EX-99.1 2 d814176dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

PRESS RELEASE

 

For release:    November 3, 2014
Contact:    Media
   Linda Hohn
   Associate General Counsel
   (610) 660-6862
   lhohn@global-indemnity.com

Global Indemnity plc Reports Third Quarter 2014 Financial Results.

Dublin, Ireland (November 3, 2014) – Global Indemnity plc (NASDAQ:GBLI) today reported net income for the three months ended September 30, 2014 of $9.8 million or $.39 per share compared to net income of $6.9 million or $0.28 per share at September 30, 2013. Net income for the nine months ended September 30, 2014 was $51.8 million or $2.05 per share compared to net income of $28.0 million or $1.11 per share at September 30, 2013. As of September 30th, book value per share was $35.47, an increase of 0.1% compared to book value per share of $35.43 at June 30th, 2014, and an increase of 2.4% compared to book value per share of $34.65 at December 31, 2013.

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,
 
     2014      2013      2014      2013  

Gross Premiums Written

   $ 67.1       $ 68.8       $ 227.2       $ 228.0   

Net Premiums Written

   $ 63.3       $ 64.0       $ 212.5       $ 213.9   

Net income

   $ 9.8       $ 6.9       $ 51.8       $ 28.0   

Net income per share

   $ 0.39       $ 0.28       $ 2.05       $ 1.11   

Operating income

   $ 10.1       $ 5.9       $ 28.6       $ 21.3   

Operating income per share

   $ 0.40       $ 0.24       $ 1.13       $ 0.85   

Combined ratio analysis:

           

Loss ratio

     53.9         55.1         56.3         57.0   

Expense ratio

     40.4         43.5         40.2         43.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Combined ratio

     94.3         98.6         96.5         100.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     As of
September 30,
2014
     As of
June 30,
2014
     As of
December 31,
2013
 

Book value per share

   $ 35.47       $ 35.43       $ 34.65   

Shareholders’ equity

   $ 898.1       $ 896.8       $ 873.3   

Cash and invested assets (1)

   $ 1,514.4       $ 1,602.5       $ 1,568.1   

 

(1) Including receivable/(payable) for securities sold/(purchased)

 

1


Cynthia Y. Valko, Chief Executive Officer, commented: “Over the nine month period ending September 30, our operating margins continued to improve, enhancing profitability and our return on capital. From a top line perspective, excluding commercial auto (where we determined to reduce exposure) our premium revenue continued to grow, increasing more than 5% compared to the comparable 2013 period. We are experiencing healthy growth in small business, programs and casualty reinsurance. However, our large property insurance and catastrophe reinsurance premiums are flat with last year as a result of increased competition, particularly from new entrants to the insurance marketplace, including pension plans, hedge funds, and other non-insurance companies seeking insurance underwriting income to replace yields no longer available in the bond market. The absence of credible bond market yields on high quality, short and mid-term duration fixed income assets, which constitute roughly 85% or more of Global’s investment holdings, significantly constrains Global’s investment and net income. In regard to the balance sheet, in late June, Global trimmed its equity portfolio by selling $150 million of its $275 million equity portfolio (approximately, 55%), realizing a net capital gain of $43 million. Global utilized part of the $150 million of sale proceeds to pay down a portion of the outstanding balance of its credit facility with J.P. Morgan (NYSE: JPM). As a result of reducing its equity portfolio and applying the proceeds to debt reduction, Global’s cash and invested assets contracted by $50 million (approximately) while its funded debt declined by about $40 million between December 31 and September 30, 2014.

Cynthia Valko continued: “Finally, I am also delighted to report that on October 16, Global agreed to acquire American Reliable Insurance Company (“American Reliable”), a specialty provider of personal lines and agricultural (equine, farm, & ranch) insurance, from Assurant, Inc. (NYSE: AIZ). In this roughly $400 million enterprise value transaction, Global will pay Assurant approximately $114 million in cash at closing (which could be increased to approximately $120 million to account for net earnings between June 30, 2014 and the closing) and will assume approximately $280 million of insurance related obligations. Global will utilize its internal resources and capital base to finance the transaction. The American Reliable acquisition, which is anticipated to close by year end, is expected to both double Global’s insurance premium revenue and be accretive to earnings in 2015.”

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 in the United States, as well as reinsurance worldwide. Global Indemnity plc’s two primary segments are:

 

    United States Based Insurance 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 the acquisition of American Reliable may not occur because the conditions to the closing of the transaction are not satisfied or for another reason, the risk that the transaction is not consummated on the terms contemplated, the risk that the proposed transaction proves disruptive to the operations of American Reliable or Global Indemnity, 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 the Private Securities Litigation Reform Act of 1995.

 

2


Global Indemnity plc’s Combined Ratio for the Three and Nine Months Ended September 30, 2014 and 2013

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,
 
     2014      2013     2014     2013  

Loss Ratio:

         

Current Accident Year

         

Excluding Catastrophes

     45.3         48.1        46.7        49.1   

Catastrophes

     8.4         9.5        12.6        10.7   
  

 

 

    

 

 

   

 

 

   

 

 

 

Current Accident Year

     53.7         57.6        59.3        59.8   

Changes to Prior Accident Year

     0.2         (2.5     (3.0     (2.8
  

 

 

    

 

 

   

 

 

   

 

 

 

Loss Ratio – Calendar Year

     53.9         55.1        56.3        57.0   

Expense Ratio

     40.4         43.5        40.2        43.0   
  

 

 

    

 

 

   

 

 

   

 

 

 

Combined Ratio

     94.3         98.6        96.5        100.0   
  

 

 

    

 

 

   

 

 

   

 

 

 

For the three months ended September 30th, the calendar year loss ratio decreased by 1.2 points to 53.9 in 2014 from 55.1 in 2013.

For the three months ended September 30, 2014, the current accident year loss ratio improved to 53.7 compared to 57.6 for the same period in 2013. Excluding catastrophes, the current accident year loss ratio improved by 2.8 points, from 48.1 in 2013 to 45.3 in 2014.

 

    The current accident year property loss ratio was 44.3 in both 2013 and 2014. Excluding catastrophes, the current accident year property loss ratio increased 2.3 points, from 29.8 in 2013 to 32.1 in 2014.

 

    The current accident year casualty loss ratio improved by 8.5 points to 74.1 in 2014 from 82.6 in 2013.

Calendar year results for the three months ended September 30, 2014 include a 0.2 point increase in the loss ratio related to prior accident years, which was primarily driven by an increase in marine severity within the Reinsurance Operations, partially offset by less than anticipated catastrophe losses.

For the three months ended September 30th, the expense ratio decreased from 43.5 in 2013 to 40.4 in 2014.

The decrease is primarily due to the recognition of a $1.7 million premium deficiency charge in 2013.

For the nine months ended September 30th, the calendar year loss ratio improved by 0.7 points to 56.3 in 2014 from 57.0 in 2013.

For the nine months ended September 30, 2014, the current accident year loss ratio improved by .5 points to 59.3 compared to 59.8 for the same period in 2013. Excluding catastrophes, the current accident year loss ratio improved by 2.4 points, from 49.1 in 2013 to 46.7 in 2014.

 

    The current accident year property loss ratio increased 2.0 points to 52.4 in 2014 from 50.4 in 2013. Excluding catastrophes, the current accident year property loss ratio improved by 0.2 points, from 33.9 in 2013 to 33.7 in 2014.

 

    The current accident year casualty loss ratio improved by 4.0 points to 73.5 in 2014 from 77.5 in 2013.

Calendar year results for the nine months ended September 30, 2014 include a 3.0 point reduction in the loss ratio related to prior accident years, which was primarily driven by lower than excepted severity in the U.S. Insurance Operations professional lines.

For the nine months ended September 30th, the expense ratio decreased from 43.0 in 2013 to 40.2 in 2014.

The improvement in the expense ratio is primarily due to the growth in earned premium volume in 2014 as well as the impact of the premium deficiency charge of $1.7 million recognized in 2013.

 

3


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  
     2014      2013      2014      2013  

Insurance Operations

   $ 56,489       $ 59,747       $ 52,674       $ 54,995   

Reinsurance Operations

     10,609         9,038         10,588         9,035   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 67,098       $ 68,785       $ 63,262       $ 64,030   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Nine Months Ended September 30,  
     Gross Premiums Written      Net Premiums Written  
     2014      2013      2014      2013  

Insurance Operations

   $ 170,037       $ 172,714       $ 156,369       $ 159,010   

Reinsurance Operations

     57,163         55,255         56,126         54,844   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 227,200       $ 227,969       $ 212,495       $ 213,854   
  

 

 

    

 

 

    

 

 

    

 

 

 

Insurance Operations: For the three months ended September 30, 2014, gross premiums written and net premiums written decreased 5.5% and 4.2%, respectively, compared to the same period in 2013. Excluding commercial auto business ($0.5 million in 2014), gross premiums written and net premiums written increased approximately 4.3% and 6.2%, respectively, compared to the same period in 2013. Growth was realized in small business and programs.

For the nine months ended September 30, 2014, gross premiums written and net premiums written decreased 1.5% and 1.7%, respectively, compared to the same period in 2013. Excluding commercial auto business ($2.5 million in 2014), gross premiums written and net premiums written increased approximately 5.8% and 6.1%, respectively, compared to the same period in 2013. Growth was realized in small business and programs.

Reinsurance Operations: For the three months ended September 30, 2014, gross premiums written and net premiums written increased 17.4% and 17.2%, respectively, compared to the same period in 2013. This increase is mainly due to a change in the Company’s quota share participation on several property treaties as well as several new professional treaties.

For the nine months ended September 30, 2014, gross premiums written and net premiums written increased 3.5% and 2.3%, respectively, compared to the same period in 2013. This increase is mainly due to a change in the Company’s quota share participation on several property treaties as well as several new professional treaties.

###

Note: Tables Follow

 

4


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,
 
     2014     2013     2014      2013  

Gross premiums written

   $ 67,098      $ 68,785      $ 227,200       $ 227,969   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net premiums written

   $ 63,262      $ 64,030      $ 212,495       $ 213,854   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net premiums earned

   $ 68,028      $ 64,469      $ 201,589       $ 179,136   

Net investment income

     6,527        8,486        22,488         28,285   

Net realized investment gains

     1,158        1,641        40,226         10,204   

Other income

     126        183        449         484   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total revenues

     75,839        74,779        264,752         218,109   

Net losses and loss adjustment expenses

     36,654        35,483        113,496         102,195   

Acquisition costs and other underwriting expenses

     27,458        28,028        81,114         76,977   

Corporate and other operating expenses

     3,481        2,627        9,614         7,444   

Interest expense

     118        3,585        628         5,939   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     8,128        5,056        59,900         25,554   

Income tax expense (benefit)

     (1,633     (1,892     8,108         (2,423
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

   $ 9,761      $ 6,948      $ 51,792       $ 27,977   
  

 

 

   

 

 

   

 

 

    

 

 

 

Weighted average shares outstanding – basic

     25,138        25,082        25,127         25,066   
  

 

 

   

 

 

   

 

 

    

 

 

 

Weighted average shares outstanding – diluted

     25,335        25,189        25,323         25,151   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income per share – basic

   $ 0.39      $ 0.28      $ 2.06       $ 1.12   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income per share – diluted

   $ 0.39      $ 0.28      $ 2.05       $ 1.11   
  

 

 

   

 

 

   

 

 

    

 

 

 

Combined ratio analysis:

         

Loss ratio

     53.9        55.1        56.3         57.0   

Expense ratio

     40.4        43.5        40.2         43.0   
  

 

 

   

 

 

   

 

 

    

 

 

 

Combined ratio

     94.3        98.6        96.5         100.0   
  

 

 

   

 

 

   

 

 

    

 

 

 

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.

 

5


GLOBAL INDEMNITY PLC

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     (Unaudited)
September 30, 2014
    December 31, 2013  

ASSETS

    

Fixed Maturities:

    

Available for sale securities, at fair value (amortized cost: 2014 – $1,296,990 and 2013 – $1,187,685)

   $ 1,308,771      $ 1,204,364   

Equity securities:

    

Available for sale, at fair value (cost: 2014 – $96,084 and 2013 – $191,425)

     120,736        254,070   

Other invested assets:

    

Available for sale securities, at fair value (cost: 2014 – $21,528 and 2013 – $3,065)

     21,118        3,489   
  

 

 

   

 

 

 

Total investments

     1,450,625        1,461,923   

Cash and cash equivalents

     66,616        105,492   

Premiums receivable, net

     62,211        49,888   

Reinsurance receivables, net

     178,193        197,887   

Funds held by ceding insurers

     23,762        18,662   

Deferred federal income taxes

     16,817        4,206   

Deferred acquisition costs

     26,090        22,177   

Intangible assets

     17,725        17,990   

Goodwill

     4,820        4,820   

Prepaid reinsurance premiums

     5,464        5,199   

Receivable for securities sold

     —          723   

Other assets

     27,492        22,812   
  

 

 

   

 

 

 

Total assets

   $ 1,879,815      $ 1,911,779   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Liabilities:

    

Unpaid losses and loss adjustment expenses

   $ 739,931      $ 779,466   

Unearned premiums

     127,798        116,629   

Federal income taxes payable

     1,567        1,595   

Ceded balances payable

     4,150        5,177   

Payable for securities purchased

     2,865        —     

Contingent commissions

     12,511        12,677   

Margin borrowing facility

     62,274        100,000   

Other liabilities

     30,624        22,955   
  

 

 

   

 

 

 

Total liabilities

     981,720        1,038,499   
  

 

 

   

 

 

 

Shareholders’ equity:

    

Ordinary shares, $0.0001 par value, 900,000,000 ordinary shares authorized; A ordinary shares issued: 16,322,645 and 16,200,406 respectively; A ordinary shares outstanding: 13,257,830 and 13,141,035, respectively; B ordinary shares issued and outstanding: 12,061,370 and 12,061,370, respectively

     3        3   

Additional paid-in capital

     518,889        516,653   

Accumulated other comprehensive income, net of taxes

     24,954        54,028   

Retained earnings

     455,653        403,861   

A ordinary shares in treasury, at cost: 3,064,815 and 3,059,371 shares, respectively

     (101,404     (101,265
  

 

 

   

 

 

 

Total shareholders’ equity

     898,095        873,280   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,879,815      $ 1,911,779   
  

 

 

   

 

 

 

 

6


GLOBAL INDEMNITY PLC

SELECTED INVESTMENT DATA

(Dollars in millions)

 

     Market Value as of  
     (Unaudited)
September 30, 2014
    December 31, 2013  

Fixed Maturities

   $ 1,308.8      $ 1,204.4   

Cash and cash equivalents

     66.6        105.5   
  

 

 

   

 

 

 

Total bonds and cash and cash equivalents

     1,375.4        1,309.9   

Equities and other invested assets

     141.9        257.5   
  

 

 

   

 

 

 

Total cash and invested assets, gross

     1,517.3        1,567.4   

Receivable / (payable) for securities

     (2.9     0.7   
  

 

 

   

 

 

 

Total cash and invested assets, net

   $ 1,514.4      $ 1,568.1   
  

 

 

   

 

 

 
     (Unaudited)
Three Months Ended
September 30, 2014 (a)
    (Unaudited)
Nine Months Ended
September 30, 2014 (a)
 

Net investment income

   $ 6.5      $ 22.5   
  

 

 

   

 

 

 

Net realized investment gains

     1.2        40.2   

Net unrealized investment loss

     (11.9     (43.7
  

 

 

   

 

 

 

Net realized and unrealized investment returns

     (10.7     (3.5
  

 

 

   

 

 

 

Total investment return

   $ (4.2   $ 19.0   
  

 

 

   

 

 

 

Average total cash and invested assets (b)

   $ 1,558.5      $ 1,541.3   
  

 

 

   

 

 

 

Total investment return % annualized

     (1.1 %)      1.6

 

(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.

 

7


GLOBAL INDEMNITY PLC

SUMMARY OF OPERATING INCOME

(Unaudited)

(Dollars and shares in thousands, except per share data)

 

     For the Three Months
Ended September 30,
     For the Nine Months
Ended September 30,
 
     2014     2013      2014      2013  

Operating income

   $ 10,099      $ 5,944       $ 28,621       $ 21,321   

Adjustments:

          

Net realized investment gains, net of tax

     (338     1,004         23,171         6,656   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total after-tax adjustments

     (338     1,004         23,171         6,656   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income

   $ 9,761      $ 6,948       $ 51,792       $ 27,977   
  

 

 

   

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding – basic

     25,138        25,082         25,127         25,065   
  

 

 

   

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding – diluted

     25,335        25,189         25,323         25,151   
  

 

 

   

 

 

    

 

 

    

 

 

 

Operating income per share – basic

   $ 0.40      $ 0.24       $ 1.14       $ 0.85   
  

 

 

   

 

 

    

 

 

    

 

 

 

Operating income per share – diluted

   $ 0.40      $ 0.24       $ 1.13       $ 0.85   
  

 

 

   

 

 

    

 

 

    

 

 

 

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.

 

8