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GI

Global Indemnity Group, LLC (GBLI)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered improved underwriting and earnings: combined ratio fell to 94.3% (vs. 99.7% YoY, 96.6% QoQ), net income available to common rose to $12.65M and diluted EPS to $0.92, while total revenues were $111.8M .
  • Penn-America performance strengthened: combined ratio 92.6% (vs. 105.7% YoY) with underwriting income of $7.3M and gross written premiums of $103.1M (vs. $84.0M YoY) .
  • Investment income continued to be a tailwind ($16.5M in Q3), and management emphasized a strategy shift toward longer duration maturities as conditions permit; current book yield was 4.6% and duration 0.8 years at 9/30/24 .
  • Long-term targets reaffirmed (≥10% premium growth CAGR, low-90s combined ratio, 36–37% expense ratio), with tech modernization progressing (first transactional app live in September, cloud migration ~two-thirds complete), supporting operational efficiency into 2025 .
  • Capital allocation remains a potential catalyst: quarterly distribution maintained at $0.35 per share (raised vs. prior year), and management reiterated consideration of special dividend or tender if organic/M&A uses do not emerge .

What Went Well and What Went Wrong

What Went Well

  • Underwriting improvement: consolidated combined ratio down to 94.3% (YoY 99.7%); current accident year combined ratio 93.5% as Penn-America drove better property and casualty results .
  • Investment engine: Q3 net investment income rose to $16.5M (from $14.2M YoY), with book yield at 4.6% and duration 0.8 years; management expects opportunities to extend duration and increase returns .
  • Segment momentum: Penn-America combined ratio 92.6% and underwriting income $7.3M, with gross written premiums rising to $103.1M (YoY $84.0M); CEO emphasized rate increases modestly exceeding inflation and strong execution .

What Went Wrong

  • Net earned premium and total revenues declined YoY: net earned premiums $95.4M (vs. $111.7M YoY) and total revenues $111.8M (vs. $126.1M YoY), reflecting runoff in non-core operations .
  • Expense ratio remains above long-term target: consolidated expense ratio at 39.4% in Q3 (vs. target 36–37%); management noted fixed costs and timing of earned premium recovery will take time to normalize .
  • Non-core runoff still a drag: CFO cited non-core combined ratio of 118.9% YTD and runoff expenses as elevated, though impact is diminishing as portfolios wind down .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Total Revenues ($USD Millions)$126.1 $108.7 $111.8
Net Earned Premiums ($USD Millions)$111.7 $92.8 $95.4
Net Income Available to Common ($USD Millions)$7.59 $9.98 $12.65
Diluted EPS ($USD)$0.55 $0.73 $0.92
Loss Ratio (%)58.3% 57.8% 54.9%
Expense Ratio (%)41.4% 38.8% 39.4%
Combined Ratio (%)99.7% 96.6% 94.3%
Penn-America SegmentQ3 2023Q2 2024Q3 2024
Gross Written Premiums ($USD Millions)$84.0 $100.6 $103.1
Underwriting Income (Loss) ($USD Millions)$(4.5) $4.7 $7.3
Combined Ratio (%)105.7% 95.2% 92.6%
Loss Ratio (%)67.1% 57.2% 54.7%
Expense Ratio (%)38.6% 38.0% 37.9%
KPIs (As of)Dec 31, 2023Jun 30, 2024Sep 30, 2024
Book Value per Share ($)$47.53 $48.56 $49.88
Shareholders’ Equity ($USD Millions)$648.8 $667.5 $686.7
Cash & Invested Assets ($USD Millions)$1,390.4 $1,435.2 $1,468.0
Shares Outstanding (Millions)13.6 13.7 13.7

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Premium Growth Target (CAGR)Multi-year“around 10% per annum” (Q2) “at least 10%” (Q3) Maintained/clarified upward language
Combined Ratio TargetMulti-yearLow 90s Low 90s Maintained
Expense Ratio TargetMulti-year36–37% 36–37% Maintained
Dividend per Share (Quarterly)Ongoing$0.35 (Q2 declared) $0.35 (Q3 declared; Dec 31 payment) Maintained QoQ; Raised YoY
Investment Portfolio StrategyLate 2024–2025Well-positioned to redeploy into longer-dated, higher-yielding investments post-election Actively looking to invest in longer duration maturities to further increase returns Progressing toward longer duration

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Technology modernizationPlan to digitize infra; cloud migration and new modules slated for H2’24/H1’25 First transactional app live in Sept; ~2/3 servers moved to cloud; data lakehouse; more products in 2024–2025 Advancing execution
Investment portfolio repositioningShort duration (≈1.0 yrs) and rising book yield (4.5%); ready to extend duration post-election Duration 0.8 yrs; book yield 4.6%; actively evaluating longer maturities to boost returns Building to extension
Catastrophe loss managementCat losses down ~35% YTD vs 2023; property non-cat improved Cat losses ~$10.3M YTD; Helene ~$1.5M; continued exposure management Sustained improvement
Expense ratio trajectoryAbove target; fixed cost base needs time; improvement expected by 2026 Penn-America expense ratio trending better (≈38.2% YTD) but still work to reach ≤37% Gradual improvement
Reinsurance growthAssumed Re treaties doubled; strong growth expected 7 new treaties in 2024; GWP up to $19.3M (vs. $8.4M) Accelerating
Capital allocationDebate between buybacks/tender/special dividend; cautious on timing No buybacks in Q3; tender/special dividend remain under consideration Ongoing evaluation

Management Commentary

  • “Our overall goals remain, first, growing our insurance business at a compound annual growth rate of at least 10%; second, achieve a combined ratio in the low 90s; and third, manage our insurance expenses to a competitive level of 36% to 37%.” — CEO Joseph Brown .
  • “Current book yield on the fixed income portfolio is now 4.6% with the duration of 0.8 years at September 30, 2024… We’re actively looking opportunities to invest in longer duration maturities to further increase investment returns.” — CFO Brian Riley .
  • “Our first transactional replacement application went live in September… processing all aspects of our Wholesale Commercial excess liability policies in the new environment.” — CEO Joseph Brown .
  • “Penn-America’s accident year combined ratio was 93.9%… property loss ratio improved… cat losses declined to $10.3 million including Hurricane Helene at $1.5 million.” — CFO Brian Riley .

Q&A Highlights

  • Discontinued/non-core runoff: ~<$5M earned premium remains to run off in Q4 and ends in 2025; full runoff on loss reserve side expected by end of 2025 .
  • Capital returns: No share repurchases in Q3; management continues to evaluate tender offers or special dividends if excess capital not deployed into growth/M&A .
  • New products and expansion: Actively evaluating additions within current lines; expect more products over next 6–12 months .
  • Reserves/social inflation: Casualty long-term loss trend assumptions raised to 6–7%; reserves margins expanded, exposures in problematic programs reduced .
  • Expense ratio pathway: Fixed costs and earned premium timing imply gradual progress; internal costs managed to balance service and growth .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q3 2024 EPS and revenue were unavailable via the API at the time of this analysis (Daily Request Limit exceeded). As a result, we cannot formally assess beat/miss vs. consensus for Q3 2024 using S&P Global data [GetEstimates error].
  • Actual Q3 metrics: diluted EPS $0.92 and total revenues $111.8M from company filings; estimate comparisons should be revisited once S&P Global consensus is accessible .
Q3 2024 vs. Consensus (S&P Global)ConsensusActual
Diluted EPS ($USD)N/A (unavailable)$0.92
Total Revenues ($USD Millions)N/A (unavailable)$111.8

Key Takeaways for Investors

  • Underwriting momentum: consolidated combined ratio improved to 94.3%, with Penn-America at 92.6%; continued property and casualty execution supports mid-90s combined ratio thesis .
  • Investment tailwind: short-duration, high-quality bond book with 4.6% yield and active consideration of longer maturities positions net investment income to remain robust into 2025 .
  • Segment growth durability: Penn-America gross written premiums rose YoY; InsurTech and Assumed Re show strong growth vectors underpinning double-digit premium growth target .
  • Cat risk managed: YTD catastrophe losses down ~35%; continued discipline around property exposures reduces volatility potential .
  • Expense ratio runway: near-term ratios remain ~39% but trajectory points lower with scale and tech; reaching ≤37% is multi-year and depends on earned premium growth .
  • Capital allocation optionality: $0.35 quarterly distribution maintained; buybacks/tender/special dividend remain viable levers if organic/M&A deployment is limited — potential valuation catalyst if executed .
  • Monitoring items: non-core runoff (ends by 2025), reserve trends under social inflation, and timing of duration extension in the investment portfolio — each can influence reported ROE and volatility .