GBLI: UPDATE: The company reported 4th quarter and fiscal 2022 earnings which showed ongoing strength in its Continuing Lines businesses. An update was provided on recent discontinued lines of business.
NYSE:GBLI
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Global Indemnity Group (NYSE:GBLI) reported fiscal year 2022 financial and operating results on March 9th. The company continued to show strong growth in its Continuing Lines of business. Gross written premiums, net written premiums, and net earned premiums for the Continuing Lines increased 17.3%, 18.7% and 27.2%, respectively. Consolidated (including exited lines) gross written premiums, net written premiums, and net earned premiums increased 6.7%, 1.9% and 1.2%, respectively.
Underwriting income in the Continuing Lines business was $16.2 million in 2022 compared to $11.3 million in 2021. Consolidated underwriting income was $8.3 million in 2022 compared to a loss of ($10.4) million in 2021. The combined ratio for Continuing Lines was 97.1% in 2022 which was comprised of a Loss Ratio of 59.9% and an Expense Ratio of 37.2%. Consolidated combined ratio was 98.8%.
The company made a concerted effort to lower its catastrophe exposure last year which resulted in catastrophe losses for Continuing Lines of $11.0 million for the year compared to losses of $19.4 million in 2021.
The company provides an adjusted operating income figure in order to provide an underlying metric for the health of the core Continuing Lines businesses. Adjusted operating income excludes exited lines underwriting losses, realized investment losses, as well as other extraordinary gains and losses. The 2022 adjusted operating income was $19.5 million, or $1.30 per diluted shares, compared to $0.97 in the prior year.
Investment income for 2022 came in at $27.6 million in 2022, or $33.6 million if a loss on an alternative investment is excluded. This compared to $37.0 million in 2021, or $26.2 million excluding alternative investments. The company experienced a slightly smaller asset base for investments due to the early retirement of $130 million in debt in April 2022. Book yield on the investment portfolio increased from 2.2% at the end of 2021 to 3.5% as of December 31, 2022. Duration of the fixed income portfolio at December 31, 2022 was 1.7 years compared to a duration of 3.0 years at the end of 2021 and 4.5 years as of June 2021.
Book value per share was $44.87 at the end of 2022, a decrease from $48.44 as of 12/31/2021. The decrease was primarily due to the effects of rising interest rates on the company’s bond portfolio which created realized losses. The company expects this to be recovered in 2024 due to the current 1.7 year duration on the fixed income portfolio. Shareholders equity also includes $49.5 million of net after-tax unrealized fixed income losses, much of which is anticipated to be recovered by the end of 2024. However, on a sequential basis, book value per share increased by $1.11 from $43.76 as of 9/30/22. This was primarily due to share repurchases described below.
In the 4th quarter of 2022, the company announced it would begin a stock repurchase program before the end of the year. Repurchases of up to $32 million (since increased to $60 million) of GBLI’s outstanding Common A Shares were authorized with an expiration of December 31, 2027. 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 during the 4th quarter of 2022.
During the fourth quarter of 2022, the company decided to restructure its insurance operations in an effort to strengthen its market presence and enhance its focus on GBLI’s core Wholesale Commercial and InsurTech products. As a result, the company will be exiting its four brokerage divisions: Professional Liability, Excess Casualty, Environmental, and Middle Market Property. The company will cease writing new business and existing renewals will be placed in run-off for these four divisions.
New CEO Jay Brown stated, “My objective for 2023 is to get our company being valued above book value in recognition that our insurance operations are adding value to my fellow owners. As such, my relentless daily focus as CEO will continue to be to work with both the board and the management team to make that happen in the near term.”
Investors may be getting the rare opportunity to get in on the ground floor of a dynamic P&C insurance company that is poised for rapid growth and increase in book value. With the company trading at such a large discount to book value, a margin of safety appears to exist at this time.
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