Ladies and gentlemen, thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Global Indemnity Group 2024 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. We will also be taking questions from the webcast. If you would like to submit a question via the web, please use the Q&A button located at the bottom right side of your webcast screen. Thank you. I would now like to turn the call over to Evan Kasowitz. Please go ahead.

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, believes, 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 descriptions 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 of Global Indemnity.

Thank you, Evan. Good morning, and thank you all for joining us for the GBLI year-end update on our 2024 financial and operational results. Consistent with our past calls, I will first provide a few overview comments on the ongoing results in our Penn America segment. Given the fact that year-end numbers are consistent with prior quarters, I will keep my comments to a minimum. Then our Chief Financial Officer, Brian Riley, will expand on the 2024 financial highlights for both our insurance operations and the holding company. It gives me great pleasure to report that the GBLI team achieved solid insurance results consistent with the goals we had established for 2024. They continue building momentum to consistently hit the long-term metrics for revenue growth and underwriting profits that we had established to create value for our shareholders.

Pan America insurance revenue momentum, as measured by gross premium, maintained the pattern we saw in the third quarter with total premium excluding terminated programs, having finished up 12% through 2024. This was driven by the excellent 17% growth we achieved in Insurtech coupled with 12% growth in our largest division, wholesale commercial. Our assumed reinsurance operation finished up 83% in its second full year of operations. We expect these segment-wide positive trends to continue in 2025. Turning to insurance underwriting performance, I am very delighted to report a full-year 94.4% underwriting result for the Penn America segment. This result was modestly better than the 95.2% we recorded in 2023. The good results continue for both our casualty and property coverages. Importantly, our rate increases continued to modestly exceed our own estimates of inflation trends. This will continue to be a key objective for 2025, given the continued uncertainty on the national inflation front. Also, our estimates for the past year results remain stable with virtually no difference between calendar and accident year numbers. Our reserve margins remain solid with modest improvement recorded throughout the year. The ongoing efforts to manage catastrophe exposures for our property sentiments continue to be reflected in our modest losses from catastrophes in 2024. Total cat losses for the full year were down roughly 26% from 2023.

I will note that we experienced $15 million in catastrophe losses from the recent Los Angeles wildfires. Given the magnitude of the LA fires, this result was modestly below our property market share in California, albeit still significant for a company of our size. Although we expect an annual average of around $17 million from cat losses, given our current book of business, the sheer magnitude of this single loss exceeded the different models we have used for wildfires in the LA basin. Like most industry players, we are rethinking the validity of our past severity model estimates for wildfire cat exposures. We continue to manage internal expenses a bit higher than our long-term targets to provide the best service to our customers. As noted in past quarters, we have maintained Penn America's staff numbers just slightly below 2023 as we grow our business at double-digit levels and keep expense growth at roughly half of that growth rate. Our Penn America expense ratio is starting to trend in the right direction, with the 2024 ratio of 38.1%, but we still have significant work to do in order to get this down to 37% or lower. As noted last quarter, a key factor in growing our business is attaining outstanding underwriting results, achieving competitive expense levels, and utilizing technology effectively across all dimensions. We have just completed the first full year of a multiyear effort to transform our technology platforms, transactions, and information software, and data storage. These investments are well underway with our transition to the cloud above 75% completed, with the remaining migration to be completed in 2025. As I mentioned last quarter, the first transactional application went live in September, and we are now processing all aspects of our wholesale commercial excess liability policies in the new technology…

Thank you, Jay. My commentary will focus on full-year results. Of course, we can answer any questions you may have on the fourth quarter numbers. Net income was $43.2 million compared to $25.4 million in 2023. The combination of net income and a $12 million increase in market value of the fixed income portfolio both value per share increased from $47.53 to year-end 2023 to $49.98 at December 31st. Including the events paid in 2024 of the $1.04 per share return to shareholders was 8.1% for 2024. For 2024, both underwriting income and investment forms again contributed to the improvement in net income. Starting with investments, investment income increased 13% to $62.4 million from a year ago. Actions taken since early 2022 to sell longer-dated securities in short duration and translate into much higher parent book yields. Cash flows and maturities of fixed income securities of $1.1 billion yielding 4.36% were reinvested in an average yield of 4.87%. Current book yield on the fixed income portfolio is now 4.4% with a duration of 0.8 years at December 31st, 2024. Comparatively, at December 31st, 2023, book yield was 4% with a duration of 1.1 years. At the end of December 2022, book yield was 3.5% with a duration of 1.7 years. And at December 31st, 2021, book yield was 2.2% with a duration of 3.2 years. The average credit quality of the fixed income portfolio remains at double A. As a result of the low duration, we have $1 billion of investments maturing in 2025. We expect that a significant amount of those maturities to be reinvested on longer matured ensuring fixed income investments to improve returns. Through February 2025, approximately $320 million of the portfolio was reinvested in 5.2% consisting of two-thirds in high-quality corporate and structured securities. We expect this strategy will increase duration to about 1.25 years by the end of the first quarter of 2025.

Now let's move to underwriting performance for 2024. We continue to see good results as the current accident year consolidated operating income was $18.8 million compared to $14.3 million in 2023. This was driven by a consolidated next year combined ratio of 95.4 in 2024 compared to 97.3 in 2023. The improvement in the current extra underwriting income was due to the strong performance of our core business, Penn America. Penn America's underwriting income was $22.1 million in 2024 compared to $18.5 million in 2023. As Jay noted, Penn America's accident year combined ratio improved to 94.4 in 2024 compared to 95.2 in 2023. The accident loss ratio of 56.4 is a point better than the 57.4 in 2023. The property loss ratio closed the year at 53.9 compared to 53.4 in 2023. Correct? Non-cat loss ratio remains strong. We posted 46.3% in 2024 and 43.6% in 2023. Cat loss ratio improved to 7.6 in 2024 compared to 9.8% in 2023. Overall cat losses declined to $12.7 million compared to $13.8 million in 2023. The casualty loss ratio is 58.4 in 2024 compared to 59.9 in 2023. Unlike last year, our non-core operations have a diminished effect on our overall performance. Our non-core operations net our premium dropped to $7.2 million compared to $118.8 million in 2023. Mainly from an assumed retrocession casualty treaty which we did not renew. Further, the runoff of our exited specialty property business results in no catastrophe losses in 2024, compared to $3.4 million last year. The current accident year underwriting loss was $3.3 million for 2024. Combined ratio was 145.6. The loss ratio was in line with but runoff expenses remain a bit high as we wind down a number of the smaller underwriting portfolios. As for the calendar year underwriting income, we have consolidated calendar year underwriting income of $17.8 million compared to $3 million in 2023. Looking at prior accident year losses, book reserves remained solidly above our current actuarial obligations. 2024 loss nullity related to prior accident years was only a modest increase of $72,000. Turning to premiums. Consolidated gross premiums were $389.8 million in 2024 compared to $416.4 million in 2023. This decrease is entirely due to runoff business of our non-core segment, declined $57 million year over year offset partially by the growth of the country. Penn America's gross rate increased 8% to $400 million compared to $369.7 million in 2023.

As Jay noted, excluding terminated products, Penn America's roadside premiums grew from $352.4 million in 2023 to $395.1 million in 2024, a 12% increase.

Let me add a little color on each of those divisions. Wholesale commercial, which focuses on Main Street small business, grew 6% to $248.6 million compared to $234.9 million in 2023. Excluding premium audit in these calendar numbers, the underlying policy premium trends are the best indicator of growth was 12% which includes rate increases of 7%. Insurtech, which consists of vacant express and collectibles, grew 17% to $56.3 million in 2024 compared to $48.3 million in 2023. Let me break down those two products a bit. One's for Vacant Express, grew 24% to $40.5 million driven by organic growth from existing agents and agency appointments. New technical automation implemented in the third quarter of 2023 for vacant dwelling products, including the expansion of monoline general liability product contributed to the growth in premium our agents are producing. Collectibles, gross rated premium of $15.8 million was slightly higher than 2023 by 5%. We've implemented underwriting action on cash refund risk that has curtailed growth a bit but is expected to improve overall profitability. Our assumed reinsurance business continues to grow at a nice pace. We signed on eight new treaties in 2024. Gross written premiums grew to $25.4 million compared to $13.9 million in 2023. Specialty products excluding terminated products, mentioned earlier, was $64.7 million compared to $55.3 million in 2023. We signed on two new products in 2024 that contributed a million during the year. We expect to have four new products signed on over the next six to twelve months. In closing, we are pleased with the 2024 results. Further, despite the impact of the first quarter wildfires as Jay mentioned, our outlook for 2025 is very positive. We continue to expect revenue growth of 10% from Penn America. Further, we expect to see continued improvement in our non-catastrophe accident year loss ratios. Book reserves remained solidly above current actuarial locations. We believe premium pricing is continuing to track with loss inflation. Discretionary capital, which is considered the amount of consolidated equity in excess of that amount required to maintain the strongest levels with our rating agencies increased to $255 million at December 31, 2024, compared to $200 million in December 31, 2023. Due to growth in equity, and the reduced capital needed to run off the non-core business. As Jay noted earlier, this will support the efforts to invest in the growth of Penn America underwriters. Lastly, the portfolio is well positioned to invest in longer-term duration maturities at higher yields. Thank you. We'll now take your questions.

If you would like to submit a question via the web please use the Q&A button located at the bottom right side of your webcast screen. Your first question comes from the line of Tom Kerr with Vaxx MoCap Research. Please go ahead.

Good morning, guys. Real quick on the California fires. Was that just the underwriting type issues or you guys been trying to get rate increases and deal with that issue?

We've had an outstanding rate increase for our vacant express probably for a year plus at this point in time. Like most carriers, it's just stalled completely in the regulatory environment. But otherwise, you know, it was actually a sizable loss for us, but it involved very few number of properties. I think it was less than ten properties overall were involved in the fire.

Okay. Great. And can you provide a little more color on the reinsurance segment and that growth in that? And what is the plans? I mean, that could that continued strong growth in 2025?

Yeah. Our growth there was is if you recall, two years ago when we cut back dramatically when I first arrived at the company, obviously, our view at that point in time with the reduced volume we were doing in other sectors that we had a lot of capacity available. We had had a history of doing some reinsurance, but we decided over the near term being two years ago and a couple years forward that the best use of our internal capital was to develop some existing specialty product relationships into Assundre Insurance. So we're up to, Brian, how many? Sixteen. Sixteen treaties at this point in time. Roughly $45 million in force. And we expect that we're gonna have a nice increase in 2025 and 2026. At that point, we'll be looking at our other lines of business and allocation of capital across our businesses to decide if we wanna grow it much beyond that.

Got it. Two more quick ones for me on the project manifest, do you see any benefits yet on the on the de-stacking of your organization in terms of the ability to move capital between organizations? Has that kinda started yet?

We picked up net of net of the dividends to the holding company about $50 million. So we're our statutory surplus is right around $500 million. As we get above that, that'll give us more capacity in the cemetery insurance market.

Got it. Last one, I have to ask the standard share buyback question with $55 million in discretionary capital. Any portion of that could be used to buy back, you know, the stock at a discounted book value?

Of course. Could be used to buy back stock at a discount. But right now, the board feels more enthusiastic about our prospects for adding additional products and different types of underwriting into our company through the America. Our decision to hire Praveen is very much focused on this and we expect that we can get better returns on growing our insurance business in the short term than just buying back stock.

Got it. Alright. I'll jump back in the queue. Thank you.

Your next question comes from the line of Ross Haberman with RLH Investments. Please go ahead.

Good morning, gentlemen. Thanks for taking the call. I have a quick question. Could you go back to the California? Could you tell us what your total exposure is there? And is it on the direct commercial side, or is it mostly on the reinsurance side?

Thank you. Our total exposure in California is about six basis points of the total market. I don't have it at my fingertips exactly how much the premium was. It was all on our direct book. It was not on any assumed reinsurance.

And the $15 million, could that be a bigger number as time goes on or that's your best guess? At least as of today?

We've paid over half the losses at this point. Because of the small number. It's, as I said, it's less than ten losses, ten individual properties that were involved. So we're pretty confident the number is not gonna move too much at this point.

Okay. And your total fire or wildfire exposure, which you said you're reassessing what is that number today?

Well, it depends on the frequency and the location of loss. It's you know, we have wildfire exposure in California and other states. My comment there was really focused on the fact that we use catastrophe models to estimate our exposure and manage how much we'll do in particular areas. One of the ways those models work is to assess the frequency of a cat loss of a particular size. And so we typically manage to a one in 250 or one in 500. Kind of level. As the maximum that we expect from a loss? This one went almost double that in terms against what the model estimated. And so what I'm saying is that we're like a lot of people wondering at the tail of the individual models that we're using are they are they that inaccurate? Why are they off that much? Now was an unusual fire, but it is something that we expect in California. We have different zones. That we have fire exposure. One of the two fires was in a more exposed area. That was the Eaton fire. We actually had no losses in the Eaton location. Pasadena, which was slightly better in terms of the rating and expected a less frequency of loss actually turned out for us to be where all of the properties were burned in that particular situation. So, again, it's a modeling question for us. We're constantly trying to improve our models and this one came in somewhat of a surprise, but we've all seen an escalation in the size of cat losses. Now in comparison, if we go back for the prior four years, were cat losses wildfire losses. And in each of the four years, we had no wildfire losses at all. And so we were very we're pretty comfortable and with the way we're managing that exposure, but, again, the models for this type of loss don't seem to work very well.

So, basically, you've gotta reassess it and rejigger, I guess, the assumptions there?

Yeah. We're looking at it. It's you know, we're trying to there's a couple of minor adjustments that we're making very quickly in terms of what we would do in a zone three versus a zone four or a five, and we're trying to save maybe we have to move that out a little bit to contain that exposure. But, again, this size loss is not disproportionate for a company our size. I mean, it's kind of the in the if you're going to write any property business, you're going to have some cat exposures than this. For us, it always hurts more when it comes in the first quarter but over the course of the year, we typically expect, as I mentioned, something like $16 or $17 million in cat losses. Some years, it's more. Some years, it's less. But that's what our current book would expect over time to see in a normal year.

Overall, just a follow-up question. Overall, given what happened in California, what kind of rate increases going forward do you expect in that state or in that general area? Given what happened.

What we expect and what we get might be two different things. But I would say that we need at least 50% on the type of business that was affected by this particular wildfire. And perhaps more depending on the types of individual exposures. But it's California's been tough on rates, and it's a real obstacle, and they're creating a real problem for themselves in terms of not allowing carriers to get an adequate rate, which makes it much harder for people to obtain coverage. And that's obviously not the goal of the insurance industry. We want to provide coverage for every possible exposure that we feel we can rate appropriately.

I guess if you can't get an appropriately risk rate, whether it's 50% as you hope to, do you say you know, hypothetically, if you can only get 20 or 25, do you say it's not worth it to us? It's not worth the risk? We're just not gonna write there anymore.

Typically, that'll be a decision that we face selectively over time, and we try and manage it in line with what our customers are trying to achieve, meaning our agent partners. But the reality is we are a for-profit business. We're very, very focused on making good shareholders. And if we can't make it in California selling CAD exposed business, we'll find some place else in the United States to sell more business.

And just one last question. You brought in this new gentleman to expand your lines of business. Do you have a rough idea of what kind of lines is he sort of gonna be focused on yet?

Stay tuned.

Your next question comes from the line of Andrew Vendigme. That's from the web. Is there room to reduce the expense ratio without compromising underwriting quality? Any uses for excess capital, maybe a special dividend?

We don't currently plan any special dividends. And in terms of our expense ratio, there is room. We expect that as we've run off the remaining terminated business there'll be a little bit of pickup in terms of that area not needing expenses. But the big lift for us in terms of where we are, given that we were $250 million higher a couple years ago is really growing back to that size over the next couple of years and bringing the expense ratio down another point and a half. From where it currently exists. The expense ratio is somewhat misleading sometimes to look at. You see 38% and kinda go, wow. That's a big number. And then you have to realize that less than twelve or thirteen percent of that is our internal expenses. And the remainder is commissions. We pay our agents licensing fees, etcetera. And so the actual cost that we're dealing with is out of that 38 is roughly twelve or thirteen percent of that total. Not percent, but portion of. So about a third of the expense is something that we're focused on managing down a point and a point and a half. In the next couple of years.

Your next question comes from Justin Saunders via web. Anything abnormal in the Q4's corporate and other operating expenses wraps to $7 million for the quarter?

Yeah. From the year, corporate expenses are up $5 million. Professional fees related to project manifest and implementation drove most of that.

Or use the Q&A button located at the bottom right side of your webcast. Your next question comes from the line of Joel Stracca via web. Regarding Project Manifest, GBLI has tried growth strategies in the past and failed. You were brought in to map those out. Can you explain why a growth strategy will work this time?

Sure. One is our new structure allows us to bring in additional underwriting teams coupled with the technology investment we're making. Our growth structure that we tried and attempted two or three years ago, our biggest problem was the underwriting teams were bought in and were operating in an essentially a manual environment with no technology support. That was a mistake on our part. We talked about it at the time, and it's certainly not a mistake we're gonna make going forward. This time around, we feel much more comfortable that our technology investments are creating a platform that will allow a variety of products we don't currently sell to be offered to existing and new agency partners. The other thing to, I guess, kinda reflect on is we made a very clear decision to bring in a particular individual with a lot of experience with products that we don't currently offer, and so we're looking to expand given his knowledge and contacts in the industry. Some of which will be built internally. Some of which will be by bringing in additional people. And finally, in some cases, by actually buying certain types of operations from other carriers. It's always hard to say if you weren't successful in the past, why do you think you're gonna be successful this time? But I would tell you that based on my last two and a half years here, the team and the board and particularly Fox Paine have focused very carefully about a comprehensive plan to bring this out where we can grow at a greater rate than we've been able to grow over the last few weeks and past. And I think time will tell if we're successful at that. But I think now that we have a very stable profitable underwriting base in place, we don't have any major decisions to make about staffing in the short term in terms of having too much. And having approximately fifteen months behind us in a three-year technology spend, I feel very, very personally confident that this is gonna be a special strategy for global to pursue.

I will now turn the call back over to Evan Kasowitz for closing remarks.

Thank you. This concludes our 2024 earnings call. We look forward to speaking with you about our first quarter 2025 results.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.