Global Indemnity Group Q4 2025 Earnings Call - First sub-90% quarterly accident year combined ratio in years

Jonathan, Conference Operator: Good morning, ladies and gentlemen, and thank you for standing by, and welcome to the Global Indemnity Group 2025 earnings call. My name is Jonathan, and I will be your conference operator today. During the speaker’s presentation, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during this session, you’ll need to press star one one on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press star one one again. For web questions, select Questions from the toolbar to submit your web questions. As a reminder, today’s program is being recorded. Now I’d like to introduce your host for today’s program, Evan Kasowitz, President of Belmont Holdings. Please go ahead.

Evan Kasowitz, President of Belmont Holdings, Global Indemnity Group, LLC: Thank you, operator. Today’s conference call is being recorded. GBLI’s remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including, without limitation, believes, expectations, or estimates. We caution you that such forward-looking statements should not be regarded as a representation by us that the future plans, estimates, or expectations contemplated by us will in fact be achieved. Please refer to our annual report on Form 10-K and our other filings with the SEC for descriptions of the business environment in which we operate and the important factors that may materially affect our results. Global Indemnity Group, LLC is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. It is now my pleasure to turn the call over to Mr.

Joseph W. Brown, Chief Executive of Global Indemnity.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Thank you, Evan. Good morning, and thank you for joining us for the GBLI year-end 2025 results conference call. With me today are Evan Kasowitz and Brian Riley, our Chief Financial Officer. Following our usual format, I will first provide overview comments on my assessments of both the fourth quarter and the full year’s results. Our CFO, Brian Riley, will provide the highlights of our financial and operating results. Following Brian’s comments, we look forward to your questions. This quarter’s results continue the very strong underlying positive insurance operating trends that we have seen for the last several quarters. Our fourth quarter combined ratio of 89.3 produced an underwriting profit of $11 million, a very nice increase over the 96.6% we recorded in the fourth quarter last year.

This was our first sub 90% quarterly accident year combined ratio in the past several years, reflecting both exceptional property results for non-cat losses and solid casualty results. Our short duration investment portfolio delivered acceptable net investment income results at $15.3 million, down a tad from the prior period of $16.1 million. As Brian will provide more details on the investment portfolio, I would just observe that we are sitting at an extremely short duration of 1 year with very high-quality fixed income investments. Given where we are in a very uncertain world today, I am personally happy that we are playing defense and have the ability to redeploy into a more attractive portfolio once things settle down.

As we noted in our press release, excluding the largest ever California wildfire loss that we experienced in the first quarter, our quarterly year-to-date accident results improved each quarter with a sequence of 94.8%, 94.7%, 93.2%, and 92.2% for the full year. Even including the wildfire losses, which occurred in the first quarter, we still had an okay full-year accident result of 96.2%. I would also note that we did make a modest adjustment to prior year loss reserves in the fourth quarter of $9 million. That’s about 1.2% of year-end carried reserves. The adverse development continues as it has over the past few years to be largely attributed to the accident years 2020, 2021, and 2022.

These are the three years where we had an extraordinarily poor loss experience in a couple of programs, both have since terminated, and our New York City habitational risks. We continue to grow our ongoing book of business, which we label as Core Belmont, at 9%. The press release mentioned our overall reported premium growth was flat as we continued to trim back our remaining underperforming specialty programs. I will note that the 9% growth was driven by a 77% growth in our assumed reinsurance book, 16% in VacantExpress, 8% in collectibles, and 3% in Penn-America Wholesale. The modest 3% growth in Penn was a disappointment given that we had grown at 8% for the first 9 months of 2025.

This was driven by a major drop in new business submissions, resulting in a very weak fourth quarter as we observed a major shift in the level of price competition in the E&S wholesale space. This heightened competition has been fueled by both our existing E&S competitors and the admitted market coming back into the property markets in a big way. Given the work we have put into improving our current products and the discipline to trim everything that didn’t meet our underwriting criteria, we feel very strongly that we should now see Belmont Core gross premiums grow in the 15%-20% range or more in 2026. As we expected, our restructuring expenses remain high. This is due to the combination of, number one, our ongoing investments in completing year two of the three-year digital transformation of our technology stack.

That includes software, infrastructure, and data. Number 2, our investment in talent to grow our Katalyx distribution platform. I recognize that this focused combination, along with normal operating costs, leaves our overall expenses too high. As such, we are deeply focused on minimizing the effect on our competitiveness within each product channel. Having established that our Kaleidoscope platform is working for our first two deployed products exactly as envisioned 2 years ago, building on this momentum, we are confident that all 3 of our existing direct product groups, that would be wholesale commercial, VacantExpress, and Collectibles, will be fully integrated on the platform by year-end. Not only will our customers see a difference in both our service levels and responsiveness, but our organization will finally be structured to benefit from scale over the next few years.

In addition to the progress we have made in our software development, 98% of our data center servers have now been moved into our cloud configuration, with the remaining few servers scheduled to move mid-year. As we have previously communicated, all our internal data has now been moved to a modern cloud-based fabric lakehouse. We are currently running a large number of our existing reporting packages against both the old and the new data sources to verify that the mapping is 100% reconciled. Equally important, the data has been structured and stored to prepare us for the significant number of emerging AI projects that are being identified across all aspects of our company. Reflecting on the last three years of significant IT investment and our renewed focus on core business, it can be challenging to see just how far we’ve come.

However, our ongoing commitment to underwriting excellence has resulted in an exceptionally attractive book of in-force business. As the year progresses, we’re set to start seeing the business rationale for our digital transformation unfold in real time. I want to reaffirm my personal belief in the strength of our existing core business. With our reorganized structure and the strategic efforts we’ve been putting in place, I am very confident that we are well-positioned to deliver substantial value to our owners in the near future. At this point, I’ll turn it over to Brian.

Brian Riley, Chief Financial Officer, Global Indemnity Group, LLC: Thank you, Jay. The underwriting results, as Jay mentioned, improved steadily since the California wildfire event that resulted in a $15.7 million of underwriting loss that contributed 4 points to the combined ratio and $12 million loss after tax. Given that, I’ll focus my discussion on operating income, excluding the impact of the California wildfires, to describe year-over-year performance. Operating income, which excludes after-tax impact of unrealized losses on equity securities, was $40.2 million, compared to $42.9 million in 2024. Starting with investments, investment income was up slightly to $62.7 million from $62.4 million in 2024, mostly in line with growth in average cash and investments as average yield remained steady at 4.4%.

Growth in the investment portfolio stunted by runoff of our loss reserves in our Belmont Non-Core segment, which declined by $67 million to $237 million at year-end. The current book yield on the fixed income portfolio was 4.4%, with an average duration of approximately 1 year, almost unchanged since December 31, 2024. The average credit quality of the fixed income portfolio remains at double A minus. Second, corporate expenses were higher by $6 million, resulting from personnel costs and professional fees for the build-out of Katalyx and mergers and acquisitions activity. Lastly, calendar year underwriting income increased by about $5 million. A 1-point improvement in the combined ratio to 94.6%, compared to 95.6% in 2024, and consists of a few notable components.

First, current accident year underwriting income improved by $13.9 million, as a current accident year combined ratio of 92.2 was better than 2024 by 3.2 points. Our loss ratio was better than 2024 by 4.1 points, driven by both property and casualty. Property was 44.8, 9.3 points better than 2024, and casualty was 57.6, better than 2024 by around 1 point. As Jay mentioned, our expense ratio continues to be elevated, about 1 point higher than 2024 for investment in personnel to build out Katalyx. Partially offsetting the strong current accident year results was an increase to prior accident years’ losses of $9 million. As Jay mentioned, this increase was driven by accident years 2020 through 2022 on a couple terminated programs and New York habitational business, mainly severity driven.

Turning to premiums. Belmont Core gross written premiums was $401 million compared to $400 million in 2024. Excluding terminated products, gross written premiums increased 9% to $401 million compared to $367 million in 2024. Let me add a little color at the divisional level. Penn-America finished the year up 3% at $256 million. Lower than growth of 8% through the first nine months, mainly due to the decline in new business in the fourth quarter due to increased competition in the E&S marketplace as well as competition from embedded markets. Retention, however, does remain strong at 70%. Collectibles finished the year up 8%, and VacantExpress finished the year up 16%, driven by continued agency expansion.

Belmont Core assumed reinsurance gross written premiums grew 77% to $45 million, resulting from 7 new treaties we added during 2024 and 7 new treaties added in 2025, increasing our in-force treaties to 17 as of year-end. Specialty products, excluding programs terminated during 2024, ended the year flat at $37 million. In summary, although we are seeing increased competition in the marketplace, we are optimistic given our underwriting performance trends over the last 3 accident years. Our investment portfolio remains positioned to invest in longer duration maturities at higher yields. Booked reserves remain solidly above current actuarial indications. Last, discretionary capital, which we consider to be the amount of consolidated equity in excess of that required to maintain the strongest levels with our rating agencies, is $284 million at year-end. Thank you. We will now take your questions.

Jonathan, Conference Operator: Certainly. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press star one one again. Our first question for today comes from the line of Tom Kerr from Zacks Small Cap Research. Your question please.

Tom Kerr, Analyst, Zacks Small Cap Research: Good morning, guys. Did you give an expense ratio for the fourth quarter? What would that be?

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Brian.

Brian’s working for a second.

Brian Riley, Chief Financial Officer, Global Indemnity Group, LLC: It’s, yeah, a little over 40.5.

Tom Kerr, Analyst, Zacks Small Cap Research: Okay. Just the big picture on the expense ratio again, you said it’s gonna be elevated. Does it drift down towards the end of the year finally, or is it more level and 2027’s gonna see the big improvement in expense ratios?

Brian Riley, Chief Financial Officer, Global Indemnity Group, LLC: I think 2026 will be pretty level with that. We’ll start to see some improvement starting in 2027.

Tom Kerr, Analyst, Zacks Small Cap Research: Okay. On the competition, maybe give your big picture thoughts on just the overall cycle, the competition. You mentioned it’s just in E&S, but is there other stuff going on broad-based in the P&C world that’s seeing softening or turn or whatever you wanna call it?

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Sure. I, you know, it’s, I don’t know if it’s my sixth or seventh cycle in 50 years, but they all seem to have similar ingredients. We seem to, as an industry, to be very uncomfortable making money. When we make a lot of money, and particularly when we don’t have a lot of cat losses, the market reacts much, much quicker than it used to, just simply because information systems are better today. The market is more responsive. I think the fourth quarter, the concentrated change in the property markets, driven by not only our own excellent results, but everybody’s excellent results, has caused the admitted market to come back in and a significant drop in actual available premium.

Now, when we look out and talk to our various wholesale partners and look at their numbers, obviously it’s not the same across the board, but there was a big change in the fourth quarter. I think we’re looking at headwinds going into 2026. We’re working very quickly to map against what we had been offering in the fourth quarter into the first quarter and making adjustments in real time to try and match up against our competition where we feel comfortable we can still make money. But this is a big change in the cycle, not to be underestimated. It’s very different. It’s concentrated for us in the wholesale market, but we see a little bit of the effect in VacantExpress obviously also too.

Tom Kerr, Analyst, Zacks Small Cap Research: Okay, great. Two more quick ones. The specialty products premiums, is that an inflection point where it’s gonna be stable or is that where you wanna be or is there more declines you think this year?

Brian Riley, Chief Financial Officer, Global Indemnity Group, LLC: Short term, I think it’s pretty stable, again, starting with a little more growth in 2027, Tom.

Tom Kerr, Analyst, Zacks Small Cap Research: Okay.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Yeah. We trimmed out more than two-thirds of the book.

Brian Riley, Chief Financial Officer, Global Indemnity Group, LLC: Yeah

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: In the last two years. The really bad ones went away right away when I first got here, and we picked up a few more that we identified that had issues, and have gotten rid of them in the past 12 months. We ended the year with programs that we’re 100% comfortable with going forward. We do expect to see some organic growth in that area in 2026.

Tom Kerr, Analyst, Zacks Small Cap Research: Got it. Last one is, you guys switched to the Nasdaq, I think four months ago, maybe? Or, any benefits to that, or any good reasons, or benefits from switching from the New York Stock Exchange to the Nasdaq?

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Well, as advertised, we should get better trading volumes, but I don’t think we’ve seen that quite yet. We’re hoping to see a little bit more activity for both buyers and sellers because our market, our actual public market has been so thin in trading volumes. It’s been hard for buyers to buy a big chunk or sellers to move on from owning our stock. We’re hoping the volumes pick up a bit and that they get a better execution on both sides.

Tom Kerr, Analyst, Zacks Small Cap Research: Got it. Well, thanks. I’ll get back in the queue.

Jonathan, Conference Operator: Thank you. Our next question comes from the line of Ross Haberman from RLH Investments. Your question, please.

Ross Haberman, Analyst, RLH Investments: Good morning, gentlemen. How are you? Could you talk about, do you have any exposure on the private equity side? There’s been a lot of discussion about that in the last couple of months, and any reinsurance exposure to what’s happening in the Middle East. Thanks.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Thank goodness, not to any of our knowledge, do we have any exposure to what’s happening directly in the Middle East. In terms of private equity, do you mean on the investment side?

Ross Haberman, Analyst, RLH Investments: Yes. Yeah.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: We don’t hold any direct private equity. We do have some small investments in some private credit funds. I think roughly about $20 million at this point in time.

Ross Haberman, Analyst, RLH Investments: What’s your thought going forward with those funds? Are you comfortable with them? Do you think you’re gonna exit? What’s your thought going forward with those funds?

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: You know, four or five months into it, I would have to say we’re disappointed. The hard question is always should I be a buyer versus a seller at this point in time?

Ross Haberman, Analyst, RLH Investments: Right.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: It’s our investment portfolio is managed by a subcommittee of the board, and they spent a fair amount of time discussing it at last week’s board meeting. It’s individual discussions. There’s a difference between the four different BDCs that we own. We’re hopeful that whatever pain we felt in that is behind us. As you know, it’s been a bit of a free fall for the last three or four weeks.

Ross Haberman, Analyst, RLH Investments: Yes, I’ve seen that. Last question, I did see you took some realized losses, about $3.66 million last year. Was that related to the private debt, or can you tell us a little bit about what?

Brian Riley, Chief Financial Officer, Global Indemnity Group, LLC: Yeah.

Ross Haberman, Analyst, RLH Investments: Was that or where it was from?

Brian Riley, Chief Financial Officer, Global Indemnity Group, LLC: Ross, that’s exactly it. It’s realized gains on the income statement, but unrealized in the sense that they’re mark-to-market, and we’re still holding them.

Ross Haberman, Analyst, RLH Investments: That’s related to the $20 million gross exposure you’re saying?

Brian Riley, Chief Financial Officer, Global Indemnity Group, LLC: Yeah.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Yeah.

Ross Haberman, Analyst, RLH Investments: Um.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: $20 million. Exactly.

Ross Haberman, Analyst, RLH Investments: Okay. Final question, going back to the prior question, he talked about your overhead and expense ratio. Should that be moderated, I should say, over the next couple quarters, or should we see the level of expense that we saw in this fourth quarter? Again, excluding the $9 million, I guess, adjustment you had mentioned.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Yeah, our existing book continues to perform very well. Our in-force loss portfolio book and our loss reserves and our existing in-force premium, we don’t see any major changes happening in that in the near term. I do think that it’s hard to count on the kind of exceptional year we have to be duplicated back-to-back, but certainly through whatever we are, two months and a few days into the first part of the year, our property book continues to perform well, and our casualty book looks good.

Ross Haberman, Analyst, RLH Investments: Thank you very much.

Jonathan, Conference Operator: Thank you. I’m not showing any further questions from the phone lines at this time. We’ll now move to our web questions.

Evan Kasowitz, President of Belmont Holdings, Global Indemnity Group, LLC: Thank you, Jonathan. We have one web question from Joel Straka. Book value per share, including the dividend, grew 1% last year. That’s obviously an unacceptable return. What return on equity do you expect in 2026 and 2027, and how does that compare to your cost of equity?

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Tough question. I would say, book value before we pay dividends should increase a minimum of 6%-7% a year with our current structure, and that would be the same for both of the next 2 years. We are carrying an extraordinary level of excess capital. Brian actually added a different way of thinking about our return on the underlying insurance business and investment business. Taking out all of the excess, you see a return that’s in the low- to mid-teens %. That’s kind of the underlying book of business we’re managing, and we have to deal with our cost structure and our excess capital. We believe the opportunity is emerging very quickly to deploy that excess capital in our business. We’ve structured our IT investments such that we could add product very easily.

We can increase our writings 30, 40, 50% without any real substantial change. I mean, infinitesimal change in our staffing under the new system that we’ve been building. We’re really poised to be able to deliver much better returns. I would share your conclusion that the return over the last couple of years has been unacceptable. It’s certainly something that we spend an enormous amount of time discussing in the boardroom about why we’ve had those numbers produced. That’s not something we’re proud of, and it’s something we expect to do better going forward.

Jonathan, Conference Operator: We have a follow-up question from the line of Thomas Kerr from Zacks Small Cap Research.

Tom Kerr, Analyst, Zacks Small Cap Research: Hello?

Jonathan, Conference Operator: Yes, your line is open.

Tom Kerr, Analyst, Zacks Small Cap Research: Okay. Sorry. Just one final question, and this wouldn’t be a GBLI call without a share buyback question. You guys are at 58% of book value, I think, as of today. $284 million discretionary capital. I don’t think anybody’s saying buy $284 million in shares buyback, but any updated comment on share buybacks from three months ago when we had the last call?

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: No.

Tom Kerr, Analyst, Zacks Small Cap Research: Okay.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Just to elaborate, our board continues to believe the investments we’ve been making in our company will lead us to a real opportunity going forward to put that capital to work, either through additional product inside our existing channels or adding additional arms to our company. It’s a tough call, and I would agree with what you’re saying, that it looks like a lot of capital, and it’s something that we wanna redeploy.

Tom Kerr, Analyst, Zacks Small Cap Research: Got it. Thanks for the call. Thanks for the answer.

Jonathan, Conference Operator: Thank you. Our next question is a follow-up from the line of Ross Haberman from RLH Investments. Your question please.

Ross Haberman, Analyst, RLH Investments: Sorry, Jay, just one final question along the lines you were talking about. Are you actively looking to buy new lines of business as part of the expansion or as part of the organic growth plan? Would that include if you found small, I don’t know, small public and/or private businesses with that, or are you actively looking in that direction as part of your expansion plans? Thanks.

Joseph W. Brown, Chief Executive Officer, Global Indemnity Group, LLC: Yeah, let me remind you that a year ago, a little bit over a year ago, we split the company into a distribution platform, Katalyx, and Belmont Insurance, which is our insurance platform. Belmont, obviously, is where the excess capital sits, and so they’re open for more business, entertaining additional programs or individual MGAs that might approach them with existing books of business that would meet Belmont’s appetite. On the Katalyx side, we spent most of last year looking at an enormous number of possible acquisitions, some of which would have involved Belmont underwriting the business, most of which would have been coming with other capacity. And as we’ve looked at those, we obviously didn’t find a large number of acquisitions, so we continue to sit with a large amount of excess capital. We’ve been active and open for business.

Our best growth, the most predictable growth, and the best way to continue profitability is to grow our existing business. I would say 85%-90% of our focus as a management team continue to execute what we’ve been doing well for the past two or three years in our core business. If that continues to perform well, it’s easier then to add business to that as we go forward.

Ross Haberman, Analyst, RLH Investments: Thanks again.

Jonathan, Conference Operator: Thank you. This does conclude the question and answer session of today’s program. I’d like to hand the program back to Evan Kasowitz for any further remarks.

Evan Kasowitz, President of Belmont Holdings, Global Indemnity Group, LLC: Thank you again. This concludes our 2025 fourth quarter earnings call. We look forward to speaking with you about our first quarter 2026 results.

Jonathan, Conference Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.