Thank you for standing by. My name is Danica, and I'll be your conference operator today. At this time, I would like to welcome everyone to the GBLI Third Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Steve Ries, Head of Investor Relations. Please go ahead.

Thank you, Danica. 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, 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 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. It is now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive Officer of Global Indemnity.

Thank you, Steve. Good morning, and thanks to everyone for joining us this morning for our third quarter results call. Before I provide some commentary on our 2023 results, let me address an obvious topic. As we have previously disclosed, the Company has been engaged in conversations that could potentially lead to a transaction to sell a portion of our insurance operations for the entire company. GBLI has now retained an investment banker, Tony Ursano of Insurance Advisory Partners to assist the Company in evaluating the efficacy of any potential transaction. We expect this process will likely conclude in the next few months. Given where we are in the process, we will not say anything more today or respond to any questions on this during this call. As we have noticed in our previous calls this year, the significant restructuring that occurred at the beginning of 2023, continues to make direct comparisons to prior year overall results somewhat difficult. Our ongoing operating segments are primarily Commercial Specialty and, to a lesser extent, Reinsurance Operations. I will focus my comments on Commercial Specialty year-to-date accident year results, and then Tom will address all the financial aspects of our GAAP results. As a reminder, the long-term operating metrics we are focused on for Commercial Specialty, our loss and loss expense ratios, consistent with our long-term average in the mid-50s, an expense ratio of below 38% for this year, trending to 36% in a couple of years and a combined ratio in the low 90s and growth averaging 10%. Although we continue to make good progress against our growth objectives, we are still observing some continued negative effects from our restructuring efforts, primarily in our Targeted Specialty class specific segment, where our priority focus on profitability has caused a drop in gross written…

Thank you, Jay, and good morning, everyone. Net income for the third quarter of 2023 was $7.7 million compared to net income of $7.3 million in the comparable period of 2022. The $7.3 million in '22 excludes the net gain from the sale of the farm business in August 2022. Loss reserve releases were $0.1 million in the third quarter of 2023, compared to $3 million in the corresponding period last year. Actions taken to focus on core business lines, reduce expenses, reduce catastrophe exposure, and reposition the investment portfolio are being realized. The Company is moving in the right direction. Book value per share increased from $46.03 per share at June 30, 2023, to $46.27 per share at September 30, 2023. Investment income increased significantly in 2023 and underwriting income was positive. I will now discuss some of the key drivers of net income starting with investment performance. Investment income was $14.2 million, $13.3 million was from fixed income, $900,000 was from alternatives. This is well ahead of the third quarter of last year, which had $8.4 million, comprised of $9.5 million of fixed income and a negative $1.1 million from alternatives. On a year-to-date basis, investment income was $39.4 million, comprised of $37.3 million from fixed income investments and $2.1 million from alternative investments. This compares to $16.9 million in '22, comprised of $22.8 million from fixed income investments and negative investment income of $5.9 million from alternatives. Investment income from the fixed income portfolio is almost double what it was in 2022 due to the actions taken in early 2022 to sell longer-dated securities and short duration. Market interest rates increased in the third quarter of 2023. Even though interest rates rose, the short-duration portfolio kept unrealized losses to $0.9 million net of tax during the quarter.…

[Operator Instructions] Our first question comes from David Schiff with Shift Insurance.

Jay, it's David. I just was asked -- wanted to ask one question, if you all are able to buy back stock at the present?

We are -- we continue to entertain reverse inquiries given the small amount of business that's available in the market on a daily basis, we don't have any kind of an active repurchase program in the marketplace.

Our next question comes from Tom Kerr from Zacks Investment Research.

Can you go back in more detail on the InsurTech growth? I think you mentioned Vacant and some other, what were sort of the drivers of those individual lines growing strongly?

Yes. No, it's marketing efforts. One, on the Vacant side, a number of new agents have been appointed. We've also introduced a new monoline liability product. Both of those things are driving a lot of growth there. And on [collect], it's very focused marketing efforts, which are driving a lot of business to our portals.

Okay. Great. And then you guys mentioned the 9% average pricing increase. Was that across all Commercial Specialty or just Package or just where that kind of came from?

Yes. Package.

So the whole Package. Okay. And are there other problematic books of business like the restaurant out there? Or is that pretty much the worst? Or is that just an ongoing process to get rid of these problem books of business?

In terms of where we were about 9 or 10 months ago, we went through a pretty thorough review when I got here. We made some very quick decisions to exit a combination of products or books of business that weren't profitable. We also made a decision to exit some lines of business that we weren't in a position to have proper expense ratios. All of that was done at the beginning of the year. And obviously, we're in a continuous process of underwriting and looking at individual risks and individual books of business. But at this point in time, we're very satisfied with the book of business that we're underwriting.

Okay. Two more quick ones. And then what's left in the cat losses? Is that being eliminated or reduced? Or how do you sort of measure how much cat exposure you have or what in the future?

No, it's been significantly reduced. Our reinsurance buy has been able to come down significantly. The upper limit of our cat tower now is $75 million, which still provides protection north of a 102 -- of 1 in 250-year event. Our losses -- our Continuing Lines cat losses for the quarter were only $5.2 million, $2.5 million of that was Maui. There were no other really big losses during the quarter. It was just several little ones. So we're very, very happy with the actions that we've taken to reduce [Audio Gap] for this company.

That's great. One more quick one on the book yield. Is there a sort of timing path to go from 4% to 5%? I mean is that a 12- or 18-month process? Or any color you can give on how that looks?

Well, I'll let you figure it out to some degree, not to be coy. We have $800 million of cash flow coming off between now and the end of next year. That is being invested at close to -- literally, you can get yields very -- treasury close to 5.5% today. So it's -- we have full expectations that the bulk yield of our portfolio will continue to increase. And if rates stay at the levels they are today, I mean yields in that range will eventually be realized. [indiscernible] range.

[Operator Instructions] Our next question comes from Anthony Mottolese from Dowling & Partners.

I'm just hoping to get a little bit more color on the reserve strengthening in the Continuing Lines. I understand you mentioned it was $7 million in Targeted Specialty and then just the remainder was years 2020 and prior. Are there -- any specific years there? And could any color on exactly what you were seeing in Targeted Specialty certain areas or geographies? Anything would be helpful there.

Sure. When we did our review of the business at the end of last year, we made some decisions that created an Exited Line or a Discontinued Line, certain books of business because of the way they were coded stayed inside, Package Specialty, for example. So we have a runoff significant reduction, probably going to be about 75%, 80% in a target -- in a small book of business in New York habitational. So it affected current accident year because that business is running off to the tune of about $7 million. And that was the $7 million that Tom referred to very specifically. The rest of the reserve strengthening primarily occurred in the year 2020 or prior. Part of the reason that 2020 continues to be a little bit of an animus is because of COVID. We had a big slowdown in reported claims and then a backlog in certain litigation environments. And obviously, we've tried to estimate that precisely as we've gone through '21, '22 and '23, but there has been some lag effect. And so what we did was some corrections during the course of the quarter there for 2020 and prior.

Yes. I'm just going to add one thing to Jay -- to what Jay said also, is within Targeted specialty, there was also an underperforming program that was terminated in the first quarter of this year. There is no more premium after the first quarter but we did have some earned from that program this year, and we continue to see some adverse development related to that program, which is included in the reserve strengthening numbers that we noted.

Our next question comes from Tony Polak with Aegis.

My questions were answered.

Great. Thank you. That concludes our Q&A session. I will now turn the call back over to Steve Ries for closing remarks.

Thank you, Danica. Thank you for joining us and your continued interest in investment in Global Indemnity. We look forward to speaking with you after 2023 results release.

Thank you, ladies and gentlemen. That concludes today's call. You may now disconnect.