March 9, 2023

Stephen W. Ries

Gross Written Premiums

Net Written Premiums

Net Earned Premiums

Net income (loss) available to shareholders

Net income from Continuing Lines

Net loss from Exited Lines (1)

Net income (loss) available to shareholders per share

Adjusted operating income

Adjusted operating income per share

Combined ratio analysis:

Loss ratio

Expense ratio

Combined ratio

Underwriting loss from Exited Lines, net of tax.

Book value per share (1)

Book value per share plus cumulative dividends and excluding AOCI

Shareholders’ equity (2)

Cash and invested assets (3)

Shares Outstanding (in millions)

Net of cumulative Company distributions/dividends to common shareholders totaling $5.00 per share, $4.75 per share, $4.50 per share, $4.25 per share and $4.00 per share as of December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively.

Shareholders’ equity includes $4 million of series A cumulative fixed rate preferred shares.

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

Gross written premiums, net written premiums, and net earned premiums excluding the Exited Lines (“Continuing Lines”), increased 17.3%, 18.7% and 27.2%, respectively. Consolidated gross written premiums, net written premiums, and net earned premiums increased 6.7%, 1.9% and 1.2%, respectively.

Underwriting income – For the Continuing Lines business, underwriting income was $16.2 million in 2022 compared to $11.3 million in 2021. Consolidated underwriting income (loss) was $8.3 million in 2022 compared to ($10.4) million in 2021.

The combined ratio for Continuing Lines was 97.1% for the twelve months ended December 31, 2022 (Loss Ratio 59.9% and Expense Ratio 37.2%).

Lower Catastrophes – Strategy to lower catastrophe exposure resulted in catastrophe losses for Continuing Lines of $11.0 million for the twelve months ended December 31, 2022 compared to $19.4 million in 2021.

The Company sold its Farm, Ranch & Stable business to Everett Cash Mutual for $30.0 million. GBLI retained $45.0 million of capital supporting this business as well as the unearned premium reserves of approximately $40.0 million.

Investment income – $27.6 million in 2022 ($33.6 million excluding alternative investments) compared to $37.0 million in 2021 ($26.2 million excluding alternative investments). The decrease was primarily due to decreased returns from alternative investments and a smaller investment asset base due to the early retirement of $130 million of subordinated debt in April 2022. This decrease was partially offset by an increase in yield within the fixed maturities portfolio due to the rise in rates.

Book yield on the portfolio increased from 2.2% at December 31, 2021 to 3.5% at December 31, 2022.

Due to rising interest rates and other macro-economic considerations, the Company exited an alternative investment which primarily invested in bank loans rated B and BB.

Duration of the fixed income portfolio at December 31, 2022 was 1.7 years compared to duration of 3.0 years at December 31, 2021, and 4.5 years at June 2021.

Realized gains/(losses) – ($32.9) million in 2022 compared to $15.9 million in 2021. Realized losses in 2022 were attributable primarily to the Company shortening duration of its fixed income investment portfolio as well as accelerating future maturities. At current interest rates, GBLI anticipates that it will recover these losses in 2024.

The net loss for the twelve months ended December 31, 2022 of $1.3 million was primarily the result of substantially shortening the duration of the Company’s fixed income securities in its investment portfolio, the impact of exiting an alternative investment, and the write off of debt issuance costs related to the redemption of $130 million of subordinated debt in April 2022 offset by the gain realized on the sale of the Farm, Ranch & Stable business.

Book value per share – Decrease of $3.57 per share from $48.44 at December 31, 2021 to $44.87 at December 31, 2022 primarily due to rising interest rates, which the Company anticipates will be recovered in 2024 due to the 1.7 year duration of the Company’s fixed income investment portfolio. In addition to realized losses, shareholders’ equity includes $49.5 million of net after-tax unrealized fixed income losses most of which the Company anticipates will be recovered by the end of 2024 given current interest rates.

Book value per share including cumulative dividends and excluding accumulated other comprehensive income increased $0.98 per share from $52.00 at December 31, 2021 to $52.98 at December 31, 2022.

Book value per share increased $1.11 per share from $43.76 at September 30, 2022 to $44.87 at December 31, 2022 primarily due to the stock repurchase program initiated in the fourth quarter of 2022. Under this program, the Company repurchased 907,082 shares from third parties for an aggregate amount of $21.9 million, or $24.17 per share through December 31, 2022. The Company is authorized to repurchase up to $60 million of its class A common shares.

The Company incurred a total of $5.5 million in restructuring charges in the fourth quarter of 2022 and the first quarter of 2023, which the Company anticipates will result in $16.0 million of recurring annual expense savings beginning in 2023.

Revenues:

Gross written premiums

Net written premiums

Net earned premiums

Other income

Total revenues

Losses and Expenses:

Net losses and loss adjustment expenses

Acquisition costs and other underwriting expenses

Income (loss) from segments

Combined ratio analysis:

Loss ratio

Expense ratio

Combined ratio

Revenues:

Gross written premiums

Net written premiums

Net earned premiums

Other income

Total revenues

Losses and Expenses:

Net losses and loss adjustment expenses

Acquisition costs and other underwriting expenses

Income (loss) from segments

Combined ratio analysis:

Loss ratio

Expense ratio

Combined ratio

Commercial Specialty

Reinsurance Operations

Continuing Lines

Exited Lines

Total

For the Continuing Lines business, the accident year casualty loss ratio improved by 0.3 points to 61.1% in 2022 from 61.4% in 2021. The consolidated accident year casualty loss ratio improved by 0.2 points to 60.6% in 2022 from 60.8% in 2021. The improvement in the Continuing Lines accident year casualty loss ratio is primarily due to a change in the mix of business partially offset by higher claims severity within Commercial Specialty. The improvement in the consolidated accident year casualty loss ratio is primarily due to lower claims severity in the Farm, Ranch & Stable business lines as well as a change in the mix of business partially offset by higher claims severity within Commercial Specialty.

For the Continuing Lines business, the accident year property loss ratio improved by 2.2 points to 58.7% in 2022 from 60.9% in 2021. The consolidated accident year property loss ratio improved by 3.9 points to 61.6% in 2022 from 65.5% in 2021. The improvement in the Continuing Lines accident year property loss ratio is primarily due to lower catastrophe claims frequency and severity partially offset by higher non-catastrophe claims severity. The improvement in the consolidated accident year property loss ratio is primarily due to lower catastrophe claims frequency and severity partially offset by higher non-catastrophe claims frequency and severity.

Gross written premiums

Net written premiums

Net earned premiums

Net investment income

Net realized investment gains (losses)

Other income

Total revenues

Net losses and loss adjustment expenses

Acquisition costs and other underwriting expenses

Corporate and other operating expenses

Interest expense

Loss on extinguishment of debt

Income before income taxes

Income tax expense

Net income (loss)

Less: Preferred stock distributions

Net income (loss) available to common shareholders

Per share data:

Net income (loss) available to common shareholders

Basic

Diluted (1)

Weighted-average number of shares outstanding

Basic

Diluted (1)

Cash distributions declared per common share

Combined ratio analysis: (2)

Loss ratio

Expense ratio

Combined ratio

For the twelve months ended December 31, 2022, weighted-average shares outstanding – basic was used to calculate diluted earnings per share due to a net loss for the period.

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 earned premiums. The expense ratio is the ratio of acquisition costs and other underwriting expenses to net earned premiums. The combined ratio is the sum of the loss and expense ratios.

Fixed Maturities:

Available for sale, at fair value (amortized cost: 2022 - $1,301,723 and 2021 - $1,193,746; net of allowance for expected credit losses of: $0 in 2022 and 2021)

Equity securities, at fair value

Other invested assets

Total investments

Cash and cash equivalents

Premium receivables, net of allowance for expected credit losses of $3,322 at December 31, 2022 and $2,996 at December 31, 2021

Reinsurance receivables, net of allowance for expected credit losses of $8,992 at December 31, 2022 and 2021

Funds held by ceding insurers

Deferred federal income taxes

Deferred acquisition costs

Intangible assets

Goodwill

Prepaid reinsurance premiums

Lease right of use assets

Other assets

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities:

Unpaid losses and loss adjustment expenses

Unearned premiums

Ceded balances payable

Payable for securities purchased

Contingent commissions

Debt

Lease liabilities

Other liabilities

Total liabilities

Shareholders’ equity:

Series A cumulative fixed rate preferred shares, $1,000 par value; 100,000,000 shares authorized, shares issued and outstanding: 4,000 and 4,000 shares, respectively, liquidation preference: $1,000 and $1,000 per share, respectively

Common shares: no par value; 900,000,000 common shares authorized; class A common shares issued: 10,876,041 and 10,574,589, respectively; class A common shares outstanding: 10,073,660 and 10,557,093, respectively; class B common shares issued and outstanding: 3,793,612 and 3,947,206, respectively

Additional paid-in capital (1)

Accumulated other comprehensive income, net of taxes

Retained earnings (1)

Class A common shares in treasury, at cost: 802,381 and 17,496 shares, respectively

Total shareholders’ equity

Total liabilities and shareholders’ equity

Since the Company’s initial public offering in 2003, the Company has returned $583 million to shareholders, including $510 million in share repurchases and $73 million in dividends/distributions.

Fixed maturities

Cash and cash equivalents

Total bonds and cash and cash equivalents

Equities and other invested assets

Total cash and invested assets, gross

Payable for securities purchased

Total cash and invested assets, net

Net investment income

Net realized investment gains (losses)

Net unrealized investment losses

Net realized and unrealized investment return

Total investment return

Average total cash and invested assets

Total investment return %

Amounts in this table are shown on a pre-tax basis.

Adjusted operating income, net of tax

Adjustments:

Underwriting loss from Exited Lines

Adjusted operating income (loss) including Exited Lines, net of tax (1)

Net realized investment gains (losses)

Net gain from sale of renewal rights

Loss on extinguishment of debt

Net income (loss)

Weighted average shares outstanding – basic

Weighted average shares outstanding – diluted

Adjusted operating income per share – basic (2)

Adjusted operating income per share – diluted (2)

Adjusted operating income (loss) including Exited Lines, net of tax, excludes preferred shareholder distributions of $0.44 million for each of the twelve months ended December 31, 2022 and 2021, respectively.

The adjusted operating income per share calculation is net of preferred shareholder distributions of $0.44 million for each of the twelve months ended December 31, 2022 and 2021, respectively.

Disseminated pursuant to the “safe harbor” provisions of Section 21E of the Security Exchange Act of 1934.