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Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Global Indemnity Group Q3 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn today’s call over to Steve Reis, Head of Investor Relations. Please go ahead sir.

Steve Reis: Thank you, Sunita. As a reminder, today’s conference call is being recorded and some remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including without limitation, beliefs, expectations or estimates. We caution you that such forward-looking statements should not be regarded as representations by us that the future plans, estimates or expectations contemplated by us will, in fact, be achieved. Please refer to our annual report on Form 10-K and our other filings with the SEC for descriptions of the business environment in which we operate and important factors that may materially affect our results. Global Indemnity Group LLC is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

It’s now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive Officer of GBLI.

Jay Brown: Thank you, Steve. Good morning, and thank you all for joining us for the GBLI nine-months update on our 2024 financial and operational results. Consistent with our past call, I will first provide a few overview comments and our Chief Financial Officer, Brian Riley, will review the 2024 financial highlights for both our insurance operations and holding company. Let’s start with the big picture. Through nine months our team has continued to achieve results that are both consistent with our plan for 2024 and our building momentum to hit the long-term metrics, I had established great value for our shareholders. I will again remind you that our overall goals remain, first, growing our insurance business at a compound annual growth rate of at least 10%; second, achieve a combined ratio in the low 90s; and third, manage our insurance expenses to a competitive level of 36% to 37%.

The results for nine months got very close to what we reported last quarter for the first six months of 2024. Insurance revenue momentum as measured by gross premium improved on the pattern we saw in the second quarter with total premium, excluding terminated products, now up 12% through nine months. This is driven by the strong year-to-date 14% growth we saw in Wholesale Commercial, InsurTech and Assumed Reinsurance. I should note that momentum continues to build that these operations grew by 23% in the year-over-year numbers for the third quarter. Our efforts to turnaround our Specialty Products business remains a work in progress as gross premium excluding terminated products remain flat through nine months. Turning to insurance underwriting performance.

I am very delighted to report a nine-month combined ratio of 93.9 for the Penn-America segment. The good results continue for both our casualty and property coverages. Importantly, our rate increases continue to modestly exceed our estimates of inflation trends. Also, our estimates for the past year results remain stable with de minimis differences between calendar and accident year numbers. Our efforts to manage cat exposures for our Property segments, continues to be reflected in our modest losses from catastrophes in 2024. Total cat losses through nine-months are down roughly 35% from 2023. As a point of reference, gross losses for both the two most recent hurricanes, Helene and Milton, are both expected to each come in around $1.5 million.

We continue to manage expenses a bit higher than our long-term targets to provide the best possible service to our customers. As noted in the past quarters, we are maintaining Penn-Americas staff numbers just slightly below last year. As we grow our business at double-digit levels and keep expense growth at half of that growth rate. Our Penn-America expense ratio is starting to trend in the right direction with the nine-month ratio of 38.2% but we still have work to do in order to get this down to 37% or lower. A key factor in growing our business, achieving outstanding underwriting results, and achieving competitive expense levels is utilizing technology as an effective competitive weapon across all dimensions. As noted in the last few quarters, we’ve embarked on a multi-year effort to transform our technology platforms, transaction and information software and data storage.

These investments are well underway with about two-thirds of our servers move to the cloud from onsite location and our data stores now move to a cloud-based lakehouse. Our first transactional replacement application went live in September. And we’re now processing all aspects of our wholesale commercial excess liability policies in the new environment. We are targeting this year-end to add special events for wholesale commercial and to add all the remaining products for wholesale in next year. And additional first quarter module is focused on our underwriters and operations staff who will be receiving an integrated underwriting workstation to both improve the time to handle referral business, and to improve service for our agents. As Brian will review in more detail, our decision to go very short and high quality in our bond investment continued payoff with additional favorable comparisons to prior year in both our investment returns and an improvement in the market value of our investments.

Our Board continues to canvas with outside investment advisors to plan our return to a more conventional insurance investment portfolio as we hope to see some clarity in the investment horizon as we move past the election. As we now approach the year-end and are updating our plans for next year, I will note that I just completed the end of my second year as the CEO of Global. The first six months of my tenure were very choppy as we repositioned the company as the smaller but much more focused E&S company. However, as a result for the subsequent six quarters have emerged, the decision to focus on areas where we can excel is really beginning to pay dividends. I’m thankful that I had both the support of the Board to affect these changes and more importantly the superb efforts of the managers and staff at GBLI.

We’re all looking forward to 2025 and beyond as we enhance and implement both our tactical and strategic plan. Brian?

Brian Riley: Thank you, Jay. As the first nine months of tracking similarly to the first half of the year, my commentary will focus on results for the first nine months. Of course, we can answer any questions you may have on the third quarter numbers. Net income was $34.2 million, compared to $19.5 million in 2023. With the combination of net income and a $15 million increase in market value of the fixed income portfolio, book value per share increased from $47.53 at year-end to $49.88 at September 30. Including dividends paid in 2024 of a $1.05 per share, return to shareholders was 8.2% for the first nine months of 2024. For the first nine months of 2024 both underwriting and investment income performance again contributed to the improvement in net income.

Starting with investments. Investment income increased 18% to $46.3 million from a year ago. Actions taken since early 2022 to sell longer dated securities and shortened duration have translated into much higher current bulk yields. Cash flows of $50 million plus $625 million of fixed income securities, yielding 3.6% that matured during the year were reinvested in an average yield of 5.1%. Current book yield on the fixed income portfolio is now 4.6% with the duration of 0.8 years at September 30, 2024. Comparatively at the end of 2022 book yield was 3.5% with a duration of 1.7 years. At the end of 2021, the book yield was 2.2% with the duration of 3.2 years. The average credit quality of the fixed income portfolio remains at AA minus. As a result of the low duration we have a $480 million investments maturing in the fourth quarter of 2024.

As Jay mentioned, we’re actively looking opportunities to invest in longer duration maturities to further increase investment returns. And let’s move to underwriting performance for the first nine months of the year. We continue to see excellent results as the current accident year consolidated underwriting income was $15.3 million, compared to $5 million a year ago. This was driven by the consolidated accident year combined ratio of 95% in 2024 compared to 98.9% and 2023. The improvement in the current accident year underwriting income was due to strong performance in our core business, Penn-America. Penn-America’s accident year underwriting income was $17.6 million in 2024 compared to $9.7 million in 2023. As Jay noted, Penn-America’s accident year combined ratio was 93.9%, an improvement of 2.8 points from 96.7% in the same period last year.

The accident year loss ratio of 55.7% was 3.1 points better than 2023, mainly due to our performance of our property business. Property loss ratio improved to 51.9 million in 2024, compared to 58.9 in 2023 due to both non-catastrophe and catastrophe performance. The non-catastrophe loss ratio improved to 43.5 in 2024, compared to 47.2 in 2023, due to the decline in the number of large fire losses experienced in 2023. Cat loss ratio improved to 8.4% in 2024, compared to 11.8% in 2023. Cat losses declined to $10.3 million including Hurricane Helene at $1.5 million, compared to $12.6 million in 2023. The casualty loss ratio of 58.8%, remains in line with expectations. Unlike 2023, our non-core operations are having a diminished effect on our overall performance.

Our non-core operations net earned premium has dropped to $12.3 million in 2024, compared to $114.2 million in 2023, mainly from an assumed retrocession casualty treaty which was non-renewed at the end of 2022. Further, the runoff of our exit specialty property business resulted in no catastrophe losses in 2024, compared to $3.2 million in the same period last year. The overall underwriting loss was $2.3 million for 2024, compared to $4.7 million in 2023 in the non-core segment. Additionally, the combined ratio was 118.9% and the loss ratio was in line with expectations at 62.6%, but runoff expenses remained a bit high, as we wind down the number of smaller underwriting portfolios. As for the calendar year, underwriting income was $14.6 million in 2024, compared to $3.9 million in 2023.

And as for prior accident losses, book reserves remain solidly above current actuarial indications. Loss in LAE related to prior accident years was a modest reduction of $, the first nine months of the year. Turning to premiums, consolidated gross premiums was $294 million in 2024, compared to $332 million in 2023. This decrease is entirely due to the runoff business of our non-core segment which declined $58 million year-over-year, offset partially by the growth of Penn-America. Penn-America’s gross written premiums increased 7.4% to $297.8 million in 2024, compared to $277.4 million in 2023. Including terminated programs Penn-America’s gross written premiums grew from $262.8 million in 2023 to $293 million in 2024 a 12% increase. This is in line with our plan.

And as Jay mentioned earlier, growth of 14% was achieved in aggregate by our Wholesale Commercial and InsurTech and Assumed Reinsurance divisions. We had a little color on those divisions. Wholesale Commercial which focuses on main street small business through 7% to $186.9 million compared to $174.4 million in 2023. Excluding premium audit in these calendar year numbers the underlying policy of premium trends our best indicator of growth was 12% which includes rate increase of 9%. InsurTech which consists of vacant express and collectibles grew 17% to $41.9 million in 2024, compared to $35.7 million in 2023. Let me break down those two products for you. Vacant Express grew 26% to $29.8 million driven by organic growth from existing agents and agency appointments.

New technical automation implemented in the third quarter of 2023, for our vacant dwelling products including the expansion of monoline general liability product. contributed to the growth in premium our agents are producing. Collectibles, gross written premium of $12.1 million was slightly higher than 2023 by 1%. We’ve implemented some underwriting actions on catastrophe prone risk that has curtailed growth a bit but it’s expected to improve overall profitability. Our Assumed Reinsurance book of business continues to grow at a nice pace with our plan to see significant growth in 2024. We signed on seven new treaties this year. Gross written premiums grew to $19.3 million in 2024 compared to $8.4 million in 2023. And last specialty products, including the terminated products mentioned earlier was $44.9 million, slightly higher than 2023 by $0.7 million.

We signed on two new products in 2024 that contributed a $1 million for the first nine months of the year. We expect to have four new products signed on over the next 6 to 12 months. In closing, we are pleased with the first nine months of the year. Further, our outlook for the full year 2024 and 2025 is very positive. Penn-America continues strong current accident year performance. Booked reserves remains solidly above our current actuarial indications. We believe premium pricing is tracking with loss inflation. Discretionary capital which we consider to be the amount of consolidated equity in excess of that amount required to maintain the strongest levels of capital with our rating agencies increased to $240 million at September 30 2024 compared to $200 million at the end of last year, due to growth in equity and reduced capital needed for the runoff of non-core business.

This will support growth at Penn-America as well as other corporate opportunities. Lastly, our investment portfolio is well-positioned to invest in longer duration maturities and higher yields. Thank you. We will now take your questions.

Operator: [Operator Instructions] Your first question from the audio lines comes from the line of Ross Haberman with RLH Investments.

Ross Haberman: Good morning, gentlemen. Nice quarter. How are you? Could you talk about a little bit more about your discontinued lines? How much is left and what’s the timing in terms of get getting out of the rest of them? Thank you.

Jay Brown: Yes, our discontinued lines at this stage we have about a little less than $5 million of earned premium that needs to run off in the fourth quarter and ends in 2025. So by the end of 2025 we’d expect that to be fully earned and full runoff on the loss reserve side.

Ross Haberman: And just one follow-up are you actively looking for more lines to purchase or get into and if so sort of what categories? Thank you.

Jay Brown: We are constantly looking for new opportunities to expand our book of business. Right now what we’ve done for the past two years is create stability in our existing business and get it kind of working at its highest levels and we’re going to start in 2025 and 2026 adding additional products within those lines and perhaps expanding into lines we’re not currently in. And it’s an opportunistic, look at the world. It’s not something that we have decided in advance that we’re going to do a particular product, but we’re looking at things that we can evolve that are consistent with the approaches we have right now. So the answer is yes, we are looking but you won’t see anything probably for another six to nine months. I’d say that now and something will probably pop up next quarter but that’s kind of the timeframes that we’re going to start looking to expand upon what we’re doing today.

Ross Haberman: And just one last one, I apologize. Did you buy back any shares in the quarter? And if so how much?

Jay Brown: No, we did not.

Ross Haberman: Thank you.

Operator: [Operator Instructions]

Jay Brown: It doesn’t look like there’s any more questions. I guess, the numbers speak for themselves this quarter which is always a good thing. We look forward to talking to you again in three months.

Steve Reis: Thank you very much, everybody. If you have any questions before then, please reach out to me.

Operator: This concludes today’s call. Thank you for joining. You may now disconnect your lines.