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Global Indemnity plc Reports Third Quarter 2015 Financial Results

DUBLIN, Ireland, Nov. 05, 2015 (GLOBE NEWSWIRE) -- Global Indemnity plc (NASDAQ:GBLI) today reported net income of $14.2 million or $0.55 per share for the nine months ended September 30, 2015. Operating income was $19.4 million for the nine months ended September 30, 2015. Excluding one-time costs associated with the acquisition of American Reliable Insurance Company (“American Reliable”), operating income was $24.8 million at September 30, 2015. Book value per share was $35.82 at September 30, 2015 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 Nine Months
Ended September 30,
As of
September 30,

As of
December 31,

2015 2014 2015 2014
Gross Premiums Written$459.5 $227.2 Book value per share$35.82 $35.86
Net Premiums Written$394.6 $212.5 Shareholders’ equity$921.7 $908.3
Cash and invested assets (1)$1,831.7 $1,611.8
Net income$14.2 $51.8
Net income per share$0.55 $2.05 (1) Including receivable/(payable) for securities sold/(purchased)
Operating income$19.4 $28.6
Operating income per share$0.76 $1.13
Combined ratio analysis:
Loss ratio 59.6 56.3
Expense ratio 39.4 40.2
Combined ratio 99.0 96.5


Cynthia Y. Valko, Chief Executive Officer, commented: “Net written premiums for nine months increased by 86% compared to the same period in 2014 as a result of the acquisition of American Reliable in January, 2015. Operating income, excluding acquisition costs related to the acquisition of American Reliable, was $24.8 million. This was less than 2014 operating income of $28.6 million; however, 2015 results were impacted by $9 million from the wildfires in California. The reinsurance and commercial segments performed well, contributing $17 million in underwriting profit compared to $7 million in 2014, and the overall expense ratio improved approximately 1 point from the integration of American Reliable. We continue to focus on expense management and profitability of our various business lines as we integrate American Reliable with Global Indemnity.”

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 Nine Months Ended September 30, 2015 and 2014

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

Nine Months Ended
September 30,
2015 2014
Loss Ratio:
Current Accident Year
Excluding Catastrophes 50.5 46.7
Catastrophes 13.6 12.6
Current Accident Year 64.1 59.3
Changes to Prior Accident Year (4.5
)
(3.0
)
Loss Ratio – Calendar Year 59.6 56.3
Expense Ratio 39.4
40.2
Combined Ratio 99.0 96.5


For the nine months ended September 30th, the accident year loss ratio increased by 4.8 points compared to 2014.

For the nine months ended September 30, 2015, the current accident year loss ratio was 64.1 compared to 59.3 for the same period in 2014.

  • The current accident year casualty loss ratio improved by 4.1 points to 69.4 in 2015 from 73.5 in 2014.
  • The current accident year property loss ratio increased 10.0 points to 62.4 in 2015 from 52.4 in 2014 mainly due to losses with the Company’s Personal Lines as a result of the wild fires in California. In addition, some of the increase is attributable to change in the mix of business due to the acquisition of American Reliable, which has a higher loss ratio than the legacy business lines.


Calendar year results for the nine months ended September 30, 2015 include a 4.5 point reduction in the loss ratio related to prior accident years which was primarily driven by better than expected emergence in general liability, better than anticipated frequency and severity in professional lines, and less than anticipated severity on property catastrophe losses within the Company’s Reinsurance Operations.

For the nine months ended September 30th, the expense ratio improved from 40.2 in 2014 to 39.4 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

Nine Months Ended September 30,
Gross Premiums Written Net Premiums Written
2015 2014 2015 2014
Commercial Lines Operations$161,746 $170,037 $149,647 $156,369
Personal Lines Operations 249,564 - 196,785 -
Reinsurance Operations 48,222 57,163 48,174 56,126
Total$ 459,532 $ 227,200 $394,606 $ 212,495


Gross premiums written and net premiums written increased 102.3% and 85.7%, respectively, compared to the same period in 2014.

Commercial Lines Operations: For the nine months ended September 30, 2015, gross premiums written and net premiums written decreased 4.9% and 4.3%, respectively, compared to the same period in 2014. The decline was due to efforts to trim unprofitable business, tightening of underwriting standards within programs, and a more competitive market within property brokerage.

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 $41.7 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 $196.8 million for the nine months ended September 30, 2015 compared to $196.4 million for the same period in 2014.

Reinsurance Operations: For the nine months ended September 30, 2015, gross premiums written and net premiums written decreased 15.6% and 14.2%, 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 September 30,
For the Nine Months
Ended September 30,
2015 2014 2015 2014
Gross premiums written$150,148 $67,098 $459,532 $227,200
Net premiums written$122,497 $63,262 $394,606 $212,495
Net premiums earned$124,707 $68,028 $380,921 $201,589
Net investment income 8,852 6,527 26,234 22,488
Net realized investment gains (10,778) 1,158 (7,216) 40,226
Other income 1,279 126 2,408 449
Total revenues 124,060 75,839 402,347 264,752
Net losses and loss adjustment expenses 77,691 36,654 226,870 113,496
Acquisition costs and other underwriting expenses 50,934 27,458 150,118 81,114
Corporate and other operating expenses 3,567 3,481 19,441 9,614
Interest expense 1,595 118 2,635 628
Income before income taxes (9,727) 8,128 3,283 59,900
Income tax expense (benefit) (5,981) (1,633) (10,882) 8,108
Net income (1) (2)$ (3,746) $ 9,761 $ 14,165 $ 51,792
Weighted average shares outstanding–basic 25,464 25,138 25,453 25,127
Weighted average shares outstanding–diluted 25,705 25,335 25,685 25,323
Net income per share – basic $ (0.15) $ 0.39 $ 0.56 $ 2.06
Net income per share – diluted$ (0.15) $ 0.39 $ 0.55 $ 2.05
Combined ratio analysis: (1)
Loss ratio 62.3 53.9 59.6 56.3
Expense ratio 40.8 40.4 39.4 40.2
Combined ratio 103.1 94.3 99.0 96.5


(1) 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)
September 30, 2015
December 31, 2014
Fixed Maturities:
Available for sale securities, at fair value
(amortized cost: 2015 - $1,539,192 and 2014 - $1,272,948)
$1,548,885 $1,283,475
Equity securities:
Available for sale, at fair value
(cost: 2015 - $99,257 and 2014 - $99,297)
106,666 122,048
Other invested assets:
Available for sale securities, at fair value
(cost: 2015 - $31,137 and 2014 - $33,174)
33,555 33,663
Total investments 1,689,106 1,439,186
Cash and cash equivalents 146,686 58,823
Restricted cash - 113,696
Premiums receivable, net 95,438 56,586
Reinsurance receivables, net 134,187 125,718
Funds held by ceding insurers 24,523 25,176
Deferred federal income taxes 35,809 20,250
Deferred acquisition costs 57,398 25,238
Intangible assets 26,417 17,636
Goodwill 6,936 4,820
Prepaid reinsurance premiums 39,150 4,725
Receivable for securities sold - 60
Federal income taxes receivable 5,187 3,139
Other assets 57,782 34,980
Total assets $2,318,619 $1,930,033
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses $729,509 $675,472
Unearned premiums 297,657 120,815
Ceded balances payable 4,110 2,800
Payable for securities 4,126 -
Contingent commissions 14,397 12,985
Debt 292,144 174,673
Other liabilities 54,964 34,998
Total liabilities 1,396,907 1,021,743
Shareholders’ equity:
Ordinary shares, $0.0001 par value, 900,000,000 ordinary shares authorized; A ordinary shares issued: 16,748,528 and 16,331,577 respectively; A ordinary shares outstanding: 13,671,818 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 529,319 519,590
Accumulated other comprehensive income, net of taxes 13,245 23,384
Retained earnings 480,882 466,717
A ordinary shares in treasury, at cost: 3,076,710 and 3,064,815 shares, respectively (101,737) (101,404)
Total shareholders’ equity 921,712 908,290
Total liabilities and shareholders’ equity $2,318,619 $1,930,033



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

December 31, 2014
Fixed maturities$1,548.9 $1,283.5
Cash and cash equivalents 146.7 172.5
Total bonds and cash and cash equivalents 1,695.6 1,456.0
Equities and other invested assets 140.2 155.7
Total cash and invested assets, gross 1,835.8 1,611.7
Receivable/(payable) for securities sold (purchased) (4.1) 0.1
Total cash and invested assets, net$1,831.7 $1,611.8





(Unaudited)
Three Months Ended
September 30, 2015
(1)
(Unaudited)
Nine Months Ended
September 30, 2015
(1)
Net investment income $8.8 $26.2
Net realized investment gains / (losses) (2) (10.8) (7.2)
Net change in unrealized investment gains and losses (10.4) (15.6)
Net realized and unrealized investment returns (21.2) (22.8)
Total investment return $(12.4) $3.4
Total investment return % annualized (0.7%) 0.2%
Average total cash and invested assets $1,801.0 $1,788.8

  1. Amounts in this table are shown on a pre-tax basis.
  2. Net realized investment gains/(losses) include a net loss from the Company’s interest rate swaps in the amount of $8.1 million and $8.9 million for the three months and nine months ending September 2015, respectively.

GLOBAL INDEMNITY PLC
SUMMARY OF OPERATING INCOME
(Unaudited)
(Dollars and shares in thousands, except per share data)
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2015 2014 2015 2014
Operating income $ 3,699 $ 10,099 $ 19,430 (1)$ 28,621 (2)
Adjustments:
Net realized investment gains, net of tax (7,445) (338) (5,265) 23,171
Total after-tax adjustments (7,445) (338) (5,265) 23,171
Net income $ (3,746) $ 9,761 $ 14,165 $ 51,792
Weighted average shares outstanding – basic 25,464 25,138 25,453 25,127
Weighted average shares outstanding – diluted 25,705 25,335 25,685 25,323
Operating income per share – basic$ 0.15 $ 0.40 $ 0.76 $ 1.14
Operating income per share – diluted $ 0.14 $ 0.40 $ 0.76 $ 1.13


(1) Excluding $5.4 million of acquisition expenses related to American Reliable Insurance Company, operating income would have been $24.8 million for the nine months ended September 30, 2015.

(2) Excluding $0.9 million of acquisition expenses related to American Reliable Insurance Company, operating income would have been $29.5 million for the nine months ended September 30, 2014.

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.






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

Source:Global Indemnity plc