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Operator: Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Global Indemnity Group First Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Evan Kasowitz, President of Belmont Holdings. You may begin.

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

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

Jay Brown: Thank you, Evan. Good morning, and thank you all for joining us for the GBLI first quarter update on our 2025 financial and operational results. Consistent with our past calls, I will first provide a few overview comments to put this quarter into context. Then our Chief Financial Officer, Brian Riley, will expand on this quarter’s financial numbers for our insurance and investment operations. When I joined the company 2.5 years ago, we established a tactical plan to maximize long-term value for our shareholders. First, we assessed our product offerings and then spent a few months refocusing our insurance business around those core products that had consistently been underwritten profitably. 2023 was a realignment and transition year as we underwent the expense restructuring to match our slim down product offerings and designed a long-term competitive IT architecture.

These efforts started to pay off in 2024 as we grew our core business consistent with our long-term goals, hit our underwriting targets and deployed the first components of our proprietary underwriting and policy management software. Our insurance operations have been building momentum to consistently achieve both long-term growth and profitability metrics to create value for our shareholders. This momentum continued in the first quarter as our underlying core growth, excluding terminated products, was 16%, and our underwriting results, excluding the California wildfires, slightly out-passed last year at a combined ratio of 94.8%. I will come back to the wildfires in a few moments, which obviously depressed the first quarter completely. Having stabilized our operations to achieve appropriate growth in underwriting results for existing products, we completed our Project Manifest strategic restructuring at the end of 2024 to facilitate efficient and controlled rapid product expansion.

We anticipate that this expansion will occur over the next few years, fueled by a mixture of both organic growth, incubated new teams, and coupled with some focused purchases of existing distribution operations. As noted on our last call, we have begun to build out our agency and insurance services group with the hiring of Praveen Reddy, and he has now started to recruit a few key additional members to facilitate execution of this next stage of growth for GBLI. Given the completion of the legal restructuring at the end of last year, this quarter marks the first time we will start to report on our numbers consistent with the new structure. As we have not yet added any new products or established new carrier relationships, the results in the short-term will not show any meaningful benefits from our new structure.

Brian will provide more detailed comments on both overall insurance operations and the first breakdown by the new segments. Turning to a couple of key performance indicators. Our rate increases and exposure growth continued to modestly exceed our estimates of social and price inflation trends. This will continue to be a key objective for 2025, given the ongoing uncertainty on the national price inflation front. Also our estimates for the prior year’s loss results remain stable with virtually no difference between calendar and accident year numbers. Our reserve margins also remained solid with no change in margin estimated at quarter-end from last year-end. Our ongoing efforts to manage catastrophe exposures for our property segments experienced a bit of a disappointment with a $15 million catastrophic loss from the recent Los Angeles wildfires.

Virtually all of our loss occurred in the Palisades fire with almost no loss in the Eaton fire. Given the industry impact of the L.A. fires, our result was modestly below our property share in California, albeit still very significant for a company of our size in a calendar quarter. Although we expect an annual average of $17 million from all catastrophic losses given our current book of business in a calendar year, the sheer magnitude of this catastrophic loss in the Palisades fire exceeded the different models we have used for wildfires in the more moderate wildfire risk locations like the Palisades in the L.A. Basin. Like most industry players, we are rethinking the validity of past severity model estimates for wildfire cat exposures and have already taken steps to further reduce our property exposures to wildfires.

We continue to manage internal expenses a bit higher than our long-term targets in order to provide the best service for our customers. As noted in the past quarters, we have maintained staff numbers just slightly below 2023 as we grow our business at double-digit levels and keep expense growth at half of those growth rates. While the expense ratio for the existing business is trending in the right direction with a 2024 ratio of approximately 38%, corporate expenses associated with Project Manifest and the build-out of our agency and insurance services staff escalated that ratio by a couple of points in the first quarter. Although we expect to make additional investments in people over the next couple of years, we still have not lost sight of our long-term expense objective, and we’ll continue to work to get expense ratios down to 37% or lower.

In conclusion, our reported numbers clearly fell short of our targets, but the underlying trends remain strong and point to significant shareholder value growth going forward. I’ll now turn the call over to Brian.

Brian Riley: Thank you, Jay. The net loss of $4 million for the first quarter includes losses from California wildfires of $15.6 million pretax or $12.2 million after tax. Excluding the California wildfire losses, net income would have been $8.2 million for the first quarter compared to $11.4 million in the same period last year. Including a $3.5 million of unrealized gains on the bond portfolio, comprehensive loss was $500,000 for the quarter. Book value per share decreased from $49.98 at year-end to $47.85 at March 31, driven by $500,000 of comprehensive loss, which equates to about $0.04, $5 million of dividends at $0.35 per share, with the remainder from stock compensation for the successful completion of Project Manifest.

Let me add a little color on investments and underwriting performance. Starting with investments. Investment income increased 2% to $14.8 million from a year ago. Cash flows and maturities of bonds totaling $685 million, yielding 4.75%, were reinvested at an average yield of 4.86%. Current book yield on the fixed income portfolio is now 4.5% with a duration of 1.3 years at March 31 compared to 4.4% and a duration of 0.8 years at December 31, 2024. For further comparison, the book yield was 2.2% with a duration of 3.2 years at December 31, 2021, before the company took action in early ’22 to sell longer-dated securities and shortened duration. The average credit quality of the fixed income portfolio remains at AA-. As a result of that low duration, we have $700 million of investments maturing in the remainder of 2025.

Overall, we are well positioned to take advantage of further opportunities to improve yield on the fixed income portfolio. As for underwriting performance, in the first quarter of ’25, we changed how we manage our segments, and we now have three segments, One, Agency and Insurance Services; two, Belmont Core; and three, Belmont Non-Core. Our new segment, Agency and Insurance Services, consists of our three agencies that have produced direct business, our technology company and our claim services company. The Agency and Insurance Services segment generated income on affiliated agreements of $1.8 million before tax for the quarter. Belmont Core, previously referred to as Penn-America, and Belmont Non-Core, previously referred to as simply Non-Core, makes up our insurance company operations.

Since the Belmont Non-Core business is having a diminishing impact on overall results, I will comment on consolidated underwriting results. Current accident year loss was $10.3 million for the first quarter due to the previously mentioned California wildfire losses of $15.6 million. Excluding California wildfires, underwriting income would have been in line with ’24 at $5.3 million in ’25. The consolidated accident year combined ratio was 111.5% in ’25. Excluding the wildfires, it was 94.8% compared to 94.9% in ’24. The current accident year expense ratio was 40% for ’25 compared to 39.6% in 2024. Expenses remain elevated, as Jay mentioned, here in the short run as we run off our noncore businesses and invest in our new agency operations. Longer term, we expect improvement in the expense ratio targeting 37%.

As Jay mentioned, our calendar year results are virtually the same as our accident year results. Looking at prior year losses, book reserves remain solidly above current actuarial indications. Turning to premiums. Consolidated gross premiums increased 6% to $98.7 million in ’25 compared to $93.5 million in ’24. Excluding terminated products, gross written premiums increased 16% to $98.4 million in ’25 compared to $85 million in 2024. Let me add a little color at the divisional level, starting with Wholesale Commercial, which focuses on Main Street small business, grew 6% to $64.9 million compared to $61.1 million in ’24. Excluding premium audit in these calendar year numbers, the underlying policy of premium trends, our best indicator of growth was 14% and includes rate increases of 5%.

InsurTech, which consists of Vacant Express and Collectibles, grew 20% to $15 million in ’25 compared to $12.5 million in ’24. First, Vacant Express grew 23% and $10.9 million, driven by organic growth from existing agents and agency appointments. Collectibles grew 12% to $4.1 million compared to $3.6 million and includes rate increases of 4%. Our assumed business gross written premiums grew to $10.9 million in ’25 compared to $2.9 million in ’24, resulting from eight new treaties added during ’24 and one new treaty added here in ’25. Specialty Products, excluding terminated products, was $7.6 million compared to $8.6 million in ’24. We signed on three new products in ’25 that are expected to contribute premiums starting in the second quarter of ’25.

Despite the impacts of the California wildfires, our outlook for 2025 is very positive. We continue to expect premium growth of at least 10%. Our underwriting performance for the last three quarters of ’25 is expected to improve compared to the same period in ’24. Booked reserves remain solidly above our actuarial indications. We believe premium pricing is continuing to track with loss inflation. Discretionary capital, which we consider the amount of consolidated equity in excess of that required to maintain the strongest levels with our A rating agencies is $251 million at March 31. And as Jay noted, this will support the efforts to invest in the growth of Penn-America underwriters. Lastly, our investment portfolio is well positioned to invest in longer term, longer duration maturities at higher yields.

Thank you. We will now take your questions.

Operator: [Operator Instructions] And our first question comes from the line of Ross Haberman with RLH Investments. Your line is open.

Ross Haberman: Good morning, gentlemen. Thanks for taking the call. Could you go back to the expense ratio you said, do you think we can get down below 40% in the next two or three quarters? Or is that going to be a 2026 event? Thank you.

Brian Riley: I would say long-term, that 37% we targeted is into that ’26, ’27 range. I would expect this year to be in that 39% to 40% range this year.

Ross Haberman: And just one technical question. I saw the shares were up by roughly 0.5 million shares. I guess you call it A2. Could you explain that? What — how did that come about? And where were those issued? Thank you.

Jay Brown: Sure. There was 550,000 A2 shares issued to Fox Paine as a fee for their advice and counsel and implementation of Project Manifest at the end of last year. Those shares were issued in the first quarter, which is why they are appearing for the first time this quarter.

Ross Haberman: And there — and the voting rights to that are similar to the A, more? Just give us how — why were they characterized as A2 as opposed to just regular A?

Jay Brown: They have a different form in terms of they have voting rights and dividend rights similar to A shares. But the difference is they only have value in the event there is a value creation greater than the existing book value at the time they were issued. And it’s a little complicated, but essentially, if the company were to be sold, you have to achieve — everybody else has to get paid the amount first and then A2 gets paid after that. So it’s a form of — it’s kind of a combination of a restricted stock and an option, and that you have to hit a certain target in order for the value to be created.

Ross Haberman: Thank you. Wonderful.

Operator: And our next question comes from the webcast from [Joel Straka]. Book value per share declined from $49.98 at December 31 to $47.85 at March 31, primarily because you increased your common shares outstanding by 4.4% in one quarter by issuing stock compensation to the Board Chairman’s private equity firm. Can you explain why you’re issuing stock to insiders rather than repurchasing stock when you’re trading at roughly 60% of book value?

Jay Brown: Sure. There’s really — you buried two different questions there. The decision to issue shares to Fox Paine was a result of a request under the contract that Fox Paine has with Global that a fee be paid for the creation and implementation of Project Manifest. Our Conflicts Committee of the Board evaluated that request and made a determination based with the assistance of outside legal and financial advice that, that compensation for that advice would be paid in terms of the shares that are described in our 10-K and in our 10-Q, which are the A2 shares, the 550,000. In terms of the second part of the question, which is why aren’t we buying back shares at 60% of book value, I think the reason for that, as we’ve said in the past, is our Board currently feels that we can create more long-term value by investing in our operations, particularly in the new Penn-America underwriter operation, which is designed to create additional growth and profits for Global Indemnity.

And that’s a decision our Board has made and has continued to reinforce at this point in time that that’s where we’re going to be investing funds going forward.

Operator: And a follow-up for Joel’s question. Also, can you explain why you’re retaining $251 million of excess capital when you’re shrinking book value per share, earning an inadequate return on equity and trading at 60% of book value? By retaining that $251 million, you’re turning it into $151 million of market value. Wouldn’t it be smarter to return that excess capital to shareholders through share repurchases or dividends? And wouldn’t doing that improve your return on equity and your price to book value multiple? I assume that the Board Chairman’s private equity firm came up with a plan to deploy that excess capital or that excess capital to generate a double-digit return on equity.

Jay Brown: I have to think carefully about — I think I’ve answered most of that question in terms of how the Board made its decision. I’m not going to argue with the alternatives of buying back shares at a huge discount to book value as potentially being a short-term boost to shareholder value. But our Board has made the decision that they are focused on long-term growth and not looking to pop the stock price in the short term. So they believe that that capital will be invested and will generate double-digit returns over the long term.

Operator: And our next question is from [Stefano Latapi]. Can we expect more or can we expect any more losses from the L.A. fire or has all been paid?

Jay Brown: It hasn’t all been paid, but the majority of it has been paid out, but our estimates are very solid at this point in time. So we don’t expect any material change in the numbers that we reported in the first quarter results.

Operator: And our next question is from [Joe Winn]. Given the increased tariffs and a looming economic recession, how might these microeconomic factors impact claim volumes, underwriting profitability, and investment income for our portfolio? And what financial or operational strategies should we consider strengthening our resilience in the upcoming market?

Jay Brown: I think there’s two parts of the impact of the economics on our company. The first impact, which is really on the fluctuating interest rates that are dramatically fluctuating from day-to-day in some cases, but certainly from quarter-to-quarter. And it’s the reason we have chosen as a company to remain extremely short duration in fixed income. We’re definitely playing a defensive strategy, waiting for the horizon to be clear in terms of making long-term investments. And that’s kind of on the investment side. In terms of the short-term impact on claims, the biggest thing that we worry about in economic depression or when economics turn down for the country is probably more watching carefully for fraud claims and particularly any interruption in people making their premium payments that are due to us.

But insurance is a long-term game. And the reality is it operates pretty much the same way over a long-term, and we have to be able to handle the ups and downs of short-term economic fluctuations.

Operator: And our next question comes from [Michael O’Brien]. What was the tangible book value dilution for the 550,000 shares issued to Fox Paine on March 6, 2025?

Brian Riley: Yes. The per share impact was $1.74.

Operator: And our next question is going to come from the line of Tom Kerr with Zacks Research. Your line is open.

Tom Kerr: Good morning, guys. Just a couple of quick financials. Most of my questions have been answered. On the SG&A, you said that was high because of Project Manifest. Does that maintain those levels throughout the year as you invest in that project?

Brian Riley: No. The first — Tom, the first quarter includes $2.7 million related to the A2 shares that’s not going to repeat as related to those adviser fees. So no, I don’t expect those to repeat at the same levels. But as Jay mentioned, we are — we will be investing. So there will be some elevated costs compared to last year.

Tom Kerr: Does the investment in Project Manifest happen in the other line items? Or is it only SG&A?

Brian Riley: That’s in the corporate expense line item.

Tom Kerr: For the expense ratio, right? Okay. Last question was, can you refresh our memory of when the Specialty Products terminated business anniversaries, and you have apples-to-apples comparison, when will that happen?

Jay Brown: We had a very large program was terminated at year-end, and it was instantaneous. And so essentially, it will be a full 12-month rollout and the apples-and-apples comparison will occur starting January next year.

Tom Kerr: I thought it was earlier than that. Sorry about that. I think that’s all I have for the day.

Jay Brown: You are correct. There were some earlier terminated programs that go back a few years and then were running off, but we did have — the most significant one was one that got terminated at the end of last year.

Tom Kerr: That’s what I was thinking. Okay, thank you. That’s all I have.

Operator: And your next question comes from the line of [Chris Coranda]. If the shares issued to Fox Paine are some combination of restricted stock and the option in the event of a sale of the business, why is the book value calculated including all of the A2 Fox Paine shares? Doesn’t that understate the current book value?

Jay Brown: That’s a very good question. Brian, it’s really an accounting question in terms of how it gets included in the book value.

Brian Riley: Yes. In the numerator of the book value is only the dividend portion of the value, which is $2.6 million. The additional $8.3 million is the option value. So that, from an accounting perspective, is not recognized as an expense with the reciprocating increased equity until there’s a change in control. And as Jay mentioned, the only way that ultimately that the $8.2 million is liquidated is upon a change in control event, which is sale of the company or a substantial part of the company.

Operator: And your next question comes from the line of Justin Sanders. Should we expect corporate expenses to trend back towards prior year levels post Q1 and the expense impact of Project Manifest? Or should we model it higher for the mentioned growth initiatives?

Jay Brown: I think in terms of a run rate, it will trend back towards what we have spent historically. But to the extent we actually — which we expect we will make potentially purchasing some target operations, there will be expenses associated with those transactions. And so — and they would be identified and separated out at the time of the transaction. So we’d be able to essentially give you that number as it occurs. But as of right now, there’s nothing in our forecast that’s planned for. So we will essentially trend back to our historical numbers for corporate expenses.

Operator: And there are no further questions at this time. Evan Kasowitz, I’ll turn the call back over to you.

Evan Kasowitz: Thank you again. This concludes our 2025 first quarter earnings call. We look forward to speaking with you again.

Operator: This concludes today’s conference call. You may now disconnect.