UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
001-34809
Commission File Number
GLOBAL INDEMNITY GROUP, LLC
(Exact name of registrant as specified in its charter)
Delaware
85-2619578
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer Identification No.)
112 S. French Street, Suite 105
Wilmington, DE 19801
(Address of principal executive office including zip code)
Registrant's telephone number, including area code: (302) 691-6276
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit such files.). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer
☐;
Accelerated filer
☒;
Non-accelerated filer
Smaller reporting company
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Class A Common Shares
GBLI
New York Stock Exchange
As of August 4, 2023, the registrant had outstanding 9,729,046 Class A Common Shares and 3,793,612 Class B Common Shares.
TABLE OF CONTENTS
Page
PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements:
3
Consolidated Balance Sheets As of June 30, 2023 (Unaudited) and December 31, 2022
Consolidated Statements of Operations Quarters and Six Months Ended June 30, 2023 (Unaudited) and June 30, 2022 (Unaudited)
4
Consolidated Statements of Comprehensive Income (Loss) Quarters and Six Months Ended June 30, 2023 (Unaudited) and June 30, 2022 (Unaudited)
5
Consolidated Statements of Changes in Shareholders’ Equity Quarters and Six Months Ended June 30, 2023 (Unaudited) and June 30, 2022 (Unaudited)
6
Consolidated Statements of Cash Flows Six Months Ended June 30, 2023 (Unaudited) and June 30, 2022 (Unaudited)
7
Notes to Consolidated Financial Statements (Unaudited)
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
35
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
53
Item 4.
Controls and Procedures
PART II – OTHER INFORMATION
Legal Proceedings
54
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
55
Signature
56
Item 1. Financial Statements
Consolidated Balance Sheets
(In thousands, except share amounts)
(Unaudited)June 30, 2023
December 31, 2022
ASSETS
Fixed maturities:
Available for sale, at fair value (amortized cost: $1,311,567 and $1,301,723; net of allowance for expected credit losses of $0 at June 30, 2023 and December 31, 2022)
$
1,265,606
1,248,198
Equity securities, at fair value
17,153
17,520
Other invested assets
37,282
38,176
Total investments
1,320,041
1,303,894
Cash and cash equivalents
45,447
38,846
Premium receivables, net of allowance for expected credit losses of $4,056 at June 30, 2023 and $3,322 at December 31, 2022
141,498
168,743
Reinsurance receivables, net of allowance for expected credit losses of $8,992 at June 30, 2023 and December 31, 2022
95,616
85,721
Funds held by ceding insurers
16,660
19,191
Deferred federal income taxes
42,679
47,099
Deferred acquisition costs
52,019
64,894
Intangible assets
14,633
14,810
Goodwill
4,820
Prepaid reinsurance premiums
10,626
17,421
Lease right of use assets
10,790
11,739
Other assets
19,173
23,597
Total assets
1,774,002
1,800,775
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses
866,951
832,404
Unearned premiums
215,187
269,353
Ceded balances payable
3,844
17,241
Payable for securities purchased
22,115
66
Contingent commissions
3,431
8,816
Lease liabilities
14,194
15,701
Other liabilities
21,872
30,965
Total liabilities
1,147,594
1,174,546
Commitments and contingencies (Note 11)
—
Shareholders’ equity:
Series A cumulative fixed rate preferred shares, $1,000 par value; 100,000,000 shares authorized, shares issued and outstanding: 4,000 and 4,000 shares, respectively, liquidation preference: $1,000 per share and $1,000 per share, respectively
4,000
Common shares: no par value; 900,000,000 common shares authorized; class A common shares issued: 11,000,287 and 10,876,041 respectively; class A common shares outstanding: 9,729,046 and 10,073,660, respectively; class B common shares issued and outstanding: 3,793,612 and 3,793,612, respectively
Additional paid-in capital
453,427
451,305
Accumulated other comprehensive income (loss), net of tax
(37,171
)
(43,058
Retained earnings
238,315
233,468
Class A common shares in treasury, at cost: 1,271,241 and 802,381 shares, respectively
(32,163
(19,486
Total shareholders’ equity
626,408
626,229
Total liabilities and shareholders’ equity
See accompanying notes to consolidated financial statements.
Consolidated Statements of Operations
(In thousands, except shares and per share data)
(Unaudited)Quarters Ended June 30,
(Unaudited)Six Months Ended June 30,
2023
2022
Revenues:
Gross written premiums
110,100
196,823
233,085
387,806
Ceded written premiums
(4,104
(29,665
(11,228
(61,166
Net written premiums
105,996
167,158
221,857
326,640
Change in net unearned premiums
23,160
(11,409
47,371
(22,068
Net earned premiums
129,156
155,749
269,228
304,572
Net investment income
13,216
1,930
25,224
8,522
Net realized investment losses
(761
(9,916
(2,281
(35,301
Other income
282
97
636
523
Total revenues
141,893
147,860
292,807
278,316
Losses and Expenses:
Net losses and loss adjustment expenses
78,082
92,618
166,083
177,313
Acquisition costs and other underwriting expenses
47,101
61,098
100,579
117,790
Corporate and other operating expenses
4,990
2,993
11,358
7,653
Interest expense
12
410
3,005
Loss on extinguishment of debt
3,529
Income (loss) before income taxes
11,708
(12,788
14,775
(30,974
Income tax expense (benefit)
2,371
(626
2,944
(4,039
Net income (loss)
9,337
(12,162
11,831
(26,935
Less: preferred stock distributions
110
220
Net income (loss) available to common shareholders
9,227
(12,272
11,611
(27,155
Per share data:
Net income (loss) available to common shareholders (1)
Basic
0.68
(0.84
0.86
(1.87
Diluted
0.67
0.84
Weighted-average number of shares outstanding
13,478,014
14,543,234
13,573,841
14,529,170
13,707,984
13,794,221
Cash distributions declared per common share
0.25
0.50
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses)
(3,077
(21,503
5,080
(63,876
Reclassification adjustment for losses included in net income (loss)
479
7,877
966
30,962
Unrealized foreign currency translation gains (losses)
42
(227
(159
(115
Other comprehensive income (loss), net of tax
(2,556
(13,853
5,887
(33,029
Comprehensive income (loss), net of tax
6,781
(26,015
17,718
(59,964
Consolidated Statements of Changes in Shareholders’ Equity
Number of Series A Cumulative Fixed Rate Preferred Shares
Number at beginning and end of period
Number of class A common shares issued:
Number at beginning of period
10,928,380
10,614,555
10,876,041
10,574,589
Common shares issued under share incentive plans, net of forfeitures
49,628
35,442
75,541
50,598
Common shares issued to directors
22,279
25,760
48,705
50,570
Number at end of period
11,000,287
10,675,757
Number of class B common shares issued:
3,793,612
3,947,206
Par value of Series A Cumulative Fixed Rate Preferred Shares
Balance at beginning and end of period
Additional paid-in capital:
Balance at beginning of period
452,385
448,266
447,406
Share compensation plans
1,042
1,786
2,122
2,646
Balance at end of period
450,052
Accumulated other comprehensive income (loss), net of deferred income tax:
(34,615
(12,772
6,404
Other comprehensive income (loss):
Change in unrealized holding gains (losses)
(2,598
(13,626
6,046
(32,914
Other comprehensive income (loss)
(26,625
Retained earnings:
232,506
230,771
249,301
Preferred share distributions
(110
(220
Distributions to shareholders ($0.25 per share per quarter in 2023 and 2022)
(3,418
(3,742
(6,764
(7,389
214,757
Number of treasury shares:
1,055,683
22,277
802,381
17,496
Class A common shares purchased
215,558
11,173
468,860
15,954
1,271,241
33,450
Treasury shares, at cost:
(26,038
(610
(490
Class A common shares purchased, at cost
(6,125
(294
(12,677
(414
(904
641,280
Consolidated Statements of Cash Flows
Cash flows from operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation
3,342
3,265
Amortization of debt issuance costs
41
Restricted stock and stock option expense
Amortization of bond premium and discount, net
(1,725
1,628
2,281
35,301
Loss from equity method investments, net of distributions
106
5,913
Changes in:
Premium receivables, net
27,245
(33,515
Reinsurance receivables, net
(9,895
(4,200
2,330
3,905
34,547
44,757
(54,166
20,111
(13,397
(20,585
Other assets and liabilities
(7,679
(3,986
(5,385
(1,575
12,875
(9,758
6,795
1,956
Net cash provided by operating activities
14,171
18,459
Cash flows from investing activities:
Proceeds from sale of fixed maturities
96,890
829,205
Proceeds from sale of equity securities
24
88,726
Proceeds from maturity of fixed maturities
50,685
42,483
Proceeds from maturity of preferred stock
270
Proceeds from other invested assets
789
6,542
Amounts received in connection with derivatives
4,490
Purchases of fixed maturities
(135,826
(860,076
Purchases of equity securities
(28
(10,376
Net cash provided by investing activities
12,804
100,994
Cash flows from financing activities:
Distributions paid to common shareholders
(7,477
(7,255
Distributions paid to preferred shareholders
Purchases of class A common shares
Redemption of subordinated notes
(130,000
Net cash used for financing activities
(20,374
(137,889
Net change in cash and cash equivalents
6,601
(18,436
Cash and cash equivalents at beginning of period
78,278
Cash and cash equivalents at end of period
59,842
Global Indemnity Group, LLC (“Global Indemnity”, "GBLI", or “the Company”), 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. Global Indemnity Group, LLC’s class A common shares are publicly traded on the New York Stock Exchange under the ticker symbol GBLI. Global Indemnity Group, LLC’s predecessors have been publicly traded since 2003. See Note 2 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2022 Annual Report on Form 10-K for additional information regarding the redomestication.
The interim consolidated financial statements are unaudited, but have been prepared in conformity with United States of America generally accepted accounting principles (“GAAP”), which differs in certain respects from those principles followed in reports to insurance regulatory authorities. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The unaudited consolidated financial statements include all adjustments that are, in the opinion of management, of a normal recurring nature and are necessary for a fair statement of results for the interim periods. Results of operations for the quarters and six months ended June 30, 2023 and 2022 are not necessarily indicative of the results of a full year. The accompanying notes to the unaudited consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s 2022 Annual Report on Form 10-K.
The consolidated financial statements include the accounts of Global Indemnity Group, LLC and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The Company restructured its insurance operations to strengthen its market presence and enhance its focus on GBLI’s core Package Specialty and Targeted Specialty products. As a result, the Company exited its four brokerage divisions: Professional Liability, Excess Casualty, Environmental, and Middle Market Property. The Company ceased writing new business and existing renewals were placed in run-off for these four divisions. The restructuring plan, which was initiated in the fourth quarter of 2022, was completed in the first quarter of 2023.
In connection with the restructuring plan, the Company incurred restructuring costs of $3.4 million during the fourth quarter of 2022 and $2.1 million during the six months ended June 30, 2023 for total restructuring costs of $5.5 million.
The following table summarizes charges incurred by expense type and the remaining liability as of December 31, 2022 and June 30, 2023:
(Dollars in thousands)
Consolidated Statements of Operations Line
Employee Termination
Lease Right of Use Asset Impairment
Total
Charges incurred in 2022
2,635
Acquisition costs and other underwriting expenses (1)
812
Non-cash asset charges
(812
Liability at December 31, 2022
Charges incurred in 2023
2,121
Cash payments in 2023
(4,249
Liability at June 30, 2023
507
(1) These charges were recorded within the Company's Exited Line segment.
Any information technology initiatives related to business lines within Exited Lines have been discontinued.
The amortized cost and estimated fair value of the Company’s fixed maturities securities were as follows as of June 30, 2023 and December 31, 2022:
Amortized Cost
Allowance for Expected Credit Losses
GrossUnrealizedGains
GrossUnrealizedLosses
Estimated Fair Value
As of June 30, 2023
U.S. treasuries
396,451
(7,701
388,762
Obligations of states and political subdivisions
32,272
(1,666
30,606
Mortgage-backed securities
65,086
396
(4,816
60,666
Asset-backed securities
212,095
186
(7,966
204,315
Commercial mortgage-backed securities
86,313
21
(5,880
80,454
Corporate bonds
343,600
102
(12,038
331,664
Foreign corporate bonds
175,750
30
(6,641
169,139
Total fixed maturities
1,311,567
747
(46,708
As of December 31, 2022
352,533
(8,430
344,103
33,471
(1,876
31,595
67,560
165
(5,609
62,116
198,161
390
(9,151
189,400
104,777
20
(6,133
98,664
353,622
16
(14,858
338,780
191,599
(8,059
183,540
1,301,723
591
(54,116
As of June 30, 2023 and December 31, 2022, the Company’s investments in equity securities consist of the following:
June 30, 2023
Common stock
1,113
1,271
Preferred stock
16,040
16,249
Excluding U.S. treasuries and limited partnerships, the Company did not hold any debt or equity investments in a single issuer in excess of 2.0% and 2.4% of shareholders' equity at June 30, 2023 and December 31, 2022, respectively.
9
The amortized cost and estimated fair value of the Company’s fixed maturities portfolio classified as available for sale at June 30, 2023, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Due in one year or less
489,914
483,894
Due in one year through five years
428,150
410,281
Due in five years through ten years
17,529
15,287
Due after fifteen years
12,480
10,709
The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses that are not deemed to have credit losses, categorized by the period that the securities were in a continuous loss position as of June 30, 2023. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 5.
Less than 12 months
12 months or longer
Fair Value
198,477
(3,953
120,678
(3,748
319,155
7,810
(222
19,795
(1,444
27,605
16,354
(707
33,913
(4,109
50,267
91,904
(1,888
95,269
(6,078
187,173
1,678
(69
76,056
(5,811
77,734
74,010
(1,175
230,601
(10,863
304,611
23,100
(154
119,948
(6,487
143,048
413,333
(8,168
696,260
(38,540
1,109,593
The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses that are not deemed to have credit losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2022. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 5.
335,781
(7,518
8,322
(912
27,772
(1,378
3,778
(498
31,550
51,517
(4,228
7,860
(1,381
59,377
97,857
(3,610
62,689
(5,541
160,546
67,926
(4,072
27,907
(2,061
95,833
261,123
(8,480
71,192
(6,378
332,315
150,308
(5,469
31,232
(2,590
181,540
992,284
(34,755
212,980
(19,361
1,205,264
10
The Company regularly performs various analytical valuation procedures with respect to its investments, including reviewing each available for sale debt security in an unrealized loss position to assess whether the decline in fair value below amortized cost basis has resulted from a credit loss or other factors. In assessing whether a credit loss exists, the Company compares the present value of the cash flows expected to be collected from the security to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for expected credit losses is recorded. Subsequent changes in the allowances are recorded in the period of change as either credit loss expense or reversal of credit loss expense. Any impairments related to factors other than credit losses and the intent to sell are recorded through other comprehensive income, net of taxes.
For fixed maturities, the factors considered in reaching the conclusion that a credit loss exists include, among others, whether:
According to accounting guidance for debt securities in an unrealized loss position, the Company is required to assess whether it has the intent to sell the debt security or more likely than not will be required to sell the debt security before the anticipated recovery. If either of these conditions is met, any allowance for expected credit losses is written off and the amortized cost basis is written down to the fair value of the fixed maturity security with any incremental impairment reported in earnings. That new amortized cost basis shall not be adjusted for subsequent recoveries in fair value.
The Company elected the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of the available for sale debt securities for the purposes of identifying and measuring an impairment and to not measure an allowance for expected credit losses for accrued interest receivables. Accrued interest receivable is written off through net realized investment gains (losses) at the time the issuer of the bond defaults or is expected to default on payment. The Company made an accounting policy election to present the accrued interest receivable balance with other assets on the Company’s consolidated statements of financial position. Accrued interest receivable related to fixed maturities was $8.3 million and $8.4 million as of June 30, 2023 and December 31, 2022, respectively.
The following is a description, by asset type, of the methodology and significant inputs that the Company used to measure the amount of credit loss recognized in earnings, if any:
U.S. treasuries – As of June 30, 2023, gross unrealized losses related to U.S. treasuries were $7.701 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, macroeconomic and market analysis is conducted in evaluating these securities. Consideration is given to the interest rate environment, duration and yield curve management of the portfolio, sector allocation and security selection. Based on the analysis performed, the Company did not recognize a credit loss on U.S. treasuries during the period.
Obligations of states and political subdivisions – As of June 30, 2023, gross unrealized losses related to obligations of states and political subdivisions were $1.666 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, elements that may influence the performance of the municipal bond market are considered in evaluating these securities such as investor expectations, supply and demand patterns, and current versus historical yield and spread relationships. The analysis relies on the output of fixed income credit analysts, as well as dedicated municipal bond analysts who perform extensive in-house fundamental analysis on each issuer, regardless of their rating by the major agencies. Based on the analysis performed, the Company did not recognize a credit loss on obligations of states and political subdivisions during the period.
11
Mortgage-backed securities (“MBS”) – As of June 30, 2023, gross unrealized losses related to mortgage-backed securities were $4.816 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, mortgage-backed securities are modeled to project principal losses under downside, base, and upside scenarios for the economy and home prices. The primary assumption that drives the security and loan level modeling is the Home Price Index (“HPI”) projection. These forecasts incorporate not just national macro-economic trends, but also regional impacts to arrive at the most granular and accurate projections. These assumptions are incorporated into the model as a basis to generate delinquency probabilities, default curves, loss severity curves, and voluntary prepayment curves at the loan level within each deal. The model utilizes HPI-adjusted current loan to value, payment history, loan terms, loan modification history, and borrower characteristics as inputs to generate expected cash flows and principal loss for each bond under various scenarios. Based on the analysis performed, the Company did not recognize a credit loss on mortgage-backed securities during the period.
Asset backed securities (“ABS”) - As of June 30, 2023, gross unrealized losses related to asset backed securities were $7.966 million. The weighted average credit enhancement for the Company’s asset backed portfolio is 35.0. This represents the percentage of pool losses that can occur before an asset backed security will incur its first dollar of principal losses. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, every ABS transaction is analyzed on a stand-alone basis. This analysis involves a thorough review of the collateral, prepayment, and structural risk in each transaction. Additionally, the analysis includes an in-depth credit analysis of the originator and servicer of the collateral. The analysis projects an expected loss for a deal given a set of assumptions specific to the asset type. These assumptions are used to calculate at what level of losses the deal will incur its first dollar of principal loss. The major assumptions used to calculate this ratio are loss severities, recovery lags, and no advances on principal and interest. Based on the analysis performed, the Company did not recognize a credit loss on asset backed securities during the period.
Commercial mortgage-backed securities (“CMBS”) - As of June 30, 2023, gross unrealized losses related to the CMBS portfolio were $5.880 million. The weighted average credit enhancement for the Company’s CMBS portfolio is 46.9. This represents the percentage of pool losses that can occur before a commercial mortgage-backed security will incur its first dollar of principal loss. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, a loan level analysis is utilized where every underlying CMBS loan is re-underwritten based on a set of assumptions reflecting expectations for the future path of the economy. Each loan is analyzed over time using a series of tests to determine if a credit event will occur during the life of the loan. Inherent in this process are several economic scenarios and their corresponding rent/vacancy and capital market states. The five primary credit events that frame the analysis include loan modifications, term default, balloon default, extension, and ability to pay off at balloon. The resulting output is the expected loss adjusted cash flows for each bond under the base case and distressed scenarios. Based on the analysis performed, the Company did not recognize a credit loss on commercial mortgage-backed securities during the period.
Corporate bonds - As of June 30, 2023, gross unrealized losses related to corporate bonds were $12.038 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, analysis for this asset class includes maintaining detailed financial models that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default. Based on the analysis performed, the Company did not recognize a credit loss on corporate bonds during the period.
Foreign bonds – As of June 30, 2023, gross unrealized losses related to foreign bonds were $6.641 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, detailed financial models are maintained that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default. Based on the analysis performed, the Company did not recognize a credit loss on foreign bonds during the period.
The Company has evaluated its investment portfolio and has determined that an allowance for expected credit losses on its investments is not required.
The Company recorded the following impairments on its investment portfolio for the quarters and six months ended June 30, 2023 and 2022 and are related to securities in an unrealized loss position where the Company had an intent to sell the securities:
Quarters Ended June 30,
Six Months Ended June 30,
2022 (1)
Impairment related to intent to sell
(680
(26,205
Accumulated Other Comprehensive Income (Loss), Net of Tax
Accumulated other comprehensive income, net of tax, as of June 30, 2023 and December 31, 2022 was as follows:
Net unrealized gains (losses) from:
Fixed maturities
(45,961
(53,525
Foreign currency fluctuations
(328
(127
Deferred taxes
9,118
10,594
The following tables present the changes in accumulated other comprehensive income, net of tax, by components, for the quarters and six months ended June 30, 2023 and 2022:
Quarter Ended June 30, 2023(Dollars in thousands)
Unrealized Gains and Losses on Available for Sale Securities
Foreign Currency Items
Accumulated Other Comprehensive Income (Loss)
Beginning balance, net of tax
(34,314
(301
Other comprehensive income (loss) before reclassification, before tax
(3,757
(3,704
Amounts reclassified from accumulated other comprehensive income, before tax
587
Other comprehensive income (loss), before tax
(3,170
(3,117
Income tax (expense) benefit
572
(11
561
Ending balance, net of tax
(36,912
(259
Quarter Ended June 30, 2022(Dollars in thousands)
(12,769
(3
Other comprehensive loss before reclassification, before tax
(26,518
(287
(26,805
9,317
Other comprehensive loss, before tax
(17,201
(17,488
Income tax benefit
3,575
60
3,635
(26,395
(230
13
Six Months Ended June 30, 2023(Dollars in thousands)
(42,958
(100
Other comprehensive (loss) before reclassification, before tax
6,371
(201
6,170
1,193
7,564
7,363
(1,518
(1,476
Six Months Ended June 30, 2022(Dollars in thousands)
6,519
(79,267
(146
(79,413
38,081
(41,186
(41,332
8,272
31
8,303
The reclassifications out of accumulated other comprehensive income for the quarters and six months ended June 30, 2023 and 2022 were as follows:
Amounts Reclassified fromAccumulated OtherComprehensive Income
Details about Accumulated OtherComprehensive Income Components
Affected Line Item in the ConsolidatedStatements of Operations
Unrealized gains and losses on available for sale securities
Other net realized investment (gains) losses
8,637
Other than temporary impairment losses on investments
680
Total before tax
(108
(1,440
Total reclassifications, net of tax
11,876
26,205
(7,119
14
Net Realized Investment Gains (Losses)
The components of net realized investment gains (losses) for the quarters and six months ended June 30, 2023 and 2022 were as follows:
Gross realized gains
456
662
Gross realized losses
(596
(9,773
(1,207
(38,743
Net realized gains (losses)
(587
(9,317
(1,193
(38,081
Equity securities:
209
2
784
1,806
(383
(2,417
(1,872
(5,566
(174
(2,415
(1,088
(3,760
Derivatives:
2,872
8,960
(1,056
(2,420
Net realized gains (losses) (1)
1,816
6,540
Total net realized investment gains (losses)
The following table shows the calculation of the portion of realized gains and losses related to equity securities held as of June 30, 2023 and 2022:
Net gains (losses) recognized during the period on equity securities
Less: net gains (losses) recognized during the period on equity securities sold during the period
18
10,616
Unrealized gains (losses) recognized during the reporting period on equity securities
(1,917
(1,106
(14,376
The proceeds from sales and redemptions of available for sale and equity securities resulting in net realized investment gains (losses) for the six months ended June 30, 2023 and 2022 were as follows:
Equity securities
15
Net Investment Income
The sources of net investment income for the quarters and six months ended June 30, 2023 and 2022 were as follows:
12,313
7,467
23,773
13,871
257
275
447
609
300
99
563
131
697
(5,300
1,164
(4,874
Total investment income
13,567
2,541
25,947
9,737
Investment expense
(351
(611
(723
(1,215
The Company’s total investment return on a pre-tax basis for the quarters and six months ended June 30, 2023 and 2022 were as follows:
Net realized and unrealized investment returns
(3,878
(27,404
5,082
(76,633
Total investment return
9,338
(25,474
30,306
(68,111
Total investment return % (1)
0.7
%
(1.8
%)
2.3
(4.8
Average investment portfolio (2)
1,345,235
1,395,519
1,343,024
1,429,227
As of June 30, 2023 and December 31, 2022, the Company did not own any fixed maturity securities that were non-income producing for the preceding twelve months.
Insurance Enhanced Asset-Backed and Credit Securities
As of June 30, 2023, the Company held insurance enhanced municipal bonds with a market value of approximately $6.2 million which represented 0.5% of the Company’s total cash and invested assets, net of payable/ receivable for securities purchased and sold. The financial guarantors of the Company’s $6.2 million municipal bonds include Assured Guaranty Corporation ($5.0 million) and Ambac Financial Group ($1.2 million).
The Company had no direct investments in the entities that have provided financial guarantees or other credit support to any security held by the Company at June 30, 2023.
Bonds Held on Deposit
Certain cash and cash equivalents and bonds available for sale were deposited with various governmental authorities in accordance with statutory requirements, were held as collateral, or were held in trust. The fair values were as follows as of June 30, 2023 and December 31, 2022:
On deposit with governmental authorities
20,983
19,290
Held in trust pursuant to third party requirements
164,845
161,901
Total (1)
185,828
181,191
Variable Interest Entities
A Variable Interest Entity (“VIE”) refers to an investment in which an investor holds a controlling interest that is not based on the majority of voting rights. Under the VIE model, the party that has the power to exercise significant management influence and maintain a controlling financial interest in the entity’s economics is said to be the primary beneficiary, and is required to consolidate the entity within their results. Other entities that participate in a VIE, for which their financial interests fluctuate with changes in the fair value of the investment entity’s net assets but do not have significant management influence and the ability to direct the VIE’s significant economic activities are said to have a variable interest in the VIE but do not consolidate the VIE in their financial results.
The Company has variable interests in two VIE’s for which it is not the primary beneficiary. These investments are accounted for under the equity method of accounting as their ownership interest exceeds 3% of their respective investments.
The carrying value of one of the Company’s VIE’s, which invests in distressed securities and assets, was $4.4 million and $4.8 million as of June 30, 2023 and December 31, 2022, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $18.6 million and $19.0 million at June 30, 2023 and December 31, 2022, respectively. The carrying value and maximum exposure to loss of a second VIE that invests in Real Estate Investment Trust (“REIT”) qualifying assets was $9.4 million and $9.8 million as of June 30, 2023 and December 31, 2022, respectively. The Company’s investment in VIEs is included in other invested assets on the consolidated balance sheets with changes in carrying value recorded in the consolidated statements of operations.
Derivatives were used by the Company to reduce risks from changes in interest rates and limit exposure to severe equity market changes. The Company used interest rate swaps with terms to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount. The Company has also used exchange-traded futures contracts, which give the holder the right and obligation to participate in market movements at a future date, to allow the Company to react faster to market conditions. When using derivatives, the Company posts collateral and settles variation margin in cash on a daily basis equal to the amount of the derivatives’ change in value.
The Company accounts for the interest rate swaps and futures as non-hedge instruments and recognizes the fair value of the interest rate swaps in other assets or other liabilities on the consolidated balance sheets with the changes in fair value recognized as net realized investment gains or losses in the consolidated statements of operations. The Company is ultimately responsible for the valuation of the interest rate swaps. To aid in determining the estimated fair value of the interest rate swaps, the Company relies on the forward interest rate curve and information obtained from a third party financial institution.
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The following table summarizes the net gains included in the consolidated statements of operations for changes in the fair value of the derivatives and the periodic net interest settlements under the derivatives for the quarters and six months ended June 30, 2023 and 2022:
Interest rate swap agreements
Net realized investment gains (losses)
The Company terminated its outstanding interest rate swaps in the fourth quarter of 2022 and was not utilizing interest rate swap agreements as of December 31, 2022. There are no outstanding amounts related to the interest rate swap agreements on the consolidated balance sheets as of June 30, 2023 or December 31, 2022.
The accounting standards related to fair value measurements define fair value, establish a framework for measuring fair value, outline a fair value hierarchy based on inputs used to measure fair value, and enhance disclosure requirements for fair value measurements. These standards do not change existing guidance as to whether or not an instrument is carried at fair value. The Company has determined that its fair value measurements are in accordance with the requirements of these accounting standards.
The Company’s invested assets are carried at their fair value and are categorized based upon a fair value hierarchy:
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset.
The following table presents information about the Company’s invested assets measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.
Fair Value Measurements
As of June 30, 2023 (Dollars in thousands)
Level 1
Level 2
Level 3
Assets:
59,717
949
329,939
1,725
874,170
2,674
Total assets measured at fair value
890,210
3,787
1,282,759
As of December 31, 2022 (Dollars in thousands)
61,156
960
189,073
327
336,767
2,013
900,795
3,300
917,044
4,571
1,265,718
The securities classified as Level 1 in the above tables consist of U.S. treasuries actively traded on an exchange.
The securities classified as Level 2 in the above tables consist primarily of fixed maturities, and equity securities. Based on the typical trading volumes and the lack of quoted market prices for fixed maturities, security prices are derived through recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information. If there are no recent reported trades, matrix or model processes are used to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Included in the pricing of asset-backed securities, collateralized mortgage obligations, and mortgage-backed securities are estimates of the rate of future prepayments of principal over the remaining life of the securities. Such estimates are derived based on the characteristics of the underlying structure and prepayment speeds previously experienced at the interest rate levels projected for the underlying collateral.
The investments classified as Level 3 in the above table consist of fixed maturities and equity securities with unobservable inputs.
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The following table presents changes in Level 3 investments measured at fair value on a recurring basis for the quarters and six months ended June 30, 2023 and 2022:
Quarters EndedJune 30,
Six Months EndedJune 30,
Beginning balance
4,335
4,288
2,769
Total gains (realized / unrealized):
Included in accumulated other comprehensive income
23
Included in earnings attributable to realized gains / losses
(113
(102
(172
(170
Transfers into level 3
607
857
Purchases
39
113
1,479
Sales
(473
(523
(736
(602
Ending balance
4,350
Gains (losses) included in earnings attributable to the change in unrealized gains (losses) related to assets still held at end of reporting period
(103
(9
(162
(14
Fair Value of Alternative Investments
Other invested assets consist of limited partnerships whose carrying value approximates fair value. The following table provides the fair value and future funding commitments related to these investments at June 30, 2023 and December 31, 2022.
Future FundingCommitment
European Non-Performing Loan Fund, LP (1)
4,406
14,214
4,832
Mortgage Debt Fund, LP (2)
9,374
9,771
Global Debt Fund, LP (3)
23,502
23,573
Limited Liability Companies and Limited Partnerships with ownership interest exceeding 3%
The Company uses the equity method to account for investments in limited liability companies and limited partnerships where its ownership interest exceeds 3%. The equity method of accounting for an investment in limited liability companies and limited partnerships requires that its cost basis be updated to account for the income or loss earned on the investment. In the Fair Value of Alternative Investments table above, all of the investments are booked on a one quarter lag due to non-availability of data at the time the financial statements are prepared. The investment income (loss) associated with the limited liability companies and limited partnerships whose ownership interest exceeds 3% is reflected in the consolidated statements of operations in the amounts of $0.5 million and ($5.3) million for the quarters ended June 30, 2023 and 2022, respectively, and $0.6 million and ($5.4) million for the six months ended June 30, 2023 and 2022, respectively.
Pricing
The Company’s pricing vendors provide prices for all investment categories except for investments in limited liability companies and limited partnerships. Two primary vendors are utilized to provide prices for equity and fixed maturity securities.
The following is a description of the valuation methodologies used by the Company’s pricing vendors for investment securities carried at fair value:
The Company performs certain procedures to validate whether the pricing information received from the pricing vendors is reasonable, to ensure that the fair value determination is consistent with accounting guidance, and to ensure that its assets are properly classified in the fair value hierarchy. The Company’s procedures include, but are not limited to:
During the quarters and six months ended June 30, 2023 and 2022, the Company has not adjusted quotes or prices obtained from the pricing vendors.
For premium receivables, the allowance is based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, direct placement with collection agencies, solvency of insured or agent, terminated agents, and other relevant factors.
The following table is an analysis of the allowance for expected credit losses related to the Company's premium receivables for the quarters and six months ended June 30, 2023 and 2022:
3,379
2,937
3,322
2,996
Current period provision for expected credit losses
1,369
536
1,717
619
Write-offs
(692
(554
(983
(696
4,056
2,919
For reinsurance receivables, the allowance is based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, disputes, applicable coverage defenses, insolvent reinsurers, financial strength of solvent reinsurers based on AM Best Ratings and other relevant factors.
The following table is an analysis of the allowance for expected credit losses related to the Company's reinsurance receivables for the quarters and six months ended June 30, 2023 and 2022:
8,992
Recoveries of amounts previously written off
Global Indemnity Group, LLC is a publicly traded partnership for U.S. federal income tax purposes and meets the qualifying income exception to maintain partnership status. As a publicly traded partnership, Global Indemnity Group, LLC is generally not subject to federal income tax and most state income taxes. However, income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions.
As of June 30, 2023, the statutory income tax rates of the countries where the Company conducts business are 21% in the United States, 0% in Bermuda, and 25% on non-trading income, 33% on capital gains and 12.5% on trading income in the Republic of Ireland. The statutory income tax rate of each country is applied against the expected annual taxable income of the Company in each country to estimate the annual income tax expense.
The Company’s income (loss) before income taxes is derived from its U.S. subsidiaries for the quarters and six months ended June 30, 2023 and 2022.
The following table summarizes the components of income tax expense (benefit):
Deferred income tax expense (benefit):
U.S. Federal
Total deferred income tax expense (benefit)
Total income tax expense (benefit)
The weighted average expected tax provision has been calculated using income (loss) before income taxes in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate.
22
The following table summarizes the differences between the tax provision for financial statement purposes and the expected tax provision at the weighted average tax rate:
Amount
% of Pre-Tax Income
Expected tax provision at weighted average tax rate
2,459
21.0
(2,686
Adjustments:
Dividend exclusion
(21
(0.2
(24
0.2
Parent income treated as partnership for tax
(1.2
1,827
(14.3
Other
79
(2.0
Effective income tax expense (benefit)
20.3
4.9
The effective income tax expense rate for the quarter ended June 30, 2023 was 20.3% compared to an effective income tax benefit rate of 4.9% for the quarter ended June 30, 2022. The difference between 2023 and 2022 is primarily due to a change in income or loss at the parent company which is treated as a partnership for tax.
3,103
(6,505
(38
(0.3
(46
0.1
Parent (income) loss treated as partnership for tax
(342
(2.3
2,070
(6.7
221
1.5
442
(1.4
19.9
13.0
The effective income tax expense rate for the six months ended June 30, 2023 was 19.9% compared to an effective income tax benefit rate of 13.0% for the six months ended June 30, 2022. The difference between 2023 and 2022 is primarily due to a change in income or loss at the parent company which is treated as a partnership for tax.
The Company has a net operating loss (“NOL”) carryforward of $98.1 million as of June 30, 2023, which begins to expire in 2036 based on when the original NOL was generated. The Company’s NOL carryforward as of December 31, 2022 was $116.4 million.
The Company did not have any Section 163(j) ("163(j)") carryforward as of June 30, 2023 or December 31, 2022. The 163(j) carryforward relates to the limitation on the deduction for business interest expense paid or accrued.
Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:
857,520
770,332
759,904
Less: Ceded reinsurance receivables
73,665
93,194
73,021
94,443
Net balance at beginning of period
783,855
677,138
759,383
665,461
Incurred losses and loss adjustment expenses related to:
Current year
78,031
96,189
166,032
183,947
Prior years
51
(3,571
(6,634
Total incurred losses and loss adjustment expenses
Paid losses and loss adjustment expenses related to:
24,565
29,079
34,184
42,394
44,354
30,201
98,264
89,904
Total paid losses and loss adjustment expenses
68,919
59,280
132,448
132,298
Net balance at end of period
793,018
710,476
Plus: Ceded reinsurance receivables
73,933
94,185
804,661
When analyzing loss reserves and prior year development, the Company considers many factors, including the frequency and severity of claims, loss trends, case reserve settlements that may have resulted in significant development, and any other additional or pertinent factors that may impact reserve estimates.
During the second quarter of 2023, the Company's increased its prior accident year loss reserves by $0.1 million, which consisted of a $5.0 million increase related to Commercial Specialty, a $1.0 million increase related to Reinsurance Operations, and a $5.9 million decrease related to Exited Lines.
The $5.0 million increase in prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
The $1.0 million increase of prior accident year loss reserves related to Reinsurance Operations primarily consisted of the following:
The $5.9 million decrease in prior accident year loss reserves related to Exited Lines primarily consisted of the following:
During the second quarter of 2022, the Company decreased its prior accident year loss reserves by $3.6 million, which consisted of a $2.3 million decrease related to Commercial Specialty, a $1.2 million decrease related to Reinsurance Operations, and a $0.1 million decrease related to Exited Lines.
The $2.3 million decrease of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
The $1.2 million reduction of prior accident year loss reserves related to Reinsurance Operations primarily consisted of the following:
The $0.1 million reduction of prior accident year loss reserves related to Exited Lines consisted of the following:
During the first six months of 2023, the Company increased its prior accident year loss reserves by $0.1 million, which consisted of a $6.5 million increase related to Commercial Specialty, a $1.0 million increase related to Reinsurance Operations, and a $7.4 million decrease related to Exited Lines.
The $6.5 million increase of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
The $7.4 million reduction of prior accident year loss reserves related to Exited Lines primarily consisted of the following:
25
During the first six months of 2022, the Company decreased its prior accident year loss reserves by $6.6 million, which consisted of a $0.4 million decrease related to Commercial Specialty, a $1.2 million decrease related to Reinsurance Operations, and a $5.0 million decrease related to Exited Lines.
The $0.4 million decrease of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:
The $5.0 million reduction of prior accident year loss reserves related to Exited Lines primarily consisted of the following:
Repurchases of the Company's class A common shares
On 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. 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. 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.
26
The following table provides information with respect to the class A common shares that were surrendered or repurchased during the six months ended June 30, 2023:
Period (1)
Total Numberof SharesPurchased
AveragePrice PaidPer Share
Total Number of Shares Purchased as Part of Publicly Announced Plan or Program
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
January 1-31, 2023
3,302
(3)
23.31
250,000
(4)
25.90
106,604,066
April 1-30, 2023
200,000
28.00
101,004,066
June 1-30, 2023
15,558
33.74
27.04
The following table provides information with respect to the class A common shares that were surrendered or repurchased during the six months ended June 30, 2022:
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2022
4,781
(2)
25.13
June 1-30, 2022
26.28
25.94
There were no class B common shares that were surrendered or repurchased during the quarters and six months ended June 30, 2023 or 2022.
Each class A common share has one vote and each class B common share has ten votes.
As of June 30, 2023, Global Indemnity Group, LLC’s class A common shares were held by approximately 140 shareholders of record. There were two holders of record of Global Indemnity Group, LLC’s class B common shares, all of whom are affiliated investment funds of Fox Paine & Company, LLC, as of June 30, 2023. Global Indemnity Group, LLC’s preferred shares were held by 1 holder of record, an affiliate of Fox Paine & Company, LLC, as of June 30, 2023.
Please see Note 16 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2022 Annual Report on Form 10-K for more information on the Company’s repurchase program.
27
Distributions
Distribution payments of $0.25 per common share were declared during the six months ended June 30, 2023 as follows:
Approval Date
Record Date
Payment Date
Total Distributions Declared (Dollars in thousands)
March 2, 2023
March 24, 2023
March 31, 2023
3,410
June 1, 2023
June 23, 2023
3,375
Various (1)
Various
6,764
Distribution payments of $0.25 per common share were declared during the six months ended June 30, 2022 as follows:
March 3, 2022
March 21, 2022
March 31, 2022
3,597
June 2, 2022
June 20, 2022
June 30, 2022
3,602
190
7,389
In addition, distributions paid to Global Indemnity Group, LLC's preferred shareholder were $0.1 million in each of the quarters ended June 30, 2023 and 2022 and $0.2 million in each of the six months ended June 30, 2023 and 2022.
Accrued distributions on unvested shares, which were included in other liabilities on the consolidated balance sheets, were $0.3 million and $1.1 million as of June 30, 2023 and December 31, 2022, respectively. Accrued preferred distributions were less than $0.1 million as of both June 30, 2023 and December 31, 2022 and were included in other liabilities on the consolidated balance sheets.
Please see Note 16 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2022 Annual Report on Form 10-K for more information on the Company’s distribution program.
Fox Paine Entities
Pursuant to Global Indemnity Group, LLC’s Limited Liability Company Agreement (“LLCA”), Fox Paine Capital Fund II International, L.P. (the “Fox Paine Fund”), 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”) currently constitute a Class B Majority Shareholder (as defined in the LLCA) and, as such, have the right to appoint a number of Global Indemnity Group, LLC’s directors equal in aggregate to the pro rata percentage of the voting power in Global Indemnity Group, LLC beneficially held by the Fox Paine Entities, rounded up to the nearest whole number of directors. The Fox Paine Entities beneficially own shares representing approximately 83.9% of the voting power of Global Indemnity Group, LLC as of June 30, 2023. The Fox Paine Entities control the appointment or election of all of Global Indemnity Group, LLC’s Directors due to the LLCA and their controlling share ownership. Global Indemnity Group, LLC’s Chairman is the chief executive and founder of Fox Paine & Company, LLC.
Management fee expense of $0.8 million and $0.7 million were incurred during the quarters ended June 30, 2023 and 2022, respectively, and management fee expense of $1.5 million and $1.4 million were incurred during the six months ended June 30, 2023 and 2022, respectively. Prepaid management fees, which were included in other assets on the consolidated balance sheets, were $0.5 million and $2.1 million as of June 30, 2023 and December 31, 2022, respectively.
In addition, Fox Paine & Company, LLC may also propose and negotiate transaction fees with the Company subject to the provisions of the Company’s related party transaction and conflict matter policies, including approval of Global Indemnity Group, LLC’s Conflicts Committee of the Board of Directors, for those services from time to time. Each of the Company’s
28
transactions with Fox Paine & Company, LLC are reviewed and approved by Global Indemnity Group, LLC’s Conflicts Committee, which is composed of independent directors, and the Board of Directors (other than Saul A. Fox, Chairman of the Board of Directors of Global Indemnity Group, LLC and Chief Executive of Fox Paine & Company, LLC, who is not a member of the Conflicts Committee and recused himself from the Board of Directors’ deliberations related to fees paid to Fox Paine & Company, LLC or its affiliates).
The Company is, from time to time, involved in various legal proceedings in the ordinary course of business. The Company maintains insurance and reinsurance coverage for such risks in amounts that it considers adequate. However, there can be no assurance that the insurance and reinsurance coverage that the Company maintains is sufficient or will be available in adequate amounts or at a reasonable cost. The Company does not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on its business, results of operations, cash flows, or financial condition.
There is a greater potential for disputes with reinsurers who are in runoff. Some 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.
Commitments
In 2014, the Company entered into a $50 million commitment to purchase an alternative investment vehicle which is comprised of European non-performing loans. As of June 30, 2023, the Company has funded $35.8 million of this commitment leaving $14.2 million as unfunded. Since the investment period has concluded, the Company expects minimal capital calls will be made prospectively.
Other Commitments
The Company is party to a Management Agreement, as amended, with Fox Paine & Company, LLC, whereby in connection with certain management services provided to it by Fox Paine & Company, LLC, the Company agreed to pay an annual management fee to Fox Paine & Company, LLC. See Note 10 above for additional information pertaining to this management agreement.
Share Incentive Plan
On June 14, 2023, the Company’s Shareholders approved the Global Indemnity Group, LLC 2023 Share Incentive Plan (“the 2023 Plan”). The primary purpose of the 2023 Plan is to provide Global Indemnity a competitive advantage in attracting, retaining, and motivating officers, employees, consultants and non-employee directors, and to position Global Indemnity to offer incentives linked to the financial results of the Company’s business and increases in shareholder value. Under the 2023 Plan, the Company may issue up to 2.5 million class A common shares pursuant to awards granted under the Plan. The 2023 Plan replaced the Global Indemnity Group, LLC 2018 Share Incentive Plan, as amended and restated on August 28, 2020 which expired pursuant to its terms on March 4, 2023.
Options
No stock options were awarded during the quarters and six months ended June 30, 2023 or 2022. No unvested stock options were forfeited during the quarters and six months ended June 30, 2023 or 2022.
29
Restricted Shares / Restricted Stock Units
There were no restricted class A common shares or restricted stock units granted to key employees during the quarters and six months ended June 30, 2023 and 2022. There were no restricted class A common shares or restricted stock units forfeited during the quarter and six months ended June 30, 2023 and 2022.
There were 49,628 and 35,442 restricted stock units that vested during the quarters ended June 30, 2023 and 2022, respectively, and 75,541 and 61,522 restricted stock units that vested during the six months ended June 30, 2023 and 2022, respectively Upon vesting, the restricted stock units converted to restricted class A common shares.
During the quarters ended June 30, 2023 and 2022, the Company granted 22,279 and 25,760 class A common shares, respectively, at a weighted average grant date value of $30.20 and $25.96 per share, respectively, to non-employee directors of the Company under the Plan. During the six months ended June 30, 2023 and 2022, the Company granted 48,705 and 50,570 class A common shares, respectively, at a weighted average grant date value of $27.63 and $25.80 per share, respectively, to non-employee directors of the Company under the Plan. The Company previously granted 157,139 shares to a non-employee director with deferred vesting. These shares vested on January 13, 2023. All other shares granted to non-employee directors of the Company are fully vested but are subject to certain restrictions.
Rule 10b5-1 Trading Plans
The Company did not have any Rule 10b5-1 Trading Plans in place during the six months ended June 30, 2023 and 2022.
Earnings per share have been computed using the weighted average number of common shares and common share equivalents outstanding during the period.
The following table sets forth the computation of basic and diluted earnings per share:
(Dollars in thousands, except share and per share data)
Numerator:
Denominator:
Weighted average shares for basic earnings per share
Non-vested restricted stock units
61,579
58,571
168,391
161,809
Weighted average shares for diluted earnings per share (1)
Earnings per share - Basic
Earnings per share - Diluted
If the Company had not incurred a loss in the quarter ended June 30, 2022, 14,749,370 weighted average shares would have been used to compute the diluted loss per share calculation. In addition to the basic shares, weighted average shares for the diluted calculation for the quarter ended June 30, 2022 would have included 110,417 shares of non-vested restricted stock units and 95,719 share equivalents for options.
If the Company had not incurred a loss in the six months ended June 30, 2022, 14,728,182 weighted average shares would have been used to compute the diluted loss per share calculation. In addition to the basic shares, weighted average shares for
the diluted calculation for the six months ended June 30, 2022 would have included 103,670 shares of non-vested restricted stock units and 95,342 share equivalents for options.
The weighted average shares outstanding used to determine dilutive earnings per share does not include 346,667 shares for both the quarter and six months ended June 30, 2023 and 393,333 shares for both the quarter and six months ended June 30, 2022, which were deemed to be anti-dilutive.
During the fourth quarter of 2022, the Company restructured its insurance operations to strengthen its market presence and enhance its focus on GBLI’s core Package Specialty and Targeted Specialty products. As a result, the Company exited four brokerage divisions: Professional Liability, Excess Casualty, Environmental, and Middle Market Property. The Company ceased writing new business and existing renewals were placed in run-off for these four divisions. Based on the decisions to exit these lines of business, the Company changed the way it manages and analyzes its operating results. The chief operating decision makers decided they will be reviewing the specific results of these exited lines within the Company's Exited Lines segment. In addition, a decision was made in the fourth quarter of 2022 to reclassify several smaller reinsurance treaties from Reinsurance Operations to Commercial Specialty. Management believes these segment changes 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. Accordingly, the segment results for the quarter and six months ended June 30, 2022 have been revised to reflect these changes.
The Company manages its business through two ongoing business segments. Commercial Specialty offers specialty property and casualty products designed for GBLI's Package Specialty and Targeted Specialty product offerings. These product lines are offered primarily in the excess and surplus lines marketplace. Reinsurance Operations provides reinsurance and insurance solutions through brokers and primary writers including insurance and reinsurance companies. The Company also has an Exited Lines segment that contains lines of business that are no longer being written or are in runoff.
The following are tabulations of business segment information for the quarters and six months ended June 30, 2023 and 2022. Corporate information is included to reconcile segment data to the consolidated financial statements.
CommercialSpecialty
ReinsuranceOperations
(1)
Exited Lines
95,347
14,844
(91
91,896
(744
93,408
29,585
6,163
266
301
93,674
29,594
6,189
129,457
58,662
19,512
(92
33,972
10,737
2,392
Income (loss) from segments
1,040
(655
3,889
4,274
Unallocated Items:
Other loss
(19
(4,990
(12
Income before income taxes
Income tax expense
(2,371
Net income
Segment assets
999,271
383,040
222,491
1,604,802
Corporate assets
169,200
32
105,010
46,524
45,289
99,667
20,967
93,997
39,162
22,590
Other income (loss)
260
(196
84
94,257
39,182
22,394
155,833
52,804
22,793
17,021
35,543
14,553
11,002
5,910
1,836
(5,629
2,117
(2,993
(410
(3,529
Loss before income taxes
626
Net loss
1,002,120
326,804
384,991
1,713,915
147,864
1,861,779
190,855
38,260
3,970
183,130
467
186,590
64,432
18,206
533
103
187,123
18,309
269,864
118,781
40,775
6,527
69,498
23,553
7,528
(1,156
104
4,254
3,202
(11,358
(2,944
33
207,858
87,520
92,428
197,830
41,290
185,194
73,460
45,918
519
185,713
45,922
305,095
106,463
43,852
26,998
69,069
26,514
22,207
10,181
3,094
(3,283
9,992
(7,653
(3,005
4,039
The Company did not adopt any new accounting pronouncements during the six months ended June 30, 2023.
34
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes of the Company included elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to the Company’s plans and strategy, constitutes forward-looking statements that involve risks and uncertainties. Please see "Cautionary Note Regarding Forward-Looking Statements" at the end of this Item 2 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained herein. For more information regarding the Company’s business and operations, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Financial Highlights
2023 Second Quarter Results of Operations
2023 Second Quarter Consolidated Financial Condition
Results of Operations
During the quarter ended June 30, 2023, net income of $9.3 million was realized. The $9.3 million of net income is significantly better than the $12.2 million net loss realized in the same period in 2022 and net income of $2.5 million from the quarter ended March 31, 2023. Post March 31, 2023, actions have been taken to reduce exposures at commercial vacant properties. The Continuing Lines accident year underwriting income(1) for the quarter ended June 30, 2023 was $6.5 million and the accident year combined ratio(1) was 94.9%. Net investment income significantly increased in the second quarter of 2023 compared to the same period in 2022. Book yield of the fixed income investment portfolio was 3.8% at June 30, 2023
compared to 2.2% at December 31, 2021. Actions taken to focus on Continuing Lines and to reposition the investment portfolio in early 2022 are improving results.
The following table summarizes the Company’s results for the quarters and six months ended June 30, 2023 and 2022:
Change
(44.1
(39.9
(36.6
(32.1
(17.1
(11.6
258.3
21.6
(16.9
(11.5
Losses and expenses:
(15.7
(6.3
(22.9
(14.6
Underwriting income
101.9
(68.0
NM
196.0
(92.3
(93.5
(246.2
66.7
48.4
(97.1
(99.6
(100.0
(191.6
(147.7
(172.9
(176.8
(143.9
Underwriting Ratios:
Loss ratio (2):
60.5
59.5
61.7
58.2
Expense ratio (3)
36.5
39.2
37.4
38.7
Combined ratio (4)
97.0
98.7
99.1
96.9
NM – not meaningful
36
Premiums
The following table summarizes the change in premium volume by business segment:
% Change
Gross written premiums (1)
Commercial Specialty
(9.2
(8.2
Reinsurance Operations (3)
(68.1
(56.3
Continuing Lines
110,191
151,534
(27.3
229,115
295,378
(22.4
(100.2
(95.7
Total gross written premiums
3,451
5,343
(35.4
7,725
10,028
(23.0
653
24,322
(97.3
3,503
51,138
(93.1
Total ceded written premiums
4,104
29,665
(86.2
11,228
61,166
(81.6
Net written premiums (2)
(7.8
(7.4
106,740
146,191
(27.0
221,390
285,350
(103.5
(98.9
Total net written premiums
(0.6
0.8
(24.5
(12.3
122,993
133,159
(7.6
251,022
258,654
(3.0
(72.7
(60.4
Total net earned premiums
Gross written premiums decreased by 44.1% and 39.9% for the quarter and six months ended June 30, 2023 as compared to same periods in 2022. The decrease in gross written premiums is being driven by a reduction in premiums in both Continuing Lines as well as Exited Lines. The reduction in Continuing Lines is primarily due to the non-renewal of a casualty treaty within Reinsurance Operations, the non-renewal of a restaurant book of business within Commercial Specialty, and actions taken within Commercial Specialty to improve underwriting results by not renewing underperforming business. These decreases were partially offset by increased pricing within Commercial Specialty.
To support future growth in the Company's Commercial Specialty segment and provide capital for business initiatives including share repurchases, a decision was made to reduce writings in its Reinsurance Operations. The Company anticipates that its Reinsurance Operations will comprise a smaller percentage of the Company's overall business prospectively.
37
Net Retention
The ratio of net written premiums to gross written premiums is referred to as the Company’s net premium retention. The Company’s net premium retention is summarized by segments as follows:
Point
96.4
94.9
96.0
95.2
Reinsurance Operations
100.0
96.5
0.4
96.6
0.0
817.6
46.3
771.3
11.8
44.7
(32.9
96.3
84.9
11.4
84.2
11.1
The net premium retention for the quarter and six months ended June 30, 2023 increased by 11.4 points and 11.1 points, respectively, as compared to the same periods in 2022. While the Company still has ceding arrangements in place related to the sale of renewal rights, the Company's overall net retention is not significantly impacted in 2023 as Exited Lines' gross written premiums comprise a much smaller percentage of the Company's consolidated gross written premiums. See Note 3 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2022 Annual Report on Form 10-K 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.
Net Earned Premiums
Net earned premiums within the Commercial Specialty segment decreased by 0.6% for the quarter ended June 30, 2023 as compared to the same period in 2022 primarily due to the reduction in premiums written in 2023 as a result of actions taken within Commercial Specialty to improve underwriting results by not renewing underperforming business as well as the non-renewal of a restaurant book of business. Net earned premiums within the Commercial Specialty segment increased by 0.8% for the six months ended June 30, 2023 as compared to the same period in 2022. This increase in net earned premiums was primarily due to the growth in premiums written in the prior year as a result of organic growth from existing agents and pricing increases. Property net earned premiums were $35.8 million and $36.5 million for the quarters ended June 30, 2023 and 2022, respectively, and $73.5 million and $70.9 million for the six months ended June 30, 2023 and 2022, respectively. Casualty net earned premiums were $57.6 million and $57.5 million for the quarters ended June 30, 2023 and 2022, respectively, and $113.1 million and $114.3 million for the six months ended June 30, 2023 and 2022, respectively.
Net earned premiums within the Reinsurance Operations segment decreased by 24.5% and 12.3% for the quarter and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 primarily due to the non-renewal of a casualty treaty. There were no property net earned premiums for the quarters and six months ended June 30, 2023 and 2022. Casualty net earned premiums were $29.6 million and $39.2 million for the quarters ended June 30, 2023 and 2022, respectively, and $64.4 million and $73.5 million for the six months ended June 30, 2023 and 2022, respectively.
Net earned premiums within the Exited Lines segment decreased by 72.7% and 60.4% for the quarter and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 primarily due to the sale of renewal rights related to the Company's Farm, Ranch & Stable business on August 8, 2022. The decrease in net earned premiums is also due to exiting lines of business unrelated to the Company’s continuing businesses. Property net earned premiums were $4.0 million and $17.6 million for the quarters ended June 30, 2023 and 2022, respectively, and $12.7 million and $36.4 million for the six months ended June 30, 2023 and 2022, respectively. Casualty net earned premiums were $2.2 million and $5.0 million for the quarters ended June 30, 2023 and 2022, respectively, and $5.5 million and $9.5 million for the six months ended June 30, 2023 and 2022, respectively.
38
Reserves
Management’s best estimate at June 30, 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 $867.0 million and $793.0 million, respectively, as of June 30, 2023. A breakout of the Company’s gross and net reserves, as of June 30, 2023, is as follows:
Gross Reserves
Case
IBNR (1)
173,460
333,469
506,929
22,866
195,507
218,373
196,326
528,976
725,302
63,052
78,597
141,649
259,378
607,573
Net Reserves (2)
157,512
301,260
458,772
180,378
496,767
677,145
44,876
70,997
115,873
225,254
567,764
Each reserve category has an implicit frequency and severity for each accident year as a result of the various assumptions made. If the actual levels of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’s best estimate. For most of its reserve categories, the Company believes that frequency can be predicted with greater accuracy than severity. Therefore, the Company believes management’s best estimate is more likely influenced by changes in severity than frequency. The following table, which the Company believes reflects a reasonable range of variability around its best estimate based on historical loss experience and management’s judgment, reflects the impact of changes (which could be favorable or unfavorable) in frequency and severity on the Company’s current accident year net loss estimate of $166.0 million for claims occurring during the six months ended June 30, 2023:
Severity Change
-10%
-5%
0%
5%
10%
Frequency Change
(24,075
(16,188
(8,302
(415
7,471
-3%
(21,086
(13,034
(4,981
3,072
11,124
-2%
(19,592
(11,456
(3,321
4,815
12,950
-1%
(18,097
(9,879
(1,660
6,558
14,777
(16,603
8,302
16,603
1%
(15,109
(6,724
1,660
10,045
18,430
2%
(13,615
(5,147
3,321
11,788
20,256
3%
(12,120
(3,570
4,981
13,532
22,082
(9,132
17,018
25,735
The Company’s net reserves for losses and loss adjustment expenses of $793.0 million as of June 30, 2023 relate to multiple accident years. 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.
Underwriting Results
Commercial Specialty's results for the quarter ended June 30, 2023 are reflective of actions taken to improve profitabilty. Actions were taken to cease writing business which was not providing an acceptable return on capital. As a result, accident year underwriting income(1) improved to $6.1 million for the quarter ended June 30, 2023 from an accident year underwriting loss(1) of $0.6 million for the quarter ended March 31, 2023.
The components of income (loss) from the Company’s Commercial Specialty segment and corresponding underwriting ratios are as follows:
2.7
11.6
(4.4
0.6
Underwriting income (loss)
(82.4
(111.4
Loss ratio:
Current accident year
57.5
58.6
(1.1
60.2
57.7
2.5
Prior accident year
5.3
(2.4
7.7
3.5
3.7
Calendar year loss ratio
62.8
56.2
6.6
63.7
6.2
Expense ratio
36.4
37.8
37.2
37.3
(0.1
Combined ratio
99.2
94.0
5.2
100.9
94.8
6.1
Accident year combined ratio (2)
93.7
97.3
95.0
40
Reconciliation of non-GAAP financial measures and ratios
The table below reconciles the non-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio. The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within Commercial Specialty may be obscured by prior accident year adjustments. 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.
Losses
LossRatio
Property
Non catastrophe property losses and ratio excluding the effect of prior accident year (1)
16,100
44.9
18,159
49.7
38,676
52.6
35,493
50.1
Effect of prior accident year
(1,436
(4.0
(3,130
(8.6
(2,695
(3.7
(1,307
(1.9
Non catastrophe property losses and ratio (2)
14,664
40.9
15,029
41.1
35,981
48.9
34,186
48.2
Catastrophe losses and ratio excluding the effect of prior accident year (1)
4,087
3,054
8.4
7,415
10.1
5,206
7.3
429
1.2
(302
(0.8
1,851
2.6
(228
Catastrophe losses and ratio (2)
4,516
12.6
2,752
7.6
9,266
12.7
4,978
7.0
Total property losses and ratio excluding the effect of prior accident year (1)
20,187
56.3
21,213
58.1
46,091
62.7
40,699
57.4
(1,007
(2.8
(3,432
(9.4
(844
(1,535
(2.2
Total property losses and ratio (2)
19,180
53.5
17,781
48.7
45,247
61.6
39,164
55.2
Casualty
Total casualty losses and ratio excluding the effect of prior accident year (1)
33,496
33,881
59.0
66,233
66,168
57.9
5,986
10.4
1,142
2.0
7,301
6.5
1,131
1.0
Total casualty losses and ratio (2)
39,482
68.6
35,023
61.0
73,534
65.1
67,299
58.9
Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1)
53,683
55,094
112,324
106,867
4,979
(2,290
6,457
(404
Total net losses and loss adjustment expense and total loss ratio (2)
See “Results of Operations” above for a discussion on consolidated premiums.
Other Income
Other income was $0.3 million for each of the quarters ended June 30, 2023 and 2022 and $0.5 million for each of the six months ended June 30, 2023 and 2022. Other income is primarily comprised of fee income.
Loss Ratio
The current accident year losses and loss ratio is summarized as follows:
Property losses
Non-catastrophe
(11.3
9.0
Catastrophe
33.8
42.4
13.2
Casualty losses
Total accident year losses
(2.6
5.1
Current accident year loss ratio:
3.0
2.8
Property loss ratio
Casualty loss ratio
Total accident year loss ratio
The current accident year non-catastrophe property loss ratio improved by 4.8 points during the quarter ended June 30, 2023 as compared to the same period in 2022 reflecting lower claims frequency in the second accident quarter compared to last year.
The current accident year non-catastrophe property loss ratio increased by 2.5 points during the six months ended June 30, 2023 as compared to the same period in 2022 reflecting higher claims severity mainly due to fire losses in the first accident quarter compared to last year.
The current accident year catastrophe loss ratio increased by 3.0 points during the quarter ended June 30, 2023 as compared to the same period in 2022 recognizing higher claims severity in the calendar quarter compared to last year.
The current accident year catastrophe loss ratio increased by 2.8 points during the six months ended June 30, 2023 as compared to the same period in 2022 recognizing higher claims frequency and severity in the first six months compared to last year.
The current accident year casualty loss ratio improved by 0.8 points during the quarter ended June 30, 2023 as compared to the same period in 2022 reflecting lower claims frequency in the calendar quarter compared to last year.
The current accident year casualty loss ratio increased by 0.7 points during the six months ended June 30, 2023 as compared to the same period in 2022 recognizing higher claims severity in the first six months compared to last year.
The calendar year loss ratio for the quarter and six months ended June 30, 2023 includes an increase of $5.0 million, or 5.3 percentage points, and an increase of $6.5 million, or 3.5 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratio for the quarter and six months ended June 30, 2022 includes a decrease of $2.3 million, or 2.4 percentage points, and a decrease of $0.4 million, or 0.2 percentage points, respectively, related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.
Expense Ratios
The expense ratio for the Company’s Commercial Specialty segment improved by 1.4 points from 37.8% for the quarter ended June 30, 2022 to 36.4% for the quarter ended June 30, 2023 primarily due to a reduction in commission expenses and the recovery of medical premiums in 2023 due to lower than expected medical costs in 2022.
The expense ratio for the Company’s Commercial Specialty segment improved by 0.1 points from 37.3% for the six months ended June 30, 2022 to 37.2% for the six months ended June 30, 2023.
The components of income (loss) from the Company’s Reinsurance Operations segment and corresponding underwriting ratios are as follows:
2023 (1)
(55.0
(14.4
(7.0
(26.2
(11.2
(135.7
(96.6
Current accident year (2)
62.6
61.3
1.3
61.4
0.3
3.4
(3.1
1.6
(1.7
3.3
Calendar year loss ratio (3)
66.0
7.8
63.3
59.7
3.6
36.3
(0.9
36.6
36.1
0.5
102.3
95.4
6.9
99.9
95.8
4.1
Accident year combined ratio (4)
98.9
97.9
98.3
97.2
Reconciliation of non-GAAP financial ratios
The table above reconciles the non-GAAP ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP ratio. The Company believes the non-GAAP ratios are useful to investors when evaluating the Company's underwriting performance as trends within Reinsurance Operations may be obscured by prior accident year adjustments. These non-GAAP ratios should not be considered as a substitute for its most directly comparable GAAP ratio and does not reflect the overall underwriting profitability of the Company.
43
The Company recognized other income of less than $0.1 million during each of the quarters ended June 30, 2023 and 2022. There was no other income recognized during the six months ended June 30, 2023 and 2022. Other income is primarily comprised of foreign exchange gains and losses.
The current accident year loss ratio increased by 1.3 points during the quarter ended June 30, 2023 as compared to the same period in 2022 primarily reflecting an increase in the excess professional liability expected loss ratio.
The current accident year loss ratio increased by 0.3 points during the six months ended June 30, 2023 as compared to the same period in 2022 primarily reflecting an increase in the excess professional liability expected loss ratio.
The calendar year loss ratios for the quarter and six months ended June 30, 2023 includes an increase of $1.0 million, or 3.4 percentage points, and an increase of $1.0 million, or 1.6 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratios for the quarter and six months ended June 30, 2022 includes a decrease of $1.2 million, or 3.1 percentage, and a decrease of $1.2 million, or 1.7 point percentage, respectively, related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.
The expense ratio for the Company’s Reinsurance Operations segment improved 0.9 points from 37.2% for the quarter ended June 30, 2022 to 36.3% for the quarter ended June 30, 2023 primarily due to a reduction in staff and professional services to align expenses with business being written.
The expense ratio for the Company’s Reinsurance Operations segment increased 0.5 points from 36.1% for the six months ended June 30, 2022 to 36.6% for the six months ended June 30, 2023 primarily due to an increase in commission expense.
44
The components of income (loss) from the Company’s Exited Lines segment and corresponding underwriting ratios are as follows:
(113.3
(72.4
(60.1
(100.5
(75.8
(78.3
(66.1
(169.1
229.6
94.7
75.6
19.1
76.5
69.7
6.8
(96.2
(95.9
(40.6
(10.9
(29.7
(1.5
75.3
(76.8
35.9
58.8
38.8
(9.9
41.3
(7.1
124.0
(86.7
77.2
107.2
(30.0
Accident year combined ratio (1)
144.6
119.1
119.4
111.3
45
The table below reconciles the non-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio. The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends within Exited Lines may be obscured by prior accident year adjustments. 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.
3,421
85.8
9,335
52.9
7,073
55.8
19,596
53.8
(472
(11.8
615
(1,637
(12.9
(3,252
(8.9
2,949
74.0
9,950
56.4
5,436
42.9
16,344
1,013
25.4
5,327
30.2
3,155
24.9
7,479
20.5
(4,324
(108.4
(648
(4,175
(1,119
(3,311
(83.0
4,679
26.5
(1,020
(8.0
6,360
17.4
4,434
111.2
14,662
83.1
10,228
80.7
27,075
74.3
(4,796
(120.2
(33
(5,812
(45.8
(4,371
(12.0
(362
(9.0
14,629
82.9
4,416
34.9
22,704
62.3
1,400
64.3
2,420
3,703
67.0
4,913
51.8
(1,130
(51.9
(1,592
(28.8
(619
(6.5
12.4
48.3
2,111
38.2
4,294
45.3
5,834
17,082
13,931
31,988
(5,926
(61
(7,404
46
Other Income (Loss)
The Company recognized income of less than $0.1 million and a loss of $0.2 million for the quarters ended June 30, 2023 and 2022, respectively, and income of $0.1 million and income of less than $0.1 million for the six months ended June 30, 2023 and 2022, respectively. Other income (loss) is primarily comprised of fee income net of bank fees.
(63.4
(63.9
(81.0
(57.8
(69.8
(62.2
(42.1
(24.6
(65.8
(56.4
32.9
4.4
28.1
6.4
15.4
15.2
The current accident year non-catastrophe property loss ratio increased by 32.9 points during the quarter ended June 30, 2023 as compared to the same period in 2022 reflecting higher claims severity in the calendar quarter compared to last year.
The current accident year non-catastrophe property loss ratio increased by 2.0 points during the six months ended June 30, 2023 as compared to the same period in 2022 primarily reflecting higher claims severity in the first six months compared to last year.
The current accident year catastrophe loss ratio improved by 4.8 points during the quarter ended June 30, 2023 as compared to the same period in 2022 primarily recognizing lower claims severity in the calendar quarter compared to last year.
The current accident year catastrophe loss ratio increased by 4.4 points during the six months ended June 30, 2023 as compared to the same period in 2022 primarily recognizing higher claims frequency and severity in the first six months compared to last year.
The current accident year casualty loss ratio increased by 15.4 points during the quarter ended June 30, 2023 as compared to the same period in 2022 primarily reflecting higher claims severity in the calendar quarter compared to last year and growth in the brokerage divisions which had higher expected loss ratios.
The current accident year casualty loss ratio increased by 15.2 points during the six months ended June 30, 2023 as compared to the same period in 2022 primarily reflecting higher claims severity in the first six months compared to last year and growth in the brokerage divisions which had higher expected loss ratios.
The calendar year loss ratio for the quarter and six months ended June 30, 2023 includes a decrease of $5.9 million, or 96.2 percentage points, and a decrease of $7.4 million, or 40.6 percentage points, respectively, related to reserve development on prior accident years. The calendar year loss ratio for the quarter and six months ended June 30, 2022 includes a decrease of
47
$0.1 million, or 0.3 percentage points, and an decrease of $5.0 million, or 10.9 percentage points, respectively, related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.
Expense Ratio
The expense ratio for the Company’s Exited Lines improved by 9.9 points from 48.7% for the quarter ended June 30, 2022 to 38.8% for the quarter ended June 30, 2023 and improved by 7.1 points from 48.4% for the six months ended June 30, 2022 to 41.3% for the six months ended June 30, 2023 due to restructuring actions which reduced expenses.
Unallocated Corporate Items
The Company’s fixed income portfolio, excluding cash, continues to maintain high quality with an A average rating and a duration of 1.4 years.
Gross investment income (1)
433.9
166.5
Investment expenses
(42.6
(40.5
584.8
Gross investment income increased by 433.9% and 166.5% for the quarter and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The increase was primarily due to an increase in yield within the fixed maturities portfolio due to the rise in rates and increased returns from alternative investments.
Investment expenses decreased by 42.6% and 40.5% for the quarter and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 due to decreased investment management expenses.
At June 30, 2023, the Company held agency mortgage-backed securities with a market value of $3.0 million. Excluding the agency mortgage-backed securities, the average duration of the Company’s fixed maturities portfolio was 1.4 years as of June 30, 2023, compared with 1.8 years as of June 30, 2022. Including cash and short-term investments, the average duration of the Company’s fixed maturities portfolio, excluding agency mortgage-backed securities was 1.3 years and 1.7 years as of June 30, 2023 and June 30, 2022, respectively. Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration. The Company’s embedded book yield on its fixed maturities, not including cash, was 3.8% as of June 30, 2023, compared to 2.7% as of June 30, 2022. The embedded book yield on the $30.6 million of taxable municipal bonds in the Company’s portfolio was 3.0% at June 30, 2023, compared to an embedded book yield of 3.1% on the Company’s taxable municipal bonds of $32.4 million at June 30, 2022.
48
(8,637
(11,876
Derivatives
Other-than-temporary impairment losses (1)
(1) 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 resulting in other-than-temporary impairment losses. The majority of which were sold in the 2nd quarter of 2022. Most of the proceeds from the sale of these securities were reinvested into fixed income investments with maturities of two years. As a result of these actions, the Company's book yield rose over time. Book yield was approximately 2.2% at December 31, 2021 and 3.8% at June 30, 2023.
See Note 3 of the notes to the consolidated financial statements in Item 1 of Part I of this report for an analysis of total investment return on a pre-tax basis for the quarters and six months ended June 30, 2023 and 2022.
Corporate and Other Operating Expenses
Corporate and other operating expenses 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 were $5.0 million and $3.0 million during the quarters ended June 30, 2023 and 2022, respectively. Corporate and other operating expenses for the quarter ended June 30, 2022 were lower than normal due to the Company receiving an employee retention credit under the CARES Act of $2.7 million in May 2022.
Corporate and other operating expenses were $11.4 million and $7.7 million during the six months ended June 30, 2023 and 2022, respectively. The increase in corporate and other operating expenses is primarily due to restructuring costs incurred in the first quarter of 2023. In addition, corporate and other operating expenses for 2022 were lower than normal due to the Company receiving an employee retention credit under the CARES Act of $2.7 million in May 2022.
Interest Expense
Interest expense was $0.4 million and $3.0 million during the quarter and six months ended June 30, 2022. There was less than $0.1 million of interest expense during the quarter and six months ended June 30, 2023. The reduction in interest expense was due to the redemption of the 7.875% Subordinated Notes due 2047 on April 15, 2022.
Income Tax Expense / Benefit
Income tax expense was $2.4 million for the quarter ended June 30, 2023 compared with income tax benefit of $0.6 million for the quarter ended June 30, 2022. The increase in income tax expense is primarily due to higher taxable income in the Company's U.S. Subsidiaries in 2023.
Income tax expense was $2.9 million for the six months ended June 30, 2023 compared with an income tax benefit of $4.0 million for the six months ended June 30, 2022. The increase in income tax expense is primarily due to higher taxable income in the Company's U.S. Subsidiaries in 2023.
See Note 7 of the notes to the consolidated financial statements in Item 1 of Part I of this report for a comparison of income tax between periods.
49
Net Income (Loss)
The factors described above resulted in net income of $9.3 million and a net loss of $12.2 million for the quarters ended June 30, 2023 and 2022, respectively, and net income of $11.8 million and a net loss of $26.9 million for the six months ended June 30, 2023 and 2022, respectively.
Critical Accounting Estimates and Policies
The Company’s consolidated financial statements are prepared in conformity with GAAP, which require it to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.
The most critical accounting policies involve significant estimates and include those used in determining the liability for unpaid losses and loss adjustment expenses, recoverability of reinsurance receivables, investments, fair value measurements, goodwill and intangible assets, deferred acquisition costs, and taxation. For a detailed discussion on each of these policies, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes to any of these policies or underlying methodologies during the current year.
Liquidity and Capital Resources
Sources and Uses of Funds
Global Indemnity Group, LLC is a holding company. Its principal asset is its ownership of the shares of its direct and indirect subsidiaries, including those of its insurance companies: United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, and Penn-Patriot Insurance Company.
Global Indemnity Group, LLC’s 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. 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. The principal sources of funds at these direct and indirect subsidiaries include underwriting operations, investment income, proceeds from sales and redemptions of investments, capital contributions, intercompany borrowings, and dividends from subsidiaries. Funds are used principally by these operating subsidiaries to pay claims and operating expenses, to make debt payments, to purchase investments, and to make distribution payments. In addition, the Company periodically reviews opportunities related to business acquisitions, and as a result, liquidity may be needed in the future.
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 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.
As of June 30, 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 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. The dividend limitations imposed by state laws are based on the statutory financial results of each insurance company that are determined by using statutory accounting practices that differ in various respects from accounting principles used in financial statements prepared in conformity with GAAP. See “Regulation - Statutory Accounting Principles” in Item 1 of Part I of the Company’s 2022 Annual Report on Form 10-K. Key differences relate to, among other
50
items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes. See Note 22 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2022 Annual Report on Form 10-K for further information on dividend limitations related to the Insurance Companies. There were no dividend declared or paid during the quarter and six months ended June 30, 2023.
Cash Flows
Sources of operating funds consist primarily of net written premiums and investment income. Funds are used primarily to pay claims and operating expenses and to purchase investments. As a result of the distribution policy, funds are also used to pay distributions to shareholders of the Company.
The Company’s reconciliation of net income (loss) to net cash provided by operations is generally influenced by the following:
Net cash provided by operating activities was $14.2 million and $18.5 million for the six months ended June 30, 2023 and 2022, respectively. The decrease in operating cash flows of approximately $4.3 million from the prior year was primarily a net result of the following items:
Net premiums collected
237,847
276,206
(38,359
Net losses paid
(141,431
(136,756
(4,675
Underwriting and corporate expenses
(105,981
(130,981
25,000
23,748
15,116
8,632
Interest paid
(5,126
5,114
(4,288
See the consolidated statements of cash flows in the consolidated financial statements in Item 1 of Part I of this report for details concerning the Company’s investing and financing activities.
Liquidity
Stock Repurchase
On October 21, 2022, Global Indemnity Group, LLC announced that up to $32 million of share repurchases were authorized. On January 3, 2023, Global Indemnity Group, LLC announced that it authorized an increase in the aggregate stock purchases from $32 million to $60 million. On June 8, 2023, the Company’s Board of Directors approved an additional increase in the existing share buyback authorization amount of $60 million to $135 million.
During the six months ended June 30, 2023, 450,000 shares were repurchased for approximately $12.1 million at an average purchase price of $26.83 per share. As a result of these transactions, book value per share increased by $0.60 per share since December 31, 2022.
From the time of the initial announcement, a total of 1,357,082 shares were repurchased for approximately $34.0 million at an average purchase price of $25.05 per share. 138,151 shares that were acquired were reissued at an average price per share of $24.17. As a result of these transactions, book value per share increased by $1.69 per share since inception of the stock purchase program in October 2022.
Restructuring
The Company restructured its insurance operations to strengthen its market presence and enhance its focus on GBLI’s core Package Specialty and Targeted Specialty products. The restructuring plan, which was initiated in the fourth quarter of 2022, was completed in the first quarter of 2023. The Company incurred restructuring costs of $3.4 million during the fourth quarter of 2022 and $2.1 million during the six months ended June 30, 2023 for total restructuring costs of $5.5 million. Post completion of the restructuring, the Company anticipates recurring annual expense savings of $16.0 million.
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 24, 2023 and June 23, 2023. Distributions paid to common shareholders were $7.5 million during the six months ended June 30, 2023. In addition, distributions of $0.2 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the six months ended June 30, 2023.
Other than the items discussed in the preceding paragraphs, there have been no material changes to the Company’s liquidity during the quarter and six months ended June 30, 2023. Please see Item 7 of Part II in the Company’s 2022 Annual Report on Form 10-K for information regarding the Company’s liquidity.
Capital Resources
There have been no material changes to the Company’s capital resources during the quarter and six months ended June 30, 2023. Please see Item 7 of Part II in the Company’s 2022 Annual Report on Form 10-K for information regarding the Company’s capital resources.
Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report may include forward-looking statements within the meaning of Section 21E of the Security Exchange Act of 1934, as amended, that reflect the Company’s current views with respect to future events and financial performance. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, expectations or consequences of identified transactions or natural disasters, and statements about the future performance, operations, products and services of the companies.
The Company’s business and operations are and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. See “Risk Factors” in Item 1A of Part I in the Company’s 2022 Annual Report on Form 10-K for risks, uncertainties and other factors that could cause actual results and experience to differ from those projected. The Company’s forward-looking statements speak only as of the date of this report or as of the date they were made. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
52
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the quarter ended June 30, 2023, global equities rose approximately 6.9% with U.S. equities outperforming, gaining approximately 8.7%. U.S. fixed income lost approximately 0.8% with the average spread moving tighter during the quarter. Market expectations were met in June as the FOMC voted to pause the current tightening cycle, but volatility quickly resumed as the revised dot plots and Federal Reserve Chair Jerome Powell’s hawkish comments demonstrated that this meeting was not the end of this cycle. The combination of challenges that still exist in the banking industry, the Treasury’s need to replenish its General Account and the desire to observe additional economic data likely contributed to the more measured approach. Short-dated Treasury yields have been on the rise, leading to the steepest curve inversion since the Fed began raising rates in March of 2022 and fueling concerns that the U.S. will enter a recession later this year.
The Company’s investment grade fixed income portfolio continues to maintain high quality with an A average rating and a duration of 1.3 years. Portfolio purchases were focused within US Treasury and asset backed securities. These purchases were funded primarily through cash inflows, sales of US Treasury securities and CMBS, as well as maturities and paydowns. During the second quarter, the portfolio’s allocation to US Treasury securities increased, while the portfolio’s exposure to investment grade credit and CMBS securities decreased.
Other than the changes described in the preceding paragraphs, there have been no other material changes to the Company’s market risk since December 31, 2022. Please see Item 7A of Part II in the Company’s 2022 Annual Report on Form 10-K for information regarding the Company’s market risk.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2023. Based upon that evaluation, and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2023, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
The Company is, from time to time, involved in various legal proceedings in the ordinary course of business. The Company maintains insurance and reinsurance coverage for risks in amounts that it considers adequate. However, there can be no assurance that the insurance and reinsurance coverage that the Company maintains is sufficient or will be available in adequate amounts or at a reasonable cost. The Company does not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on its business, results of operations, cash flows, or financial condition.
There is a greater potential for disputes with reinsurers who are in runoff. Some 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 1A. Risk Factors
The Company’s results of operations and financial condition are subject to numerous risks and uncertainties described in Item 1A of Part I in the Company’s 2022 Annual Report on Form 10-K, filed with the SEC on March 15, 2023. The risk factors identified therein have not materially changed.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company’s Share Incentive Plan allows employees to surrender the Company’s class A common shares as payment for the tax liability incurred upon the vesting of restricted stock. There were 15,558 shares and 18,860 shares surrendered by the Company’s employees during the quarter and six months ended June 30, 2023, respectively. All class A common shares surrendered by the Company’s employees are held as treasury stock and recorded at cost until formally retired.
Global Indemnity Group, LLC repurchased 200,000 shares and 450,000 shares from third parties under its repurchase program during the quarter and six months ended June 30, 2023, respectively. All class A common shares repurchased from third parties under its repurchase program are held as treasury stock and recorded at cost until formally retired.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6.Exhibits
31.1+
Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) / 15d-14 (a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+
Certification of Chief Financial Officer pursuant to Rule 13a-14 (a) / 15d-14 (a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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+ Filed or furnished herewith, as applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant
Dated: August 9, 2023
By:
/s/ Thomas M. McGeehan
Thomas M. McGeehan
Chief Financial Officer
(Authorized Signatory and Principal Financial and Accounting Officer)