By Thomas Kerr, CFA

NYSE:GBLI

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Full Year 2024 Financial Results

Global Indemnity Group (NYSE:GBLI) reported 4^th quarter and full year 2024 financial and operating results which showed continued underwriting improvement compared to the prior year period. Underwriting income was $17.8 million in 2024 compared to $3.0 million in 2023. For 2024, net income was $42.8 million, or $3.12 per diluted share compared to $25.0 million and EPS of $1.83 in the prior year period.

In the company’s core business segment, Penn-America, gross written premiums in aggregate for Wholesale Commercial, InsurTech, Assumed Reinsurance and Specialty Products grew 8.0% to $400.0 million for the full year (11% growth without the planned decline in Specialty Products). The Specialty Products segment is expected to stabilize and potentially grow in 2025. Penn-America’s accident year underwriting income was $22.1 million in 2024 compared to $18.5 million in 2023. Penn-America’s calendar year loss ratio was 56.9% for the year which was a significant improvement from 65.8% for 2023.

Net investment income increased 12.6% in 2024 to $62.4 million compared to $55.4 million in the prior year period as a result of strategies employed in late 2022 to take advantage of the rising interest rate environment. Book yield on the investment portfolio increased to 4.4% at the end of 2024.

During the year. maturities of fixed income securities totaling $1.1 billion which were yielding 4.36% were reinvested at an average yield of 4.87%. Current book yield on the fixed income portfolio is 4.4% with a duration of 0.8 years as of the end of 2024. This compares to the end of 2023 where the book yield was 4.0% with a duration of 1.1 years. At the end of 2022, book yield was 3.5% with a duration of 1.7 years. The average credit quality of the fixed income portfolio remains mostly AA rated. As a result of the current low duration, the company has approximately $1 billion of investments maturing in 2025 that are expected to be reinvested in longer maturity bonds to improve overall investment returns.

Through February 2025, approximately $320 million of the portfolio was reinvested at 5.2% which consists of roughly 2/3rds in high-quality corporate and structured securities. This strategy will increase duration to about 1.25 years by the end of the 1^st quarter of 2025.

Annualized return on equity (ROE), including unrealized gains on fixed-income securities included in stockholders' equity, was 8.4% in 2024 compared to 7.2% in 2023. Annualized investment return was 5.5% for the full year 2024.

The company also stated it expects pretax net catastrophe losses of approximately $15.6 million from the California wildfires in the 1^st quarter of 2025. In a typical calendar year, total cat losses are in the $16-$17 million range.

Segment Review

In 2024, Penn-America gross written premiums for the Wholesale Commercial, InsurTech, and Assumed Reinsurance businesses increased 11.0%. This growth was driven by organic agency growth and price increases. InsurTech gross written premiums 17% and Assumed Reinsurance grew 83% compared to 2023 (within InsurTech, the Vacant Express business grew 24%). Management continues to believe that the reinsurance business is an attractive market currently and may grow 30%-40% annually over the next 3-4 years. Gross written premiums for Specialty Products decreased 4.0%. Specialty Products has been undergoing pricing and product line adjustments to position it for growth in 2025 and beyond. Penn-America’s total gross written premiums increased 8.0%. 

In the Non-Core Operations segment, gross written premiums declined to ($10.2) million in 2024 from $46.7 million in the prior year period. The decrease in gross written premiums was primarily due to a casualty retrocessional treaty the company did not renew as well as selling the manufactured home & dwelling and farm businesses. We expect a small amount of earned premiums from this segment in 2025 and none in 2026.

Combined Ratios

The consolidated calendar year combined ratio was 95.6% for 2024 (Loss Ratio 56.6% and Expense Ratio 39.0%) as compared to 99.7% (Loss Ratio 61.1% and Expense Ratio 38.6%) for the prior year period. The improvement is primarily due to improved performance in non-catastrophe related business.

The company’s catastrophe losses declined to $12.7 million in 2024 from $17.2 million in 2023. 2024 losses include $1.5 million related to Hurricane Helene.

In the Penn-America segment, the calendar year combined ratio was 95.0% in 2024 compared to 103.6% for the prior year period. In the Non-Core Operations segment, the calendar year combined ratio was 126.8% in 2024 compared to 87.9% in 2023. The expense ratio at Penn-America remains elevated at 38.1% in 2024 as the company made a conscious decision not to reduce staff levels after the premium reductions since 2022 in order to maintain high levels of customer service. It is the company’s goal to reduce the Penn-America expense ratio to the 36%-37% range which should occur in the 2026-2027 time frame.

Valuation and Estimates

GBLI book value per share increased to $49.98 as of December 31, 2024. On March 6, 2025, the Board of Directors approved a dividend of $0.35 per common share which is to be paid on March 28, 2025. The current dividend yield is approximately 3.83%.

Our 2025 total revenue estimate is adjusted to $470.0 million which includes $398.7 million in Net Earned Premiums and $70.5 million in Investment Income. Our 2025 EPS estimate is $3.20. As the consolidated combined expense ratio continues to drift down, we believe EPS of over $4.00 can be achieved in the next 2-3 years.

Management stated its long-term financial goals which are:

1) Grow the overall business at a rate of 10% or higher,

2) Achieve a combined ratio in the low 90’s,

3) Manage the expense ratio to a competitive level of 36%-37%.

GBLI stock is currently selling at 71% of book value based on December 31, 2024 shareholders’ equity. We separate our price target into near-term and long-term objectives. Our near-term target is $50.00 which assumes GBLI stock will trade near book value per share. We maintain our long-term price target of $55.00 per share based on the stock selling at a small premium to future book value per share.

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