10q10k10q10k.net

What changed in Global Indemnity Group, LLC's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Global Indemnity Group, LLC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+433 added−473 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-15)

Top changes in Global Indemnity Group, LLC's 2023 10-K

433 paragraphs added · 473 removed · 325 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

105 edited+34 added−51 removed54 unchanged
Biggest changeThe following table summarizes by type the estimated fair value of Global Indemnity’s investments and cash and cash equivalents as of December 31, 2022, 2021, and 2020: December 31, 2022 December 31, 2021 December 31, 2020 (Dollars in thousands) Estimated Fair Value Percent of Total Estimated Fair Value Percent of Total Estimated Fair Value Percent of Total Cash and cash equivalents $ 38,846 2.9 % $ 78,278 5.1 % $ 67,359 4.6 % U.S. treasuries 344,103 25.6 150,118 9.8 197,480 13.6 Agency obligations — — 5,630 0.4 — — Obligations of states and political subdivisions 31,595 2.4 54,721 3.6 61,243 4.2 Mortgage-backed securities (1) 62,116 4.6 250,341 16.3 358,778 24.7 Asset-backed securities 189,400 14.1 172,642 11.3 117,593 8.1 Commercial mortgage-backed securities 98,664 7.3 136,893 8.9 110,959 7.6 Corporate bonds 338,780 25.3 292,383 19.0 240,717 16.5 Foreign corporate bonds 183,540 13.7 139,138 9.1 104,416 7.2 Total fixed maturities 1,248,198 93.0 1,201,866 78.4 1,191,186 81.9 Equity securities 17,520 1.3 99,978 6.5 98,990 6.8 Other invested assets 38,176 2.8 152,651 10.0 97,018 6.7 Total investments and cash and cash equivalents (2) $ 1,342,740 100.0 % $ 1,532,773 100.0 % $ 1,454,553 100.0 % (1) Includes collateralized mortgage obligations of $58,773, $101,698, and $108,136 for 2022, 2021, and 2020, respectively.
Biggest changeThese regulations permit investments, within specified limits and subject to certain qualifications, in federal, state, and municipal obligations, corporate bonds, and preferred and common equity securities. 13 The following table summarizes by type the estimated fair value of Global Indemnity’s investments and cash and cash equivalents as of December 31, 2023, 2022, and 2021: December 31, 2023 December 31, 2022 December 31, 2021 (Dollars in thousands) Estimated Fair Value Percent of Total Estimated Fair Value Percent of Total Estimated Fair Value Percent of Total Cash and cash equivalents $ 38,037 2.7 % $ 38,846 2.9 % $ 78,278 5.1 % U.S. treasuries 494,223 35.6 344,103 25.6 150,118 9.8 Agency obligations — — — — 5,630 0.4 Obligations of states and political subdivisions 26,150 1.9 31,595 2.4 54,721 3.6 Mortgage-backed securities (1) 58,927 4.3 62,116 4.6 250,341 16.3 Asset-backed securities 202,952 14.6 189,400 14.1 172,642 11.3 Commercial mortgage-backed securities 79,080 5.7 98,664 7.3 136,893 8.9 Corporate bonds 291,713 21.0 338,780 25.3 292,383 19.0 Foreign corporate bonds 140,748 10.2 183,540 13.7 139,138 9.1 Total fixed maturities 1,293,793 93.3 1,248,198 93.0 1,201,866 78.4 Equity securities 16,508 1.2 17,520 1.3 99,978 6.5 Other invested assets 38,236 2.8 38,176 2.8 152,651 10.0 Total investments and cash and cash equivalents (2) $ 1,386,574 100.0 % $ 1,342,740 100.0 % $ 1,532,773 100.0 % (1) Includes collateralized mortgage obligations of $56,186, $58,773, and $101,698 for 2023, 2022, and 2021, respectively.
Berkley Corporation In addition to the companies mentioned above, the Company is facing competition from other standard line companies who are continuing to write risks that traditionally had been written by excess and surplus lines carriers, Bermuda companies who are establishing relationships with wholesale brokers and purchasing carriers, and other excess and surplus lines competitors.
Berkley Corporation In addition to the companies mentioned above, the Company is facing competition from standard line companies who are continuing to write risks that traditionally had been written by excess and surplus lines carriers, Bermuda companies who are establishing relationships with wholesale brokers and purchasing carriers, and other excess and surplus lines competitors.
See “Regulation – Statutory Accounting Principles.” Key differences relate to, among other items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes, if any. See the “Liquidity and Capital Resources” section in Item 7 of Part II of this report for a more complete description of the state dividend limitations.
See “Regulation – Statutory Accounting Principles.” Key differences relate to, among other items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes, if any. 19 See the “Liquidity and Capital Resources” section in Item 7 of Part II of this report for a more complete description of the state dividend limitations.
Competition The Company competes with numerous domestic and international insurance and reinsurance companies, mutual companies, specialty insurance companies, underwriting agencies, diversified financial services companies, Lloyd's syndicates, risk retention groups, insurance buying groups, risk securitization products and alternative self-insurance mechanisms.
Competition The Company competes with numerous domestic and international insurance companies, mutual companies, specialty insurance companies, underwriting agencies, diversified financial services companies, Lloyd's syndicates, risk retention groups, insurance buying groups, risk securitization products and alternative self-insurance mechanisms.
In contrast, the excess and surplus lines market provides coverage for businesses that often do not fit the underwriting criteria of an insurance company operating in the standard markets due to their relatively greater unpredictable loss patterns and unique niches of exposure requiring rate and policy form flexibility.
The excess and surplus lines market provides coverage for businesses that often do not fit the underwriting criteria of an insurance company operating in the standard markets due to their relatively unpredictable loss patterns and unique niches of exposure requiring rate and policy form flexibility.
There were no other significant changes to any of the Company’s reinsurance treaties during 2022. 10 The following table sets forth the ten reinsurers for which the Company has the largest reinsurance receivables as of December 31, 2022. Also shown are the amounts of premiums ceded by the Company to these reinsurers during the year ended December 31, 2022.
There were no other significant changes to any of the Company’s reinsurance treaties during 2023. 10 The following table sets forth the ten reinsurers for which the Company has the largest reinsurance receivables as of December 31, 2023. Also shown are the amounts of premiums ceded by the Company to these reinsurers during the year ended December 31, 2023.
The liability for unpaid losses and loss adjustment expenses, inclusive of A&E reserves, reflects the Company’s best estimates for future amounts needed to pay losses and related loss adjustment expenses as of each of the balance sheet dates reflected in the financial statements herein in accordance with generally accepted accounting principles ("GAAP").
The liability for unpaid losses and loss adjustment expenses, inclusive of A&E reserves, reflects Management’s best estimates for future amounts needed to pay losses and related loss adjustment expenses as of each of the balance sheet dates reflected in the financial statements herein in accordance with generally accepted accounting principles ("GAAP").
See Note 13 of the notes to the consolidated financial statements in Item 8 of Part II of this report for the survival ratios on a gross and net basis for the Company’s A&E claims. Investments The Company’s investment policy is determined by the Investment Committee of the Board of Directors.
See Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of this report for the survival ratios on a gross and net basis for the Company’s A&E claims. Investments The Company’s investment policy is determined by the Investment Committee of the Board of Directors.
See Note 22 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the NAIC's risk-based capital model for determining the levels of statutory capital and surplus an insurer must maintain.
See Note 21 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the NAIC's risk-based capital model for determining the levels of statutory capital and surplus an insurer must maintain.
Regulation At December 31, 2022, the Company had five subsidiaries operating as insurance companies domiciled in the United States; United National Insurance Company, Penn-America Insurance Company, and Penn-Star Insurance Company, which are domiciled in Pennsylvania; Diamond State Insurance Company which is domiciled in Indiana; and Penn-Patriot Insurance Company, which is domiciled in Virginia.
Regulation At December 31, 2023, the Company had five subsidiaries operating as insurance companies domiciled in the United States; United National Insurance Company, Penn-America Insurance Company, and Penn-Star Insurance Company, which are domiciled in Pennsylvania; Diamond State Insurance Company which is domiciled in Indiana; and Penn-Patriot Insurance Company, which is domiciled in Virginia.
IBNR reserves are based on the Company's historical statistical information with respect to the expected number and nature of claims arising from occurrences that have not been reported, supplemented with industry experience. The Company also establishes its reserves based on estimates of future trends in claims severity and other subjective factors.
IBNR reserves are based on the Company's historical statistical information with respect to the expected number and nature of claims arising from occurrences that have not been reported, supplemented with industry experience when deemed appropriate. The Company also establishes its reserves based on estimates of future trends in claims severity and other subjective factors.
The specialty admitted market is subject to greater state regulation than the surplus lines market, particularly with regards to rate and form filing requirements and the ability to enter and exit lines of business. Insureds purchasing coverage from specialty admitted insurance companies do so because the insurance product is not otherwise available from standard market insurers.
These policies are subject to greater state regulation than the surplus lines market, particularly with regards to rate and form filing requirements and the ability to enter and exit lines of business. Insureds purchasing coverage from specialty admitted insurance companies do so because the insurance product is not otherwise available from standard market insurers.
See Note 13 of the notes to the consolidated financial statements in Item 8 of Part II of this report for tables showing the Company’s gross and net reserves for A&E losses.
See Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of this report for tables showing the Company’s gross and net reserves for A&E losses.
While the Company has recorded allowances for expected credit losses for reinsurance receivables based on relevant information about past events including historical experience, currently available information as well as supportable forecasts that affect the collectability, conditions may change or additional information might be obtained that may require the Company to record additional allowances.
While the Company has recorded allowances for expected credit losses for reinsurance receivables based on relevant information about past events including historical experience, currently available information, and supportable forecasts that affect the collectability, conditions may change or additional information might be obtained that may require the Company to record additional allowances.
Based on the standards currently adopted, the insurance companies reported in their 2022 statutory filings that their capital and surplus are above the prescribed risk-based capital requirements.
Based on the standards currently adopted, the insurance companies reported in their 2023 statutory filings that their capital and surplus are above the prescribed risk-based capital requirements.
The Company can hold fixed maturities to recovery and/or maturity; however, the Company regularly re-evaluates its positions and will sell a security if warranted by market conditions. The overall weighted average duration of the Company’s fixed maturities portfolio was 1.7 years as of December 31, 2022 compared to 3.2 years at December 31, 2021.
The Company can hold fixed maturities to recovery and/or maturity; however, the Company regularly re-evaluates its positions and will sell a security if warranted by market conditions. The overall weighted average duration of the Company’s fixed maturities portfolio was 1.1 years as of December 31, 2023 compared to 1.7 years at December 31, 2022.
The Company’s investment policy allows it to invest in taxable and tax-exempt fixed income investments including corporate bonds as well as publicly traded equities and private equity and private debt investments. The insurance group holds $1,173.6 million of investments, of which, are comprised of 98.7% of fixed income and 1.3% of preferred stock.
The Company’s investment policy allows it to invest in taxable and tax-exempt fixed income investments including corporate bonds as well as publicly traded equities and private equity and private debt investments. The insurance group holds $1,232.2 million of investments, of which, are comprised of 98.7% of fixed income and 1.3% of preferred stock.
The Company also faces credit risk. 93.1% of the Company’s fixed income securities are investment grade securities. 14.6% of the Company’s fixed maturities are rated AAA. See “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of Part II of this report for a more detailed discussion of the credit market and the Company’s investment strategy.
The Company also faces credit risk. 93.6% of the Company’s fixed income securities are investment grade securities. 25.9% of the Company’s fixed maturities are rated AAA. See “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of Part II of this report for a more detailed discussion of the credit market and the Company’s investment strategy.
Global Indemnity Group, LLC believes that it has met in previous taxable years, and intends to manage its affairs so that it will continue to meet in the current and subsequent taxable years, the qualifying income exception to maintain partnership status for U.S. federal income tax purposes.
Since August 28, 2020, Global Indemnity Group, LLC believes that it has met in previous taxable years, and intends to manage its affairs so that it will continue to meet in the current and subsequent taxable years, the qualifying income exception to maintain partnership status for U.S. federal income tax purposes.
Business Segments See Note 23 of the notes to consolidated financial statements in Item 8 of Part II of this report for gross and net written premiums, income and total assets of each operating segment for the years ended December 31, 2022, 2021 and 2020.
Business Segments See Note 22 of the notes to consolidated financial statements in Item 8 of Part II of this report for gross and net written premiums, income, and total assets of each operating segment for the years ended December 31, 2023, 2022 and 2021.
History Global Indemnity Group, LLC, 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.
History Global Indemnity Group, LLC (“Global Indemnity” or “GBLI”), 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 manufactured home, dwelling, motorcycle, watercraft, certain homeowners products, and farm, ranch & equine business within Exited Lines operated primarily in the standard or admitted markets and were distributed through retail agents, wholesale general agents, and brokers. These insurance products were either underwritten via limited binding authority, specific binding authority, or by internal personnel.
The manufactured home, dwelling, motorcycle, watercraft, certain homeowners products, and farm, ranch & equine business within Non-Core Operations operated primarily in the standard or admitted markets and were distributed through retail agents, wholesale general agents, and brokers. These insurance products were either underwritten via limited binding authority, specific binding authority, or by internal personnel.
The Company seeks to mitigate its reinvestment risk by investing in securities with varied maturity dates, so that only a portion of the portfolio will mature, be called, or be prepaid at any point in time. 15 As of December 31, 2022, the Company had aggregate equity securities of $17.5 million that primarily consisted of preferred stocks.
The Company seeks to mitigate its reinvestment risk by investing in securities with varied maturity dates, so that only a portion of the portfolio will mature, be called, or be prepaid at any point in time. As of December 31, 2023, the Company had aggregate equity securities of $16.5 million that consisted of preferred stocks.
See Note 22 of the notes to consolidated financial statements in Item 8 of Part II of this report for the maximum amount of distributions that the Company’s insurance companies could pay as dividends in 2023.
See Note 21 of the notes to consolidated financial statements in Item 8 of Part II of this report for the maximum amount of distributions that the Company’s insurance companies could pay as dividends in 2024.
The Property Brokerage product within Exited Lines operated predominantly in the excess and surplus lines or non-admitted markets and were distributed through wholesale brokers and 6 underwritten by the Company’s personnel and selected brokers with limited binding authority. The property and catastrophe reinsurance treaties within Exited Lines were distributed through brokers and on a direct basis.
The Property Brokerage product within Non-Core Operations operated predominantly in the excess and surplus lines or non-admitted markets and were distributed through wholesale brokers and underwritten by the Company’s personnel and selected brokers with limited binding authority. The retrocessional reinsurance treaties within Non-Core Operations were distributed through brokers and on a direct basis.
The Company’s insurance subsidiaries departures from usual values of certain IRIS ratios are as follows: • Investment yields were lower than the IRIS range for Penn-Patriot Insurance Company.
The Company’s insurance subsidiaries' departures from usual values of certain IRIS ratios are as follows: • Investment yields were lower than the IRIS range for Penn-Patriot Insurance Company and Penn-America Insurance Company.
The Company will make available, free of charge on its website, the most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company files such material with, or furnishes it to, the United States Securities and Exchange Commission (“SEC”).
The Company will make available, free of charge on its website, the most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company files such material with, or furnishes it to, the United States Securities and Exchange Commission (“SEC”). 20 The public may also read and copy any materials the Company files with the U.S.
As of December 31, 2022, the Company had $10.8 million of net loss reserves for asbestos-related claims and $10.9 million for environmental claims. The Company attempts to estimate the full impact of the A&E exposures by establishing specific case reserves on all known losses.
As of December 31, 2023, the Company had $10.7 million of net loss reserves for asbestos-related claims and $10.4 million for environmental claims. The Company attempts to estimate the full impact of the A&E exposures by establishing specific case reserves on all known losses.
The weighted average duration of the Company’s asset-backed, mortgage-backed and commercial mortgage-backed securities was 2.0 years as of December 31, 2022. At December 31, 2022, the Company’s embedded book yield on its fixed maturities, not including cash, was 3.5% compared with 2.2% at December 31, 2021.
The weighted average duration of the Company’s asset-backed, mortgage-backed and commercial mortgage-backed securities was 1.8 years as of December 31, 2023. At December 31, 2023, the Company’s embedded book yield on its fixed maturities, not including cash, was 4.0% compared with 3.5% at December 31, 2022.
Duration was lowered in response to rising interest rates. The Company’s fixed maturities, excluding the asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations, had a weighted average maturity of 2.2 years and a weighted average duration, including cash and short-term investments, of 1.5 years as of December 31, 2022.
Duration was lowered in response to rising interest rates. The Company’s fixed maturities, excluding the asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations, had a weighted average maturity of 1.4 years and a weighted average duration, including cash and short-term investments, of 0.9 years as of December 31, 2023.
Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of limits on the policies it has written, it does make the assuming reinsurer liable to the insurer to the extent of the insurance ceded.
Some of the Company’s reinsurance contracts renew on an annual basis. Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of limits on the policies it has written, it does make the assuming reinsurer liable to the insurer to the extent of the insurance ceded.
At December 31, 2022, a partnership that invests in stressed and distressed debt instruments was valued at $4.8 million, a partnership that invests in Real Estate Investment Trust (“REIT”) qualifying assets was valued at $9.8 million, and a partnership comprised of performing, stressed or distressed securities and loans across the global fixed income markets was valued at $23.6 million.
At December 31, 2023, a partnership that invests in stressed and distressed debt instruments was valued at $4.0 million, a partnership that invests in Real Estate Investment Trust (“REIT”) qualifying assets was valued at $8.2 million, and a partnership comprised of performing, stressed or distressed securities and loans across the global fixed income markets was valued at $26.0 million.
Collectively, the Company’s insurance subsidiaries are licensed in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The Commercial Specialty segments comprises the Company’s Insurance Operations (“Insurance Operations”).
Collectively, the Company’s insurance subsidiaries are licensed in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The Penn-America segment comprises the Company’s Insurance Operations (“Insurance Operations”).
(2) Does not include net (payable) for securities (purchased) of ($66), ($794), and ($4,667) for 2022, 2021, and 2020, respectively. The Company does not acquire fixed maturities with the intention to sell these securities in a short period of time.
(2) Does not include net receivable (payable) for securities sold (purchased) of $3,858, ($66), and ($794) for 2023, 2022, and 2021, respectively. The Company does not acquire fixed maturities with the intention to sell these securities in a short period of time.
The Company’s financial statements reflect a net unrealized loss on fixed maturities available for sale as of December 31, 2022 of $53.5 million on a pre-tax basis.
The Company’s financial statements reflect a net unrealized loss on fixed maturities available for sale as of December 31, 2023 of $28.3 million on a pre-tax basis.
To protect against these exposures, the Company purchases a property catastrophe treaty. Effective June 1, 2022, the Company purchased three layers of occurrence coverage for losses of $115 million in excess of $10 million. The first layer provides coverage of 40% of $10 million in excess of $10 million and can be reinstated once at no additional charge.
To protect against these exposures, the Company purchases a property catastrophe treaty. Effective June 1, 2023, the Company purchased two layers of occurrence coverage for losses of $50 million in excess of $25 million. The first layer provides coverage of 100% of $25 million in excess of $25 million and can be reinstated once at no additional charge.
For a discussion of the variances between years, see “Results of Operations” in Item 7 of Part II of this report. Commercial Specialty The Company’s Commercial Specialty segment distributes specialty property and casualty insurance products and operates predominantly in the excess and surplus lines, or non-admitted, marketplace.
For a discussion of the variances between years, see “Results of Operations” in Item 7 of Part II of this report. PENN-AMERICA The Penn-America segment distributes specialty property and casualty insurance products in the excess and surplus lines marketplace.
The Company regularly monitors the underwriting quality of its wholesale general agents and retail agents through a disciplined system of controls, which includes one or more of the following: • automated system criteria edits and exception reports; • individual policy reviews to measure adherence to the Company’s underwriting manual or letter of authority including: risk selection, underwriting compliance, policy issuance and pricing; • periodic on-site and virtual comprehensive audits to evaluate processes, controls, profitability and adherence to all aspects of the Company’s underwriting manual or letter of authority including: risk selection, underwriting compliance, policy issuance and pricing; • internal quarterly actuarial analysis of loss ratios produced by business underwritten by the Company’s wholesale general agents and retail agents; and • internal quarterly analysis of financial results, including premium growth and overall profitability of business produced by the Company’s wholesale general agents and retail agents.
Risks that are not within the specific binding authority must be submitted to Penn-America’s underwriting personnel directly for underwriting review and approval or denial. 7 The Company regularly monitors the underwriting quality of its wholesale general agents and retail agents through a disciplined system of controls, which includes one or more of the following: • automated system criteria edits and exception reports; • targeted policy reviews to measure adherence to the Company’s underwriting manual or letter of authority including: risk selection, underwriting compliance, policy issuance and pricing; • periodic on-site and virtual comprehensive audits to evaluate processes, controls, profitability and adherence to all aspects of the Company’s underwriting manual or letter of authority including: risk selection, underwriting compliance, policy issuance and pricing; • internal quarterly actuarial analysis of loss ratios produced by business underwritten by the Company’s wholesale general agents and retail agents; and • internal quarterly analysis of financial results, including premium growth and overall profitability of business produced by the Company’s wholesale general agents and retail agents.
However, there is no precise method for the subsequent evaluation of the adequacy of the consideration given to inflation, or to any other specific factor, or to the way one factor may affect another. The same reserving process detailed above is used for Exited Lines.
However, there is no precise method for the subsequent evaluation of the adequacy of the consideration given to inflation, or to any other specific factor, or to the way one factor may affect another.
However, in some states, the Company is required, depending on the circumstances, to provide coverage for certain bodily injury claims, such as an individual's exposure to a release of chemicals. The Company has also issued policies that were intended to provide limited pollution and environmental coverage. These policies were specific to certain types of products underwritten by the Company.
Currently, the Company’s policies continue to exclude classic environmental contamination claims. However, in some states, the Company is required, depending on the circumstances, to provide coverage for certain bodily injury claims, such as an individual's exposure to a release of chemicals. The Company has also issued policies that were intended to provide limited pollution and environmental coverage.
The carrying value of these investments approximates fair value. There is no readily available independent market price for these limited liability partnership investments and the Company does not have access to daily valuations. The Company receives annual audited financial statements from each of the partnership investments it owns.
The carrying value of these investments approximates fair value. There is no readily available independent market price for these limited liability partnership investments and the Company does not have access to daily valuations.
Dividends may be paid without advanced regulatory approval only out of unassigned surplus. The dividend limitations imposed by the applicable state laws are based on the statutory financial results of each company within the Insurance Operations that are determined using statutory accounting practices that differ in various respects from accounting principles used in financial statements prepared in conformity with GAAP.
The dividend limitations imposed by the applicable state laws are based on the statutory financial results of each company within the Insurance Operations that are determined using statutory accounting practices that differ in various respects from accounting principles used in financial statements prepared in conformity with GAAP.
Reserves for Unpaid Losses and Loss Adjustment Expenses Applicable insurance laws require the Company to maintain reserves to cover its estimated ultimate losses under insurance policies and reinsurance treaties that it writes and for loss adjustment expenses relating to the investigation and settlement of claims.
The Company reviews and supervises the claims handled by its reinsurers seeking to protect its reputation and minimize exposure. 11 Reserves for Unpaid Losses and Loss Adjustment Expenses Applicable insurance laws require the Company to maintain reserves to cover its estimated ultimate losses under insurance policies and reinsurance treaties that it writes and for loss adjustment expenses relating to the investigation and settlement of claims.
Reviews for Insurance Operations are generally performed both gross and net of reinsurance and ceded reviews are also completed for most reserve categories. In addition to the Company’s internal reserve analysis, independent external actuaries perform a full, detailed review of the reserves annually.
Reserve reviews for Insurance Operations are summarized on both a gross and net of reinsurance basis. In addition to the Company’s internal reserve analysis, independent external actuaries perform a full, detailed review of the reserves annually.
At December 31, 2022, the Company carried reinsurance receivables, net of collateral held in trust, of $76.8 million. This amount is net of an allowance for expected credit losses of $9.0 million at December 31, 2022. Historically, there have been insolvencies following a period of competitive pricing in the industry.
This amount is net of an allowance for expected credit losses of $9.0 million at December 31, 2023. Historically, there have been insolvencies following a period of competitive pricing in the industry.
See the notes to consolidated financial statements in Item 8 of Part II of this report for a reconciliation of the Company’s liability for losses and loss adjustment expenses, net of reinsurance ceded, as well as further discussion surrounding changes to reserves for prior accident years.
See the notes to consolidated financial statements in Item 8 of Part II of this report for a reconciliation of the Company’s liability for losses and loss adjustment expenses, net of reinsurance ceded, as well as further discussion surrounding changes to reserves for prior accident years. 12 Asbestos and Environmental (“A&E”) Exposure The Company’s environmental exposure arises from the sale of general liability and commercial multi-peril insurance.
(Dollars in millions) AM Best Rating Gross Reinsurance Receivables Percent of Total Ceded Premiums Written Percent of Total Munich Re America Corp. A+ $ 45.3 47.9 % $ 5.3 3.9 % General Reinsurance Corp. A++ 10.4 11.0 3.9 2.9 Swiss Reinsurance America Corp.
(Dollars in millions) AM Best Rating Gross Reinsurance Receivables Percent of Total Ceded Premiums Written Percent of Total Munich Re America Corp. A+ $ 41.2 46.1 % $ 2.1 12.3 % General Reinsurance Corp. A++ 9.6 10.7 0.8 4.7 Swiss Reinsurance America Corp.
In particular, the Company competes against insurance subsidiaries of the groups in the specialty insurance market noted below, insurance companies, and others, including: • American International Group • Argo Group International Holdings, Ltd. • Ategrity Specialty Holdings LLC • Atlantic Casualty Insurance Company • Berkshire Hathaway • Canopius US Insurance, Inc. • CapSpecialty Insurance Group • Everest Re Group, Ltd. • Great American Insurance Group • Hallmark Financial Services, Inc. • HCC Insurance Holdings, Inc. • IFG Companies • James River Group Holdings • Kinsale Capital Group, Inc. • Markel Corporation • Nationwide Insurance • RLI Corporation • RSUI Group • Selective Insurance Group, Inc. 16 • The Hartford • The Travelers Companies, Inc. • Westchester Surplus Lines Insurance Co • W.R.
In particular, the Company competes against insurance subsidiaries of the groups in the specialty insurance market noted below, insurance companies, and others, including: • American International Group • Ategrity Specialty Holdings LLC • Atlantic Casualty Insurance Company • Berkshire Hathaway • CapSpecialty Insurance Group • Chubb Limited • IFG Companies • James River Group Holdings • Kinsale Capital Group, Inc. • Markel Corporation • Nationwide Insurance • RLI Corporation • RSUI Group • Selective Insurance Group, Inc. • The Hartford • The Travelers Companies, Inc. • W.R.
Management believes these segments allow users of the Company’s financial statements to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a whole. The segment results for the years ended December 31, 2021 and 2020 have been revised to reflect these changes.
Management believes these segments allow users of the Company’s financial statements to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a whole.
Companies within the Company’s Insurance Operations are licensed to write on an admitted basis in all 50 U.S. States, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, while others are eligible to write on a surplus lines (non-admitted) basis.
Penn-America underwrites commercial coverages for 900 classes of casualty business and 200 classes of property business. Companies within the Insurance Operations are eligible to write on a surplus lines (non-admitted) basis and others are licensed to write on an admitted basis in all 50 U.S. States, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
Reserves with respect to these classes are therefore inherently less likely to be adjusted. 12 The losses and loss adjustment expense reserving process is intended to reflect the impact of inflation and other factors affecting loss payments by taking into account changes in historical payment patterns and perceived trends.
The losses and loss adjustment expense reserving process is intended to reflect the impact of inflation and other factors affecting loss payments by taking into account changes in historical payment patterns and perceived trends.
The insurance departments for the states of Indiana, Virginia, and Pennsylvania completed their most recent financial examinations of the Company’s insurance subsidiaries for the period ended December 31, 2017. Their final reports were issued in 2019 and there were no materially adverse findings.
The insurance departments for the states of Indiana, Virginia, and Pennsylvania completed their most recent financial examinations of the Company’s insurance subsidiaries for the period ended December 31, 2022. No material adverse findings were reported to the Company. Their final reports are expected to be issued in 2024.
The Company has also received a number of asbestos-related claims, the majority of which are declined based on well-established exclusions. In establishing the liability for unpaid losses and loss adjustment expenses related to A&E exposures, management considers facts currently known and the current state of the law and coverage litigations. Estimates of these liabilities are reviewed and updated continually.
In establishing the liability for unpaid losses and loss adjustment expenses related to A&E exposures, management considers facts currently known and the current state of the law and coverage litigations. Estimates of these liabilities are reviewed and updated continually.
As of December 31, 2022, the Company had $1,342.7 million of investments and cash and cash equivalent assets, including $17.5 million of equity securities, which are primarily comprised of preferred stock, and $38.2 million of limited partnership investments. 13 Insurance company investments must comply with applicable statutory regulations that prescribe the type, quality, and concentration of investments.
As of December 31, 2023, the Company had $1,386.6 million of investments and cash and cash equivalent assets, including $16.5 million of preferred stock, and $38.2 million of limited partnership investments. Insurance company investments must comply with applicable statutory regulations that prescribe the type, quality, and concentration of investments.
Income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and, therefore, is not taxable to Global Indemnity Group, LLC’s shareholders until the income is distributed by the subsidiaries to Global Indemnity Group, LLC.
Income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and, therefore, is not taxable to Global Indemnity Group, LLC’s shareholders until the income is distributed by the subsidiaries to Global Indemnity Group, LLC. The Company operates its business through two segments, Penn-America and Non-Core Operations.
Other classes of insurance that the Company underwrites, such as most property insurance, historically have shorter intervals between the occurrence of an insured event, reporting of the claim, and final resolution.
Other classes of insurance that the Company underwrites, such as most property insurance, historically have shorter intervals between the occurrence of an insured event, reporting of the claim, and final resolution. Reserves with respect to these classes are therefore inherently less likely to be adjusted.
In addition, the Company holds $189.4 million in asset-backed securities, of which 62.7% are rated AA- or better and $98.7 million in commercial mortgaged-backed securities, of which 87.0% are rated AA+ or better. The weighted average credit enhancement for the Company’s asset-backed securities is 34.2. The Company also faces liquidity risk.
In addition, the Company holds $203.0 million in asset-backed securities, of which 82.2% are rated A- or better and $79.1 million in commercial mortgaged-backed securities, of which 83.0% are rated AA or better. The weighted 14 average credit enhancement for the Company’s asset-backed securities is 36.1. The Company also faces liquidity risk.
Statutory accounting practices established by the NAIC and adopted in part by the Pennsylvania, Indiana, and Virginia regulators determine, among other things, the amount of statutory surplus and statutory net income (loss) of the insurance companies and thus determine, in part, the amount of funds these subsidiaries have available to pay dividends. 19 State Dividend Limitations The insurance companies are restricted by statute as to the amount of dividends that they may pay without the prior approval of the applicable state regulatory authorities.
Statutory accounting practices established by the NAIC and adopted in part by the Pennsylvania, Indiana, and Virginia regulators determine, among other things, the amount of statutory surplus and statutory net income (loss) of the insurance companies and thus determine, in part, the amount of funds these subsidiaries have available to pay dividends.
Amended & Restated Reinsurance Agreement – Effective October 26, 2021, the company entered into an agreement to cede 100% of its underwriting results related to certain specialty property business. Reinsurance Agreement – Effective August 8 th , 2022, the company entered into an agreement to cede 100% of its underwriting results related to certain agricultural business.
The treaty is subject to an aggregate limit of $20 million. Amended & Restated Reinsurance Agreement – Effective October 26, 2021, the company entered into an agreement to cede 100% of its underwriting results related to certain specialty property business.
Large loss trends and analysis are reviewed by a Large Loss committee. To handle claims, the Company utilizes its own in-house claims department as well as third-party assuming reinsurers, to whom it delegates limited claims handling authority.
Large loss trends and analysis are reviewed by a Large Loss committee. To handle claims, the Company utilizes its own in-house claims department as well as third-party assuming reinsurers, to whom it delegates limited claims handling authority. The experienced in-house staff of claims management professionals are assigned to one of four dedicated claim units: casualty, property, subrogation, and construction defect.
While excess and surplus lines market exposures may have higher perceived insurance risk than their standard market counterparts, excess and surplus lines market underwriters historically have been able to generate underwriting profitability superior to standard market underwriters. 5 A portion of the Company’s Commercial Specialty segment is written on a specialty admitted basis.
While excess and surplus lines market exposures may have higher perceived insurance risk than their standard market counterparts, excess and surplus lines market underwriters historically have been able to generate underwriting profitability superior to standard market underwriters.
Casualty Excess of Loss – Effective January 1, 2023, the Company amended the casualty excess of loss treaty, that was in effect, to provide coverage of 80% of $10 million per occurrence in excess of $2.5 million per occurrence for casualty lines of business.
Casualty Excess of Loss – Effective December 31, 2023, the Company terminated the casualty excess of loss treaty. The contract was on a continuous basis. Effective January 1, 2024, the Company purchased a new treaty to provide coverage of 80% of $10 million per occurrence in excess of $2.5 million per occurrence for casualty lines of business.
The following table summarizes, by Standard & Poor's rating classifications, the estimated fair value of Global Indemnity’s investments in fixed maturities, as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 (Dollars in thousands) Estimated Fair Value Percent of Total Estimated Fair Value Percent of Total AAA $ 182,063 14.6 % $ 211,069 17.6 % AA 442,731 35.4 436,832 36.2 A 240,697 19.3 182,478 15.2 BBB 296,680 23.8 283,286 23.6 BB 22,057 1.8 20,056 1.7 B 1,466 0.1 6,601 0.5 CCC 4,804 0.4 4,253 0.4 CC 2,914 0.2 3,304 0.3 C 2,622 0.2 3,242 0.3 D 2,555 0.2 2,202 0.2 Not rated 49,609 4.0 48,543 4.0 Total fixed maturities $ 1,248,198 100.0 % $ 1,201,866 100.0 % The following table sets forth the expected maturity distribution of the Company’s fixed maturities portfolio at their estimated market value as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 (Dollars in thousands) Estimated Market Value Percent of Total Estimated Market Value Percent of Total Due in one year or less $ 113,491 9.1 % $ 50,544 4.2 % Due in one year through five years 747,197 59.8 366,276 30.5 Due in five years through ten years 25,594 2.1 176,777 14.7 Due in ten years through fifteen years 198 — 14,867 1.2 Due after fifteen years 11,538 0.9 33,526 2.8 Securities with fixed maturities 898,018 71.9 641,990 53.4 Mortgaged-backed securities 62,116 5.0 250,341 20.8 Commercial mortgage-backed securities 98,664 7.9 136,893 11.4 Asset-backed securities 189,400 15.2 172,642 14.4 Total fixed maturities $ 1,248,198 100.0 % $ 1,201,866 100.0 % The value of the Company’s portfolio of bonds is inversely related to changes in market interest rates.
The following table summarizes, by Standard & Poor's rating classifications, the estimated fair value of Global Indemnity’s investments in fixed maturities, as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 (Dollars in thousands) Estimated Fair Value Percent of Total Estimated Fair Value Percent of Total AAA $ 335,381 25.9 % $ 182,063 14.6 % AA 391,983 30.3 442,731 35.4 A 257,714 19.9 240,697 19.3 BBB 225,934 17.5 296,680 23.8 BB 14,537 1.1 22,057 1.8 B 1,592 0.1 1,466 0.1 CCC 4,020 0.3 4,804 0.4 CC 2,779 0.2 2,914 0.2 C 2,338 0.2 2,622 0.2 D 2,420 0.2 2,555 0.2 Not rated 55,095 4.3 49,609 4.0 Total fixed maturities $ 1,293,793 100.0 % $ 1,248,198 100.0 % The following table sets forth the expected maturity distribution of the Company’s fixed maturities portfolio at their estimated market value as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 (Dollars in thousands) Estimated Market Value Percent of Total Estimated Market Value Percent of Total Due in one year or less $ 660,141 51.0 % $ 113,491 9.1 % Due in one year through five years 270,667 20.9 747,197 59.8 Due in five years through ten years 11,619 0.9 25,594 2.1 Due after ten years 10,407 0.8 11,736 0.9 Securities with fixed maturities 952,834 73.6 898,018 71.9 Mortgaged-backed securities 58,927 4.6 62,116 5.0 Commercial mortgage-backed securities 79,080 6.1 98,664 7.9 Asset-backed securities 202,952 15.7 189,400 15.2 Total fixed maturities $ 1,293,793 100.0 % $ 1,248,198 100.0 % The value of the Company’s portfolio of bonds is inversely related to changes in market interest rates.
The following table shows the average amount of fixed maturities, income earned on fixed maturities, and the book yield thereon, as well as unrealized gain (loss) for the periods indicated: Years Ended December 31, (Dollars in thousands) 2022 2021 2020 Average fixed maturities at book value $ 1,247,735 $ 1,171,378 $ 1,190,289 Gross income on fixed maturities (1) $ 33,852 $ 25,751 $ 31,987 Book yield 2.71 % 2.20 % 2.69 % Fixed maturities at book value $ 1,301,723 $ 1,193,746 $ 1,149,009 Unrealized gain (loss) $ (53,525 ) $ 8,120 $ 42,177 (1) Represents income earned by fixed maturities, gross of investment expenses and excluding realized gains and losses. 14 The Company has sought to structure its portfolio to reduce the risk of default on collateralized commercial real estate obligations and asset-backed securities.
The following table shows the average amount of fixed maturities, income earned on fixed maturities, and the book yield thereon, as well as unrealized gain (loss) for the periods indicated: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Average fixed maturities at book value $ 1,311,908 $ 1,247,735 $ 1,171,378 Gross income on fixed maturities (1) $ 49,987 $ 33,852 $ 25,751 Book yield 3.81 % 2.71 % 2.20 % Fixed maturities at book value $ 1,322,092 $ 1,301,723 $ 1,193,746 Unrealized gain (loss) $ (28,299 ) $ (53,525 ) $ 8,120 (1) Represents income earned by fixed maturities, gross of investment expenses and excluding realized gains and losses.
The primary business divisions within the Commercial Specialty segment include: • Wholesale Commercial distributes property and general liability products for small commercial businesses through a select network of wholesale general agents with specific binding authority.
The primary business divisions within the Penn-America segment include: • Wholesale Commercial distributes property and general liability products for small commercial businesses through a select network of wholesale general agents with specific binding authority using company administered systems to rate, quote and issue policies. • Programs distributes property and general liability niche products through program administrators with specific binding authority.
The type, cost and limits of reinsurance it purchases can vary from year to year based upon the Company’s desired retention levels and the availability of quality reinsurance at an acceptable price.
Reinsurance assists the Company in controlling exposure to severe losses and protecting capital resources. The type, cost and limits of reinsurance it purchases can vary from year to year based upon the Company’s desired retention levels and the availability of quality reinsurance at an acceptable price. The Company purchases reinsurance based on guidelines established by management.
The Company generally estimates such losses and claims costs through an evaluation of individual reported claims. The Company also establishes reserves for incurred but not reported losses (“IBNR”).
The Company generally estimates such losses and claims costs through an evaluation of individual reported claims. The Company also establishes reserves for incurred but not reported losses (“IBNR”). The Company’s IBNR reserves include provisions for development on known cases as well as provisions for claims that have occurred but not been reported.
The second layer provided coverage of $25 million in excess of $25 million and could be reinstated once at no additional charge. The third layer provided coverage of $150 million in excess of $50 million and could be reinstated once at no additional charge.
The first layer provided coverage of 40% of $10 million in excess of $10 million and could be reinstated once at no additional charge. The second layer provided coverage of $30 million in excess of $20 million and could be reinstated once for an additional charge.
The Company believes that this approach allows it to control net exposure in these product areas most cost effectively. 9 The Company purchases reinsurance on an excess of loss basis to cover individual risk severity. These structures are utilized to protect the Company’s primary positions on property and casualty products.
The Company will typically seek to place proportional reinsurance for umbrella and excess products, certain specialty products, or new products in the development stage. The Company believes that this approach allows it to control net exposure in these product areas most cost effectively. 9 The Company purchases reinsurance on an excess of loss basis to cover individual risk severity.
To the extent that there may be an increase or decrease in catastrophe or casualty clash exposure in the future, the Company may increase or decrease its reinsurance protection for these exposures commensurately.
Reinsurance Agreement – Effective August 8 th , 2022, the company entered into an agreement to cede 100% of its underwriting results related to certain agricultural business. To the extent that there may be an increase or decrease in catastrophe or casualty clash exposure in the future, the Company may increase or decrease its reinsurance protection for these exposures commensurately.
Global Indemnity's insurance companies have been notified that an examination will be conducted for the period ending December 31, 2022. Before a person can acquire control of an U.S. insurance company, prior written approval must be obtained from the insurance commissioner of the state where the insurer is domiciled.
Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance commissioner of the state where the insurer is domiciled.
The excess of loss structures allow the Company to maximize underwriting profits over time by retaining a greater portion of the risk in these products, while helping to protect against the possibility of unforeseen volatility.
These structures are utilized to protect the Company’s primary positions on property and casualty products. The excess of loss structures allow the Company to maximize underwriting profits over time by retaining its desired amount of risk in each product written while helping to protect against the possibility of unforeseen volatility.
Because a person acquiring 10% or more of Global Indemnity Group, LLC’s common shares would indirectly control the same percentage of the stock of the insurance companies, the insurance change of control laws of Pennsylvania, Indiana, and Virginia would likely apply to such a transaction. 18 These laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of Global Indemnity Group, LLC, including through transactions, and in particular unsolicited transactions, that some or all of the shareholders of Global Indemnity Group, LLC might consider desirable.
Because a person acquiring 10% or more of Global Indemnity Group, LLC’s common shares would indirectly control the same percentage of the stock of the insurance companies, the insurance change of control laws of Pennsylvania, Indiana, and Virginia would likely apply to such a transaction.
The Company will cease writing new business and existing renewals will be placed in run-off for these four divisions. On August 8, 2022, the Company sold the renewal rights related to its Farm, Ranch & Stable business for policies written on or after August 8, 2022 to Everett Cash Mutual Insurance Company.
On August 8, 2022, the Company sold the renewal rights related to its Farm, Ranch & Stable business for policies written on or after August 8, 2022 to Everett Cash Mutual Insurance Company. On October 26, 2021, the Company sold the renewal rights related to its manufactured and dwelling homes business.
The Company provides its wholesale general agents and retail agents with a comprehensive, regularly updated underwriting manual that specifically outlines risk eligibility which is developed based on the type of insured, nature of exposure and overall expected profitability.
Premiums audits are performed on the Company’s casualty business rated on revenue and payroll exposure. A comprehensive, regularly updated underwriting manual that specifically outlines risk eligibility which is developed based on the type of insured, nature of exposure and overall expected profitability is used for underwriting.
In the standard market, policies must be written by insurance companies that are admitted to transact business in the state in which the policy is issued. As a result, in the standard property and casualty insurance market, insurance companies tend to compete for customers primarily on the basis of price, coverage, value-added service, and financial strength.
As a result, in the standard property and casualty insurance market, insurance companies tend to compete for customers primarily on the basis of price, coverage, value-added service, and financial strength. The Company offers several specialized products that are sold in the admitted market. The insurance products required by these insureds are not otherwise available from standard market insurers.
The Company differentiates itself from the competition by distributing Wholesale Commercial and InsurTech products that are not readily available in the market. Each of the Company’s products has its own distinct competitive environment. The Company seeks to compete through innovative products, appropriate pricing, niche underwriting expertise, and quality service to policyholders, general agencies and brokers.
The Company differentiates itself from the competition by distributing products that are not readily available in the market. Each of the Company’s products has its own distinct competitive environment.
Publications of AM Best indicate that "A" (Excellent) ratings are assigned to those companies that, in AM Best's opinion, have an excellent ability to meet their ongoing obligations to policyholders. To determine a credit rating, AM Best performs quantitative and qualitative analysis which includes evaluating balance sheet strength, operating performance, enterprise risk management, and the business profile.
To determine a credit rating, AM Best performs quantitative and qualitative analysis which includes evaluating balance sheet strength, operating performance, enterprise risk management, and the business profile.
See Note 3 of the notes to consolidated financial statements in Item 8 of Part II of this report for additional information on these sales.
In the first quarter of 2023, the Company reduced its workforce by 54 employees in conjunction with the restructuring of its insurance operations. See Note 3 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the restructuring.
Insurance Regulatory Information System Ratios The NAIC Insurance Regulatory Information System ("IRIS") was developed by a committee of the state insurance regulators and is intended primarily to assist state insurance departments in executing their statutory mandates to oversee the financial condition of insurance companies operating in their respective states.
These laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of Global Indemnity Group, LLC, including through transactions, and in particular unsolicited transactions, that some or all of the shareholders of Global Indemnity Group, LLC might consider desirable. 18 Insurance Regulatory Information System Ratios The NAIC Insurance Regulatory Information System ("IRIS") was developed by a committee of the state insurance regulators and is intended primarily to assist state insurance departments in executing their statutory mandates to oversee the financial condition of insurance companies operating in their respective states.

… 110 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

50 edited+27 added−10 removed148 unchanged
Biggest changeFinally, because holders are required to report their allocable share of gross ordinary income, tax reporting for holders of Global Indemnity Group, LLC’s common shares is more complicated than for shareholders of a regular corporation. 32 Holders of Global Indemnity Group, LLC’s common shares may be subject to an additional U.S. federal income tax on net investment income allocated to such holder by Global Indemnity Group, LLC and on gain on the sale of Global Indemnity Group, LLC’s common shares.
Biggest changeFinally, because holders are required to report their allocable share of gross ordinary income, tax reporting for holders of Global Indemnity Group, LLC’s common shares is more complicated than for shareholders of a regular corporation.
Although Global Indemnity Group, LLC’s Board of Directors has determined that the repurchase program is in the best interests of its shareholders, the repurchases expose the Company to risks including: 29 • the use of a substantial portion of the Company’s cash reserves, which may reduce its ability to engage in significant cash acquisitions or to pursue other business opportunities that could create significant value to its shareholders; • the risk that the Company may not be able to replenish its cash reserves by raising debt or equity financing in the future on terms acceptable to the Company, or at all; and • the risk that these repurchases have reduced the Company’s “public float,” which is the number of Global Indemnity Group, LLC shares owned by non-affiliate shareholders and available for trading in the securities markets, and likely reduced the number of its shareholders, which may reduce the volume of trading in Global Indemnity Group, LLC shares and may result in lower share prices and reduced liquidity in the trading of Global Indemnity Group, LLC shares.
Although Global Indemnity Group, LLC’s Board of Directors has determined that the repurchase program is in the best interests of its shareholders, the repurchases expose the Company to risks including: • the use of a substantial portion of the Company’s cash reserves, which may reduce its ability to engage in significant cash acquisitions or to pursue other business opportunities that could create significant value to its shareholders; • the risk that the Company may not be able to replenish its cash reserves by raising debt or equity financing in the future on terms acceptable to the Company, or at all; and • the risk that these repurchases have reduced the Company’s “public float,” which is the number of Global Indemnity Group, LLC shares owned by non-affiliate shareholders and available for trading in the securities markets, and likely reduced the number of its shareholders, which may reduce the volume of trading in Global Indemnity Group, LLC shares and may result in lower share prices and reduced liquidity in the trading of Global Indemnity Group, LLC shares.
The Company is exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, fires, floods, landslides, tornadoes, typhoons, tsunamis, hailstorms, explosions, climate events or weather patterns and public health crises, illness, epidemics or pandemic health events, as well as man-made disasters, including acts of terrorism, military actions, cyber-terrorism, explosions and biological, chemical or radiological events.
The Company is exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, fires, floods, landslides, tornadoes, typhoons, tsunamis, hailstorms, explosions, climate events or weather patterns, public health crises such as illness, epidemics or pandemic health events, as well as man-made disasters, including acts of terrorism, military actions, cyber-terrorism, explosions and biological, chemical or radiological events.
For example, as industry practices and legal, judicial, social and other conditions change, unexpected and unintended exposures related to claims and coverage may emerge. These exposures may either extend coverage beyond the Company’s underwriting intent or increase the frequency or severity of claims. As a result, such developments could cause the Company’s level of reserves to be inadequate.
For example, as industry practices and legal, judicial, social and other conditions change, unexpected and unintended exposures related to claims and coverage may emerge. These exposures may either extend coverage beyond the Company’s 21 underwriting intent or increase the frequency or severity of claims. As a result, such developments could cause the Company’s level of reserves to be inadequate.
Consequently, holders of Global Indemnity Group, LLC’s common shares who are U.S. taxpayers may need to file annually with the IRS (and certain states) a request for an extension past the April 15 or the otherwise applicable due date of their income tax return for the taxable year.
Consequently, holders of Global 33 Indemnity Group, LLC’s common shares who are U.S. taxpayers may need to file annually with the IRS (and certain states) a request for an extension past the April 15 or the otherwise applicable due date of their income tax return for the taxable year.
These fluctuations in demand and competition could produce underwriting results that would have a negative impact on the Company’s consolidated results of operations and financial condition. The Company faces significant competitive pressures in its business that could cause demand for its products to fall and adversely affect the Company’s profitability.
These fluctuations in demand and competition could produce underwriting results that would have a negative impact on the Company’s consolidated results of operations and financial condition. 26 The Company faces significant competitive pressures in its business that could cause demand for its products to fall and adversely affect the Company’s profitability.
Even if Global Indemnity Group, LLC does not distribute cash in an amount that is sufficient to fund a holder’s tax 30 liabilities, such holder will still be required to pay income taxes on their share of Global Indemnity Group, LLC’s taxable income.
Even if Global Indemnity Group, LLC does not distribute cash in an amount that is sufficient to fund a holder’s tax liabilities, such holder will still be required to pay income taxes on their share of Global Indemnity Group, LLC’s taxable income.
Credit tightening could negatively impact the Company’s future investment returns and limit the ability to invest in certain classes of investments. Credit tightening may cause opportunities that are marginally attractive to not be financed, which 23 could cause a decrease in the number of bond issuances.
Credit tightening could negatively impact the Company’s future investment returns and limit the ability to invest in certain classes of investments. Credit tightening may cause opportunities that are marginally attractive to not be financed, which could cause a decrease in the number of bond issuances.
These conventions are designed to more closely align the receipt of cash and the allocation of income between holders of Global Indemnity Group, LLC’s common shares, but these assumptions and conventions may not be in compliance with 31 all aspects of applicable tax requirements.
These conventions are designed to more closely align the receipt of cash and the allocation of income between holders of Global Indemnity Group, LLC’s common shares, but these assumptions and conventions may not be in compliance with all aspects of applicable tax requirements.
A downgrade could result in a significant reduction in the number of insurance contracts the Company 22 writes and in a substantial loss of business; as such business could move to other competitors with higher ratings, thus causing premiums and earnings to decrease.
A downgrade could result in a significant reduction in the number of insurance contracts the Company writes and in a substantial loss of business; as such business could move to other competitors with higher ratings, thus causing premiums and earnings to decrease.
The cost of remediating a potential material weakness could materially adversely affect the Company’s business and financial condition. 33 The Company’s operating results and shareholders’ equity may be adversely affected by currency fluctuations. The Company’s functional currency is the U.S. dollar.
The cost of remediating a potential material weakness could materially adversely affect the Company’s business and financial condition. The Company’s operating results and shareholders’ equity may be adversely affected by currency fluctuations. The Company’s functional currency is the U.S. dollar.
Although reinsurance makes the reinsurer liable to the Company to the extent the risk is transferred, it does not relieve the Company of its liability to its policyholders. Upon payment of claims, the Company will bill its reinsurers for their share of such claims.
Although reinsurance makes the reinsurer liable to the Company to the extent the risk is transferred, it does not relieve the Company of 25 its liability to its policyholders. Upon payment of claims, the Company will bill its reinsurers for their share of such claims.
As a result of the foregoing, the Dodd-Frank Act, or other additional federal regulation that is adopted in the future, could impose significant burdens on the Company, including impacting the ways in which it conducts business, increasing compliance 27 costs and duplicating state regulation, and could result in a competitive disadvantage, particularly relative to smaller insurers who may not be subject to the same level of regulation.
As a 28 result of the foregoing, the Dodd-Frank Act, or other additional federal regulation that is adopted in the future, could impose significant burdens on the Company, including impacting the ways in which it conducts business, increasing compliance costs and duplicating state regulation, and could result in a competitive disadvantage, particularly relative to smaller insurers who may not be subject to the same level of regulation.
Global 28 Indemnity Group, LLC has also agreed to pay Fox Paine & Company, LLC a transaction advisory fee of cash in an amount to be agreed upon, plus reimbursement of expenses upon the consummation of a change of control transaction that does not involve Fox Paine & Company, LLC and its affiliates in exchange for advisory services to be provided by Fox Paine & Company, LLC in connection therewith.
Global Indemnity Group, LLC has also agreed to pay Fox Paine & Company, LLC a transaction advisory fee of cash in an amount to be agreed upon, plus reimbursement of expenses upon the consummation 29 of a change of control transaction that does not involve Fox Paine & Company, LLC and its affiliates in exchange for advisory services to be provided by Fox Paine & Company, LLC in connection therewith.
The Reinsurance Operations conducts business with some customers in foreign currencies and several of the Company’s U.S. and non-U.S. subsidiaries maintain cash accounts in foreign currencies. At period-end, the Company re-measures non-U.S. currency financial assets to their current U.S. dollar equivalent. The resulting gain or loss on foreign denominated cash accounts is reflected in income during the period.
The Company conducts business with some customers in foreign currencies and several of the Company’s U.S. and non-U.S. subsidiaries maintain cash accounts in foreign currencies. At period-end, the Company re-measures non-U.S. currency financial assets to their current U.S. dollar equivalent. The resulting gain or loss on foreign denominated cash accounts is reflected in income during the period.
(the “Fox Paine Fund”), an investment fund managed by Fox Paine & Company, LLC, together with Fox Mercury Investments, L.P. and certain of its affiliates (the “FM Entities”), and Fox Paine & Company LLC (collectively, the “Fox Paine Entities”) beneficially own shares representing approximately 83.2% of Global Indemnity Group, LLC’s total voting power.
(the “Fox Paine Fund”), an investment fund managed by Fox Paine & Company, LLC, together with Fox Mercury Investments, L.P. and certain of its affiliates (the “FM Entities”), and Fox Paine & Company LLC (collectively, the “Fox Paine Entities”) beneficially own shares representing approximately 83.8% of Global Indemnity Group, LLC’s total voting power.
The Board of Directors currently consists of six directors, all of whom were either identified and proposed for consideration for the Board of Directors by the Fox Paine Entities or appointed by the Fox Paine Entities.
The Board of Directors currently consists of seven directors, all of whom were either identified and proposed for consideration for the Board of Directors by the Fox Paine Entities or appointed by the Fox Paine Entities.
For example, the Company may experience disruptions to its business as a result of the COVID-19 pandemic and any associated protective or preventative measures including but not limited to: • clients choosing to limit purchases of insurance due to declining business conditions, which would inhibit the Company’s ability to generate earned premium; • travel restrictions and quarantines leading to a lack of in-person meetings, which would hinder the Company’s ability to establish relationships or originate new business; • cancellation, delays, or non-payment of premium could negatively impact the Company’s liquidity; • 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 or other conditions included in policies that would otherwise preclude coverage; • alternative working arrangements, including colleagues working remotely, which could negatively impact the Company’s business; and • significant volatility in financial markets affecting the market value and liquidity of the Company’s investment portfolio.
The Company may also experience disruptions to its business as a result of a pandemic and any associated protective or preventative measures including but not limited to: • clients choosing to limit purchases of insurance due to declining business conditions, which would inhibit the Company’s ability to generate earned premium; • travel restrictions and quarantines leading to a lack of in-person meetings, which would hinder the Company’s ability to establish relationships or originate new business; • cancellation, delays, or non-payment of premium could negatively impact the Company’s liquidity; • 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 or other conditions included in policies that would otherwise preclude coverage; • significant volatility in financial markets affecting the market value and liquidity of the Company’s investment portfolio.
See Note 11 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s reinsurance receivable balances as of December 31, 2022 and 2021.
See Note 10 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s reinsurance receivable balances as of December 31, 2023 and 2022.
Also, see Note 22 of the notes to consolidated financial statements in Item 8 of Part II of this report for the maximum amount of dividends that could be paid by the Company’s U.S. insurance subsidiaries in 2023. 26 The Company’s businesses are heavily regulated and changes in regulation may limit the way it operates.
Also, see Note 21 of the notes to consolidated 27 financial statements in Item 8 of Part II of this report for the maximum amount of dividends that could be paid by the Company’s U.S. insurance subsidiaries in 2024. The Company’s businesses are heavily regulated and changes in regulation may limit the way it operates.
See Note 6 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s investments as of December 31, 2022 and 2021.
See Note 5 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s investments as of December 31, 2023 and 2022.
In addition, Global Indemnity Group, LLC has agreed to pay Fox Paine & Company, LLC an annual management fee which is adjusted annually to reflect change in the consumer price index published by the US Department of Labor Bureau of Labor Statistics “CPI-U”, in exchange for management services. The current fee charged in 2022 was $3.0 million.
In addition, Global Indemnity Group, LLC has agreed to pay Fox Paine & Company, LLC an annual management fee which is adjusted annually to reflect change in the consumer price index published by the US Department of Labor Bureau of Labor Statistics “CPI-U”, in exchange for management services.
If the Company fails to protect the privacy of third-party data or implement practices and procedures deemed necessary by regulators or consumers or to comply with the CCPA or other applicable regimes, the Company may be subject to fines, penalties, litigation, and reputational harm and its business may be seriously harmed.
If the Company fails to protect the privacy of third-party data or implement practices and procedures deemed necessary by regulators or consumers, the Company may be subject to fines, penalties, litigation, and reputational harm and its business may be seriously harmed.
Foreign exchange risk is reviewed as part of the Company’s risk management process. The Company may experience losses resulting from fluctuations in the values of non-U.S. currencies relative to the strength of the U.S. dollar, which could adversely impact the Company’s results of operations and financial condition. Item 1B. UNRESOLVE D STAFF COMMENTS None.
Foreign exchange risk is reviewed as part of the Company’s risk management process. The Company may experience losses resulting from fluctuations in the values of non-U.S. currencies relative to the strength of the U.S. dollar, which could adversely impact the Company’s results of operations and financial condition.
In addition to having an effect on reserves and pre-tax income, increasing or "strengthening" reserves causes a reduction in the Company’s insurance companies' surplus and could cause the rating of its insurance company subsidiaries to be downgraded or placed on credit watch.
In addition to having an effect on reserves and pre-tax income, increasing or "strengthening" reserves causes a reduction in the Company’s insurance companies' surplus and could cause the rating of its insurance company subsidiaries to be downgraded or placed on credit watch. Such a downgrade could, in turn, adversely affect the Company’s ability to sell insurance policies.
Insurance premiums generally flow from the insured to their retail broker, then into a trust account controlled by the Company’s professional general agencies. Several of the Company’s professional general agencies are required to forward funds, net of commissions, to the Company following the end of each month.
This accumulation of balances due to the Company exposes it to credit risk. Insurance premiums generally flow from the insured to their retail broker, then into a trust account controlled by the Company’s professional general agencies. Several of the Company’s professional general agencies are required to forward funds, net of commissions, to the Company following the end of each month.
A loss of all or substantially all of the business produced by one or more of these wholesale general agent and wholesale broker offices as well as other insurance companies or reinsurance companies could have an adverse effect on the Company’s results of operations.
A loss of all or substantially all of the business produced by one or more of these wholesale general agents or larger retail agents as well as other insurance companies or reinsurance companies could have an adverse effect on the Company’s results of operations.
Investment income generated by its investment portfolio as well as dividends and other permitted distributions from insurance subsidiaries are expected to be Global Indemnity Group, LLC's sole source of funds to meet ongoing cash requirements, including debt service payments, if any, and other expenses.
Investment income generated by its investment portfolio as well as dividends and other permitted distributions from insurance subsidiaries are expected to be Global Indemnity Group, LLC's main source of funds to meet ongoing cash requirements and other expenses.
Since the Company depends on wholesale general agent and wholesale broker offices as well as other insurance companies and reinsurance companies for a significant portion of its revenue, a loss of one or more could adversely affect the Company.
Since the Company depends on wholesale general agents and retail agents as wells as other insurance companies and reinsurance companies for a significant portion of its revenue, a loss of one or more could adversely affect the Company.
The following factors may have a substantial impact on the Company’s future actual losses and loss adjustment experience: • claim and expense payments; • frequency and severity of claims; • legislative and judicial developments; and • changes in economic conditions, including the effect of inflation.
Establishing an appropriate level of reserves is an inherently uncertain process. The following factors may have a substantial impact on the Company’s future actual losses and loss adjustment experience: • claim and expense payments; • frequency and severity of claims; • legislative and judicial developments; and • changes in economic conditions, including the effect of inflation.
The Company’s Commercial Specialty products are distributed through approximately 360 wholesale general agent and wholesale broker offices that have specific quoting and binding authority and that in turn sell the Company’s insurance products to insureds through retail insurance brokers. The Company also markets and distributes its reinsurance products 24 through third-party brokers, insurance companies and reinsurance companies.
The Company’s Penn-America products are distributed through approximately 360 wholesale general agents that have specific quoting and binding authority and that in turn sell the Company’s insurance products to insureds through retail insurance brokers. Penn-America also distributes its products through approximately 2,400 retail agents. The Company markets and distributes its reinsurance products through third-party brokers, insurance companies and reinsurance companies.
Since October 2022 and through March 15, 2023, Global Indemnity Group, LLC repurchased and retired an aggregate of 1,157,082 shares of its class A common shares in the open market and in privately negotiated transactions at an aggregate price of $28.4 million or an average of $24.54 per share.
Since October 2022 and through March 15, 2024, Global Indemnity Group, LLC repurchased and retired an aggregate of 1,357,082 shares of its class A common shares in the open market and in privately negotiated transactions at an aggregate price of $34.0 million or an average of $25.05 per share.
General Risk Factors If the Company is unable to maintain effective internal control over financial reporting, the Company’s business may be adversely affected, investors may lose confidence in the accuracy and completeness of the Company’s financial reports and the market price of Global Indemnity Group, LLC’s common stock could be adversely affected.
In addition, the Company does not currently maintain key man life insurance policies with respect to any of its employees. 34 General Risk Factors If the Company is unable to maintain effective internal control over financial reporting, the Company’s business may be adversely affected, investors may lose confidence in the accuracy and completeness of the Company’s financial reports and the market price of Global Indemnity Group, LLC’s common stock could be adversely affected.
These and other disruptions related to COVID-19 could materially and adversely affect the Company’s business, financial condition and results of operations. A decline in rating for any of the Company’s insurance subsidiaries could adversely affect its position in the insurance market; making it more difficult to market its insurance products and cause premiums and earnings to decrease.
A decline in rating for any of the Company’s insurance subsidiaries could adversely affect its position in the insurance market; making it more difficult to market its insurance products and cause premiums and earnings to decrease.
The Company’s profitability could be adversely affected if it loses business to competitors offering similar products at or below the Company’s prices. 25 Many of the Company’s general agencies pay the insurance premiums on business they have bound to the Company on a monthly basis. This accumulation of balances due to the Company exposes it to credit risk.
Some of the Company’s competitors have greater financial and marketing resources than the Company does. The Company’s profitability could be adversely affected if it loses business to competitors offering similar products at or below the Company’s prices. Many of the Company’s general agencies pay the insurance premiums on business they have bound to the Company on a monthly basis.
The Company’s business practices with respect to data could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection. In June 2018, California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect on January 2020.
The Company’s business practices with respect to data could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.
As of such date, under its share repurchase program (which was increased by its Board of Directors to $60.0 million in January 2023), Global Indemnity Group, LLC had a remaining authorization to purchase up to an additional $31.6 million of its class A common shares.
As of such date, under its share repurchase program, Global Indemnity Group, LLC had a remaining authorization to purchase up to an additional $101.0 million of its class A common shares.
The Company has investments in limited partnerships which are not liquid. For several limited partnership investments, the Company does not have the contractual option to redeem its interests but receives distributions based on the liquidation of the underlying assets.
The Company has investments in limited partnerships which are not liquid. For several limited partnership investments, the Company does not have the contractual option to redeem its interests but receives distributions based on the liquidation of the underlying assets. During the 3rd quarter of 2023, the Company provided the Global Debt Fund, LP with a formal withdrawal request in full.
In addition, a portion of the amount realized, whether or not representing gain, may be treated as ordinary income to such holder to the extent attributable to the holder’s allocable share of unrealized gain or loss in Global Indemnity Group, LLC’s assets that consist of certain unrealized receivables or inventory (if any).
In addition, a portion of the amount realized, whether or not representing gain, may be treated as ordinary income to such holder to the extent attributable to the holder’s allocable share of unrealized gain or loss in Global Indemnity Group, LLC’s assets that consist of certain unrealized receivables or inventory (if any). 32 Global Indemnity Group, LLC cannot match transferors and transferees of Global Indemnity Group, LLC’s common shares, and therefore, Global Indemnity Group, LLC has adopted certain income tax accounting conventions that may not conform with all aspects of applicable tax requirements.
To the extent that Fox Paine & Company, LLC is unable or unwilling to provide similar services in the future, and the Company is unable to perform those services itself or is unable to secure replacement services, the Company’s business could be adversely affected.
To the extent that Fox Paine & Company, LLC is unable or unwilling to provide similar services in the future, and the Company is unable to perform those services itself or is unable to secure replacement services, the Company’s business could be adversely affected. 30 The Company's share repurchase program may affect or increase the volatility of the price of its class A common shares.
A failure in the Company’s operational systems or infrastructure or those of third parties, including security breaches or cyber-attacks, could disrupt the Company’s business, its reputation, and / or cause losses which would have a material effect on the Company’s business operations and financial results.
These ratings are subject to periodic review by, and may be revised downward or revoked at the sole discretion of AM Best. 23 A failure in the Company’s operational systems or infrastructure or those of third parties, including security breaches or cyber-attacks, could disrupt the Company’s business, its reputation, and / or cause losses which would have a material effect on the Company’s business operations and financial results.
Publications of AM Best indicate that companies are assigned "A" (Excellent) ratings if, in AM Best's opinion, they have an excellent ability to meet their ongoing obligations to policyholders. These ratings are subject to periodic review by, and may be revised downward or revoked at the sole discretion of AM Best.
Publications of AM Best indicate that companies are assigned "A" (Excellent) ratings if, in AM Best's opinion, they have an excellent ability to meet their ongoing obligations to policyholders.
They could also result in reduced underwriting capacity making it more difficult for the Company’s agents to place business. Disasters also could disrupt public and private infrastructure, including communications and financial services, which could disrupt the Company’s ordinary business operations.
They could also result in reduced underwriting capacity making it more difficult for the Company’s agents to place business.
As a result, the Company’s operating results depend in part on the performance of its investment portfolio. The Company’s operating results are subject to a variety of investment risks, including risks relating to general economic conditions, market volatility, interest rate fluctuations, liquidity risk and credit and default risk.
The Company’s operating results are subject to a variety of investment risks, including risks relating to general economic conditions, market volatility, interest rate fluctuations, liquidity risk and credit and default risk. The fair value of fixed income investments can fluctuate depending on changes in interest rates and the credit quality of underlying issuers.
A natural or man-made disaster also could disrupt the operations of the Company’s counterparties or result in increased prices for the products and services they provide to the Company. Finally, a natural or man-made disaster could increase the incidence or severity of E&O claims against the Company.
Disasters also could disrupt public and private infrastructure, including communications and financial services, which could disrupt the Company’s ordinary business operations. A natural or man-made disaster could also disrupt the operations of the Company’s counterparties or result in increased prices for the products and services they provide to the Company.
Income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions and, therefore, is not taxable to Global Indemnity Group, LLC’s shareholders until the income is distributed by the subsidiaries to Global Indemnity Group, LLC.
Income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions and, therefore, is not taxable to Global Indemnity Group, LLC’s shareholders until the income is distributed by the subsidiaries to Global Indemnity Group, LLC. 31 There can be no assurance that amounts paid as distributions on Global Indemnity Group, LLC’s common shares will be sufficient to cover the tax liability arising from ownership of the common shares.
For one limited partnership investment, up to one third of the partnership can be redeemed upon 90 days notice each June 30th or December 31st. The Company does not have the ability to sell or transfer its limited partnership interests without consent from the general partner.
Going forward, one fifth of the partnership will be redeemed based on June 30th and December 31st fair values until the limited partnership investment is fully liquidated. The Company does not have the ability to sell or transfer its limited partnership interests without consent from the general partner.
In addition, the restructuring could harm the Company’s relationships with its agents or it may not be able to execute its strategies as efficiently as before the restructuring. If actual claims payments exceed the Company’s reserves for losses and loss adjustment expenses, the Company’s financial condition and results of operations could be adversely affected.
The Company's ability to grow profitably could be impaired if it cannot effectively overcome these obstacles or it improperly implement new insurance products. If actual claims payments exceed the Company’s reserves for losses and loss adjustment expenses, the Company’s financial condition and results of operations could be adversely affected.
Investment Related Risks The Company’s investment performance may suffer as a result of adverse capital market developments or other factors, which would in turn adversely affect its financial condition and results of operations. The Company derives a significant portion of its income from its invested assets.
The Company derives a significant portion of its income from its invested assets. As a result, the Company’s operating results depend in part on the performance of its investment portfolio.
Such a downgrade could, in turn, adversely affect the Company’s ability to sell insurance policies. 21 The occurrence of natural or man-made disasters, including the COVID-19 outbreak, could result in declines in business and increases in claims that could adversely affect the Company’s business, financial condition and results of operations.
As a result, the full extent of liability under the Company's insurance contracts may not be known for many years after a contract is issued. 22 The occurrence of natural or man-made disasters could adversely affect the Company’s business, financial condition and results of operations.
Removed
The Company’s insurance subsidiaries obtain an annual statement of opinion from an independent actuarial firm on the reasonableness of these reserves. Establishing an appropriate level of reserves is an inherently uncertain process.
Added
In addition, the restructuring could harm the Company’s relationships with its agents or it may not be able to execute its strategies as efficiently as before the restructuring. The Company may not be able to effectively start up or integrate new product opportunities.
Removed
The extent to which COVID-19 impacts the Company’s business will depend on future developments which are highly uncertain and cannot be predicted with confidence, including: • the ultimate severity of COVID-19 and its associated variants; • the continued duration of the pandemic; • business closures, travel restrictions, social distancing and other actions taken to contain COVID-19; and • the effectiveness of actions taken to contain and treat COVID-19, including vaccine distribution and effectiveness.
Added
The Company's ability to grow the business depends, in part, on the creation, implementation or acquisition of new insurance products that are profitable and fit within the Company's business model.
Removed
The fair value of fixed income investments can fluctuate depending on changes in interest rates and the credit quality of underlying issuers.
Added
The Company's ability to grow profitably requires the identification of market opportunities, which may include acquisitions, and the ability to attract and retain underwriting and claims expertise to support that growth.
Removed
The Company’s competitors include, among others: American International Group, Argo Group International Holdings, Ltd., Ategrity Specialty Holdings LLC, Atlantic Casualty Insurance Company, Berkshire Hathaway, Canopius US Insurance, Inc., CapSpecialty Insurance Group, Everest Re Group, Ltd., Great American Insurance Group, Hallmark Financial Services, Inc., HCC Insurance Holdings, Inc., IFG Companies, James River Group Holdings, Kinsale Capital Group, Inc., Markel Corporation, Nationwide Insurance, RLI Corporation, RSUI Group, Selective Insurance Group, Inc., The Hartford, The Travelers Companies, Inc., Westchester Surplus Lines Insurance Co, and W.R.
Added
New product launches, as well as resources to integrate business acquisitions, are subject to many obstacles, including ensuring the Company has sufficient business and systems processes, determining appropriate pricing, obtaining reinsurance, assessing opportunity costs and regulatory burdens, and planning for internal infrastructure needs.
Removed
Berkley Corporation. Some of the Company’s competitors have greater financial and marketing resources than the Company does.
Added
The failure of any of the loss limitations or exclusions employed by the Company, or changes in other claims or coverage issues, could have a material adverse effect on the Company's financial condition or results of operations. Although the Company seeks to mitigate its loss exposure through a variety of methods, the future is inherently unpredictable.
Removed
The CCPA, among other things, requires covered companies to provide new disclosures to California consumers and afford such consumers with the rights to opt-out of certain sales of personal information. The CCPA creates a private right of action for statutory damages for certain breaches of information.
Added
It is difficult to predict the timing, frequency and severity of losses with statistical certainty. It is not possible to completely eliminate the Company's exposure to unforecasted or unpredictable events and, to the extent that losses from such risks occur, the Company's financial condition and results of operations could be materially adversely affected.
Removed
The Company's share repurchase program may affect or increase the volatility of the price of its class A common shares.
Added
For instance, various provisions within policies issued by the Company, such as limitations or exclusions from coverage or choice of forum, which have been negotiated to limit the Company's risks, may not be enforceable in the manner intended by the Company.
Removed
There can be no assurance that amounts paid as distributions on Global Indemnity Group, LLC’s common shares will be sufficient to cover the tax liability arising from ownership of the common shares.
Added
In addition, policy terms are designed to manage the Company's exposure to expanding theories of legal liability like those which have given rise to claims for lead paint asbestos, mold, construction defects and environmental matters.
Removed
Global Indemnity Group, LLC cannot match transferors and transferees of Global Indemnity Group, LLC’s common shares, and therefore, Global Indemnity Group, LLC has adopted certain income tax accounting conventions that may not conform with all aspects of applicable tax requirements.
Added
Many of the policies issued by the Company also include conditions requiring the prompt reporting of claims to the Company and entitle the Company to decline coverage in the event of a violation of those conditions.
Removed
In addition, the Company does not currently maintain key man life insurance policies with respect to any of its employees.
Added
Also, many of the Company's policies limit the period during which a policyholder may bring a claim under the policy, which in many cases is shorter than the statutory period under which such claims can be brought against the Company's policyholders.
Added
While these exclusions and limitations help the Company to assess and reduce its loss exposure and help eliminate known exposures to certain risks, it is possible that a court or regulatory authority could nullify or void an exclusion or legislation could be enacted modifying or barring the use of such endorsements and limitations.
Added
These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on the Company's financial condition or results of operations. As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge.
Added
An example is court decisions that read policy exclusions narrowly so as to expand coverage, thereby requiring insurers to create and write new exclusions. These issues may adversely affect the Company's business by either broadening coverage beyond its underwriting intent or by increasing the number or size of claims.
Added
In some instances, these changes may not become apparent until sometime after the Company has issued insurance contracts that are affected by the changes.
Added
In addition, there could be unanticipated problems with the Company’s disaster recovery processes, or a support failure from external providers, that could have an adverse effect on the Company’s ability to conduct business if a significant number of employees were unable to work in the event of a disaster.
Added
A natural or man-made disaster could increase the incidence or severity of E&O claims against the Company.
Added
As a result, it is possible that any, or a combination of all, of these factors related to natural or man-made disasters could have a material adverse effect on the Company’s business, financial condition, and results of operations.
Added
Third parties, including third party administrators and cloud-based systems, are also subject to cyber-attacks and breaches of confidential information, along with the other risks outlined above, any one of which may result in the Company incurring substantial costs and other negative consequences, including a material adverse effect on the Company's business, reputation, financial condition, results of operations or liquidity.
Added
The Company's increased use of open source software, cloud technology and software as a service can make it more difficult to identify and remedy such situations due to the disparate location of code utilized in its operations.
Added
The Company’s business success and profitability depend, in part, on effective information technology systems and on continuing to develop and implement improvements in technology, particularly as the Company’s business processes become more digital.

… 7 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−0 removed0 unchanged
Biggest changeThe Company intends to execute early lease termination clauses in Scottsdale, Arizona, Omaha, Nebraska, and Cavan, Ireland. As a result, the lease liability on the Company's consolidated balance sheet at December 31, 2022 include $4.6 million which represents the present value of expected lease costs through the early termination date.
Biggest changeAs a result, the lease liability on the Company's consolidated balance sheet at December 31, 2023 and 2022 include $3.2 million and $4.6 million, respectively, which represents the present value of expected lease costs through the early termination date. The Company believes the Bala Cynwyd, Pennsylvania location is suitable and adequate to meet its needs.
Item 2. P ROPERTIES At December 31, 2022, office space leased in Bala Cynwyd, Pennsylvania, holds the Commercial Specialty segment’s principal executive offices and headquarters. A decision has been made for employees who do not work at the Bala Cynwyd, Pennsylvania office to work remotely.
Item 2. P ROPERTIES At December 31, 2023, office space leased in Bala Cynwyd, Pennsylvania, holds the Penn-America segment’s principal executive offices and headquarters. A decision has been made for employees who do not work at the Bala Cynwyd, Pennsylvania office to work remotely.
The Company believes the Bala Cynwyd, Pennsylvania location is suitable and adequate to meet its needs. Additionally, a number of the Company’s personnel work remotely and almost all of the Company’s personnel have the ability to work remotely.
Additionally, a number of the Company’s personnel work remotely and almost all of the Company’s personnel have the ability to work remotely.
Added
The Company exercised the early lease termination clauses for its Omaha, Nebraska and Cavan, Ireland leases and intends to exercise the early termination clause for its Scottsdale, Arizona lease.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changeSome 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 4. MINE SAF ETY DISCLOSURES None. 34 PART II
Biggest changeSome 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 4. MINE SAF ETY DISCLOSURES None. 37 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. MINE SAFETY DISCLOSURES 34 PART II Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 35 Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 37 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 70 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 72
Biggest changeItem 4. MINE SAFETY DISCLOSURES 37 PART II Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 38 Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 40 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 70 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 72

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+2 added−2 removed6 unchanged
Biggest changeOn January 3, 2023, Global Indemnity Group, LLC announced that it had authorized an increase in the aggregate stock purchase program from $32 million, which was authorized on October 21, 2022, to $60 million. The authorization to repurchase will expire on December 31, 2027.
Biggest changeOn October 21, 2022, Global Indemnity Group, LLC announced it commenced a stock repurchase program beginning in the fourth quarter of 2022. On January 3, 2023, Global Indemnity Group, LLC announced that it had authorized an increase in the aggregate stock purchase program from $32 million, which was authorized on October 21, 2022, to $60 million.
Effective January 3, 2022, Global Indemnity Group, LLC voluntarily transferred the listing of its class A common shares from the NASDAQ to the NYSE and is trading under the ticker symbol GBLI. Prior to January 3, 2022, the Company’s class A common shares continued to trade on the NASDAQ. Global Indemnity Group, LLC’s predecessors have been publicly traded since 2003.
Effective January 3, 2022, Global Indemnity Group, LLC voluntarily transferred the listing of its class A common shares from the NASDAQ to the NYSE and is trading under the ticker symbol GBLI. Prior to January 3, 2022, the Company’s class A common shares traded on the NASDAQ. Global Indemnity Group, LLC’s predecessors have been publicly traded since 2003.
See Note 16 to the consolidated financial statements in Item 8 of Part II of this report for additional information on the retirement of Global Indemnity Group, LLC’s class A common shares as well as a tabular disclosure of Global Indemnity Group, LLC’s share repurchases by month.
See Note 15 to the consolidated financial statements in Item 8 of Part II of this report for additional information on the retirement of Global Indemnity Group, LLC’s class A common shares as well as a tabular disclosure of Global Indemnity Group, LLC’s share repurchases by month.
The Fox Paine Entities comprise the two holders of record of Global Indemnity Group, LLC’s class B common shares as of December 31, 2022. See Note 19 to the consolidated financial statements in Item 8 of Part II of this report for information regarding securities authorized under Global Indemnity Group, LLC’s equity compensation plans.
The Fox Paine Entities comprise the two holders of record of Global Indemnity Group, LLC’s class B common shares as of December 31, 2023. See Note 18 to the consolidated financial statements in Item 8 of Part II of this report for information regarding securities authorized under Global Indemnity Group, LLC’s equity compensation plans.
For a discussion of factors affecting the Company’s ability to make distributions, see “Business – Regulation” in Item 1 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Sources and Uses of Funds” in Item 7 of Part II, and Note 22 of the notes to the consolidated financial statements in Item 8 of Part II of this report. 36
For a discussion of factors affecting the Company’s ability to make distributions, see “Business – Regulation” in Item 1 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Sources and Uses of Funds” in Item 7 of Part II, and Note 21 of the notes to the consolidated financial statements in Item 8 of Part II of this report. 39
See “Management’s Discussion and Analysis of Financial Condition – Liquidity and Capital Resources – Sources and Uses of Funds” in Item 7 of Part II of this report for dividend limitation and Note 22 of the notes to the consolidated financial statement in Item 8 of Part II of this report for the dividends declared and paid by the Company’s insurance subsidiaries in 2022.
See “Management’s Discussion and Analysis of Financial Condition – Liquidity and Capital Resources – Sources and Uses of Funds” in Item 7 of Part II of this report for dividend limitation and Note 21 of the notes to the consolidated financial statement in Item 8 of Part II of this report for the dividends declared and paid by the Company’s insurance subsidiaries in 2023.
See Note 16 of the consolidated financial statements in Item 8 of Part II of this report for dividends / distributions declared during the years ended December 31, 2022, 2021, and 2020. Global Indemnity Group, LLC is a holding company and has no direct operations.
See Note 15 of the consolidated financial statements in Item 8 of Part II of this report for distributions declared during the years ended December 31, 2023, 2022, and 2021. Global Indemnity Group, LLC is a holding company and has no direct operations.
There is no established public trading market for Global Indemnity Group, LLC’s class B common shares. As of December 31, 2022, Global Indemnity Group, LLC’s class A common shares were held by approximately 150 shareholders of record.
There is no established public trading market for Global Indemnity Group, LLC’s class B common shares. As of December 31, 2023, Global Indemnity Group, LLC’s class A common shares were held by approximately 140 shareholders of record.
Performance of Global Indemnity Group, LLC’s Class A Common Shares The following graph represents a five-year comparison of the cumulative total return to shareholders for the Company’s class A common shares and stock of companies included in the NASDAQ Insurance Index and NASDAQ Composite Index. 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 GBLI $ 100.0 $ 86.2 $ 70.5 $ 68.0 $ 59.8 $ 55.5 NASDAQ Insurance Index 100.0 91.5 115.9 117.0 132.5 135.1 NASDAQ Composite Index 100.0 96.1 130.0 186.7 226.6 151.6 35 Recent Sales of Unregistered Securities There were no sales of unregistered equity securities during the year ended December 31, 2022.
Performance of Global Indemnity Group, LLC’s Class A Common Shares The following graph represents a five-year comparison of the cumulative total return to shareholders for the Company’s class A common shares and stock of companies included in the NASDAQ Insurance Index and NASDAQ Composite Index. 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 GBLI $ 100.0 $ 81.8 $ 78.9 $ 69.4 $ 64.3 $ 89.0 NASDAQ Insurance Index 100.0 126.7 127.9 144.8 147.6 159.8 NASDAQ Composite Index 100.0 135.2 194.2 235.8 157.7 226.2 38 Recent Sales of Unregistered Securities There were no sales of unregistered equity securities during the year ended December 31, 2023.
During 2022, Global Indemnity Group, LLC purchased an aggregate 15,954 of surrendered class A common shares from employees for $0.4 million. All shares purchased from employees are held as treasury stock and recorded at cost until formally retired. On October 21, 2022, GBLI announced that it would commence a stock repurchase program beginning in the fourth quarter of 2022.
During 2023, Global Indemnity Group, LLC purchased an aggregate 18,860 of surrendered class A common shares from employees for $0.6 million. All shares repurchased from third parties and employees are held as treasury stock and recorded at cost until formally retired.
Under the repurchase program, the Company repurchased 907,082 shares from third parties for an aggregate amount of $21.9 million, or $24.17 per share through December 31, 2022. Of these shares repurchased and held in treasury, one of the Directors of Global Indemnity Group, LLC purchased 138,151 shares in December 31, 2022.
Under the repurchase program, the Company repurchased 1,357,082 shares from third parties for an aggregate amount of $34.0 million, or $25.05 per share during the year ended December 31, 2023. As a result of these transactions, book value per share increased by $1.69 per share.
Removed
As a result of these transactions, book value per share increased by $1.09 per share.
Added
On June 8, 2023, Global Indemnity Group, LLC's Board of Directors approved an additional increase in the existing share buyback authorization amount of $60 million to $135 million. The authorization to repurchase will expire on December 31, 2027.
Removed
Distribution Policy The Company’s distribution program anticipates a distribution rate of $0.25 per share per quarter ($1.00 per share per year). Continued payment of distributions is subject to future determinations by the Board of Directors based on the Company’s results, financial conditions, amounts required to grow the Company’s business, and other factors deemed relevant by the Board.
Added
Distributions Future dividends remain subject to the discretion of GBLI’s Board of Directors, including the Board of Director’s evaluation of the company’s financial performance, capital and reserve positions, liquidity, balance sheet, and other factors.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

150 edited+44 added−85 removed121 unchanged
Biggest changeSee “Business Segments” in Item 1 of Part I of this report for a description of the Company’s segments. 47 Results of Operations The following table summarizes the Company’s results for the years ended December 31, 2022, 2021, and 2020: Years Ended December 31, % Years Ended December 31, % (Dollars in thousands) 2022 2021 Change 2021 2020 Change Gross written premiums $ 727,603 $ 682,122 6.7 % $ 682,122 $ 606,603 12.4 % Net written premiums $ 591,331 $ 580,068 1.9 % $ 580,068 $ 548,167 5.8 % Net earned premiums $ 602,471 $ 595,610 1.2 % $ 595,610 $ 567,699 4.9 % Other income 1,462 1,815 (19.4 %) 1,815 2,038 (10.9 %) Total revenues 603,933 597,425 1.1 % 597,425 569,737 4.9 % Losses and expenses: Net losses and loss adjustment expenses 359,228 384,964 (6.7 %) 384,964 336,201 14.5 % Acquisition costs and other underwriting expenses 236,381 222,841 6.1 % 222,841 215,607 3.4 % Underwriting income (loss) 8,324 (10,380 ) (180.2 %) (10,380 ) 17,929 (157.9 %) Net investment income 27,627 37,020 (25.4 %) 37,020 28,392 30.4 % Net realized investment gains (losses) (32,929 ) 15,887 NM 15,887 (14,662 ) (208.4 %) Other income 29,903 27,936 7.0 % 27,936 80 NM Corporate and other operating expenses (24,421 ) (27,179 ) (10.1 %) (27,179 ) (41,998 ) (35.3 %) Interest expense (3,004 ) (10,481 ) (71.3 %) (10,481 ) (15,792 ) (33.6 %) Loss on extinguishment of debt (3,529 ) — NM — (3,060 ) NM Income (loss) before income taxes 1,971 32,803 (94.0 %) 32,803 (29,111 ) (212.7 %) Income tax (expense) benefit (2,821 ) (3,449 ) (18.2 %) (3,449 ) 8,105 (142.6 %) Net income (loss) $ (850 ) $ 29,354 (102.9 %) $ 29,354 $ (21,006 ) (239.7 %) Underwriting Ratios: Loss ratio (1) 59.6 % 64.7 % 64.7 % 59.2 % Expense ratio (2) 39.2 % 37.4 % 37.4 % 38.0 % Combined ratio (3) 98.8 % 102.1 % 102.1 % 97.2 % 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.
Biggest changePenn-America's accident year underwriting income(2) was $18.5 million, $13.5 million, and $14.1 million for the years ended December 31, 2023, 2022, and 2021, respectively, and the accident year combined ratio(2) was 95.2%, 96.5%, and 95.8% for the years ended December 31, 2023, 2022, and 2021, respectively. 49 The following table summarizes the Company’s results for the years ended December 31, 2023, 2022, and 2021: Years Ended December 31, % Years Ended December 31, % (Dollars in thousands) 2023 2022 Change 2022 2021 Change Gross written premiums $ 416,397 $ 727,603 (42.8 %) $ 727,603 $ 682,122 6.7 % Net written premiums $ 399,319 $ 591,331 (32.5 %) $ 591,331 $ 580,068 1.9 % Net earned premiums $ 473,357 $ 602,471 (21.4 %) $ 602,471 $ 595,610 1.2 % Other income 1,435 1,462 (1.8 %) 1,462 1,815 (19.4 %) Total revenues 474,792 603,933 (21.4 %) 603,933 597,425 1.1 % Losses and expenses: Net losses and loss adjustment expenses 289,153 359,228 (19.5 %) 359,228 384,964 (6.7 %) Acquisition costs and other underwriting expenses 182,617 236,381 (22.7 %) 236,381 222,841 6.1 % Underwriting income (loss) 3,022 8,324 (63.7 %) 8,324 (10,380 ) (180.2 %) Net investment income 55,444 27,627 100.7 % 27,627 37,020 (25.4 %) Net realized investment gains (losses) (2,107 ) (32,929 ) (93.6 %) (32,929 ) 15,887 NM Other income — 29,903 (100.0 %) 29,903 27,936 7.0 % Corporate and other operating expenses (23,383 ) (24,421 ) (4.3 %) (24,421 ) (27,179 ) (10.1 %) Interest expense — (3,004 ) (100.0 %) (3,004 ) (10,481 ) (71.3 %) Loss on extinguishment of debt — (3,529 ) (100.0 %) (3,529 ) — 100.0 % Income before income taxes 32,976 1,971 NM 1,971 32,803 (94.0 %) Income tax expense (7,547 ) (2,821 ) 167.5 % (2,821 ) (3,449 ) (18.2 %) Net income (loss) $ 25,429 $ (850 ) NM $ (850 ) $ 29,354 (102.9 %) Underwriting Ratios: Loss ratio (3) 61.1 % 59.6 % 59.6 % 64.7 % Expense ratio (4) 38.6 % 39.2 % 39.2 % 37.4 % Combined ratio (5) 99.7 % 98.8 % 98.8 % 102.1 % NM – not meaningful (1) Net income (loss) excluding the net gain on the sale of the Company’s Manufactured Home and Dwelling renewal rights and the Company's Farm, Ranch & Stable renewal rights of ($17.3) million and $12.9 million during the years ended December 31, 2022 and 2021, respectively, is a non-GAAP measure which excludes the impact of gross proceeds of $30.0 million, impairments and expenses of $9.2 million, and tax expense of $4.4 million related to sale of Farm, Ranch & Stable renewal rights in 2022 and excludes the impact of gross proceeds of $28.0 million, impairments and expenses of $7.2 million, and tax expense of $4.4 million related to the sale of Manufactured Home and Dwelling renewal rights in 2021.
Distributions The Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 21, 2022, June 20, 2022, October 4, 2022, and December 23, 2022. Distributions paid to common shareholders were $14.4 million during the year ended December 31, 2022.
During 2022, the Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 21, 2022, June 20, 2022, October 4, 2022, and December 23, 2022. Distributions paid to common shareholders were $14.4 million during the year ended December 31, 2022.
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.
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.
In conjunction with the liquidation of American Reliable Insurance Company, a series of capital 66 contributions were made downstream within GBLI Holdings, LLC and subsidiaries in an effort to reallocate the capital from the sale of American Reliable Insurance Company. All of the intercompany transactions discussed above eliminate in consolidation and have no impact on the consolidating financial statements.
In conjunction with the liquidation of American Reliable Insurance Company, a series of capital contributions were made downstream within GBLI Holdings, LLC and subsidiaries in an effort to reallocate the capital from the sale of American Reliable Insurance Company. 66 All of the intercompany transactions discussed above eliminate in consolidation and have no impact on the consolidating financial statements.
See the contractual obligation table below for additional information on these commitments. In order to meet its short-term and long-term needs, Global 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.
See the contractual obligation table below for additional information on these commitments. In order to meet its current short-term and long-term needs, Global 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 outstanding balance on this note was $69.4 million at December 31, 2022. On April 13, 2022, GBLI Holdings, LLC issued a promissory note to Global Indemnity Investment Inc. for the principal amount of $18.4 million. This note bears interest at a rate equal to the short-term, annual compound AFR in effect for April 2022 which was 1.26%.
The outstanding balance on this note was $69.4 million at December 31, 2023. On April 13, 2022, GBLI Holdings, LLC issued a promissory note to Global Indemnity Investment Inc. for the principal amount of $18.4 million. This note bears interest at a rate equal to the short-term, annual compound AFR in effect for April 2022 which was 1.26%.
Please see Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a discussion of the Company’s tax uncertainties. Leases The Company determines if an arrangement is a lease at inception. Leases with a term of 12 months or less are not recorded on the consolidated balance sheets.
Please see Note 11 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a discussion of the Company’s tax uncertainties. Leases The Company determines if an arrangement is a lease at inception. Leases with a term of 12 months or less are not recorded on the consolidated balance sheets.
The outstanding principal amount of each advance shall be payable on the last day of the applicable interest period of such advance and on demand. There is no balance outstanding on this note at December 31, 2022. On April 13, 2022, GBLI Holdings, LLC issued a promissory note to Global Indemnity Group, LLC for the principal amount of $69.4 million.
The outstanding principal amount of each advance shall be payable on the last day of the applicable interest period of such advance and on demand. There is no balance outstanding on this note at December 31, 2023. On April 13, 2022, GBLI Holdings, LLC issued a promissory note to Global Indemnity Group, LLC for the principal amount of $69.4 million.
The Company continues to closely monitor its asbestos exposure and make adjustments where they are warranted. Reserve analyses performed by the Company’s internal and external actuaries result in actuarial point estimates. The results of the detailed reserve reviews were summarized and discussed with the Company’s senior management to determine management's best estimate of reserves.
The Company continues to closely monitor its asbestos exposure and make adjustments where they are warranted. 43 Reserve analyses performed by the Company’s internal and external actuaries result in actuarial point estimates. The results of the detailed reserve reviews were summarized and discussed with the Company’s senior management to determine Management's best estimate of reserves.
The Company retained the unearned premium reserves for business written prior to August 8, 2022. Everett Cash Mutual Insurance Company also acquired the 63 Company’s wholly-owned subsidiary, American Reliable Insurance Company, on December 31, 2022 for an amount equal to book value, which was $10.0 million, at the time of closing.
The Company retained the unearned premium reserves for business written prior to August 8, 2022. Everett Cash Mutual Insurance Company also acquired the Company’s wholly-owned subsidiary, American Reliable Insurance Company, on December 31, 2022 for an amount equal to book value, which was $10.0 million, at the time of closing.
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. 43 Recoverability of Reinsurance Receivables The Company regularly reviews the collectability of its reinsurance receivables, and includes adjustments resulting from this review in earnings in the period in which the adjustment arises.
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. Recoverability of Reinsurance Receivables The Company regularly reviews the collectability of its reinsurance receivables, and includes adjustments resulting from this review in earnings in the period in which the adjustment arises.
Under Virginia law, Penn-Patriot Insurance Company may not pay any dividend or make any distribution of cash or other property, the fair market value of which, together with that of any other dividends or distributions made within the preceding 12 consecutive months exceeds the lesser of either (1) 10% of its surplus as of the 31 st day of December of the last preceding year, or (2) its net income, not including net realized capital gains, for the 12 month period ending on the 31 st day of December of the last preceding year, not including pro rata distributions of any class of its securities, unless the commissioner approves the proposed payment or fails to disapprove such payment within 30 days after receiving notice of such payment.
Under Virginia law, Penn-Patriot Insurance Company may not pay any dividend or make any distribution of cash or other property, the fair market value of which, together with that of any other dividends or distributions made within the preceding 12 consecutive months exceeds the greater of either (1) 10% of its surplus as of the 31 st day of December of the last preceding year, or (2) its net income, not including net realized capital gains, for the 12 month period ending on the 31 st day of December of the last preceding year, not including pro rata distributions of any class of its securities, unless the commissioner approves the proposed payment or fails to disapprove such payment within 30 days after receiving notice of such payment.
With respect to bonds, the Company’s credit exposure limit for each issuer varies with the issuer’s credit quality. The allocation between taxable and tax-exempt bonds is determined based on market conditions and tax considerations. The fixed income portfolio currently has a duration of 1.7 years.
With respect to bonds, the Company’s credit exposure limit for each issuer varies with the issuer’s credit quality. The allocation between taxable and tax-exempt bonds is determined based on market conditions and tax considerations. The fixed income portfolio currently has a duration of 1.1 years.
In addition, the 40 inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place and the use of case incurred losses may not eliminate the issues associated with estimating the incurred loss pattern subsequent to the most mature point available.
In addition, the inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place and the use of case incurred losses may not eliminate the issues associated with estimating the incurred loss pattern subsequent to the most mature point available.
The actuarial methods used to project ultimate losses for both long-tail and short-tail reserve categories include, but are not limited to, the following: • Paid Development method; • Incurred Development method; • Expected Loss Ratio method; • Bornhuetter-Ferguson method using premiums and paid loss; • Bornhuetter-Ferguson method using premiums and incurred loss; and • Average Loss method.
The actuarial methods used to project ultimate losses for both long-tail and short-tail reserve categories include, but are not limited to, the following: • Paid Development method; • Incurred Development method; • Expected Loss Ratio method; 41 • Bornhuetter-Ferguson method using premiums and paid loss; • Bornhuetter-Ferguson method using premiums and incurred loss; and • Average Loss method.
In connection with these actions, the Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell, the majority of which were sold in the 2nd quarter of 2022.
In connection with these actions, the Company identified fixed maturities securities with a 59 weighted average life of five years or greater as having an intent to sell, the majority of which were sold in the 2nd quarter of 2022.
Lease right-of-use assets (“ROU”) and lease liabilities are included on the consolidated balance sheets. 45 Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.
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 future minimum lease payments over the lease term at the commencement date.
Funds are used primarily to pay claims and operating expenses and to purchase investments. As a result of the dividend / distribution policy, funds may also be used to pay distributions to shareholders of the Company.
Funds are used primarily to pay claims and operating expenses and to purchase investments. As a result of the distribution policy, funds may also be used to pay distributions to shareholders of the Company.
There are no valuation allowances as of December 31, 2022 and 2021. The deferred tax asset balance is analyzed regularly by management. This assessment requires significant judgment and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of carryforward periods, and tax planning strategies and/or actions.
There are no valuation allowances as of December 31, 2023 and 2022. The deferred tax asset balance is analyzed regularly by management. This assessment requires significant judgment and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of carryforward periods, and tax planning strategies and/or actions.
As of December 31, 2022, the Company also had future funding commitments of $14.2 million related to investments that are currently in their harvest period and it is unlikely that a capital call will be made. The Company has access to various capital sources including dividends from insurance subsidiaries and access to the debt and equity capital markets.
As of December 31, 2023, the Company also had future funding commitments of $14.2 million related to investments that are currently in their harvest period and it is unlikely that a capital call will be made. The Company has access to various capital sources including dividends from insurance subsidiaries and access to the debt and equity capital markets.
The amounts shown above represent future commitments under such operating leases. (2) Represents future funding commitment of the Company’s participation in a limited partnership investment. See Note 18 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on this commitment.
The amounts shown above represent future commitments under such operating leases. (2) Represents future funding commitment of the Company’s participation in a limited partnership investment. See Note 17 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on this commitment.
On each third anniversary of this Note, the interest rate shall reset to the then applicable short-term, annual compounded AFR for such month. The Note is due on April 13, 2031. The outstanding balance on this note was $18.4 million at December 31, 2022.
On each third anniversary of this Note, the interest rate shall reset to the then applicable short-term, annual compounded AFR for such month. The Note is due on April 13, 2031. The outstanding balance on this note was $18.4 million at December 31, 2023.
The Commercial Specialty segment comprises the Company’s Insurance Operations, which currently includes the operations of United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, Penn-Patriot Insurance Company, American Insurance Adjustment Agency, Inc., Collectibles Insurance Services, LLC, Global Indemnity Insurance Agency, LLC, and J.H. Ferguson & Associates, LLC.
The Penn-America segment comprises the Company’s Insurance Operations, which currently includes the operations of United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, Penn-Patriot Insurance Company, American Insurance Adjustment Agency, Inc., Collectibles Insurance Services, LLC, Global Indemnity Insurance Agency, LLC, and J.H. Ferguson & Associates, LLC.
See Note 3 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the sale of renewal rights related to the Company’s manufactured and dwelling homes business and the Company's Farm, Ranch & Stable business.
See Note 2 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the sale of renewal rights related to the Company’s manufactured and dwelling homes business and the Company's Farm, Ranch & Stable business.
See Note 3 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business.
See Note 2 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business.
The Company believes it has sufficient liquidity to meet its capital needs. See Note 22 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a discussion of the Company’s dividend capacity.
The Company believes it has sufficient liquidity to meet its capital needs. See Note 21 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a discussion of the Company’s dividend capacity.
See Note 5 of the notes to consolidated financial statements contained in Item 8 of Part II of this report. Actual results could differ from those estimates and assumptions. 39 The Company believes that of the Company’s significant accounting policies, the following may involve a higher degree of judgment and estimation.
See Note 4 of the notes to consolidated financial statements contained in Item 8 of Part II of this report. Actual results could differ from those estimates and assumptions. The Company believes that of the Company’s significant accounting policies, the following may involve a higher degree of judgment and estimation.
For a listing of the ten reinsurers for which the Company has the largest reinsurance asset amounts as of December 31, 2022, see “Reinsurance of Underwriting Risk” in Item 1 of Part I of this report. Investments The carrying amount of the Company’s investments approximates their fair value.
For a listing of the ten reinsurers for which the Company has the largest reinsurance asset amounts as of December 31, 2023, see “Reinsurance of Underwriting Risk” in Item 1 of Part I of this report. 45 Investments The carrying amount of the Company’s investments approximates their fair value.
Due to fluctuations in interest rates, the Company received $12.7 million and $2.7 million in connection with these derivative instruments for the years ended December 31, 2022 and 2021, respectively. The Company terminated its outstanding interest rate swaps in the fourth quarter of 2022.
Derivative Instruments The Company entered into derivative instruments related to interest rate swaps. Due to fluctuations in interest rates, the Company received $12.7 million and $2.7 million in connection with these derivative instruments for the years ended December 31, 2022 and 2021, respectively. The Company terminated its outstanding interest rate swaps in the fourth quarter of 2022.
(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.
(4) 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.
See Note 22 of the notes to consolidated financial statements in Item 8 of Part II of this report for the maximum amount of distributions that U.S. insurance companies could pay as dividends in 2023. Surplus Levels Global Indemnity’s insurance companies are required by law to maintain a certain minimum level of policyholders’ surplus on a statutory basis.
See Note 21 of the notes to consolidated financial statements in Item 8 of Part II of this report for the maximum amount of distributions that U.S. insurance companies could pay as dividends in 2024. Surplus Levels Global Indemnity’s insurance companies are required by law to maintain a certain minimum level of policyholders’ surplus on a statutory basis.
Fair Value Measurements The Company categorizes its invested assets and derivative instruments that are accounted for at fair value in the consolidated statements into a fair value hierarchy. The fair value hierarchy is directly related to the amount of subjectivity associated with the inputs utilized to determine the fair value of these assets.
Fair Value Measurements The Company categorizes its invested assets that are accounted for at fair value in the consolidated statements into a fair value hierarchy. The fair value hierarchy is directly related to the amount of subjectivity associated with the inputs utilized to determine the fair value of these assets.
Global Indemnity Group, LLC’s short-term and long-term liquidity needs include but are not limited to the payment of corporate expenses, debt service payments, distributions to shareholders, and share repurchases. The Company also has commitments in the form of operating leases, commitments to fund limited liability investments, and unpaid losses and loss expense obligations.
Global Indemnity Group, LLC’s current short-term and long-term liquidity needs include but are not limited to the payment of corporate expenses, distributions to shareholders, and share repurchases. The Company also has commitments in the form of operating leases, commitments to fund limited liability investments, and unpaid losses and loss expense obligations.
Capital Resources Investment Portfolio In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio. The Company identified fixed maturities securities with a weighted average life of five years or 65 greater as having an intent to sell.
Capital Resources Investment Portfolio In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio. In connection with these actions, the Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell.
See Note 6 of the notes to consolidated financial statements in Item 8 of Part II of this report for the specific methodologies and significant assumptions used by asset class as well as an analysis of the Company’s securities with gross unrealized losses as of December 31, 2022 and 2021.
See Note 5 of the notes to consolidated financial statements in Item 8 of Part II of this report for the specific methodologies and significant assumptions used by asset class as well as an analysis of the Company’s securities with gross unrealized losses as of December 31, 2023 and 2022.
GBLI Holdings, LLC is dependent on dividends from its subsidiaries as well as reimbursements from its subsidiaries for utilization of net operating losses and other tax attributes in order to meet its corporate expense obligations and intercompany financing obligations.
GBLI Holdings, LLC is dependent on dividends from its subsidiaries as well as reimbursements from its subsidiaries for utilization of net operating losses in order to meet its corporate expense obligations and intercompany financing obligations.
See Note 6 of the notes to the consolidated financial statements in Item 8 of Part II of this report for an analysis of total investment return on a pre-tax basis for the years ended December 31, 2022, 2021, and 2020.
See Note 5 of the notes to the consolidated financial statements in Item 8 of Part II of this report for an analysis of total investment return on a pre-tax basis for the years ended December 31, 2023, 2022, and 2021.
Distributions paid to common shareholders were $14.4 million during the year ended December 31, 2022. In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the year ended December 31, 2022.
In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the year ended December 31, 2022.
See Note 11 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s reinsurance receivable balances and collectability as of December 31, 2022 and 2021.
See Note 10 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s reinsurance receivable balances and collectability as of December 31, 2023 and 2022.
The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends in the Company's Commercial Specialty segment may be obscured by prior accident year adjustments.
The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends in the Company's Penn-America segment may be obscured by prior accident year adjustments.
The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends in the Company's Exited Lines segment may be obscured by prior accident year adjustments.
The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends in the Company's Non-Core Operations segment may be obscured by prior accident year adjustments.
See Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a comparison of income tax between periods. 60 Net Income (Loss) The factors described above resulted in a net loss of $0.9 million, net income of $29.4 million, and a net loss of $21.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.
See Note 11 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a comparison of income tax between periods. 60 Net Income (Loss) The factors described above resulted in net income of $25.4 million, net loss of $0.9 million, and net income of $29.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Management believes these segments allow users of the Company’s financial statements to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a whole. The segment results for the years ended December 31, 2021 and 2020 have been revised to reflect these changes.
Management believes these segments allow users of the Company’s financial statements to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a whole. Segment results for prior years have been revised to reflect these changes.
Impairments and expenses related to dispositions within Exited Lines represent impairments of goodwill, intangible assets, software, and lease costs as well as legal expenses and merger and acquisition fees related to the sale of renewal rights related to the Company's Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business.
Impairments and expenses related to dispositions within Non-Core Operations represent impairments of goodwill, intangible assets, software, and lease costs as well as legal expenses and merger and acquisition fees related to the sale of renewal rights related to the Company's Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business.
The Company also reviews assumed reinsurance segments each quarter by treaty and treaty year which is comprised primarily of long-tailed business. To manage its Insurance Operations, the Company's insurance products target specific, defined groups of insureds with customized coverage to meet their needs. The primary business divisions include Wholesale Commercial and InsurTech.
The Company also reviews assumed reinsurance segments each quarter by treaty and treaty year which is comprised primarily of long-tailed business. To manage its Insurance Operations, the Company's insurance products target specific, defined groups of insureds with customized coverage to meet their needs.
As of December 31, 2022, the Company had a deferred tax asset of approximately $10.6 million related to net unrealized losses on a fixed maturity available for sale securities.
As of December 31, 2023, the Company had a deferred tax asset of approximately $5.6 million related to net unrealized losses on fixed maturity available for sale securities.
Corporate and Other Operating Expenses Years Ended December 31, (Dollars in thousands) 2022 2021 2020 Corporate expenses - nondisposition related $ 13,959 $ 19,977 $ 41,998 Impairments and expenses related to dispositions within Exited Lines 10,462 7,202 — Corporate and Other Operating Expenses $ 24,421 $ 27,179 $ 41,998 Corporate expenses - nondisposition related 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, impairment losses, and taxes incurred which are not directly related to operations.
Corporate and Other Operating Expenses Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Corporate expenses - nondisposition related $ 23,383 $ 13,959 $ 19,977 Impairments and expenses related to dispositions within Non-Core Operations — 10,462 7,202 Corporate and Other Operating Expenses $ 23,383 $ 24,421 $ 27,179 Corporate expenses - nondisposition related 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, impairment losses, and taxes incurred which are not directly related to operations.
The embedded book yield on the $54.6 million of taxable municipal bonds in the Company’s portfolio was 2.8% at December 31, 2021, compared to an embedded book yield of 3.0% on the Company’s taxable municipal bonds of $61.2 million at December 31, 2020.
The embedded book yield on the $31.6 million of taxable municipal bonds in the Company’s portfolio was 3.1% at December 31, 2022, compared to an embedded book yield of 2.8% on the Company’s taxable municipal bonds of $54.6 million at December 31, 2021.
A premium deficiency is recognized if the sum of expected losses and loss adjustment expenses and unamortized acquisition costs exceeds related unearned premium. This evaluation is done at a distribution and product line level for Insurance Operations and Exited Lines and at a treaty level for Reinsurance Operations.
A premium deficiency is recognized if the sum of expected losses and loss adjustment expenses and unamortized acquisition costs exceeds related unearned premium. This evaluation is done at a distribution and product line/treaty level.
The Company incurred restructuring charges of $3.4 million in the fourth quarter of 2022 and $2.1 million in the first quarter of 2023 for a total of $5.5 million. The Company anticipates recurring annual expense savings of $16.0 million beginning in 2023.
The restructuring plan was initiated in the fourth quarter of 2022 and was completed in the first quarter of 2023. The Company incurred restructuring charges of $3.4 million in 2022 and $2.0 million in 2023 for a total of $5.4 million. The Company anticipates recurring annual expense savings of $16.0 million.
The reduction in retention is primarily due to all of the Company's manufactured and dwelling homes policies, except for Florida and Louisiana which are in run-off, were ceded to American Family Mutual Insurance Company in 2022 and all policies written with an effective date of August 8, 2022 and later within the Company's Farm, Ranch & Stable business were ceded to Everett Cash Mutual Insurance Company.
All of the Company's manufactured and dwelling homes policies, except for Florida and Louisiana which have been fully run-off, were ceded to American Family Mutual Insurance Company in 2022 and all policies written with an effective date of August 8, 2022 and later within the Company's Farm, Ranch & Stable business were ceded to Everett Cash Mutual Insurance Company.
See Note 14 of the notes to the consolidated financial statements in Item 8 of Part II of this report for details on the Company’s debt. Income Tax Benefit/ Expense The income tax expense was $2.8 million for the year ended December 31, 2022 compared with income tax expense of $3.4 million for the year ended December 31, 2021.
See Note 13 of the notes to the consolidated financial statements in Item 8 of Part II of this report for details on the Company’s debt. Income Tax Benefit/ Expense The income tax expense was $7.5 million for the year ended December 31, 2023 compared with income tax expense of $2.8 million for the year ended December 31, 2022.
The calendar year loss ratio for the years ended December 31, 2022, 2021, and 2020 includes a decrease of $5.2 million, or 6.2%, an increase of $8.2 million, or 4.4%, and a decrease of $6.4 million, or 2.6%, respectively, related to reserve development on prior accident years.
The calendar year loss ratio for the years ended December 31, 2023, 2022, and 2021 includes a decrease of $20.3 million, or 17.1%, a decrease of $10.9 million, or 4.5%, and an increase of $6.8 million, or 2.4%, respectively, related to reserve development on prior accident years.
Management’s best estimate at December 31, 2022 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 $832.4 million and $759.4 million, respectively, as of December 31, 2022.
Management’s best estimate at December 31, 2023 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 $850.6 million and $777.8 million, respectively, as of December 31, 2023.
Net Realized Investment Gains (Losses) The components of net realized investment gains (losses) for the years ended December 31, 2022, 2021, and 2020 were as follows: Years Ended December 31, (Dollars in thousands) 2022 2021 2020 Equity securities $ (3,392 ) $ 13,440 $ (15,250 ) Fixed maturities (13,405 ) 342 23,604 Derivatives 10,073 2,105 (22,256 ) Other-than-temporary impairment losses (26,205 ) — (760 ) Net realized investment gains (losses) $ (32,929 ) $ 15,887 $ (14,662 ) 59 In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio.
Net Realized Investment Gains (Losses) The components of net realized investment gains (losses) for the years ended December 31, 2023, 2022, and 2021 were as follows: Years Ended December 31, (Dollars in thousands) 2023 2022 2021 Equity securities $ (453 ) $ (3,392 ) $ 13,440 Fixed maturities (1,654 ) (13,405 ) 342 Derivatives — 10,073 2,105 Other-than-temporary impairment losses — (26,205 ) — Net realized investment gains (losses) $ (2,107 ) $ (32,929 ) $ 15,887 In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio.
Other Income Other income was $1.0 million, $1.0 million, and $0.9 million for the years ended December 31, 2022, 2021, and 2020, respectively.
Other Income Other income was $1.3 million, $1.0 million, and $1.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.
An additional limitation is that Indiana does not permit a domestic insurer to declare or pay a dividend except out of unassigned surplus unless otherwise approved by the commissioner before the dividend is paid.
An additional limitation is that Indiana does not permit a domestic insurer to declare or pay a dividend except out of unassigned surplus unless otherwise approved by the commissioner before the dividend is paid. The Company’s insurance subsidiaries did not declare or pay any dividends in 2023.
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, and Penn-Star 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, and Penn-Star Insurance Company.
The authorization to repurchase will expire on December 31, 2027. The timing and actual number of shares repurchased, if any, will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.
The timing and actual number of shares repurchased, if any, will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.
The calendar year loss ratio for the years ended December 31, 2022, 2021, and 2020 includes a decrease of $1.4 million, or 0.4%, an increase of $1.6 million or 0.5%, and a decrease of $23.5 million or 8.5%, respectively, related to reserve development on prior accident years.
The calendar year loss ratio for the years ended December 31, 2023, 2022, and 2021 includes an increase of $29.9 million, or 8.4%, an increase of $2.8 million or 0.8%, and an increase of $1.8 million or 0.6%, respectively, related to reserve development on prior accident years.
Stock Repurchase On October 21, 2022, GBLI announced that it would commence a stock repurchase program beginning in the fourth quarter of 2022. On January 3, 2023, Global Indemnity Group, LLC announced that it had authorized an increase in the aggregate stock purchase program from $32 million, which was authorized on October 21, 2022, to $60 million.
On January 3, 2023, Global Indemnity Group, LLC announced that it had authorized an increase in the aggregate stock purchase program from $32 million, which was authorized on October 21, 2022, to $60 million.
For umbrella business, the shift from the Expected Loss Ratio method to the Bornhuetter-Ferguson methods to the Loss Development method may be more protracted than for most long-tailed lines.
For umbrella business, the shift from the Expected Loss Ratio method to the Bornhuetter-Ferguson methods to the Loss Development method may be more protracted than for most long-tailed lines. Reserves for short-tail lines tend to make the shift across methods more quickly than the long-tail lines.
See Note 8 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further information about the fair value hierarchy and the Company’s assets that are accounted for at fair value.
The reported value of financial instruments not carried at fair value, principally cash and cash equivalents, approximate fair value. See Note 7 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further information about the fair value hierarchy and the Company’s assets that are accounted for at fair value.
(2) Net written premiums equal gross written premiums less ceded premiums written. (3) External business only, excluding business assumed from affiliates. Gross written premiums increased by 6.7% for year ended December 31, 2022 as compared to 2021.
(2) Net written premiums equal gross written premiums less ceded premiums written. (3) External business only, excluding business assumed from affiliates. Gross written premiums decreased by 42.8% for year ended December 31, 2023 as compared to 2022.
The current accident year property catastrophe loss ratio for 2022 improved by 3.8 points compared to 2021 recognizing lower claims frequency.
The current accident year property catastrophe loss ratio for 2022 improved by 4.5 points compared to 2021 reflecting lower claims frequency.
Impairments and expenses related to dispositions within Exited Lines were $10.5 million and $7.2 million during the years ended December 31, 2022 and 2021, respectively. There was no impairments and expenses related to dispositions within Exited Lines during the year ended December 31, 2020.
Impairments and expenses related to dispositions within Non-Core Operations were $10.5 million and $7.2 million during the years ended December 31, 2022 and 2021, respectively. There were no impairments and expenses related to dispositions within Non-Core Operations during the year ended December 31, 2023.
The decrease in income tax expense is primarily due to lower taxable income in the Company's U.S. subsidiaries. The income tax expense was $3.4 million for the year ended December 31, 2021 compared with income tax benefit of $8.1 million for the year ended December 31, 2020.
The increase in income tax expense is primarily due to higher taxable income in the Company's U.S. subsidiaries. The income tax expense was $2.8 million for the year ended December 31, 2022 compared with income tax expense of $3.4 million for the year ended December 31, 2021.
As of December 31, 2022, the Company has no interest rate swap agreements. 67 Contractual Obligations The Company has commitments in the form of operating leases, commitments to fund limited liability investments, subordinated notes, and unpaid losses and loss expense obligations.
No amounts related to the derivative instruments were received in 2023. The Company has no interest rate swap agreements as of December 31, 2023. 67 Contractual Obligations The Company has commitments in the form of operating leases, commitments to fund limited liability investments, and unpaid losses and loss expense obligations.
American Reliable and United National non-renewed manufactured home and dwelling insurance in Louisiana beginning on or about January 31, 2022, for policies renewing on or after March 7, 2022.
American Reliable commenced the non-renewal of manufactured home insurance in Florida beginning on March 11, 2022, for policies expiring on or after July 10, 2022. American Reliable and United National non-renewed manufactured home and dwelling insurance in Louisiana beginning on or about January 31, 2022, for policies renewing on or after March 7, 2022.
In light of the many uncertainties associated with establishing the estimates and making the assumptions necessary to establish reserve levels, the Company reviews its reserve estimates on a regular basis and makes adjustments in the period that the need for such adjustments is determined.
In light of the many uncertainties associated with establishing the estimates and making the assumptions necessary to establish reserve levels, the Company reviews its reserve estimates on a regular basis and makes adjustments in the period that the need for such adjustments is determined. 44 The key assumptions fundamental to the reserving process are often different for various reserve categories and accident years.
To estimate losses from claims that have occurred but have not yet been reported to the Company ("pure IBNR"), various extrapolation techniques are applied to the pattern of claims that have been reported to estimate the number of claims yet to be reported.
To estimate losses from claims that have occurred but have not yet been reported to the Company, various extrapolation techniques are applied to the pattern of claims that have been reported to estimate the number of claims yet to be reported which will ultimately pay positive loss amounts.
The future liquidity of both Global Indemnity Group, LLC and GBLI Holdings, LLC is dependent on the ability of its subsidiaries to generate income 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.
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 impairment is measured as the difference between the carrying amount and the estimated fair value of the asset. 44 See Note 9 of the notes to the consolidated financial statements in Item 8 of Part II of this report for more details concerning the Company’s goodwill and intangible assets as well as the result of its impairment testing.
See Note 8 of the notes to the consolidated financial statements in Item 8 of Part II of this report for more details concerning the Company’s goodwill and intangible assets as well as the result of its impairment testing.
Any future expected loss on the related unearned premium is recorded first by impairing the unamortized acquisition costs on the related unearned premium followed by an increase to losses and loss adjustment expense reserves on additional expected loss in excess of unamortized acquisition costs.
Any future expected loss on the related unearned premium is recorded first by impairing the unamortized acquisition costs on the related unearned premium followed by an increase to losses and loss adjustment expense reserves on additional expected loss in excess of unamortized acquisition costs. The Company calculates deferred acquisition costs for Penn-America and Non-Core Operations separately by distribution lines.
The approximate amount of the unearned premium reserves at November 30, 2021 was $33.8 million. The Company received a 40% ceding commission which included a provision for a 4% claims administration fee to be paid by the Company directly to K2 Claims. Trust accounts Global Indemnity Reinsurance established trust accounts to collateralize exposure it had to certain third-party ceding companies.
The approximate amount of the unearned premium reserves at November 30, 2021 was $33.8 million. The Company received a 40% ceding commission which included a provision for a 4% claims administration fee to be paid by the Company directly to K2 Claims.
Reserves for short-tail lines tend to make the shift across methods more quickly than the long-tail lines. 41 For other more complex reserve categories where the above methods may not produce reliable indications, the Company's actuaries uses additional methods tailored to the characteristics of the specific situation. Such reserve categories include losses from construction defect and A&E claims.
For other more complex reserve categories where the above methods may not produce reliable indications, the Company's actuaries use additional methods tailored to the characteristics of the specific situation. Such reserve categories include losses from construction defect and A&E claims.
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.
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’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.
Lease expenses for minimum lease payments are recognized on a straight-line basis over the lease term. 47 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 reserve estimate is the difference between the estimated ultimate loss and the losses paid to date. The difference between the estimated ultimate loss and the case incurred loss (paid loss plus case reserve) is considered to be IBNR.
The reserve estimate is the difference between the estimated ultimate loss and the losses paid to date.
Dividends / distributions paid to common shareholders were $14.3 million during the year ended December 31, 2020. In addition, distributions of $0.1 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the year ended December 31, 2020.
In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the year ended December 31, 2023.

… 199 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed12 unchanged
Biggest changeAs of December 31, 2022, assuming identical shifts in interest rates for securities of all maturities, the table below illustrates the sensitivity of market value in Global Indemnity’s bonds to selected hypothetical changes in basis point increases and decreases: (Dollars in thousands) Change in Market Value Basis Point Change Market Value % (200) $ 1,289,601 41,403 3.3 % (100) 1,268,914 20,716 1.7 % No change 1,248,198 — — 100 1,227,459 (20,739 ) (1.7 %) 200 1,206,726 (41,472 ) (3.3 %) Credit Risk The Company’s investment policy requires that its investments in debt instruments are of high credit quality issuers and limit the amount of credit exposure to any one issuer based upon the rating of the security.
Biggest changeAs of December 31, 2023, assuming identical shifts in interest rates for securities of all maturities, the table below illustrates the sensitivity of market value in Global Indemnity’s bonds to selected hypothetical changes in basis point increases and decreases: (Dollars in thousands) Change in Market Value Basis Point Change Market Value % (200) $ 1,322,494 28,701 2.2 % (100) 1,308,143 14,350 1.1 % No change 1,293,793 — — 100 1,279,448 (14,345 ) (1.1 %) 200 1,265,106 (28,687 ) (2.2 %) Credit Risk The Company’s investment policy requires that its investments in debt instruments are of high credit quality issuers and limit the amount of credit exposure to any one issuer based upon the rating of the security.
There was no credit loss recorded on these investments during the years ended December 31, 2022 or 2021. In addition, the Company has credit risk exposure to its general agencies and reinsurers.
There was no credit loss recorded on these investments during the years ended December 31, 2023 or 2022. In addition, the Company has credit risk exposure to its general agencies and reinsurers.
The Company continues to hold a minimal amount of equity securities as of December 31, 2022, however, the positions do not pose a significant equity price risk.
The Company continues to hold a minimal amount of preferred stocks as of December 31, 2023, however, the positions do not pose a significant equity price risk.
As of December 31, 2021, the Company had approximately $35.3 million worth of investment exposure to subprime and Alt-A investments. As of December 31, 2021, approximately $19.1 million of those investments have been rated BBB to AAA by Standard & Poor’s and $16.1 million were rated below investment grade.
As of December 31, 2023, the Company had approximately $27.8 million worth of investment exposure to subprime and Alt-A investments. As of December 31, 2023, approximately $15.1 million of those investments have been rated BBB to AAA by Standard & Poor’s and $12.7 million were rated below investment grade.

Other GBLI 10-K year-over-year comparisons