett Cash Mutual Insurance Company is also acquiring the Company’s wholly owned subsidiary, American Reliable Insurance Company, for book value which is expected to be $10.0 million at the time of closing. The transaction is subject to receiving regulatory approval which is expected to be received during the 4th quarter of 2022. Under the agreements, total consideration to be paid by Everett Cash Mutual Insurance Company is $40 million.
COVID-19
The Company’s liquidity could be negatively impacted by the cancellation, delays, or non-payment of premiums related to the ongoing COVID-19 pandemic and its lasting impacts. There is continued risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Commercial Specialty and Farm, Ranch & Stable policies, or other conditions included in policies that would otherwise preclude coverage which would negatively impact liquidity. In addition, the liquidity of the Company’s investment portfolio could be negatively impacted by disruption experienced in global financial markets. Management is taking actions it considers prudent to minimize the impact on the Company’s liquidity. However, given the ongoing uncertainty surrounding the duration, magnitude and geographic reach of COVID-19, the Company is regularly evaluating the impact of COVID-19 on its liquidity.
Distributions
The Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 21, 2022 and June 20, 2022. Distributions paid to common shareholders were $7.3 million during the six months ended June 30, 2022. In addition, distributions of $0.2 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the six months ended June 30, 2022.
55
GLOBAL INDEMNITY GROUP, LLC
Investment Portfolio
Due to shortening duration, significantly more of the investment portfolio will mature annually.
On May 18th, 2022, the Company provided the Credit Fund, LLC with formal withdrawal requests in full. As outlined in the fund’s offering documents, redemption proceeds are wired to the account of record within 30 days of June 30, 2022. Proceeds of $99.6 million are expected to be invested into fixed income investments with maturities of two years and less.
Other than the items discussed in the preceding paragraphs, there have been no material changes to the Company’s liquidity during the quarter and six months ended June 30, 2022. Please see Item 7 of Part II in the Company’s 2021 Annual Report on Form 10-K for information regarding the Company’s liquidity.
Capital Resources
Investment Portfolio
In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio. The Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell. Most of the proceeds from the sale of these securities are being reinvested into fixed income investments with maturities of two years and less.
Redemption of Debt
On April 15, 2022, the Company redeemed the entire $130 million in aggregate principal amount of the outstanding 2047 Notes plus accrued and unpaid interest on the 2047 Notes redeemed to, but not including the Redemption Date of April 15, 2022. The funds to redeem the debt were primarily obtained through the sale of the Company’s equity portfolio in the amount of $75.9 million, $32.0 million in dividends from insurance company subsidiaries, $18.4 million from distributions received from private equity investments, and the remainder from its subsidiary, GBLI Holdings, LLC.
Intercompany Pooling Arrangement
The Company’s U.S. insurance company participate in an intercompany pooling arrangement whereby premiums, losses, and expenses are shared pro rata amongst the U.S. insurance companies. American Reliable currently comprises 30% of the pool. Prior to the sale of American Reliable, the intercompany pooling agreement will be amended. American Reliable will be removed from the pool and its 30% participation in the business and capital will be allocated to the Company’s remaining five insurance companies.
For additional information on the Sale of American Reliable, please see the liquidity section above.
Other than the item discussed in the preceding paragraphs, there have been no material changes to the Company’s capital resources during the quarter and six months ended June 30, 2022. Please see Item 7 of Part II in the Company’s 2021 Annual Report on Form 10-K for information regarding the Company’s capital resources.
Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report may include forward-looking statements within the meaning of Section 21E of the Security Exchange Act of 1934, as amended, that reflect the Company’s current views with respect to future events and financial performance. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, expectations or
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GLOBAL INDEMNITY GROUP, LLC
consequences of identified transactions or natural disasters, and statements about the future performance, operations, products and services of the companies.
The Company’s business and operations are and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. See “Risk Factors” in Item 1A of Part I in the Company’s 2021 Annual Report on Form 10-K for risks, uncertainties and other factors that could cause actual results and experience to differ from those projected. The Company’s forward-looking statements speak only as of the date of this report or as of the date they were made. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
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Item 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
For the quarter ended June 30, 2022, risk assets were challenged with both equities and bonds moving significantly lower. Global equities fell approximately 15.4% with U.S. equities underperforming, losing approximately 16.1%. U.S. fixed income lost approximately 4.7% with average spreads moving wider during the quarter. Heightened volatility in all markets remained the theme in June as ten-year treasury yields rose significantly during the month only to end slightly higher at the end of June. The increase in rates was triggered by an upside surprise in inflation data, but the combination of decreasing consumer confidence and rising growth concerns ultimately resulted in interest rates falling and spreads across all sectors widening. While the 75-basis-point increase by the Federal Reserve was anticipated, there is growing concern that an aggressive rate rise will result in a recession. Chair Powell continues to point to the strength of the labor market as support for the economy that will allow the Federal Reserve to focus on regaining price stability.
The Company’s investment grade fixed income portfolio continues to maintain high quality with an A average rating and a duration of 1.7 years. Portfolio purchases were focused within US Treasury, and investment grade credit securities. These purchases were funded primarily through cash inflows, sales of US Treasury, MBS, and investment grade credit securities, as well as maturities and paydowns. During the second quarter, the portfolio’s allocation to US Treasuries and investment grade credit increased, while the portfolio’s exposure to MBS securities decreased.
Other than the changes described in the preceding paragraph, there have been no other material changes to the Company’s market risk since December 31, 2021. Please see Item 7A of Part II in the Company’s 2021 Annual Report on Form 10-K for information regarding the Company’s market risk.
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Item 4. |
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2022. Based upon that evaluation, and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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GLOBAL INDEMNITY GROUP, LLC
PART II-OTHER INFORMATION
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Item 1. |
Legal Proceedings |
The Company is, from time to time, involved in various legal proceedings in the ordinary course of business. The Company maintains insurance and reinsurance coverage for risks in amounts that it considers adequate. However, there can be no assurance that the insurance and reinsurance coverage that the Company maintains is sufficient or will be available in adequate amounts or at a reasonable cost. The Company does not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on its business, results of operations, cash flows, or financial condition.
There is a greater potential for disputes with reinsurers who are in runoff. Some of the Company’s reinsurers’ have operations that are in runoff, and therefore, the Company closely monitors those relationships. The Company anticipates that, similar to the rest of the insurance and reinsurance industry, it will continue to be subject to litigation and arbitration proceedings in the ordinary course of business.
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Item 1A. |
Risk Factors |
The Company’s results of operations and financial condition are subject to numerous risks and uncertainties described in Item 1A of Part I in the Company’s 2021 Annual Report on Form 10-K, filed with the SEC on March 16, 2022. The risk factors identified therein have not materially changed.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
The Company’s Share Incentive Plan allows employees to surrender the Company’s class A common shares as payment for the tax liability incurred upon the vesting of restricted stock. There were 11,173 shares and 15,954 shares surrendered by the Company’s employees during quarter and six months ended June 30, 2022, respectively. All class A common shares surrendered by the Company’s employees are held as treasury stock and recorded at cost until formally retired.
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Item 3. |
Defaults upon Senior Securities |
None.
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Item 4. |
Mine Safety Disclosures |
None.
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Item 5. |
Other Information |
None.
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GLOBAL INDEMNITY GROUP, LLC
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Item 6. |
Exhibits |
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31.1+ |
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31.2+ |
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32.1+ |
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32.2+ |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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+ |
Filed or furnished herewith, as applicable. |
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GLOBAL INDEMNITY GROUP, LLC
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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GLOBAL INDEMNITY GROUP, LLC |
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Registrant |
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Dated: August 9, 2022 |
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By: |
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/s/ Thomas M. McGeehan |
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Thomas M. McGeehan |
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Chief Financial Officer |
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(Authorized Signatory and Principal Financial and Accounting Officer) |
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