Global Indemnity Group(GBLI) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements, management's analysis of financial condition, market risk disclosures, and internal controls Item 1. Financial Statements This section presents Global Indemnity Group's unaudited consolidated financial statements for Q3 and nine months ended September 30, 2023 Consolidated Balance Sheets This section details the company's financial position, presenting assets, liabilities, and shareholders' equity for September 30, 2023, and December 31, 2022 Consolidated Balance Sheet Highlights (Unaudited) | Metric | September 30, 2023 (in millions) | December 31, 2022 (in millions) | | :--- | :--- | :--- | | Total Investments | $1,340.9 | $1,303.9 | | Total Assets | $1,767.8 | $1,800.8 | | Total Liabilities | $1,137.2 | $1,174.5 | | Total Shareholders' Equity | $630.7 | $626.2 | - Total assets decreased slightly to $1.77 billion from $1.80 billion at year-end 2022, while total shareholders' equity increased to $630.7 million from $626.2 million over the same period[8] Consolidated Statements of Operations This section details the company's financial performance over specific periods, presenting revenues, expenses, and net income or loss Key Operating Results (Unaudited) | Metric | Q3 2023 (in millions) | Q3 2022 (in millions) | Nine Months 2023 (in millions) | Nine Months 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Gross Written Premiums | $98.9 | $175.8 | $332.0 | $563.6 | | Net Earned Premiums | $111.7 | $153.6 | $380.9 | $458.2 | | Total Revenues | $126.1 | $194.6 | $418.9 | $472.9 | | Net Income (Loss) | $7.7 | $23.7 | $19.5 | $(3.2) | | Diluted EPS | $0.55 | $1.60 | $1.39 | $(0.24) | - Net income for the nine months ended September 30, 2023, was $19.5 million, a significant turnaround from a net loss of $3.2 million in the same period of 2022; however, Q3 2023 net income of $7.7 million was lower than Q3 2022's $23.7 million, which was boosted by other income[10] Consolidated Statements of Cash Flows This section outlines the cash inflows and outflows from operating, investing, and financing activities for the specified periods Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 (in millions) | Nine Months Ended Sep 30, 2022 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $36.8 | $41.7 | | Net cash provided by (used for) investing activities | $(8.6) | $37.0 | | Net cash used for financing activities | $(20.5) | $(138.1) | | Net change in cash and cash equivalents | $7.6 | $(59.4) | Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements, including accounting policies and significant transactions - The Company completed a restructuring of its insurance operations in Q1 2023, exiting four brokerage divisions to focus on core Package Specialty and Targeted Specialty products; total restructuring costs were $5.5 million, with $2.1 million incurred in the first nine months of 2023[23][24] - On August 8, 2022, the Company sold the renewal rights for its Farm, Ranch & Stable business for $30.0 million, recognized as other income; related impairments and expenses totaled $9.2 million[26][27][28] - The Company's investment portfolio, primarily fixed maturities, was valued at $1.29 billion at fair value as of September 30, 2023; the portfolio's book yield increased from approximately 2.2% at December 31, 2021, to 4.0% at September 30, 2023[29][45] - For the nine months ended September 30, 2023, prior accident year loss reserve adjustments netted to zero, comprising a $21.0 million increase for Commercial Specialty, offset by decreases of $1.7 million for Reinsurance Operations and $19.3 million for Exited Lines[94][95][96][97] - The Company's share repurchase authorization was increased to $135 million, expiring on December 31, 2027; during the nine months ended September 30, 2023, the company purchased 468,860 Class A common shares[99][101] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q3 and nine-month 2023 financial results, detailing strategic restructuring impacts, investment income, segment performance, liquidity, and capital Financial Highlights This section summarizes key financial metrics and performance indicators for the third quarter of 2023 Q3 2023 Financial Highlights | Metric | Value | | :--- | :--- | | Net Income | $7.7 million | | Diluted EPS | $0.55 | | Net Earned Premium | $111.7 million | | Continuing Lines Accident Year Combined Ratio | 97.8% | | Net Investment Income | $14.2 million | | Book Value Per Common Share | $46.27 | Results of Operations This section provides a detailed analysis of the company's revenues, expenses, and profitability across its business segments - Gross written premiums decreased by 43.7% in Q3 2023 and 41.1% in the first nine months of 2023, driven by restructuring, business exits, and non-renewal of treaties[149][151] - Net investment income increased significantly by 69.3% in Q3 2023 and 133.1% in the first nine months of 2023, due to investment portfolio repositioning and a higher book yield of 4.0%[144][145][146] - The Commercial Specialty segment incurred an underwriting loss of $12.3 million in Q3 2023, primarily due to a $14.5 million strengthening of prior accident year reserves and $2.5 million in Maui fire losses[160][161] - Corporate and other operating expenses decreased to $5.3 million in Q3 2023 from $14.1 million in Q3 2022, mainly due to prior-year impairments and expenses from the Farm, Ranch & Stable renewal rights sale[198] Liquidity and Capital Resources This section assesses the company's ability to meet its financial obligations and fund operations, including cash flow, share repurchases, and restructuring impacts - Net cash provided by operating activities was $36.8 million for the first nine months of 2023, a decrease from $41.7 million in the same period of 2022, primarily due to lower net premiums collected[215] - The company's share buyback authorization increased to $135 million; 450,000 shares were repurchased for approximately $12.1 million in the first nine months of 2023, increasing book value per share by $0.60[216][217] - The Q1 2023 restructuring incurred total costs of $5.5 million and is expected to generate recurring annual expense savings of $16.0 million[219][220] Quantitative and Qualitative Disclosures about Market Risk The company's investment grade fixed income portfolio maintains an A+ average rating and 1.2-year duration, increasing U.S. Treasury allocation amid Q3 market volatility - The company's investment grade fixed income portfolio maintains a high quality with an A+ average rating and a short duration of 1.2 years as of September 30, 2023[231] - During Q3 2023, the portfolio's allocation to U.S. Treasury securities increased, while exposure to investment grade credit decreased, funded by cash inflows, maturities, and paydowns[231] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of September 30, 2023, with no material internal control changes during the quarter - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[233] - There were no material changes in the company's internal controls over financial reporting during the third quarter of 2023[234] PART II – OTHER INFORMATION This section provides disclosures on legal proceedings, risk factors, equity security sales, and a list of filed exhibits Legal Proceedings The company is involved in various legal proceedings, but management does not anticipate any material adverse effect on its business or financial condition - The company does not expect any currently pending legal proceedings to have a material adverse effect on its business or financial condition[236] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - The risk factors identified in the company's 2022 Annual Report on Form 10-K have not materially changed[238] Unregistered Sales of Equity Securities and Use of Proceeds During the nine months ended September 30, 2023, 18,860 Class A common shares were surrendered for tax liabilities, and 450,000 shares were repurchased, with no Q3 repurchases - No shares were repurchased by the company during the quarter ended September 30, 2023[240] - For the nine months ended September 30, 2023, the company repurchased 450,000 shares under its repurchase program[240] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL data files[244]