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Global Indemnity plc Reports Third Quarter 2016 Financial Results

DUBLIN, Ireland, Nov. 03, 2016 (GLOBE NEWSWIRE) -- Global Indemnity plc (NASDAQ:GBLI) today reported net income for the nine months ended September 30, 2016 of $11.5 million or $0.66 per share and operating income of $17.3 million or $0.99 per share. As of September 30th, book value per share was $44.55, an increase of 3.7% 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 Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2016 2015 2016 2015
Gross Premiums Written$ 133.6 $ 150.1 $429.3 $459.5
Net Premiums Written$ 115.1 $ 122.5 $357.2 $394.6
Net income$ 9.5 $ (3.7) $ 11.5 $ 14.2
Net income (loss) per share$ 0.54 $(0.15) $ 0.66 $ 0.55
Operating income$ 8.3 $ 3.7 $ 17.3 $ 19.4
Operating income per share$ 0.47 $ 0.15 $ 0.99 $ 0.76
Combined ratio analysis:
Loss ratio 60.3 62.3 59.9 59.6
Expense ratio (1) 40.3 40.8 41.4 39.4
Combined ratio 100.6 103.1 101.3 99.0
(1) The expense ratio for the three months and nine months ended September 30, 2015 benefited approximately 0.8 points and 1.4 points, respectively, from a purchase accounting adjustment related to the purchase of American Reliable Insurance Company.


As of
September 30,
2016
As of
June 30,
2016
Book value per share$ 44.55 $ 43.91
Shareholders’ equity$ 782.4 $ 770.7
Cash and invested assets (2)$1,528.2 $1,533.0
(2) Including receivable/(payable) for securities sold/(purchased)


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 Three and Nine Months Ended September 30, 2016 and 2015

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

Three Months Ended
September 30,
Nine Months Ended
September 30,
2016 2015 2016 2015
Loss Ratio:
Current Accident Year
Excluding Catastrophes 56.0 54.2 53.0 50.5
Catastrophes 12.2 14.9 13.9 13.6
Current Accident Year 68.2 69.1 66.9 64.1
Changes to Prior Accident Year (7.9
)
(6.8)
(7.0
)
(4.5
)
Loss Ratio – Calendar Year 60.3 62.3 59.9 59.6
Expense Ratio 40.3 40.8 41.4 39.4
Combined Ratio 100.6 103.1 101.3 99.0

For the three months ended September 30th, the calendar year loss ratio improved by 2.0 points to 60.3 in 2016 from 62.3 in 2015.

For the three months ended September 30, 2016, the current accident year loss ratio improved to 68.2 compared to 69.1 for the same period in 2015.

  • The current accident year property loss ratio improved by 2.6 point to 66.0 in 2016 from 68.6 in 2015 primarily due to the decrease in the severity of catastrophes experienced in 2016.
  • The current accident year casualty loss ratio increased by 3.5 points to 74.2 in 2016 from 70.7 in 2015 primarily due to an increase in loss severity in the agriculture line.

Calendar year results for the three months ended September 30, 2016 include a 7.9 point reduction in the loss ratio related to prior accident years. This was primarily driven by lower than expected claims frequency and severity experienced across multiple prior accident years within Commercial Lines, primarily related to general liability, as well as a reduction related to the Company’s property treaties within the Reinsurance Operations.

For the three months ended September 30th, the expense ratio improved from 40.8 in 2015 to 40.3 in 2016.

The improvement in the expense ratio is due to efficiencies realized from the integration of American Reliable into the Company’s U.S. Insurance Operations.

For the nine months ended September 30th, the calendar year loss ratio increased by 0.3 points to 59.9 in 2016 from 59.6 in 2015.

For the nine months ended September 30, 2016, the current accident year loss ratio increased by 2.8 points to 66.9 compared to 64.1 for the same period in 2015.

  • The current accident year property loss ratio increased 4.1 points to 66.5 in 2016 from 62.4 in 2015 primarily due to higher losses from convective storms in 2016 as opposed to 2015.
  • The current accident year casualty loss ratio improved by 1.6 points to 67.8 in 2016 from 69.4 in 2015. This improvement is mainly due to a decrease in reported claim frequency reflecting the milder winter experienced in 2016 offset by an increase in loss severity in the agriculture line.

Calendar year results for the nine months ended September 30, 2016 include a 7.0 point reduction in the loss ratio related to prior accident years, which was primarily driven by lower than expected claims frequency and severity experienced across multiple prior accident years within Commercial Lines, primarily related to general liability, and less than expected emergence on property catastrophe treaties within the Reinsurance Operations.

For the nine months ended September 30th, the expense ratio increased from 39.4 in 2015 to 41.4 in 2016.

The increase is primarily due to the reduction in earned premiums in 2016 as a result of the quota share arrangement and the 2015 expense ratio benefitting from accounting adjustments related to the purchase of American Reliable.

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

(Dollars in thousands)Three Months Ended September 30,
Gross Premiums Written Net Premiums Written
2016 2015 2016 2015
Commercial Lines Operations $50,214 $52,920 $45,754 $49,325
Personal Lines Operations 73,557 87,349 59,499 63,302
Reinsurance Operations 9,798 9,879 9,798 9,870
Total$133,569 $150,148 $115,051 $122,497
Nine Months Ended September 30,
Gross Premiums Written Net Premiums Written
2016 2015 2016 2015
Commercial Lines Operations$157,335 $161,746 $141,764 $149,647
Personal Lines Operations 236,978 249,564 180,542 196,785
Reinsurance Operations 34,941 48,222 34,927 48,174
Total$429,254 $459,532 $357,233 $394,606

Commercial Lines Operations: Gross premiums written and net premiums written decreased 5.1% and 7.2%, respectively, for the three months ended September 30, 2016, and decreased 2.7% and 5.3%, respectively, for the nine months ended September 30, 2016 as compared to the same periods in 2015. The decline in premiums is primarily due to limiting catastrophe exposure in certain areas.

Personal Lines Operations: For the three and nine months ended September 30, 2016, gross premiums written decreased 15.8% and 5.0%, respectively, and net premiums written decreased by 6.0% and 8.3%, respectively, as compared to the same periods in 2015. Gross premiums written include business written by American Reliable that is ceded to insurance entities owned by Assurant under a 100% quota share reinsurance agreement in the amount of $7.3 million and $18.7 million for the three months ended September 30, 2016 and 2015, respectively, and $30.9 million and $41.7 million for the nine months ended September 30, 2016 and 2015, respectively. Excluding the business that is ceded 100% to insurance entities owned by Assurant, gross premiums written decreased by 3.5% and 0.8% for the three and nine months ended September 30, 2016, respectively, and net premiums written decreased by 6.0% and 8.3% for the three and nine months ended September 30, 2016, respectively. The reduction in net premiums written is due to purchasing additional reinsurance to reduce catastrophe exposure.

Reinsurance Operations: For the three months ended September 30, 2016, gross premiums written and net premiums written decreased 0.8% and 0.7%, respectively, as compared to the same period in 2015. For the nine months ended September 30, 2016, gross premiums written and net premiums written both decreased 27.5% compared to the same period in 2015. The decline was primarily due to one treaty being non-renewed in 2016 in an effort to reduce catastrophe exposure.

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,
2016 2015 2016 2015
Gross premiums written$ 133,569 $ 150,148 $ 429,254 $ 459,532
Net premiums written$ 115,051 $ 122,497 $ 357,233 $ 394,606
Net premiums earned$ 119,553 $ 124,707 $ 358,993 $ 380,921
Net investment income 8,795 8,852 25,103 26,234
Net realized investment gains (losses) 1,928 (10,778) (9,057) (7,216)
Other income (1) 7,852 1,279 9,603 2,408
Total revenues 138,128 124,060 384,642 402,347
Net losses and loss adjustment expenses 72,162 77,691 215,057 226,870
Acquisition costs and other underwriting expenses 48,129 50,934 148,761 150,118
Corporate and other operating expenses 5,006 3,567 13,064 19,441
Interest expense 2,233 1,595 6,677 2,635
Income (loss) before income taxes 10,598 (9,727) 1,083 3,283
Income tax expense (benefit) 1,063 (5,981) (10,412) (10,882)
Net income (loss)$ 9,535 $ (3,746) $ 11,495 $ 14,165
Weighted average shares outstanding–basic 17,255 25,464 17,241 25,453
Weighted average shares outstanding–diluted 17,540 25,464 17,516 25,685
Net income (loss) per share – basic $ 0.55 $ (0.15) $ 0.67 $ 0.56
Net income (loss) per share – diluted (2)$ 0.54 $ (0.15) $ 0.66 $ 0.55
Combined ratio analysis: (3)
Loss ratio 60.3 62.3 59.9 59.6
Expense ratio 40.3 40.8 41.4 39.4
Combined ratio 100.6 103.1 101.3 99.0
(1) On September 30, 2016, the Company sold all the outstanding shares of capital stock of one of its wholly owned subsidiaries, United National Specialty Insurance Company, to an unrelated party and recognized a pretax gain of $6.9 million. This transaction will not have an impact on the Company’s ongoing business operations. Business previously written by United National Specialty Insurance Company has been and will be written by other companies within the Company’s U.S. Insurance Operations.
(2) For the quarter ended September 30, 2015, diluted loss per share is the same as basic loss per share since there was a net loss for the period.
(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)
September 30, 2016
December 31, 2015
Fixed Maturities:
Available for sale securities, at fair value
(amortized cost: 2016 - $1,297,465 and 2015 - $1,308,333)
$ 1,310,957 $ 1,306,149
Equity securities:
Available for sale, at fair value
(cost: 2016 - $102,899 and 2015 - $100,157)
122,779 110,315
Other invested assets 32,635 32,592
Total investments 1,466,371 1,449,056
Cash and cash equivalents 63,779 67,037
Premiums receivable, net 86,469 89,245
Reinsurance receivables, net 108,452 115,594
Funds held by ceding insurers 19,356 16,037
Federal income taxes receivable 4,656 4,828
Deferred federal income taxes 39,337 34,687
Deferred acquisition costs 55,141 56,517
Intangible assets 23,211 23,607
Goodwill 6,521 6,521
Prepaid reinsurance premiums 38,401 44,363
Receivable for securities sold - 172
Other assets 70,121 49,630
Total assets $ 1,981,815 $ 1,957,294
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses $ 664,382 $ 680,047
Unearned premiums 278,561 286,285
Ceded balances payable 11,718 4,589
Payables for securities purchased 1,921 -
Contingent commissions 9,392 11,069
Debt 173,162 172,034
Other liabilities 60,236 53,344
Total liabilities 1,199,372 1,207,368
Shareholders’ equity:
Ordinary shares, $0.0001 par value, 900,000,000 ordinary shares authorized; A ordinary shares issued:16,568,674 and 16,424,546 respectively; A ordinary shares outstanding: 13,429,780 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 532,498 529,872
Accumulated other comprehensive income, net of taxes 23,279 4,078
Retained earnings 329,911 318,416
A ordinary shares in treasury, at cost: 3,138,894 and 3,110,795 shares, respectively (103,248) (102,443)
Total shareholders’ equity 782,443 749,926
Total liabilities and shareholders’ equity $1,981,815 $1,957,294


GLOBAL INDEMNITY PLC
SELECTED INVESTMENT DATA
(Dollars in millions)
Market Value as of
(Unaudited)
September 30, 2016 December 31, 2015
Fixed maturities $1,311.0 $1,306.1
Cash and cash equivalents 63.7 67.0
Total bonds and cash and cash equivalents 1,374.7 1,373.1
Equities and other invested assets 155.4 143.0
Total cash and invested assets, gross 1,530.1 1,516.1
Receivable/(payable) for securities sold (purchased) (1.9) 0.2
Total cash and invested assets, net $1,528.2 $1,516.3
(Unaudited) (Unaudited)
Three Months Ended
September 30, 2016
(a)
Nine Months Ended
September 30, 2016
(a)
Net investment income $8.8 $25.1
Net realized investment gains (losses) 1.9 (9.1)
Net change in unrealized investment gains 2.1 25.4
Net realized and unrealized investment returns 4.0 16.3
Total investment return $12.8 $41.4
Average total cash and invested assets (b) $1,530.6 $1,522.2
Total investment return % annualized 3.3% 3.6%
(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 September 30,
For the Nine Months
Ended September 30,
2016 2015 2016 2015
Operating income (loss)$ 8,262 $ 3,699 $ 17,337 $ 19,430
Adjustments:
Net realized investment gains (losses), net of tax 1,273 (7,445) (5,842) (5,265)
Net income (loss)$ 9,535 $ (3,746) $ 11,495 $ 14,165
Weighted average shares outstanding – basic 17,255 25,464 17,241 25,453
Weighted average shares outstanding – diluted 17,540 25,464 17,516 25,685
Operating income (loss) per share – basic$ 0.48 $ 0.15 $ 1.01 $ 0.76
Operating income (loss) per share – diluted (1)$ 0.47 $ 0.15 $ 0.99 $ 0.76
(1) For the quarter ended September 30, 2015, diluted operating income per share and basic operating income per share were the same due to a net loss for the period.

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.

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

Source:Global Indemnity plc