UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended SeptemberJune 30, 20202021
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
001-34809
Commission File Number
GLOBAL INDEMNITY GROUP, LLC
(Exact name of registrant as specified in its charter)
Delaware | 85-2619578 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Three Bala Plaza East, Suite 300
Bala Cynwyd, PA
19004
(Address of principal executive office including zip code)
Registrant's telephone number, including area code: (610) 664-1500
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. Yes ☒ No ☐
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.). Yes ☒ No ☐
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.:
Large accelerated filer | ☐; |
| Accelerated filer | ☒; |
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Non-accelerated filer | ☐; |
| 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 ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Class A Common Shares | GBLI | NASDAQ Global Select Market |
7.875% Subordinated Notes due 2047 | GBLIL | NASDAQ Global Select Market |
As of October 29, 2020,July 28, 2021, the registrant had outstanding 10,242,70310,515,177 Class A Common Shares 4,133,366and 3,947,206 Class B Common Shares, and 4,000 Series A Cumulative Fixed Rate Preferred Shares.
TABLE OF CONTENTS
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Item 1. |
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| 3 | |
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| Consolidated Balance Sheets |
| 3 |
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Item 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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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) September 30, 2020 |
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| December 31, 2019 |
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| (Unaudited) June 30, 2021 |
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| December 31, 2020 |
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ASSETS |
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Fixed maturities: |
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Available for sale, at fair value (amortized cost: $1,260,439 and $1,231,568; net of allowance of: 2020 - $0) |
| $ | 1,303,775 |
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| $ | 1,253,159 |
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Available for sale, at fair value (amortized cost: $1,150,603 and $1,149,009; net of allowance for expected credit losses of $0 at June 30, 2021 and December 31, 2020) |
| $ | 1,174,097 |
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| $ | 1,191,186 |
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Equity securities, at fair value |
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| 75,941 |
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| 263,104 |
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| 90,669 |
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| 98,990 |
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Other invested assets |
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| 37,749 |
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| 47,279 |
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| 166,003 |
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| 97,018 |
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Total investments |
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| 1,417,465 |
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| 1,563,542 |
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| 1,430,769 |
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| 1,387,194 |
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Cash and cash equivalents |
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| 37,211 |
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| 44,271 |
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| 49,105 |
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| 67,359 |
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Premiums receivable, net of allowance for credit losses of $2,869 at September 30, 2020 |
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| 109,820 |
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| 118,035 |
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Reinsurance receivables, net of allowance for credit losses of $8,992 at September 30, 2020 |
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| 112,633 |
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| 83,938 |
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Premium receivables, net of allowance for expected credit losses of $2,822 at June 30, 2021 and $2,900 at December 31, 2020 |
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| 123,932 |
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| 109,431 |
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Reinsurance receivables, net of allowance for expected credit losses of $8,992 at June 30, 2021 and December 31, 2020 |
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| 90,247 |
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| 88,708 |
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Funds held by ceding insurers |
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| 46,894 |
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| 48,580 |
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| 33,793 |
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| 45,480 |
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Federal income taxes receivable |
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| 0 |
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| 10,989 |
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Deferred federal income taxes |
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| 35,300 |
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| 31,077 |
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| 37,169 |
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| 34,265 |
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Deferred acquisition costs |
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| 67,470 |
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| 70,677 |
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| 69,061 |
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| 65,195 |
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Intangible assets |
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| 21,094 |
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| 21,491 |
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| 20,698 |
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| 20,962 |
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Goodwill |
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| 6,521 |
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| 6,521 |
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| 6,521 |
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| 6,521 |
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Prepaid reinsurance premiums |
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| 15,558 |
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| 16,716 |
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| 15,141 |
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| 12,881 |
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Lease right of use assets |
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| 19,979 |
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| 21,077 |
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Other assets |
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| 69,791 |
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| 60,048 |
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| 40,902 |
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| 45,835 |
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Total assets |
| $ | 1,939,757 |
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| $ | 2,075,885 |
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| $ | 1,937,317 |
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| $ | 1,904,908 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Liabilities: |
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Unpaid losses and loss adjustment expenses |
| $ | 669,930 |
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| $ | 630,181 |
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| $ | 697,618 |
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| $ | 662,811 |
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Unearned premiums |
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| 304,074 |
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| 314,861 |
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| 308,984 |
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| 291,495 |
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Ceded balances payable |
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| 9,576 |
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| 20,404 |
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| 14,339 |
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| 8,943 |
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Payable for securities purchased |
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| 5,630 |
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| 850 |
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| 3,707 |
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| 4,667 |
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Contingent commissions |
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| 11,329 |
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| 11,928 |
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| 6,420 |
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| 10,832 |
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Debt |
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| 126,253 |
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| 296,640 |
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| 126,359 |
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| 126,288 |
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Lease liabilities |
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| 21,566 |
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| 22,950 |
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Other liabilities |
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| 92,252 |
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| 74,212 |
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| 48,759 |
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| 58,598 |
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Total liabilities |
| $ | 1,219,044 |
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| $ | 1,349,076 |
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| $ | 1,227,752 |
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| $ | 1,186,584 |
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Commitments and contingencies (Note 11) |
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| — |
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| — |
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Commitments and contingencies (Note 12) |
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| — |
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| — |
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Shareholders’ equity: |
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Series A cumulative fixed rate preferred shares, $1,000 par value; 100,000,000 shares authorized, shares issued and outstanding: 4,000 and 0 shares, respectively, liquidation preference: $1,000 per share and $0, respectively |
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| 4,000 |
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| — |
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Common shares, par value: no par at September 30, 2020 and $0.0001 at December 31, 2019, 900,000,000 common shares authorized; class A common shares issued: 10,242,703 and 10,282,277 respectively; class A common shares outstanding: 10,242,703 and 10,167,056, respectively; class B common shares issued and outstanding: 4,133,366 and 4,133,366, respectively |
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| 0 |
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| 2 |
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Series A cumulative fixed rate preferred shares, $1,000 par value; 100,000,000 shares authorized, shares issued and outstanding: 4,000 and 4,000 shares, respectively, liquidation preference: $1,000 per share and $1,000 per share, respectively |
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| 4,000 |
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| 4,000 |
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Common shares: no par value; 900,000,000 common shares authorized; class A common shares issued: 10,532,270 and 10,263,722 respectively; class A common shares outstanding: 10,515,177 and 10,263,722, respectively; class B common shares issued and outstanding: 3,947,206 and 4,133,366, respectively |
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| 0 |
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| 0 |
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Additional paid-in capital |
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| 443,437 |
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| 442,403 |
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| 447,804 |
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| 445,051 |
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Accumulated other comprehensive income, net of taxes |
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| 35,720 |
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| 17,609 |
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Accumulated other comprehensive income, net of tax |
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| 18,968 |
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| 34,308 |
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Retained earnings |
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| 237,556 |
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| 270,768 |
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| 239,272 |
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| 234,965 |
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Class A common shares in treasury, at cost: 0 and 115,221 shares, respectively |
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| 0 |
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| (3,973 | ) | ||||||||
Class A common shares in treasury, at cost: 17,093 and 0 shares, respectively |
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| (479 | ) |
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| 0 |
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Total shareholders’ equity |
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| 720,713 |
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| 726,809 |
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| 709,565 |
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| 718,324 |
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Total liabilities and shareholders’ equity |
| $ | 1,939,757 |
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| $ | 2,075,885 |
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| $ | 1,937,317 |
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| $ | 1,904,908 |
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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)
|
| (Unaudited) Quarters Ended September 30, |
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| (Unaudited) Nine Months Ended September 30, |
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| (Unaudited) Quarters Ended June 30, |
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| (Unaudited) Six Months Ended June 30, |
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| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Revenues: |
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Gross written premiums |
| $ | 143,749 |
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| $ | 157,177 |
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| $ | 464,022 |
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| $ | 478,699 |
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| $ | 175,236 |
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| $ | 164,549 |
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| $ | 338,794 |
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| $ | 320,273 |
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Net written premiums |
| $ | 130,611 |
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| $ | 138,836 |
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| $ | 416,987 |
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| $ | 421,321 |
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| $ | 160,653 |
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| $ | 147,264 |
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| $ | 308,336 |
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| $ | 286,376 |
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Net earned premiums |
| $ | 140,302 |
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| $ | 133,312 |
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| $ | 426,617 |
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| $ | 383,602 |
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| $ | 149,408 |
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| $ | 141,847 |
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| $ | 293,108 |
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| $ | 286,315 |
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Net investment income |
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| 11,746 |
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| 11,348 |
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| 19,516 |
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| 32,393 |
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Net realized investment gains (losses): |
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Other than temporary impairment losses on investments |
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| 0 |
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| 0 |
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| 0 |
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| (1,897 | ) | ||||||||||||||||
Other net realized investment gains (losses) |
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| 7,323 |
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| (2,690 | ) |
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| (22,332 | ) |
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| 13,187 |
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Total net realized investment gains (losses) |
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| 7,323 |
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| (2,690 | ) |
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| (22,332 | ) |
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| 11,290 |
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Net investment income (loss) |
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| 10,633 |
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| (2,359 | ) |
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| 20,469 |
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| 7,770 |
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Net realized investment gains (losses) |
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| 3,833 |
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| 38,507 |
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| 7,652 |
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| (29,655 | ) | ||||||||||||||||
Other income |
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| 542 |
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| 264 |
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| 1,473 |
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| 1,274 |
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| 521 |
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| 766 |
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| 898 |
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| 931 |
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Total revenues |
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| 159,913 |
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| 142,234 |
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| 425,274 |
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| 428,559 |
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| 164,395 |
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| 178,761 |
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| 322,127 |
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| 265,361 |
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Losses and Expenses: |
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Net losses and loss adjustment expenses |
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| 97,148 |
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| 73,583 |
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| 242,092 |
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| 201,979 |
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| 90,938 |
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| 67,297 |
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| 181,721 |
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| 144,944 |
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Acquisition costs and other underwriting expenses |
|
| 53,268 |
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| 53,366 |
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| 163,258 |
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| 153,643 |
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| 57,213 |
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| 53,578 |
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|
| 111,977 |
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| 109,990 |
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Corporate and other operating expenses |
|
| 21,196 |
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|
| 3,858 |
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| 34,037 |
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| 11,702 |
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| 6,329 |
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| 8,618 |
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| 10,605 |
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| 12,841 |
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Interest expense |
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| 3,620 |
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|
| 5,023 |
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|
| 13,197 |
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|
| 15,088 |
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|
| 2,696 |
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| 4,712 |
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| 5,291 |
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| 9,577 |
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Loss on extinguishment of debt |
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| 3,060 |
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| 0 |
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| 3,060 |
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| 0 |
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Income (loss) before income taxes |
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| (18,379 | ) |
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| 6,404 |
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|
| (30,370 | ) |
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| 46,147 |
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| 7,219 |
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|
| 44,556 |
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|
| 12,533 |
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|
| (11,991 | ) |
Income tax expense (benefit) |
|
| (3,209 | ) |
|
| (317 | ) |
|
| (8,173 | ) |
|
| 5,163 |
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|
| 844 |
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|
| 7,005 |
|
|
| 641 |
|
|
| (4,964 | ) |
Net income (loss) |
| $ | (15,170 | ) |
| $ | 6,721 |
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| $ | (22,197 | ) |
| $ | 40,984 |
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| $ | 6,375 |
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| $ | 37,551 |
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| $ | 11,892 |
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| $ | (7,027 | ) |
Less: Preferred stock distributions |
|
| 42 |
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| 0 |
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| 42 |
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| 0 |
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Less: preferred stock distributions |
|
| 110 |
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|
| 0 |
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|
| 220 |
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| 0 |
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Net income (loss) available to common shareholders |
| $ | (15,212 | ) |
| $ | 6,721 |
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| $ | (22,239 | ) |
| $ | 40,984 |
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| $ | 6,265 |
|
| $ | 37,551 |
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| $ | 11,672 |
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| $ | (7,027 | ) |
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Per share data: |
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Net income (loss) available to common shareholders (1) |
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Basic |
| $ | (1.06 | ) |
| $ | 0.47 |
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| $ | (1.56 | ) |
| $ | 2.89 |
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| $ | 0.43 |
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| $ | 2.63 |
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| $ | 0.81 |
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| $ | (0.49 | ) |
Diluted |
| $ | (1.06 | ) |
| $ | 0.47 |
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| $ | (1.56 | ) |
| $ | 2.86 |
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| $ | 0.43 |
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| $ | 2.61 |
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| $ | 0.80 |
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| $ | (0.49 | ) |
Weighted-average number of shares outstanding |
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Basic |
|
| 14,304,426 |
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|
| 14,202,859 |
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|
| 14,276,594 |
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| 14,181,530 |
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| 14,412,446 |
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| 14,275,500 |
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| 14,396,523 |
|
|
| 14,262,525 |
|
Diluted |
|
| 14,304,426 |
|
|
| 14,327,757 |
|
|
| 14,276,594 |
|
|
| 14,328,861 |
|
|
| 14,681,731 |
|
|
| 14,389,400 |
|
|
| 14,651,124 |
|
|
| 14,262,525 |
|
Cash dividends/distributions declared per common share |
| $ | 0.25 |
|
| $ | 0.25 |
|
| $ | 0.75 |
|
| $ | 0.75 |
|
| $ | 0.25 |
|
| $ | 0.25 |
|
| $ | 0.50 |
|
| $ | 0.50 |
|
(1) | For the |
See accompanying notes to consolidated financial statements.
4
GLOBAL INDEMNITY GROUP, LLC
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
|
| (Unaudited) Quarters Ended September 30, |
|
| (Unaudited) Nine Months Ended September 30, |
|
| (Unaudited) Quarters Ended June 30, |
|
| (Unaudited) Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Net income (loss) |
| $ | (15,170 | ) |
| $ | 6,721 |
|
| $ | (22,197 | ) |
| $ | 40,984 |
|
| $ | 6,375 |
|
| $ | 37,551 |
|
| $ | 11,892 |
|
| $ | (7,027 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain |
|
| (448 | ) |
|
| 9,421 |
|
|
| 30,748 |
|
|
| 48,883 |
| ||||||||||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss) |
|
| 0 |
|
|
| (2 | ) |
|
| 0 |
|
|
| (4 | ) | ||||||||||||||||
Reclassification adjustment for gains included in net income (loss) |
|
| (2,104 | ) |
|
| (847 | ) |
|
| (13,205 | ) |
|
| (2,665 | ) | ||||||||||||||||
Unrealized foreign currency translation gain (loss) |
|
| 579 |
|
|
| 200 |
|
|
| 568 |
|
|
| 331 |
| ||||||||||||||||
Unrealized holding gains (losses) |
|
| 9,477 |
|
|
| 33,229 |
|
|
| (15,701 | ) |
|
| 31,196 |
| ||||||||||||||||
Reclassification adjustment for (gains) losses included in net income (loss) |
|
| (295 | ) |
|
| (9,388 | ) |
|
| 521 |
|
|
| (11,101 | ) | ||||||||||||||||
Unrealized foreign currency translation gains (losses) |
|
| (67 | ) |
|
| 1,292 |
|
|
| (160 | ) |
|
| (11 | ) | ||||||||||||||||
Other comprehensive income (loss), net of tax |
|
| (1,973 | ) |
|
| 8,772 |
|
|
| 18,111 |
|
|
| 46,545 |
|
|
| 9,115 |
|
|
| 25,133 |
|
|
| (15,340 | ) |
|
| 20,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss), net of tax |
| $ | (17,143 | ) |
| $ | 15,493 |
|
| $ | (4,086 | ) |
| $ | 87,529 |
|
| $ | 15,490 |
|
| $ | 62,684 |
|
| $ | (3,448 | ) |
| $ | 13,057 |
|
See accompanying notes to consolidated financial statements.
5
GLOBAL INDEMNITY GROUP, LLC
Consolidated Statements of Changes in Shareholders’ Equity
(In thousands, except share amounts)
|
| (Unaudited) Quarters Ended September 30, |
|
| (Unaudited) Nine Months Ended September 30, |
|
| (Unaudited) Quarters Ended June 30, |
|
| (Unaudited) Six Months Ended June 30, |
| |||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||||||
Number of Series A Cumulative Fixed Rate Preferred Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Preferred shares issued |
|
| 4,000 |
|
|
| 0 |
|
|
| 4,000 |
|
|
| 0 |
| |||||||||||||||||
Number at end of period |
|
| 4,000 |
|
|
| 0 |
|
|
| 4,000 |
|
|
| 0 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Number at beginning and end of period |
|
| 4,000 |
|
|
| 0 |
|
|
| 4,000 |
|
|
| 0 |
| |||||||||||||||||
Number of class A common shares issued: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Number at beginning of period |
|
| 10,333,540 |
|
|
| 10,239,520 |
|
|
| 10,282,277 |
|
|
| 10,171,954 |
|
|
| 10,303,832 |
|
|
| 10,305,404 |
|
|
| 10,263,722 |
|
|
| 10,282,277 |
| |
Common shares issued / (forfeited) under share incentive plans |
|
| (230 | ) |
|
| 0 |
|
|
| (576 | ) |
|
| 36,180 |
| |||||||||||||||||
Common shares issued under share incentive plans, net of forfeitures |
|
| 22,540 |
|
|
| (346 | ) |
|
| 42,644 |
|
|
| (346 | ) | |||||||||||||||||
Common shares issued to directors |
|
| 29,893 |
|
|
| 19,275 |
|
|
| 81,502 |
|
|
| 50,661 |
|
|
| 19,738 |
|
|
| 28,482 |
|
|
| 39,744 |
|
|
| 51,609 |
| |
Reduction in treasury shares due to redomestication |
|
| (120,500 | ) |
|
| 0 |
|
|
| (120,500 | ) |
|
| 0 |
| |||||||||||||||||
Share conversion |
|
| 186,160 |
|
|
| 0 |
|
|
| 186,160 |
|
|
| 0 |
| |||||||||||||||||
Number at end of period |
|
| 10,242,703 |
|
|
| 10,258,795 |
|
|
| 10,242,703 |
|
|
| 10,258,795 |
|
|
| 10,532,270 |
|
|
| 10,333,540 |
|
|
| 10,532,270 |
|
|
| 10,333,540 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Number of class B common shares issued: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Number at beginning and end of period |
|
| 4,133,366 |
|
|
| 4,133,366 |
|
|
| 4,133,366 |
|
|
| 4,133,366 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Number at beginning of period |
|
| 4,133,366 |
|
|
| 4,133,366 |
|
|
| 4,133,366 |
|
|
| 4,133,366 |
| |||||||||||||||||
Share conversion |
|
| (186,160 | ) |
|
| 0 |
|
|
| (186,160 | ) |
|
| 0 |
| |||||||||||||||||
Number at end of period |
|
| 3,947,206 |
|
|
| 4,133,366 |
|
|
| 3,947,206 |
|
|
| 4,133,366 |
| |||||||||||||||||
Par value of Series A Cumulative Fixed Rate Preferred Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Preferred shares issued |
| $ | 4,000 |
|
|
| 0 |
|
| $ | 4,000 |
|
|
| 0 |
| |||||||||||||||||
Balance at end of period |
| $ | 4,000 |
|
|
| 0 |
|
| $ | 4,000 |
|
|
| 0 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at beginning and end of period |
| $ | 4,000 |
|
| $ | 0 |
|
| $ | 4,000 |
|
| $ | 0 |
| |||||||||||||||||
Par value of class A common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of period |
| $ | 1 |
|
| $ | 1 |
|
| $ | 1 |
|
| $ | 1 |
| |||||||||||||||||
Reduction in par due to redomestication |
|
| (1 | ) |
|
| 0 |
|
|
| (1 | ) |
|
| 0 |
| |||||||||||||||||
Balance at end of period |
| $ | 0 |
|
| $ | 1 |
|
| $ | 0 |
|
| $ | 1 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at beginning and end of period |
| $ | 0 |
|
| $ | 1 |
|
| $ | 0 |
|
| $ | 1 |
| |||||||||||||||||
Par value of class B common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of period |
| $ | 1 |
|
| $ | 1 |
|
| $ | 1 |
|
| $ | 1 |
| |||||||||||||||||
Reduction in par due to redomestication |
|
| (1 | ) |
|
| 0 |
|
|
| (1 | ) |
|
| 0 |
| |||||||||||||||||
Balance at end of period |
| $ | 0 |
|
| $ | 1 |
|
| $ | 0 |
|
| $ | 1 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at beginning and end of period |
| $ | 0 |
|
| $ | 1 |
|
| $ | 0 |
|
| $ | 1 |
| |||||||||||||||||
Additional paid-in capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of period |
| $ | 445,173 |
|
| $ | 439,707 |
|
| $ | 442,403 |
|
| $ | 438,182 |
|
| $ | 446,199 |
|
| $ | 443,641 |
|
| $ | 445,051 |
|
| $ | 442,403 |
| |
Reduction in treasury shares due to redomestication |
|
| (4,126 | ) |
|
| 0 |
|
|
| (4,126 | ) |
|
| 0 |
| |||||||||||||||||
Share compensation plans |
|
| 2,390 |
|
|
| 988 |
|
|
| 5,160 |
|
|
| 2,513 |
|
|
| 1,605 |
|
|
| 1,532 |
|
|
| 2,753 |
|
|
| 2,770 |
| |
Balance at end of period |
| $ | 443,437 |
|
| $ | 440,695 |
|
| $ | 443,437 |
|
| $ | 440,695 |
|
| $ | 447,804 |
|
| $ | 445,173 |
|
| $ | 447,804 |
|
| $ | 445,173 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Accumulated other comprehensive income, net of deferred income tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of period |
| $ | 37,693 |
|
| $ | 16,542 |
|
| $ | 17,609 |
|
| $ | (21,231 | ) |
| $ | 9,853 |
|
| $ | 12,560 |
|
| $ | 34,308 |
|
| $ | 17,609 |
| |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Change in unrealized holding gains (losses) |
|
| (2,552 | ) |
|
| 8,574 |
|
|
| 17,543 |
|
|
| 46,218 |
|
|
| 9,182 |
|
|
| 23,841 |
|
|
| (15,180 | ) |
|
| 20,095 |
| |
Change in other than temporary impairment losses recognized in other comprehensive income (loss) |
|
| 0 |
|
|
| (2 | ) |
|
| 0 |
|
|
| (4 | ) | |||||||||||||||||
Unrealized foreign currency translation gains |
|
| 579 |
|
|
| 200 |
|
|
| 568 |
|
|
| 331 |
| |||||||||||||||||
Unrealized foreign currency translation gains (losses) |
|
| (67 | ) |
|
| 1,292 |
|
|
| (160 | ) |
|
| (11 | ) | |||||||||||||||||
Other comprehensive income (loss) |
|
| (1,973 | ) |
|
| 8,772 |
|
|
| 18,111 |
|
|
| 46,545 |
|
|
| 9,115 |
|
|
| 25,133 |
|
|
| (15,340 | ) |
|
| 20,084 |
| |
Balance at end of period |
| $ | 35,720 |
|
| $ | 25,314 |
|
| $ | 35,720 |
|
| $ | 25,314 |
|
| $ | 18,968 |
|
| $ | 37,693 |
|
| $ | 18,968 |
|
| $ | 37,693 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Retained earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of period |
| $ | 256,442 |
|
| $ | 242,234 |
|
| $ | 270,768 |
|
| $ | 215,132 |
|
| $ | 236,688 |
|
| $ | 222,549 |
|
| $ | 234,965 |
|
| $ | 270,768 |
| |
Cumulative effect adjustment resulting from adoption of new accounting guidance |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (5 | ) | |||||||||||||||||
Net income (loss) |
|
| (15,170 | ) |
|
| 6,721 |
|
|
| (22,197 | ) |
|
| 40,984 |
|
|
| 6,375 |
|
|
| 37,551 |
|
|
| 11,892 |
|
|
| (7,027 | ) | |
Preferred share distributions |
|
| (42 | ) |
|
| 0 |
|
|
| (42 | ) |
|
| 0 |
|
|
| (110 | ) |
|
| 0 |
|
|
| (220 | ) |
|
| 0 |
| |
Dividends / distributions to shareholders ($0.25 per share per quarter in 2020 and 2019) |
|
| (3,674 | ) |
|
| (3,609 | ) |
|
| (10,973 | ) |
|
| (10,765 | ) | |||||||||||||||||
Dividends / distributions to shareholders ($0.25 per share per quarter in 2021 and 2020) |
|
| (3,681 | ) |
|
| (3,658 | ) |
|
| (7,365 | ) |
|
| (7,299 | ) | |||||||||||||||||
Balance at end of period |
| $ | 237,556 |
|
| $ | 245,346 |
|
| $ | 237,556 |
|
| $ | 245,346 |
|
| $ | 239,272 |
|
| $ | 256,442 |
|
| $ | 239,272 |
|
| $ | 256,442 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Number of treasury shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Number at beginning of period |
|
| 120,104 |
|
|
| 110,449 |
|
|
| 115,221 |
|
|
| 76,642 |
|
|
| 9,993 |
|
|
| 119,945 |
|
|
| 0 |
|
|
| 115,221 |
| |
Class A common shares purchased |
|
| 396 |
|
|
| 0 |
|
|
| 5,120 |
|
|
| 27,028 |
|
|
| 7,100 |
|
|
| 0 |
|
|
| 16,915 |
|
|
| 4,724 |
| |
Retirement of shares |
|
| 0 |
|
|
| 0 |
|
|
| 159 |
|
|
| 6,779 |
|
|
| 0 |
|
|
| 159 |
|
|
| 0 |
|
|
| 159 |
| |
Reduction in treasury shares due to redomestication |
|
| (120,500 | ) |
|
| 0 |
|
|
| (120,500 | ) |
|
| 0 |
| |||||||||||||||||
Forfeited shares |
|
| 0 |
|
|
| 0 |
|
|
| 178 |
|
|
| 0 |
| |||||||||||||||||
Number at end of period |
|
| 0 |
|
|
| 110,449 |
|
|
| 0 |
|
|
| 110,449 |
|
|
| 17,093 |
|
|
| 120,104 |
|
|
| 17,093 |
|
|
| 120,104 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Treasury shares, at cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of period |
| $ | (4,116 | ) |
| $ | (3,973 | ) |
| $ | (3,973 | ) |
| $ | (3,026 | ) |
| $ | (283 | ) |
| $ | (4,116 | ) |
| $ | 0 |
|
| $ | (3,973 | ) | |
Class A common shares purchased, at cost |
|
| (10 | ) |
|
| 0 |
|
|
| (153 | ) |
|
| (947 | ) |
|
| (196 | ) |
|
| 0 |
|
|
| (479 | ) |
|
| (143 | ) | |
Reduction in treasury shares due to redomestication |
|
| 4,126 |
|
|
| 0 |
|
|
| 4,126 |
|
|
| 0 |
| |||||||||||||||||
Balance at end of period |
| $ | 0 |
|
| $ | (3,973 | ) |
| $ | 0 |
|
| $ | (3,973 | ) |
| $ | (479 | ) |
| $ | (4,116 | ) |
| $ | (479 | ) |
| $ | (4,116 | ) | |
Total shareholders’ equity |
| $ | 720,713 |
|
| $ | 707,384 |
|
| $ | 720,713 |
|
| $ | 707,384 |
|
| $ | 709,565 |
|
| $ | 735,194 |
|
| $ | 709,565 |
|
| $ | 735,194 |
|
See accompanying notes to consolidated financial statements.
6
GLOBAL INDEMNITY GROUP, LLC
Consolidated Statements of Cash Flows
(In thousands)
|
| (Unaudited) Nine Months Ended September 30, |
|
| (Unaudited) Six Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (22,197 | ) |
| $ | 40,984 |
|
| $ | 11,892 |
|
| $ | (7,027 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization and depreciation |
|
| 5,121 |
|
|
| 5,327 |
|
|
| 4,176 |
|
|
| 3,463 |
|
Amortization of debt issuance costs |
|
| 182 |
|
|
| 198 |
|
|
| 71 |
|
|
| 132 |
|
Restricted stock and stock option expense |
|
| 5,157 |
|
|
| 2,513 |
|
|
| 2,753 |
|
|
| 2,769 |
|
Deferred federal income taxes |
|
| (8,303 | ) |
|
| 5,198 |
|
|
| 641 |
|
|
| (4,964 | ) |
Amortization of bond premium and discount, net |
|
| 4,828 |
|
|
| 3,697 |
|
|
| 3,043 |
|
|
| 2,941 |
|
Net realized investment (gains) loss |
|
| 22,332 |
|
|
| (11,290 | ) | ||||||||
Loss on extinguishment of debt |
|
| 3,060 |
|
|
| — |
| ||||||||
Equity in the earnings of equity method limited liability investments |
|
| 8,004 |
|
|
| 0 |
| ||||||||
Net realized investment (gains) losses |
|
| (7,652 | ) |
|
| 29,655 |
| ||||||||
(Income) loss from equity method investments, net of distributions |
|
| (1,658 | ) |
|
| 11,489 |
| ||||||||
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums receivable, net |
|
| 8,215 |
|
|
| (25,313 | ) | ||||||||
Premium receivables, net |
|
| (14,501 | ) |
|
| (7,265 | ) | ||||||||
Reinsurance receivables, net |
|
| (28,695 | ) |
|
| 31,406 |
|
|
| (1,539 | ) |
|
| (7,151 | ) |
Funds held by ceding insurers |
|
| 2,132 |
|
|
| 786 |
|
|
| 11,485 |
|
|
| 749 |
|
Unpaid losses and loss adjustment expenses |
|
| 39,749 |
|
|
| (46,744 | ) |
|
| 34,807 |
|
|
| 20,892 |
|
Unearned premiums |
|
| (10,787 | ) |
|
| 34,885 |
|
|
| 17,489 |
|
|
| (800 | ) |
Ceded balances payable |
|
| (10,828 | ) |
|
| 21,437 |
|
|
| 5,396 |
|
|
| 3,256 |
|
Other assets and liabilities, net |
|
| 1,211 |
|
|
| (9,929 | ) | ||||||||
Other assets and liabilities |
|
| (8,377 | ) |
|
| 625 |
| ||||||||
Contingent commissions |
|
| (599 | ) |
|
| (601 | ) |
|
| (4,412 | ) |
|
| (3,252 | ) |
Federal income tax receivable/payable |
|
| 10,989 |
|
|
| (270 | ) |
|
| 0 |
|
|
| 5,478 |
|
Deferred acquisition costs, net |
|
| 3,207 |
|
|
| (9,185 | ) | ||||||||
Deferred acquisition costs |
|
| (3,866 | ) |
|
| 558 |
| ||||||||
Prepaid reinsurance premiums |
|
| 1,158 |
|
|
| 2,831 |
|
|
| (2,260 | ) |
|
| 862 |
|
Net cash provided by operating activities |
|
| 33,936 |
|
|
| 45,930 |
|
|
| 47,488 |
|
|
| 52,410 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of fixed maturities |
|
| 600,962 |
|
|
| 642,049 |
|
|
| 636,040 |
|
|
| 427,111 |
|
Proceeds from sale of equity securities |
|
| 563,926 |
|
|
| 206,212 |
|
|
| 42,821 |
|
|
| 378,915 |
|
Proceeds from maturity of fixed maturities |
|
| 89,875 |
|
|
| 113,480 |
|
|
| 38,459 |
|
|
| 15,651 |
|
Proceeds from maturity of preferred stock |
|
| 666 |
|
|
| — |
| ||||||||
Proceeds from other invested assets |
|
| 1,823 |
|
|
| 14,201 |
|
|
| 2,673 |
|
|
| 623 |
|
Amounts paid in connection with derivatives |
|
| (20,130 | ) |
|
| (12,516 | ) |
|
| (276 | ) |
|
| (20,060 | ) |
Purchases of fixed maturities |
|
| (702,727 | ) |
|
| (701,684 | ) |
|
| (680,805 | ) |
|
| (457,841 | ) |
Purchases of equity securities |
|
| (393,963 | ) |
|
| (325,972 | ) |
|
| (27,402 | ) |
|
| (358,085 | ) |
Purchases of other invested assets |
|
| (297 | ) |
|
| (3,500 | ) |
|
| (70,000 | ) |
|
| (297 | ) |
Net cash provided by (used for) investing activities |
|
| 139,469 |
|
|
| (67,730 | ) | ||||||||
Net cash used for investing activities |
|
| (57,824 | ) |
|
| (13,983 | ) | ||||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under margin borrowing facility |
|
| (73,629 | ) |
|
| 8,561 |
| ||||||||
Dividends paid to common shareholders |
|
| (10,683 | ) |
|
| (7,130 | ) | ||||||||
Issuance of series A cumulative fixed rate preferred shares |
|
| 4,000 |
|
|
| 0 |
| ||||||||
Net borrowings under margin borrowing facility |
|
| 0 |
|
|
| 958 |
| ||||||||
Dividends / distributions paid to common shareholders |
|
| (7,219 | ) |
|
| (7,120 | ) | ||||||||
Distributions paid to preferred shareholders |
|
| (220 | ) |
|
| 0 |
| ||||||||
Purchases of class A common shares |
|
| (153 | ) |
|
| (947 | ) |
|
| (479 | ) |
|
| (143 | ) |
Redemption of subordinated notes |
|
| (100,000 | ) |
|
| 0 |
| ||||||||
Net cash provided by (used for) financing activities |
|
| (180,465 | ) |
|
| 484 |
| ||||||||
Net cash used for financing activities |
|
| (7,918 | ) |
|
| (6,305 | ) | ||||||||
Net change in cash and cash equivalents |
|
| (7,060 | ) |
|
| (21,316 | ) |
|
| (18,254 | ) |
|
| 32,122 |
|
Cash and cash equivalents at beginning of period |
|
| 44,271 |
|
|
| 99,497 |
|
|
| 67,359 |
|
|
| 44,271 |
|
Cash and cash equivalents at end of period |
| $ | 37,211 |
|
| $ | 78,181 |
|
| $ | 49,105 |
|
| $ | 76,393 |
|
See accompanying notes to consolidated financial statements.
7
GLOBAL INDEMNITY GROUP, LLC
1. | Principles of Consolidation and Basis of Presentation |
References to “the Company” refer to Global Indemnity Group, LLC and its subsidiaries. If prior to August 28, 2020, references to the Company refer to Global Indemnity Limited and its subsidiaries.
Global Indemnity Group, LLC, (“Global Indemnity” or “the Company”), a Delaware limited liability company formed on June 23, 2020, replaced Global Indemnity Limited, incorporated in the Cayman Islands as an exempted company with limited liability, as the ultimate parent company of the Global Indemnity group of companies as a result of a redomestication transaction completed on August 28, 2020. The Company’sGlobal Indemnity Group, LLC’s class A common shares are publicly traded on the NASDAQ Global Select Market under the ticker symbol GBLI. The Company’sGlobal Indemnity Group, LLC’s predecessors have been publicly traded since 2003. See Note 2 belowof the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2020 Annual Report on Form 10-K for additional information regarding the redomestication.
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 Company manages its businessinsurance companies’ primary activity is providing insurance products across a distribution network that includes binding authority, program, brokerage and reinsurance. The insurance companies are managed through4 business segments: Commercial Specialty, Specialty Property, Farm, Ranch & Stable, and Reinsurance Operations. The Company’s Commercial Specialty segment offers specialty property and casualty insurance products in the excess and surplus lines marketplace. The Company manages Commercial Specialty by differentiating them into 4 product classifications: 1) Penn-America, which markets property and general liability products to small commercial businesses through a select network of wholesale general agents with specific binding authority; 2) United National, which markets insurance products for targeted insured segments, including specialty products, such as property, general liability, and professional lines through program administrators with specific binding authority; 3) Diamond State, which markets property, casualty, and professional lines products, which are developed by the Company’s underwriting department by individuals with expertise in those lines of business, through wholesale brokers and also markets through program administrators having specific binding authority; and 4) Vacant Express, which primarily insures dwellings which are currently vacant, undergoing renovation, or are under construction and is marketed through aggregators, brokers, and retail agents. These product classifications comprise the Company’s Commercial Specialty business segment and are not considered individual business segments because each product has similar economic characteristics, distribution, and coverage. The Company’s Specialty Property segment offers specialty personal lines property and casualty insurance products through general and specialty agents with specific binding authority. The Company’s Farm, Ranch & Stable segment provides specialized property and casualty coverage including Commercial Farm Auto and Excess/Umbrella Coverage for the agriculture industry as well as specialized insurance products for the equine mortality and equine major medical industry. These insurance products are sold through wholesalers and retail agents, with a selected number having specific binding authority. Collectively, the Company’s U.S. insurance subsidiaries are licensed in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The Commercial Specialty, Specialty Property, and Farm, Ranch, & Stable segments comprise the Company’s Insurance Operations (“Insurance Operations”). The Company’s Reinsurance Operations segment provides reinsurance solutions through brokers and primary writers including insurance and reinsurance companies. Prior to the redomestication transactions, the Company’s Reinsurance Operations consisted solely of the operations of its Bermuda-based wholly-owned subsidiary, Global Indemnity Reinsurance Company, Ltd. (“Global Indemnity Reinsurance”). As part of the redomestication transactions, Global Indemnity Reinsurance was merged with and into Penn-Patriot Insurance Company ("Penn-Patriot"), with Penn-Patriot surviving, resulting in the assumption of Global Indemnity Reinsurance's business by the Company’sGlobal Indemnity group of companies’ existing U.S. insurance company subsidiaries. The Commercial Specialty, Specialty Property, Farm, Ranch & Stable, and Reinsurance Operations segments comprise the Company’s 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.
8
GLOBAL INDEMNITY GROUP, LLC
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 ninesix months ended SeptemberJune 30, 20202021 and 20192020 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 20192020 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.
8
GLOBAL INDEMNITY GROUP, LLC
2.RedomesticationCertain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Consolidated Balance Sheets for the fiscal year ended December 31, 2020 to present the lease right of use assets and lease liabilities separately from other assets and other liabilities, respectively. This change in classification does not affect previously reported Assets or Liabilities in the Consolidated Balance Sheet.
At 12:01 a.m., Eastern Time, on August 28, 2020 (the "Effective Time"), Global Indemnity Limited, incorporated2.Summary of Significant Accounting Policies
There have been no significant changes to the Company's accounting policies during the current year except for the following:
The receipt of results for investments in the Cayman Islands as an exempted company withlimited partnerships and limited liability completedcompanies may vary. If results are received on a timely basis, they are included in current results. If they are not received on a timely basis, they are recorded on a one quarter lag. The recording of such results are applied consistently for each investment once the previously disclosed schemetiming of arrangement and amalgamation under Sections 86 and 87receiving the results has been established.
Please see Note 3 of the Cayman Islands Companies Law (2020 Revision) (the "Scheme of Arrangement") that effected certain transactions (the "Redomestication") that resultednotes to the consolidated financial statements in the shareholders of Global Indemnity Limited becoming the holders of allItem 8 Part II of the issued and outstanding common shares of the Company. In accordance with the terms of the Scheme of Arrangement, the following steps occurred effectively simultaneously at the Effective Time:
|
|
|
|
|
|
As a result, any references to class A common shares after the Effective Time refer to Global Indemnity Group, LLC class A common shares and any references to class A common shares prior to the Effective Time refers to Global Indemnity Limited A ordinary shares.
As previously disclosed, the Redomestication was approved by Global Indemnity Limited’s shareholders at a special meeting and an extraordinary general meeting heldCompany's 2020 Annual Report on August 25, 2020, convened by Order of the Grand Court of the Cayman Islands dated July 22, 2020. The terms and conditions of the issuance of the securities in connection with the Redomestication were sanctioned by the Grand Court of the Cayman Islands pursuant to an Order granted on August 26, 2020 after a hearing upon the fairness of such terms and conditions at which all holders of Global Indemnity Limited ordinary shares had a right to appear and of which adequate notice had been given.
Following completion of the Scheme of Arrangement, New CayCo merged with and into the Company, with the Company surviving as the ultimate parent company. Additionally, as part of the Redomestication transactions, Global Indemnity Reinsurance Company was merged with and into Penn-Patriot, with Penn-Patriot surviving, resulting in the assumption of Global Indemnity Reinsurance’s business by the Company’s existing U.S. insurance company subsidiaries (the "GI Bermuda Transaction" and, together with the Redomestication and the other transactions described in Global Indemnity Limited's Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on July 23, 2020 (the "Redomestication Proxy Statement"), the "Transactions").
Prior to the Redomestication, the Global Indemnity Limited A ordinary shares were listedForm 10-K for more information on the Nasdaq Global Select Market ("Nasdaq") under the symbol "GBLI" and registered under Section 12(b)Company's summary of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). At the Effective Time, the Company’s class A common shares are deemed to be registered under Section 12(b) of the Exchange Act pursuant to Rule 12g-3(a) under the Exchange Act. The issuance of the class A common shares by the Company in the Redomestication was exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), by virtue of Section 3(a)(10) of the Securities Act. The Company’s class A common shares began trading on Nasdaq under the symbol "GBLI," the same symbol under which the Global Indemnity Limited ordinary shares previously traded, at the commencement of trading on Nasdaq on August 28, 2020.significant accounting policies.
On August 27, 2020, the Company issued 4,000 series A cumulative fixed rate preferred shares. Following the Effective Time, all of the issued and outstanding series A fixed rate preferred shares were unaffected by the Scheme of Arrangement. See Note 10 for additional information regarding the issuance of these preferred shares.
9
GLOBAL INDEMNITY GROUP, LLC
3. | Investments |
The Company implemented new accounting guidance on January 1, 2020 related to the measurement of credit losses on financial instruments. For financial assets held at amortized cost basis, the new guidance requires a forward-looking methodology for in-scope financial assets that reflects expected credit losses and requires consideration of a broader range of information for credit loss estimates, including historical experience, current economic conditions and supportable forecasts that affect the collectability of the financial assets. For available for sale debt securities, credit losses are still measured similar to the old guidance; however, the new guidance requires that credit losses be presented as an allowance rather than as a write-down of the amortized cost basis of the impaired security and allows for the reversal of credit losses in the current period net income. Any impairments related to factors other than credit losses continue to be recorded through other comprehensive income, net of taxes.
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 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 was $6.1 million and $7.0 million as of September 30, 2020 and December 31, 2019, respectively.
The amortized cost and estimated fair value of the Company’s fixed maturities securities were as follows as of SeptemberJune 30, 20202021 and December 31, 2019:2020:
(Dollars in thousands) |
| Amortized Cost |
|
| Allowance for Credit Losses |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Estimated Fair Value |
|
| Amortized Cost |
|
| Allowance for Expected Credit Losses |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Estimated Fair Value |
| ||||||||||
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
As of June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury and agency obligations |
| $ | 197,192 |
|
| $ | 0 |
|
| $ | 4,980 |
|
| $ | (215 | ) |
| $ | 201,957 |
| ||||||||||||||||||||
U.S. treasuries |
| $ | 148,611 |
|
| $ | 0 |
|
| $ | 1,278 |
|
| $ | (2,840 | ) |
| $ | 147,049 |
| ||||||||||||||||||||
Agency obligations |
|
| 10,628 |
|
|
| 0 |
|
|
| 5 |
|
|
| (56 | ) |
|
| 10,577 |
| ||||||||||||||||||||
Obligations of states and political subdivisions |
|
| 59,134 |
|
|
| 0 |
|
|
| 3,055 |
|
|
| (188 | ) |
|
| 62,001 |
|
|
| 62,666 |
|
|
| 0 |
|
|
| 2,829 |
|
|
| (9 | ) |
|
| 65,486 |
|
Mortgage-backed securities |
|
| 393,325 |
|
|
| 0 |
|
|
| 8,879 |
|
|
| (1,120 | ) |
|
| 401,084 |
|
|
| 306,158 |
|
|
| 0 |
|
|
| 4,190 |
|
|
| (2,151 | ) |
|
| 308,197 |
|
Asset-backed securities |
|
| 137,953 |
|
|
| 0 |
|
|
| 2,198 |
|
|
| (1,001 | ) |
|
| 139,150 |
|
|
| 131,543 |
|
|
| 0 |
|
|
| 1,301 |
|
|
| (229 | ) |
|
| 132,615 |
|
Commercial mortgage-backed securities |
|
| 132,271 |
|
|
| 0 |
|
|
| 7,444 |
|
|
| (804 | ) |
|
| 138,911 |
|
|
| 106,120 |
|
|
| 0 |
|
|
| 4,160 |
|
|
| (247 | ) |
|
| 110,033 |
|
Corporate bonds |
|
| 243,082 |
|
|
| 0 |
|
|
| 16,914 |
|
|
| (1,135 | ) |
|
| 258,861 |
|
|
| 265,316 |
|
|
| 0 |
|
|
| 12,097 |
|
|
| (973 | ) |
|
| 276,440 |
|
Foreign corporate bonds |
|
| 97,482 |
|
|
| 0 |
|
|
| 4,533 |
|
|
| (204 | ) |
|
| 101,811 |
|
|
| 119,561 |
|
|
| 0 |
|
|
| 4,374 |
|
|
| (235 | ) |
|
| 123,700 |
|
Total fixed maturities |
| $ | 1,260,439 |
|
| $ | 0 |
|
| $ | 48,003 |
|
| $ | (4,667 | ) |
| $ | 1,303,775 |
|
| $ | 1,150,603 |
|
| $ | 0 |
|
| $ | 30,234 |
|
| $ | (6,740 | ) |
| $ | 1,174,097 |
|
(Dollars in thousands) |
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Estimated Fair Value |
| ||||
As of December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury and agency obligations |
| $ | 153,906 |
|
| $ | 3,580 |
|
| $ | (797 | ) |
| $ | 156,689 |
|
Obligations of states and political subdivisions |
|
| 63,256 |
|
|
| 853 |
|
|
| (271 | ) |
|
| 63,838 |
|
Mortgage-backed securities |
|
| 325,448 |
|
|
| 3,177 |
|
|
| (251 | ) |
|
| 328,374 |
|
Asset-backed securities |
|
| 168,020 |
|
|
| 937 |
|
|
| (420 | ) |
|
| 168,537 |
|
Commercial mortgage-backed securities |
|
| 183,944 |
|
|
| 4,369 |
|
|
| (209 | ) |
|
| 188,104 |
|
Corporate bonds |
|
| 239,860 |
|
|
| 8,478 |
|
|
| (79 | ) |
|
| 248,259 |
|
Foreign corporate bonds |
|
| 97,134 |
|
|
| 2,247 |
|
|
| (23 | ) |
|
| 99,358 |
|
Total fixed maturities |
| $ | 1,231,568 |
|
| $ | 23,641 |
|
| $ | (2,050 | ) |
| $ | 1,253,159 |
|
109
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, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasuries |
| $ | 195,444 |
|
| $ | 0 |
|
| $ | 3,125 |
|
| $ | (1,089 | ) |
| $ | 197,480 |
|
Obligations of states and political subdivisions |
|
| 58,140 |
|
|
| 0 |
|
|
| 3,170 |
|
|
| (67 | ) |
|
| 61,243 |
|
Mortgage-backed securities |
|
| 351,453 |
|
|
| 0 |
|
|
| 7,876 |
|
|
| (551 | ) |
|
| 358,778 |
|
Asset-backed securities |
|
| 116,349 |
|
|
| 0 |
|
|
| 1,890 |
|
|
| (646 | ) |
|
| 117,593 |
|
Commercial mortgage-backed securities |
|
| 105,509 |
|
|
| 0 |
|
|
| 6,094 |
|
|
| (644 | ) |
|
| 110,959 |
|
Corporate bonds |
|
| 223,387 |
|
|
| 0 |
|
|
| 17,703 |
|
|
| (373 | ) |
|
| 240,717 |
|
Foreign corporate bonds |
|
| 98,727 |
|
|
| 0 |
|
|
| 5,716 |
|
|
| (27 | ) |
|
| 104,416 |
|
Total fixed maturities |
| $ | 1,149,009 |
|
| $ | 0 |
|
| $ | 45,574 |
|
| $ | (3,397 | ) |
| $ | 1,191,186 |
|
As of SeptemberJune 30, 20202021 and December 31, 2019,2020, the Company’s investments in equity securities consist of the following:
(Dollars in thousands) |
| September 30, 2020 |
|
| December 31, 2019 |
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||||
Common stock |
| $ | 0 |
|
| $ | 135,329 |
|
| $ | 68,261 |
|
| $ | 60,379 |
|
Preferred stock |
|
| 11,268 |
|
|
| 11,656 |
|
|
| 22,408 |
|
|
| 11,683 |
|
Index funds that invest in fixed maturities |
|
| 64,673 |
|
|
| 54,648 |
|
|
| 0 |
|
|
| 26,928 |
|
Index funds that invest in common stock |
|
| 0 |
|
|
| 61,471 |
| ||||||||
Total |
| $ | 75,941 |
|
| $ | 263,104 |
|
| $ | 90,669 |
|
| $ | 98,990 |
|
As of SeptemberJune 30, 20202021 and December 31, 2019,2020, the Company held Fannie Mae mortgage pools that totaled as much as 4.6%2.6% and 4.2%3.9% of shareholders’ equity, respectively. Excluding the Fannie Mae pools, U.S. treasuries, agency bonds, index funds, limited liability companies, and limited partnerships, the Company did not hold any debt or equity investments in a single issuer in excess of 2%2.2% and 3%1.9% of shareholders' equity at SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively.
The amortized cost and estimated fair value of the Company’s fixed maturities portfolio classified as available for sale at SeptemberJune 30, 2020,2021, 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 |
|
| Amortized Cost |
|
| Estimated Fair Value |
| ||||
Due in one year or less |
| $ | 43,213 |
|
| $ | 43,642 |
|
| $ | 39,545 |
|
| $ | 39,976 |
|
Due in one year through five years |
|
| 218,132 |
|
|
| 228,538 |
|
|
| 181,497 |
|
|
| 189,605 |
|
Due in five years through ten years |
|
| 242,488 |
|
|
| 252,950 |
|
|
| 294,129 |
|
|
| 298,071 |
|
Due in ten years through fifteen years |
|
| 27,757 |
|
|
| 29,337 |
|
|
| 31,684 |
|
|
| 32,641 |
|
Due after fifteen years |
|
| 65,300 |
|
|
| 70,163 |
|
|
| 59,927 |
|
|
| 62,959 |
|
Mortgage-backed securities |
|
| 393,325 |
|
|
| 401,084 |
|
|
| 306,158 |
|
|
| 308,197 |
|
Asset-backed securities |
|
| 137,953 |
|
|
| 139,150 |
|
|
| 131,543 |
|
|
| 132,615 |
|
Commercial mortgage-backed securities |
|
| 132,271 |
|
|
| 138,911 |
|
|
| 106,120 |
|
|
| 110,033 |
|
Total |
| $ | 1,260,439 |
|
| $ | 1,303,775 |
|
| $ | 1,150,603 |
|
| $ | 1,174,097 |
|
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, 2021. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 5.
|
| 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 |
| $ | 92,627 |
|
| $ | (2,840 | ) |
| $ | 0 |
|
| $ | 0 |
|
| $ | 92,627 |
|
| $ | (2,840 | ) |
Agency obligations |
|
| 4,962 |
|
|
| (56 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 4,962 |
|
|
| (56 | ) |
Obligations of states and political subdivisions |
|
| 951 |
|
|
| (9 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 951 |
|
|
| (9 | ) |
Mortgage-backed securities |
|
| 124,366 |
|
|
| (2,142 | ) |
|
| 1,236 |
|
|
| (9 | ) |
|
| 125,602 |
|
|
| (2,151 | ) |
Asset-backed securities |
|
| 38,554 |
|
|
| (90 | ) |
|
| 10,923 |
|
|
| (139 | ) |
|
| 49,477 |
|
|
| (229 | ) |
Commercial mortgage-backed securities |
|
| 17,787 |
|
|
| (104 | ) |
|
| 1,391 |
|
|
| (143 | ) |
|
| 19,178 |
|
|
| (247 | ) |
Corporate bonds |
|
| 50,347 |
|
|
| (885 | ) |
|
| 2,666 |
|
|
| (88 | ) |
|
| 53,013 |
|
|
| (973 | ) |
Foreign corporate bonds |
|
| 17,720 |
|
|
| (227 | ) |
|
| 379 |
|
|
| (8 | ) |
|
| 18,099 |
|
|
| (235 | ) |
Total fixed maturities |
| $ | 347,314 |
|
| $ | (6,353 | ) |
| $ | 16,595 |
|
| $ | (387 | ) |
| $ | 363,909 |
|
| $ | (6,740 | ) |
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 September 30,December 31, 2020. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 5 of the notes to the consolidated financial statements in Item 1 of Part I of this report:5.
|
| Less than 12 months |
|
| 12 months or longer |
|
| Total (1) |
| |||||||||||||||
(Dollars in thousands) |
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
| ||||||
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury and agency obligations |
| $ | 37,486 |
|
| $ | (215 | ) |
| $ | 0 |
|
| $ | 0 |
|
| $ | 37,486 |
|
| $ | (215 | ) |
Obligations of states and political subdivisions |
|
| 2,471 |
|
|
| (188 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 2,471 |
|
|
| (188 | ) |
Mortgage-backed securities |
|
| 97,405 |
|
|
| (1,017 | ) |
|
| 1,421 |
|
|
| (103 | ) |
|
| 98,826 |
|
|
| (1,120 | ) |
Asset-backed securities |
|
| 31,769 |
|
|
| (733 | ) |
|
| 9,916 |
|
|
| (268 | ) |
|
| 41,685 |
|
|
| (1,001 | ) |
Commercial mortgage-backed securities |
|
| 12,098 |
|
|
| (689 | ) |
|
| 1,026 |
|
|
| (115 | ) |
|
| 13,124 |
|
|
| (804 | ) |
Corporate bonds |
|
| 28,337 |
|
|
| (1,135 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 28,337 |
|
|
| (1,135 | ) |
Foreign corporate bonds |
|
| 11,899 |
|
|
| (204 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 11,899 |
|
|
| (204 | ) |
Total fixed maturities |
| $ | 221,465 |
|
| $ | (4,181 | ) |
| $ | 12,363 |
|
| $ | (486 | ) |
| $ | 233,828 |
|
| $ | (4,667 | ) |
|
|
11
GLOBAL INDEMNITY GROUP, LLC
The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2019. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 5 of the notes to the consolidated financial statements in Item 1 of Part I of this report:
|
| Less than 12 months |
|
| 12 months or longer |
|
| Total (1) |
| |||||||||||||||
(Dollars in thousands) |
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
| ||||||
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury and agency obligations |
| $ | 35,633 |
|
| $ | (797 | ) |
| $ | 0 |
|
| $ | 0 |
|
| $ | 35,633 |
|
| $ | (797 | ) |
Obligations of states and political subdivisions |
|
| 27,180 |
|
|
| (271 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 27,180 |
|
|
| (271 | ) |
Mortgage-backed securities |
|
| 93,579 |
|
|
| (244 | ) |
|
| 902 |
|
|
| (7 | ) |
|
| 94,481 |
|
|
| (251 | ) |
Asset-backed securities |
|
| 43,402 |
|
|
| (167 | ) |
|
| 16,152 |
|
|
| (253 | ) |
|
| 59,554 |
|
|
| (420 | ) |
Commercial mortgage-backed securities |
|
| 25,698 |
|
|
| (196 | ) |
|
| 1,945 |
|
|
| (13 | ) |
|
| 27,643 |
|
|
| (209 | ) |
Corporate bonds |
|
| 19,407 |
|
|
| (79 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 19,407 |
|
|
| (79 | ) |
Foreign corporate bonds |
|
| 4,822 |
|
|
| (20 | ) |
|
| 2,035 |
|
|
| (3 | ) |
|
| 6,857 |
|
|
| (23 | ) |
Total fixed maturities |
| $ | 249,721 |
|
| $ | (1,774 | ) |
| $ | 21,034 |
|
| $ | (276 | ) |
| $ | 270,755 |
|
| $ | (2,050 | ) |
|
|
|
| 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 |
| $ | 81,999 |
|
| $ | (1,089 | ) |
| $ | 0 |
|
| $ | 0 |
|
| $ | 81,999 |
|
| $ | (1,089 | ) |
Obligations of states and political subdivisions |
|
| 2,588 |
|
|
| (67 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 2,588 |
|
|
| (67 | ) |
Mortgage-backed securities |
|
| 57,350 |
|
|
| (551 | ) |
|
| 4 |
|
|
| 0 |
|
|
| 57,354 |
|
|
| (551 | ) |
Asset-backed securities |
|
| 22,268 |
|
|
| (389 | ) |
|
| 13,354 |
|
|
| (257 | ) |
|
| 35,622 |
|
|
| (646 | ) |
Commercial mortgage-backed securities |
|
| 10,294 |
|
|
| (526 | ) |
|
| 1,154 |
|
|
| (118 | ) |
|
| 11,448 |
|
|
| (644 | ) |
Corporate bonds |
|
| 7,783 |
|
|
| (373 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 7,783 |
|
|
| (373 | ) |
Foreign corporate bonds |
|
| 885 |
|
|
| (27 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 885 |
|
|
| (27 | ) |
Total fixed maturities |
| $ | 183,167 |
|
| $ | (3,022 | ) |
| $ | 14,512 |
|
| $ | (375 | ) |
| $ | 197,679 |
|
| $ | (3,397 | ) |
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.
12
GLOBAL INDEMNITY GROUP, LLCThe 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 was $5.6 million and $5.7 million as of June 30, 2021 and December 31, 2020, respectively.
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. treasury and agency obligationstreasuries – As of SeptemberJune 30, 2020,2021, gross unrealized losses related to U.S. treasury and agency obligationstreasuries were $0.215$2.840 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, macroeconomic and market analysis is conducted in evaluating these securities. Consideration is given to the interest rate environment, duration and yield curve management of the portfolio, sector allocation and security selection. Based on the analysis performed, the Company did not recognize a credit loss on U.S. treasurytreasuries during the period.
Agency obligations – As of June 30, 2021, gross unrealized losses related to agency obligations were $0.056 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, macroeconomic and market analysis is conducted in evaluating these securities. Consideration is given to the interest rate environment, duration and yield curve management of the portfolio, sector allocation and security selection. Based on the analysis performed, the Company did not recognize a credit loss on agency obligations during the period.
Obligations of states and political subdivisions – As of SeptemberJune 30, 2020,2021, gross unrealized losses related to obligations of states and political subdivisions were $0.188$0.009 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, elements that may influence the performance of the municipal bond market are considered in evaluating these securities such as investor expectations, supply and demand patterns, and current versus historical yield and spread relationships. The analysis relies on the output of fixed income credit analysts, as well as dedicated municipal bond analysts who perform extensive in-house fundamental analysis on each issuer, regardless of their rating by the major agencies. Based on the analysis performed, the Company did not recognize a credit loss on obligations of states and political subdivisions during the period.
12
GLOBAL INDEMNITY GROUP, LLC
Mortgage-backed securities (“MBS”) – As of SeptemberJune 30, 2020,2021, gross unrealized losses related to mortgage-backed securities were $1.120$2.151 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, mortgage-backed securities are modeled to project principal losses under downside, base, and upside scenarios for the economy and home prices. The primary assumption that drives the security and loan level modeling is the Home Price Index (“HPI”) projection. These forecasts incorporate not just national macro-economic trends, but also regional impacts to arrive at the most granular and accurate projections. These assumptions are incorporated into the model as a basis to generate delinquency probabilities, default curves, loss severity curves, and voluntary prepayment curves at the loan level within each deal. The model utilizes HPI-adjusted current LTV,loan to value, payment history, loan terms, loan modification history, and borrower characteristics as inputs to generate expected cash flows and principal loss for each bond under various scenarios. Based on the analysis performed, the Company did not recognize a credit loss on mortgage-backed securities during the period.
Asset backed securities (“ABS”) - As of SeptemberJune 30, 2020,2021, gross unrealized losses related to asset backed securities were $1.001$0.229 million. The weighted average credit enhancement for the Company’s asset backed portfolio is 33.3.32.1. This represents the percentage of pool losses that can occur before an asset backed security will incur its first dollar of principal losses. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, every ABS transaction is analyzed on a stand-alone basis. This analysis involves a thorough review of the collateral, prepayment, and structural risk in each transaction. Additionally, the analysis includes an in-depth credit analysis of the originator and servicer of the collateral. The analysis projects an expected loss for a deal given a set of assumptions specific to the asset type. These assumptions are used to calculate at what level of losses the deal will incur its first dollar of principal loss. The major assumptions used to calculate this ratio are loss severities, recovery lags, and no advances on principal and interest. Based on the analysis performed, the Company did not recognize a credit loss on asset backed securities during the period.
Commercial mortgage-backed securities (“CMBS”) - As of SeptemberJune 30, 2020,2021, gross unrealized losses related to the CMBS portfolio were $0.804$0.247 million. The weighted average credit enhancement for the Company’s CMBS portfolio is 32.4.34.5. This represents the percentage of pool losses that can occur before a commercial mortgage-backed security will incur its first dollar of principal loss. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, a loan level analysis is utilized where every underlying CMBS loan is re-underwritten based on a set of assumptions reflecting expectations for the future path of the economy. Each loan is analyzed over time using a series of tests to determine if a credit event will occur during the life of the loan. Inherent in this process are several economic scenarios and their corresponding rent/vacancy and capital market states. The five primary credit events that frame the analysis include loan modifications, term default, balloon default, extension, and ability to pay off at balloon. The resulting output is the expected loss adjusted cash flows for each bond under the base case and distressed scenarios. Based on the analysis performed, the Company did not recognize a credit loss on commercial mortgage-backed securities during the period.
Corporate bonds - As of SeptemberJune 30, 2020,2021, gross unrealized losses related to corporate bonds were $1.135$0.973 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, analysis for this
13
GLOBAL INDEMNITY GROUP, LLC
asset class includes maintaining detailed financial models that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default. Based on the analysis performed, the Company did not recognize a credit loss on corporate bonds during the period.
Foreign bonds – As of SeptemberJune 30, 2020,2021, gross unrealized losses related to foreign bonds were $0.204$0.235 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, detailed financial models are maintained that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default. Based on the analysis performed, the Company did not recognize a credit loss on foreign bonds during the period.
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 other than temporary impairments (“OTTI”) on its investment portfolio for the quarter and nine months ended September 30, 2019:
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||
(Dollars in thousands) |
| 2019 |
|
| 2019 |
| ||
Fixed maturities: |
|
|
|
|
|
|
|
|
OTTI losses, gross |
| $ | 0 |
|
| $ | (1,897 | ) |
Portion of loss recognized in other comprehensive income (pre-tax) |
|
| 0 |
|
|
| 0 |
|
Net impairment losses on fixed maturities recognized in earnings |
| $ | 0 |
|
| $ | (1,897 | ) |
The following table is an analysis of the credit losses recognized in earnings on fixed maturities held by the Company for the quarter and nine months ended September 30, 2019 for which a portion of the OTTI loss was recognized in other comprehensive income.
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||
(Dollars in thousands) |
| 2019 |
|
| 2019 |
| ||
Balance at beginning of period |
| $ | 13 |
|
| $ | 13 |
|
Additions where no OTTI was previously recorded |
|
| 0 |
|
|
| 0 |
|
Additions where an OTTI was previously recorded |
|
| 0 |
|
|
| 0 |
|
Reductions for securities for which the company intends to sell or more likely than not will be required to sell before recovery |
|
| 0 |
|
|
| 0 |
|
Reductions reflecting increases in expected cashflows to be collected |
|
| 0 |
|
|
| 0 |
|
Reductions for securities sold during the period |
|
| 0 |
|
|
| 0 |
|
Balance at end of period |
| $ | 13 |
|
| $ | 13 |
|
14
GLOBAL INDEMNITY GROUP, LLC
Accumulated Other Comprehensive Income, Net of Tax
Accumulated other comprehensive income, net of tax, as of SeptemberJune 30, 20202021 and December 31, 20192020 was as follows:
(Dollars in thousands) |
| September 30, 2020 |
|
| December 31, 2019 |
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||||
Net unrealized gains (losses) from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities |
| $ | 43,336 |
|
| $ | 21,591 |
|
| $ | 23,494 |
|
| $ | 42,177 |
|
Foreign currency fluctuations |
|
| (587 | ) |
|
| (1,032 | ) |
|
| (41 | ) |
|
| 161 |
|
Deferred taxes |
|
| (7,029 | ) |
|
| (2,950 | ) |
|
| (4,485 | ) |
|
| (8,030 | ) |
Accumulated other comprehensive income, net of tax |
| $ | 35,720 |
|
| $ | 17,609 |
|
| $ | 18,968 |
|
| $ | 34,308 |
|
The following tables present the changes in accumulated other comprehensive income, net of tax, by componentcomponents, for the quarters and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
Quarter Ended September 30, 2020 (Dollars In Thousands) |
| Unrealized Gains and Losses on Available for Sale Securities |
|
| Foreign Currency Items |
|
| Accumulated Other Comprehensive Income |
| |||||||||||||||
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 |
| $ | 38,736 |
|
| $ | (1,043 | ) |
| $ | 37,693 |
|
| $ | 9,819 |
|
| $ | 34 |
|
| $ | 9,853 |
|
Other comprehensive income before reclassification, before tax |
|
| 1,852 |
|
|
| 456 |
|
|
| 2,308 |
|
|
| 11,797 |
|
|
| (84 | ) |
|
| 11,713 |
|
Amounts reclassified from accumulated other comprehensive income, before tax |
|
| (2,276 | ) |
|
| 0 |
|
|
| (2,276 | ) |
|
| (453 | ) |
|
| 0 |
|
|
| (453 | ) |
Other comprehensive income, before tax |
|
| (424 | ) |
|
| 456 |
|
|
| 32 |
|
|
| 11,344 |
|
|
| (84 | ) |
|
| 11,260 |
|
Income tax (expense) benefit |
|
| (2,128 | ) |
|
| 123 |
|
|
| (2,005 | ) | ||||||||||||
Income tax benefit |
|
| (2,162 | ) |
|
| 17 |
|
|
| (2,145 | ) | ||||||||||||
Ending balance, net of tax |
| $ | 36,184 |
|
| $ | (464 | ) |
| $ | 35,720 |
|
| $ | 19,001 |
|
| $ | (33 | ) |
| $ | 18,968 |
|
Quarter Ended September 30, 2019 (Dollars In Thousands) |
| Unrealized Gains and Losses on Available for Sale Securities |
|
| Foreign Currency Items |
|
| Accumulated Other Comprehensive Income |
| |||||||||||||||
Quarter Ended June 30, 2020 (Dollars In Thousands) |
| Unrealized Gains and Losses on Available for Sale Securities |
|
| Foreign Currency Items |
|
| Accumulated Other Comprehensive Income |
| |||||||||||||||
Beginning balance, net of tax |
| $ | 17,745 |
|
| $ | (1,203 | ) |
| $ | 16,542 |
|
| $ | 14,895 |
|
| $ | (2,335 | ) |
| $ | 12,560 |
|
Other comprehensive income (loss) before reclassification, before tax |
|
| 10,767 |
|
|
| 200 |
|
|
| 10,967 |
| ||||||||||||
Other comprehensive income before reclassification, before tax |
|
| 37,805 |
|
|
| 1,292 |
|
|
| 39,097 |
| ||||||||||||
Amounts reclassified from accumulated other comprehensive income, before tax |
|
| (946 | ) |
|
| 0 |
|
|
| (946 | ) |
|
| (12,820 | ) |
|
| 0 |
|
|
| (12,820 | ) |
Other comprehensive income (loss), before tax |
|
| 9,821 |
|
|
| 200 |
|
|
| 10,021 |
| ||||||||||||
Other comprehensive income, before tax |
|
| 24,985 |
|
|
| 1,292 |
|
|
| 26,277 |
| ||||||||||||
Income tax expense |
|
| (1,249 | ) |
|
| 0 |
|
|
| (1,249 | ) |
|
| (1,144 | ) |
|
| 0 |
|
|
| (1,144 | ) |
Ending balance, net of tax |
| $ | 26,317 |
|
| $ | (1,003 | ) |
| $ | 25,314 |
|
| $ | 38,736 |
|
| $ | (1,043 | ) |
| $ | 37,693 |
|
Nine Months Ended September 30, 2020 (Dollars In Thousands) |
| Unrealized Gains and Losses on Available for Sale Securities |
|
| Foreign Currency Items |
|
| Accumulated Other Comprehensive Income |
| |||||||||||||||
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 |
| $ | 18,641 |
|
| $ | (1,032 | ) |
| $ | 17,609 |
|
| $ | 34,181 |
|
| $ | 127 |
|
| $ | 34,308 |
|
Other comprehensive income before reclassification, before tax |
|
| 38,773 |
|
|
| 445 |
|
|
| 39,218 |
|
|
| (19,389 | ) |
|
| (202 | ) |
|
| (19,591 | ) |
Amounts reclassified from accumulated other comprehensive income, before tax |
|
| (17,028 | ) |
|
| 0 |
|
|
| (17,028 | ) |
|
| 706 |
|
|
| 0 |
|
|
| 706 |
|
Other comprehensive income, before tax |
|
| 21,745 |
|
|
| 445 |
|
|
| 22,190 |
|
|
| (18,683 | ) |
|
| (202 | ) |
|
| (18,885 | ) |
Income tax (expense) benefit |
|
| (4,202 | ) |
|
| 123 |
|
|
| (4,079 | ) |
|
| 3,503 |
|
|
| 42 |
|
|
| 3,545 |
|
Ending balance, net of tax |
| $ | 36,184 |
|
| $ | (464 | ) |
| $ | 35,720 |
|
| $ | 19,001 |
|
| $ | (33 | ) |
| $ | 18,968 |
|
1514
GLOBAL INDEMNITY GROUP, LLC
Nine Months Ended September 30, 2019 (Dollars In Thousands) |
| Unrealized Gains and Losses on Available for Sale Securities |
|
| Foreign Currency Items |
|
| Accumulated Other Comprehensive Income |
| |||||||||||||||
Six Months Ended June 30, 2020 (Dollars In Thousands) |
| Unrealized Gains and Losses on Available for Sale Securities |
|
| Foreign Currency Items |
|
| Accumulated Other Comprehensive Income |
| |||||||||||||||
Beginning balance, net of tax |
| $ | (19,897 | ) |
| $ | (1,334 | ) |
| $ | (21,231 | ) |
| $ | 18,641 |
|
| $ | (1,032 | ) |
| $ | 17,609 |
|
Other comprehensive income before reclassification, before tax |
|
| 55,960 |
|
|
| 331 |
|
|
| 56,291 |
| ||||||||||||
Other comprehensive income (loss) before reclassification, before tax |
|
| 36,921 |
|
|
| (11 | ) |
|
| 36,910 |
| ||||||||||||
Amounts reclassified from accumulated other comprehensive income, before tax |
|
| (2,834 | ) |
|
| 0 |
|
|
| (2,834 | ) |
|
| (14,752 | ) |
|
| 0 |
|
|
| (14,752 | ) |
Other comprehensive income, before tax |
|
| 53,126 |
|
|
| 331 |
|
|
| 53,457 |
| ||||||||||||
Other comprehensive income (loss), before tax |
|
| 22,169 |
|
|
| (11 | ) |
|
| 22,158 |
| ||||||||||||
Income tax expense |
|
| (6,912 | ) |
|
| 0 |
|
|
| (6,912 | ) |
|
| (2,074 | ) |
|
| 0 |
|
|
| (2,074 | ) |
Ending balance, net of tax |
| $ | 26,317 |
|
| $ | (1,003 | ) |
| $ | 25,314 |
|
| $ | 38,736 |
|
| $ | (1,043 | ) |
| $ | 37,693 |
|
The reclassifications out of accumulated other comprehensive income for the quarters and ninesix months ended SeptemberJune 30, 20202021 and 20192020 were as follows:
|
|
|
| Amounts Reclassified from Accumulated Other Comprehensive Income |
|
|
|
| Amounts Reclassified from Accumulated Other Comprehensive Income |
| ||||||||||
(Dollars in thousands) |
|
|
| Quarters Ended September 30, |
|
|
|
| Quarters Ended June 30, |
| ||||||||||
Details about Accumulated Other Comprehensive Income Components |
| Affected Line Item in the Consolidated Statements of Operations |
| 2020 |
|
| 2019 |
|
| Affected Line Item in the Consolidated Statements of Operations |
| 2021 |
|
| 2020 |
| ||||
Unrealized gains and losses on available for sale securities |
| Other net realized investment (gains) losses |
| $ | (2,276 | ) |
| $ | (946 | ) |
| Other net realized investment (gains) losses |
| $ | (453 | ) |
| $ | (12,820 | ) |
|
| Other than temporary impairment losses on investments |
|
| 0 |
|
|
| 0 |
|
| Income tax expense (benefit) |
|
| 158 |
|
|
| 3,432 |
|
|
| Total before tax |
|
| (2,276 | ) |
|
| (946 | ) |
| Total reclassifications, net of tax |
| $ | (295 | ) |
| $ | (9,388 | ) |
|
| Income tax expense (benefit) |
|
| 172 |
|
|
| 99 |
| ||||||||||
|
| Unrealized gains and losses on available for sale securities, net of tax |
|
| (2,104 | ) |
|
| (847 | ) | ||||||||||
Foreign currency items |
| Other net realized investment (gains) losses |
|
| 0 |
|
|
| 0 |
| ||||||||||
|
| Income tax expense |
|
| 0 |
|
|
| 0 |
| ||||||||||
|
| Foreign currency items, net of tax |
|
| 0 |
|
|
| 0 |
| ||||||||||
Total reclassifications |
| Total reclassifications, net of tax |
| $ | (2,104 | ) |
| $ | (847 | ) |
|
|
|
| Amounts Reclassified from Accumulated Other Comprehensive Income |
|
|
|
| Amounts Reclassified from Accumulated Other Comprehensive Income |
| ||||||||||
(Dollars in thousands) |
|
|
| Nine Months Ended September 30, |
|
|
|
| Six Months Ended June 30, |
| ||||||||||
Details about Accumulated Other Comprehensive Income Components |
| Affected Line Item in the Consolidated Statements of Operations |
| 2020 |
|
| 2019 |
|
| Affected Line Item in the Consolidated Statements of Operations |
| 2021 |
|
| 2020 |
| ||||
Unrealized gains and losses on available for sale securities |
| Other net realized investment (gains) losses |
| $ | (17,028 | ) |
| $ | (4,731 | ) |
| Other net realized investment (gains) losses |
| $ | 706 |
|
| $ | (14,752 | ) |
|
| Other than temporary impairment losses on investments |
|
| 0 |
|
|
| 1,897 |
|
| Income tax expense (benefit) |
|
| (185 | ) |
|
| 3,651 |
|
|
| Total before tax |
|
| (17,028 | ) |
|
| (2,834 | ) |
| Total reclassifications, net of tax |
| $ | 521 |
|
| $ | (11,101 | ) |
|
| Income tax expense (benefit) |
|
| 3,823 |
|
|
| 169 |
| ||||||||||
|
| Unrealized gains and losses on available for sale securities, net of tax |
|
| (13,205 | ) |
|
| (2,665 | ) | ||||||||||
Foreign currency items |
| Other net realized investment (gains) losses |
|
| 0 |
|
|
| 0 |
| ||||||||||
|
| Income tax expense |
|
| 0 |
|
|
| 0 |
| ||||||||||
|
| Foreign currency items, net of tax |
|
| 0 |
|
|
| 0 |
| ||||||||||
Total reclassifications |
| Total reclassifications, net of tax |
| $ | (13,205 | ) |
| $ | (2,665 | ) |
16
15
GLOBAL INDEMNITY GROUP, LLC
Net Realized Investment Gains (Losses)
The components of net realized investment gains (losses) for the quarters and ninesix months ended SeptemberJune 30, 20202021 and 20192020 were as follows:
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains |
| $ | 2,705 |
|
| $ | 1,054 |
|
| $ | 21,685 |
|
| $ | 5,765 |
|
| $ | 2,300 |
|
| $ | 16,738 |
|
| $ | 5,678 |
|
| $ | 18,980 |
|
Gross realized losses |
|
| (429 | ) |
|
| (108 | ) |
|
| (4,657 | ) |
|
| (2,931 | ) |
|
| (1,847 | ) |
|
| (3,918 | ) |
|
| (6,384 | ) |
|
| (4,228 | ) |
Net realized gains (losses) |
|
| 2,276 |
|
|
| 946 |
|
|
| 17,028 |
|
|
| 2,834 |
|
|
| 453 |
|
|
| 12,820 |
|
|
| (706 | ) |
|
| 14,752 |
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains |
|
| 4,942 |
|
|
| 1,681 |
|
|
| 14,669 |
|
|
| 26,936 |
|
|
| 4,338 |
|
|
| 29,402 |
|
|
| 8,784 |
|
|
| 11,507 |
|
Gross realized losses |
|
| (55 | ) |
|
| (3,146 | ) |
|
| (31,870 | ) |
|
| (9,076 | ) |
|
| (943 | ) |
|
| (1,508 | ) |
|
| (1,021 | ) |
|
| (33,595 | ) |
Net realized gains (losses) |
|
| 4,887 |
|
|
| (1,465 | ) |
|
| (17,201 | ) |
|
| 17,860 |
|
|
| 3,395 |
|
|
| 27,894 |
|
|
| 7,763 |
|
|
| (22,088 | ) |
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains |
|
| 1,520 |
|
|
| 341 |
|
|
| 19,514 |
|
|
| 341 |
|
|
| 1,366 |
|
|
| 7,625 |
|
|
| 3,719 |
|
|
| 19,401 |
|
Gross realized losses |
|
| (1,360 | ) |
|
| (2,512 | ) |
|
| (41,673 | ) |
|
| (9,745 | ) |
|
| (1,381 | ) |
|
| (9,832 | ) |
|
| (3,124 | ) |
|
| (41,720 | ) |
Net realized gains (losses) (1) |
|
| 160 |
|
|
| (2,171 | ) |
|
| (22,159 | ) |
|
| (9,404 | ) |
|
| (15 | ) |
|
| (2,207 | ) |
|
| 595 |
|
|
| (22,319 | ) |
Total net realized investment gains (losses) |
| $ | 7,323 |
|
| $ | (2,690 | ) |
| $ | (22,332 | ) |
| $ | 11,290 |
|
| $ | 3,833 |
|
| $ | 38,507 |
|
| $ | 7,652 |
|
| $ | (29,655 | ) |
(1) | Includes periodic net interest settlements related to the derivatives of $1.4 million and |
Net realized investment gains (losses) for the quarter and nine months ended September 30, 2020 were primarily due to the impact of changes in fair value due to the recent disruption in the global financial markets.
The following table shows the calculation of the portion of realized gains and losses related to equity securities held as of SeptemberJune 30, 20202021 and 2019:2020:
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net gains and (losses) recognized during the period on equity securities |
| $ | 4,887 |
|
| $ | (1,465 | ) |
| $ | (17,201 | ) |
| $ | 17,860 |
|
Less: Net gains (losses) recognized during the period on equity securities sold during the period |
|
| 3,419 |
|
|
| (614 | ) |
|
| (366 | ) |
|
| 9,836 |
|
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date |
| $ | 1,468 |
|
| $ | (851 | ) |
| $ | (16,835 | ) |
| $ | 8,024 |
|
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net gains (losses) recognized during the period on equity securities |
| $ | 3,395 |
|
| $ | 27,894 |
|
| $ | 7,763 |
|
| $ | (22,088 | ) |
Less: net gains (losses) recognized during the period on equity securities sold during the period |
|
| 1,429 |
|
|
| 436 |
|
|
| 2,805 |
|
|
| (3,785 | ) |
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date |
| $ | 1,966 |
|
| $ | 27,458 |
|
| $ | 4,958 |
|
| $ | (18,303 | ) |
The proceeds from sales and redemptions of available for sale and equity securities resulting in net realized investment gains (losses) for the ninesix months ended SeptemberJune 30, 20202021 and 20192020 were as follows:
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Fixed maturities |
| $ | 600,962 |
|
| $ | 642,049 |
|
| $ | 636,040 |
|
| $ | 427,111 |
|
Equity securities |
|
| 563,926 |
|
|
| 206,212 |
|
|
| 42,821 |
|
|
| 378,915 |
|
1716
GLOBAL INDEMNITY GROUP, LLC
Net Investment Income
The sources of net investment income for the quarters and ninesix months ended SeptemberJune 30, 20202021 and 20192020 were as follows:
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Fixed maturities |
| $ | 7,421 |
|
| $ | 8,806 |
|
| $ | 25,013 |
|
| $ | 27,692 |
|
| $ | 6,648 |
|
| $ | 8,551 |
|
| $ | 13,475 |
|
| $ | 17,592 |
|
Equity securities |
|
| 1,390 |
|
|
| 1,704 |
|
|
| 4,161 |
|
|
| 4,384 |
|
|
| 618 |
|
|
| 1,407 |
|
|
| 1,293 |
|
|
| 2,771 |
|
Cash and cash equivalents |
|
| 260 |
|
|
| 372 |
|
|
| 492 |
|
|
| 1,242 |
|
|
| 214 |
|
|
| 52 |
|
|
| 264 |
|
|
| 232 |
|
Other invested assets |
|
| 3,485 |
|
|
| 1,280 |
|
|
| (8,004 | ) |
|
| 1,394 |
|
|
| 3,788 |
|
|
| (12,022 | ) |
|
| 6,785 |
|
|
| (11,489 | ) |
Total investment income |
|
| 12,556 |
|
|
| 12,162 |
|
|
| 21,662 |
|
|
| 34,712 |
|
|
| 11,268 |
|
|
| (2,012 | ) |
|
| 21,817 |
|
|
| 9,106 |
|
Investment expense |
|
| (810 | ) |
|
| (814 | ) |
|
| (2,146 | ) |
|
| (2,319 | ) |
|
| (635 | ) |
|
| (347 | ) |
|
| (1,348 | ) |
|
| (1,336 | ) |
Net investment income |
| $ | 11,746 |
|
| $ | 11,348 |
|
| $ | 19,516 |
|
| $ | 32,393 |
|
| $ | 10,633 |
|
| $ | (2,359 | ) |
| $ | 20,469 |
|
| $ | 7,770 |
|
The Company’s total investment return on a pre-tax basis for the quarters and ninesix months ended SeptemberJune 30, 20202021 and 20192020 were as follows:
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Net investment income |
| $ | 11,746 |
|
| $ | 11,348 |
|
| $ | 19,516 |
|
| $ | 32,393 |
|
| $ | 10,633 |
|
| $ | (2,359 | ) |
| $ | 20,469 |
|
| $ | 7,770 |
|
Net realized investment gains (losses) |
|
| 7,323 |
|
|
| (2,690 | ) |
|
| (22,332 | ) |
|
| 11,290 |
|
|
| 3,833 |
|
|
| 38,507 |
|
|
| 7,652 |
|
|
| (29,655 | ) |
Change in unrealized holding gains and losses |
|
| 32 |
|
|
| 10,021 |
|
|
| 22,190 |
|
|
| 53,457 |
| ||||||||||||||||
Change in unrealized holding gains (losses) |
|
| 11,260 |
|
|
| 26,277 |
|
|
| (18,885 | ) |
|
| 22,158 |
| ||||||||||||||||
Net realized and unrealized investment returns |
|
| 7,355 |
|
|
| 7,331 |
|
|
| (142 | ) |
|
| 64,747 |
|
|
| 15,093 |
|
|
| 64,784 |
|
|
| (11,233 | ) |
|
| (7,497 | ) |
Total investment return |
| $ | 19,101 |
|
| $ | 18,679 |
|
| $ | 19,374 |
|
| $ | 97,140 |
|
| $ | 25,726 |
|
| $ | 62,425 |
|
| $ | 9,236 |
|
| $ | 273 |
|
Total investment return % (1) |
|
| 1.2 | % |
|
| 1.2 | % |
|
| 1.3 | % |
|
| 6.2 | % |
|
| 1.8 | % |
|
| 3.9 | % |
|
| 0.6 | % |
|
| 0.0 | % |
Average investment portfolio (2) |
| $ | 1,541,227 |
|
| $ | 1,585,165 |
|
| $ | 1,528,005 |
|
| $ | 1,562,177 |
|
| $ | 1,452,754 |
|
| $ | 1,591,987 |
|
| $ | 1,463,027 |
|
| $ | 1,620,186 |
|
(1) | Not annualized. |
(2) | Average of total cash and invested assets, net of receivable/payable for securities purchased and sold, as of the beginning and end of the period. |
As of SeptemberJune 30, 20202021 and December 31, 2019,2020, the Company did 0t own any fixed maturity securities that were non-income producing for the preceding twelve months.
Insurance Enhanced Asset-Backed and Credit Securities
As of SeptemberJune 30, 2020,2021, the Company held insurance enhanced bonds with a market value of approximately $26.0$30.3 million which represented 1.8%2.0% of the Company’s total cash and invested assets, net of payable/ receivable for securities purchased and sold.
The insurance enhanced bonds are comprised of $15.3 million of municipal bonds, $10.6$7.2 million of commercial mortgage-backed securities, and less than $0.1$7.8 million of collateralized mortgage obligations. The financial guarantors of the Company’s $26.0$30.3 million of insurance enhanced commercial-mortgage-backed, municipal securities, and collateralized mortgage obligations include Municipal Bond Insurance Association ($3.22.8 million), Assured Guaranty Corporation ($10.09.6 million), Federal Home Loan Mortgage Corporation ($10.615.0 million), Federal National Mortgage Association ($0.3 million), Ambac Financial Group ($2.21.9 million), School Bond Guaranty Program ($0.2 million), and Federal Deposit Insurance Corporation (less than $0.1Higher Education State Aid Intercept Program ($0.5 million).
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 SeptemberJune 30, 2020.2021.
1817
GLOBAL INDEMNITY GROUP, LLC
Bonds Held on Deposit
Certain cash balances, cash equivalents, equity securities, 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 pursuant to intercompany reinsurance agreements.trust. The fair values were as follows as of SeptemberJune 30, 20202021 and December 31, 2019:2020:
|
| Estimated Fair Value |
|
| Estimated Fair Value |
| ||||||||||
(Dollars in thousands) |
| September 30, 2020 |
|
| December 31, 2019 |
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||||
On deposit with governmental authorities |
| $ | 27,082 |
|
| $ | 26,431 |
|
| $ | 26,762 |
|
| $ | 26,966 |
|
Intercompany trusts held for the benefit of U.S. policyholders |
|
| 142,496 |
|
|
| 179,116 |
| ||||||||
Held in trust pursuant to third party requirements |
|
| 84,174 |
|
|
| 133,122 |
|
|
| 81,033 |
|
|
| 100,234 |
|
Letter of credit held for third party requirements |
|
| 2,645 |
|
|
| 1,458 |
|
|
| 2,512 |
|
|
| 3,970 |
|
Securities held as collateral |
|
| 555 |
|
|
| 91,229 |
|
|
| 0 |
|
|
| 494 |
|
Total |
| $ | 256,952 |
|
| $ | 431,356 |
|
| $ | 110,307 |
|
| $ | 131,664 |
|
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 34 VIE’s for which it is not the primary beneficiary. These investments are accounted for under the equity method of accounting as their ownership interest exceeds 3% of their respective investments.
The carrying value of one of the Company’s VIE’s, which invests in distressed securities and assets, was $11.3$9.9 million and $13.5$10.8 million as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $25.5$24.1 million and $27.7$25.0 million at SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. The carrying value of a second VIE that also invests in distressed securities and assets was $17.0$13.7 million and $24.0$15.7 million at SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $34.0$30.7 million and $41.0$32.7 million at SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. The carrying value and maximum exposure to loss of a third VIE that invests in REITReal Estate Investment Trust (“REIT”) qualifying assets was $9.5$11.6 million and $9.8$10.5 million as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. The Company’scarrying value and maximum exposure to loss from thisof a fourth VIE, which factorsinvests in future funding commitments,a broad portfolio of non-investment grade loans, was $9.5$105.7 million and $10.3$60.0 million at Septemberas of June 30, 20202021 and December 31, 2019,2020, respectively. The Company’s investment in VIEs is included in other invested assets on the consolidated balance sheet with changes in carrying value recorded in the consolidated statements of operations.
4.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. In 2019, theThe Company began to utilizealso utilizes 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. The Company posts collateral and settles variation margin in cash on a daily basis equal to the amount of the futures contracts’ change in value scaled by a multiplier.
18
GLOBAL INDEMNITY GROUP, LLC
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
19
GLOBAL INDEMNITY GROUP, LLC
interest rate swaps, the Company relies on the forward interest rate curve and information obtained from a third party financial institution.
The following table summarizes information on the location and the gross amount of the derivatives on the consolidated balance sheets as of SeptemberJune 30, 20202021 and December 31, 2019:2020:
(Dollars in thousands) |
|
|
| September 30, 2020 |
|
| December 31, 2019 |
|
|
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments under ASC 815 |
| Balance Sheet Location |
| Notional Amount |
|
| Fair Value |
|
| Notional Amount |
|
| Fair Value |
|
| Balance Sheet Location |
| Notional Amount |
|
| Fair Value |
|
| Notional Amount |
|
| Fair Value |
| ||||||||
Interest rate swap agreements |
| Other assets/liabilities |
| $ | 200,000 |
|
| $ | (17,931 | ) |
| $ | 200,000 |
|
| $ | (10,275 | ) |
| Other assets/liabilities |
| $ | 213,022 |
|
| $ | (12,712 | ) |
| $ | 213,022 |
|
| $ | (16,430 | ) |
Futures contracts on bonds (1) |
| Other assets/liabilities |
|
| 30,418 |
|
|
| 0 |
|
|
| 16,894 |
|
|
| 0 |
|
| Other assets/liabilities |
|
| 0 |
|
|
| 0 |
|
|
| 28,996 |
|
|
| 0 |
|
Futures contracts on equities (1) |
| Other assets/liabilities |
|
| 0 |
|
|
| 0 |
|
|
| 57,816 |
|
|
| 0 |
| ||||||||||||||||||
Total |
|
|
| $ | 230,418 |
|
| $ | (17,931 | ) |
| $ | 274,710 |
|
| $ | (10,275 | ) | ||||||||||||||||||
Total (2) |
|
|
| $ | 213,022 |
|
| $ | (12,712 | ) |
| $ | 242,018 |
|
| $ | (16,430 | ) |
(1) | Futures are settled daily such that their fair value is not reflected in the consolidated statements of financial position |
(2) | 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 ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
|
|
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
|
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in thousands) |
| Consolidated Statements of Operations Line |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| Consolidated Statements of Operations Line |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Interest rate swap agreements |
| Net realized investment gains (losses) |
| $ | 45 |
|
| $ | (1,831 | ) |
| $ | (10,827 | ) |
| $ | (9,064 | ) |
| Net realized investment gains (losses) |
| $ | (15 | ) |
| $ | (1,449 | ) |
| $ | 914 |
|
| $ | (10,872 | ) |
Futures contracts on bonds |
| Net realized investment gains (losses) |
|
| 115 |
|
|
| 15 |
|
|
| (2,343 | ) |
|
| 15 |
|
| Net realized investment gains (losses) |
|
| 0 |
|
|
| (59 | ) |
|
| (319 | ) |
|
| (2,458 | ) |
Futures contracts on equities |
| Net realized investment gains (losses) |
|
| 0 |
|
|
| (355 | ) |
|
| (8,989 | ) |
|
| (355 | ) |
| Net realized investment gains (losses) |
|
| 0 |
|
|
| (699 | ) |
|
| 0 |
|
|
| (8,989 | ) |
Total |
|
|
| $ | 160 |
|
| $ | (2,171 | ) |
| $ | (22,159 | ) |
| $ | (9,404 | ) |
|
|
| $ | (15 | ) |
| $ | (2,207 | ) |
| $ | 595 |
|
| $ | (22,319 | ) |
As of both SeptemberJune 30, 20202021 and December 31, 2019,2020, the Company is due $3.0$2.4 million and $2.8 million, respectively, for funds it needed to post to execute the swap transaction and $18.6$15.0 million and $12.5$17.5 million, respectively, for margin calls made in connection with the interest rate swaps. These amounts are included in other assets on the consolidated balance sheets.
As of SeptemberJune 30, 2020 and2021, the Company was 0t utilizing futures contracts. As of December 31, 2019,2020, the Company posted initial margin of $0.6$0.5 million and $3.0 million, respectively, in securities for trading futures contracts and haswith a mark-to-market payablereceivable of less than $0.1 million and receivable of $0.3 million, respectively, in connection with the futures contracts.million. Variation margin is included in other assets on the consolidated balance sheets.
5. | 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.
19
GLOBAL INDEMNITY GROUP, LLC
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. |
20
GLOBAL INDEMNITY GROUP, LLC
| • | 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.
The following table presents information about the Company’s invested assets and derivative instruments measured at fair value on a recurring basis as of SeptemberJune 30, 20202021 and December 31, 20192020 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.
|
| Fair Value Measurements |
|
| Fair Value Measurements |
| ||||||||||||||||||||||||||
As of September 30, 2020 (Dollars in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||||||||||||||
As of June 30, 2021 (Dollars in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury and agency obligations |
| $ | 200,457 |
|
| $ | 1,500 |
|
| $ | 0 |
|
| $ | 201,957 |
| ||||||||||||||||
U.S. treasuries |
| $ | 147,049 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 147,049 |
| ||||||||||||||||
Agency obligations |
|
| 0 |
|
|
| 10,577 |
|
|
| 0 |
|
|
| 10,577 |
| ||||||||||||||||
Obligations of states and political subdivisions |
|
| 0 |
|
|
| 62,001 |
|
|
| 0 |
|
|
| 62,001 |
|
|
| 0 |
|
|
| 65,486 |
|
|
| 0 |
|
|
| 65,486 |
|
Mortgage-backed securities |
|
| 0 |
|
|
| 401,084 |
|
|
| 0 |
|
|
| 401,084 |
|
|
| 0 |
|
|
| 308,197 |
|
|
| 0 |
|
|
| 308,197 |
|
Commercial mortgage-backed securities |
|
| 0 |
|
|
| 138,911 |
|
|
| 0 |
|
|
| 138,911 |
|
|
| 0 |
|
|
| 110,033 |
|
|
| 0 |
|
|
| 110,033 |
|
Asset-backed securities |
|
| 0 |
|
|
| 139,150 |
|
|
| 0 |
|
|
| 139,150 |
|
|
| 0 |
|
|
| 131,784 |
|
|
| 831 |
|
|
| 132,615 |
|
Corporate bonds |
|
| 0 |
|
|
| 258,861 |
|
|
| 0 |
|
|
| 258,861 |
|
|
| 0 |
|
|
| 276,036 |
|
|
| 404 |
|
|
| 276,440 |
|
Foreign corporate bonds |
|
| 0 |
|
|
| 101,811 |
|
|
| 0 |
|
|
| 101,811 |
|
|
| 0 |
|
|
| 123,700 |
|
|
| 0 |
|
|
| 123,700 |
|
Total fixed maturities |
|
| 200,457 |
|
|
| 1,103,318 |
|
|
| 0 |
|
|
| 1,303,775 |
|
|
| 147,049 |
|
|
| 1,025,813 |
|
|
| 1,235 |
|
|
| 1,174,097 |
|
Equity securities |
|
| 64,673 |
|
|
| 11,268 |
|
|
| 0 |
|
|
| 75,941 |
|
|
| 68,261 |
|
|
| 22,408 |
|
|
| 0 |
|
|
| 90,669 |
|
Total assets measured at fair value |
| $ | 265,130 |
|
| $ | 1,114,586 |
|
| $ | 0 |
|
| $ | 1,379,716 |
|
| $ | 215,310 |
|
| $ | 1,048,221 |
|
| $ | 1,235 |
|
| $ | 1,264,766 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments |
| $ | 0 |
|
| $ | 17,931 |
|
| $ | 0 |
|
| $ | 17,931 |
|
| $ | 0 |
|
| $ | 12,712 |
|
| $ | 0 |
|
| $ | 12,712 |
|
Total liabilities measured at fair value |
| $ | 0 |
|
| $ | 17,931 |
|
| $ | 0 |
|
| $ | 17,931 |
|
| $ | 0 |
|
| $ | 12,712 |
|
| $ | 0 |
|
| $ | 12,712 |
|
20
GLOBAL INDEMNITY GROUP, LLC
|
| Fair Value Measurements |
|
| Fair Value Measurements |
| ||||||||||||||||||||||||||
As of December 31, 2019 (Dollars in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||||||||||||||
As of December 31, 2020 (Dollars in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury and agency obligations |
| $ | 156,689 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 156,689 |
| ||||||||||||||||
U.S. treasuries |
| $ | 197,480 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 197,480 |
| ||||||||||||||||
Obligations of states and political subdivisions |
|
| 0 |
|
|
| 63,838 |
|
|
| 0 |
|
|
| 63,838 |
|
|
| 0 |
|
|
| 61,243 |
|
|
| 0 |
|
|
| 61,243 |
|
Mortgage-backed securities |
|
| 0 |
|
|
| 328,374 |
|
|
| 0 |
|
|
| 328,374 |
|
|
| 0 |
|
|
| 358,778 |
|
|
| 0 |
|
|
| 358,778 |
|
Commercial mortgage-backed securities |
|
| 0 |
|
|
| 188,104 |
|
|
| 0 |
|
|
| 188,104 |
|
|
| 0 |
|
|
| 110,959 |
|
|
| 0 |
|
|
| 110,959 |
|
Asset-backed securities |
|
| 0 |
|
|
| 168,537 |
|
|
| 0 |
|
|
| 168,537 |
|
|
| 0 |
|
|
| 117,593 |
|
|
| 0 |
|
|
| 117,593 |
|
Corporate bonds |
|
| 0 |
|
|
| 248,259 |
|
|
| 0 |
|
|
| 248,259 |
|
|
| 0 |
|
|
| 240,717 |
|
|
| 0 |
|
|
| 240,717 |
|
Foreign corporate bonds |
|
| 0 |
|
|
| 99,358 |
|
|
| 0 |
|
|
| 99,358 |
|
|
| 0 |
|
|
| 104,416 |
|
|
| 0 |
|
|
| 104,416 |
|
Total fixed maturities |
|
| 156,689 |
|
|
| 1,096,470 |
|
|
| 0 |
|
|
| 1,253,159 |
|
|
| 197,480 |
|
|
| 993,706 |
|
|
| 0 |
|
|
| 1,191,186 |
|
Equity securities |
|
| 251,448 |
|
|
| 11,656 |
|
|
| 0 |
|
|
| 263,104 |
|
|
| 87,307 |
|
|
| 11,683 |
|
|
| 0 |
|
|
| 98,990 |
|
Total assets measured at fair value |
| $ | 408,137 |
|
| $ | 1,108,126 |
|
| $ | 0 |
|
| $ | 1,516,263 |
|
| $ | 284,787 |
|
| $ | 1,005,389 |
|
| $ | 0 |
|
| $ | 1,290,176 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments |
| $ | 0 |
|
| $ | 10,275 |
|
| $ | 0 |
|
| $ | 10,275 |
|
| $ | 0 |
|
| $ | 16,430 |
|
| $ | 0 |
|
| $ | 16,430 |
|
Total liabilities measured at fair value |
| $ | 0 |
|
| $ | 10,275 |
|
| $ | 0 |
|
| $ | 10,275 |
|
| $ | 0 |
|
| $ | 16,430 |
|
| $ | 0 |
|
| $ | 16,430 |
|
The securities classified as Level 1 in the above table consist of U.S. Treasuriestreasuries and equity securities actively traded on an exchange.
21
GLOBAL INDEMNITY GROUP, LLC
The securities classified as Level 2 in the above table consist primarily of fixed maturity 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 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 with unobservable inputs. The Company does not have access to daily valuations; therefore, market trades, performance of the underlying assets, and key risks are considered in order to estimate fair values of these debt instruments.
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, 2021 and 2020:
|
| Quarters Ended June 30, |
|
| For the Six Months Ended |
| ||||||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Beginning balance |
| $ | 2,203 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Total gains (realized / unrealized): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in accumulated other comprehensive income |
| 7 |
|
|
| 0 |
|
| -32 |
|
|
| 0 |
| ||
Transfers into level 3 |
|
| 702 |
|
|
| 0 |
|
|
| 702 |
|
| �� | 0 |
|
Transfers out of level 3 |
|
| (1,720 | ) |
|
| 0 |
|
|
| (1,720 | ) |
|
| 0 |
|
Amortization of bond premium and discount, net |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Purchases |
|
| 43 |
|
|
| 0 |
|
|
| 2,285 |
|
|
| 0 |
|
Sales |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Ending balance |
| $ | 1,235 |
|
|
| 0 |
|
| $ | 1,235 |
|
|
| 0 |
|
21
GLOBAL INDEMNITY GROUP, LLC
For the Company’s material debt arrangements, the current fair value of the Company’s debt at SeptemberJune 30, 20202021 and December 31, 20192020 was as follows:
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||||
(Dollars in thousands) |
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
| ||||
Margin Borrowing Facility (1) |
| $ | 0 |
|
| $ | 0 |
|
| $ | 73,629 |
|
| $ | 73,629 |
|
7.75% Subordinated Notes due 2045 (2) |
|
| 0 |
|
|
| 0 |
|
|
| 96,864 |
|
|
| 100,264 |
|
7.875% Subordinated Notes due 2047 (3) |
|
| 126,253 |
|
|
| 130,153 |
|
|
| 126,147 |
|
|
| 134,462 |
|
Total |
| $ | 126,253 |
|
| $ | 130,153 |
|
| $ | 296,640 |
|
| $ | 308,355 |
|
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||||||||||
(Dollars in thousands) |
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
| ||||
7.875% Subordinated Notes due 2047 (1) |
| $ | 126,359 |
|
| $ | 133,587 |
|
| $ | 126,288 |
|
| $ | 132,008 |
|
Total |
| $ | 126,359 |
|
| $ | 133,587 |
|
| $ | 126,288 |
|
| $ | 132,008 |
|
(1) |
|
| As of |
|
|
The fair value of the margin borrowing facility approximates its carrying value due to the facility being due on demand. The subordinated notes due 2045 and 2047 are publicly traded instruments and are classified as Level 1 in the fair value hierarchy.
22
GLOBAL INDEMNITY GROUP, LLC
Fair Value of Alternative Investments
Other invested assets consist of limited liability companies and limited partnerships whose carrying value approximates fair value. The following table provides the fair value and future funding commitments related to these investments at SeptemberJune 30, 20202021 and December 31, 2019.2020.
|
| September 30, 2020 |
|
| December 31, 2019 |
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||||||||||||||||||||
(Dollars in thousands) |
| Fair Value |
|
| Future Funding Commitment |
|
| Fair Value |
|
| Future Funding Commitment |
|
| Fair Value |
|
| Future Funding Commitment |
|
| Fair Value |
|
| Future Funding Commitment |
| ||||||||
European Non-Performing Loan Fund, LP (1) |
| $ | 11,283 |
|
| $ | 14,214 |
|
| $ | 13,530 |
|
| $ | 14,214 |
|
| $ | 9,930 |
|
| $ | 14,214 |
|
| $ | 10,808 |
|
| $ | 14,214 |
|
Distressed Debt Fund, LP (2) |
|
| 16,979 |
|
|
| 17,000 |
|
|
| 23,966 |
|
|
| 17,000 |
|
|
| 13,748 |
|
|
| 17,000 |
|
|
| 15,721 |
|
|
| 17,000 |
|
Mortgage Debt Fund, LP (3) |
|
| 9,487 |
|
|
| 0 |
|
|
| 9,783 |
|
|
| 506 |
|
|
| 11,615 |
|
|
| 0 |
|
|
| 10,489 |
|
|
| 0 |
|
Credit Fund, LLC (4) |
|
| 105,710 |
|
|
| 0 |
|
|
| 60,000 |
|
|
| 0 |
| ||||||||||||||||
Global Debt Fund, LP (5) |
|
| 25,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||||||
Total |
| $ | 37,749 |
|
| $ | 31,214 |
|
| $ | 47,279 |
|
| $ | 31,720 |
|
| $ | 166,003 |
|
| $ | 31,214 |
|
| $ | 97,018 |
|
| $ | 31,214 |
|
(1) | This limited partnership invests in distressed securities and assets through senior and subordinated, secured and unsecured debt and equity, in both public and private large-cap and middle-market companies. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. |
(2) | This limited partnership invests in stressed and distressed securities and structured products. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. |
(3) | This limited partnership invests in REIT qualifying assets such as mortgage loans, investor property loans, and commercial mortgage loans. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. |
(4) | This limited liability company invests in a broad portfolio of non-investment grade loans, secured and unsecured corporate debt, credit default swaps, reverse repurchase agreements and synthetic indices. The Company does have the ability to sell its interest by providing notice to the fund. |
(5) | This limited partnership invests in performing, stressed or distressed securities and loans across the global fixed income markets. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. |
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 3%. The equity method of accounting for an investment in a limited partnershipliability companies and limited partnerships requires that its cost basis be updated to account for the income or loss earned on the investment. In the Fair Value of Alternative Investments table above, all of the investments, except for the Credit Fund, LLC, are booked on a one quarter lag due to non-availability of data at the time the financial statements are prepared. Information for the Credit Fund, LLC is received on a timely basis and is included in current results. The investment income associated with these limited liability companies and limited partnerships which is booked on a one quarter lag, is reflected in the consolidated statements of operations in the amounts of $3.5$3.8 million and $1.3($12.0) million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $(8.0)$6.8 million and $1.4($11.5) million for the ninesix months ended SeptemberJune 30, 2021 and 2020, and 2019, respectively.
22
GLOBAL INDEMNITY GROUP, LLC
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 |
| • | 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. |
23
GLOBAL INDEMNITY GROUP, LLC
| • | 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. |
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 ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the Company has not adjusted quotes or prices obtained from the pricing vendors.
6.Allowance for Expected Credit Losses - Premiums ReceivablePremium Receivables and Reinsurance Receivables
The Company implemented new accounting guidance on January 1, 2020 related to the measurement of credit losses on financial instruments. Please see Note 17 for further discussion on this new accounting guidance.
For premiumspremium 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.
23
GLOBAL INDEMNITY GROUP, LLC
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, 2021 and 2020:
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Beginning balance |
| $ | 2,772 |
|
| $ | 2,746 |
|
| $ | 2,900 |
|
| $ | 2,754 |
|
Current period provision for expected credit losses |
|
| 172 |
|
|
| 313 |
|
|
| 260 |
|
|
| 475 |
|
Write-offs |
|
| (122 | ) |
|
| (128 | ) |
|
| (338 | ) |
|
| (298 | ) |
Ending balance |
| $ | 2,822 |
|
| $ | 2,931 |
|
| $ | 2,822 |
|
| $ | 2,931 |
|
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 A.MAM Best Ratings and other relevant factors.
The following table is an analysis of the allowance for expected credit losses related to the Company's premiums receivable and reinsurance receivables for the quarterquarters and ninesix months ended SeptemberJune 30, 2021 and 2020:
|
| Quarter Ended September 30, 2020 |
|
| Nine Months Ended September 30, 2020 |
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in thousands) |
| Premiums Receivable |
|
| Reinsurance Receivables |
|
| Premiums Receivable |
|
| Reinsurance Receivables |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Beginning balance |
| $ | 2,931 |
|
| $ | 8,992 |
|
| $ | 2,754 |
|
| $ | 8,992 |
|
| $ | 8,992 |
|
| $ | 8,992 |
|
| $ | 8,992 |
|
| $ | 8,992 |
|
Current period provision for expected credit losses |
|
| 476 |
|
|
| 0 |
|
|
| 951 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Write-offs |
|
| (538 | ) |
|
| 0 |
|
|
| (836 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Ending balance |
| $ | 2,869 |
|
| $ | 8,992 |
|
| $ | 2,869 |
|
| $ | 8,992 |
|
| $ | 8,992 |
|
| $ | 8,992 |
|
| $ | 8,992 |
|
| $ | 8,992 |
|
7.Income Taxes
Effective August 28, 2020, the parent Company, Global Indemnity Group, LLC isbecame 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
24
GLOBAL INDEMNITY GROUP, LLC
As of SeptemberJune 30, 2020,2021, the statutory income tax rates of the countries where the Company conducts or conducted business are 21% in the United States, 0% in Bermuda, 0% in the Cayman Islands, 19% in the United Kingdom, and 25% on non-trading income, 33% on capital gains and 12.5% on trading income in the Republic of Ireland. The statutory income tax rate of each country is applied against the expected annual taxable income of the Company in each country to estimate the annual income tax expense.
The Company’s income (loss) before income taxes from its non-U.S. subsidiaries and U.S. subsidiaries for the quarters and ninesix months ended SeptemberJune 30, 20202021 and 20192020 were as follows:
Quarter Ended September 30, 2020 (Dollars in thousands) |
| Non-U.S. Subsidiaries |
|
| U.S. Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
Quarter Ended June 30, 2021 (Dollars in thousands) |
| Non-U.S. Subsidiaries |
|
| U.S. Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
| $ | 13,085 |
|
| $ | 130,664 |
|
| $ | 0 |
|
| $ | 143,749 |
|
| $ | 0 |
|
| $ | 175,236 |
|
| $ | 0 |
|
| $ | 175,236 |
|
Net written premiums |
| $ | 13,085 |
|
| $ | 117,526 |
|
| $ | 0 |
|
| $ | 130,611 |
|
| $ | 0 |
|
| $ | 160,653 |
|
| $ | 0 |
|
| $ | 160,653 |
|
Net earned premiums |
| $ | 9,983 |
|
| $ | 130,319 |
|
| $ | 0 |
|
| $ | 140,302 |
|
| $ | 0 |
|
| $ | 149,408 |
|
| $ | 0 |
|
| $ | 149,408 |
|
Net investment income |
|
| 4,054 |
|
|
| 9,851 |
|
|
| (2,159 | ) |
|
| 11,746 |
|
|
| 0 |
|
|
| 10,633 |
|
|
| 0 |
|
|
| 10,633 |
|
Net realized investment gains |
|
| 1,511 |
|
|
| 5,812 |
|
|
| 0 |
|
|
| 7,323 |
|
|
| 0 |
|
|
| 3,833 |
|
|
| 0 |
|
|
| 3,833 |
|
Other income |
|
| 164 |
|
|
| 378 |
|
|
| 0 |
|
|
| 542 |
|
|
| 0 |
|
|
| 521 |
|
|
| 0 |
|
|
| 521 |
|
Total revenues |
|
| 15,712 |
|
|
| 146,360 |
|
|
| (2,159 | ) |
|
| 159,913 |
|
|
| 0 |
|
|
| 164,395 |
|
|
| 0 |
|
|
| 164,395 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 519 |
|
|
| 96,629 |
|
|
| 0 |
|
|
| 97,148 |
|
|
| 0 |
|
|
| 90,938 |
|
|
| 0 |
|
|
| 90,938 |
|
Acquisition costs and other underwriting expenses |
|
| 3,584 |
|
|
| 49,684 |
|
|
| 0 |
|
|
| 53,268 |
|
|
| 0 |
|
|
| 57,213 |
|
|
| 0 |
|
|
| 57,213 |
|
Corporate and other operating expenses |
|
| 17,283 |
|
|
| 3,913 |
|
|
| 0 |
|
|
| 21,196 |
|
|
| 0 |
|
|
| 6,329 |
|
|
| 0 |
|
|
| 6,329 |
|
Interest expense |
|
| 193 |
|
|
| 5,586 |
|
|
| (2,159 | ) |
|
| 3,620 |
|
|
| 0 |
|
|
| 2,696 |
|
|
| 0 |
|
|
| 2,696 |
|
Loss on extinguishment of debt |
|
| 3,060 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,060 |
| ||||||||||||||||
Loss before income taxes |
| $ | (8,927 | ) |
| $ | (9,452 | ) |
| $ | 0 |
|
| $ | (18,379 | ) | ||||||||||||||||
Income before income taxes |
| $ | 0 |
|
| $ | 7,219 |
|
| $ | 0 |
|
| $ | 7,219 |
|
Quarter Ended September 30, 2019 (Dollars in thousands) |
| Non-U.S. Subsidiaries |
|
| U.S. Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
Quarter Ended June 30, 2020 (Dollars in thousands) |
| Non-U.S. Subsidiaries |
|
| U.S. Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
| $ | 19,980 |
|
| $ | 137,197 |
|
| $ | 0 |
|
| $ | 157,177 |
|
| $ | 16,052 |
|
| $ | 148,497 |
|
| $ | 0 |
|
| $ | 164,549 |
|
Net written premiums |
| $ | 19,990 |
|
| $ | 118,846 |
|
| $ | 0 |
|
| $ | 138,836 |
|
| $ | 16,052 |
|
| $ | 131,212 |
|
| $ | 0 |
|
| $ | 147,264 |
|
Net earned premiums |
| $ | 19,512 |
|
| $ | 113,800 |
|
| $ | 0 |
|
| $ | 133,312 |
|
| $ | 19,546 |
|
| $ | 122,301 |
|
| $ | 0 |
|
| $ | 141,847 |
|
Net investment income |
|
| 7,212 |
|
|
| 7,732 |
|
|
| (3,596 | ) |
|
| 11,348 |
| ||||||||||||||||
Net investment income (loss) |
|
| 6,906 |
|
|
| (5,777 | ) |
|
| (3,488 | ) |
|
| (2,359 | ) | ||||||||||||||||
Net realized investment gains (losses) |
|
| 375 |
|
|
| (3,065 | ) |
|
| 0 |
|
|
| (2,690 | ) |
|
| (1,668 | ) |
|
| 40,175 |
|
|
| 0 |
|
|
| 38,507 |
|
Other income (loss) |
|
| (234 | ) |
|
| 498 |
|
|
| 0 |
|
|
| 264 |
| ||||||||||||||||
Other income |
|
| 302 |
|
|
| 464 |
|
|
| 0 |
|
|
| 766 |
| ||||||||||||||||
Total revenues |
|
| 26,865 |
|
|
| 118,965 |
|
|
| (3,596 | ) |
|
| 142,234 |
|
|
| 25,086 |
|
|
| 157,163 |
|
|
| (3,488 | ) |
|
| 178,761 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 7,628 |
|
|
| 65,955 |
|
|
| 0 |
|
|
| 73,583 |
|
|
| (207 | ) |
|
| 67,504 |
|
|
| 0 |
|
|
| 67,297 |
|
Acquisition costs and other underwriting expenses |
|
| 6,201 |
|
|
| 47,165 |
|
|
| 0 |
|
|
| 53,366 |
|
|
| 5,695 |
|
|
| 47,883 |
|
|
| 0 |
|
|
| 53,578 |
|
Corporate and other operating expenses |
|
| 1,514 |
|
|
| 2,344 |
|
|
| 0 |
|
|
| 3,858 |
|
|
| 4,947 |
|
|
| 3,671 |
|
|
| 0 |
|
|
| 8,618 |
|
Interest expense |
|
| 351 |
|
|
| 8,268 |
|
|
| (3,596 | ) |
|
| 5,023 |
|
|
| 334 |
|
|
| 7,866 |
|
|
| (3,488 | ) |
|
| 4,712 |
|
Income (loss) before income taxes |
| $ | 11,171 |
|
| $ | (4,767 | ) |
| $ | 0 |
|
| $ | 6,404 |
| ||||||||||||||||
Income before income taxes |
| $ | 14,317 |
|
| $ | 30,239 |
|
| $ | 0 |
|
| $ | 44,556 |
|
25
GLOBAL INDEMNITY GROUP, LLC
Nine Months Ended September 30, 2020 (Dollars in thousands) |
| Non-U.S. Subsidiaries |
|
| U.S. Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
Six Months Ended June 30, 2021 (Dollars in thousands) |
| Non-U.S. Subsidiaries |
|
| U.S. Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
| $ | 46,654 |
|
| $ | 417,368 |
|
| $ | 0 |
|
| $ | 464,022 |
|
| $ | 0 |
|
| $ | 338,794 |
|
| $ | 0 |
|
| $ | 338,794 |
|
Net written premiums |
| $ | 46,654 |
|
| $ | 370,333 |
|
| $ | 0 |
|
| $ | 416,987 |
|
| $ | 0 |
|
| $ | 308,336 |
|
| $ | 0 |
|
| $ | 308,336 |
|
Net earned premiums |
| $ | 53,384 |
|
| $ | 373,233 |
|
| $ | 0 |
|
| $ | 426,617 |
|
| $ | 0 |
|
| $ | 293,108 |
|
| $ | 0 |
|
| $ | 293,108 |
|
Net investment income |
|
| 17,336 |
|
|
| 11,324 |
|
|
| (9,144 | ) |
|
| 19,516 |
|
|
| 0 |
|
|
| 20,469 |
|
|
| 0 |
|
|
| 20,469 |
|
Net realized investment losses |
|
| (3,867 | ) |
|
| (18,465 | ) |
|
| 0 |
|
|
| (22,332 | ) | ||||||||||||||||
Net realized investment gains |
|
| 0 |
|
|
| 7,652 |
|
|
| 0 |
|
|
| 7,652 |
| ||||||||||||||||
Other income |
|
| 148 |
|
|
| 1,325 |
|
|
| 0 |
|
|
| 1,473 |
|
|
| 0 |
|
|
| 898 |
|
|
| 0 |
|
|
| 898 |
|
Total revenues |
|
| 67,001 |
|
|
| 367,417 |
|
|
| (9,144 | ) |
|
| 425,274 |
|
|
| 0 |
|
|
| 322,127 |
|
|
| 0 |
|
|
| 322,127 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 12,874 |
|
|
| 229,218 |
|
|
| 0 |
|
|
| 242,092 |
|
|
| 0 |
|
|
| 181,721 |
|
|
| 0 |
|
|
| 181,721 |
|
Acquisition costs and other underwriting expenses |
|
| 17,828 |
|
|
| 145,430 |
|
|
| 0 |
|
|
| 163,258 |
|
|
| 0 |
|
|
| 111,977 |
|
|
| 0 |
|
|
| 111,977 |
|
Corporate and other operating expenses |
|
| 23,357 |
|
|
| 10,680 |
|
|
| 0 |
|
|
| 34,037 |
|
|
| 0 |
|
|
| 10,605 |
|
|
| 0 |
|
|
| 10,605 |
|
Interest expense |
|
| 869 |
|
|
| 21,472 |
|
|
| (9,144 | ) |
|
| 13,197 |
|
|
| 0 |
|
|
| 5,291 |
|
|
| 0 |
|
|
| 5,291 |
|
Loss on extinguishment of debt |
|
| 3,060 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,060 |
| ||||||||||||||||
Income (loss) before income taxes |
| $ | 9,013 |
|
| $ | (39,383 | ) |
| $ | 0 |
|
| $ | (30,370 | ) | ||||||||||||||||
Income before income taxes |
| $ | 0 |
|
| $ | 12,533 |
|
| $ | 0 |
|
| $ | 12,533 |
|
Nine Months Ended September 30, 2019 (Dollars in thousands) |
| Non-U.S. Subsidiaries |
|
| U.S. Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
Six Months Ended June 30, 2020 (Dollars in thousands) |
| Non-U.S. Subsidiaries |
|
| U.S. Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
| $ | 69,588 |
|
| $ | 409,111 |
|
| $ | 0 |
|
| $ | 478,699 |
|
| $ | 33,569 |
|
| $ | 286,704 |
|
| $ | 0 |
|
| $ | 320,273 |
|
Net written premiums |
| $ | 69,591 |
|
| $ | 351,730 |
|
| $ | 0 |
|
| $ | 421,321 |
|
| $ | 33,569 |
|
| $ | 252,807 |
|
| $ | 0 |
|
| $ | 286,376 |
|
Net earned premiums |
| $ | 52,798 |
|
| $ | 330,804 |
|
| $ | 0 |
|
| $ | 383,602 |
|
| $ | 43,401 |
|
| $ | 242,914 |
|
| $ | 0 |
|
| $ | 286,315 |
|
Net investment income |
|
| 22,254 |
|
|
| 20,824 |
|
|
| (10,685 | ) |
|
| 32,393 |
|
|
| 13,282 |
|
|
| 1,473 |
|
|
| (6,985 | ) |
|
| 7,770 |
|
Net realized investment gains |
|
| 1,768 |
|
|
| 9,522 |
|
|
| 0 |
|
|
| 11,290 |
| ||||||||||||||||
Net realized investment losses |
|
| (5,378 | ) |
|
| (24,277 | ) |
|
| 0 |
|
|
| (29,655 | ) | ||||||||||||||||
Other income (loss) |
|
| (256 | ) |
|
| 1,530 |
|
|
| 0 |
|
|
| 1,274 |
|
|
| (16 | ) |
|
| 947 |
|
|
| 0 |
|
|
| 931 |
|
Total revenues |
|
| 76,564 |
|
|
| 362,680 |
|
|
| (10,685 | ) |
|
| 428,559 |
|
|
| 51,289 |
|
|
| 221,057 |
|
|
| (6,985 | ) |
|
| 265,361 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 24,076 |
|
|
| 177,903 |
|
|
| 0 |
|
|
| 201,979 |
|
|
| 12,355 |
|
|
| 132,589 |
|
|
| 0 |
|
|
| 144,944 |
|
Acquisition costs and other underwriting expenses |
|
| 16,556 |
|
|
| 137,087 |
|
|
| 0 |
|
|
| 153,643 |
|
|
| 14,244 |
|
|
| 95,746 |
|
|
| 0 |
|
|
| 109,990 |
|
Corporate and other operating expenses |
|
| 4,822 |
|
|
| 6,880 |
|
|
| 0 |
|
|
| 11,702 |
|
|
| 6,074 |
|
|
| 6,767 |
|
|
| 0 |
|
|
| 12,841 |
|
Interest expense |
|
| 1,059 |
|
|
| 24,714 |
|
|
| (10,685 | ) |
|
| 15,088 |
|
|
| 676 |
|
|
| 15,886 |
|
|
| (6,985 | ) |
|
| 9,577 |
|
Income before income taxes |
| $ | 30,051 |
|
| $ | 16,096 |
|
| $ | 0 |
|
| $ | 46,147 |
| ||||||||||||||||
Income (loss) before income taxes |
| $ | 17,940 |
|
| $ | (29,931 | ) |
| $ | 0 |
|
| $ | (11,991 | ) |
The following table summarizes the components of income tax expense (benefit):
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Current income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Foreign |
| $ | 130 |
|
| $ | (17 | ) |
| $ | 130 |
|
| $ | (35 | ) | ||||||||||||||||
U.S. Federal |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||||||
Total current income tax expense (benefit) |
|
| 130 |
|
|
| (17 | ) |
|
| 130 |
|
|
| (35 | ) | ||||||||||||||||
Deferred income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal |
|
| (3,339 | ) |
|
| (300 | ) |
|
| (8,303 | ) |
|
| 5,198 |
|
| $ | 844 |
|
| $ | 7,005 |
|
| $ | 641 |
|
| $ | (4,964 | ) |
Total deferred income tax expense (benefit) |
|
| (3,339 | ) |
|
| (300 | ) |
|
| (8,303 | ) |
|
| 5,198 |
|
|
| 844 |
|
|
| 7,005 |
|
|
| 641 |
|
|
| (4,964 | ) |
Total income tax expense (benefit) |
| $ | (3,209 | ) |
| $ | (317 | ) |
| $ | (8,173 | ) |
| $ | 5,163 |
|
| $ | 844 |
|
| $ | 7,005 |
|
| $ | 641 |
|
| $ | (4,964 | ) |
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.
26
GLOBAL INDEMNITY GROUP, LLC
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 September 30, |
|
| Quarters Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||
(Dollars in thousands) |
| Amount |
|
| % of Pre- Tax Income |
|
| Amount |
|
| % of Pre- Tax Income |
|
| Amount |
|
| % of Pre- Tax Income |
|
| Amount |
|
| % of Pre- Tax Income |
| ||||||||
Expected tax provision at weighted average tax rate |
| $ | (1,985 | ) |
|
| 10.8 | % |
| $ | (1,001 | ) |
|
| 15.6 | % |
| $ | 1,516 |
|
|
| 21.0 | % |
| $ | 6,348 |
|
|
| 14.2 | % |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax exempt interest |
|
| (1 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||||||
Dividend exclusion |
|
| (86 | ) |
|
| 0.5 |
|
|
| (33 | ) |
|
| 0.5 |
|
|
| (19 | ) |
|
| (0.3 | ) |
|
| (41 | ) |
|
| (0.1 | ) |
Non-deductible interest |
|
| 416 |
|
|
| (2.3 | ) |
|
| 695 |
|
|
| (10.8 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 678 |
|
|
| 1.6 |
|
Change in tax status |
|
| (1,704 | ) |
|
| 9.3 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||||||
Parent income treated as partnership for tax |
|
| (146 | ) |
|
| 0.8 |
|
|
| 0 |
|
|
| 0 |
|
|
| (819 | ) |
|
| (11.3 | ) |
|
| 0 |
|
|
| 0 |
|
Other |
|
| 297 |
|
|
| (1.6 | ) |
|
| 22 |
|
|
| (0.3 | ) |
|
| 166 |
|
|
| 2.3 |
|
|
| 20 |
|
|
| 0 |
|
Effective income tax benefit |
| $ | (3,209 | ) |
|
| 17.5 | % |
| $ | (317 | ) |
|
| 5.0 | % | ||||||||||||||||
Effective income tax expense |
| $ | 844 |
|
|
| 11.7 | % |
| $ | 7,005 |
|
|
| 15.7 | % |
The effective income tax benefitexpense rate for the quarter ended SeptemberJune 30, 2021 decreased to 11.7%, compared to 15.7% for the quarter ended June 30, 2020. Although the percentage of U.S. income before taxes to consolidated income before taxes increased from 67.9% in 2020 to 100.0% in 2021, 54.0% of the U.S. income before taxes for quarter ended June 30, 2021 relates to Global Indemnity Group, LLC for which its income passes through to its shareholders. Global Indemnity Group, LLC has elected to be a partnership for purposes of U.S. tax.
|
| Six Months Ended June 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
| ||||||||||
(Dollars in thousands) |
| Amount |
|
| % of Pre- Tax Income |
|
| Amount |
|
| % of Pre- Tax Income |
| ||||
Expected tax provision at weighted average tax rate |
| $ | 2,632 |
|
|
| 21.0 | % |
| $ | (6,287 | ) |
|
| 52.4 | % |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax exempt interest |
|
| 0 |
|
|
| 0 |
|
|
| (1 | ) |
|
| 0 |
|
Dividend exclusion |
|
| (36 | ) |
|
| (0.3 | ) |
|
| (112 | ) |
|
| 0.9 |
|
Non-deductible interest |
|
| 0 |
|
|
| 0 |
|
|
| 1,357 |
|
|
| (11.3 | ) |
Parent income treated as partnership for tax |
|
| (2,186 | ) |
|
| (17.4 | ) |
|
| 0 |
|
|
| 0 |
|
Other |
|
| 231 |
|
|
| 1.8 |
|
|
| 79 |
|
|
| (0.6 | ) |
Effective income tax expense (benefit) |
| $ | 641 |
|
|
| 5.1 | % |
| $ | (4,964 | ) |
|
| 41.4 | % |
The effective income tax expense rate for the six months ended June 30, 2021 was 17.5%5.1%, compared with an effective income tax benefit rate of 5.0%41.4% for the quartersix months ended SeptemberJune 30, 2019.2020. The increase ineffective income tax benefitexpense rate of 5.1% for the quartersix months ended SeptemberJune 30, 2020 was primarily due2021 results from 83.1% of income before taxes is from Global Indemnity Group, LLC which has elected to higher pre-tax lossbe a partnership for the Company’spurposes of U.S. subsidiariestax for the quarter ended September 30, 2020as comparedwhich its income passes through to the same period in 2019 and the change in tax status which is the income tax benefit recognized on net insurance liabilities that were redomiciled from Bermuda at 0% tax rate to the United States at a 21% tax rate.
|
| Nine Months Ended September 30, |
| |||||||||||||
|
| 2020 |
|
| 2019 |
| ||||||||||
(Dollars in thousands) |
| Amount |
|
| % of Pre- Tax Income |
|
| Amount |
|
| % of Pre- Tax Income |
| ||||
Expected tax provision at weighted average tax rate |
| $ | (8,270 | ) |
|
| 27.2 | % |
| $ | 3,380 |
|
|
| 7.3 | % |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax exempt interest |
|
| (2 | ) |
|
| 0 |
|
|
| (1 | ) |
|
| 0 |
|
Dividend exclusion |
|
| (198 | ) |
|
| 0.6 |
|
|
| (256 | ) |
|
| (0.6 | ) |
Non-deductible interest |
|
| 1,773 |
|
|
| (5.8 | ) |
|
| 2,063 |
|
|
| 4.5 |
|
Change in tax status |
|
| (1,704 | ) |
|
| 5.6 |
|
|
| 0 |
|
|
| 0 |
|
Parent income treated as partnership for tax |
|
| (146 | ) |
|
| 0.5 |
|
|
| 0 |
|
|
| 0 |
|
Other |
|
| 374 |
|
|
| (1.2 | ) |
|
| (23 | ) |
|
| 0 |
|
Effective income tax expense (benefit) |
| $ | (8,173 | ) |
|
| 26.9 | % |
| $ | 5,163 |
|
|
| 11.2 | % |
its shareholders. The effective income tax benefit rate of 41.4% for the ninesix months ended SeptemberJune 30, 2020 was 26.9%, compared with an effective income tax expense rate of 11.2% for the nine months ended September 30, 2019. The increase in income tax benefit for the nine months ended September 30, 2020 was primarily due to a pre-tax loss forresulted from investment losses incurred by the Company’s U.S. subsidiaries forprimarily resulting from the nine months ended September 30, 2020as comparedimpact of changes in fair value on equity securities and derivatives due to a gaindisruption in the same period in 2019 and the change in tax status which is the income tax benefit recognized on net insurance liabilities that were redomiciled from Bermuda at 0% tax rate to the United States atglobal financial markets as a 21% tax rate.result of COVID-19.
The Company has a net operating loss (“NOL”) carryforward of $24.9$28.3 million as of SeptemberJune 30, 2020,2021, which begins to expire in 2036 based on when the original NOL was generated. The Company’s NOL carryforward as of December 31, 20192020 was $21.9$26.2 million.
The Company has a Section 163(j) (“163(j)”) carryforward of $6.8$4.2 million and $9.0$5.6 million as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively, which can be carried forward indefinitely. The 163(j) carryforward relates to the limitation on the deduction for business interest expense paid or accrued.
The Company had an alternative minimum tax (“AMT”) credit carryforward of $11.0 million as of December 31, 2019. Under the provisions of the CARES Act, the Company filed a request for a full refund in 2020. The Company received $5.5
27
GLOBAL INDEMNITY GROUP, LLC
million and $11.0 million of the AMT credit carryforward during the quarter and nine months ended September 30, 2020, respectively.
8.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 September 30, |
|
| Nine Months Ended September 30, |
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Balance at beginning of period |
| $ | 651,073 |
|
| $ | 608,773 |
|
| $ | 630,181 |
|
| $ | 680,031 |
|
| $ | 675,908 |
|
| $ | 639,468 |
|
| $ | 662,811 |
|
| $ | 630,181 |
|
Less: Ceded reinsurance receivables |
|
| 87,221 |
|
|
| 59,834 |
|
|
| 76,273 |
|
|
| 109,342 |
|
|
| 79,421 |
|
|
| 78,753 |
|
|
| 82,158 |
|
|
| 76,273 |
|
Net balance at beginning of period |
|
| 563,852 |
|
|
| 548,939 |
|
|
| 553,908 |
|
|
| 570,689 |
|
|
| 596,487 |
|
|
| 560,715 |
|
|
| 580,653 |
|
|
| 553,908 |
|
Incurred losses and loss adjustment expenses related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year |
|
| 108,859 |
|
|
| 80,533 |
|
|
| 273,709 |
|
|
| 225,022 |
|
|
| 85,409 |
|
|
| 86,603 |
|
|
| 179,603 |
|
|
| 164,850 |
|
Prior years |
|
| (11,711 | ) |
|
| (6,950 | ) |
|
| (31,617 | ) |
|
| (23,043 | ) |
|
| 5,529 |
|
|
| (19,306 | ) |
|
| 2,118 |
|
|
| (19,906 | ) |
Total incurred losses and loss adjustment expenses |
|
| 97,148 |
|
|
| 73,583 |
|
|
| 242,092 |
|
|
| 201,979 |
|
|
| 90,938 |
|
|
| 67,297 |
|
|
| 181,721 |
|
|
| 144,944 |
|
Paid losses and loss adjustment expenses related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year |
|
| 60,114 |
|
|
| 47,290 |
|
|
| 119,541 |
|
|
| 102,806 |
|
|
| 38,558 |
|
|
| 37,393 |
|
|
| 60,277 |
|
|
| 59,427 |
|
Prior years |
|
| 29,612 |
|
|
| 20,789 |
|
|
| 105,185 |
|
|
| 115,419 |
|
|
| 38,400 |
|
|
| 26,767 |
|
|
| 91,630 |
|
|
| 75,573 |
|
Total paid losses and loss adjustment expenses |
|
| 89,726 |
|
|
| 68,079 |
|
|
| 224,726 |
|
|
| 218,225 |
|
|
| 76,958 |
|
|
| 64,160 |
|
|
| 151,907 |
|
|
| 135,000 |
|
Net balance at end of period |
|
| 571,274 |
|
|
| 554,443 |
|
|
| 571,274 |
|
|
| 554,443 |
|
|
| 610,467 |
|
|
| 563,852 |
|
|
| 610,467 |
|
|
| 563,852 |
|
Plus: Ceded reinsurance receivables |
|
| 98,656 |
|
|
| 78,844 |
|
|
| 98,656 |
|
|
| 78,844 |
|
|
| 87,151 |
|
|
| 87,221 |
|
|
| 87,151 |
|
|
| 87,221 |
|
Balance at end of period |
| $ | 669,930 |
|
| $ | 633,287 |
|
| $ | 669,930 |
|
| $ | 633,287 |
|
| $ | 697,618 |
|
| $ | 651,073 |
|
| $ | 697,618 |
|
| $ | 651,073 |
|
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 thirdsecond quarter of 2020,2021, the Company reducedincreased its prior accident year loss reserves by $11.7$5.5 million, which consisted of a $3.5$5.9 million decreaseincrease related to Commercial Specialty, a $2.0 million decrease related to Specialty Property, a $1.3$0.1 million decrease related to Farm, Ranch & Stable, and a $4.9$0.3 million decrease related to Reinsurance Operations.
The $3.5$5.9 million reductionincrease of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
| • |
|
• | General Liability: A $0.7 million decrease reflects a reduction of $0.9 million in the 2000 accident year from a runoff reserve category as well as other |
|
|
|
• | Professional: A |
The $2.0 million decrease of prior accident year loss reserves related to Specialty Property primarily consisted of the following:
|
|
28
GLOBAL INDEMNITY GROUP, LLC
|
|
The $1.3$0.1 million reduction of prior accident year loss reserves related to Farm, Ranch & Stable primarily consisted of the following:
| • |
|
The $4.9$0.3 million decrease in prior accident year loss reserves related to Reinsurance Operations were based on a review of the experience reported from cedants. There was a $3.2$0.3 million decrease in the property lines primarilymainly in the 20092017 through 2012 and 2014 through 20182020 accident years, partially offset by an increase in the 2019 accident year. In addition, there was a reduction of $1.7 million in the professional lines in the 2014 and 2015 accident years.
28
GLOBAL INDEMNITY GROUP, LLC
During the thirdsecond quarter of 2019,2020, the Company reduced its prior accident year loss reserves by $7.0$19.3 million which consisted of a $5.2$14.2 million decrease related to Commercial Specialty, $1.3a $4.6 million decrease related to Specialty Property, $1.2a $0.8 million decrease related to Farm, Ranch & Stable, and a $0.7$0.3 million increase related to Reinsurance Operations.
The $5.2$14.2 million reduction of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
| • | General Liability: A |
|
|
The $1.3 million reduction of prior accident year loss reserves related to Specialty Property primarily consisted of the following:
|
|
|
|
The $1.2 million reduction of prior accident year loss reserves related to Farm, Ranch, & Stable primarily consisted of the following:
|
|
The $0.7 million increase in prior accident year loss reserves related to Reinsurance Operations primarily consisted of the following:
|
|
29
GLOBAL INDEMNITY GROUP, LLC
During the first nine months of 2020, the Company reduced its prior accident year loss reserves by $31.6 million, which consisted of a $17.8 million decrease related to Commercial Specialty, a $6.6 million decrease related to Specialty Property, a $2.1 million decrease related to Farm, Ranch, & Stable, and a $5.1 million decrease related to Reinsurance Operations.
The $17.8 million decrease in prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
|
|
• | Commercial Auto Liability: A $1.0 million reduction in the 2010 through 2016 accident years recognizes lower than anticipated claims severity. |
• | Property: An increase of $5.8 million primarily recognizes higher than expected claims severity mainly in the 2017 through 2019 accident years, partially offset by a decrease in the 2016 accident year. The bulk of the increase was in the 2018 accident year which reflects a higher estimated ultimate for Hurricane Michael. The increase in ultimate resulted from receiving additional information in the quarter for a Property Brokerage claim. |
• | Professional: A $0.7 million decrease primarily in the 2009 and 2010 accident years reflects lower than expected claims severity. |
The $4.6 million decrease of prior accident year loss reserves related to Specialty Property primarily consisted of the following:
• | General Liability: A $1.4 million decrease primarily recognizes lower than expected claims severity mainly in the 2015 through 2018 accident years. |
• | Property: A $3.2 million decrease mainly reflects lower than anticipated claims severity in the 2015 through 2018 accident years, partially offset by an increase in the 2019 accident year due to higher than expected claims severity. |
The $0.8 million reduction of prior accident year loss reserves related to Farm, Ranch & Stable primarily consisted of the following:
• | Property: A $0.7 million decrease mainly reflects lower than anticipated claims severity in the 2016 through 2019 accident years. |
• | General Liability: A $0.1 million decrease primarily recognizes lower than expected claims severity mainly in the 2015 through 2017 and 2019 accident years, partially offset by an increase in the 2013 accident year due to higher than anticipated claims severity. |
The $0.3 million increase in prior accident year loss reserves related to Reinsurance Operations was from the property lines. Based on a review of the experience reported from cedants, increases were in the 2011 and 2019 accident years, partially offset by decreases in the 2012 through 2018 accident years.
During the first six months of 2021, the Company increased its prior accident year loss reserves by $2.1 million, which consisted of a $5.6 million increase related to Commercial Specialty, a $1.6 million decrease related to Specialty Property, a $0.9 million decrease related to Farm, Ranch & Stable, and a $1.0 million decrease related to Reinsurance Operations.
29
GLOBAL INDEMNITY GROUP, LLC
The $5.6 million increase in prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
• | General Liability: A $0.8 million reduction reflects a decrease of $0.9 million in the 2000 accident year from a runoff reserve category as well as other decreases mainly resulting from lower than anticipated claims severity in the 2007, 2008, 2011 and 2013 through 2016 accident years partially offset by increases in the 2012, 2017 and 2018 accident years. |
• | Property: An increase of $6.8 million primarily recognizes higher than expected claims severity mainly in the 2016 and 2018 accident years partially offset by decreases in the 2017, 2019 and 2020 accident years. The majority of the increase was in the 2018 accident year which reflects an increase in the estimated ultimate for Hurricane Michael due to recognizing case incurred emergence on a Property Brokerage claim. |
• | Professional: A $0.4 million decrease primarily in the 2019 and 2020 accident years mainly reflecting lower than anticipated claims severity. |
The $1.6 million decrease in prior accident year loss reserves related to Specialty Property primarily consisted of the following:
• | General Liability: A $1.2 million reduction mostly in the 2018 accident year primarily reflects lower than anticipated claims severity. |
• | Property: A $0.4 million decrease mostly in the non-catastrophe reserve segments. The reductions were primarily in the 2016 through 2019 accident years mainly due to lower than expected claims severity partially offset by an increase in the 2020 accident year driven by higher than anticipated claims severity. |
The $0.9 million decrease in prior accident year loss reserves related to Farm, Ranch & Stable primarily consisted of the following:
• | Property: A $0.8 million decrease in total reflects subrogation recoveries of $1.1 million in the catastrophe reserve category from the California Thomas wildfire loss in the 2017 accident year and a decrease of $0.5 million in the 2019 accident year primarily recognizing lower than expected claims severity. These decreases were partially offset by increases in the 2018 and 2020 accident years mainly due to higher than anticipated claims severity. |
• | General Liability: A $0.1 million reduction primarily reflects decreases in the 2015 and 2017 accident years, mostly offset by increases in the 2007 and 2018 accident years. |
The $1.0 million reduction of prior accident year loss reserves related to Reinsurance Operations was from the property lines. Based on a review of the experience reported from cedants, decreases were recognized primarily in the 2011, 2017 and 2018 accident years partially offset by increases in the 2010 and 2019 accident years. In total, property catastrophe decreased $2.7 million and property non-catastrophe increased $1.7 million.
During the first six months of 2020, the Company reduced its prior accident year loss reserves by $19.9 million, which consisted of a $14.2 million decrease related to Commercial Specialty, a $4.6 million decrease related to Specialty Property, a $0.8 million decrease related to Farm, Ranch & Stable, and a $0.3 million decrease related to Reinsurance Operations.
The $14.2 million decrease in prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
• | General Liability: An $18.0 million reduction in aggregate with $4.7 million of favorable development in the construction defect reserve category and $13.3 million of favorable development in the other general liability reserve categories. The reduction in the construction defect reserve category primarily recognizes lower than expected claims frequency and severity in the 2005 through 2009, 2015 and 2017 accident years, slightly offset by an increase in the 2016 accident year. For the other general liability reserve categories, lower than anticipated claims severity was the main driver of the favorable development primarily in the 2005 through 2015 accident years, partially offset by |
30
GLOBAL INDEMNITY GROUP, LLC
|
|
|
• |
|
| Workers Compensation: A $0.2 million decrease primarily in loss adjustment expense reserves in the 2012 accident year and accident years prior to |
| • | Property: An increase of $5.8 million primarily recognizes higher than expected claims severity mainly in the 2017 through 2019 accident years. The bulk of the increase was in the 2018 accident year which reflects a higher estimated ultimate for Hurricane Michael. The increase in ultimate resulted from receiving additional information in the |
• | Professional: A $0.7 million decrease mainly in the 2009, 2010 and 2019 accident years reflects lower than expected claims severity, partially offset by an increase in the 2006 accident year. |
• | Commercial Auto Liability: A $1.0 million reduction in the 2010 through 2016 accident years recognizes lower than anticipated claims severity. |
The $6.6$4.6 million decrease in prior accident year loss reserves related to Specialty Property primarily consisted of the following:
| • | General Liability: A |
| • | Property: A |
The $2.1$0.8 million decrease in prior accident year loss reserves related to Farm, Ranch & Stable primarily consisted of the following:
| • | Property: A |
| • | General Liability: A $0.1 million decrease primarily recognizes lower than expected claims severity mainly in the 2015 through |
The $5.1 million decrease in prior accident year loss reserves related to Reinsurance Operations were based on a review of the experience reported from cedants. There was a $3.4 million decrease in the property lines primarily in the 2009 through 2010 and 2012 through 2017 accident years, partially offset by an increase in the 2019 accident year. In addition, there was a reduction of $1.7 million in the professional lines in the 2014 and 2015 accident years.
30
GLOBAL INDEMNITY GROUP, LLC
During the first nine months of 2019, the Company reduced its prior accident year loss reserves by $23.0 million, which consisted of a $12.1 million decrease related to Commercial Specialty, $10.5 million decrease related to Specialty Property, $4.0 million decrease related to Farm, Ranch, & Stable, and a $3.5 million increase related to Reinsurance Operations.
The $12.1$0.3 million reduction of prior accident year loss reserves related to Commercial Specialty primarily consistedReinsurance Operations was from the property lines. Based on a review of the following:experience reported from cedants, decreases were in the 2012 through 2017 accident years, partially offset by increases in the 2011, 2018 and 2019 accident years.
|
|
|
|
|
|
|
|
|
|
The $10.5 million reductionCompany determines if an arrangement is a lease at inception. Leases with a term of prior accident year loss reserves related to Specialty Property primarily consisted12 months or less are not recorded on the consolidated balance sheets. For leases with a term of greater than 12 months, lease right-of-use assets (“ROU”) and lease liabilities are included on the consolidated balance sheets.
Lease ROU assets and lease liabilities are recognized based on the present value of the following:future minimum lease payments over the lease term at the commencement date. The Company’s leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate at the commencement date in determining the present value of future payments. The ROU assets are calculated using the initial lease liability amount, plus any lease payments made at or before the commencement date, minus any lease incentives received, plus any initial direct costs incurred.
The Company’s lease agreements may contain both lease and non-lease components which are accounted separately. The Company elected the practical expedient on not separating lease components from non-lease components for its equipment leases.
|
|
|
|
|
The $4.0 million reduction of prior accident year loss reserves related to Farm, Ranch, & Stable primarily consisted of the following:
|
|
|
|
The $3.5 million increase in prior accident year loss reserves related to Reinsurance Operations primarily consisted of the following:
|
|
31
GLOBAL INDEMNITY GROUP, LLC
The Company leases office space and equipment under various operating lease arrangements. The Company’s leases have remaining lease terms ranging from 4 months to 9 years. Some building leases have options to extend, terminate, or retract the leased area. In June, 2021, the Company exercised the contraction clause of 1 of its leases. The Company incurred a $0.4 million contraction fee in conjunction with exercising the contraction clause. The related ROU asset and lease liability were revalued at June 30, 2021. The Company did not factor in any other term extension, terminations, or space retractions into the lease terms used to calculate the right-of-use assets and lease liabilities since it was uncertain as to whether these options would be executed.
Lease expenses for minimum lease payments are recognized on a straight-line basis over the lease term.
The components of lease expenses were as follows:
|
|
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Operating lease expenses |
| $ | 814 |
|
| $ | 731 |
|
| $ | 1,451 |
|
| $ | 1,479 |
|
Short-term lease expenses |
|
| 2 |
|
|
| 2 |
|
|
| 5 |
|
|
| 4 |
|
Total lease expenses |
| $ | 816 |
|
| $ | 733 |
|
| $ | 1,456 |
|
| $ | 1,483 |
|
There was 0 sublease income for the quarters and six months ended June 30, 2021 and 2020.
Supplemental cash flow information related to leases was as follows:
|
| Six Months Ended June 30, |
| |||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
| ||
Cash paid for amounts included in the measurement of liabilities: |
|
|
|
|
|
|
|
|
Operating leases |
| $ | 1,456 |
|
| $ | 711 |
|
Right-of-use assets obtained in exchange for new lease obligations: |
|
|
|
|
|
|
|
|
Operating leases |
| $ | 244 |
|
| $ | 91 |
|
Supplemental balance sheet information related to leases was as follows:
The table below presents the lease-related assets and liabilities recorded on the consolidated balance sheets.
(Dollars in thousands) |
| Classification on the consolidated balance sheets |
| June 30, 2021 |
|
| December 31, 2020 |
| ||
Assets: |
|
|
|
|
|
|
|
|
|
|
Operating lease assets |
| Lease right of use assets |
| $ | 19,979 |
|
| $ | 21,077 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
| Lease liabilities |
| $ | 21,566 |
|
| $ | 22,950 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term: |
|
|
|
|
|
|
|
| ||
Operating leases |
|
|
| 8.3 years |
|
| 8.8 years |
| ||
|
|
|
|
|
|
|
|
|
|
|
Weighted-average discount rate: |
|
|
|
|
|
|
|
| ||
Operating leases (1) |
|
|
|
| 1.5 | % |
|
| 2.6 | % |
|
|
The Company’s outstanding debt consisted of the following at September 30, 2020 and December 31, 2019:
(Dollars in thousands) |
| September 30, 2020 |
|
| December 31, 2019 |
| ||
Margin Borrowing Facility |
| $ | 0 |
|
| $ | 73,629 |
|
7.75% Subordinated Notes due 2045 |
|
| 0 |
|
|
| 96,864 |
|
7.875% Subordinated Notes due 2047 |
|
| 126,253 |
|
|
| 126,147 |
|
Total |
| $ | 126,253 |
|
| $ | 296,640 |
|
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 0.8% and 1.9% at September 30, 2020 and December 31, 2019, respectively. This facility is due on demand. The borrowings are subject to maintenance margin, which is a minimum account balance that must be maintained. A decline in market conditions could require an additional deposit of collateral. As of December 31, 2019, approximately $88.2 million in securities were deposited as collateral to support borrowings. The Company did 0t have any securities that were deposited as collateral at September 30, 2020. The amount borrowed against the margin account may fluctuate as routine investment transactions, such as dividends received, investment income received, maturities and pay-downs, impact cash balances. The margin facility contains customary events of default, including, without limitation, insolvency, failure to make required payments, failure to comply with any representations or warranties, failure to adequately assure future performance, and failure of a guarantor to perform under its guarantee. The amount outstanding on the Company’s margin borrowing facility was $73.6 million as of December 31, 2019. The Company did 0t have any amounts outstanding on the margin borrowing facility as of September 30, 2020.
The Company recorded interest expense related to the Margin Borrowing Facility of approximately $0.1 million and $0.5 million for the quarters ended September 30, 2020 and 2019, respectively, and $0.5 million and $1.4 million for the nine months ended September 30, 2020 and 2019, respectively.
7.75% Subordinated Notes due 2045
The Company redeemed the entire $100 million in aggregate principal amount of the outstanding 7.75% Subordinated Notes due 2045 (“2045 Notes”) plus accrued and unpaid interest on the 2045 Notes redeemed to, but not including, the Redemption Date of August 15, 2020. In connection with the redemption, the Company wrote off deferred issuance costs of $3.1 million which is recognized as a loss on extinguishment of debt in its consolidated statements of operations for the quarter and nine months ended September 30, 2020.
Interest expense, including amortization of deferred issuance costs through the date of redemption, recognized on the 2045 Notes was $1.0 million and $2.0 million for the quarters ended September 30, 2020 and 2019, respectively, and $4.9 million and $5.9 million for the nine months ended September 30, 2020 and 2019, respectively.
7.875% Subordinated Notes due 2047
On March 23, 2017, Global Indemnity Limited issued Subordinated Notes due in 2047 in the aggregate principal amount of $120.0 million through an underwritten public offering (the “2047 Notes”). Pursuant to the underwriting agreement, Global Indemnity Limited granted the underwriters a 30 day option to purchase up to an additional $18 million aggregate principal amount of the 2047 Notes solely to cover over-allotments, if any. On March 30, 2017, the underwriters exercised their over-allotment option in the amount of $10 million principal amount of the 2047 Notes. As a result, the aggregate principal amount of the 2047 Notes increased to $130.0 million. The sale of the 2047 Notes pursuant to the over-allotment option closed on March 30, 2017.
The 2047 Notes bear interest at an annual rate equal to 7.875%, payable quarterly in arrears on January 15, April 15, July 15, and October 15 of each year, commencing July 15, 2017. The 2047 Notes mature on April 15, 2047. The Company has the
32
GLOBAL INDEMNITY GROUP, LLC
At June 30, 2021, future minimum lease payments under non-cancelable operating leases were as follows:
(Dollars in thousands) |
|
|
|
|
2021 (1) |
| $ | 1,689 |
|
2022 |
|
| 2,621 |
|
2023 |
|
| 2,652 |
|
2024 |
|
| 2,613 |
|
2025 |
|
| 2,643 |
|
Thereafter |
|
| 10,716 |
|
Total future minimum lease payments |
| $ | 22,934 |
|
Less: amount representing interest |
|
| 1,368 |
|
Present value of minimum lease payments |
| $ | 21,566 |
|
right to redeem(1)Excludes the 2047 Notes in $25 increments, in whole or in part, on and after April 15, 2022, or on any interest payment date thereafter, at a redemption price equal to 100% of the principal amount of the 2047 Notes being redeemed plus accrued and unpaid interest to, but not including, the date of redemption. If the Company redeems only a portion of the 2047 Notes on any date of redemption, the Company may subsequently redeem additional 2047 Notes.
The 2047 Notes are subordinated unsecured obligations and rank (i) senior to the Company’s existing and future capital stock, (ii) senior in right of payment to future junior subordinated debt, (iii) equally in right of payment with any existing unsecured, subordinated debt that the Company has issued or may issue in the future that ranks equally with the 2047 Notes, and (iv) subordinate in right of payment to any of the Company’s future senior debt. In addition, the 2047 Notes are structurally subordinated to all existing and future indebtedness, liabilities and other obligations of the Company’s subsidiaries including the Company’s margin borrowing facility.
The 2047 Notes do not require the maintenance of any financial ratios or specified levels of net worth or liquidity, and do not contain provisions that would afford holders of the 2047 Notes protection in the event of a sudden and dramatic decline in the Company’s credit quality resulting from any highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect holders. The 2047 Notes do not restrict the Company in any way, now or in the future, from incurring additional indebtedness, including senior indebtedness that would rank senior in right of payment to the 2047 Notes. There is no right of acceleration of maturity of the 2047 Notes in the case of default in the payment of principal, premium, if any, or interest on the 2047 Notes or in the performance of any other obligation of the Company under the notes or if the Company defaults on any other debt securities. Holders may accelerate payment of indebtedness on the 2047 Notes only upon the Company’s bankruptcy, insolvency or reorganization.
The Company incurred $4.2 million in deferred issuance costs associated with the 2047 Notes, which is being amortized over the term of the 2047 Notes. Interest expense, including amortization of deferred issuance costs, recognized on the 2047 Notes was $2.6 million for each of the quarters ended September 30, 2020 and 2019 and $7.8 million for each of the ninesix months ended SeptemberJune 30, 2020 and 2019.
The following table represents the amounts recorded for the subordinated notes as of September 30, 2020 and December 31, 2019:
|
| September 30, 2020 |
| |||||||||
(Dollars in thousands) |
| Outstanding Principal |
|
| Unamortized Debt Issuance Costs |
|
| Net Carrying Amount |
| |||
7.875% Subordinated Notes due 2047 |
| $ | 130,000 |
|
| $ | (3,747 | ) |
| $ | 126,253 |
|
|
| $ | 130,000 |
|
| $ | (3,747 | ) |
| $ | 126,253 |
|
|
| December 31, 2019 |
| |||||||||
(Dollars in thousands) |
| Outstanding Principal |
|
| Unamortized Debt Issuance Costs |
|
| Net Carrying Amount |
| |||
7.75% Subordinated Notes due 2045 |
| $ | 100,000 |
|
| $ | (3,136 | ) |
| $ | 96,864 |
|
7.875% Subordinated Notes due 2047 |
|
| 130,000 |
|
|
| (3,853 | ) |
|
| 126,147 |
|
|
| $ | 230,000 |
|
| $ | (6,989 | ) |
| $ | 223,011 |
|
Supplemental Indentures
On August 28, 2020, in connection with the merger of Global Indemnity Limited with and into New Cayco, each of Global Indemnity Limited, as successor to Global Indemnity plc, an Irish public limited company, GBLI Holdings, LLC, a Delaware limited liability company, as co-obligor (the "Co-Obligor"), New CayCo, Wells Fargo Bank, National Association, as trustee (the "Original Trustee"), and U.S. Bank National Association, as series trustee of the 7.875% Subordinated Notes due 2047 (the "Series Trustee" and, together with the Original Trustee, the "Trustees") entered into a Fourth Supplemental Indenture, dated as of August 28, 2020 (the "Fourth Supplemental Indenture"), to the base indenture, dated as of August 12, 2015 (as supplemented, the "Indenture").
33
GLOBAL INDEMNITY GROUP, LLC
Pursuant to the Fourth Supplemental Indenture, New CayCo expressly assumed the obligations of Global Indemnity Limited under the Indenture, including the obligations of Global Indemnity Limited under the outstanding 2047 Notes issued pursuant to such Indenture.2021
On August 28, 2020, in connection with the merger of New Cayco with and into Global Indemnity Group, LLC, each of New CayCo, the Co-Obligor, Global Indemnity Group, LLC and the Trustees entered into a Fifth Supplemental Indenture, dated as of August 28, 2020 (the "Fifth Supplemental Indenture"), to the Indenture.
Pursuant to the Fifth Supplemental Indenture, Global Indemnity Group, LLC expressly assumed the obligations of New CayCo under the Indenture, including the obligations of New CayCo under the outstanding 2047 Notes issued pursuant to such Indenture.
Co-obligor Transaction
On April 25, 2018, GBLI Holdings, LLC, an indirect wholly owned subsidiary of the Company, became a subordinated co-obligor with respect to the 2045 Notes, which were fully redeemed in August 2020, and the 2047 Notes with the same obligations and duties as the Company under the Indenture (including the due and punctual performance and observance of all of the covenants and conditions to be performed by the Company, including, without limitation, the obligation to pay the principal of, and interest on, the 2047 Notes when due whether at maturity, by acceleration, redemption or otherwise), and with the same rights, benefits and privileges of the Company thereunder. Notwithstanding the foregoing, GBLI Holdings, LLC's obligations (including the obligation to pay the principal of and interest in respect of the 2047 Notes) are subject to subordination to all monetary obligations or liabilities of GBLI Holdings, LLC owing to any regulated reinsurance or insurance company that is a direct or indirect subsidiary of the Company, in addition to indebtedness of GBLI Holdings, LLC for borrowed money. If the Company pays any amount with respect to the subordinated note obligations, the Company is entitled to be reimbursed by GBLI Holdings, LLC within 10 business days after a demand is made to GBLI Holding, LLC by the Company. In consideration for becoming a subordinated co-obligor on the subordinated notes, GBLI Holdings, LLC received a promissory note from Global Indemnity Limited with a principal amount of $230 million due April 15, 2047 that has since been assigned to an affiliate. This promissory note was settled in August 2020.
10.Shareholders’ Equity
On August 28, 2020, Global Indemnity Limited completedThere were 7,100 A ordinary shares that were surrendered or repurchased during the previously disclosed schemequarter ended June 30, 2021 with an average price paid per share of arrangement and amalgamation that effected certain transactions (the "Redomestication") that resulted in the shareholders of Global Indemnity Limited becoming the holders of all of the issued and outstanding$27.64. There were 0 class A common shares ofthat were surrendered or repurchased during the Company. Please see Note 2 for details on the redomestication.
The treasury shares of Global Indemnity Limited were not subject to the scheme of arrangement. The carrying value of the Global Indemnity Limited treasury shares, $4.1 million, were offset against the Additional Paid-in Capital account of Global Indemnity Limited, according to the Company’s policy regarding the treatment of treasury shares. Please see Note 2 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2019 Annual Report on Form 10-K for more information on the Company’s policy regarding the treatment of treasury shares.
Issuance of Preferred Shares
On August 27, 2020, the Company issued and sold to Wyncote LLC (“Wyncote”), an affiliate of Fox Paine & Company, LLC, 4,000 Series A Preferred Interests at a price of $1,000 per Series A Preferred Interest, for the aggregate purchase price of $4,000,000. The issuance of Series A Preferred Interests to Wyncote was made pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act. The Series A Preferred Interests are not convertible into or exchangeable for any other securities or property of the Company. The shares are redeemable at the discretion of the Company after five years or at the discretion of the holders upon the occurrence of a change in control of the Company. While the preferred shares are non-voting, the preferred shareholders are entitled to appoint 2 additional members to the Company’s Board of Directors whenever the “Unpaid Targeted Priority Return” (as defined in the applicable Share Designation) with respect to the preferred shares exceed zero immediately following six or more “Distribution Dates” (as defined in the applicable Share Designation), whether or not such Distribution Dates occur consecutively.
34
GLOBAL INDEMNITY GROUP, LLC
Following the Effective Time, all of the issued and outstanding Series A Preferred Interests sold to Wyncote remain outstanding as "Series A Cumulative Fixed Rate Preferred Shares", unaffected by the Scheme of Arrangement and subject to the terms of the Second Amended and Restated Limited Liability Company Agreement of the Company (the “LLC Agreement”) and that certain Share Designation, effective as of the Effective Time, that sets forth the designation, rights, preferences, powers, duties, restrictions, limitations and obligations of the Series A Cumulative Fixed Rate Preferred Shares from and after the Effective Time.quarters ended June 30, 2020.
The following table provides information with respect to the class A common shares that were surrendered or repurchased during the quartersix months ended SeptemberJune 30, 2020:2021:
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 |
| ||||
August 1-31, 2020 |
|
| 396 |
| (2) | $ | 24.95 |
|
|
| 0 |
|
|
| 0 |
|
Total |
|
| 396 |
|
| $ | 24.95 |
|
|
| 0 |
|
|
|
|
|
|
|
(2) Surrendered by employees as payment of taxes withheld on the vesting of restricted stock.
There were 0 class A commons shares that were surrendered or repurchased during the quarter ended September 30, 2019.
The following table provides information with respect to the class A common shares that were surrendered or repurchased during the nine months ended September 30, 2020:
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, 2020 |
|
| 3,124 |
| (2) | $ | 29.63 |
|
|
| 0 |
|
|
| 0 |
|
February 1-29, 2020 |
|
| 1,600 |
| (2) | $ | 31.13 |
|
|
| 0 |
|
|
| 0 |
|
August 1-31, 2020 |
|
| 396 |
|
| $ | 24.95 |
|
|
| 0 |
|
|
| 0 |
|
Total |
|
| 5,120 |
|
| $ | 29.74 |
|
|
| 0 |
|
|
|
|
|
|
|
(2) Surrendered by employees as payment of taxes withheld on the vesting of restricted stock.
The following table provides information with respect to the class A common shares that were surrendered or repurchased during the nine months ended September 30, 2019:
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 |
| 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, 2019 |
|
| 7,945 |
| (2) | $ | 36.23 |
|
| 0 |
| 0 | ||||||||||||||||
February 1-28, 2019 |
|
| 19,083 |
| (2) | $ | 34.59 |
|
| 0 |
| 0 | ||||||||||||||||
January 1-31, 2021 |
|
| 6,720 |
| (2) | $ | 28.59 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||
March 1-31, 2021 |
|
| 3,095 |
| (2) | $ | 29.40 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||
June 1-30, 2021 |
|
| 7,100 |
| (2) | $ | 27.64 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||
Total |
|
| 27,028 |
|
| $ | 35.07 |
|
| 0 |
|
|
|
| 16,915 |
|
| $ | 28.34 |
|
|
| 0 |
|
|
| 0 |
|
(1) | Based on settlement date. |
(2) | Surrendered by employees as payment of taxes withheld on the vesting of restricted |
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, 2020:
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, 2020 |
|
| 3,124 |
| (2) | $ | 29.63 |
|
| 0 |
| 0 |
February 1-29, 2020 |
|
| 1,600 |
| (2) | $ | 31.13 |
|
| 0 |
| 0 |
Total |
|
| 4,724 |
|
| $ | 30.14 |
|
| 0 |
| 0 |
(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 186,160 of class B common shares to class A common shares. There were 0 other class B common shares that were surrendered or repurchased during the quarters and ninesix months ended SeptemberJune 30, 20202021 or 2019.2020.
35
33
GLOBAL INDEMNITY GROUP, LLC
As of SeptemberJune 30, 2020, the Company’s2021, Global Indemnity Group, LLC’s class A common shares were held by approximately 190180 shareholders of record. There were 4 holders of record of the Company’sGlobal Indemnity Group, LLC’s class B common shares, all of whom are affiliated investment funds of Fox Paine & Company, LLC, as of SeptemberJune 30, 2020. The Company’s2021. Global Indemnity Group, LLC’s preferred shares were held by 1 holder of record, an affiliate of Fox Paine & Company, LLC, as of SeptemberJune 30, 2020.2021.
Please see Note 1214 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 20192020 Annual Report on Form 10-K for more information on the Company’s repurchase program.
Dividends / Distributions
Dividend & distributionDistribution payments of $0.25 per common share were declared during the ninesix months ended SeptemberJune 30, 20202021 as follows:
Approval Date |
| Record Date |
| Payment Date |
| Total Dividends / Distributions Declared (Dollars in thousands) |
| |
February 9, 2020 (1) |
| March 24, 2020 |
| March 31, 2020 |
| $ | 3,539 |
|
June 7, 2020 (1) |
| June 23, 2020 |
| June 30, 2020 |
|
| 3,545 |
|
September 13, 2020 (2) |
| September 25, 2020 |
| September 30, 2020 |
|
| 3,552 |
|
Various (3) |
| Various |
| Various |
|
| 337 |
|
Total |
|
|
|
|
| $ | 10,973 |
|
Approval Date |
| Record Date |
| Payment Date |
| Total Distributions Declared (Dollars in thousands) |
| |
February 14, 2021 |
| March 22, 2021 |
| March 31, 2021 |
| $ | 3,570 |
|
June 5, 2021 |
| June 21, 2021 |
| June 30, 2021 |
|
| 3,579 |
|
Various (1) |
| Various |
| Various |
|
| 216 |
|
Total |
|
|
|
|
| $ | 7,365 |
|
| (1) | Represents |
|
|
|
|
Dividend payments of $0.25 per common share were declared during the ninesix months ended SeptemberJune 30, 20192020 as follows:
Approval Date |
| Record Date |
| Payment Date |
| Total Dividends Declared (Dollars in thousands) |
|
| Record Date |
| Payment Date |
| Total Dividends Declared (Dollars in thousands) |
| ||
February 10, 2019 |
| March 22, 2019 |
| March 29, 2019 |
| $ | 3,521 |
| ||||||||
June 2, 2019 |
| June 21, 2019 |
| June 28, 2019 |
|
| 3,525 |
| ||||||||
September 15, 2019 |
| September 26, 2019 |
| October 2, 2019 |
|
| 3,528 |
| ||||||||
February 9, 2020 |
| March 24, 2020 |
| March 31, 2020 |
| $ | 3,539 |
| ||||||||
June 7, 2020 |
| June 23, 2020 |
| June 30, 2020 |
|
| 3,545 |
| ||||||||
Various (1) |
| Various |
| Various |
|
| 191 |
|
| Various |
| Various |
|
| 215 |
|
Total |
|
|
|
|
| $ | 10,765 |
|
|
|
|
|
| $ | 7,299 |
|
| (1) | Represents dividends declared on unvested shares, net of forfeitures. |
As of SeptemberJune 30, 20202021 and December 31, 2019,2020, accrued distributions on unvested shares, which were included in other liabilities on the consolidated balance sheets, were $0.6$0.9 million and $0.3$0.7 million, respectively. Accrued preferred distributions were less than $0.1 million as of Septemberboth June 30, 2021 and December 31, 2020 and were included in other liabilities on the consolidated balance sheets.
Please see Note 1214 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 20192020 Annual Report on Form 10-K for more information on the Company’s dividend program.
36
GLOBAL INDEMNITY GROUP, LLC
11. | Related Party Transactions |
Fox Paine Entities
As of September 30, 2020,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 (collectively, the(the “Fox Paine Funds”), which are managed by Fox Paine & Company, LLC, beneficially own approximately 77.5% of the Company’s total voting power. As of September 30, 2020,together with Fox Mercury Investments, L.P. and certain of its affiliates (the “FM Entities”), and Fox Paine & Company LLC (collectively, the “FM“Fox Paine Entities”) separately beneficially own approximately 4.8% ofcurrently constitute a Class B Majority Shareholder (as defined in the Company’s total voting power. The Fox Paine FundsLLCA) and, as such, have the right to appoint a number of the Company’s DirectorsGlobal Indemnity Group, LLC’s directors equal in aggregate to the pro rata percentage of the voting power in the CompanyGlobal Indemnity Group, LLC beneficially held by the Fox Paine Funds, FM Entities, and Fox Paine & Company, LLC (collectively, “Fox Paine Entities”) so long asrounded up to the nearest whole number of directors. The Fox Paine Entities beneficially own a majorityshares representing approximately 82.9% of the outstanding class B common shares of the Company and shares representing an aggregate 25% or more of the total voting power in the Company.of Global Indemnity Group, LLC as of June 30, 2021. The Fox Paine FundsEntities control the appointment or election of all of the Company’sGlobal Indemnity Group, LLC’s Directors due to the LLCA and their controlling share ownership. The Company’sGlobal Indemnity Group, LLC’s Chairman is the chief executive and founder of Fox Paine & Company, LLC.
34
GLOBAL INDEMNITY GROUP, LLC
On August 27, 2020, the CompanyGlobal Indemnity Group, LLC issued and sold to Wyncote LLC, an affiliate of Fox Paine & Company, LLC, 4,000 Series A Cumulative Fixed Rate Preferred Interests at a price of $1,000 per Series A Preferred Interest, for the aggregate purchase price of $4,000,000. While thethese preferred sharesinterests are non-voting, the preferred shareholders are entitled to appoint two additional members to the Company’sGlobal Indemnity Group, LLC’s Board of Directors whenever the “Unpaid Targeted Priority Return” with respect to the preferred sharesinterests exceed zero immediately following six or more “Distribution Dates”, whether or not such Distribution Dates occur consecutively. See Note 10 for additional information on the Series A Cumulative Fixed Rate Preferred Interests.
The Company relies on Fox Paine & Company, LLC to provide management services and other services related to the operations of the Company. Starting in 2014, the management fee is adjusted annually to reflect the percentage change in the CPI-U. On May 6, 2020, Global Indemnity LimitedGroup, LLC’s Board of Directors is obligated to take, and Fox Paine & Company, LLC entered intocause Global Indemnity Group, LLC’s officers to take, any necessary actions to effectuate such appointments, including expanding the Second Amended and Restated Management Agreement, effective as of September 5, 2019 (the “Management Agreement”), to: (i) eliminate the Company’s obligation to reimburse Fox Paine & Company, LLC for its travel, lodging, meals, and other items relating to attendance at regularly scheduled meetingssize of the Board of Directors, which have averaged approximately $550,000 per year (since execution of the Management Agreement in 2013), and (ii) increase Fox Paine & Company, LLC’s base Annual Service Fee by $550,000 per year. On August 28, 2020, in connection with the Redomestication, the Company and Fox Paine & Company, LLC entered into the Third Amended and Restated Management Agreement effective as of August 28, 2020 (the “Management Agreement”). The Management Agreement amends and restates the Second Amended and Restated Management Agreement, dated as of May 6, 2020, between Fox Paine & Company, LLC and Global Indemnity Limited, to reflect the assumption by Global Indemnity Group, LLCany exercise of the obligations under the Management Agreement and to make related conforming changes and immaterial modifications to the Management Agreement.foregoing provisions.
Management fee expense of $0.6$0.7 million and $0.5$0.8 million was incurred during the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and management fee expense of $2.0$1.3 million and $1.5$1.4 million was incurred during the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. Prepaid management fees, which were included in other assets on the consolidated balance sheets, were $2.5$0.5 million and $1.4$1.8 million as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively.
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 the Company’sGlobal Indemnity Group, LLC’s Conflicts Committee of the Board of Directors or Global Indemnity Limited’s Audit Committee of the Board of Directors, for those services from time to time. Each of the Company’s transactions with Fox Paine & Company, LLC described below wasare reviewed and approved by the Company’seither Global Indemnity Group, LLC’s Conflicts Committee or Audit Committee, which is composed of independent directors, and the Board of Directors (other than Saul A. Fox, Chairman of the Board of Directors of the CompanyGlobal Indemnity Group, LLC and Chief Executive of Fox Paine & Company, LLC, who is not a member of the Conflicts Committee and was not a member of Global Indemnity Limited’s Audit Committee and recused himself from the Board of Directors’ deliberations).
37
GLOBAL INDEMNITY GROUP, LLC
Illiquid Investment Fund Divestiture Fee
On December 21, 2018, GBLI Holdings, LLC exited an investment in a private credit fund pursuantdeliberations related to a sale of GBLI Holdings, LLC’s investment to third parties at par plus accrued interest. Fox Paine & Company, LLC provided services to GBLI Holdings, LLC in connection with the sale, including conducting due diligence to evaluate the private fund, recommending that GBLI Holdings, LLC withdraw from the private fund, and conducting extended negotiations with the private fund to secure GBLI Holdings, LLC’s withdrawal from the private fund on favorable terms. Fox Paine & Company, LLC’s services for GBLI Holdings, LLC in connection with the sale were performed during the second, third, and fourth quarters of 2018. The total fee for these services was $2.0 million which was accrued in the 4th quarter of 2018, which is the period in which the transaction was completed, and wasfees paid in May 2019.
Redomestication Fee
Pursuant to the Management Agreement, Fox Paine & Company, LLC performed extensive financial advisory services for the Company in connection with the conceptualization, design, structuring and implementation of the redomestication plan. In accordance with the Management Agreement, Fox Paine & Company, LLC may propose and negotiate advisory fees for such services with the Company, subject to the provisions of the Company’s related party transaction policies. The Company agreed to pay an advisory fee to Fox Paine & Company, LLC for such services in an amount of $10.0 million, which was accrued at September 30, 2020, and will be paid in a subsequent period. The $10.0 million fee was approved by the Conflicts Committee.
or its affiliates).
12.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 $50 million commitment to purchase an alternative investment vehicle which is comprised of European non-performing loans. As of SeptemberJune 30, 2020,2021, the Company has funded $35.8 million of this commitment leaving $14.2 million as unfunded. Since the investment period has concluded, the Company expects minimal capital calls will be made prospectively.
In 2017, the Company entered into a $50 million commitment to purchase an alternative investment vehicle comprised of stressed and distressed securities and structured products. As of SeptemberJune 30, 2020,2021, the Company has funded $33.0 million of this commitment leaving $17.0 million as unfunded. Since the investment period has concluded, the Company expects minimal capital calls will be made prospectively.
In 2019,2021, the Company entered into a $10$25 million commitment to purchase an alternative investment vehicle which is comprised of mortgageperforming, stressed or distressed securities and loans and other real-estate related investments.across the global fixed income markets. As of SeptemberJune 30, 2020,2021, the Company has fully funded this commitment.
35
GLOBAL INDEMNITY GROUP, LLC
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
38
GLOBAL INDEMNITY GROUP, LLC
management fee to Fox Paine & Company, LLC. See Note 1110 above for additional information pertaining to this management agreement.
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 Farm, Ranch & Stable policies, or other conditions included in policies that would otherwise preclude coverage.
13. | Share-Based Compensation Plans |
In connection with the Redomestication, the 2018 Share Incentive Plan was amended and restated to reflect Global Indemnity Group, LLC’s assumption of the sponsorship of the plan and other changes deemed necessary and appropriate to reflect the completion of the Redomestication.
Options
During the first quarter of 2021, the Company granted 140,000 Performance-Based Options under the Plan. The Performance-Based Options vest in 33% increments over a three-year period subject to the achievement of certain underwriting results and expire ten years after the grant date or the occurrence of certain events specified in the agreement, whichever is earlier. NaN stock options were awarded during the quartersquarter ended June 30, 2021 or the quarter and ninesix months ended SeptemberJune 30, 2020 and 2019.2020. NaN unvested options were forfeited during the quarter ended June 30, 2021. 300,000 unvested options were forfeited during the six months ended June 30, 2021. NaN unvested stock options were forfeited during the quartersquarter and ninesix months ended SeptemberJune 30, 2020 or 2019.2020.
Restricted Shares / Restricted Stock Units
There were 0 restricted class A common shares granted to key employees during the quarters and six months ended SeptemberJune 30, 2021 and 2020 and 2019 or the nine months ended September 30, 2020.
During the nine months ended September 30, 2019, the Company granted 36,180 restricted class A common shares, with a weighted average grant date value of $35.82 per share, to key employees under the Plan. 9,063 of these shares vested immediately. 27,117 of these shares will vest as follows:
|
|
|
|
Therethere were 0 restricted stock units granted to key employees during the quarterquarters ended SeptemberJune 30, 2021 and 2020 and 2019.or the six months ended June 30, 2021.
During the ninesix months ended SeptemberJune 30, 2020, the Company granted 161,238 restricted stock units, with a weighted average grant date value of $30.32 per share, to key employees under the Plan. 3,375 of these restricted stock units will vest evenly over the next three years on January 1, 2021, January 1, 2022 and January 1, 2023.
66,957 of these restricted stock units will vest as follows:
| • |
|
The remaining 90,906 restricted stock units will vest as follows:
| • | 16.5% |
| • | Subject to Board approval, 50% of restricted stock units will vest 100%, no later than March 15, 2023, following a re-measurement of 2019 results as of December 31, 2022. |
39During the quarter and six months ended June 30, 2021, there were 22,540 and 42,977 restricted stock units, respectively, that became fully vested. Upon vesting, the restricted stock units converted to restricted class A common shares. During the quarter and six months ended June 30, 2020, there were 0 restricted stock units that vested.
36
GLOBAL INDEMNITY GROUP, LLC
During the nine monthsquarters ended SeptemberJune 30, 2019,2021 and 2020, the Company granted 175,498 restricted stock units, with a weighted average grant date value of $30.18 per unit, to key employees under the Plan. These restricted stock units will vest as follows:
|
|
During the quarters ended September 30, 202019,738 and 2019, the Company granted 29,893 and 19,27528,482 class A common shares, respectively, at a weighted average grant date value of $22.58$28.71 and $24.97$23.70 per share, respectively, to non-employee directors of the Company under the Plan. Of the shares granted during the quarters ended June 30, 2021 and 2020, the vesting of 4,838 shares and 7,912 shares, respectively, is deferred until January 1, 2024 or a change of control, whichever is earlier. The remaining shares granted to non-employee directors of the Company in 2021 and 2020 were fully vested but are subject to certain restrictions.
During the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the Company granted 81,50239,744 and 50,66151,609 class A common shares, respectively, at a weighted average grant date value of $24.85$28.51 and $28.50$26.16 per share, respectively, to non-employee directors of the Company under the Plan. AllOf the shares granted during the six months ended June 30, 2021 and 2020, the vesting of these9,741 shares and 14,334 shares, respectively, is deferred until January 1, 2024 or a change of control, whichever is earlier. The remaining shares granted to non-employee directors of the Company in 20202021 and 20192020 were fully vested but are subject to certain restrictions.
Book Value Appreciation Rights (“BVAR”)
During the second quarter of 2021, the Company granted 2,500,000 Penn-Patriot BVARs with an aggregate initial notional value equal to approximately 5% of Penn-Patriot’s book value, which entitles the holder to a payment based on the value of the per-BVAR appreciation in Penn-Patriot’s book value over the initial notional value. The BVARs will vest by December 31, 2026, subject to the achievement of certain performance goals and nine months ended September 30, 2020,continued employment as of the vesting date, with half of the applicable appreciation value of the BVARs payable on April 1, 2027 and an additional amount payable on April 1, 2030 following a true-up of underwriting results for the applicable performance period. The BVARs will vest in full in the event of a “change in control” of Penn-Patriot and a specified portion may vest in the event the holder is terminated by Penn-Patriot without cause.
During the second quarter of 2021, the Company also granted 41,667 restricted stock units400,000 Penn-Patriot BVARS with an aggregate initial notional value equal to approximately 0.8% of Penn-Patriot’s book value, which entitles the holder to a non-employee director thatpayment based on the value of the per-BVAR appreciation in Penn-Patriot’s book value over the initial notional value. The BVARs will vest ratably overby December 31, 2026, subject to the achievement of certain performance goals and continued employment as of the vesting date, with half of the applicable appreciation value of the BVARs payable on April 1, 2027 and an additional amount payable on April 1, 2030 following a true-up of underwriting results for the applicable performance period. The BVARs will vest in full in the event of a “Change in Control” of Penn-Patriot and a specified portion may vest in the event the holder is terminated by Penn-Patriot without cause.
There were 0 BVARs granted during the quarter and six months ended June 30, 2020.
Virtual Stock
10,000 shares of Penn-Patriot Virtual Stock with an initial notional value of $100,000 was granted during the second quarter of 2021. These shares have a three years on January 1, 2022, January 1, 2023,year cliff vesting period and January 1, 2024.are payable in either cash or Global Indemnity Group, LLC’s class A common shares at the discretion of Global Indemnity Group, LLC’s Board of Directors. There were 0 virtual shares issued during the quarter and six months ended June 30, 2020.
14.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.
37
GLOBAL INDEMNITY GROUP, LLC
The following table sets forth the computation of basic and diluted earnings per share:
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in thousands, except share and per share data) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | (15,170 | ) |
| $ | 6,721 |
|
| $ | (22,197 | ) |
| $ | 40,984 |
|
| $ | 6,375 |
|
| $ | 37,551 |
|
| $ | 11,892 |
|
| $ | (7,027 | ) |
Less: preferred stock distributions |
|
| 42 |
|
|
| — |
|
|
| 42 |
|
|
| — |
|
|
| 110 |
|
|
| 0 |
|
|
| 220 |
|
|
| 0 |
|
Net income (loss) available to common shareholders |
| $ | (15,212 | ) |
| $ | 6,721 |
|
| $ | (22,239 | ) |
| $ | 40,984 |
|
| $ | 6,265 |
|
| $ | 37,551 |
|
| $ | 11,672 |
|
| $ | (7,027 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares for basic earnings per share |
|
| 14,304,426 |
|
|
| 14,202,859 |
|
|
| 14,276,594 |
|
|
| 14,181,530 |
|
|
| 14,412,446 |
|
|
| 14,275,500 |
|
|
| 14,396,523 |
|
|
| 14,262,525 |
|
Non-vested restricted stock |
|
| — |
|
|
| 23,059 |
|
|
| — |
|
|
| 19,201 |
|
|
| 12,310 |
|
|
| 14,112 |
|
|
| 11,254 |
|
|
| 0 |
|
Non-vested restricted stock units |
|
| — |
|
|
| 0 |
|
|
| — |
|
|
| 2,954 |
|
|
| 140,785 |
|
|
| 24,293 |
|
|
| 129,035 |
|
|
| 0 |
|
Options |
|
| — |
|
|
| 101,839 |
|
|
| — |
|
|
| 125,176 |
|
|
| 116,190 |
|
|
| 75,495 |
|
|
| 114,312 |
|
|
| 0 |
|
Weighted average shares for diluted earnings per share (1) |
|
| 14,304,426 |
|
|
| 14,327,757 |
|
|
| 14,276,594 |
|
|
| 14,328,861 |
|
|
| 14,681,731 |
|
|
| 14,389,400 |
|
|
| 14,651,124 |
|
|
| 14,262,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - Basic |
| $ | (1.06 | ) |
| $ | 0.47 |
|
| $ | (1.56 | ) |
| $ | 2.89 |
|
| $ | 0.43 |
|
| $ | 2.63 |
|
| $ | 0.81 |
|
| $ | (0.49 | ) |
Earnings per share - Diluted |
| $ | (1.06 | ) |
| $ | 0.47 |
|
| $ | (1.56 | ) |
| $ | 2.86 |
|
| $ | 0.43 |
|
| $ | 2.61 |
|
| $ | 0.80 |
|
| $ | (0.49 | ) |
(1) | For the |
If the Company had not incurred a loss in the quartersix months ended SeptemberJune 30, 2020, 14,444,32614,408,907 weighted average shares would have been used to compute the diluted loss per share calculation. In addition to the basic shares, weighted average shares for the diluted calculation for the six months ended June 30, 2020 would have included 18,21815,195 shares of non-vested restricted stock, 48,84629,691 shares of non-vested restricted stock units, and 72,836101,496 share equivalents for options.
If the Company had not incurred a loss in the nine months ended September 30, 2020, 14,421,393 weighted average shares would have been used to compute the diluted loss per share calculation. In addition to the basic shares, weighted average shares for the diluted calculation would have included 15,366 shares of non-vested restricted stock, 36,796 shares of non-vested restricted stock units, and 92,637 share equivalents for options.
The weighted average shares outstanding used to determine dilutive earnings per share does not include 572,957540,000 shares and 570,332 shares for the quarterquarters ended June 30, 2021 and nine months ended September 30, 2020, respectively, and 500,000540,000 shares and 566,957 shares for the quarter and ninesix months ended SeptemberJune 30, 20192021 and 2020, respectively, which were deemed to be anti-dilutive.
40
GLOBAL INDEMNITY GROUP, LLC
15. | Segment Information |
The Company manages its businessinsurance companies are managed through 4 business segments. Commercial Specialty offers specialty property and casualty products designed for product lines such as Small Business Binding Authority, Property Brokerage, and Programs. Specialty Property offers specialty personal lines property and casualty insurance products. Farm, Ranch & Stable offers specialized property and casualty coverage including Commercial Farm Auto and Excess/Umbrella Coverage for the agriculture industry as well as specialized insurance products for the equine mortality and equine major medical industry. Reinsurance Operations provides reinsurance solutions through brokers and primary writers including insurance and reinsurance companies.
38
GLOBAL INDEMNITY GROUP, LLC
The following are tabulations of business segment information for the quarters and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
Quarter Ended September 30, 2020 (Dollars in thousands) |
| Commercial Specialty |
| (1) | Specialty Property |
| (1) | Farm, Ranch, & Stable |
| (1) | Reinsurance Operations |
| (2) | Total |
| |||||||||||||||||||||||||
Quarter Ended June 30, 2021 (Dollars in thousands) |
| Commercial Specialty |
|
| Specialty Property |
|
| Farm, Ranch & Stable |
|
| Reinsurance Operations |
| (1) | Total |
| |||||||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
| $ | 74,971 |
|
| $ | 34,730 |
|
| $ | 19,443 |
|
| $ | 14,605 |
|
| $ | 143,749 |
|
| $ | 96,680 |
|
| $ | 33,013 |
|
| $ | 20,851 |
|
| $ | 24,692 |
|
| $ | 175,236 |
|
Net written premiums |
| $ | 69,074 |
|
| $ | 29,971 |
|
| $ | 16,961 |
|
| $ | 14,605 |
|
| $ | 130,611 |
|
| $ | 88,332 |
|
| $ | 29,749 |
|
| $ | 17,880 |
|
| $ | 24,692 |
|
| $ | 160,653 |
|
Net earned premiums |
| $ | 73,887 |
|
| $ | 31,388 |
|
| $ | 19,978 |
|
| $ | 15,049 |
|
| $ | 140,302 |
|
| $ | 80,146 |
|
| $ | 29,892 |
|
| $ | 17,960 |
|
| $ | 21,410 |
|
| $ | 149,408 |
|
Other income |
|
| 0 |
|
|
| 450 |
|
|
| 35 |
|
|
| 112 |
|
|
| 597 |
|
|
| 0 |
|
|
| 458 |
|
|
| 40 |
|
|
| 14 |
|
|
| 512 |
|
Total revenues |
|
| 73,887 |
|
|
| 31,838 |
|
|
| 20,013 |
|
|
| 15,161 |
|
|
| 140,899 |
|
|
| 80,146 |
|
|
| 30,350 |
|
|
| 18,000 |
|
|
| 21,424 |
|
|
| 149,920 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 42,879 |
|
|
| 34,430 |
|
|
| 14,649 |
|
|
| 5,190 |
|
|
| 97,148 |
|
|
| 51,818 |
|
|
| 15,302 |
|
|
| 11,161 |
|
|
| 12,657 |
|
|
| 90,938 |
|
Acquisition costs and other underwriting expenses |
|
| 26,943 |
|
|
| 13,364 |
|
|
| 7,443 |
|
|
| 5,518 |
|
|
| 53,268 |
|
|
| 29,633 |
|
|
| 12,579 |
|
|
| 7,187 |
|
|
| 7,814 |
|
|
| 57,213 |
|
Income (loss) from segments |
| $ | 4,065 |
|
| $ | (15,956 | ) |
| $ | (2,079 | ) |
| $ | 4,453 |
|
| $ | (9,517 | ) |
| $ | (1,305 | ) |
| $ | 2,469 |
|
| $ | (348 | ) |
| $ | 953 |
|
| $ | 1,769 |
|
Unallocated Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10,633 |
|
Net realized investment gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,833 |
|
Other loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (55 | ) | ||||||||||||||||||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9 |
| ||||||||||||||||||||
Corporate and other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (21,196 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6,329 | ) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,620 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,696 | ) |
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,060 | ) | ||||||||||||||||||||
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (18,379 | ) | ||||||||||||||||||||
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,209 |
| ||||||||||||||||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (15,170 | ) | ||||||||||||||||||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,219 |
| ||||||||||||||||||||
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (844 | ) | ||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 6,375 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
| $ | 752,002 |
|
| $ | 207,831 |
|
| $ | 137,697 |
|
| $ | 269,771 |
|
| $ | 1,367,301 |
|
| $ | 881,795 |
|
| $ | 210,362 |
|
| $ | 141,009 |
|
| $ | 292,078 |
|
| $ | 1,525,244 |
|
Corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 572,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 412,073 |
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,939,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,937,317 |
|
(1) |
|
| External business only, excluding business assumed from affiliates. |
4139
GLOBAL INDEMNITY GROUP, LLC
Quarter Ended September 30, 2019 (Dollars in thousands) |
| Commercial Specialty |
| (1) | Specialty Property |
| (1) | Farm, Ranch, & Stable |
| (1) | Reinsurance Operations |
| (2) | Total |
| |||||||||||||||||||||||||
Quarter Ended June 30, 2020 (Dollars in thousands) |
| Commercial Specialty |
|
| Specialty Property |
|
| Farm, Ranch & Stable |
|
| Reinsurance Operations |
| (1) | Total |
| |||||||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
| $ | 73,175 |
|
| $ | 42,611 |
|
| $ | 21,410 |
|
| $ | 19,981 |
|
| $ | 157,177 |
|
| $ | 87,297 |
|
| $ | 37,978 |
|
| $ | 23,222 |
|
| $ | 16,052 |
|
| $ | 164,549 |
|
Net written premiums |
| $ | 62,925 |
|
| $ | 37,628 |
|
| $ | 18,294 |
|
| $ | 19,989 |
|
| $ | 138,836 |
|
| $ | 77,880 |
|
| $ | 33,075 |
|
| $ | 20,257 |
|
| $ | 16,052 |
|
| $ | 147,264 |
|
Net earned premiums |
| $ | 60,869 |
|
| $ | 34,554 |
|
| $ | 18,377 |
|
| $ | 19,512 |
|
| $ | 133,312 |
|
| $ | 69,728 |
|
| $ | 33,543 |
|
| $ | 19,030 |
|
| $ | 19,546 |
|
| $ | 141,847 |
|
Other income (loss) |
|
| 0 |
|
|
| 465 |
|
|
| 34 |
|
|
| (235 | ) |
|
| 264 |
| ||||||||||||||||||||
Other income |
|
| 0 |
|
|
| 429 |
|
|
| 36 |
|
|
| 279 |
|
|
| 744 |
| ||||||||||||||||||||
Total revenues |
|
| 60,869 |
|
|
| 35,019 |
|
|
| 18,411 |
|
|
| 19,277 |
|
|
| 133,576 |
|
|
| 69,728 |
|
|
| 33,972 |
|
|
| 19,066 |
|
|
| 19,825 |
|
|
| 142,591 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 27,389 |
|
|
| 25,997 |
|
|
| 10,939 |
|
|
| 9,258 |
|
|
| 73,583 |
|
|
| 28,877 |
|
|
| 13,691 |
|
|
| 13,439 |
|
|
| 11,290 |
|
|
| 67,297 |
|
Acquisition costs and other underwriting expenses |
|
| 24,820 |
|
|
| 14,571 |
|
|
| 7,776 |
|
|
| 6,199 |
|
|
| 53,366 |
|
|
| 26,516 |
|
|
| 13,761 |
|
|
| 7,606 |
|
|
| 5,695 |
|
|
| 53,578 |
|
Income (loss) from segments |
| $ | 8,660 |
|
| $ | (5,549 | ) |
| $ | (304 | ) |
| $ | 3,820 |
|
| $ | 6,627 |
|
| $ | 14,335 |
|
| $ | 6,520 |
|
| $ | (1,979 | ) |
| $ | 2,840 |
|
| $ | 21,716 |
|
Unallocated Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,348 |
| ||||||||||||||||||||
Net realized investment loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,690 | ) | ||||||||||||||||||||
Net investment loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,359 | ) | ||||||||||||||||||||
Net realized investment gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 38,507 |
| ||||||||||||||||||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22 |
| ||||||||||||||||||||
Corporate and other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,858 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8,618 | ) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,023 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4,712 | ) |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 44,556 |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 317 |
| ||||||||||||||||||||
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,005 | ) | ||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 6,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 37,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
| $ | 705,260 |
|
| $ | 246,080 |
|
| $ | 136,420 |
|
| $ | 346,137 |
|
| $ | 1,433,897 |
|
| $ | 753,310 |
|
| $ | 203,561 |
|
| $ | 140,658 |
|
| $ | 277,242 |
|
| $ | 1,374,771 |
|
Corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 650,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 738,377 |
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,084,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,113,148 |
|
(1) | External business only, excluding business assumed from affiliates. |
40
GLOBAL INDEMNITY GROUP, LLC
Six Months Ended June 30, 2021 (Dollars in thousands) |
| Commercial Specialty |
|
| Specialty Property |
|
| Farm, Ranch & Stable |
|
| Reinsurance Operations |
| (1) | Total |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
| $ | 184,012 |
|
| $ | 66,371 |
|
| $ | 41,853 |
|
| $ | 46,558 |
|
| $ | 338,794 |
|
Net written premiums |
| $ | 166,847 |
|
| $ | 59,448 |
|
| $ | 35,483 |
|
| $ | 46,558 |
|
| $ | 308,336 |
|
Net earned premiums |
| $ | 156,296 |
|
| $ | 60,483 |
|
| $ | 36,101 |
|
| $ | 40,228 |
|
| $ | 293,108 |
|
Other income (loss) |
|
| 0 |
|
|
| 888 |
|
|
| 74 |
|
|
| (42 | ) |
|
| 920 |
|
Total revenues |
|
| 156,296 |
|
|
| 61,371 |
|
|
| 36,175 |
|
|
| 40,186 |
|
|
| 294,028 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 105,053 |
|
|
| 29,780 |
|
|
| 22,962 |
|
|
| 23,926 |
|
|
| 181,721 |
|
Acquisition costs and other underwriting expenses |
|
| 57,810 |
|
|
| 25,618 |
|
|
| 14,173 |
|
|
| 14,376 |
|
|
| 111,977 |
|
Income (loss) from segments |
| $ | (6,567 | ) |
| $ | 5,973 |
|
| $ | (960 | ) |
| $ | 1,884 |
|
| $ | 330 |
|
Unallocated Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,469 |
|
Net realized investment gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,652 |
|
Other loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (22 | ) |
Corporate and other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,605 | ) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,291 | ) |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,533 |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (641 | ) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 11,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
| $ | 881,795 |
|
| $ | 210,362 |
|
| $ | 141,009 |
|
| $ | 292,078 |
|
| $ | 1,525,244 |
|
Corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 412,073 |
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,937,317 |
|
(1) |
|
| External business only, excluding business assumed from affiliates. |
4241
GLOBAL INDEMNITY GROUP, LLC
Nine Months Ended September 30, 2020 (Dollars in thousands) |
| Commercial Specialty |
| (1) | Specialty Property |
| (1) | Farm, Ranch, & Stable |
| (1) | Reinsurance Operations |
| (2) | Total |
| |||||||||||||||||||||||||
Six Months Ended June 30, 2020 (Dollars in thousands) |
| Commercial Specialty |
|
| Specialty Property |
|
| Farm, Ranch & Stable |
|
| Reinsurance Operations |
| (1) | Total |
| |||||||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
| $ | 243,099 |
|
| $ | 107,951 |
|
| $ | 64,798 |
|
| $ | 48,174 |
|
| $ | 464,022 |
|
| $ | 168,128 |
|
| $ | 73,221 |
|
| $ | 45,355 |
|
| $ | 33,569 |
|
| $ | 320,273 |
|
Net written premiums |
| $ | 219,437 |
|
| $ | 93,053 |
|
| $ | 56,323 |
|
| $ | 48,174 |
|
| $ | 416,987 |
|
| $ | 150,363 |
|
| $ | 63,082 |
|
| $ | 39,362 |
|
| $ | 33,569 |
|
| $ | 286,376 |
|
Net earned premiums |
| $ | 211,329 |
|
| $ | 99,147 |
|
| $ | 57,691 |
|
| $ | 58,450 |
|
| $ | 426,617 |
|
| $ | 137,442 |
|
| $ | 67,759 |
|
| $ | 37,713 |
|
| $ | 43,401 |
|
| $ | 286,315 |
|
Other income |
|
| 0 |
|
|
| 1,306 |
|
|
| 107 |
|
|
| 96 |
|
|
| 1,509 |
| ||||||||||||||||||||
Other income (loss) |
|
| 0 |
|
|
| 856 |
|
|
| 72 |
|
|
| (16 | ) |
|
| 912 |
| ||||||||||||||||||||
Total revenues |
|
| 211,329 |
|
|
| 100,453 |
|
|
| 57,798 |
|
|
| 58,546 |
|
|
| 428,126 |
|
|
| 137,442 |
|
|
| 68,615 |
|
|
| 37,785 |
|
|
| 43,385 |
|
|
| 287,227 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 109,191 |
|
|
| 65,619 |
|
|
| 37,698 |
|
|
| 29,584 |
|
|
| 242,092 |
|
|
| 66,312 |
|
|
| 31,189 |
|
|
| 23,049 |
|
|
| 24,394 |
|
|
| 144,944 |
|
Acquisition costs and other underwriting expenses |
|
| 79,452 |
|
|
| 41,357 |
|
|
| 22,687 |
|
|
| 19,762 |
|
|
| 163,258 |
|
|
| 52,509 |
|
|
| 27,993 |
|
|
| 15,244 |
|
|
| 14,244 |
|
|
| 109,990 |
|
Income (loss) from segments |
| $ | 22,686 |
|
| $ | (6,523 | ) |
| $ | (2,587 | ) |
| $ | 9,200 |
|
| $ | 22,776 |
|
| $ | 18,621 |
|
| $ | 9,433 |
|
| $ | (508 | ) |
| $ | 4,747 |
|
| $ | 32,293 |
|
Unallocated Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,770 |
|
Net realized investment loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (22,332 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (29,655 | ) |
Other loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (36 | ) | ||||||||||||||||||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
| ||||||||||||||||||||
Corporate and other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (34,037 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (12,841 | ) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13,197 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (9,577 | ) |
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,060 | ) | ||||||||||||||||||||
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (30,370 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,991 | ) |
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,964 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (22,197 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (7,027 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
| $ | 752,002 |
|
| $ | 207,831 |
|
| $ | 137,697 |
|
| $ | 269,771 |
|
| $ | 1,367,301 |
|
| $ | 753,310 |
|
| $ | 203,561 |
|
| $ | 140,658 |
|
| $ | 277,242 |
|
| $ | 1,374,771 |
|
Corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 572,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 738,377 |
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,939,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,113,148 |
|
(1) |
|
| External business only, excluding business assumed from affiliates. |
43
GLOBAL INDEMNITY GROUP, LLC
Nine Months Ended September 30, 2019 (Dollars in thousands) |
| Commercial Specialty |
| (1) | Specialty Property |
| (1) | Farm, Ranch, & Stable |
| (1) | Reinsurance Operations |
| (2) | Total |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
| $ | 214,467 |
|
| $ | 128,771 |
|
| $ | 65,872 |
|
| $ | 69,589 |
|
| $ | 478,699 |
|
Net written premiums |
| $ | 185,202 |
|
| $ | 110,668 |
|
| $ | 55,861 |
|
| $ | 69,590 |
|
| $ | 421,321 |
|
Net earned premiums |
| $ | 173,215 |
|
| $ | 104,740 |
|
| $ | 52,849 |
|
| $ | 52,798 |
|
| $ | 383,602 |
|
Other income (loss) |
|
| 0 |
|
|
| 1,406 |
|
|
| 96 |
|
|
| (228 | ) |
|
| 1,274 |
|
Total revenues |
|
| 173,215 |
|
|
| 106,146 |
|
|
| 52,945 |
|
|
| 52,570 |
|
|
| 384,876 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 81,731 |
|
|
| 57,611 |
|
|
| 32,203 |
|
|
| 30,434 |
|
|
| 201,979 |
|
Acquisition costs and other underwriting expenses |
|
| 70,522 |
|
|
| 44,163 |
|
|
| 22,403 |
|
|
| 16,555 |
|
|
| 153,643 |
|
Income (loss) from segments |
| $ | 20,962 |
|
| $ | 4,372 |
|
| $ | (1,661 | ) |
| $ | 5,581 |
|
| $ | 29,254 |
|
Unallocated Items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 32,393 |
|
Net realized investment gain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,290 |
|
Corporate and other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,702 | ) |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (15,088 | ) |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 46,147 |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,163 | ) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 40,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
| $ | 705,260 |
|
| $ | 246,080 |
|
| $ | 136,420 |
|
| $ | 346,137 |
|
| $ | 1,433,897 |
|
Corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 650,259 |
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,084,156 |
|
|
|
|
|
16.Condensed Consolidating Financial Information Provided in Connection with Outstanding Debt of Subsidiaries
The following tables present condensed consolidating balance sheets at September 30, 2020 and December 31, 2019, condensed consolidating statements of operations and condensed consolidating statements of comprehensive income for the quarters and nine months ended September 30, 2020 and 2019 and condensed consolidating statements of cash flows for the nine months ended September 30, 2020 and 2019. GBLI Holdings, LLC is a 100% owned subsidiary of the Company. See Note 9 for information on the Company’s debt obligations.
44
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Balance Sheets at September 30, 2020 (Dollars in thousands) |
| Global Indemnity Group, LLC (Parent co- obligor) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Group, LLC Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Group, LLC Consolidated |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
| $ | 212,050 |
|
| $ | 48,940 |
|
| $ | 1,156,475 |
|
| $ | 0 |
|
| $ | 1,417,465 |
|
Cash and cash equivalents |
|
| 13,765 |
|
|
| 2,575 |
|
|
| 20,871 |
|
|
| 0 |
|
|
| 37,211 |
|
Investments in subsidiaries |
|
| 491,851 |
|
|
| 387,913 |
|
|
| 339,384 |
|
|
| (1,219,148 | ) |
|
| 0 |
|
Due from subsidiaries and affiliates |
|
| (3,999 | ) |
|
| (7,522 | ) |
|
| 11,521 |
|
|
| 0 |
|
|
| 0 |
|
Notes receivable – affiliate |
|
| 11,283 |
|
|
| 0 |
|
|
| 0 |
|
|
| (11,283 | ) |
|
| 0 |
|
Interest receivable – affiliate |
|
| 16 |
|
|
| 0 |
|
|
| 0 |
|
|
| (16 | ) |
|
| 0 |
|
Premiums receivable, net |
|
| 0 |
|
|
| 0 |
|
|
| 109,820 |
|
|
| 0 |
|
|
| 109,820 |
|
Reinsurance receivables, net |
|
| 0 |
|
|
| 0 |
|
|
| 112,633 |
|
|
| 0 |
|
|
| 112,633 |
|
Funds held by ceding insurers |
|
| 0 |
|
|
| 0 |
|
|
| 46,894 |
|
|
| 0 |
|
|
| 46,894 |
|
Federal income taxes receivable |
|
| 0 |
|
|
| 2,892 |
|
|
| (2,892 | ) |
|
| 0 |
|
|
| 0 |
|
Deferred federal income taxes |
|
| 0 |
|
|
| 38,805 |
|
|
| (3,505 | ) |
|
| 0 |
|
|
| 35,300 |
|
Deferred acquisition costs |
|
| 0 |
|
|
| 0 |
|
|
| 67,470 |
|
|
| 0 |
|
|
| 67,470 |
|
Intangible assets |
|
| 0 |
|
|
| 0 |
|
|
| 21,094 |
|
|
| 0 |
|
|
| 21,094 |
|
Goodwill |
|
| 0 |
|
|
| 0 |
|
|
| 6,521 |
|
|
| 0 |
|
|
| 6,521 |
|
Prepaid reinsurance premiums |
|
| 0 |
|
|
| 0 |
|
|
| 15,558 |
|
|
| 0 |
|
|
| 15,558 |
|
Other assets |
|
| 13,240 |
|
|
| 19,444 |
|
|
| 40,854 |
|
|
| (3,747 | ) |
|
| 69,791 |
|
Total assets |
| $ | 738,206 |
|
| $ | 493,047 |
|
| $ | 1,942,698 |
|
| $ | (1,234,194 | ) |
| $ | 1,939,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid losses and loss adjustment expenses |
| $ | 0 |
|
| $ | 0 |
|
| $ | 669,930 |
|
| $ | 0 |
|
| $ | 669,930 |
|
Unearned premiums |
|
| 0 |
|
|
| 0 |
|
|
| 304,074 |
|
|
| 0 |
|
|
| 304,074 |
|
Ceded balances payable |
|
| 0 |
|
|
| 0 |
|
|
| 9,576 |
|
|
| 0 |
|
|
| 9,576 |
|
Payable for Securities |
|
| 2,207 |
|
|
| 0 |
|
|
| 3,423 |
|
|
| 0 |
|
|
| 5,630 |
|
Contingent commissions |
|
| 0 |
|
|
| 0 |
|
|
| 11,329 |
|
|
| 0 |
|
|
| 11,329 |
|
Debt |
|
| 0 |
|
|
| 130,000 |
|
|
| 0 |
|
|
| (3,747 | ) |
|
| 126,253 |
|
Notes payable – affiliates |
|
| 0 |
|
|
| 0 |
|
|
| 11,283 |
|
|
| (11,283 | ) |
|
| 0 |
|
Accrued interest payable – affiliates |
|
| 0 |
|
|
| 0 |
|
|
| 16 |
|
|
| (16 | ) |
|
| 0 |
|
Other liabilities |
|
| 15,286 |
|
|
| 23,663 |
|
|
| 53,303 |
|
|
| 0 |
|
|
| 92,252 |
|
Total liabilities |
|
| 17,493 |
|
|
| 153,663 |
|
|
| 1,062,934 |
|
|
| (15,046 | ) |
|
| 1,219,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
| 720,713 |
|
|
| 339,384 |
|
|
| 879,764 |
|
|
| (1,219,148 | ) |
|
| 720,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
| $ | 738,206 |
|
| $ | 493,047 |
|
| $ | 1,942,698 |
|
| $ | (1,234,194 | ) |
| $ | 1,939,757 |
|
|
|
|
|
45
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Balance Sheets at December 31, 2019 (Dollars in thousands) |
| Global Indemnity Limited (Parent co-obligor) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Limited Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Limited Consolidated |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
| $ | 44,468 |
|
| $ | 257,317 |
|
| $ | 1,261,757 |
|
| $ | 0 |
|
| $ | 1,563,542 |
|
Cash and cash equivalents |
|
| 977 |
|
|
| 2,663 |
|
|
| 40,631 |
|
|
| 0 |
|
|
| 44,271 |
|
Investments in subsidiaries |
|
| 1,218,491 |
|
|
| 355,777 |
|
|
| 434,278 |
|
|
| (2,008,546 | ) |
|
| 0 |
|
Due from subsidiaries and affiliates |
|
| (3,612 | ) |
|
| (3,965 | ) |
|
| 7,577 |
|
|
| 0 |
|
|
| 0 |
|
Notes receivable – affiliate |
|
| 0 |
|
|
| 80,049 |
|
|
| 445,498 |
|
|
| (525,547 | ) |
|
| 0 |
|
Interest receivable – affiliate |
|
| 0 |
|
|
| 5,014 |
|
|
| 17,258 |
|
|
| (22,272 | ) |
|
| 0 |
|
Premiums receivable, net |
|
| 0 |
|
|
| 0 |
|
|
| 118,035 |
|
|
| 0 |
|
|
| 118,035 |
|
Reinsurance receivables, net |
|
| 0 |
|
|
| 0 |
|
|
| 83,938 |
|
|
| 0 |
|
|
| 83,938 |
|
Funds held by ceding insurers |
|
| 0 |
|
|
| 0 |
|
|
| 48,580 |
|
|
| 0 |
|
|
| 48,580 |
|
Federal income taxes receivable |
|
| 0 |
|
|
| 14,197 |
|
|
| (3,208 | ) |
|
| 0 |
|
|
| 10,989 |
|
Deferred federal income taxes |
|
| 0 |
|
|
| 31,833 |
|
|
| (756 | ) |
|
| 0 |
|
|
| 31,077 |
|
Deferred acquisition costs |
|
| 0 |
|
|
| 0 |
|
|
| 70,677 |
|
|
| 0 |
|
|
| 70,677 |
|
Intangible assets |
|
| 0 |
|
|
| 0 |
|
|
| 21,491 |
|
|
| 0 |
|
|
| 21,491 |
|
Goodwill |
|
| 0 |
|
|
| 0 |
|
|
| 6,521 |
|
|
| 0 |
|
|
| 6,521 |
|
Prepaid reinsurance premiums |
|
| 0 |
|
|
| 0 |
|
|
| 16,716 |
|
|
| 0 |
|
|
| 16,716 |
|
Other assets |
|
| 9,394 |
|
|
| 12,622 |
|
|
| 45,021 |
|
|
| (6,989 | ) |
|
| 60,048 |
|
Total assets |
| $ | 1,269,718 |
|
| $ | 755,507 |
|
| $ | 2,614,014 |
|
| $ | (2,563,354 | ) |
| $ | 2,075,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid losses and loss adjustment expenses |
| $ | 0 |
|
| $ | 0 |
|
| $ | 630,181 |
|
| $ | 0 |
|
| $ | 630,181 |
|
Unearned premiums |
|
| 0 |
|
|
| 0 |
|
|
| 314,861 |
|
|
| 0 |
|
|
| 314,861 |
|
Ceded balances payable |
|
| 0 |
|
|
| 0 |
|
|
| 20,404 |
|
|
| 0 |
|
|
| 20,404 |
|
Payable for securities purchased |
|
| 0 |
|
|
| 0 |
|
|
| 850 |
|
|
| 0 |
|
|
| 850 |
|
Contingent commissions |
|
| 0 |
|
|
| 0 |
|
|
| 11,928 |
|
|
| 0 |
|
|
| 11,928 |
|
Debt |
|
| 0 |
|
|
| 303,629 |
|
|
| 0 |
|
|
| (6,989 | ) |
|
| 296,640 |
|
Notes payable – affiliates |
|
| 520,498 |
|
|
| 0 |
|
|
| 5,049 |
|
|
| (525,547 | ) |
|
| 0 |
|
Accrued interest payable – affiliates |
|
| 20,343 |
|
|
| 0 |
|
|
| 1,929 |
|
|
| (22,272 | ) |
|
| 0 |
|
Other liabilities |
|
| 2,068 |
|
|
| 17,600 |
|
|
| 54,544 |
|
|
| 0 |
|
|
| 74,212 |
|
Total liabilities |
|
| 542,909 |
|
|
| 321,229 |
|
|
| 1,039,746 |
|
|
| (554,808 | ) |
|
| 1,349,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
| 726,809 |
|
|
| 434,278 |
|
|
| 1,574,268 |
|
|
| (2,008,546 | ) |
|
| 726,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
| $ | 1,269,718 |
|
| $ | 755,507 |
|
| $ | 2,614,014 |
|
| $ | (2,563,354 | ) |
| $ | 2,075,885 |
|
|
|
|
|
46
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Statements of Operations for the Quarter Ended September 30, 2020 (Dollars in thousands) |
| Global Indemnity Group, LLC (Parent co-obligor)(3) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Group, LLC Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Group, LLC Consolidated |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
| $ | 0 |
|
| $ | 0 |
|
| $ | 140,302 |
|
| $ | 0 |
|
| $ | 140,302 |
|
Net investment income |
|
| 1,300 |
|
|
| 4,642 |
|
|
| 5,976 |
|
|
| (172 | ) |
|
| 11,746 |
|
Net realized investment gains |
|
| 451 |
|
|
| 4,107 |
|
|
| 2,765 |
|
|
| 0 |
|
|
| 7,323 |
|
Other income (loss) |
|
| (1 | ) |
|
| 0 |
|
|
| 543 |
|
|
| 0 |
|
|
| 542 |
|
Total revenues |
|
| 1,750 |
|
|
| 8,749 |
|
|
| 149,586 |
|
|
| (172 | ) |
|
| 159,913 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 0 |
|
|
| 0 |
|
|
| 97,148 |
|
|
| 0 |
|
|
| 97,148 |
|
Acquisition costs and other underwriting expenses |
|
| 0 |
|
|
| 0 |
|
|
| 53,268 |
|
|
| 0 |
|
|
| 53,268 |
|
Corporate and other operating expenses |
|
| 17,324 |
|
|
| 3,662 |
|
|
| 210 |
|
|
| 0 |
|
|
| 21,196 |
|
Interest expense |
|
| 179 |
|
|
| 3,569 |
|
|
| 44 |
|
|
| (172 | ) |
|
| 3,620 |
|
Loss on extinguishment of debt |
|
| 3,060 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,060 |
|
Income (loss) before equity in net income (loss) of subsidiaries and income taxes |
|
| (18,813 | ) |
|
| 1,518 |
|
|
| (1,084 | ) |
|
| 0 |
|
|
| (18,379 | ) |
Equity in net income (loss) of subsidiaries |
|
| 3,643 |
|
|
| (10,312 | ) |
|
| (5,784 | ) |
|
| 12,453 |
|
|
| 0 |
|
Loss before income taxes |
|
| (15,170 | ) |
|
| (8,794 | ) |
|
| (6,868 | ) |
|
| 12,453 |
|
|
| (18,379 | ) |
Income tax benefit |
|
| 0 |
|
|
| (3,010 | ) |
|
| (199 | ) |
|
| 0 |
|
|
| (3,209 | ) |
Net loss |
| $ | (15,170 | ) |
| $ | (5,784 | ) |
| $ | (6,669 | ) |
| $ | 12,453 |
|
| $ | (15,170 | ) |
|
|
|
|
(3) Includes activity for Global Indemnity Limited from July 1, 2020 to August 27, 2020 and activity for Global Indemnity Group, LLC from August 28, 2020 to September 30, 2020
47
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Statements of Operations for the Quarter Ended September 30, 2019 (Dollars in thousands) |
| Global Indemnity Limited (Parent co-obligor) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Limited Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Limited Consolidated |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
| $ | 0 |
|
| $ | 0 |
|
| $ | 133,312 |
|
| $ | 0 |
|
| $ | 133,312 |
|
Net investment income |
|
| 393 |
|
|
| 2,798 |
|
|
| 8,442 |
|
|
| (285 | ) |
|
| 11,348 |
|
Net realized investment gains (losses) |
|
| (101 | ) |
|
| (3,525 | ) |
|
| 936 |
|
|
| 0 |
|
|
| (2,690 | ) |
Other income |
|
| 0 |
|
|
| 0 |
|
|
| 264 |
|
|
| 0 |
|
|
| 264 |
|
Total revenues |
|
| 292 |
|
|
| (727 | ) |
|
| 142,954 |
|
|
| (285 | ) |
|
| 142,234 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 0 |
|
|
| 0 |
|
|
| 73,583 |
|
|
| 0 |
|
|
| 73,583 |
|
Acquisition costs and other underwriting expenses |
|
| 0 |
|
|
| 0 |
|
|
| 53,366 |
|
|
| 0 |
|
|
| 53,366 |
|
Corporate and other operating expenses |
|
| 1,320 |
|
|
| 2,159 |
|
|
| 379 |
|
|
| 0 |
|
|
| 3,858 |
|
Interest expense |
|
| 278 |
|
|
| 4,957 |
|
|
| 73 |
|
|
| (285 | ) |
|
| 5,023 |
|
Income (loss) before equity in net income (loss) of subsidiaries and income taxes |
|
| (1,306 | ) |
|
| (7,843 | ) |
|
| 15,553 |
|
|
| — |
|
|
| 6,404 |
|
Equity in net income (loss) of subsidiaries |
|
| 8,027 |
|
|
| 1,699 |
|
|
| (4,462 | ) |
|
| (5,264 | ) |
|
| 0 |
|
Income (loss) before income taxes |
|
| 6,721 |
|
|
| (6,144 | ) |
|
| 11,091 |
|
|
| (5,264 | ) |
|
| 6,404 |
|
Income tax expense (benefit) |
|
| 0 |
|
|
| (1,682 | ) |
|
| 1,365 |
|
|
| 0 |
|
|
| (317 | ) |
Net income (loss) |
| $ | 6,721 |
|
| $ | (4,462 | ) |
| $ | 9,726 |
|
| $ | (5,264 | ) |
| $ | 6,721 |
|
|
|
|
|
48
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Statements of Operations for the Nine Months Ended September 30, 2020 (Dollars in thousands) |
| Global Indemnity Group, LLC (Parent co-obligor)(3) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Group, LLC Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Group, LLC Consolidated |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
| $ | 0 |
|
| $ | 0 |
|
| $ | 426,617 |
|
| $ | 0 |
|
| $ | 426,617 |
|
Net investment income (loss) |
|
| 1,898 |
|
|
| (3,870 | ) |
|
| 22,203 |
|
|
| (715 | ) |
|
| 19,516 |
|
Net realized investment gains (losses) |
|
| (2,295 | ) |
|
| (36,600 | ) |
|
| 16,563 |
|
|
| 0 |
|
|
| (22,332 | ) |
Other income (loss) |
|
| (1 | ) |
|
| 19 |
|
|
| 1,455 |
|
|
| 0 |
|
|
| 1,473 |
|
Total revenues |
|
| (398 | ) |
|
| (40,451 | ) |
|
| 466,838 |
|
|
| (715 | ) |
|
| 425,274 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 0 |
|
|
| 0 |
|
|
| 242,092 |
|
|
| 0 |
|
|
| 242,092 |
|
Acquisition costs and other underwriting expenses |
|
| 0 |
|
|
| 0 |
|
|
| 163,258 |
|
|
| 0 |
|
|
| 163,258 |
|
Corporate and other operating expenses |
|
| 23,466 |
|
|
| 10,143 |
|
|
| 428 |
|
|
| 0 |
|
|
| 34,037 |
|
Interest expense |
|
| 732 | �� |
|
| 13,005 |
|
|
| 175 |
|
|
| (715 | ) |
|
| 13,197 |
|
Loss on extinguishment of debt |
|
| 3,060 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,060 |
|
Income (loss) before equity in net income (loss) of subsidiaries and income taxes |
|
| (27,656 | ) |
|
| (63,599 | ) |
|
| 60,885 |
|
|
| 0 |
|
|
| (30,370 | ) |
Equity in net income (loss) of subsidiaries |
|
| 5,459 |
|
|
| 22,509 |
|
|
| (25,649 | ) |
|
| (2,319 | ) |
|
| 0 |
|
Income (loss) before income taxes |
|
| (22,197 | ) |
|
| (41,090 | ) |
|
| 35,236 |
|
|
| (2,319 | ) |
|
| (30,370 | ) |
Income tax expense (benefit) |
|
| 0 |
|
|
| (15,441 | ) |
|
| 7,268 |
|
|
| 0 |
|
|
| (8,173 | ) |
Net income (loss) |
| $ | (22,197 | ) |
| $ | (25,649 | ) |
| $ | 27,968 |
|
| $ | (2,319 | ) |
| $ | (22,197 | ) |
|
|
|
|
(3) Includes activity for Global Indemnity Limited from January 1, 2020 to August 27, 2020 and activity for Global Indemnity Group, LLC from August 28, 2020 to September 30, 2020
49
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Statements of Operations for the Nine Months Ended September 30, 2019 (Dollars in thousands) |
| Global Indemnity Limited (Parent co-obligor) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Limited Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Limited Consolidated |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
| $ | 0 |
|
| $ | 0 |
|
| $ | 383,602 |
|
| $ | 0 |
|
| $ | 383,602 |
|
Net investment income |
|
| 1,764 |
|
|
| 5,743 |
|
|
| 25,747 |
|
|
| (861 | ) |
|
| 32,393 |
|
Net realized investment gains |
|
| 298 |
|
|
| 7,969 |
|
|
| 3,023 |
|
|
| 0 |
|
|
| 11,290 |
|
Other income |
|
| 0 |
|
|
| 30 |
|
|
| 1,244 |
|
|
| 0 |
|
|
| 1,274 |
|
Total revenues |
|
| 2,062 |
|
|
| 13,742 |
|
|
| 413,616 |
|
|
| (861 | ) |
|
| 428,559 |
|
Losses and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 0 |
|
|
| 0 |
|
|
| 201,979 |
|
|
| 0 |
|
|
| 201,979 |
|
Acquisition costs and other underwriting expenses |
|
| 0 |
|
|
| 0 |
|
|
| 153,643 |
|
|
| 0 |
|
|
| 153,643 |
|
Corporate and other operating expenses |
|
| 4,306 |
|
|
| 6,406 |
|
|
| 990 |
|
|
| 0 |
|
|
| 11,702 |
|
Interest expense |
|
| 829 |
|
|
| 14,875 |
|
|
| 245 |
|
|
| (861 | ) |
|
| 15,088 |
|
Income (loss) before equity in net income of subsidiaries and income taxes |
|
| (3,073 | ) |
|
| (7,539 | ) |
|
| 56,759 |
|
|
| 0 |
|
|
| 46,147 |
|
Equity in net income of subsidiaries |
|
| 44,057 |
|
|
| 16,597 |
|
|
| 10,903 |
|
|
| (71,557 | ) |
|
| 0 |
|
Income before income taxes |
|
| 40,984 |
|
|
| 9,058 |
|
|
| 67,662 |
|
|
| (71,557 | ) |
|
| 46,147 |
|
Income tax expense (benefit) |
|
| 0 |
|
|
| (1,845 | ) |
|
| 7,008 |
|
|
| 0 |
|
|
| 5,163 |
|
Net income |
| $ | 40,984 |
|
| $ | 10,903 |
|
| $ | 60,654 |
|
| $ | (71,557 | ) |
| $ | 40,984 |
|
|
|
|
|
Condensed Consolidating Statements of Comprehensive Income (Loss) for the Quarter Ended September 30, 2020 (Dollars in thousands) |
| Global Indemnity Group, LLC (Parent co-obligor)(3) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Group, LLC Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Group, LLC Consolidated |
| |||||
Net loss |
| $ | (15,170 | ) |
| $ | (5,784 | ) |
| $ | (6,669 | ) |
| $ | 12,453 |
|
| $ | (15,170 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) |
|
| (1,310 | ) |
|
| (1,049 | ) |
|
| 1,911 |
|
|
| 0 |
|
|
| (448 | ) |
Equity in other comprehensive income of unconsolidated subsidiaries |
|
| (561 | ) |
|
| 1,596 |
|
|
| 603 |
|
|
| (1,638 | ) |
|
| 0 |
|
Reclassification adjustment for gains included in net income |
|
| (102 | ) |
|
| 56 |
|
|
| (2,058 | ) |
|
| 0 |
|
|
| (2,104 | ) |
Unrealized foreign currency translation gains |
|
| 0 |
|
|
| 0 |
|
|
| 579 |
|
|
| 0 |
|
|
| 579 |
|
Other comprehensive income, net of tax |
|
| (1,973 | ) |
|
| 603 |
|
|
| 1,035 |
|
|
| (1,638 | ) |
|
| (1,973 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss, net of tax |
| $ | (17,143 | ) |
| $ | (5,181 | ) |
| $ | (5,634 | ) |
| $ | 10,815 |
|
| $ | (17,143 | ) |
|
|
|
|
(3) Includes activity for Global Indemnity Limited from July 1, 2020 to August 27, 2020 and activity for Global Indemnity Group, LLC from August 28, 2020 to September 30, 2020
50
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Statements of Comprehensive Income (Loss) for the Quarter Ended September 30, 2019 (Dollars in thousands) |
| Global Indemnity Limited (Parent co-obligor) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Limited Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Limited Consolidated |
| |||||
Net income (loss) |
| $ | 6,721 |
|
| $ | (4,462 | ) |
| $ | 9,726 |
|
| $ | (5,264 | ) |
| $ | 6,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) |
|
| 0 |
|
|
| 0 |
|
|
| 9,421 |
|
|
| 0 |
|
|
| 9,421 |
|
Equity in other comprehensive income of unconsolidated subsidiaries |
|
| 8,772 |
|
|
| 4,711 |
|
|
| 4,703 |
|
|
| (18,186 | ) |
|
| 0 |
|
Portion of other-than-temporary impairment losses recognized in other comprehensive income |
|
| 0 |
|
|
| 0 |
|
|
| (2 | ) |
|
| 0 |
|
|
| (2 | ) |
Reclassification adjustment for gains included in net income |
|
| 0 |
|
|
| (8 | ) |
|
| (839 | ) |
|
| 0 |
|
|
| (847 | ) |
Unrealized foreign currency translation losses |
|
| 0 |
|
|
| 0 |
|
|
| 200 |
|
|
| 0 |
|
|
| 200 |
|
Other comprehensive income, net of tax |
|
| 8,772 |
|
|
| 4,703 |
|
|
| 13,483 |
|
|
| (18,186 | ) |
|
| 8,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of tax |
| $ | 15,493 |
|
| $ | 241 |
|
| $ | 23,209 |
|
| $ | (23,450 | ) |
| $ | 15,493 |
|
|
|
|
|
Condensed Consolidating Statements of Comprehensive Income (Loss) for the Nine Months Ended September 30, 2020 (Dollars in thousands) |
| Global Indemnity Group, LLC (Parent co-obligor)(3) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Group, LLC Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Group, LLC Consolidated |
| |||||
Net income (loss) |
| $ | (22,197 | ) |
| $ | (25,649 | ) |
| $ | 27,968 |
|
| $ | (2,319 | ) |
| $ | (22,197 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains |
|
| 322 |
|
|
| (257 | ) |
|
| 30,683 |
|
|
| 0 |
|
|
| 30,748 |
|
Equity in other comprehensive income (loss) of unconsolidated subsidiaries |
|
| 17,891 |
|
|
| 8,643 |
|
|
| 8,405 |
|
|
| (34,939 | ) |
|
| 0 |
|
Reclassification adjustment for (gains) losses included in net income |
|
| (102 | ) |
|
| 19 |
|
|
| (13,122 | ) |
|
| 0 |
|
|
| (13,205 | ) |
Unrealized foreign currency translation gains |
|
| 0 |
|
|
| 0 |
|
|
| 568 |
|
|
| 0 |
|
|
| 568 |
|
Other comprehensive income, net of tax |
|
| 18,111 |
|
|
| 8,405 |
|
|
| 26,534 |
|
|
| (34,939 | ) |
|
| 18,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss), net of tax |
| $ | (4,086 | ) |
| $ | (17,244 | ) |
| $ | 54,502 |
|
| $ | (37,258 | ) |
| $ | (4,086 | ) |
|
|
|
|
(3) Includes activity for Global Indemnity Limited from January 1, 2020 to August 27, 2020 and activity for Global Indemnity Group, LLC from August 28, 2020 to September 30, 2020
51
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Statements of Comprehensive Income (Loss) for the Nine Months Ended September 30, 2019 (Dollars in thousands) |
| Global Indemnity Limited (Parent co-obligor) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Limited Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Consolidating Adjustments (2) |
|
| Global Indemnity Limited Consolidated |
| |||||
Net income |
| $ | 40,984 |
|
| $ | 10,903 |
|
| $ | 60,654 |
|
| $ | (71,557 | ) |
| $ | 40,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains |
|
| 880 |
|
|
| 1,567 |
|
|
| 46,436 |
|
|
| 0 |
|
|
| 48,883 |
|
Equity in other comprehensive income (loss) of unconsolidated subsidiaries |
|
| 46,226 |
|
|
| 24,201 |
|
|
| 26,003 |
|
|
| (96,430 | ) |
|
| 0 |
|
Portion of other-than-temporary impairment losses recognized in other comprehensive losses |
|
| 0 |
|
|
| 0 |
|
|
| (4 | ) |
|
| 0 |
|
|
| (4 | ) |
Reclassification adjustment for (gains) losses included in net income |
|
| (561 | ) |
|
| 235 |
|
|
| (2,339 | ) |
|
| 0 |
|
|
| (2,665 | ) |
Unrealized foreign currency translation gains |
|
| 0 |
|
|
| 0 |
|
|
| 331 |
|
|
| 0 |
|
|
| 331 |
|
Other comprehensive income, net of tax |
|
| 46,545 |
|
|
| 26,003 |
|
|
| 70,427 |
|
|
| (96,430 | ) |
|
| 46,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of tax |
| $ | 87,529 |
|
| $ | 36,906 |
|
| $ | 131,081 |
|
| $ | (167,987 | ) |
| $ | 87,529 |
|
|
|
|
|
52
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Statements of Cash Flows for the Nine Months Ended September 30, 2020 (Dollars in thousands) |
| Global Indemnity Group, LLC (Parent co-obligor)(2) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Group, LLC Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Global Indemnity Group, LLC Consolidated |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities |
| $ | (10,423 | ) |
| $ | 1,526 |
|
| $ | 42,833 |
|
| $ | 33,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of fixed maturities |
|
| 18,451 |
|
|
| 36,898 |
|
|
| 545,613 |
|
|
| 600,962 |
|
Proceeds from sale of equity securities |
|
| 103,002 |
|
|
| 460,924 |
|
|
| 0 |
|
|
| 563,926 |
|
Proceeds from maturity of fixed maturities |
|
| 280 |
|
|
| 0 |
|
|
| 89,595 |
|
|
| 89,875 |
|
Proceeds from other invested assets |
|
| 1,700 |
|
|
| 123 |
|
|
| 0 |
|
|
| 1,823 |
|
Amounts paid in connection with derivatives |
|
| 0 |
|
|
| (20,130 | ) |
|
| 0 |
|
|
| (20,130 | ) |
Purchases of fixed maturities |
|
| (185,692 | ) |
|
| (50,283 | ) |
|
| (466,752 | ) |
|
| (702,727 | ) |
Purchases of equity securities |
|
| (107,228 | ) |
|
| (286,735 | ) |
|
| 0 |
|
|
| (393,963 | ) |
Purchases of other invested assets |
|
| 0 |
|
|
| (297 | ) |
|
| 0 |
|
|
| (297 | ) |
Net cash provided by (used for) investing activities |
|
| (169,487 | ) |
|
| 140,500 |
|
|
| 168,456 |
|
|
| 139,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under margin borrowing facility |
|
| 0 |
|
|
| (73,629 | ) |
|
| 0 |
|
|
| (73,629 | ) |
Proceeds (repayment) of note to affiliates |
|
| 0 |
|
|
| 5,049 |
|
|
| (5,049 | ) |
|
| 0 |
|
Dividends paid to shareholders |
|
| (10,683 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (10,683 | ) |
Issuance of series A cumulative fixed rate preferred shares |
|
| 4,000 |
|
|
| — |
|
|
| 0 |
|
|
| 4,000 |
|
Dividends from subsidiaries |
|
| 226,000 |
|
|
| — |
|
|
| (226,000 | ) |
|
| 0 |
|
Capital contribution |
|
| (26,466 | ) |
|
| 26,466 |
|
|
| 0 |
|
|
| 0 |
|
Purchase of class A common shares |
|
| (153 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (153 | ) |
Redemption of subordinated notes |
|
| 0 |
|
|
| (100,000 | ) |
|
| 0 |
|
|
| (100,000 | ) |
Net cash provided by (used for) financing activities |
|
| 192,698 |
|
|
| (142,114 | ) |
|
| (231,049 | ) |
|
| (180,465 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 12,788 |
|
|
| (88 | ) |
|
| (19,760 | ) |
|
| (7,060 | ) |
Cash and cash equivalents at beginning of period |
|
| 977 |
|
|
| 2,663 |
|
|
| 40,631 |
|
|
| 44,271 |
|
Cash and cash equivalents at end of period |
| $ | 13,765 |
|
| $ | 2,575 |
|
| $ | 20,871 |
|
| $ | 37,211 |
|
|
|
|
|
53
GLOBAL INDEMNITY GROUP, LLC
Condensed Consolidating Statements of Cash Flows for the Nine Months Ended September 30, 2019 (Dollars in thousands) |
| Global Indemnity Limited (Parent co-obligor) |
|
| GBLI Holdings, LLC (Subsidiary co-obligor) |
|
| Other Global Indemnity Limited Subsidiaries and Eliminations (non-co-obligor subsidiaries) (1) |
|
| Global Indemnity Limited Consolidated |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
| $ | 1,718 |
|
| $ | 2,593 |
|
| $ | 41,619 |
|
| $ | 45,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of fixed maturities |
|
| 48,393 |
|
|
| 101,525 |
|
|
| 492,131 |
|
|
| 642,049 |
|
Proceeds from sale of equity securities |
|
| 7,300 |
|
|
| 198,912 |
|
|
| 0 |
|
|
| 206,212 |
|
Proceeds from maturity of fixed maturities |
|
| 0 |
|
|
| 0 |
|
|
| 113,480 |
|
|
| 113,480 |
|
Proceeds from other invested assets |
|
| 3,161 |
|
|
| 11,040 |
|
|
| 0 |
|
|
| 14,201 |
|
Amounts paid in connection with derivatives |
|
| 0 |
|
|
| (12,516 | ) |
|
| 0 |
|
|
| (12,516 | ) |
Purchases of fixed maturities |
|
| (10,548 | ) |
|
| (24,280 | ) |
|
| (666,856 | ) |
|
| (701,684 | ) |
Purchases of equity securities |
|
| (40,564 | ) |
|
| (285,408 | ) |
|
| 0 |
|
|
| (325,972 | ) |
Purchases of other invested assets |
|
| 0 |
|
|
| (3,500 | ) |
|
| 0 |
|
|
| (3,500 | ) |
Net cash provided by (used for) investing activities |
|
| 7,742 |
|
|
| (14,227 | ) |
|
| (61,245 | ) |
|
| (67,730 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under margin borrowing facility |
|
| 0 |
|
|
| 8,561 |
|
|
| 0 |
|
|
| 8,561 |
|
Dividends paid to shareholders |
|
| (7,130 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (7,130 | ) |
Purchase of class A common shares |
|
| (947 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (947 | ) |
Net cash provided by (used for) financing activities |
|
| (8,077 | ) |
|
| 8,561 |
|
|
| 0 |
|
|
| 484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 1,383 |
|
|
| (3,073 | ) |
|
| (19,626 | ) |
|
| (21,316 | ) |
Cash and cash equivalents at beginning of period |
|
| 2,221 |
|
|
| 26,039 |
|
|
| 71,237 |
|
|
| 99,497 |
|
Cash and cash equivalents at end of period |
| $ | 3,604 |
|
| $ | 22,966 |
|
| $ | 51,611 |
|
| $ | 78,181 |
|
|
|
| New Accounting Pronouncements |
Accounting Standards Adopted in 20202021
In March, 2020,December, 2019, the FASB issued newupdated guidance related to the accounting for income taxes. The updated guidance that affected a variety of topicsis intended to simplify the accounting for income taxes by removing several exceptions contained in the Codification.existing guidance and amending other existing guidance to simplify several other income tax accounting matters. The amendments in this update are meant to make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarification. Thisupdated guidance is effective for all fiscal years beginning after December 15, 2019 including2020 and interim periods within those fiscal years. The Company adopted this guidance on January 1, 2020.2021. The adoption of this new accounting guidance did not have a material impact on the Company’s financial condition, results of operations, or cash flows.
In August, 2018, the FASB issued new accounting guidance which removed, modified, and added certain disclosures related to Topic 820, Fair Value. The affected disclosures are related to transfers between fair value levels, level 3 assets, and investments in certain entities that calculate net asset value. This guidance is effective for all fiscal years beginning after December 15, 2019 including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2020. The adoption of this new accounting guidance did not have a material impact on the Company’s financial condition, results of operations, or cash flows.
54
GLOBAL INDEMNITY GROUP, LLC
In January, 2017, the FASB issued updated guidance that simplifies how an entity is required to test goodwill for impairment by eliminating the requirement to calculate the implied fair value of goodwill (i.e. Step 2 of the current goodwill impairment test). Under the new amendments, an entity may still first assess qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized, if any. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. This guidance is effective for public business entities’ annual or interim goodwill impairment testing in fiscal years beginning after December 15, 2019. The Company adopted this guidance on January 1, 2020. The adoption of this new accounting guidance did not have a material impact on the Company’s financial condition, results of operations, or cash flows.
In June, 2016, the FASB issued new accounting guidance addressing the measurement of credit losses on financial instruments. The new guidance requires financial assets measured at amortized cost, which includes but are not limited to premiums receivable and reinsurance receivables, to be presented at the net amount expected to be collected over the life of the asset using an allowance for credit losses. Changes in the allowance are charged to earnings. The measurement of expected credit losses should consider relevant information about past events, including historical experience, current information, as well as reasonable and supportable forecasts that affect the collectability of the financial assets. For available for sale debt securities, credit losses should be measured similar to the old guidance; however, the new guidance requires that credit losses be presented as an allowance rather than as a write-down of the amortized cost basis of the impaired securities and allows for the reversal of credit losses in the current period net income. In addition, the Company made certain accounting policy elections related to accrued interest receivables which are described in Note 3. The Company adopted this new accounting guidance on January 1, 2020 using a modified-retrospective approach. The adoption of this new accounting guidance and the impact on the Company’s financial condition, results of operations, and cash flows is described primarily within Note 3 and Note 6.
Please see Note 22 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2019 Annual Report on Form 10-K for more information on accounting pronouncements issued but not yet adopted.
5542
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 Global Indemnitythe 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, 2019.2020.
Recent Developments
Appointment of Chief Executive
On April 19, 2021, the Company announced that David S. Charlton was named chief executive of the Company’s insurance operations and was appointed to serve as the principal executive officer of the Company. Furthermore, in connection with Mr. Charlton’s appointment, the board of directors of Global Indemnity Group, LLC (the “Board”) has increased the size of the Board from six to seven directors and appointed Mr. Charlton to fill the newly-created directorship, in each case, with effect as of execution of the CEO Agreement.
Appointment of Chief Operations Officer
On May 17, 2021, the Company announced that Reiner R. Mauer was named Chief Operations Officer of the Company’s insurance business and will serve as the principal operating officer of the Company.
COVID-19
The global outbreak of COVID-19 presentscontinues to present significant risks to the Company which the Company is not able to fully evaluate at the current time.Company. The COVID-19 pandemic may affect the Company’s operations in the fourth quarter and may continue to do so indefinitely, thereafter.indefinitely. The Company may experience reductions in premium volume, delays in the collection of premiums, and increases in COVID-19 related claims. TheAny 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.
Redomestication
On August 28, 2020, the Company completed its plan to redomesticate to the United States. Please see Note 2 of the notes to the consolidated financial statements in Item 1 of Part I of this report for additional information on the redomestication.
Redemption of Debt
In August 2020, the Company redeemed the entire $100 million in aggregate principal amount of the outstanding 2045 Notes plus accrued and unpaid interest on the 2045 Notes redeemed to, but not including, the Redemption Date of August 15, 2020.
Dividends / Distributions
During 2020,2021, the Board of Directors approved a dividend payment of $0.25 per common share to all shareholders of record on the close of business on March 24, 2020 and June 23, 2020 and approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on September 25, 2020. Dividends / distributionsMarch 22, 2021 and June 21, 2021. Distributions paid to common shareholders were $10.7$7.2 million during the ninesix months ended SeptemberJune 30, 2020. 2021. In addition, distributions of $0.2 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the six months ended June 30, 2021.
A.M.AM Best Rating
A.M.AM Best has seven Rating Categories in the A.M.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 September 23, 2020, A.M.April 21, 2021, AM Best assignedaffirmed the companies in the Insurance Operations and Reinsurance Operations a financial strength rating of "A" (Excellent). for the U.S. operating subsidiaries of Global Indemnity Group, LLC.
43
GLOBAL INDEMNITY GROUP, LLC
Overview
The Company’s Commercial Specialty segment sells its property and casualty insurance products through a group of approximately 185195 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. The Company manages its
56
GLOBAL INDEMNITY GROUP, LLC
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’s Specialty Property segment, primarily via American Reliable, offers specialty personal lines property and casualty insurance products through a group of approximately 225205 agents, primarily comprised of wholesale general agents, with specific binding authority.
The Company’s Farm, Ranch & Stable segment, primarily via American Reliable, provides specialized property and casualty coverage including Commercial Farm Auto and Excess/Umbrella Coverage for the agriculture industry as well as specialized insurance products for the equine mortality and equine major medical industry. These insurance products are sold through a group of approximately 220215 agents, primarily comprised of wholesalers and retail agents, with a selected number having specific binding authority.
The Company’s Reinsurance Operations provides reinsurance solutions through brokers and on a direct basis. It uses its capital capacity to write niche and specialty-focused treaties and business which meet the Company’s risk tolerance and return thresholds. Prior to the redomestication, the Company’s Reinsurance Operations consisted solely of the operations of Global Indemnity Reinsurance. In connection with the redomestication, Global Indemnity Reinsurance merged into Penn PatriotPenn-Patriot Insurance Company and all of its business was assumed by the Company’s existing insurance company subsidiaries.
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.
44
GLOBAL INDEMNITY GROUP, LLC
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, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020. There have been no significant changes to any of these policies or underlying methodologies during the current year except for the following.following:
57
GLOBAL INDEMNITY GROUP, LLC
Effective January 1, 2020,The receipt of results for investments in limited partnerships and limited liability companies may vary. If results are received on a timely basis, they are included in current results. If they are not received on a timely basis, they are recorded on a one quarter lag. The recording of such results is applied consistently for each investment once the Company adopted new accounting guidance related totiming of receiving the measurement of credit losses on financial instruments. In conjunction with implementing this new guidance, the Company modified its impairment process as well as made certain accounting policy elections related to accrued interest receivables. Please see Note 3 of the notes to the consolidated financial statements in Item 1 of Part I of this report for a discussion on the Company’s impairment process and accounting policy elections related to accrued interest receivable. Please see Note 6 for a discussion on the Company’s policies related to the evaluation process when estimating expected credit losses for premiums receivable and reinsurance receivables.results has been established.
Results of Operations
The following table summarizes the Company’s results for the quarters and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
|
| Quarters Ended September 30, |
|
| % |
|
| Nine Months Ended September 30, |
|
| % |
|
| Quarters Ended June 30, |
|
| % |
|
| Six Months Ended June 30, |
|
| % |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Gross written premiums |
| $ | 143,749 |
|
| $ | 157,177 |
|
|
| (8.5 | %) |
| $ | 464,022 |
|
| $ | 478,699 |
|
|
| (3.1 | %) |
| $ | 175,236 |
|
| $ | 164,549 |
|
|
| 6.5 | % |
| $ | 338,794 |
|
| $ | 320,273 |
|
|
| 5.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums |
| $ | 130,611 |
|
| $ | 138,836 |
|
|
| (5.9 | %) |
| $ | 416,987 |
|
| $ | 421,321 |
|
|
| (1.0 | %) |
| $ | 160,653 |
|
| $ | 147,264 |
|
|
| 9.1 | % |
| $ | 308,336 |
|
| $ | 286,376 |
|
|
| 7.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
| $ | 140,302 |
|
| $ | 133,312 |
|
|
| 5.2 | % |
| $ | 426,617 |
|
| $ | 383,602 |
|
|
| 11.2 | % |
| $ | 149,408 |
|
| $ | 141,847 |
|
|
| 5.3 | % |
| $ | 293,108 |
|
| $ | 286,315 |
|
|
| 2.4 | % |
Other income |
|
| 597 |
|
|
| 264 |
|
|
| 126.1 | % |
|
| 1,509 |
|
|
| 1,274 |
|
|
| 18.4 | % |
|
| 512 |
|
|
| 744 |
|
|
| (31.2 | %) |
|
| 920 |
|
|
| 912 |
|
|
| 0.9 | % |
Total revenues |
|
| 140,899 |
|
|
| 133,576 |
|
|
| 5.5 | % |
|
| 428,126 |
|
|
| 384,876 |
|
|
| 11.2 | % |
|
| 149,920 |
|
|
| 142,591 |
|
|
| 5.1 | % |
|
| 294,028 |
|
|
| 287,227 |
|
|
| 2.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 97,148 |
|
|
| 73,583 |
|
|
| 32.0 | % |
|
| 242,092 |
|
|
| 201,979 |
|
|
| 19.9 | % |
|
| 90,938 |
|
|
| 67,297 |
|
|
| 35.1 | % |
|
| 181,721 |
|
|
| 144,944 |
|
|
| 25.4 | % |
Acquisition costs and other underwriting expenses |
|
| 53,268 |
|
|
| 53,366 |
|
|
| (0.2 | %) |
|
| 163,258 |
|
|
| 153,643 |
|
|
| 6.3 | % |
|
| 57,213 |
|
|
| 53,578 |
|
|
| 6.8 | % |
|
| 111,977 |
|
|
| 109,990 |
|
|
| 1.8 | % |
Underwriting income (loss) |
|
| (9,517 | ) |
|
| 6,627 |
|
| NM |
|
|
| 22,776 |
|
|
| 29,254 |
|
|
| (22.1 | %) | |||||||||||||||||||||||||
Underwriting income |
|
| 1,769 |
|
|
| 21,716 |
|
|
| (91.9 | %) |
|
| 330 |
|
|
| 32,293 |
|
|
| (99.0 | %) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
| 11,746 |
|
|
| 11,348 |
|
|
| 3.5 | % |
|
| 19,516 |
|
|
| 32,393 |
|
|
| (39.8 | %) | ||||||||||||||||||||||||
Net investment income (loss) |
|
| 10,633 |
|
|
| (2,359 | ) |
| NM |
|
|
| 20,469 |
|
|
| 7,770 |
|
|
| 163.4 | % | |||||||||||||||||||||||||
Net realized investment gains (losses) |
|
| 7,323 |
|
|
| (2,690 | ) |
| NM |
|
|
| (22,332 | ) |
|
| 11,290 |
|
| NM |
|
|
| 3,833 |
|
|
| 38,507 |
|
|
| (90.0 | %) |
|
| 7,652 |
|
|
| (29,655 | ) |
|
| 125.8 | % | ||
Other loss |
|
| (55 | ) |
|
| — |
|
|
| 100.0 | % |
|
| (36 | ) |
|
| — |
|
|
| 100.0 | % | ||||||||||||||||||||||||
Other income (loss) |
|
| 9 |
|
|
| 22 |
|
|
| (59.1 | %) |
|
| (22 | ) |
|
| 19 |
|
| NM |
| |||||||||||||||||||||||||
Corporate and other operating expenses |
|
| (21,196 | ) |
|
| (3,858 | ) |
| NM |
|
|
| (34,037 | ) |
|
| (11,702 | ) |
|
| 190.9 | % |
|
| (6,329 | ) |
|
| (8,618 | ) |
|
| (26.6 | %) |
|
| (10,605 | ) |
|
| (12,841 | ) |
|
| (17.4 | %) | |
Interest expense |
|
| (3,620 | ) |
|
| (5,023 | ) |
|
| (27.9 | %) |
|
| (13,197 | ) |
|
| (15,088 | ) |
|
| (12.5 | %) |
|
| (2,696 | ) |
|
| (4,712 | ) |
|
| (42.8 | %) |
|
| (5,291 | ) |
|
| (9,577 | ) |
|
| (44.8 | %) |
Loss on extinguishment of debt |
|
| (3,060 | ) |
|
| — |
|
| NM |
|
|
| (3,060 | ) |
|
| — |
|
| NM |
| ||||||||||||||||||||||||||
Income (loss) before income taxes |
|
| (18,379 | ) |
|
| 6,404 |
|
| NM |
|
|
| (30,370 | ) |
|
| 46,147 |
|
|
| (165.8 | %) |
|
| 7,219 |
|
|
| 44,556 |
|
|
| (83.8 | %) |
|
| 12,533 |
|
|
| (11,991 | ) |
| NM |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
| (3,209 | ) |
|
| (317 | ) |
| NM |
|
|
| (8,173 | ) |
|
| 5,163 |
|
| NM |
|
|
| 844 |
|
|
| 7,005 |
|
|
| (88.0 | %) |
|
| 641 |
|
|
| (4,964 | ) |
|
| (112.9 | %) | ||
Net income (loss) |
| $ | (15,170 | ) |
| $ | 6,721 |
|
| NM |
|
| $ | (22,197 | ) |
| $ | 40,984 |
|
|
| (154.2 | %) |
| $ | 6,375 |
|
| $ | 37,551 |
|
|
| (83.0 | %) |
| $ | 11,892 |
|
| $ | (7,027 | ) |
| NM |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio (1): |
|
| 69.2 | % |
|
| 55.2 | % |
|
|
|
|
|
| 56.7 | % |
|
| 52.7 | % |
|
|
|
| ||||||||||||||||||||||||
Loss ratio (1): |
|
| 60.9 | % |
|
| 47.4 | % |
|
|
|
|
|
| 62.0 | % |
|
| 50.6 | % |
|
|
|
| ||||||||||||||||||||||||
Expense ratio (2) |
|
| 38.0 | % |
|
| 40.0 | % |
|
|
|
|
|
| 38.3 | % |
|
| 40.1 | % |
|
|
|
|
|
| 38.3 | % |
|
| 37.8 | % |
|
|
|
|
|
| 38.2 | % |
|
| 38.4 | % |
|
|
|
|
Combined ratio (3) |
|
| 107.2 | % |
|
| 95.2 | % |
|
|
|
|
|
| 95.0 | % |
|
| 92.8 | % |
|
|
|
|
|
| 99.2 | % |
|
| 85.2 | % |
|
|
|
|
|
| 100.2 | % |
|
| 89.0 | % |
|
|
|
|
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. |
5845
GLOBAL INDEMNITY GROUP, LLC
Premiums
The following table summarizes the change in premium volume by business segment:
|
| Quarters Ended September 30, |
|
|
|
|
|
| Nine Months Ended September 30, |
|
|
|
|
|
| Quarters Ended June 30, |
|
|
|
|
|
| Six Months Ended June 30, |
|
|
|
|
| ||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| % Change |
|
| 2020 |
|
| 2019 |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2021 | �� |
| 2020 |
|
| % Change |
| ||||||||||||
Gross written premiums (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
| $ | 74,971 |
|
| $ | 73,175 |
|
|
| 2.5 | % |
| $ | 243,099 |
|
| $ | 214,467 |
|
|
| 13.4 | % |
| $ | 96,680 |
|
| $ | 87,297 |
|
|
| 10.7 | % |
| $ | 184,012 |
|
| $ | 168,128 |
|
|
| 9.4 | % |
Specialty Property |
|
| 34,730 |
|
|
| 42,611 |
|
|
| (18.5 | %) |
|
| 107,951 |
|
|
| 128,771 |
|
|
| (16.2 | %) |
|
| 33,013 |
|
|
| 37,978 |
|
|
| (13.1 | %) |
|
| 66,371 |
|
|
| 73,221 |
|
|
| (9.4 | %) |
Farm, Ranch, & Stable |
|
| 19,443 |
|
|
| 21,410 |
|
|
| (9.2 | %) |
|
| 64,798 |
|
|
| 65,872 |
|
|
| (1.6 | %) | ||||||||||||||||||||||||
Farm, Ranch & Stable |
|
| 20,851 |
|
|
| 23,222 |
|
|
| (10.2 | %) |
|
| 41,853 |
|
|
| 45,355 |
|
|
| (7.7 | %) | ||||||||||||||||||||||||
Reinsurance (3) |
|
| 14,605 |
|
|
| 19,981 |
|
|
| (26.9 | %) |
|
| 48,174 |
|
|
| 69,589 |
|
|
| (30.8 | %) |
|
| 24,692 |
|
|
| 16,052 |
|
|
| 53.8 | % |
|
| 46,558 |
|
|
| 33,569 |
|
|
| 38.7 | % |
Total gross written premiums |
| $ | 143,749 |
|
| $ | 157,177 |
|
|
| (8.5 | %) |
| $ | 464,022 |
|
| $ | 478,699 |
|
|
| (3.1 | %) |
| $ | 175,236 |
|
| $ | 164,549 |
|
|
| 6.5 | % |
| $ | 338,794 |
|
| $ | 320,273 |
|
|
| 5.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceded written premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
| $ | 5,897 |
|
| $ | 10,250 |
|
|
| (42.5 | %) |
| $ | 23,662 |
|
| $ | 29,265 |
|
|
| (19.1 | %) |
| $ | 8,348 |
|
| $ | 9,417 |
|
|
| (11.4 | %) |
| $ | 17,165 |
|
| $ | 17,765 |
|
|
| (3.4 | %) |
Specialty Property |
|
| 4,759 |
|
|
| 4,983 |
|
|
| (4.5 | %) |
|
| 14,898 |
|
|
| 18,103 |
|
|
| (17.7 | %) |
|
| 3,264 |
|
|
| 4,903 |
|
|
| (33.4 | %) |
|
| 6,923 |
|
|
| 10,139 |
|
|
| (31.7 | %) |
Farm, Ranch, & Stable |
|
| 2,482 |
|
|
| 3,116 |
|
|
| (20.3 | %) |
|
| 8,475 |
|
|
| 10,011 |
|
|
| (15.3 | %) | ||||||||||||||||||||||||
Farm, Ranch & Stable |
|
| 2,971 |
|
|
| 2,965 |
|
|
| 0.2 | % |
|
| 6,370 |
|
|
| 5,993 |
|
|
| 6.3 | % | ||||||||||||||||||||||||
Reinsurance (3) |
|
| — |
|
|
| (8 | ) |
|
| (100.0 | %) |
|
| — |
|
|
| (1 | ) |
|
| (100.0 | %) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total ceded written premiums |
| $ | 13,138 |
|
| $ | 18,341 |
|
|
| (28.4 | %) |
| $ | 47,035 |
|
| $ | 57,378 |
|
|
| (18.0 | %) |
| $ | 14,583 |
|
| $ | 17,285 |
|
|
| (15.6 | %) |
| $ | 30,458 |
|
| $ | 33,897 |
|
|
| (10.1 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
| $ | 69,074 |
|
| $ | 62,925 |
|
|
| 9.8 | % |
| $ | 219,437 |
|
| $ | 185,202 |
|
|
| 18.5 | % |
| $ | 88,332 |
|
| $ | 77,880 |
|
|
| 13.4 | % |
| $ | 166,847 |
|
| $ | 150,363 |
|
|
| 11.0 | % |
Specialty Property |
|
| 29,971 |
|
|
| 37,628 |
|
|
| (20.3 | %) |
|
| 93,053 |
|
|
| 110,668 |
|
|
| (15.9 | %) |
|
| 29,749 |
|
|
| 33,075 |
|
|
| (10.1 | %) |
|
| 59,448 |
|
|
| 63,082 |
|
|
| (5.8 | %) |
Farm, Ranch, & Stable |
|
| 16,961 |
|
|
| 18,294 |
|
|
| (7.3 | %) |
|
| 56,323 |
|
|
| 55,861 |
|
|
| 0.8 | % | ||||||||||||||||||||||||
Farm, Ranch & Stable |
|
| 17,880 |
|
|
| 20,257 |
|
|
| (11.7 | %) |
|
| 35,483 |
|
|
| 39,362 |
|
|
| (9.9 | %) | ||||||||||||||||||||||||
Reinsurance (3) |
|
| 14,605 |
|
|
| 19,989 |
|
|
| (26.9 | %) |
|
| 48,174 |
|
|
| 69,590 |
|
|
| (30.8 | %) |
|
| 24,692 |
|
|
| 16,052 |
|
|
| 53.8 | % |
|
| 46,558 |
|
|
| 33,569 |
|
|
| 38.7 | % |
Total net written premiums |
| $ | 130,611 |
|
| $ | 138,836 |
|
|
| (5.9 | %) |
| $ | 416,987 |
|
| $ | 421,321 |
|
|
| (1.0 | %) |
| $ | 160,653 |
|
| $ | 147,264 |
|
|
| 9.1 | % |
| $ | 308,336 |
|
| $ | 286,376 |
|
|
| 7.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Specialty |
| $ | 73,887 |
|
| $ | 60,869 |
|
|
| 21.4 | % |
| $ | 211,329 |
|
| $ | 173,215 |
|
|
| 22.0 | % |
| $ | 80,146 |
|
| $ | 69,728 |
|
|
| 14.9 | % |
| $ | 156,296 |
|
| $ | 137,442 |
|
|
| 13.7 | % |
Specialty Property |
|
| 31,388 |
|
|
| 34,554 |
|
|
| (9.2 | %) |
|
| 99,147 |
|
|
| 104,740 |
|
|
| (5.3 | %) |
|
| 29,892 |
|
|
| 33,543 |
|
|
| (10.9 | %) |
|
| 60,483 |
|
|
| 67,759 |
|
|
| (10.7 | %) |
Farm, Ranch, & Stable |
|
| 19,978 |
|
|
| 18,377 |
|
|
| 8.7 | % |
|
| 57,691 |
|
|
| 52,849 |
|
|
| 9.2 | % | ||||||||||||||||||||||||
Farm, Ranch & Stable |
|
| 17,960 |
|
|
| 19,030 |
|
|
| (5.6 | %) |
|
| 36,101 |
|
|
| 37,713 |
|
|
| (4.3 | %) | ||||||||||||||||||||||||
Reinsurance (3) |
|
| 15,049 |
|
|
| 19,512 |
|
|
| (22.9 | %) |
|
| 58,450 |
|
|
| 52,798 |
|
|
| 10.7 | % |
|
| 21,410 |
|
|
| 19,546 |
|
|
| 9.5 | % |
|
| 40,228 |
|
|
| 43,401 |
|
|
| (7.3 | %) |
Total net earned premiums |
| $ | 140,302 |
|
| $ | 133,312 |
|
|
| 5.2 | % |
| $ | 426,617 |
|
| $ | 383,602 |
|
|
| 11.2 | % |
| $ | 149,408 |
|
| $ | 141,847 |
|
|
| 5.3 | % |
| $ | 293,108 |
|
| $ | 286,315 |
|
|
| 2.4 | % |
(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 decreasedincreased by 8.5%6.5% and 3.1%5.8% for the quarter and ninesix months ended SeptemberJune 30, 20202021, respectively, as compared to same periodperiods in 2019. The decrease2020. This increase is mainly due to the continued growth of existing programs, increased pricing, and several new programs within Commercial Specialty as well as the organic growth of an existing casualty treaty and the assumption of three new smaller casualty treaties within Reinsurance Operations. This growth in premiums was partially offset by the continued reduction of catastrophe exposed business within both Specialty Property and Farm, Ranch & Stable, the continued reduction in business not providing an adequate return on capital within Specialty Property, and Reinsurance Operations’the non-renewal of its property catastrophe treaties. In addition, non-renewals of several small business classes was highertreaties within Reinsurance Operations, and new business growth slowed withinactions taken by Commercial Specialty which was likely the resultto reduce risk and increase profitability of Covid-19. These reductions in premiums were partially offset by organic growth from existing agents, increased pricing, and several new programs within Commercial Specialty and growth of the new casualty treaty entered into by Reinsurance Operations in 2019.Property Brokerage.
5946
GLOBAL INDEMNITY GROUP, LLC
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 September 30, |
|
| Point |
|
| Nine Months Ended September 30, |
|
| Point |
|
| Quarters Ended June 30, |
|
| Point |
|
| Six Months Ended June 30, |
|
| Point |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Commercial Specialty |
|
| 92.1 | % |
|
| 86.0 | % |
|
| 6.1 |
|
|
| 90.3 | % |
|
| 86.4 | % |
|
| 3.9 |
|
|
| 91.4 | % |
|
| 89.2 | % |
|
| 2.2 |
|
|
| 90.7 | % |
|
| 89.4 | % |
|
| 1.3 |
|
Specialty Property |
|
| 86.3 | % |
|
| 88.3 | % |
|
| (2.0 | ) |
|
| 86.2 | % |
|
| 85.9 | % |
|
| 0.3 |
|
|
| 90.1 | % |
|
| 87.1 | % |
|
| 3.0 |
|
|
| 89.6 | % |
|
| 86.2 | % |
|
| 3.4 |
|
Farm, Ranch, & Stable |
|
| 87.2 | % |
|
| 85.4 | % |
|
| 1.8 |
|
|
| 86.9 | % |
|
| 84.8 | % |
|
| 2.1 |
| ||||||||||||||||||||||||
Farm, Ranch & Stable |
|
| 85.8 | % |
|
| 87.2 | % |
|
| (1.4 | ) |
|
| 84.8 | % |
|
| 86.8 | % |
|
| (2.0 | ) | ||||||||||||||||||||||||
Reinsurance |
|
| 100.0 | % |
|
| 100.0 | % |
|
| — |
|
|
| 100.0 | % |
|
| 100.0 | % |
|
| — |
|
|
| 100.0 | % |
|
| 100.0 | % |
|
| — |
|
|
| 100.0 | % |
|
| 100.0 | % |
|
| — |
|
Total |
|
| 90.9 | % |
|
| 88.3 | % |
|
| 2.6 |
|
|
| 89.9 | % |
|
| 88.0 | % |
|
| 1.9 |
|
|
| 91.7 | % |
|
| 89.5 | % |
|
| 2.2 |
|
|
| 91.0 | % |
|
| 89.4 | % |
|
| 1.6 |
|
The net premium retention for the quarter and ninesix months ended SeptemberJune 30, 20202021 increased by 2.62.2 points and 1.91.6 points, respectively, as compared to the same periodperiods in 2019.2020. This increase in retention is primarily driven by the restructuring of the Company’s catastrophe reinsurance treaties which occurred on June 1, 2020 as well as a change in the mix of business.
Net Earned Premiums
Net earned premiums within the Commercial Specialty segment increased by 21.4%14.9% and 22.0%13.7% for the quarter and ninesix months ended SeptemberJune 30, 2020,2021, respectively, as compared to the same periodperiods in 2019.2020. 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.programs partially offset by a reduction in Property Brokerage’s net earned premiums as a result of actions taken to reduce risk and increase profitability. Property net earned premiums were $34.8$33.0 million and $28.1$31.9 million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $97.2$67.5 million and $82.1$62.4 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. Casualty net earned premiums were $39.1$47.1 million and $32.8$37.8 million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $114.1$88.8 million and $91.1$75.0 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
Net earned premiums within the Specialty Property segment decreased by 9.2%10.9% and 5.3%10.7% for the quarter and ninesix months ended SeptemberJune 30, 2020,2021, respectively, as compared to the same periodperiods in 20192020 primarily due to a continued reduction of catastrophe exposed business and a reduction in business not providing an adequate return on capital. Property net earned premiums were $29.3$28.1 million and $31.9$31.2 million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $92.2$56.9 million and $96.7$62.8 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. Casualty net earned premiums were $2.1$1.8 million and $2.6$2.4 million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $7.0$3.6 million and $8.1$4.9 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
Net earned premiums within the Farm, Ranch & Stable segment increaseddecreased by 8.7%5.6% and 9.2%4.3% for the quarter and ninesix months ended SeptemberJune 30, 2020,2021, respectively, as compared to the same periodperiods in 2019.2020. The increasedecrease in net earned premiums was primarily due to a growth in premiums written in prior periods as a resultthe continued reduction of rate increases and new agent appointments.catastrophe exposed business. Property net earned premiums were $15.0$13.4 million and $13.1$13.7 million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $42.1$27.0 million and $37.7$27.1 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. Casualty net earned premiums were $5.0$4.6 million and $5.3 million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $15.6$9.1 million and $15.2$10.6 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
Net earned premiums within the Reinsurance Operations segment decreasedincreased by 22.9%9.5% for the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 20192020 primarily due to organic growth of an existing casualty treaty partially offset by a reduction in premiums written due to the non-renewal of its property catastrophe treaties. Net earned premiums decreased by 7.3% for the six months ended June 30, 2021 as compared to the same period in 2020 primarily due to a reduction in premiums written due to the non-renewal of its property catastrophe treaties partially offset by the neworganic growth of an existing casualty treaty entered into during 2019. Net earned premiums within the Reinsurance Operations segment increased by 10.7% for the nine months ended September 30, 2020 as compared to the same period in 2019 primarily due to the new casualty treaty entered into during 2019 partially offset by the non-renewal of its property catastrophe treaties.treaty. Property net earned premiums were $5.5$3.4 million and $13.8$9.1 million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $24.5$5.4 million and $40.6$19.0 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. Casualty net earned premiums were $9.6$18.1 million and $5.7$10.5 million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $33.9$34.9 million and $12.2$24.4 million for the ninesix months ended SeptemberJune 30, 2021 and 2020, and 2019, respectively.
6047
GLOBAL INDEMNITY GROUP, LLC
Reserves
Management’s best estimate at SeptemberJune 30, 20202021 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 $669.9$697.6 million and $571.3$610.5 million, respectively, as of SeptemberJune 30, 2020.2021. A breakout of the Company’s gross and net reserves, as of SeptemberJune 30, 2020,2021, is as follows:
|
| Gross Reserves |
|
| Gross Reserves |
| ||||||||||||||||||
(Dollars in thousands) |
| Case |
|
| IBNR (1) |
|
| Total |
|
| Case |
|
| IBNR (1) |
|
| Total |
| ||||||
Commercial Specialty |
| $ | 139,513 |
|
| $ | 275,802 |
|
| $ | 415,315 |
|
| $ | 178,475 |
|
| $ | 279,116 |
|
| $ | 457,591 |
|
Specialty Property |
|
| 22,738 |
|
|
| 35,307 |
|
|
| 58,045 |
|
|
| 13,117 |
|
|
| 25,280 |
|
|
| 38,397 |
|
Farm, Ranch, & Stable |
|
| 16,812 |
|
|
| 33,987 |
|
|
| 50,799 |
| ||||||||||||
Farm, Ranch & Stable |
|
| 12,614 |
|
|
| 32,412 |
|
|
| 45,026 |
| ||||||||||||
Reinsurance Operations |
|
| 56,627 |
|
|
| 89,144 |
|
|
| 145,771 |
|
|
| 44,185 |
|
|
| 112,419 |
|
|
| 156,604 |
|
Total |
| $ | 235,690 |
|
| $ | 434,240 |
|
| $ | 669,930 |
|
| $ | 248,391 |
|
| $ | 449,227 |
|
| $ | 697,618 |
|
|
| Net Reserves (2) |
|
| Net Reserves (2) |
| ||||||||||||||||||
(Dollars in thousands) |
| Case |
|
| IBNR (1) |
|
| Total |
|
| Case |
|
| IBNR (1) |
|
| Total |
| ||||||
Commercial Specialty |
| $ | 113,322 |
|
| $ | 234,304 |
|
| $ | 347,626 |
|
| $ | 142,426 |
|
| $ | 241,976 |
|
| $ | 384,402 |
|
Specialty Property |
|
| 11,536 |
|
|
| 25,806 |
|
|
| 37,342 |
|
|
| 10,904 |
|
|
| 21,906 |
|
|
| 32,810 |
|
Farm, Ranch, & Stable |
|
| 12,608 |
|
|
| 27,927 |
|
|
| 40,535 |
| ||||||||||||
Farm, Ranch & Stable |
|
| 11,613 |
|
|
| 25,038 |
|
|
| 36,651 |
| ||||||||||||
Reinsurance Operations |
|
| 56,627 |
|
|
| 89,144 |
|
|
| 145,771 |
|
|
| 44,185 |
|
|
| 112,419 |
|
|
| 156,604 |
|
Total |
| $ | 194,093 |
|
| $ | 377,181 |
|
| $ | 571,274 |
|
| $ | 209,128 |
|
| $ | 401,339 |
|
| $ | 610,467 |
|
(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 impact of changes (which could be favorable or unfavorable) in frequency and severity on the Company’s current accident year net loss estimate of $273.7$179.6 million for claims occurring during the ninesix months ended SeptemberJune 30, 2020:2021:
|
|
|
|
|
| Severity Change |
|
|
|
|
|
| Severity Change |
| ||||||||||||||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) |
|
| -10% |
|
| -5% |
|
| 0% |
|
| 5% |
|
| 10% |
| (Dollars in thousands) |
|
| -10% |
|
| -5% |
|
| 0% |
|
| 5% |
|
| 10% |
| ||||||||||||||
Frequency Change |
| -5% |
|
|
| (39,687 | ) |
|
| (26,686 | ) |
|
| (13,685 | ) |
|
| (684 | ) |
|
| 12,317 |
|
| -5% |
|
|
| (26,042 | ) |
|
| (17,511 | ) |
|
| (8,980 | ) |
|
| (449 | ) |
|
| 8,082 |
| ||
|
| -3% |
|
|
| (34,760 | ) |
|
| (21,485 | ) |
|
| (8,211 | ) |
|
| 5,063 |
|
|
| 18,338 |
|
| -3% |
|
|
| (22,809 | ) |
|
| (14,099 | ) |
|
| (5,388 | ) |
|
| 3,323 |
|
|
| 12,033 |
| ||
|
| -2% |
|
|
| (32,297 | ) |
|
| (18,885 | ) |
|
| (5,474 | ) |
|
| 7,937 |
|
|
| 21,349 |
|
| -2% |
|
|
| (21,193 | ) |
|
| (12,392 | ) |
|
| (3,592 | ) |
|
| 5,208 |
|
|
| 14,009 |
| ||
|
| -1% |
|
|
| (29,833 | ) |
|
| (16,285 | ) |
|
| (2,737 | ) |
|
| 10,811 |
|
|
| 24,359 |
|
| -1% |
|
|
| (19,576 | ) |
|
| (10,686 | ) |
|
| (1,796 | ) |
|
| 7,094 |
|
|
| 15,984 |
| ||
|
| 0% |
|
|
| (27,370 | ) |
|
| (13,685 | ) |
|
| — |
|
|
| 13,685 |
|
|
| 27,370 |
|
| 0% |
|
|
| (17,960 | ) |
|
| (8,980 | ) |
|
| — |
|
|
| 8,980 |
|
|
| 17,960 |
| ||
|
| 1% |
|
|
| (24,907 | ) |
|
| (11,085 | ) |
|
| 2,737 |
|
|
| 16,559 |
|
|
| 30,381 |
|
| 1% |
|
|
| (16,344 | ) |
|
| (7,274 | ) |
|
| 1,796 |
|
|
| 10,866 |
|
|
| 19,936 |
| ||
|
| 2% |
|
|
| (22,443 | ) |
|
| (8,485 | ) |
|
| 5,474 |
|
|
| 19,433 |
|
|
| 33,391 |
|
| 2% |
|
|
| (14,727 | ) |
|
| (5,568 | ) |
|
| 3,592 |
|
|
| 12,752 |
|
|
| 21,911 |
| ||
|
| 3% |
|
|
| (19,980 | ) |
|
| (5,885 | ) |
|
| 8,211 |
|
|
| 22,307 |
|
|
| 36,402 |
|
| 3% |
|
|
| (13,111 | ) |
|
| (3,861 | ) |
|
| 5,388 |
|
|
| 14,637 |
|
|
| 23,887 |
| ||
|
| 5% |
|
|
| (15,054 | ) |
|
| (684 | ) |
|
| 13,685 |
|
|
| 28,054 |
|
|
| 42,424 |
|
| 5% |
|
|
| (9,878 | ) |
|
| (449 | ) |
|
| 8,980 |
|
|
| 18,409 |
|
|
| 27,838 |
|
The Company’s net reserves for losses and loss adjustment expenses of $571.3$610.5 million as of SeptemberJune 30, 20202021 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.
6148
GLOBAL INDEMNITY GROUP, LLC
Underwriting Results
Commercial Specialty
The components of income and loss from the Company’s Commercial Specialty segment and corresponding underwriting ratios are as follows:
|
| Quarters Ended September 30, |
|
| % |
|
| Nine Months Ended September 30, |
|
| % |
|
| Quarters Ended June 30, |
|
| % |
|
| Six Months Ended June 30, |
|
| % |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 (1) |
|
| 2019 (1) |
|
| Change |
|
| 2020 (1) |
|
| 2019 (1) |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Gross written premiums |
| $ | 74,971 |
|
| $ | 73,175 |
|
|
| 2.5 | % |
| $ | 243,099 |
|
| $ | 214,467 |
|
|
| 13.4 | % |
| $ | 96,680 |
|
| $ | 87,297 |
|
|
| 10.7 | % |
| $ | 184,012 |
|
| $ | 168,128 |
|
|
| 9.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums |
| $ | 69,074 |
|
| $ | 62,925 |
|
|
| 9.8 | % |
| $ | 219,437 |
|
| $ | 185,202 |
|
|
| 18.5 | % |
| $ | 88,332 |
|
| $ | 77,880 |
|
|
| 13.4 | % |
| $ | 166,847 |
|
| $ | 150,363 |
|
|
| 11.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
| $ | 73,887 |
|
| $ | 60,869 |
|
|
| 21.4 | % |
| $ | 211,329 |
|
| $ | 173,215 |
|
|
| 22.0 | % |
| $ | 80,146 |
|
| $ | 69,728 |
|
|
| 14.9 | % |
| $ | 156,296 |
|
| $ | 137,442 |
|
|
| 13.7 | % |
Total revenues |
|
| 73,887 |
|
|
| 60,869 |
|
|
| 21.4 | % |
|
| 211,329 |
|
|
| 173,215 |
|
|
| 22.0 | % |
|
| 80,146 |
|
|
| 69,728 |
|
|
| 14.9 | % |
|
| 156,296 |
|
|
| 137,442 |
|
|
| 13.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 42,879 |
|
|
| 27,389 |
|
|
| 56.6 | % |
|
| 109,191 |
|
|
| 81,731 |
|
|
| 33.6 | % |
|
| 51,818 |
|
|
| 28,877 |
|
|
| 79.4 | % |
|
| 105,053 |
|
|
| 66,312 |
|
|
| 58.4 | % |
Acquisition costs and other underwriting expenses |
|
| 26,943 |
|
|
| 24,820 |
|
|
| 8.6 | % |
|
| 79,452 |
|
|
| 70,522 |
|
|
| 12.7 | % |
|
| 29,633 |
|
|
| 26,516 |
|
|
| 11.8 | % |
|
| 57,810 |
|
|
| 52,509 |
|
|
| 10.1 | % |
Underwriting income |
| $ | 4,065 |
|
| $ | 8,660 |
|
|
| (53.1 | %) |
| $ | 22,686 |
|
| $ | 20,962 |
|
|
| 8.2 | % | ||||||||||||||||||||||||
Underwriting income (loss) |
| $ | (1,305 | ) |
| $ | 14,335 |
|
|
| (109.1 | %) |
| $ | (6,567 | ) |
| $ | 18,621 |
|
|
| (135.3 | %) |
|
| Quarters Ended September 30, |
|
| Point |
|
| Nine Months Ended September 30, |
|
| Point |
|
| Quarters Ended June 30, |
|
| Point |
|
| Six Months Ended June 30, |
|
| Point |
| ||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
|
| 62.8 | % |
|
| 53.5 | % |
|
| 9.3 |
|
|
| 60.1 | % |
|
| 54.2 | % |
|
| 5.9 |
|
|
| 57.2 | % |
|
| 61.8 | % |
|
| (4.6 | ) |
|
| 63.7 | % |
|
| 58.6 | % |
|
| 5.1 |
|
Prior accident year |
|
| (4.8 | %) |
|
| (8.5 | %) |
|
| 3.7 |
|
|
| (8.4 | %) |
|
| (7.0 | %) |
|
| (1.4 | ) |
|
| 7.4 | % |
|
| (20.4 | %) |
|
| 27.8 |
|
|
| 3.6 | % |
|
| (10.4 | %) |
|
| 14.0 |
|
Calendar year loss ratio |
|
| 58.0 | % |
|
| 45.0 | % |
|
| 13.0 |
|
|
| 51.7 | % |
|
| 47.2 | % |
|
| 4.5 |
|
|
| 64.6 | % |
|
| 41.4 | % |
|
| 23.2 |
|
|
| 67.3 | % |
|
| 48.2 | % |
|
| 19.1 |
|
Expense ratio |
|
| 36.5 | % |
|
| 40.8 | % |
|
| (4.3 | ) |
|
| 37.6 | % |
|
| 40.7 | % |
|
| (3.1 | ) |
|
| 37.0 | % |
|
| 38.0 | % |
|
| (1.0 | ) |
|
| 37.0 | % |
|
| 38.2 | % |
|
| (1.2 | ) |
Combined ratio |
|
| 94.5 | % |
|
| 85.8 | % |
|
| 8.7 |
|
|
| 89.3 | % |
|
| 87.9 | % |
|
| 1.4 |
|
|
| 101.6 | % |
|
| 79.4 | % |
|
| 22.2 |
|
|
| 104.3 | % |
|
| 86.4 | % |
|
| 17.9 |
|
|
|
6249
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, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| Losses |
|
| Loss Ratio |
|
| Losses |
|
| Loss Ratio |
|
| Losses |
|
| Loss Ratio |
|
| Losses |
|
| Loss Ratio |
| ||||||||||||||||||||||||||||
|
| 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) |
| $ | 14,769 |
|
|
| 42.4 | % |
| $ | 13,641 |
|
|
| 48.5 | % |
| $ | 41,581 |
|
|
| 42.8 | % |
| $ | 35,694 |
|
|
| 43.5 | % |
| $ | 16,093 |
|
|
| 48.8 | % |
| $ | 14,563 |
|
|
| 45.6 | % |
| $ | 36,385 |
|
|
| 53.9 | % |
| $ | 26,812 |
|
|
| 42.9 | % |
Effect of prior accident year |
|
| (568 | ) |
|
| (1.6 | %) |
|
| 16 |
|
|
| 0.1 | % |
|
| (238 | ) |
|
| (0.2 | %) |
|
| (959 | ) |
|
| (1.2 | %) |
|
| 224 |
|
|
| 0.7 | % |
|
| 689 |
|
|
| 2.2 | % |
|
| (1,339 | ) |
|
| (2.0 | %) |
|
| 330 |
|
|
| 0.5 | % |
Non catastrophe property losses and ratio (2) |
| $ | 14,201 |
|
|
| 40.8 | % |
| $ | 13,657 |
|
|
| 48.6 | % |
| $ | 41,343 |
|
|
| 42.6 | % |
| $ | 34,735 |
|
|
| 42.3 | % |
| $ | 16,317 |
|
|
| 49.5 | % |
| $ | 15,252 |
|
|
| 47.8 | % |
| $ | 35,046 |
|
|
| 51.9 | % |
| $ | 27,142 |
|
|
| 43.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catastrophe losses and ratio excluding the effect of prior accident year (1) |
| $ | 9,537 |
|
|
| 27.4 | % |
| $ | 1,731 |
|
|
| 6.2 | % |
| $ | 23,116 |
|
|
| 23.8 | % |
| $ | 7,088 |
|
|
| 8.6 | % |
| $ | 2,666 |
|
|
| 8.1 | % |
| $ | 9,866 |
|
|
| 30.9 | % |
| $ | 12,970 |
|
|
| 19.2 | % |
| $ | 13,579 |
|
|
| 21.8 | % |
Effect of prior accident year |
|
| 626 |
|
|
| 1.8 | % |
|
| (14 | ) |
|
| (0.1 | %) |
|
| 6,063 |
|
|
| 6.2 | % |
|
| 34 |
|
|
| 0.1 | % |
|
| 6,779 |
|
|
| 20.5 | % |
|
| 5,099 |
|
|
| 16.0 | % |
|
| 8,102 |
|
|
| 12.0 | % |
|
| 5,437 |
|
|
| 8.7 | % |
Catastrophe losses and ratio (2) |
| $ | 10,163 |
|
|
| 29.2 | % |
| $ | 1,717 |
|
|
| 6.1 | % |
| $ | 29,179 |
|
|
| 30.0 | % |
| $ | 7,122 |
|
|
| 8.7 | % |
| $ | 9,445 |
|
|
| 28.6 | % |
| $ | 14,965 |
|
|
| 46.9 | % |
| $ | 21,072 |
|
|
| 31.2 | % |
| $ | 19,016 |
|
|
| 30.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property losses and ratio excluding the effect of prior accident year (1) |
| $ | 24,306 |
|
|
| 69.8 | % |
| $ | 15,372 |
|
|
| 54.7 | % |
| $ | 64,697 |
|
|
| 66.6 | % |
| $ | 42,782 |
|
|
| 52.1 | % |
| $ | 18,759 |
|
|
| 56.9 | % |
| $ | 24,429 |
|
|
| 76.5 | % |
| $ | 49,355 |
|
|
| 73.1 | % |
| $ | 40,391 |
|
|
| 64.7 | % |
Effect of prior accident year |
|
| 58 |
|
|
| 0.2 | % |
|
| 2 |
|
|
| — | % |
|
| 5,825 |
|
|
| 6.0 | % |
|
| (925 | ) |
|
| (1.1 | %) |
|
| 7,003 |
|
|
| 21.2 | % |
|
| 5,788 |
|
|
| 18.2 | % |
|
| 6,763 |
|
|
| 10.0 | % |
|
| 5,767 |
|
|
| 9.2 | % |
Total property losses and ratio (2) |
| $ | 24,364 |
|
|
| 70.0 | % |
| $ | 15,374 |
|
|
| 54.7 | % |
| $ | 70,522 |
|
|
| 72.6 | % |
| $ | 41,857 |
|
|
| 51.0 | % |
| $ | 25,762 |
|
|
| 78.1 | % |
| $ | 30,217 |
|
|
| 94.7 | % |
| $ | 56,118 |
|
|
| 83.1 | % |
| $ | 46,158 |
|
|
| 73.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Casualty losses and ratio excluding the effect of prior accident year (1) |
| $ | 22,119 |
|
|
| 56.6 | % |
| $ | 17,205 |
|
|
| 52.5 | % |
| $ | 62,289 |
|
|
| 54.6 | % |
| $ | 51,023 |
|
|
| 56.0 | % | ||||||||||||||||||||||||||||||||
Total casualty losses and ratio excluding the effect of prior accident year (1) |
| $ | 27,097 |
|
|
| 57.5 | % |
| $ | 18,697 |
|
|
| 49.4 | % |
| $ | 50,146 |
|
|
| 56.5 | % |
| $ | 40,170 |
|
|
| 53.6 | % | ||||||||||||||||||||||||||||||||
Effect of prior accident year |
|
| (3,604 | ) |
|
| (9.2 | %) |
|
| (5,190 | ) |
|
| (15.8 | %) |
|
| (23,620 | ) |
|
| (20.7 | %) |
|
| (11,149 | ) |
|
| (12.2 | %) |
|
| (1,041 | ) |
|
| (2.2 | %) |
|
| (20,037 | ) |
|
| (53.0 | %) |
|
| (1,211 | ) |
|
| (1.4 | %) |
|
| (20,016 | ) |
|
| (26.7 | %) |
Total Casualty losses and ratio (2) |
| $ | 18,515 |
|
|
| 47.4 | % |
| $ | 12,015 |
|
|
| 36.7 | % |
| $ | 38,669 |
|
|
| 33.9 | % |
| $ | 39,874 |
|
|
| 43.8 | % | ||||||||||||||||||||||||||||||||
Total casualty losses and ratio (2) |
| $ | 26,056 |
|
|
| 55.3 | % |
| $ | (1,340 | ) |
|
| (3.6 | %) |
| $ | 48,935 |
|
|
| 55.1 | % |
| $ | 20,154 |
|
|
| 26.9 | % | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1) |
| $ | 46,425 |
|
|
| 62.8 | % |
| $ | 32,577 |
|
|
| 53.5 | % |
| $ | 126,986 |
|
|
| 60.1 | % |
| $ | 93,805 |
|
|
| 54.2 | % |
| $ | 45,856 |
|
|
| 57.2 | % |
| $ | 43,126 |
|
|
| 61.8 | % |
| $ | 99,501 |
|
|
| 63.7 | % |
| $ | 80,561 |
|
|
| 58.6 | % |
Effect of prior accident year |
|
| (3,546 | ) |
|
| (4.8 | %) |
|
| (5,188 | ) |
|
| (8.5 | %) |
|
| (17,795 | ) |
|
| (8.4 | %) |
|
| (12,074 | ) |
|
| (7.0 | %) |
|
| 5,962 |
|
|
| 7.4 | % |
|
| (14,249 | ) |
|
| (20.4 | %) |
|
| 5,552 |
|
|
| 3.6 | % |
|
| (14,249 | ) |
|
| (10.4 | %) |
Total net losses and loss adjustment expense and total loss ratio (2) |
| $ | 42,879 |
|
|
| 58.0 | % |
| $ | 27,389 |
|
|
| 45.0 | % |
| $ | 109,191 |
|
|
| 51.7 | % |
| $ | 81,731 |
|
|
| 47.2 | % |
| $ | 51,818 |
|
|
| 64.6 | % |
| $ | 28,877 |
|
|
| 41.4 | % |
| $ | 105,053 |
|
|
| 67.3 | % |
| $ | 66,312 |
|
|
| 48.2 | % |
(1) | Non-GAAP measure / ratio |
(2) | Most directly comparable GAAP measure / ratio |
Premiums
See “Result of Operations” above for a discussion on consolidated premiums.
6350
GLOBAL INDEMNITY GROUP, LLC
Loss Ratio
The current accident year losses and loss ratio is summarized as follows:
|
| Quarters Ended September 30, |
|
| % |
|
| Nine Months Ended September 30, |
|
| % |
|
| Quarters Ended June 30, |
|
| % |
|
| Six Months Ended June 30, |
|
| % |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Property losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
| $ | 14,769 |
|
| $ | 13,641 |
|
|
| 8.3 | % |
| $ | 41,581 |
|
| $ | 35,694 |
|
|
| 16.5 | % |
| $ | 16,093 |
|
| $ | 14,563 |
|
|
| 10.5 | % |
| $ | 36,385 |
|
| $ | 26,812 |
|
|
| 35.7 | % |
Catastrophe |
|
| 9,537 |
|
|
| 1,731 |
|
| NM |
|
|
| 23,116 |
|
|
| 7,088 |
|
| NM |
|
|
| 2,666 |
|
|
| 9,866 |
|
|
| (73.0 | %) |
|
| 12,970 |
|
|
| 13,579 |
|
|
| (4.5 | %) | ||
Property losses |
|
| 24,306 |
|
|
| 15,372 |
|
|
| 58.1 | % |
|
| 64,697 |
|
|
| 42,782 |
|
|
| 51.2 | % |
|
| 18,759 |
|
|
| 24,429 |
|
|
| (23.2 | %) |
|
| 49,355 |
|
|
| 40,391 |
|
|
| 22.2 | % |
Casualty losses |
|
| 22,119 |
|
|
| 17,205 |
|
|
| 28.6 | % |
|
| 62,289 |
|
|
| 51,023 |
|
|
| 22.1 | % |
|
| 27,097 |
|
|
| 18,697 |
|
|
| 44.9 | % |
|
| 50,146 |
|
|
| 40,170 |
|
|
| 24.8 | % |
Total accident year losses |
| $ | 46,425 |
|
| $ | 32,577 |
|
|
| 42.5 | % |
| $ | 126,986 |
|
| $ | 93,805 |
|
|
| 35.4 | % |
| $ | 45,856 |
|
| $ | 43,126 |
|
|
| 6.3 | % |
| $ | 99,501 |
|
| $ | 80,561 |
|
|
| 23.5 | % |
NM – not meaningful
|
| Quarters Ended September 30, |
|
| Point |
|
| Nine Months Ended September 30, |
|
| Point |
|
| Quarters Ended June 30, |
|
| Point |
|
| Six Months Ended June 30, |
|
| Point |
| ||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Current accident year loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
|
| 42.4 | % |
|
| 48.5 | % |
|
| (6.1 | ) |
|
| 42.8 | % |
|
| 43.5 | % |
|
| (0.7 | ) |
|
| 48.8 | % |
|
| 45.6 | % |
|
| 3.2 |
|
|
| 53.9 | % |
|
| 42.9 | % |
|
| 11.0 |
|
Catastrophe |
|
| 27.4 | % |
|
| 6.2 | % |
|
| 21.2 |
|
|
| 23.8 | % |
|
| 8.6 | % |
|
| 15.2 |
|
|
| 8.1 | % |
|
| 30.9 | % |
|
| (22.8 | ) |
|
| 19.2 | % |
|
| 21.8 | % |
|
| (2.6 | ) |
Property loss ratio |
|
| 69.8 | % |
|
| 54.7 | % |
|
| 15.1 |
|
|
| 66.6 | % |
|
| 52.1 | % |
|
| 14.5 |
|
|
| 56.9 | % |
|
| 76.5 | % |
|
| (19.6 | ) |
|
| 73.1 | % |
|
| 64.7 | % |
|
| 8.4 |
|
Casualty loss ratio |
|
| 56.6 | % |
|
| 52.5 | % |
|
| 4.1 |
|
|
| 54.6 | % |
|
| 56.0 | % |
|
| (1.4 | ) |
|
| 57.5 | % |
|
| 49.4 | % |
|
| 8.1 |
|
|
| 56.5 | % |
|
| 53.6 | % |
|
| 2.9 |
|
Total accident year loss ratio |
|
| 62.8 | % |
|
| 53.5 | % |
|
| 9.3 |
|
|
| 60.1 | % |
|
| 54.2 | % |
|
| 5.9 |
|
|
| 57.2 | % |
|
| 61.8 | % |
|
| (4.6 | ) |
|
| 63.7 | % |
|
| 58.6 | % |
|
| 5.1 |
|
The current accident year non-catastrophe property loss ratio improvedincreased by 6.13.2 points during the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 20192020 reflecting a lowerhigher claims severity in the thirdsecond accident quarter and calendar quarter compared to last year.
The current accident year non-catastrophe property loss ratio improvedincreased by 0.711.0 points during the ninesix months ended SeptemberJune 30, 20202021 as compared to the same period in 2019 reflecting a lower2020 due to higher claims severity for the first ninesix months compared to last year.
The current accident year catastrophe loss ratio increasedimproved by 21.222.8 points during the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 2019 due to a higher2020 recognizing lower claims frequency and severity forin the thirdsecond accident quarter and calendar quarter compared to last year.
The current accident year catastrophe loss ratio increasedimproved by 15.22.6 points during the ninesix months ended SeptemberJune 30, 20202021 as compared to the same period in 20192020 due to a higherlower claims frequency and severity for the first ninethrough six months compared to last year.
The current accident year casualty loss ratio increased by 4.18.1 points during the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 2019 due to a slightly2020 reflecting higher claims frequency for the third accident quarter and higher claims severity in the calendarsecond accident quarter compared to last year.
The current accident year casualty loss ratio improvedincreased by 1.42.9 points during the ninesix months ended SeptemberJune 30, 20202021 as compared to the same period in 20192020 due to a lowerhigher claims frequency through the first ninesix months compared to last year.
The calendar year loss ratio for the quarter and ninesix months ended SeptemberJune 30, 20202021 includes a decreasean increase of $3.5$6.0 million, or 4.87.4 percentage points, and a decreasean increase of $17.8$5.6 million, or 8.43.6 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratio for the quarter and ninesix months ended SeptemberJune 30, 20192020 includes a decrease of $5.2$14.2 million, or 8.520.4 percentage points, and a decrease of $12.1$14.2 million, or 7.010.4 percentage points, respectively, related to reserve development on prior accident years. Please see Note 8 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.
6451
GLOBAL INDEMNITY GROUP, LLC
Expense Ratios
The expense ratio for the Company’s Commercial Specialty segment improved by 4.31.0 points from 40.8%38.0% for the quarter ended SeptemberJune 30, 20192020 to 36.5%37.0% for the quarter ended SeptemberJune 30, 20202021 and improved by 3.11.2 points from 40.7%38.2% for the ninesix months ended SeptemberJune 30, 20192020 to 37.6%37.0% for the ninesix months ended SeptemberJune 30, 2020.2021. The improvement in the expense ratio is primarily due to higher earned premiums.
COVID-19
COVID-19COVID-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.
Specialty Property
The components of income and loss from the Company’s Specialty Property segment and corresponding underwriting ratios are as follows:
|
| Quarters Ended September 30, |
|
| % |
|
| Nine Months Ended September 30, |
|
| % |
|
| Quarters Ended June 30, |
|
| % |
|
| Six Months Ended June 30, |
|
| % |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 (1) |
|
| 2019 (1) |
|
| Change |
|
| 2020 (1) |
|
| 2019 (1) |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Gross written premiums |
| $ | 34,730 |
|
| $ | 42,611 |
|
|
| (18.5 | %) |
| $ | 107,951 |
|
| $ | 128,771 |
|
|
| (16.2 | %) |
| $ | 33,013 |
|
| $ | 37,978 |
|
|
| (13.1 | %) |
| $ | 66,371 |
|
| $ | 73,221 |
|
|
| (9.4 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums |
| $ | 29,971 |
|
| $ | 37,628 |
|
|
| (20.3 | %) |
| $ | 93,053 |
|
| $ | 110,668 |
|
|
| (15.9 | %) |
| $ | 29,749 |
|
| $ | 33,075 |
|
|
| (10.1 | %) |
| $ | 59,448 |
|
| $ | 63,082 |
|
|
| (5.8 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
| $ | 31,388 |
|
| $ | 34,554 |
|
|
| (9.2 | %) |
| $ | 99,147 |
|
| $ | 104,740 |
|
|
| (5.3 | %) |
| $ | 29,892 |
|
| $ | 33,543 |
|
|
| (10.9 | %) |
| $ | 60,483 |
|
| $ | 67,759 |
|
|
| (10.7 | %) |
Other income |
|
| 450 |
|
|
| 465 |
|
|
| (3.2 | %) |
|
| 1,306 |
|
|
| 1,406 |
|
|
| (7.1 | %) |
|
| 458 |
|
|
| 429 |
|
|
| 6.8 | % |
|
| 888 |
|
|
| 856 |
|
|
| 3.7 | % |
Total revenues |
|
| 31,838 |
|
|
| 35,019 |
|
|
| (9.1 | %) |
|
| 100,453 |
|
|
| 106,146 |
|
|
| (5.4 | %) |
|
| 30,350 |
|
|
| 33,972 |
|
|
| (10.7 | %) |
|
| 61,371 |
|
|
| 68,615 |
|
|
| (10.6 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 34,430 |
|
|
| 25,997 |
|
|
| 32.4 | % |
|
| 65,619 |
|
|
| 57,611 |
|
|
| 13.9 | % |
|
| 15,302 |
|
|
| 13,691 |
|
|
| 11.8 | % |
|
| 29,780 |
|
|
| 31,189 |
|
|
| (4.5 | %) |
Acquisition costs and other underwriting expenses |
|
| 13,364 |
|
|
| 14,571 |
|
|
| (8.3 | %) |
|
| 41,357 |
|
|
| 44,163 |
|
|
| (6.4 | %) |
|
| 12,579 |
|
|
| 13,761 |
|
|
| (8.6 | %) |
|
| 25,618 |
|
|
| 27,993 |
|
|
| (8.5 | %) |
Underwriting income (loss) |
| $ | (15,956 | ) |
| $ | (5,549 | ) |
|
| 187.5 | % |
| $ | (6,523 | ) |
| $ | 4,372 |
|
| NM |
| |||||||||||||||||||||||||
Underwriting income |
| $ | 2,469 |
|
| $ | 6,520 |
|
|
| (62.1 | %) |
| $ | 5,973 |
|
| $ | 9,433 |
|
|
| (36.7 | %) |
|
| Quarters Ended June 30, |
|
| Point |
|
| Six Months Ended June 30, |
|
| Point |
| ||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
|
| 51.2 | % |
|
| 54.5 | % |
|
| (3.3 | ) |
|
| 51.9 | % |
|
| 52.8 | % |
|
| (0.9 | ) |
Prior accident year |
|
| — |
|
|
| (13.7 | %) |
|
| 13.7 |
|
|
| (2.7 | %) |
|
| (6.8 | %) |
|
| 4.1 |
|
Calendar year loss ratio |
|
| 51.2 | % |
|
| 40.8 | % |
|
| 10.4 |
|
|
| 49.2 | % |
|
| 46.0 | % |
|
| 3.2 |
|
Expense ratio |
|
| 42.1 | % |
|
| 41.0 | % |
|
| 1.1 |
|
|
| 42.4 | % |
|
| 41.3 | % |
|
| 1.1 |
|
Combined ratio |
|
| 93.3 | % |
|
| 81.8 | % |
|
| 11.5 |
|
|
| 91.6 | % |
|
| 87.3 | % |
|
| 4.3 |
|
NM – not meaningful
|
| Quarters Ended September 30, |
|
| Point |
|
| Nine Months Ended September 30, |
|
| Point |
| ||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
| ||||||
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
|
| 116.1 | % |
|
| 78.9 | % |
|
| 37.2 |
|
|
| 72.8 | % |
|
| 65.1 | % |
|
| 7.7 |
|
Prior accident year |
|
| (6.4 | %) |
|
| (3.7 | %) |
|
| (2.7 | ) |
|
| (6.6 | %) |
|
| (10.0 | %) |
|
| 3.4 |
|
Calendar year loss ratio |
|
| 109.7 | % |
|
| 75.2 | % |
|
| 34.5 |
|
|
| 66.2 | % |
|
| 55.1 | % |
|
| 11.1 |
|
Expense ratio |
|
| 42.6 | % |
|
| 42.2 | % |
|
| 0.4 |
|
|
| 41.7 | % |
|
| 42.2 | % |
|
| (0.5 | ) |
Combined ratio |
|
| 152.3 | % |
|
| 117.4 | % |
|
| 34.9 |
|
|
| 107.9 | % |
|
| 97.3 | % |
|
| 10.6 |
|
|
|
6552
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 Specialty Property 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, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| Losses |
|
| Loss Ratio |
|
| Losses |
|
| Loss Ratio |
|
| Losses |
|
| Loss Ratio |
|
| Losses |
|
| Loss Ratio |
| ||||||||||||||||||||||||||||
|
| 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) |
| $ | 15,264 |
|
|
| 52.0 | % |
| $ | 19,388 |
|
|
| 60.7 | % |
| $ | 40,689 |
|
|
| 44.2 | % |
| $ | 53,401 |
|
|
| 55.2 | % |
| $ | 10,692 |
|
|
| 38.0 | % |
| $ | 11,032 |
|
|
| 35.4 | % |
| $ | 23,386 |
|
|
| 41.1 | % |
| $ | 25,425 |
|
|
| 40.5 | % |
Effect of prior accident year |
|
| 66 |
|
|
| 0.2 | % |
|
| 368 |
|
|
| 1.2 | % |
|
| (2,979 | ) |
|
| (3.2 | %) |
|
| 188 |
|
|
| 0.2 | % |
|
| (55 | ) |
|
| (0.2 | %) |
|
| (3,383 | ) |
|
| (10.9 | %) |
|
| (340 | ) |
|
| (0.6 | %) |
|
| (3,045 | ) |
|
| (4.8 | %) |
Non catastrophe property losses and ratio (2) |
| $ | 15,330 |
|
|
| 52.2 | % |
| $ | 19,756 |
|
|
| 61.9 | % |
| $ | 37,710 |
|
|
| 41.0 | % |
| $ | 53,589 |
|
|
| 55.4 | % |
| $ | 10,637 |
|
|
| 37.8 | % |
| $ | 7,649 |
|
|
| 24.5 | % |
| $ | 23,046 |
|
|
| 40.5 | % |
| $ | 22,380 |
|
|
| 35.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catastrophe losses and ratio excluding the effect of prior accident year (1) |
| $ | 20,060 |
|
|
| 68.4 | % |
| $ | 5,996 |
|
|
| 18.8 | % |
| $ | 28,367 |
|
|
| 30.8 | % |
| $ | 10,080 |
|
|
| 10.4 | % |
| $ | 3,651 |
|
|
| 13.0 | % |
| $ | 6,228 |
|
|
| 20.0 | % |
| $ | 6,075 |
|
|
| 10.7 | % |
| $ | 8,307 |
|
|
| 13.2 | % |
Effect of prior accident year |
|
| (1,828 | ) |
|
| (6.2 | %) |
|
| (1,297 | ) |
|
| (4.1 | %) |
|
| (1,619 | ) |
|
| (1.8 | %) |
|
| (10,286 | ) |
|
| (10.6 | %) |
|
| 69 |
|
|
| 0.2 | % |
|
| 178 |
|
|
| 0.6 | % |
|
| (57 | ) |
|
| (0.1 | %) |
|
| 209 |
|
|
| 0.3 | % |
Catastrophe losses and ratio (2) |
| $ | 18,232 |
|
|
| 62.2 | % |
| $ | 4,699 |
|
|
| 14.7 | % |
| $ | 26,748 |
|
|
| 29.0 | % |
| $ | (206 | ) |
|
| (0.2 | %) |
| $ | 3,720 |
|
|
| 13.2 | % |
| $ | 6,406 |
|
|
| 20.6 | % |
| $ | 6,018 |
|
|
| 10.6 | % |
| $ | 8,516 |
|
|
| 13.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property losses and ratio excluding the effect of prior accident year (1) |
| $ | 35,324 |
|
|
| 120.4 | % |
| $ | 25,384 |
|
|
| 79.5 | % |
| $ | 69,056 |
|
|
| 75.0 | % |
| $ | 63,481 |
|
|
| 65.6 | % |
| $ | 14,343 |
|
|
| 51.0 | % |
| $ | 17,260 |
|
|
| 55.4 | % |
| $ | 29,461 |
|
|
| 51.8 | % |
| $ | 33,732 |
|
|
| 53.7 | % |
Effect of prior accident year |
|
| (1,762 | ) |
|
| (6.0 | %) |
|
| (929 | ) |
|
| (2.9 | %) |
|
| (4,598 | ) |
|
| (5.0 | %) |
|
| (10,098 | ) |
|
| (10.4 | %) |
|
| 14 |
|
|
| — | % |
|
| (3,205 | ) |
|
| (10.3 | %) |
|
| (397 | ) |
|
| (0.7 | %) |
|
| (2,836 | ) |
|
| (4.5 | %) |
Total property losses and ratio (2) |
| $ | 33,562 |
|
|
| 114.4 | % |
| $ | 24,455 |
|
|
| 76.6 | % |
| $ | 64,458 |
|
|
| 70.0 | % |
| $ | 53,383 |
|
|
| 55.2 | % |
| $ | 14,357 |
|
|
| 51.0 | % |
| $ | 14,055 |
|
|
| 45.1 | % |
| $ | 29,064 |
|
|
| 51.1 | % |
| $ | 30,896 |
|
|
| 49.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Casualty losses and ratio excluding the effect of prior accident year (1) |
| $ | 1,109 |
|
|
| 53.9 | % |
| $ | 1,895 |
|
|
| 72.4 | % |
| $ | 3,154 |
|
|
| 45.1 | % |
| $ | 4,656 |
|
|
| 57.6 | % | ||||||||||||||||||||||||||||||||
Total casualty losses and ratio excluding the effect of prior accident year (1) |
| $ | 947 |
|
|
| 54.0 | % |
| $ | 1,019 |
|
|
| 43.1 | % |
| $ | 1,944 |
|
|
| 54.0 | % |
| $ | 2,045 |
|
|
| 41.5 | % | ||||||||||||||||||||||||||||||||
Effect of prior accident year |
|
| (241 | ) |
|
| (11.7 | %) |
|
| (353 | ) |
|
| (13.5 | %) |
|
| (1,993 | ) |
|
| (28.5 | %) |
|
| (428 | ) |
|
| (5.3 | %) |
|
| (2 | ) |
|
| (0.1 | %) |
|
| (1,383 | ) |
|
| (58.5 | %) |
|
| (1,228 | ) |
|
| (34.1 | %) |
|
| (1,752 | ) |
|
| (35.6 | %) |
Total Casualty losses and ratio (2) |
| $ | 868 |
|
|
| 42.2 | % |
| $ | 1,542 |
|
|
| 58.9 | % |
| $ | 1,161 |
|
|
| 16.6 | % |
| $ | 4,228 |
|
|
| 52.3 | % | ||||||||||||||||||||||||||||||||
Total casualty losses and ratio (2) |
| $ | 945 |
|
|
| 53.9 | % |
| $ | (364 | ) |
|
| (15.4 | %) |
| $ | 716 |
|
|
| 19.9 | % |
| $ | 293 |
|
|
| 5.9 | % | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1) |
| $ | 36,433 |
|
|
| 116.1 | % |
| $ | 27,279 |
|
|
| 78.9 | % |
| $ | 72,210 |
|
|
| 72.8 | % |
| $ | 68,137 |
|
|
| 65.1 | % |
| $ | 15,290 |
|
|
| 51.2 | % |
| $ | 18,279 |
|
|
| 54.5 | % |
| $ | 31,405 |
|
|
| 51.9 | % |
| $ | 35,777 |
|
|
| 52.8 | % |
Effect of prior accident year |
|
| (2,003 | ) |
|
| (6.4 | %) |
|
| (1,282 | ) |
|
| (3.7 | %) |
|
| (6,591 | ) |
|
| (6.6 | %) |
|
| (10,526 | ) |
|
| (10.0 | %) |
|
| 12 |
|
|
| — | % |
|
| (4,588 | ) |
|
| (13.7 | %) |
|
| (1,625 | ) |
|
| (2.7 | %) |
|
| (4,588 | ) |
|
| (6.8 | %) |
Total net losses and loss adjustment expense and total loss ratio (2) |
| $ | 34,430 |
|
|
| 109.7 | % |
| $ | 25,997 |
|
|
| 75.2 | % |
| $ | 65,619 |
|
|
| 66.2 | % |
| $ | 57,611 |
|
|
| 55.1 | % |
| $ | 15,302 |
|
|
| 51.2 | % |
| $ | 13,691 |
|
|
| 40.8 | % |
| $ | 29,780 |
|
|
| 49.2 | % |
| $ | 31,189 |
|
|
| 46.0 | % |
(1) | Non-GAAP measure / ratio |
(2) | Most directly comparable GAAP measure / ratio |
Premiums
See “Result of Operations” above for a discussion on consolidated premiums.
66
53
GLOBAL INDEMNITY GROUP, LLC
Other Income
Other income was $0.5 million and $0.4 million for each of the quarters ended SeptemberJune 30, 2021 and 2020, respectively, and 2019 and $1.3 million and $1.4$0.9 million for both the ninesix months ended SeptemberJune 30, 20202021 and 2019, respectively.2020. Other income is primarily comprised of fee income.
Loss Ratio
The current accident year losses and loss ratio is summarized as follows:
|
| Quarters Ended September 30, |
|
| % |
|
| Nine Months Ended September 30, |
|
| % |
|
| Quarters Ended June 30, |
|
| % |
|
| Six Months Ended June 30, |
|
| % |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Property losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
| $ | 15,264 |
|
| $ | 19,388 |
|
|
| (21.3 | %) |
| $ | 40,689 |
|
| $ | 53,401 |
|
|
| (23.8 | %) |
| $ | 10,692 |
|
| $ | 11,032 |
|
|
| (3.1 | %) |
| $ | 23,386 |
|
| $ | 25,425 |
|
|
| (8.0 | %) |
Catastrophe |
|
| 20,060 |
|
|
| 5,996 |
|
| NM |
|
|
| 28,367 |
|
|
| 10,080 |
|
|
| 181.4 | % |
|
| 3,651 |
|
|
| 6,228 |
|
|
| (41.4 | %) |
|
| 6,075 |
|
|
| 8,307 |
|
|
| (26.9 | %) | |
Property losses |
|
| 35,324 |
|
|
| 25,384 |
|
|
| 39.2 | % |
|
| 69,056 |
|
|
| 63,481 |
|
|
| 8.8 | % |
|
| 14,343 |
|
|
| 17,260 |
|
|
| (16.9 | %) |
|
| 29,461 |
|
|
| 33,732 |
|
|
| (12.7 | %) |
Casualty losses |
|
| 1,109 |
|
|
| 1,895 |
|
|
| (41.5 | %) |
|
| 3,154 |
|
|
| 4,656 |
|
|
| (32.3 | %) |
|
| 947 |
|
|
| 1,019 |
|
|
| (7.1 | %) |
|
| 1,944 |
|
|
| 2,045 |
|
|
| (4.9 | %) |
Total accident year losses |
| $ | 36,433 |
|
| $ | 27,279 |
|
|
| 33.6 | % |
| $ | 72,210 |
|
| $ | 68,137 |
|
|
| 6.0 | % |
| $ | 15,290 |
|
| $ | 18,279 |
|
|
| (16.4 | %) |
| $ | 31,405 |
|
| $ | 35,777 |
|
|
| (12.2 | %) |
NM – not meaningful
|
| Quarters Ended September 30, |
|
| Point |
|
| Nine Months Ended September 30, |
|
| Point |
|
| Quarters Ended June 30, |
|
| Point |
|
| Six Months Ended June 30, |
|
| Point |
| ||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Current accident year loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
|
| 52.0 | % |
|
| 60.7 | % |
|
| (8.7 | ) |
|
| 44.2 | % |
|
| 55.2 | % |
|
| (11.0 | ) |
|
| 38.0 | % |
|
| 35.4 | % |
|
| 2.6 |
|
|
| 41.1 | % |
|
| 40.5 | % |
|
| 0.6 |
|
Catastrophe |
|
| 68.4 | % |
|
| 18.8 | % |
|
| 49.6 |
|
|
| 30.8 | % |
|
| 10.4 | % |
|
| 20.4 |
|
|
| 13.0 | % |
|
| 20.0 | % |
|
| (7.0 | ) |
|
| 10.7 | % |
|
| 13.2 | % |
|
| (2.5 | ) |
Property loss ratio |
|
| 120.4 | % |
|
| 79.5 | % |
|
| 40.9 |
|
|
| 75.0 | % |
|
| 65.6 | % |
|
| 9.4 |
|
|
| 51.0 | % |
|
| 55.4 | % |
|
| (4.4 | ) |
|
| 51.8 | % |
|
| 53.7 | % |
|
| (1.9 | ) |
Casualty loss ratio |
|
| 53.9 | % |
|
| 72.4 | % |
|
| (18.5 | ) |
|
| 45.1 | % |
|
| 57.6 | % |
|
| (12.5 | ) |
|
| 54.0 | % |
|
| 43.1 | % |
|
| 10.9 |
|
|
| 54.0 | % |
|
| 41.5 | % |
|
| 12.5 |
|
Total accident year loss ratio |
|
| 116.1 | % |
|
| 78.9 | % |
|
| 37.2 |
|
|
| 72.8 | % |
|
| 65.1 | % |
|
| 7.7 |
|
|
| 51.2 | % |
|
| 54.5 | % |
|
| (3.3 | ) |
|
| 51.9 | % |
|
| 52.8 | % |
|
| (0.9 | ) |
The current accident year non-catastrophe property loss ratio improvedincreased by 8.72.6 points during the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 20192020 reflecting a lowerhigher claims severity in the thirdsecond accident quarter and calendar quarter compared to last year.
The current accident year non-catastrophe property loss ratio improvedincreased by 11.00.6 points during the ninesix months ended SeptemberJune 30, 20202021 as compared to the same period in 20192020 due to a lowerhigher claims frequency and severity through ninefor the first six months compared to last year.
The current accident year catastrophe loss ratio increasedimproved by 49.67.0 points during the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 2019 due to a higher2020 recognizing lower claims frequency and severity forin the thirdsecond accident quarter and calendar quarter compared to last year. The impact from Hurricane Laura on the third calendar quarter loss ratio was 36.2 points which was the main driver of the higher loss ratio in the quarter.
The current accident year catastrophe loss ratio increasedimproved by 20.42.5 points during the ninesix months ended SeptemberJune 30, 20202021 as compared to the same period in 20192020 due to a higher claims frequency and severity for the first nine months compared to last year. The impact from Hurricane Laura on the nine month loss ratio was 11.5 points.
The current accident year casualty loss ratio improved by 18.5 points during the quarter ended September 30, 2020 as compared to the same period in 2019 reflecting a lower claims frequency and severity in the third accident quarter and lower claims severity in the calendar quarterthrough six months compared to last year.
The current accident year casualty loss ratio improvedincreased by 12.510.9 points during the nine monthsquarter ended SeptemberJune 30, 20202021 as compared to the same period in 20192020 reflecting higher claims frequency in the second accident quarter compared to last year.
The current accident year casualty loss ratio increased by 12.5 points during the six months ended June 30, 2021 as compared to the same period in 2020 due to a lowerhigher claims severityfrequency through ninesix months compared to last year.
67
GLOBAL INDEMNITY GROUP, LLC
The calendar year loss ratio for the quarter and ninesix months ended SeptemberJune 30, 20202021 includes a decreasean increase of $2.0less than $0.1 million, or 6.40.0 percentage points, and a decrease of $6.6$1.6 million, or 6.62.7 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratio for the quarter and ninesix months ended SeptemberJune 30, 20192020 includes a decrease of $1.3$4.6 million, or 3.713.7 percentage points, and a decrease of $10.5$4.6 million, or 10.06.8 percentage points, respectively, related to reserve development on prior accident years. Please see Note 8 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.
54
GLOBAL INDEMNITY GROUP, LLC
Expense Ratios
The expense ratio for the Company’s Specialty Property segment increased 0.41.1 points from 42.2%41.0% for the quarter ended SeptemberJune 30, 20192020 to 42.6%42.1% for the quarter ended SeptemberJune 30, 2021 and increased by 1.1 points from 41.3% for the six months ended June 30, 2020 to 42.4% for the six months ended June 30, 2021. The increase in the expense ratio is primarily due to a reduction in earned premiums. The expense ratio improved by 0.5 points from 42.2% for the nine months ended September 30, 2019 to 41.7% for the nine months ended September 30, 2020 primarily due to a reduction in compensation and travel cost partially offset by the impact of lower earned premiums.
COVID-19
COVID-19COVID-19’s lasting impacts could result in declines in business and non-payment of premiums that could adversely affect Specialty Property’s business, financial condition, and results of operation.
6855
GLOBAL INDEMNITY GROUP, LLC
Farm, Ranch & Stable
The components of income and loss from the Company’s Farm, Ranch & Stable segment and corresponding underwriting ratios are as follows:
|
| Quarters Ended September 30, |
|
| % |
|
| Nine Months Ended September 30, |
|
| % |
|
| Quarters Ended June 30, |
|
| % |
|
| Six Months Ended June 30, |
|
| % |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 (1) |
|
| 2019 (1) |
|
| Change |
|
| 2020 (1) |
|
| 2019 (1) |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Gross written premiums |
| $ | 19,443 |
|
| $ | 21,410 |
|
|
| (9.2 | %) |
| $ | 64,798 |
|
| $ | 65,872 |
|
|
| (1.6 | %) |
| $ | 20,851 |
|
| $ | 23,222 |
|
|
| (10.2 | %) |
| $ | 41,853 |
|
| $ | 45,355 |
|
|
| (7.7 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums |
| $ | 16,961 |
|
| $ | 18,294 |
|
|
| (7.3 | %) |
| $ | 56,323 |
|
| $ | 55,861 |
|
|
| 0.8 | % |
| $ | 17,880 |
|
| $ | 20,257 |
|
|
| (11.7 | %) |
| $ | 35,483 |
|
| $ | 39,362 |
|
|
| (9.9 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
| $ | 19,978 |
|
| $ | 18,377 |
|
|
| 8.7 | % |
| $ | 57,691 |
|
| $ | 52,849 |
|
|
| 9.2 | % |
| $ | 17,960 |
|
| $ | 19,030 |
|
|
| (5.6 | %) |
| $ | 36,101 |
|
| $ | 37,713 |
|
|
| (4.3 | %) |
Other income |
|
| 35 |
|
|
| 34 |
|
|
| 2.9 | % |
|
| 107 |
|
|
| 96 |
|
|
| 11.5 | % |
|
| 40 |
|
|
| 36 |
|
|
| 11.1 | % |
|
| 74 |
|
|
| 72 |
|
|
| 2.8 | % |
Total revenues |
|
| 20,013 |
|
|
| 18,411 |
|
|
| 8.7 | % |
|
| 57,798 |
|
|
| 52,945 |
|
|
| 9.2 | % |
|
| 18,000 |
|
|
| 19,066 |
|
|
| (5.6 | %) |
|
| 36,175 |
|
|
| 37,785 |
|
|
| (4.3 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 14,649 |
|
|
| 10,939 |
|
|
| 33.9 | % |
|
| 37,698 |
|
|
| 32,203 |
|
|
| 17.1 | % |
|
| 11,161 |
|
|
| 13,439 |
|
|
| (17.0 | %) |
|
| 22,962 |
|
|
| 23,049 |
|
|
| (0.4 | %) |
Acquisition costs and other underwriting expenses |
|
| 7,443 |
|
|
| 7,776 |
|
|
| (4.3 | %) |
|
| 22,687 |
|
|
| 22,403 |
|
|
| 1.3 | % |
|
| 7,187 |
|
|
| 7,606 |
|
|
| (5.5 | %) |
|
| 14,173 |
|
|
| 15,244 |
|
|
| (7.0 | %) |
Underwriting loss |
| $ | (2,079 | ) |
| $ | (304 | ) |
| NM |
|
| $ | (2,587 | ) |
| $ | (1,661 | ) |
|
| (55.7 | %) |
| $ | (348 | ) |
| $ | (1,979 | ) |
|
| (82.4 | %) |
| $ | (960 | ) |
| $ | (508 | ) |
|
| 89.0 | % |
|
| Quarters Ended June 30, |
|
| Point |
|
| Six Months Ended June 30, |
|
| Point |
| ||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
|
| 62.7 | % |
|
| 74.8 | % |
|
| (12.1 | ) |
|
| 66.0 | % |
|
| 63.2 | % |
|
| 2.8 |
|
Prior accident year |
|
| (0.6 | %) |
|
| (4.2 | %) |
|
| 3.6 |
|
|
| (2.4 | %) |
|
| (2.1 | %) |
|
| (0.3 | ) |
Calendar year loss ratio |
|
| 62.1 | % |
|
| 70.6 | % |
|
| (8.5 | ) |
|
| 63.6 | % |
|
| 61.1 | % |
|
| 2.5 |
|
Expense ratio |
|
| 40.0 | % |
|
| 40.0 | % |
|
| — |
|
|
| 39.3 | % |
|
| 40.4 | % |
|
| (1.1 | ) |
Combined ratio |
|
| 102.1 | % |
|
| 110.6 | % |
|
| (8.5 | ) |
|
| 102.9 | % |
|
| 101.5 | % |
|
| 1.4 |
|
NM – not meaningful
|
| Quarters Ended September 30, |
|
| Point |
|
| Nine Months Ended September 30, |
|
| Point |
| ||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
| ||||||
Underwriting Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
|
| 79.9 | % |
|
| 65.8 | % |
|
| 14.1 |
|
|
| 69.0 | % |
|
| 68.4 | % |
|
| 0.6 |
|
Prior accident year |
|
| (6.5 | %) |
|
| (6.3 | %) |
|
| (0.2 | ) |
|
| (3.7 | %) |
|
| (7.5 | %) |
|
| 3.8 |
|
Calendar year loss ratio |
|
| 73.4 | % |
|
| 59.5 | % |
|
| 13.9 |
|
|
| 65.3 | % |
|
| 60.9 | % |
|
| 4.4 |
|
Expense ratio |
|
| 37.3 | % |
|
| 42.3 | % |
|
| (5.0 | ) |
|
| 39.3 | % |
|
| 42.4 | % |
|
| (3.1 | ) |
Combined ratio |
|
| 110.7 | % |
|
| 101.8 | % |
|
| 8.9 |
|
|
| 104.6 | % |
|
| 103.3 | % |
|
| 1.3 |
|
|
|
6956
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 Farm, Ranch & Stable 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, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| Losses |
|
| Loss Ratio |
|
| Losses |
|
| Loss Ratio |
|
| Losses |
|
| Loss Ratio |
|
| Losses |
|
| Loss Ratio |
| ||||||||||||||||||||||||||||
|
| 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) |
| $ | 6,292 |
|
|
| 41.9 | % |
| $ | 7,542 |
|
|
| 57.6 | % |
| $ | 16,106 |
|
|
| 38.2 | % |
| $ | 21,943 |
|
|
| 58.2 | % |
| $ | 7,457 |
|
|
| 55.7 | % |
| $ | 4,737 |
|
|
| 34.6 | % |
| $ | 13,424 |
|
|
| 49.8 | % |
| $ | 9,814 |
|
|
| 36.2 | % |
Effect of prior accident year |
|
| (850 | ) |
|
| (5.7 | %) |
|
| (17 | ) |
|
| (0.1 | %) |
|
| (2,115 | ) |
|
| (5.0 | %) |
|
| (448 | ) |
|
| (1.2 | %) |
|
| (14 | ) |
|
| (0.1 | %) |
|
| (707 | ) |
|
| (5.2 | %) |
|
| 301 |
|
|
| 1.1 | % |
|
| (1,265 | ) |
|
| (4.7 | %) |
Non catastrophe property losses and ratio (2) |
| $ | 5,442 |
|
|
| 36.2 | % |
| $ | 7,525 |
|
|
| 57.5 | % |
| $ | 13,991 |
|
|
| 33.2 | % |
| $ | 21,495 |
|
|
| 57.0 | % |
| $ | 7,443 |
|
|
| 55.6 | % |
| $ | 4,030 |
|
|
| 29.4 | % |
| $ | 13,725 |
|
|
| 50.9 | % |
| $ | 8,549 |
|
|
| 31.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catastrophe losses and ratio excluding the effect of prior accident year (1) |
| $ | 6,970 |
|
|
| 46.4 | % |
| $ | 2,044 |
|
|
| 15.6 | % |
| $ | 15,488 |
|
|
| 36.8 | % |
| $ | 6,769 |
|
|
| 18.0 | % |
| $ | 1,372 |
|
|
| 10.2 | % |
| $ | 7,117 |
|
|
| 52.0 | % |
| $ | 5,499 |
|
|
| 20.4 | % |
| $ | 8,518 |
|
|
| 31.4 | % |
Effect of prior accident year |
|
| (472 | ) |
|
| (3.1 | %) |
|
| (1,089 | ) |
|
| (8.3 | %) |
|
| 89 |
|
|
| 0.2 | % |
|
| (1,784 | ) |
|
| (4.7 | %) |
|
| 10 |
|
|
| 0.1 | % |
|
| 11 |
|
|
| 0.1 | % |
|
| (1,035 | ) |
|
| (3.8 | %) |
|
| 561 |
|
|
| 2.1 | % |
Catastrophe losses and ratio (2) |
| $ | 6,498 |
|
|
| 43.3 | % |
| $ | 955 |
|
|
| 7.3 | % |
| $ | 15,577 |
|
|
| 37.0 | % |
| $ | 4,985 |
|
|
| 13.3 | % |
| $ | 1,382 |
|
|
| 10.3 | % |
| $ | 7,128 |
|
|
| 52.1 | % |
| $ | 4,464 |
|
|
| 16.6 | % |
| $ | 9,079 |
|
|
| 33.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property losses and ratio excluding the effect of prior accident year (1) |
| $ | 13,262 |
|
|
| 88.3 | % |
| $ | 9,586 |
|
|
| 73.2 | % |
| $ | 31,594 |
|
|
| 75.0 | % |
| $ | 28,712 |
|
|
| 76.2 | % |
| $ | 8,829 |
|
|
| 65.9 | % |
| $ | 11,854 |
|
|
| 86.6 | % |
| $ | 18,923 |
|
|
| 70.2 | % |
| $ | 18,332 |
|
|
| 67.6 | % |
Effect of prior accident year |
|
| (1,322 | ) |
|
| (8.8 | %) |
|
| (1,106 | ) |
|
| (8.4 | %) |
|
| (2,026 | ) |
|
| (4.8 | %) |
|
| (2,232 | ) |
|
| (5.9 | %) |
|
| (4 | ) |
|
| — |
|
|
| (696 | ) |
|
| (5.1 | %) |
|
| (734 | ) |
|
| (2.7 | %) |
|
| (704 | ) |
|
| (2.6 | %) |
Total property losses and ratio (2) |
| $ | 11,940 |
|
|
| 79.5 | % |
| $ | 8,480 |
|
|
| 64.8 | % |
| $ | 29,568 |
|
|
| 70.2 | % |
| $ | 26,480 |
|
|
| 70.3 | % |
| $ | 8,825 |
|
|
| 65.9 | % |
| $ | 11,158 |
|
|
| 81.5 | % |
| $ | 18,189 |
|
|
| 67.5 | % |
| $ | 17,628 |
|
|
| 65.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Casualty losses and ratio excluding the effect of prior accident year (1) |
| $ | 2,693 |
|
|
| 54.4 | % |
| $ | 2,503 |
|
|
| 47.4 | % |
| $ | 8,213 |
|
|
| 52.7 | % |
| $ | 7,462 |
|
|
| 49.2 | % | ||||||||||||||||||||||||||||||||
Total casualty losses and ratio excluding the effect of prior accident year (1) |
| $ | 2,439 |
|
|
| 53.4 | % |
| $ | 2,388 |
|
|
| 44.7 | % |
| $ | 4,891 |
|
|
| 53.5 | % |
| $ | 5,520 |
|
|
| 52.0 | % | ||||||||||||||||||||||||||||||||
Effect of prior accident year |
|
| 16 |
|
|
| 0.3 | % |
|
| (44 | ) |
|
| (0.8 | %) |
|
| (83 | ) |
|
| (0.5 | %) |
|
| (1,739 | ) |
|
| (11.5 | %) |
|
| (103 | ) |
|
| (2.3 | %) |
|
| (107 | ) |
|
| (2.0 | %) |
|
| (118 | ) |
|
| (1.3 | %) |
|
| (99 | ) |
|
| (0.9 | %) |
Total Casualty losses and ratio (2) |
| $ | 2,709 |
|
|
| 54.7 | % |
| $ | 2,459 |
|
|
| 46.6 | % |
| $ | 8,130 |
|
|
| 52.2 | % |
| $ | 5,723 |
|
|
| 37.7 | % | ||||||||||||||||||||||||||||||||
Total casualty losses and ratio (2) |
| $ | 2,336 |
|
|
| 51.1 | % |
| $ | 2,281 |
|
|
| 42.7 | % |
| $ | 4,773 |
|
|
| 52.2 | % |
| $ | 5,421 |
|
|
| 51.1 | % | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1) |
| $ | 15,955 |
|
|
| 79.9 | % |
| $ | 12,089 |
|
|
| 65.8 | % |
| $ | 39,807 |
|
|
| 69.0 | % |
| $ | 36,174 |
|
|
| 68.4 | % |
| $ | 11,268 |
|
|
| 62.7 | % |
| $ | 14,242 |
|
|
| 74.8 | % |
| $ | 23,814 |
|
|
| 66.0 | % |
| $ | 23,852 |
|
|
| 63.2 | % |
Effect of prior accident year |
|
| (1,306 | ) |
|
| (6.5 | %) |
|
| (1,150 | ) |
|
| (6.3 | %) |
|
| (2,109 | ) |
|
| (3.7 | %) |
|
| (3,971 | ) |
|
| (7.5 | %) |
|
| (107 | ) |
|
| (0.6 | %) |
|
| (803 | ) |
|
| (4.2 | %) |
|
| (852 | ) |
|
| (2.4 | %) |
|
| (803 | ) |
|
| (2.1 | %) |
Total net losses and loss adjustment expense and total loss ratio (2) |
| $ | 14,649 |
|
|
| 73.4 | % |
| $ | 10,939 |
|
|
| 59.5 | % |
| $ | 37,698 |
|
|
| 65.3 | % |
| $ | 32,203 |
|
|
| 60.9 | % |
| $ | 11,161 |
|
|
| 62.1 | % |
| $ | 13,439 |
|
|
| 70.6 | % |
| $ | 22,962 |
|
|
| 63.6 | % |
| $ | 23,049 |
|
|
| 61.1 | % |
(1) | Non-GAAP measure / ratio |
(2) | Most directly comparable GAAP measure / ratio |
Premiums
See “Result of Operations” above for a discussion on consolidated premiums.
57
GLOBAL INDEMNITY GROUP, LLC
Other Income
Other income was less than $0.1 million for each of the quarters ended SeptemberJune 30, 20202021 and 20192020 and $0.1 million for each ofboth the ninesix months ended SeptemberJune 30, 20202021 and 2019.2020. Other income is primarily comprised of fee income.
70
GLOBAL INDEMNITY GROUP, LLC
Loss Ratio
The current accident year losses and loss ratio is summarized as follows:
|
| Quarters Ended September 30, |
|
| % |
|
| Nine Months Ended September 30, |
|
| % |
|
| Quarters Ended June 30, |
|
| % |
|
| Six Months Ended June 30, |
|
| % |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Property losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
| $ | 6,292 |
|
| $ | 7,542 |
|
|
| (16.6 | %) |
| $ | 16,106 |
|
| $ | 21,943 |
|
|
| (26.6 | %) |
| $ | 7,457 |
|
| $ | 4,737 |
|
|
| 57.4 | % |
| $ | 13,424 |
|
| $ | 9,814 |
|
|
| 36.8 | % |
Catastrophe |
|
| 6,970 |
|
|
| 2,044 |
|
| NM |
|
|
| 15,488 |
|
|
| 6,769 |
|
|
| 128.8 | % |
|
| 1,372 |
|
|
| 7,117 |
|
|
| (80.7 | %) |
|
| 5,499 |
|
|
| 8,518 |
|
|
| (35.4 | %) | |
Property losses |
|
| 13,262 |
|
|
| 9,586 |
|
|
| 38.3 | % |
|
| 31,594 |
|
|
| 28,712 |
|
|
| 10.0 | % |
|
| 8,829 |
|
|
| 11,854 |
|
|
| (25.5 | %) |
|
| 18,923 |
|
|
| 18,332 |
|
|
| 3.2 | % |
Casualty losses |
|
| 2,693 |
|
|
| 2,503 |
|
|
| 7.6 | % |
|
| 8,213 |
|
|
| 7,462 |
|
|
| 10.1 | % |
|
| 2,439 |
|
|
| 2,388 |
|
|
| 2.1 | % |
|
| 4,891 |
|
|
| 5,520 |
|
|
| (11.4 | %) |
Total accident year losses |
| $ | 15,955 |
|
| $ | 12,089 |
|
|
| 32.0 | % |
| $ | 39,807 |
|
| $ | 36,174 |
|
|
| 10.0 | % |
| $ | 11,268 |
|
| $ | 14,242 |
|
|
| (20.9 | %) |
| $ | 23,814 |
|
| $ | 23,852 |
|
|
| (0.2 | %) |
NM – not meaningful
|
| Quarters Ended September 30, |
|
| Point |
|
| Nine Months Ended September 30, |
|
| Point |
|
| Quarters Ended June 30, |
|
| Point |
|
| Six Months Ended June 30, |
|
| Point |
| ||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Current accident year loss ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-catastrophe |
|
| 41.9 | % |
|
| 57.6 | % |
|
| (15.7 | ) |
|
| 38.2 | % |
|
| 58.2 | % |
|
| (20.0 | ) |
|
| 55.7 | % |
|
| 34.6 | % |
|
| 21.1 |
|
|
| 49.8 | % |
|
| 36.2 | % |
|
| 13.6 |
|
Catastrophe |
|
| 46.4 | % |
|
| 15.6 | % |
|
| 30.8 |
|
|
| 36.8 | % |
|
| 18.0 | % |
|
| 18.8 |
|
|
| 10.2 | % |
|
| 52.0 | % |
|
| (41.8 | ) |
|
| 20.4 | % |
|
| 31.4 | % |
|
| (11.0 | ) |
Property loss ratio |
|
| 88.3 | % |
|
| 73.2 | % |
|
| 15.1 |
|
|
| 75.0 | % |
|
| 76.2 | % |
|
| (1.2 | ) |
|
| 65.9 | % |
|
| 86.6 | % |
|
| (20.7 | ) |
|
| 70.2 | % |
|
| 67.6 | % |
|
| 2.6 |
|
Casualty loss ratio |
|
| 54.4 | % |
|
| 47.4 | % |
|
| 7.0 |
|
|
| 52.7 | % |
|
| 49.2 | % |
|
| 3.5 |
|
|
| 53.4 | % |
|
| 44.7 | % |
|
| 8.7 |
|
|
| 53.5 | % |
|
| 52.0 | % |
|
| 1.5 |
|
Total accident year loss ratio |
|
| 79.9 | % |
|
| 65.8 | % |
|
| 14.1 |
|
|
| 69.0 | % |
|
| 68.4 | % |
|
| 0.6 |
|
|
| 62.7 | % |
|
| 74.8 | % |
|
| (12.1 | ) |
|
| 66.0 | % |
|
| 63.2 | % |
|
| 2.8 |
|
The current accident year non-catastrophe property loss ratio improvedincreased by 15.721.1 points during the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 2019 due to a lower claims frequency for the third accident quarter and lower2020 reflecting higher claims frequency and severity in the calendarsecond accident quarter compared to last year.
The current accident year non-catastrophe property loss ratio improvedincreased by 20.013.6 points during the ninesix months ended SeptemberJune 30, 20202021 as compared to the same period in 2019 reflecting a lower2020 due to higher claims frequency and severity for the first ninethrough six months compared to last year.
The current accident year catastrophe loss ratio increasedimproved by 30.841.8 points during the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 2019 reflecting a higher2020 recognizing lower claims frequency and severity forin the thirdsecond accident quarter and calendar quarter compared to last year. The impact from the Midwest Derecho on the third calendar quarter loss ratio was 30.1 points which accounted for almost the entire increase from last year.
The current accident year catastrophe loss ratio increasedimproved by 18.811.0 points during the ninesix months ended SeptemberJune 30, 20202021 as compared to the same period in 2019 reflecting a higher2020 due to lower claims frequency and severity through ninesix months compared to last year. The impact from the Midwest Derecho on the nine month loss ratio was 10.7 points.
The current accident year casualty loss ratio increased by 7.08.7 points during the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 2019 due to a2020 reflecting higher claims severity forfrequency in the thirdsecond accident quarter and calendar quarter compared to last year.
The current accident year casualty loss ratio increased by 3.51.5 points during the ninesix months ended SeptemberJune 30, 20202021 as compared to the same period in 2019. The increase in the loss ratio reflects a2020 due to higher claims severityfrequency through ninesix months compared to last year.
The calendar year loss ratio for the quarter and ninesix months ended SeptemberJune 30, 20202021 includes a decrease of $1.3$0.1 million, or 6.50.6 percentage points, and a decrease of $2.1$0.9 million, or 3.72.4 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratio for the quarter and ninesix months ended SeptemberJune 30, 20192020 includes a decrease of $1.2$0.8 million, or 6.34.2 percentage points, and a decrease of $4.0$0.8 million, or 7.52.1 percentage points, respectively,
71
GLOBAL INDEMNITY GROUP, LLC
related to reserve development on prior accident years. Please see Note 8 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.
58
GLOBAL INDEMNITY GROUP, LLC
Expense Ratios
The expense ratio for the Company’s Farm, Ranch & Stable Segment improved 5.0 points from 42.3%was 40.0% for both the quarter ended SeptemberJune 30, 2019 to 37.3%2021 and June 30, 2020. The expense ratio improved 1.1 points from 40.4% for the quartersix months ended SeptemberJune 30, 2020 to 39.3% for the six months ended June 30, 2021. The improvement in the expense ratio is primarily due to a reduction of commission rate partially driven by a change in compensation and travel costagent distribution as well as higher earned premiums. The expense ratio improved 3.1 points from 42.4% for the nine months ended September 30, 2019 to 39.3% for the nine months ended September 30, 2020 primarily due to higher earned premiums.a reduction in compensation, travel, and advertising expenses.
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 Farm, Ranch & Stable policies, or other conditions included in these policies that would otherwise preclude coverage.
COVID-19COVID-19’s lasting impacts could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect Farm, Ranch & Stable’s business, financial condition, and results of operation.
Reinsurance Operations
The components of income from the Company’s Reinsurance Operations segment and corresponding underwriting ratios are as follows:
|
| Quarters Ended September 30, |
|
| % |
|
| Nine Months Ended September 30, |
|
| % |
|
| Quarters Ended June 30, |
|
| % |
|
| Six Months Ended June 30, |
|
| % |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 (1) |
|
| 2019 (1) |
|
| Change |
|
| 2020 (1) |
|
| 2019 (1) |
|
| Change |
|
| 2021 (1) |
|
| 2020 (1) |
|
| Change |
|
| 2021 (1) |
|
| 2020 (1) |
|
| Change |
| ||||||||||||
Gross written premiums |
| $ | 14,605 |
|
| $ | 19,981 |
|
|
| (26.9 | %) |
| $ | 48,174 |
|
| $ | 69,589 |
|
|
| (30.8 | %) |
| $ | 24,692 |
|
| $ | 16,052 |
|
|
| 53.8 | % |
| $ | 46,558 |
|
| $ | 33,569 |
|
|
| 38.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net written premiums |
| $ | 14,605 |
|
| $ | 19,989 |
|
|
| (26.9 | %) |
| $ | 48,174 |
|
| $ | 69,590 |
|
|
| (30.8 | %) |
| $ | 24,692 |
|
| $ | 16,052 |
|
|
| 53.8 | % |
| $ | 46,558 |
|
| $ | 33,569 |
|
|
| 38.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
| $ | 15,049 |
|
| $ | 19,512 |
|
|
| (22.9 | %) |
| $ | 58,450 |
|
| $ | 52,798 |
|
|
| 10.7 | % |
| $ | 21,410 |
|
| $ | 19,546 |
|
|
| 9.5 | % |
| $ | 40,228 |
|
| $ | 43,401 |
|
|
| (7.3 | %) |
Other income (loss) |
|
| 112 |
|
|
| (235 | ) |
|
| (147.7 | %) |
|
| 96 |
|
|
| (228 | ) |
|
| (142.1 | %) |
|
| 14 |
|
|
| 279 |
|
|
| (95.0 | %) |
|
| (42 | ) |
|
| (16 | ) |
|
| 162.5 | % |
Total revenues |
|
| 15,161 |
|
|
| 19,277 |
|
|
| (21.4 | %) |
|
| 58,546 |
|
|
| 52,570 |
|
|
| 11.4 | % |
|
| 21,424 |
|
|
| 19,825 |
|
|
| 8.1 | % |
|
| 40,186 |
|
|
| 43,385 |
|
|
| (7.4 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses and loss adjustment expenses |
|
| 5,190 |
|
|
| 9,258 |
|
|
| (43.9 | %) |
|
| 29,584 |
|
|
| 30,434 |
|
|
| (2.8 | %) |
|
| 12,657 |
|
|
| 11,290 |
|
|
| 12.1 | % |
|
| 23,926 |
|
|
| 24,394 |
|
|
| (1.9 | %) |
Acquisition costs and other underwriting expenses |
|
| 5,518 |
|
|
| 6,199 |
|
|
| (11.0 | %) |
|
| 19,762 |
|
|
| 16,555 |
|
|
| 19.4 | % |
|
| 7,814 |
|
|
| 5,695 |
|
|
| 37.2 | % |
|
| 14,376 |
|
|
| 14,244 |
|
|
| 0.9 | % |
Underwriting income |
| $ | 4,453 |
|
| $ | 3,820 |
|
|
| 16.6 | % |
| $ | 9,200 |
|
| $ | 5,581 |
|
|
| 64.8 | % |
| $ | 953 |
|
| $ | 2,840 |
|
|
| (66.4 | %) |
| $ | 1,884 |
|
| $ | 4,747 |
|
|
| (60.3 | %) |
|
| Quarters Ended September 30, |
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| Point |
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| Nine Months Ended September 30, |
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| Point |
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| Quarters Ended June 30, |
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| Point |
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| Six Months Ended June 30, |
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| Point |
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| 2020 |
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| 2019 |
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| Change |
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| 2020 |
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| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
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| 2020 |
|
| Change |
| ||||||||||||
Underwriting Ratios: |
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Loss ratio: |
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Current accident year (2) |
|
| 66.8 | % |
|
| 44.0 | % |
|
| 22.8 |
|
|
| 59.4 | % |
|
| 51.0 | % |
|
| 8.4 |
|
|
| 60.7 | % |
|
| 56.1 | % |
|
| 4.6 |
|
|
| 61.9 | % |
|
| 56.8 | % |
|
| 5.1 |
|
Prior accident year |
|
| (32.3 | %) |
|
| 3.4 | % |
|
| (35.7 | ) |
|
| (8.8 | %) |
|
| 6.7 | % |
|
| (15.5 | ) |
|
| (1.6 | %) |
|
| 1.7 | % |
|
| (3.3 | ) |
|
| (2.4 | %) |
|
| (0.6 | %) |
|
| (1.8 | ) |
Calendar year loss ratio (3) |
|
| 34.5 | % |
|
| 47.4 | % |
|
| (12.9 | ) |
|
| 50.6 | % |
|
| 57.7 | % |
|
| (7.1 | ) |
|
| 59.1 | % |
|
| 57.8 | % |
|
| 1.3 |
|
|
| 59.5 | % |
|
| 56.2 | % |
|
| 3.3 |
|
Expense ratio |
|
| 36.7 | % |
|
| 31.8 | % |
|
| 4.9 |
|
|
| 33.8 | % |
|
| 31.4 | % |
|
| 2.4 |
|
|
| 36.5 | % |
|
| 29.1 | % |
|
| 7.4 |
|
|
| 35.7 | % |
|
| 32.8 | % |
|
| 2.9 |
|
Combined ratio |
|
| 71.2 | % |
|
| 79.2 | % |
|
| (8.0 | ) |
|
| 84.4 | % |
|
| 89.1 | % |
|
| (4.7 | ) |
|
| 95.6 | % |
|
| 86.9 | % |
|
| 8.7 |
|
|
| 95.2 | % |
|
| 89.0 | % |
|
| 6.2 |
|
(1) | External business only, excluding business assumed from affiliates |
(2) | Non-GAAP ratio |
(3) | Most directly comparable GAAP ratio |
7259
GLOBAL INDEMNITY GROUP, LLC
Reconciliation of non-GAAP financial measures and ratios
The table above includes a reconciliation of the current accident year loss ratio, which is a non-GAAP ratio, to its calendar year loss ratio, which is its most directly comparable GAAP ratio. The Company believes the non-GAAP ratio is useful to investors when evaluating the Company's underwriting performance as trends in the Company's Reinsurance Operations may be obscured by prior accident year adjustments. This non-GAAP ratio 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 IncomeLoss
The Company recognized other income of less than $0.1 million in bothand $0.3 million during the quarterquarters and ninesix months ended SeptemberJune 30, 2021 and 2020, respectively, and recognized a loss of $0.2less than $0.1 million infor both the quarter and ninesix months ended SeptemberJune 30, 2019.2021 and 2020. Other incomeloss is comprised of foreign exchange gains and losses.
Loss Ratio
The current accident year loss ratio increased by 22.84.6 points during the quarter ended SeptemberJune 30, 20202021 as compared to the same period in 2019.2020. The increase in the current accident year loss ratio increased for property lines compared to the same period last year. Also, the increase in the total loss ratio reflects a mix of business shift to more casualty premium which has a higher expected loss ratio than property. The casualty net earned premium was 84% of the total Reinsurance Operations earned premium compared to 54% in 2020.
The current accident year loss ratio increased by 8.45.1 points during the ninesix months ended SeptemberJune 30, 20202021 as compared to the same period in 2019 due to an2020. The increase in the property non-catastrophecurrent accident year loss ratio and the change inreflects a mix of business as there isshift to more casualty premium being written which has a higher expected loss ratio than property. The casualty net earned premium was 87% of the total Reinsurance Operations earned premium compared to 56% in 2020.
The calendar year loss ratio for the quarter and ninesix months ended SeptemberJune 30, 20202021 includes a decrease of $4.9$0.3 million, or 32.31.6 percentage points, and a decrease of $5.1$1.0 million, or 8.82.4 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratio for the quarter and ninesix months ended SeptemberJune 30, 20192020 includes an increase of $0.7$0.3 million, or 3.41.7 percentage points, and an increasea decrease of $3.5$0.3 million, or 6.70.6 percentage points, respectively, related to reserve development on prior accident years. Please see Note 8 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 Reinsurance Operations increased by 4.97.4 points from 31.8%29.1% for the quarter ended SeptemberJune 30, 20192020 to 36.7%36.5% for the quarter ended SeptemberJune 30, 20202021 and increased by 2.42.9 points from 31.4%32.8% for the ninesix months ended SeptemberJune 30, 20192020 to 33.8%35.7% for the ninesix months ended SeptemberJune 30, 2020.2021. The increase in the expense ratio is primarily due to an increase in commission expense resulting from a change in business mix.mix as well as an increase in profit commissions.
COVID-19
COVID-19COVID-19’s lasting impacts could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect the Reinsurance Operations’ 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 AA-A+ average rating and a duration of 4.24.5 years.
7360
GLOBAL INDEMNITY GROUP, LLC
Net Investment Income
|
| Quarters Ended September 30, |
|
| % |
|
| Nine Months Ended September 30, |
|
| % |
|
| Quarters Ended June 30, |
|
| % |
|
| Six Months Ended June 30, |
|
| % |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||||
Gross investment income (loss) (1) |
| $ | 12,556 |
|
| $ | 12,162 |
|
|
| 3.2 | % |
| $ | 21,662 |
|
| $ | 34,712 |
|
|
| (37.6 | %) |
| $ | 11,268 |
|
| $ | (2,012 | ) |
|
| 660.0 | % |
| $ | 21,817 |
|
| $ | 9,106 |
|
|
| 139.6 | % |
Investment expenses |
|
| (810 | ) |
|
| (814 | ) |
|
| (0.5 | %) |
|
| (2,146 | ) |
|
| (2,319 | ) |
|
| (7.5 | %) |
|
| (635 | ) |
|
| (347 | ) |
|
| 83.0 | % |
|
| (1,348 | ) |
|
| (1,336 | ) |
|
| 0.9 | % |
Net investment income |
| $ | 11,746 |
|
| $ | 11,348 |
|
|
| 3.5 | % |
| $ | 19,516 |
|
| $ | 32,393 |
|
|
| (39.8 | %) |
| $ | 10,633 |
|
| $ | (2,359 | ) |
|
| 550.7 | % |
| $ | 20,469 |
|
| $ | 7,770 |
|
|
| 163.4 | % |
(1) | Excludes realized gains and losses |
Gross investment income (loss) increased by 3.2%660.0% and 139.6% for the quarter and decreased 37.6% for the ninesix months ended SeptemberJune 30, 2020,2021, respectively, as compared to the same period in 2019.2020. The increase for the quarter was primarily due to increased returns from alternative investments offset by a decrease in income related toyield within the fixed maturities portfolio. The decrease for nine months ended was primarily due to poor returns from alternative investments during the early part of 2020. Alternative investments are booked on a one quarter lag due to the limited partnerships typically not reporting results until one to three months following the end of the reporting period.
Investment expenses decreasedincreased by 0.5%83.0% and 7.5%0.9% for the quarter ended and ninesix months ended SeptemberJune 30, 2020,2021, respectively, as compared to the same period in 20192020 due to including investment expenses related to mutual funds as a direct offset to investment income.income during the prior year. The Company divested its investments in mutual funds during January 2021.
At SeptemberJune 30, 2020,2021, the Company held agency mortgage-backed securities with a market value of $289.7$207.7 million. Excluding the agency mortgage-backed securities, the average duration of the Company’s fixed maturities portfolio was 4.7 years as of June 30, 2021, compared with 4.8 years as of SeptemberJune 30, 2020, compared with 3.8 years as of September 30, 2019.2020. Including cash and short-term investments, the average duration of the Company’s fixed maturities portfolio, excluding agency mortgage-backed securities, was 4.64.5 years as of SeptemberJune 30, 2021, and June 30, 2020, compared with 3.5 years as of September 30, 2019.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 2.4%2.3% as of SeptemberJune 30, 2020,2021, compared to 3.0%2.5% as of SeptemberJune 30, 2019.2020. The embedded book yield on the $62.0$64.5 million of taxable municipal bonds in the Company’s portfolio, was 3.0% at SeptemberJune 30, 2020,2021, compared to an embedded book yield of 3.3%3.1% on the Company’s taxable municipal bonds of $55.6$63.8 million at SeptemberJune 30, 2019.2020.
Net Realized Investment Gains (Losses)
The components of net realized investment gains (losses) for the quarters and ninesix months ended SeptemberJune 30, 20202021 and 20192020 were as follows:
|
| Quarters Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Quarters Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Equity securities |
| $ | 4,887 |
|
| $ | (1,465 | ) |
| $ | (17,201 | ) |
| $ | 17,860 |
|
| $ | 3,395 |
|
| $ | 27,894 |
|
| $ | 7,763 |
|
| $ | (22,088 | ) |
Fixed maturities |
|
| 2,276 |
|
|
| 946 |
|
|
| 17,028 |
|
|
| 4,731 |
|
|
| 453 |
|
|
| 12,820 |
|
|
| (706 | ) |
|
| 14,752 |
|
Derivatives |
|
| 160 |
|
|
| (2,171 | ) |
|
| (22,159 | ) |
|
| (9,404 | ) |
|
| (15 | ) |
|
| (2,207 | ) |
|
| 595 |
|
|
| (22,319 | ) |
Other than temporary impairment losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,897 | ) | ||||||||||||||||
Net realized investment gains (losses) |
| $ | 7,323 |
|
| $ | (2,690 | ) |
| $ | (22,332 | ) |
| $ | 11,290 |
|
| $ | 3,833 |
|
| $ | 38,507 |
|
| $ | 7,652 |
|
| $ | (29,655 | ) |
Net realized investment gains (losses) for the quarter ended and nine months ended September 30, 2020 were primarily due to the impact of changes in fair value on equity securities and derivatives due to the recent disruption in the global financial markets as a result of COVID-19.
See Note 3 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 ninesix months ended SeptemberJune 30, 20202021 and 2019.2020.
7461
GLOBAL INDEMNITY GROUP, LLC
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 $21.2$6.3 million and $3.9$8.6 million during the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $34.0$10.6 million and $11.7$12.8 million during the ninesix months ended SeptemberJune 30, 2021 and 2020, and 2019, respectively. The increaseCorporate expenses were higher in corporate expenses is primarily2020 due to incurring $10.0 million in advisoryadditional professional fees related to the redomestication as well as an increase in legal and professional fees due to the redomestication. See Note 11 of the notes to the consolidated financial statements in Item 1 of Part I of this report for additional information on the redomestication fee.
Interest Expense
Interest expense decreased 27.9%42.8% and 12.5%44.8% during the quarter and ninesix months ended SeptemberJune 30, 2020,2021, respectively, as compared to the same period in 20192020 primarily due to a reduction in the Fed Funds effective interest rate in March, 2020 as well as the redemption of the 2045Company’s 7.75% Subordinated Notes due in 2045and the repayment of the margin borrowing facility during the quarter ended September 30,in August, 2020.
Income Tax Expense / Benefit(Benefit)
Income tax benefitexpense was $3.2$0.8 million for the quarter ended SeptemberJune 30, 20202021 compared with an income tax expense of $7.0 million for the quarter ended June 30, 2020. The reduction is driven by lower pre-tax income for the Company’s U.S. Subsidiaries.
Income tax expense was $0.6 million for the six months ended June 30, 2021 compared with an income tax benefit of $0.3$5.0 million for the quartersix months ended SeptemberJune 30, 2019.2020. The increase in the income tax benefit wasis primarily due to higher pre-tax loss forinvestment losses incurred by the Company’s U.S. subsidiaries forduring the quarter ended September 30, 2020as compared to the same period in 2019 and the change in tax status which is the income tax benefit recognized on net insurance liabilities that were redomiciled from Bermuda at 0% tax rate to the United States at a 21% tax rate.
Income tax benefit was $8.2 million for the ninesix months ended SeptemberJune 30, 2020 compared with an income tax expense of $5.2 million for the nine months ended September 30, 2019. The increase in income tax benefit was primarily due to a pre-tax loss for the Company’s U.S. subsidiaries for the nine months ended September 30, 2020as compared to a gain in the same period in 2019 and the change in tax status which is the income tax benefit recognized on net insurance liabilities that were redomiciled from Bermuda at 0% tax rate to the United States at a 21% tax rate.2020.
See Note 7 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.
Net Income (Loss)
The factors described above resulted in a net lossincome of $15.2$6.4 million and net income of $6.7$37.6 million for the quarters ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and a net lossincome of $22.2$11.9 million and net incomeloss of $41.0$7.0 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, 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’sIndemnity Group, LLC’s short term and long term liquidity needs include but are not limited to the payment of corporate expenses, debt service payments, dividend paymentsdistributions to shareholders, and share repurchases. In order to meet their short term and long term needs, the Company’sGlobal 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
75
GLOBAL INDEMNITY GROUP, LLC
to make dividenddistribution payments. In addition, the Company periodically reviews opportunities related to business acquisitions and as a result, liquidity may be needed in the future.
62
GLOBAL INDEMNITY GROUP, LLC
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 SeptemberJune 30, 2020,2021, the Company also had future funding commitments of $31.2 million related to investments. However, the related 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’sIndemnity 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 within the Insurance Operations 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 20192020 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 1820 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 20192020 Annual Report on Form 10-K for further information on dividend limitations related to the Insurance Companies. The Insurance Companies did not declare or pay any dividends during the quarter and ninesix months ended SeptemberJune 30, 2020.
Global Indemnity Reinsurance was prohibited, without the approval of the Bermuda Monetary Authority (“BMA”), from reducing by 15% or more its total statutory capital or 25% or more of its total statutory capital and surplus as set out in its previous year’s statutory financial statements, and any application for such approval must include such information as the BMA may require. See “Regulation—Bermuda Insurance Regulation” in Item 1 of Part I of the Company’s 2019 Annual Report on Form 10-K. In June, 2020, the Board of Directors of Global Indemnity Reinsurance declared and paid a dividend of $226 million to its parent company, Global Indemnity Limited. On August 26, 2020, Global Indemnity Reinsurance merged into Penn Patriot Insurance Company.2021.
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 dividenddistribution policy, established in 2017, funds may also be used in the future to pay dividendsdistributions to shareholders of the Company.
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 $33.9$47.5 million and $45.9$52.4 million for the ninequarters and six months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. The decrease in operating cash flows of approximately $12.0$4.9 million from the prior year was primarily a net result of the following items:
|
| Nine Months Ended September 30, |
|
|
|
|
|
| Six Months Ended June 30, |
|
|
|
|
| ||||||||||
(Dollars in thousands) |
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||
Net premiums collected |
| $ | 418,598 |
|
| $ | 417,803 |
|
| $ | 795 |
|
| $ | 308,353 |
|
| $ | 285,317 |
|
| $ | 23,036 |
|
Net losses paid |
|
| (231,038 | ) |
|
| (220,924 | ) |
|
| (10,114 | ) |
|
| (148,453 | ) |
|
| (131,203 | ) |
|
| (17,250 | ) |
Underwriting and corporate expenses |
|
| (183,883 | ) |
|
| (174,526 | ) |
|
| (9,357 | ) |
|
| (126,144 | ) |
|
| (120,897 | ) |
|
| (5,247 | ) |
Net investment income |
|
| 33,428 |
|
|
| 38,700 |
|
|
| (5,272 | ) |
|
| 18,952 |
|
|
| 23,138 |
|
|
| (4,186 | ) |
Net federal income taxes recovered (paid) |
|
| 10,859 |
|
|
| (235 | ) |
|
| 11,094 |
| ||||||||||||
Net federal income taxes recovered |
|
| — |
|
|
| 5,478 |
|
|
| (5,478 | ) | ||||||||||||
Interest paid |
|
| (14,028 | ) |
|
| (14,888 | ) |
|
| 860 |
|
|
| (5,220 | ) |
|
| (9,423 | ) |
|
| 4,203 |
|
Net cash provided by (used for) operating activities |
| $ | 33,936 |
|
| $ | 45,930 |
|
| $ | (11,994 | ) | ||||||||||||
Net cash provided by operating activities |
| $ | 47,488 |
|
| $ | 52,410 |
|
| $ | (4,922 | ) |
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.
7663
GLOBAL INDEMNITY GROUP, LLC
Liquidity
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.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 the 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.
Dividends / Distributions
During 2020,2021, the Board of Directors approved a dividend payment of $0.25 per common share to all shareholders of record on the close of business on March 24, 2020 and June 23, 2020 and approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on September 25, 2020. Dividends/distributionsMarch 22, 2021 and June 21, 2021. Distributions paid to common shareholders were $10.7$7.2 million during the ninesix months ended SeptemberJune 30, 2020.
Redemption2021. In addition, distributions of Debt
In August 2020,$0.2 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the Company redeemed the entire $100 million in aggregate principal amount of the outstanding 2045 Notes plus accrued and unpaid interest on the 2045 Notes redeemed to, but not including, the Redemption Date of August 15, 2020.
Repayment of Margin Borrowing Facility
The Company repaid all of the outstanding debt on the margin borrowing facility in August, 2020. six months ended June 30, 2021.
Other than the items discussed in the preceding paragraphs, there have been no material changes to the Company’s liquidity during the quarter and ninesix months ended SeptemberJune 30, 2020.2021. Please see Item 7 of Part II in the Company’s 20192020 Annual Report on Form 10-K for information regarding the Company’s liquidity.
Capital Resources
In connection with the Company’s redomestication to the United States, actions were taken to simplify the Company’s current corporate structure. As a result, a series of intercompany capital contributions and distributions took place between many of the Company’s subsidiaries. Several of the Company’s subsidiaries merged into new or existing companies. This included, but was not limited to, the merger of Global Indemnity Reinsurance into Penn Patriot Insurance Company (“Penn Patriot”) with Penn Patriot surviving as well as the amalgamation of Global Indemnity Limited with a newly formed company, New Cayco. The surviving company, New Cayco, merged into the newly formed parent company, Global Indemnity Group, LLC. In addition, $541.4 million of intercompany debt between Global Indemnity Limited and Global Indemnity Reinsurance was cancelled. The cancellation of this debt had no impact to the consolidated results of the Company.
Intercompany Dividends
In June, 2020, Global Indemnity Reinsurance declared and paid a dividend of $226.0 million to its parent, Global Indemnity Limited.
Intercompany Loan
On June 16, 2020, GBLI Holdings, LLC entered into a loan agreement with Global Indemnity Reinsurance. Under the terms of the loan agreement, GBLI Holdings, LLC agreed to lend $40.0 million to Global Indemnity Reinsurance by transferring cash and / or securities to Global Indemnity Reinsurance. This loan bears interest at a rate of 0.18% and is due on June 16, 2023. This loan was fully repaid at September 30, 2020.
77
GLOBAL INDEMNITY GROUP, LLC
On August 28, 2020, Global Indemnity Investments, Inc. entered into a promissory note with Global Indemnity Group, LLC for the principal amount of $11.3 million. This note was issued in conjunction with Global Indemnity Investment Inc.’s purchase of limited liability partnership interests from Global Indemnity Group, LLC. The note bears interest at a rate of 1.47% and is due on August 28, 2030. The outstanding balance on the note was $11.3 million at September 30, 2030.
Other than the items discussed in the preceding paragraphs, thereThere have been no material changes to the Company’s capital resources during the quarter and ninesix months ended SeptemberJune 30, 2020.2021. Please see Item 7 of Part II in the Company’s 20192020 Annual Report on Form 10-K for information regarding the Company’s capital resources.
Co-obligor Financial Information
The Company is providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” with respect to the Company’s 7.875% Subordinated Notes due in 2047 (“2047 Notes”). Global Indemnity Group, LLC (parent co-obligor) and GBLI Holdings, LLC (subsidiary co-obligor) are co-obligors of the 2047 Notes. GBLI Holdings, LLC is a wholly-owned indirect subsidiary of Global Indemnity Group, LLC. The 2047 Notes are subordinated unsecured obligations and rank (i) senior to the companies’ existing and future capital stock, (ii) senior in right of payment to the companies’ future junior subordinated debt, (iii) equally in right of payment with any existing unsecured, subordinated debt that the companies have issued or may issue in the future that ranks equally with the 2047 Notes, and (iv) subordinate in right of payment to any of the companies’ future senior debt. In addition, the 2047 Notes are structurally subordinated to all existing and future indebtedness, liabilities and other obligations of Global Indemnity Group, LLC’s subsidiaries, except for GBLI Holdings, LLC.
GBLI Holdings, LLC is a subordinated co-obligor with respect to the 2047 Notes with the same obligations and duties as Global Indemnity Group, LLC under the Indenture (including the due and punctual performance and observance of all of the covenants and conditions to be performed by Global Indemnity Group, LLC, including, without limitation, the obligation to pay the principal of, and interest on, the 2047 Notes when due whether at maturity, by acceleration, redemption or otherwise), and with the same rights, benefits and privileges of Global Indemnity Group, LLC thereunder. Notwithstanding the foregoing, GBLI Holdings, LLC's obligations (including the obligation to pay the principal of and interest in respect of the 2047 Notes) are subject to subordination to all monetary obligations or liabilities of GBLI Holdings, LLC owing to any regulated reinsurance or insurance company that is a direct or indirect subsidiary of Global Indemnity Group, LLC, in addition to indebtedness of GBLI Holdings, LLC for borrowed money. If Global Indemnity Group, LLC pays any amount with respect to the subordinated note obligations, Global Indemnity Group, LLC is entitled to be reimbursed by GBLI Holdings, LLC within 10 business days after a demand is made to GBLI Holding, LLC by Global Indemnity Group, LLC.
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GLOBAL INDEMNITY GROUP, LLC
The following tables present summarized financial information for Global Indemnity Group, LLC (Parent co-obligor) and GBLI Holdings, LLC (Subsidiary co-obligor) on a combined basis after transactions and balances within the combined entities have been eliminated.
Parent and Subsidiary Co-obligors
The following table presents the summarized balance sheet information as of June 30, 2021 and December 31, 2020.
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(Dollars in thousands) |
| June 30, 2021 |
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| December 31, 2020 |
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Intercompany note receivable |
| $ | 2,100 |
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| $ | 11,283 |
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Intercompany receivables |
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| 828 |
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| 57 |
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Investments |
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| 249,587 |
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| 250,863 |
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Total assets excluding investment in subsidiaries |
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| 314,080 |
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| 324,229 |
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Intercompany payables |
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| 5,103 |
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| 5,515 |
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Total liabilities |
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| 155,829 |
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| 158,423 |
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The following table presents the summarized statement of operations information for the six months ended June 30, 2021.
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(Dollars in thousands) |
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Total revenue |
| $ | 12,452 |
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Intercompany interest income |
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| 57 |
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Intercompany interest expense |
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| — |
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Loss before income taxes (1) |
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| (3,102 | ) |
Net loss (1) |
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| (434 | ) |
(1) | excludes equity in the earning of a subsidiary |
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 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 20192020 Annual Report on Form 10-K as supplemented by the Company’s Quarterly Report on Form 10Q for the quarterly period ending March 31, 2020 and the Company’s definitive proxy statement on Schedule 14A filed July 23, 2020, 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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GLOBAL INDEMNITY GROUP, LLC
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
For the quarter ending SeptemberJune 30, 2020,2021, global equities rose approximately 8.3%7.6% with U.S. equities outperforming, returning slightly more at approximately 8.9%8.6%. USU.S. fixed income rosereturned approximately 0.6%2.9% as spreads in all sectors compressed and10 year treasury rates declined during the treasury curve modestly steepened. Economic releasesquarter to end at 1.45%. Inflation ticked up globally, though the Federal Reserve continued to be above expectations butemphasize the transitory nature of inflation. U.S. inflation in particular experienced a faster-than-expected acceleration over the quarter. Vaccinations continued to advance globally and case counts generally moved lower, than duringalthough the summer, leaving overallspread of a new variant with higher infectiousness underscored a key risk for the economic activity below beginning-of-year levels. The market will continue to focus on the massive amount of fiscal stimulus and monetary policy actions, but will need to monitor the recent upturn in new COVID-19 infections and the volatility that may be introduced with upcoming U.S. elections.recovery.
The Company’s investment grade fixed income portfolio continues to maintain high quality with an AA-A+ average rating and a duration of 4.24.5 years. Portfolio purchases were focused within US Treasury, MBS, and US Treasuryinvestment grade credit securities. These purchases were funded primarily through cash inflows, sales of CMBS, MBS, and US Treasury and MBS securities, as well as maturities and paydowns. During the thirdsecond quarter, the portfolio’s allocation to ABS, MBS, and investment grade credit increased, while the portfolio’s exposure to CMO and US Treasuries decreased. There have been no other material changes to the Company’s market risk since December 31, 2019.2020. Please see Item 7A of Part II in the Company’s 20192020 Annual Report on Form 10-K for information regarding the Company’s market risk.
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GLOBAL INDEMNITY GROUP, LLC
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 SeptemberJune 30, 2020.2021. Based upon that evaluation, and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of SeptemberJune 30, 2020,2021, 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 SeptemberJune 30, 20202021 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
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.
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 20192020 Annual Report on Form 10-K, filed with the SEC on March 6, 2020, as supplemented by the Company’s Quarterly Report on Form 10Q for the quarterly period ending March 31, 2020 filed on May 8, 2020, and the Company’s definitive proxy statement on Schedule 14A filed July 23, 2020.12, 2021. The risk factors identified therein have not materially changed except as follows:
Holders of the Company’s common shares will
The Company may be subject to U.S. federal income tax and state and local incomeadverse foreign taxes on their share of the Company’s taxable income, regardless of whether they receive any cash dividends.related to its historic non-US subsidiaries.
Under current law, so long as
Although the Company and its subsidiaries have eliminated most of their historic foreign subsidiaries, the statute of limitations remains open in certain foreign jurisdictions, and it is not required to register as an investment company under the Investment Company Act and 90% of the Company’s gross income for each taxable year constitutes “qualifying income” within the meaning of the Internal Revenue Code on a continuing basis,possible that the Company currently expects that it will be treated, for U.S. federal income tax purposes, as a partnership and not as an association or publicly traded partnership taxable as a corporation. Holders of the Company’s common shares willcould be subject to U.S. federal, state, and local taxation on their allocable sharematerially adverse foreign taxes with respect to its historic operations. Such adverse foreign taxes could also potentially arise as a result of the Company’s items of income, gain, loss, deduction and credit, for each of the Company’s taxable years ending with or within their taxable year, regardless of whether they receive cash dividends. Such holders may not receive cash dividends equal to their allocable share of the Company’s net taxable income or even the tax liability that results from that income. The characterization of an item of our income, gain, loss, deduction or credit generally will be determined at the Company’s (rather than at the holder’s) level.
The IRS Schedules K-1 the Company will provide holders of the Company’s common shares will be more complicated than the IRS Forms 1099 provided by corporations to their stockholders, and holders of the Company’s common shares may be required to request an extension of time to file their tax returns.
Holders of the Company’s common shares will be required to take into account their allocable share of the Company’s items of income, gain, loss, deduction and other items of the partnership for the Company’s taxable year ending within or with their taxable year, regardless of whether they received cash dividends. The Company has agreed to furnish holders of the common shares, as soon as reasonably practicable after the close of each calendar year, with tax information (including IRS Schedules K-1), which describes their allocable share of gross ordinary income for the Company’s preceding taxable year. However, it may require longer than 90 days after the end of the Company’s calendar year to obtain the requisite information so that IRS Schedules K-1 may be prepared by the Company. Consequently, holders of the Company’s common shares who are U.S. taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past April 15 or the otherwise applicable due date of their income tax return for the taxable year.
In addition, each holder of the Company’s common shares will be required to report for all tax purposes consistently with the information provided by the Company for the taxable year. Because holders will be required to report their allocable share of gross ordinary income, tax reporting for holders of the Company’s common shares will be more complicated than for shareholders of a regular corporation.
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GLOBAL INDEMNITY GROUP, LLC
retroactive changes in law.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Except as disclosed in the Company’s current report on Form 8-K filed with the SEC on August 28, 2020, there were no sales of unregistered equity securities during the quarter ended September 30, 2020.
Shares surrendered
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 3967,100 shares surrendered by the Company’s employees during the quarter ended SeptemberJune 30, 2020.2021. All class A common shares surrendered by the Company’s employees are held as treasury stock and recorded at cost until formally retired. All treasury stock existing as of August 28, 2020 was retired as part of the redomestication transaction.
Item 3. | Defaults upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
None.
Item 5. | Other Information |
NoneNone.
8167
GLOBAL INDEMNITY GROUP, LLC
Item 6. | Exhibits |
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10.1 |
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31.1+ |
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31.2+ |
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GLOBAL INDEMNITY GROUP, LLC
32.1+ |
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32.2+ |
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101.INS |
| 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 |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
+ | Filed or furnished herewith, as applicable. |
8368
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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| By: |
| /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) |
8469