NYSE:GBLI
READ THE FULL GBLI RESEARCH REPORT
Global Indemnity Group (NYSE:GBLI) reported 1st quarter 2024 financial and operating results which showed improved underwriting results that were above expectations. Underwriting income was $5.3 million in the quarter compared to an underwriting loss of ($1.1) million in the 1st quarter of 2023. Net income was $11.3 million and earnings per share was $0.82, both of which increased substantially from the prior year period.
In the company’s core operating subsidiary, Penn-America, gross written premiums in aggregate for Wholesale Commercial, InsurTech, and Assumed Reinsurance business grew by 7.1% in the quarter. Gross written premiums for the Programs line decreased 26.7% in the quarter as a result of rate and underwriting actions taken to improve profitability in late 2022.
Penn-America’s accident year underwriting income was $5.6 million in the 1st quarter compared to an underwriting loss of ($0.8) million in the prior year period. Penn-America’s accident year loss ratio was 54.8% for the quarter which was a substantial improvement from 63.0% for the same period in 2023.
Net investment income increased to $14.5 million in the quarter, an increase from $12.0 million in the prior year period. The increase in net investment income was primarily due to strategies employed in 2022 to take advantage of the rising interest rate environment. Book yield on the investment portfolio increased to 4.3% from 4.0% at the end of 2023. The average duration of these securities was shortened to 1.06 years as of March 31, 2024 compared to 1.10 years on December 31, 2023 and 3.3 years as of March 31, 2022. Approximately $700 million of cash flow will be generated from maturities and investment income for the remaining quarters in 2024. This positions the company to continue to increase book yield by investing maturities in higher yielding bonds. Currently, approximately 44% of the fixed-income portfolio is invested in U.S. treasuries.
Segment Review
During the 4th quarter of 2023, the company re-evaluated its segments and determined that the business should be managed through two reportable segments: Penn-America and Non-Core Operations. The Penn-America segment comprises the company’s core products which include Wholesale Commercial, Programs, InsurTech, and Assumed Reinsurance. The Non-Core Operations segment contains lines of business that have been de-emphasized or are no longer being written.
In the Penn-America segment, gross written premiums and net written premiums for Wholesale Commercial, InsurTech, and Assumed Reinsurance businesses increased 7.1% and 7.5%, respectively, in the first quarter. This growth was driven by organic agency growth, new agents, and new products.
Gross written premiums for Programs decreased 26.7% as mentioned above. Excluding programs terminated in 2023 that did not meet long-term growth goals and underwriting income expectations, Programs’ gross written premiums declined 11.9%. Penn-America’s total gross written premiums declined by 1.4% reflecting the large decline in Programs.
In the Non-Core Operations segment, gross written premiums declined to ($0.5) million in the 1st quarter from $27.6 in the prior year period. The decrease in gross written premiums was primarily due to selling the manufactured home & dwelling and farm businesses and the non-renewal of a casualty reinsurance treaty.
Combined Ratios
The consolidated combined ratio was 94.9% for the 1st quarter (Loss Ratio 55.3% and Expense Ratio 39.6%) as compared to 101.0% (Loss Ratio 62.8% and Expense Ratio 38.2%) for the prior year period. The consolidated accident year property loss ratio improved by 18.6 points to 50.1% in the quarter. The improvement is primarily due to improved performance in non-catastrophe related business. The consolidated accident year casualty loss was 58.6% in the quarter from 58.9% in the prior year period.
In the Penn-America segment, the accident year combined ratio was 94.0% in the quarter (Loss Ratio 54.8% and Expense Ratio 39.2%) as compared to 101.2% (Loss Ratio 63.0% and Expense Ratio 38.3%) for the prior year period.
In the Non-Core Operations segment, the calendar year combined ratio was 105.0% for the quarter (Loss Ratio 60.1% and Expense Ratio 44.9%) compared to 96.0% (Loss Ratio 58.1% and Expense Ratio 37.9%) in the prior year period.
Valuation and Estimates
GBLI book value per share increased $0.65 per share to $48.18 as of March 31, 2024. On March 6, 2024, the Board of Directors approved a dividend of $0.35 per common share payable on March 28, 2024, a 40% increase over the prior quarterly dividend rate of $0.25 per common share. The current dividend yield is approximately 4.37%.
Or 2024 total revenue estimate is $469.4 million which includes $401.7 million in Net Earned Premiums and $66.5 million in Investment Income. Our 2024 EPS estimate is adjusted to $2.55. As the consolidated expense ratio continues to drift down, we believe EPS can increase to approximately $2.63 in 2025.
GBLI stock is currently selling at 66.6% of book value based on March 31, 2024 shareholders’ equity. We maintain our long-term price target of $55.00 per share based on the stock selling at a small premium to future book value per share.
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