Global Indemnity plc Reports Third Quarter 2014 Financial Results

DUBLIN, Ireland, Nov. 3, 2014 /PRNewswire/ -- 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 30^th, 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.

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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.

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:

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 30^th, 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 30^th, 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 30^th, 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.

Global Indemnity plc's Gross and Net Premiums Written Results by Segment

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

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.

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.

Contact: Media
Linda Hohn
Associate General Counsel
+1-610-660-6862
lhohn@global-indemnity.com

Related Links

http://www.globalindemnity.ie