Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Global Indemnity Group LLC (GBLI, Financial) achieved a 9% increase in revenue through the first six months of 2024, tracking towards their long-term double-digit growth target.
- The company recorded a six-month combined ratio of 94.8% for the Penn-America segment, indicating strong underwriting performance.
- Net income for the first six months of 2024 was $21.5 million, a significant increase from $11.8 million in 2023.
- Investment income increased by 18% to $29.8 million, driven by higher book yields and strategic reinvestments.
- A.M. Best affirmed GBLI's A rating, with the balance sheet strength rated at the strongest level, reflecting financial stability.
Negative Points
- The expansion of the program division is lagging, with revenue growth flat through the first six months of 2024.
- The company continues to record a higher than target expense ratio of 38.6%, which is above their long-term target.
- Gross written premiums decreased to $194.2 million in 2024 from $233.1 million in 2023, primarily due to the runoff of non-core business.
- The company faces challenges in achieving rate increases that are modestly in excess of underlying inflation trends, indicating a tempered market.
- Despite improvements, the runoff expenses remain high as GBLI winds down smaller underwriting portfolios.
Q & A Highlights
Highlights of Global Indemnity Group LLC (GBLI) Q2 2024 Earnings Call
Q: Can you describe the reinsurance effort and its execution?
A: Joseph Brown, CEO: We shifted our reinsurance efforts to reinsuring our insurance carriers directly, focusing on areas like the cannabis book and program areas. We doubled the number of treaties in 18 months and expect 30%-40% growth per year for the next few years. The reinsurance market is attractive, and our niche provides a good return on capital.
Q: Is the reinsurance effort ENSC-oriented or does it include property and weather?
A: Joseph Brown, CEO: It is very much ENSC-oriented, similar to the products we underwrite directly. We have moved away from large weather-related exposures and have not seen significant catastrophe losses in the book.
Q: What is the status of the James River ventures?
A: Brian Riley, CFO: We have a substantial amount of excess capital and are constantly looking for opportunities. We will continue to explore M&A activities to increase returns for shareholders.
Q: Can you explain why Jason Hurwitz recently left the Board?
A: Joseph Brown, CEO: Jason Hurwitz served the Board for a long time and left to pursue other interests. He was asked to return temporarily to help with significant changes, and he has now chosen to move on.
Q: Can you elaborate on the expense management and timeline for getting them back in line?
A: Brian Riley, CFO: We maintained staffing levels to ensure top customer service. We expect to reduce fixed costs from 13 points to 11 points over the next couple of years, combined with double-digit premium growth and 4%-5% inflationary increases in expenses.
Q: What is the current amount of discretionary capital?
A: Brian Riley, CFO: We can deploy about $125 million of capital while maintaining strong capital adequacy. We expect to grow this by about $30 million year-over-year.
Q: Why aren't you buying back stock in the open market or conducting a Dutch tender share repurchase?
A: Joseph Brown, CEO: While buying back stock would add to book value, the timing for such actions is still in the future. We are not currently pursuing this.
Q: How is your casualty book positioned from social inflation impacts?
A: Joseph Brown, CEO: We have increased our long-term loss trends for the casualty business to 6%-7%. Our reserves are holding up well, and we have reduced exposures that were causing problems. The impact of social inflation is less severe for our small commercial focus.
Q: What are your thoughts on a tender offer as a way to reconcile stock buyback issues?
A: Joseph Brown, CEO: A tender offer is something we continue to consider. If we can't deploy capital into the business effectively, we may pursue a special dividend or tender offer.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
