Global Indemnity plc Reports Second Quarter 2016 Financial Results

DUBLIN, Ireland, Aug. 04, 2016 (GLOBE NEWSWIRE) -- Global Indemnity plc (NASDAQ:GBLI) today reported net income for the six months ended June 30, 2016 of $2.0 million or $0.11 per share and operating income of $9.1 million or $0.52 per share. As of June 30th, book value per share was $43.91, an increase of 2.2% compared to book value per share of $42.98 at December 31, 2015.

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

For the Six Months
Ended June 30,
As of
June 30,
As of
December 31,
2016 2015 2016
2015
Gross Premiums Written $295.7 $309.4 Book value per share$ 43.91 $ 42.98
Net Premiums Written $242.2 $272.1 Shareholders’ equity$ 770.7 $ 749.9
Cash and invested assets(2) $1,533.0 $1,516.3
Net income $ 2.0 $ 17.9
Net income per share $ 0.11 $ 0.70 (2) Including receivable/(payable) for securities sold/(purchased)
Operating income $ 9.1 $ 15.7
Operating income per share $ 0.52 $ 0.61
Combined ratio analysis:
Loss ratio 59.7 58.2
Expense ratio (1) 42.0 38.7
Combined ratio 101.7 96.9
(1) The expense ratio in 2016 was approximately 1.5 points higher in 2016 primarily due to purchasing additional catastrophe reinsurance, while the 2015 ratio benefitted approximately 1.7 points from a purchase accounting adjustment. Excluding these factors, the expense ratio was consistent year-over-year. 

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 the continued integration of American Reliable business, which could result in a failure to realize the potential benefits of the acquisition, and 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 Section 21E of the Security Exchange Act of 1934.

Global Indemnity plc’s Combined Ratio for the Six Months Ended June 30, 2016

The combined ratio is a key measure of insurance profitability. The components comprising the combined ratio, by reportable business segment, for the six months ended June 30, 2016 are as follows:

Commercial
Lines
Personal
Lines
Reinsurance
Operations
Loss Ratio 57.3 65.0 39.4
Expense Ratio 41.2 43.4 37.7
Combined Ratio 98.5 108.4 77.1

Loss Ratio:

Commercial Lines Operations:

The calendar year loss ratio for the Company’s Commercial Lines was 57.3% for 2016 compared with 59.4% for 2015, an improvement of 2.1 points. The improvement was primarily due to lower than expected claims severity experienced across multiple prior accident years, primarily in liability lines. The current accident year loss ratio increased 5.2 points from 65.0% in 2015 to 70.2% in 2016 primarily due to catastrophes.

Personal Lines Operations:

The 2016 loss ratio was 65.0%, compared to 62.7% for the comparable period of 2015, primarily due to an increase in catastrophe losses. There were no adjustments to prior accident years for 2016 or 2015.

Reinsurance Operations:

The loss ratio for the Company’s Reinsurance Operations was 39.4% for 2016 compared with 31.8% for 2015. The current accident year loss ratio increased 11.2 points from 43.3% for the six months ended June 30, 2015 to 54.5% for the six months ended June 30, 2016, primarily due to catastrophic events in the second quarter of 2016. The improvement in the loss ratio related to prior years was driven by less than anticipated case incurred emergence on property catastrophe treaties.

Expense ratio:

For the six months ended June 30, the total expense ratio increased from 38.7% in 2015 to 42.0% in 2016. 1.7% of the increase is due to acquisition accounting adjustments related to the purchase of American Reliable Insurance Company in 2015. The remainder of the increase in the 2016 expense ratio was primarily due to a reduction in earned premium as a result of the Company reducing catastrophe exposure and purchasing additional reinsurance.

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

Six Months Ended June 30,
Gross Premiums Written Net Premiums Written
2016 2015 2016 2015
Commercial Lines Operations$ 107,121 $ 108,826 $ 96,010 $ 100,322
Personal Lines Operations 163,421 162,215 121,043 133,483
Reinsurance Operations 25,143 38,343 25,129 38,304
Total$ 295,685 $ 309,384 $ 242,182 $ 272,109

Gross premiums written and net premiums written decreased 4.4% and 11.0%, respectively, compared to the same period in 2015.

Commercial Lines Operations: For the six months ended June 30, 2016, gross premiums written and net premiums written decreased 1.6% and 4.3%, respectively, compared to the same period in 2015. The reduction in net premiums written was primarily due to purchasing additional reinsurance to reduce catastrophe exposure.

Personal Lines Operations: For the six months ended June 30, 2016, gross premiums written increased 0.7% and net premiums written decreased 9.3% compared to the same period in 2015. The reduction in net premiums written is due to purchasing additional reinsurance to reduce catastrophe exposure.

Reinsurance Operations: For the six months ended June 30, 2016, gross premiums written and net premiums written both decreased 34.4% compared to the same period in 2015. This decrease is mainly due to a treaty being non-renewed in 2016 in an effort to reduce catastrophe exposure. In addition, the property catastrophe reinsurance marketplace continues to be very competitive due to excess capital.

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,
2016 2015 2016 2015
Gross premiums written$ 154,319 $ 166,515 $ 295,685 $ 309,384
Net premiums written$ 125,310 $ 146,005 $ 242,182 $ 272,109
Net premiums earned$ 117,804 $ 128,877 $ 239,440 $ 256,214
Net investment income 6,562 9,141 16,308 17,382
Net realized investment gains (losses) (3,492) 6,532 (10,985) 3,562
Other income 795 577 1,751 1,129
Total revenues 121,669 145,127 246,514 278,287
Net losses and loss adjustment expenses 78,111 79,560 142,895 149,179
Acquisition costs and other underwriting expenses 48,542 50,926 100,632 99,184
Corporate and other operating expenses 4,255 4,334 8,058 15,874
Interest expense 2,229 535 4,444 1,040
Income (loss) before income taxes (11,468) 9,772 (9,515) 13,010
Income tax benefit (6,303) (1,345) (11,475) (4,901)
Net income (loss)$ (5,165) $ 11,117 $ 1,960 $ 17,911
Weighted average shares outstanding–basic 17,244 25,455 17,234 25,447
Weighted average shares outstanding–diluted (1) 17,244 25,681 17,485 25,660
Net income (loss) per share – basic $ (0.30) $ 0.44 $ 0.11 $ 0.70
Net income (loss) per share – diluted$ (0.30) $ 0.43 $ 0.11 $ 0.70
Combined ratio analysis (2):
Loss ratio 66.3 61.7 59.7 58.2
Expense ratio 41.2 39.5 42.0 38.7
Combined ratio 107.5 101.2 101.7 96.9


(1)For the quarter ended June 30, 2016, diluted loss per share is the same as basic loss per share since there was a net loss for the period.
(2)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, 2016
December 31, 2015
Fixed Maturities:
Available for sale securities, at fair value
(amortized cost: 2016 - $1,292,785 and 2015 - $1,308,333)
$ 1,306,955 $ 1,306,149
Equity securities:
Available for sale, at fair value
(cost: 2016 - $101,867 and 2015 - $100,157)
119,008 110,315
Other invested assets 35,798 32,592
Total investments 1,461,761 1,449,056
Cash and cash equivalents 70,647 67,037
Premiums receivable, net 90,275 89,245
Reinsurance receivables, net 115,365 115,594
Funds held by ceding insurers 19,927 16,037
Federal income taxes receivable 4,840 4,828
Deferred federal income taxes 41,028 34,687
Deferred acquisition costs 56,051 56,517
Intangible assets 23,342 23,607
Goodwill 6,521 6,521
Prepaid reinsurance premiums 49,763 44,363
Receivable for securities sold 561 172
Other assets 66,013 49,630
Total assets $2,006,094 $1,957,294
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses $ 683,850 $ 680,047
Unearned premiums 294,426 286,285
Ceded balances payable 12,386 4,589
Contingent commissions 9,498 11,069
Debt 174,211 172,034
Other liabilities 60,974 53,344
Total liabilities 1,235,345 1,207,368
Shareholders’ equity:
Ordinary shares, $0.0001 par value, 900,000,000 ordinary shares authorized; A ordinary shares issued: 16,559,872 and 16,424,546 respectively; A ordinary shares outstanding: 13,420,978 and 13,313,751, respectively; B ordinary shares issued and outstanding: 4,133,366 and 4,133,366, respectively 3 3
Additional paid-in capital 531,542 529,872
Accumulated other comprehensive income, net of taxes 22,076 4,078
Retained earnings 320,376 318,416
A ordinary shares in treasury, at cost: 3,138,894 and 3,110,795 shares, respectively (103,248) (102,443)
Total shareholders’ equity 770,749 749,926
Total liabilities and shareholders’ equity $2,006,094 $1,957,294


GLOBAL INDEMNITY PLC
SELECTED INVESTMENT DATA
(Dollars in millions)
Market Value as of
(Unaudited)
June 30, 2016
December 31, 2015
Fixed maturities $1,307.0 $1,306.1
Cash and cash equivalents 70.6 67.0
Total bonds and cash and cash equivalents 1,377.6 1,373.1
Equities and other invested assets 154.8 143.0
Total cash and invested assets, gross 1,532.4 1,516.1
Receivable/(payable) for securities sold (purchased) 0.6 0.2
Total cash and invested assets, net $1,533.0 $1,516.3


(Unaudited)
Three Months Ended
June 30, 2016
(a)
(Unaudited)
Six Months Ended
June 30, 2016
(a)
Net investment income $ 6.6 $ 16.3
Net realized investment losses (3.5) (11.0)
Net change in unrealized investment gains 11.5 23.3
Net realized and unrealized investment returns 8.0 12.3
Total investment return $ 14.6 $ 28.6
Average total cash and invested assets $ 1,519.6 $ 1,524.6
Total investment return % annualized 3.8% 3.8%


(a)Amounts in this table are shown on a pre-tax basis.
(b)Simple average of beginning and end of period, net of payable/receivable for securities.


GLOBAL INDEMNITY PLC
SUMMARY OF OPERATING INCOME (LOSS)
(Unaudited)
(Dollars and shares in thousands, except per share data)
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2016 2015 2016 2015
Operating income (loss)$ (2,915) $ 6,913 $ 9,076 $ 15,731
Adjustments:
Net realized investment gains (losses), net of tax (2,250) 4,204 (7,116) 2,180
Net income (loss)$ (5,165) $ 11,117 $ 1,960 $ 17,911
Weighted average shares outstanding –
basic
17,244 25,455 17,234 25,447
Weighted average shares outstanding –
diluted (1)
17,244 25,681 17,485 25,660
Operating income (loss) per share – basic$ (0.17) $ 0.27 $ 0.53 $ 0.62
Operating income (loss) per share – diluted $ (0.17) $ 0.27 $ 0.52 $ 0.61

Note Regarding Operating Income

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

(1)For the quarter ended June 30, 2016, diluted loss per share is the same as basic loss per share since there was a net loss for the period.

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

Source:Global Indemnity plc