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Global Indemnity plc Reports Second Quarter 2015 Financial Results

DUBLIN, Aug. 04, 2015 (GLOBE NEWSWIRE) -- Global Indemnity plc (NASDAQ:GBLI) today reported net income of $17.9 million or $0.70 per share for the six months ended June 30, 2015. Operating income was $15.7 million for the six months ended June 30, 2015 compared to $18.5 million at June 30, 2014. Excluding one-time costs associated with the acquisition of American Reliable Insurance Company (“American Reliable”), operating income was $21.1 million at June 30, 2015, an improvement of 14% compared to the same period of 2014. Book value per share was $36.20 at June 30, 2015, an increase 0.9% compared to book value per share of $35.86 at December 31, 2014.

Selected Operating and Balance Sheet Data (Dollars in millions, except per share data)


For the Six Months

Ended June 30,
As of
June 30,
2015

As of
December 31,
2014
2015 2014
Gross Premiums Written$309.4 $160.1 Book value per share$ 36.20 $ 35.86
Net Premiums Written$272.1 $149.2 Shareholders’ equity$ 931.3 $ 908.3
Cash and invested assets (1)$ 1,770.3 $1,611.8
Net income$ 17.9 $ 42.0
Net income per share$ 0.70 $ 1.66 (1) Including receivable/(payable) for securities sold/(purchased)
Operating income$ 15.7 $ 18.5
Operating income per share$ 0.61 $ 0.73
Combined ratio analysis:
Loss ratio 58.2 57.5
Expense ratio 38.7 40.2
Combined ratio 96.9 97.7

Cynthia Y. Valko, Chief Executive Officer, commented: "American Reliable has now been a part of Global Indemnity for six months. Premium volume compared to 2014 is almost double and the combined ratio has improved to 96.9 compared to 97.7 in 2014. We have been able to absorb many functions previously performed for American Reliable by the former parent without adding staff which has helped improve the expense ratio 1.5 points. These factors have led to operating income of $21.1 million excluding one-time costs associated with the acquisition, an improvement of 14% compared to 2014. In addition to the positive results related to the acquisition, the integration of American Reliable has been smooth with no disruptions to the existing business. The Commercial Lines and Reinsurance Operations are also holding up well even in this competitive environment. Book value per share continues to grow even with the rise in interest rates during the 2nd quarter. The investment portfolio is also well positioned, mainly invested in short duration investment grade bonds. All in all, a good start for our combined companies.”

About Global Indemnity plc and its subsidiaries

Global Indemnity plc (NASDAQ:GBLI), through its several direct and indirect wholly owned subsidiary insurance and reinsurance companies, provides both admitted and non-admitted specialty property and casualty insurance coverages and individual policyholder coverages in the United States, as well as reinsurance worldwide. Global Indemnity plc’s three primary segments are:

  • United States Based Commercial Lines Operations
  • United States Based Personal Lines Operations
  • Bermuda Based Reinsurance Operations

For more information, visit the Global Indemnity plc website at http://www.globalindemnity.ie.

Forward-Looking Information

The forward-looking statements contained in this press release1 do not address a number of risks and uncertainties. Investors are cautioned that Global Indemnity’s actual results may be materially different from the estimates expressed in, or implied, or projected by, the forward looking statements. Factors that could cause actual results to differ materially from those contemplated in the forward-looking statements include, but are not limited to, the risk that there may be difficulties in integrating the businesses of American Reliable, which could result in a failure to realize the potential benefits of the acquisition, the risk that the transaction proves disruptive to the operations of American Reliable or Global Indemnity, the risk that American Reliable’ s or Global Indemnity’s prospective insurance premiums, investment yield, or net earnings are less than anticipated (including as a result of unexpected events, competition, costs, charges or outlays whether as a consequence of the transaction or otherwise). The foregoing review of factors that could cause actual financial or operating performance to differ materially from expectations is not exhaustive. Please see Global Indemnity’s filings with the Securities and Exchange Commission for a discussion of additional risks and uncertainties which could impact the company and for a more detailed explication regarding forward-looking statements.

1 Disseminated pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

Global Indemnity plc’s Combined Ratio for the Six Months Ended June 30, 2015 and 2014

The combined ratio is a key measure of insurance profitability. The components comprising the combined ratio are as follows:

Six Months Ended
June 30,
2015 2014
Loss Ratio:
Current Accident Year
Excluding Catastrophes 48.6 47.4
Catastrophes 13.0 14.7
Current Accident Year 61.6 62.1
Changes to Prior Accident Year (3.4)
(4.6)
Loss Ratio – Calendar Year 58.2 57.5
Expense Ratio 38.7 40.2
Combined Ratio 96.9 97.7

For the six months ended June 30th, the accident year loss ratio improved by 0.5 points compared to 2014.

For the six months ended June 30, 2015, the current accident year loss ratio was 61.6 compared to 62.1 for the same period in 2014.

  • The current accident year casualty loss ratio improved by 4.6 points to 68.7 in 2015 from 73.3 in 2014.
  • The current accident year property loss ratio increased 2.9 points to 59.5 in 2015 from 56.6 in 2014 mainly due to a mix change in the business due to the acquisition of American Reliable which has a higher loss ratio.

Calendar year results for the six months ended June 30, 2015 include a 3.4 point reduction in the loss ratio related to prior accident years which was primarily driven by better than expected emergence in general liability and professional lines, and less than anticipated severity on property catastrophe losses within Reinsurance Operations.

For the six months ended June 30th, the expense ratio improved from 40.2 in 2014 to 38.7 in 2015.

The improvement in the expense ratio is primarily attributable to synergies realized as a result of the acquisition of American Reliable.

Global Indemnity plc’s Gross and Net Premiums Written Results by Segment

Six Months Ended June 30,
Gross Premiums Written Net Premiums Written
2015 2014 2015 2014
Commercial Lines Operations$ 108,826 $ 113,548 $ 100,322 $ 103,695
Personal Lines Operations 162,215 - 133,483 -
Reinsurance Operations 38,343 46,554 38,304 45,538
Total$ 309,384 $ 160,102 $ 272,109 $ 149,233

Gross premiums written and net premiums written increased 93% and 82%, respectively, compared to the same period in 2014.

Commercial Lines Operations: For the six months ended June 30, 2015, gross premiums written and net premiums written decreased 4.2% and 3.3%, respectively, compared to the same period in 2014. Underwriting actions were taken to improve profitability which included non-renewing some property business to reduce catastrophe exposure.

Personal Lines Operations: Personal lines is a new segment for the Company resulting from the acquisition of American Reliable during the first quarter of 2015.

Gross premiums written include $23.0 million of business that is currently written by American Reliable and is 100% ceded to insurance entities owned by the former parent. Net premiums written were $133.5 million for the six months ended June 30, 2015 compared to $133.6 million for the same period in 2014.

Reinsurance Operations: For the six months ended June 30, 2015, gross premiums written and net premiums written decreased 17.6% and 15.9%, respectively, compared to the same period in 2014. The decrease in gross and net premiums written is due to competition in the property catastrophe reinsurance marketplace.

Note: Tables Follow

GLOBAL INDEMNITY PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars and shares in thousands, except per share data)

For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2015 2014 2015 2014
Gross premiums written$ 166,515 $ 82,905 $ 309,384 $ 160,102
Net premiums written$ 146,005 $ 76,372 $ 272,109 $ 149,233
Net premiums earned$ 128,877 $ 66,017 $ 256,214 $ 133,561
Net investment income 9,141 7,677 17,382 15,961
Net realized investment gains 6,532 39,881 3,562 39,068
Other income 577 155 1,129 323
Total revenues 145,127 113,730 278,287 188,913
Net losses and loss adjustment expenses 79,560 38,270 149,179 76,842
Acquisition costs and other underwriting expenses 50,926 27,171 99,184 53,656
Corporate and other operating expenses 4,334 3,172 15,874 6,133
Interest expense 535 319 1,040 510
Income before income taxes 9,772 44,798 13,010 51,772
Income tax expense (benefit) (1,345) 11,590 (4,901) 9,741
Net income (1) (2)$ 11,117 $ 33,208 $ 17,911 $ 42,031
Weighted average shares outstanding–basic 25,455 25,128 25,447 25,121
Weighted average shares outstanding–diluted 25,681 25,313 25,660 25,302
Net income per share – basic $ 0.44 $ 1.32 $ 0.70 $ 1.67
Net income per share – diluted$ 0.43 $ 1.31 $ 0.70 $ 1.66
Combined ratio analysis: (3)
Loss ratio 61.7 58.0 58.2 57.5
Expense ratio 39.5 41.2 38.7 40.2
Combined ratio 101.2 99.2 96.9 97.7

(1) Excluding the $5.4 million of acquisition expenses related to American Reliable Insurance Company, net income would have been $23.3 million for the six months ended June 30, 2015.

(2) Please see the footnotes at the bottom of the Summary Of Operating Income for a reconciliation of net income to operating income.

(3) The loss ratio, expense ratio and combined ratio are GAAP financial measures that are generally viewed in the insurance industry as indicators of underwriting profitability. The loss ratio is the ratio of net losses and loss adjustment expenses to net premiums earned. The expense ratio is the ratio of acquisition costs and other underwriting expenses to net premiums earned. The combined ratio is the sum of the loss and expense ratios.

GLOBAL INDEMNITY PLC
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)


ASSETS
(Unaudited)
June 30, 2015
December 31, 2014
Fixed Maturities:
Available for sale securities, at fair value (amortized cost: 2015 - $1,541,284 and 2014 - $1,272,948) $1,550,622 $1,283,475
Equity securities:
Available for sale, at fair value (cost: 2015 - $103,019 and 2014 - $99,297) 121,238 122,048
Other invested assets:
Available for sale securities, at fair value (cost: 2015 - $28,887 and 2014 - $33,174) 31,176 33,663
Total investments 1,703,036 1,439,186
Cash and cash equivalents 66,286 58,823
Restricted cash - 113,696
Premiums receivable, net 113,218 56,586
Reinsurance receivables, net 142,828 125,718
Funds held by ceding insurers 28,047 25,176
Deferred federal income taxes 26,884 20,250
Deferred acquisition costs 52,378 25,238
Intangible assets 30,630 17,636
Goodwill 7,134 4,820
Prepaid reinsurance premiums 34,619 4,725
Receivable for securities sold 997 60
Federal income taxes receivable 4,669 3,139
Other assets 49,732 34,980
Total assets $ 2,260,458 $ 1,930,033
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses $ 769,299 $ 675,472
Unearned premiums 295,334 120,815
Ceded balances payable 18,938 2,800
Contingent commissions 13,923 12,985
Margin borrowing facility 187,407 174,673
Other liabilities 44,302 34,998

Total liabilities 1,329,203 1,021,743
Shareholders’ equity:
Ordinary shares, $0.0001 par value, 900,000,000 ordinary shares authorized; A ordinary shares issued: 16,741,806 and 16,331,577 respectively; A ordinary shares outstanding: 13,665,096 and 13,266,762, respectively; B ordinary shares issued and outstanding: 12,061,370 and 12,061,370, respectively 3 3
Additional paid-in capital 528,259 519,590
Accumulated other comprehensive income, net of taxes 20,102 23,384
Retained earnings 484,628 466,717
A ordinary shares in treasury, at cost: 3,076,710 and 3,064,815 shares, respectively (101,737) (101,404)
Total shareholders’ equity 931,255 908,290
Total liabilities and shareholders’ equity $ 2,260,458 $1,930,033


GLOBAL INDEMNITY PLC
SELECTED INVESTMENT DATA
(Dollars in millions)
Market Value as of
(Dollars in millions)(Unaudited)
June 30, 2015

December 31, 2014
Fixed maturities$1,550.6 $1,283.5
Cash and cash equivalents 66.3 172.5
Total bonds and cash and cash equivalents 1,616.9 1,456.0
Equities and other invested assets 152.4 155.7
Total cash and invested assets, gross 1,769.3 1,611.7
Receivable/payable for securities sold (purchased) 1.0 0.1
Total cash and invested assets, net $1,770.3 $1,611.8




(Dollars in thousands)
(Unaudited)
Three Months Ended
June 30, 2015
(a)
(Unaudited)
Six Months Ended
June 30, 2015
(a)
Net investment income $ 9,141 $ 17,382
Net realized investment gains 6,532 3,562
Net change in unrealized investment losses (9,752) (5,155)
Net realized and unrealized investment returns (3,220) (1,593)
Total investment return $ 5,921 $ 15,789
Total investment return % annualized 1.3% 1.8%
Average total cash and invested assets $ 1,776,326 $ 1,758,103
(a) Amounts in this table are shown on a pre-tax basis.


GLOBAL INDEMNITY PLC
SUMMARY OF OPERATING INCOME
(Unaudited)
(Dollars and shares in thousands, except per share data)
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2015 2014 2015 2014
Operating income $ 6,913 $ 8,758 $ 15,731 (1)$ 18,522
Adjustments:
Net realized investment gains, net of tax 4,204 24,450 2,180 23,509
Total after-tax adjustments 4,204 24,450 2,180 23,509
Net income $ 11,117 $ 33,208 $ 17,911 $ 42,031
Weighted average shares outstanding – basic 25,455 25,128 25,447 25,121
Weighted average shares outstanding – diluted 25,681 25,313 25,660 25,302
Operating income per share – basic$ 0.27 $ 0.35 $ 0.62 $ 0.74
Operating income per share – diluted $ 0.27 $ 0.35 $ 0.61 $ 0.73
(1) Excluding the $5.4 million of acquisition expenses related to American Reliable Insurance Company, operating income would have been $21.1 million for the six months ended June 30, 2015.

Note Regarding Operating Income

Operating income, a non-GAAP financial measure, is equal to net income excluding after-tax net realized investment gains. Operating income is not a substitute for net income determined in accordance with GAAP, and investors should not place undue reliance on this measure.

Media Stephen Ries Senior Corporate Counsel (610) 668-3270 sries@global-indemnity.com

Source:Global Indemnity plc