Global Indemnity Group(GBLI) - 2019 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents Global Indemnity Limited's unaudited consolidated financial statements for Q2 and H1 2019, covering balance sheets, income, and cash flow, with detailed accounting notes Consolidated Financial Statements The company's total assets increased to $2.02 billion as of June 30, 2019, driven by investments, while net income significantly rose in Q2 and H1 2019, despite a decrease in net cash from operating activities Consolidated Balance Sheet Highlights | Financial Metric | June 30, 2019 (Unaudited, thousands USD) | December 31, 2018 (thousands USD) | | :--- | :--- | :--- | | Total Investments | $1,509,777 | $1,410,655 | | Cash and cash equivalents | $56,215 | $99,497 | | Total Assets | $2,015,472 | $1,960,266 | | Total Liabilities | $1,320,960 | $1,331,207 | | Total Shareholders' Equity | $694,512 | $629,059 | Consolidated Statements of Operations Highlights | Income Statement Highlights | Q2 2019 (thousands USD) | Q2 2018 (thousands USD) | Six Months 2019 (thousands USD) | Six Months 2018 (thousands USD) | | :--- | :--- | :--- | :--- | :--- | | Gross Premiums Written | $179,321 | $158,817 | $321,522 | $283,064 | | Net Premiums Earned | $128,201 | $113,917 | $250,290 | $221,919 | | Total Revenues | $146,139 | $128,025 | $286,325 | $247,669 | | Net Income | $14,663 | $7,192 | $34,263 | $12,893 | | Diluted EPS | $1.02 | $0.50 | $2.39 | $0.90 | Consolidated Statements of Cash Flows Highlights | Cash Flow Highlights (Six Months Ended June 30) | 2019 (thousands USD) | 2018 (thousands USD) | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $(3,135) | $58,960 | | Net cash used for investing activities | $(35,484) | $(69,901) | | Net cash used for financing activities | $(4,663) | $(16,335) | | Net change in cash and cash equivalents | $(43,282) | $(27,276) | Notes to Consolidated Financial Statements The notes detail significant accounting policies and provide breakdowns of financial statement items, including business re-segmentation, investment portfolio analysis, favorable prior-year loss development, and new lease accounting standard adoption - In Q1 2019, the Company re-evaluated its segments, bifurcating the Personal Lines segment into 'Specialty Property' and 'Farm, Ranch, & Stable', and renaming Commercial Lines to 'Commercial Specialty', reflecting a shift in management and reporting structure[27][189] - The company's investment portfolio totaled $1.51 billion at fair value as of June 30, 2019, up from $1.41 billion at year-end 2018, primarily composed of $1.20 billion in fixed maturities and $262.0 million in equity securities[32] - For the six months ended June 30, 2019, the company reduced its prior accident year loss reserves by $16.1 million, indicating favorable development, driven by decreases in Commercial Specialty ($6.9M), Specialty Property ($9.2M), and Farm, Ranch, & Stable ($2.8M), partially offset by a $2.9 million increase in Reinsurance Operations[125] - Effective January 1, 2019, the company adopted a new lease accounting standard, resulting in the recognition of right-of-use lease assets of $25.3 million and lease liabilities of $25.4 million on the balance sheet[136][232] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a 13.6% increase in gross premiums written and significant growth in underwriting and net income for H1 2019, while detailing segment performance and cash flow trends Key Financial Performance Metrics | Key Metrics (Six Months Ended June 30) | 2019 (Millions USD) | 2018 (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Gross Premiums Written | $321.5M | $283.1M | 13.6% | | Net Premiums Earned | $250.3M | $221.9M | 12.8% | | Underwriting Income | $22.6M | $15.3M | 47.4% | | Net Income | $34.3M | $12.9M | 165.7% | | Combined Ratio | 91.4% | 93.5% | (2.1 pts) | - The increase in gross premiums written was driven by new programs in Commercial Specialty, rate increases and a new watercraft product in Specialty Property, new agents in Farm, Ranch, & Stable, and growth in the Reinsurance segment's property catastrophe book and a new casualty treaty[266] - Corporate and other operating expenses decreased significantly to $7.8 million for the first six months of 2019 from $20.2 million in 2018, primarily due to a $12.5 million advisory fee in the prior period related to a co-obligor transaction[352] - Net cash from operating activities decreased by $62.1 million year-over-year, primarily due to a $45.0 million recovery on loss indemnification received in 2018 that did not recur in 2019, and higher net losses paid in 2019[367] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's investment grade fixed income portfolio maintains high quality with a 3.6-year duration, and no material changes to market risk have occurred since year-end 2018 - The company's investment grade fixed income portfolio had an average rating of A+ and a duration of 3.6 years as of Q2 2019[381] - During the second quarter, the portfolio's allocation to governments, MBS, and CMBS increased, while exposure to investment grade credit and taxable municipals decreased[381] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[382] - No material changes in internal controls over financial reporting occurred during the quarter ended June 30, 2019[383] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings but does not expect a material adverse effect on its financial condition, noting potential disputes with runoff reinsurers - The company does not expect any currently pending legal proceedings to have a material adverse effect on its business, results of operations, cash flows, or financial condition[385] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K - The risk factors identified in the Company's 2018 Annual Report on Form 10-K have not materially changed[387] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company's Share Incentive Plan allows employees to surrender A ordinary shares for tax liabilities, but no A ordinary shares were surrendered during Q2 2019 - No A ordinary shares were surrendered by employees as payment for tax liability during the quarter ended June 30, 2019[388] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL-formatted financial information