Good day, and welcome to the Global Indemnity Group, LLC Third Quarter 2022 Earnings Conference Call. I would now like to introduce Stephen W. Ries, Head of Investor Relations.

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, beliefs, 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 made with the SEC for a description 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. Joining us are Jay Brown, CEO; Tom McGeehan, CFO; and Jonathan Oltman, President. It is now my pleasure to turn the call over to Jay Brown.

Thank you, Steve. Good morning, and thank you, everyone, for joining us today. I am sure you are all surprised to see me sitting here today as the CEO of Global. To be truthful, a few months ago, it never occurred to me either. That said, the Board asks if I would step in and take on the CEO role. And I said, yes, without any reservations. Having served on the Board for seven years, I'm obviously quite familiar with GBLI, its business and its management team. It probably makes sense if I first address the issue of David Charlton's departure before offering my initial observations as CEO and turning the presentation over to Tom McGeehan to review the nine months results. David was recruited to Global to execute the Board-driven strategy of completing a transformation to an excess and surplus lines casually focused insurance organization. In the past 18 months, David recruited many outstanding seasoned executives and specialists to complement the significant talent we already had in place. I use the word seasoned carefully here as it is a very high-energy group with significant variations in years of experience. In parallel, David initiated a significant effort to develop IT tools to substantially enhance our customer-focused strategies and to address some of our internal expense issues. As a result of suffering a series of both third-party IT delivery delays and unacceptable product deliveries, the Board requested that I step in as CEO, given both my decades of CEO and Chairman experience at several leading property casualty insurance companies and extensive oversight of IT procurement, development and implementation, including most recently as Chairman of a highly innovated insurance tech startup. In addition to my new role, the Board is fortunate to have added two experienced executives as Board members to assist…

All right. Thank you, Jay, and good morning, everybody. Shareholders' equity increased from $641.3 million at the end of June to $643.6 million at September 2022. Net income for the quarter is $23.7 million versus a loss in 2021 of $7.7 million. Underwriting income was positive. We are realizing benefits from actions taken to reduce catastrophe exposure that started several years ago. As previously announced, Hurricane Ian had a very modest impact to this quarter. We compared our losses from Hurricane Ian to four event models that were selected by AIR from their stochastic event catalog. These four event models most closely represented Hurricane Ian post landfall. Had we not taken action to reduce catastrophe exposure, the model losses from these four events averaged $12.8 million. Our losses from Hurricane Ian are approximately $11 million lower than these average modeled losses. As a result of exiting the property catastrophe business, reinsurance business, discontinuing writing properties with total insured values of $10 million and more and recent actions to non-renewed CAT-prone business in certain geographies, earnings volatility from catastrophes has reduced significantly. Catastrophes incurred for our entire book in the third quarter of 2022 were $5.9 million compared to $22.3 million in the third quarter of 2021. Commercial Specialty lines cat losses are down significantly as well. Catastrophes were $3.9 million in 3Q 2022 compared to $8.9 million in 2021. The quarter includes the sale of farm renewal rights, which were sold for $30 million as well as write-offs and costs associated with services provided by third parties of approximately $9.2 million. The change to equity also includes an unrealized loss of $18.7 million net of tax. Rising interest rates are negatively impacting book values for the entire property and casualty industry. While we don't like unrealized losses, we expect that…

[Operator Instructions] And your first question is from the line of Anthony Mottolese with Dowling & Partners. Please go ahead.

Hi. Good morning. Tom, I had a quick number question. Could you also provide the total prior year development in the quarter?

Sure.

And then – thank you. And I just had one other follow-up on the total cat number you provided. I was just kind of curious beyond Ian where those cats were coming from the quarter is very low, like you mentioned, given your risk – moving your risk profile away from cat-exposed business?

Yes. I'm sorry, your first question was the total number of cats – I'm sorry, prior year development. Yes, $3 million of reserve release in total.

Okay. Thank you.

And the second one, it really was from a – just a number of smaller cats that had occurred during the quarter. It's nothing significant beyond what we previously had announced for Hurricane Ian.

Okay. Thank you. Another question I had, it looked like Commercial Specialty growth seemed to slow a little bit in Q3 compared to the first half. Was there anything driving that? Maybe any books of businesses that weren't performing as well?

The actions we took to, as mentioned, we exited [Colorado] contractors. We took some actions in our habitational book. It was really actions that were taken to stop writing certain classes of business to improve profitability.

Jonathan, do you want to add anything to that?

Yes. This is Jonathan Oltman. Yes, just to add to Tom's comments, as you mentioned earlier, it was really several different underwriting actions that have been underway for quite a while. So the growth that you see that has slowed is very much part of our plan. We took underwriting actions, as Tom mentioned, to exit certain problematic classes of business that were troublesome from a loss ratio perspective. For example, hotels and motels were mentioning with reliability and some more conservative positions on some areas where we've seen some pressure on the loss ratio. And that combined with the rate increases that we've been getting has put some pressure on the topline. But we think all of those actions ultimately benefit the organization from an improved bottom line.

Okay. Thanks for the detail. And so then with your overall plan and strategy going forward, is there any changes under this new management team in terms of strategy or just the planned execution of it?

Not really. I mean there'll be nuanced changes because everybody has a slightly different style of approaching things. But in terms of the businesses we're in, I was part of the process of the Board of approving the entry into those businesses, and I am enthusiastic about driving them forward. So I think from the outside, you won't see any major changes. From the inside, there will be several shifts, but nothing of any real significance.

Okay. Thank you. And if I may, I have one last question. I was just hoping to have any additional insight on the timing with – in regards to your recent buyback authorization? And I was curious kind of how you came to the $32 million, that amount?

Sure. That's straightforward. The issue was, if you realize, we had exited farm less than two months ago in terms of the actual timing of the transaction. We've been analyzing our capital position post that transaction to make sure we understood where we were. As part of the change, we thought it behooved us to also indicate to the market we were prepared to enter the market with some buyback opportunities. We chose $32 million as roughly the day it was announced 10% of the value of the outstanding shares. Obviously, because it was announced pre our earnings release, we were in a quiet period. And so we couldn't enter into the actual market outside of anybody was interested in a reverse inquiry back to us. Going forward, we've retained an agent that will be entering the marketplace in due course here once we get through the next couple of days. We're obviously – we'll have some kind of a trading plan arranged with them. And obviously, certain of our owners may approach us with blocks of shares rather than going into the open market. We'll have to see how that proceeds, and we'll obviously report each quarter on any buybacks that took place during the quarter.

Okay. Thank you so much. That was all my questions.

Great. Thank you.

Your next question is from the line of Tom Kerr with Zacks Investment Research. Please go ahead.

Hi, guys. Most of my questions were just covered. A couple of quick ones. Can you break down the corporate and other operating expenses of $14 million? I didn't see that in the press release. Any further color on that?

Yes. $9.2 million of that is related to the sale of the farm renewal rights. What that is, Tom, is write-off of goodwill in changeable assets, software, lease costs. And we also had to pay third-party advisors. That is what comprises the $9.2 million. The remainder of the corporate expenses are just the normal recurring corporate expenses that happen every quarter.

And that's roughly $4 million per quarter on average?

Yes. $4 million to $5 million a quarter, that's correct.

Yes. Any thoughts on increasing the equity exposure in the investment portfolio with some of the areas of the market having significant declines recently?

It's a tough question. Obviously, what we've all experienced here over the last – for us in looking at our portfolio, really the last year and three quarters, we've been trying to reposition ourselves to be opportunistic going forward. I think where we sit today is incredibly positioned. And our Investment Committee at the Board is working with outside advisors and we'll pick appropriate times to reenter the equity market or different portions of the fixed income market as we see the opportunities arise. It's a daily occurrence, trying to think about it and trying to position right now. As Tom mentioned earlier, we are positioning some of our portfolio into some slightly higher yielding, high-quality, short-duration fixed income rather than just treasuries. But at this point, there's no real clear decision yet made about any decision to buy additional equities now that we've exited.

All right. One last question. The question was just asked about change in strategy with the new management team. Can you also comment on the specific sort of financial objectives that have been outlined, the 6%, 7%, 8% growth in net written premiums. Is that still doable? Or do you think that could change?

Certainly, in terms of minimum objectives, I think what we've outlined at our Investor Day remain in place. I would hope to hit over time over the next three to five years do better than that. That's certainly what our aspirational goals are. Right now, looking backwards versus looking forward, it's a pretty big contrast to what we've actually achieved versus what we're committing to. So I think as I tried to say in my remarks, I think the proof is in the results. And I think we have to post some good numbers here over the next year or two to demonstrate that our transformation actually is putting us on a long-term path to that kind of profitable growth.

And last question, sorry. Is acquisition, I forgot if you mentioned this, is part of the strategy going forward? Tuck-ins or anything like that, new lines you might like?

Yes. This Board has been open to both divestments and purchases historically, and that remains on the agenda. We certainly have a very, very strong capital base. It will take two or three years of internal growth to even begin to dent into how much capital we have available. And so if an opportunity arises in the near-term, I'm sure the Board will take a look at it.

Great. Thanks. That's all I got.

And at this time, there are no further questions. I will now turn the call back over to Jay Brown for closing remarks.

Thank you for joining us today. I do want to suggest that if there are any questions from investors that they follow up with Steve Ries. And one small change in our investor calls going forward. We will have an open line for questions for all investors to ask questions rather than just the few that have been able to ask questions in the past. Thank you very much for joining us today.

This does conclude the Global Indemnity Group, LLC third quarter 2022 earnings conference call. Thank you for your participation. You may now disconnect.