Earnings call transcript: Global Indemnity Q2 2025 misses EPS forecast

Global Indemnity PLC reported its second-quarter earnings for 2025, revealing a shortfall in earnings per share (EPS) compared to analyst expectations. The company posted an EPS of $0.71, falling short of the forecasted $0.85, marking a surprise of -16.47%. Despite this miss, the company demonstrated resilience with steady net income and improvements in underwriting income. According to InvestingPro data, the company maintains profitability with a gross profit margin of 14.7%, though this metric suggests room for improvement. The stock reacted negatively, with a 2.23% decline in pre-market trading, reflecting investor disappointment.

Key Takeaways

• Global Indemnity’s EPS of $0.71 missed the forecast by 16.47%.
• The company’s stock fell by 2.23% in pre-market trading.
• Underwriting income improved significantly by 61%.
• The company is advancing in technological innovations with a new policy system.
• Premium growth is expected to continue at 10% for 2025.

Company Performance

Global Indemnity maintained its net income at $10.3 million, consistent with the previous year, while its book value per share increased slightly from $47.85 to $48.35. The company achieved a return to shareholders of 1.8% for the year. Notably, underwriting income saw a significant boost of 61%, rising to $5.6 million, indicating improved operational efficiency. The company’s investment return was $17.7 million, translating to an annualized return of 4.9%.

Financial Highlights

• Revenue: $110.52 million
• Earnings per share: $0.71, down from the forecasted $0.85
• Net income: $10.3 million, unchanged from last year
• Underwriting income: $5.6 million, up 61%
• Book value per share: $48.35, up from $47.85

Earnings vs. Forecast

Global Indemnity’s actual EPS of $0.71 fell short of the forecasted $0.85, resulting in a negative surprise of 16.47%. This miss contrasts with previous quarters where the company either met or exceeded expectations, indicating a potential shift in performance dynamics.

Market Reaction

Following the earnings release, Global Indemnity’s stock experienced a decline of 2.23% in pre-market trading, with the last close value at $30.75. This movement places the stock closer to its 52-week low of $26.94, suggesting a cautious investor sentiment in light of the earnings miss. InvestingPro analysis indicates the stock is currently undervalued, with a P/E ratio of 15.03 and an attractive dividend yield of 4.55%. The company maintains a GOOD Financial Health Score, suggesting fundamental strength despite recent price weakness. For detailed valuation metrics and additional insights, check out InvestingPro’s comprehensive research report, available with a subscription.

Outlook & Guidance

Looking forward, Global Indemnity anticipates a 10% premium growth for the year 2025 and is targeting a 12% return on equity for its insurance operations. The company is also focusing on strategic investments in its Agency and Insurance Services segment and exploring selective add-on acquisitions to bolster its market position. InvestingPro analysts have identified several key factors that could impact future performance, with additional ProTips available to subscribers. The company’s market capitalization of $429.67M and stable financial health position it well for planned expansions, though net income is expected to face some pressure this year.

Executive Commentary

CEO Jay Brown expressed confidence in the company’s strategic direction, stating, "We firmly believe our reorganized structure will yield substantial value to our owners in the next few years." CFO Brian Reilly highlighted the company’s improved underwriting performance, noting, "Our underlying underwriting performance for the last 2025 is expected to improve compared to the same period in 2024."

Risks and Challenges

• Market headwinds in the small commercial sector could impact growth.
• Increased competition in the E&S market may pressure margins.
• Potential macroeconomic factors, such as inflation, could affect cost structures.
• Strategic investments and acquisitions may not yield expected returns.
• Technological advancements require significant capital and may face implementation challenges.

Q&A

During the earnings call, analysts inquired about the company’s business development opportunities and its exposure to California fire risks. Management reassured investors that there is no significant new exposure to California fires and highlighted ongoing reviews for potential expansions in agency operations.

Full transcript - Global Indemnity PLC (GBLI) Q2 2025:

Tina, Conference Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Global Indignity Group Second Quarter twenty twenty five 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.

We will also be taking questions via the webcast. Please use the Q and A button located at the bottom right hand of your webcast screen. Thank you. It is now my pleasure to turn the call over to Evan Casowitz, President of Belmont Holdings. You may begin.

Evan Casowitz, President, Belmont Holdings: Thank you, operator. Today’s conference call is being recorded. GBI’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, beliefs, 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 ks 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.

Jay Brown, Chief Executive, Global Indemnity Group: Thank you, Evan. Good morning and thank you for taking the time this morning to join us for the GBLI second quarter update on our financial and operational results. Following our usual format, I will first provide a few overview comments on my view of this quarter’s results. Then our Chief Financial Officer, Brian Reilly, will offer a few key details on our insurance and investment operations. Following Brian’s comments, we will then answer any questions you might have.

This quarter’s results are comparable to the underlying positive insurance operating investment trends that we have seen for the past several quarters. Our accident year combined ratio of 94.6% produced an underwriting profit of $5,600,000 a very nice increase over the $96,700,000 we recorded last year. Our short duration investment portfolio continued to deliver stable results at $14,700,000 with an annualized investment return of 4.9%. The overall positive insurance and investment results were offset a bit by the planned higher corporate expenses as we continue to invest in our Agency and Insurance Services segment. The resulting net income of $10,300,000 remains consistent with the results from last year.

Brian will provide a bit of insight on the areas where corporate expenses are increasing. Moving from the bottom line to the top line for insurance operations, excluding terminated contracts, gross premium grew 18% over the 2024. As we noted in our results release, we saw very solid sustainable growth in vacant express, collectibles, wholesale commercial and assumed reinsurance. Premium rate changes are running in the mid single digits, which when coupled with exposure changes are tracking close to our current expectations for loss trends. Turning from the quarterly financials.

Our efforts to revamp our technology infrastructure, information management and policy issuance systems continues to be on track. We will complete our design and coding of our Kaleidoscope policy rating, quoting and issuance system for wholesale commercial package policies to begin testing by year end. We then expect to roll out the new environment to our agency partners in conjunction with an underwriting workbench early in 2026. On a parallel track, we have now migrated all our internal data to a modern data lake for both structured and unstructured data in the cloud. We are now migrating and syncing all of our internal reports to the new single unified data source.

This effort is a very key foundational step needed to exploit artificial intelligence across the entire enterprise. I should also note that we’ve requested and received approval in July 2025 for $100,000,000 in aggregate dividends from our insurance subsidiaries. This will bolster our liquidity and position us to fund significant growth that we anticipate in our agency and insurance service operations under Praveen Reddy. Looking forward, we will continue our efforts to profitably grow our existing businesses as we continue to invest in technology, expand our underwriting capabilities through organic growth and pursue selective add on acquisitions. We firmly believe our reorganized structure will yield substantial value to our owners in the next few years.

At this point, I’ll turn it over to Brian.

Brian Reilly, Chief Financial Officer, Global Indemnity Group: Thank you, Jay. My commentary will focus on results for the second quarter. Of course, we can answer any questions you may have for the six month results. With the combination of net income and a $3,000,000 increase in market value of the fixed income portfolio, book value per share increased from $47.85 at March 31 to $48.35 at June 30. Including dividends paid of $0.35 per share, return to shareholders was 1.8% for the 2025.

Net income was $10,300,000 for the 2025 compared to $10,100,000 for the same period last year. The key drivers include: underwriting income improved by 61% to $5,600,000 in the 2025 compared to $3,500,000 for the same period last year. This was offset by an increase in corporate expenses of 1,200,000 to $7,500,000 in the 2025 resulting from recruiting fees and professional fees related to due diligence on business development opportunities. And last, investment income of $14,700,000 for the quarter was stable compared to $15,300,000 in the same period last year. Let me add a little color on investments and underwriting income.

Starting with investments. Total investment return was $17,700,000 for the 2025 compared to $17,900,000 for the same period last year. And as Jay mentioned, annualized investment return for the 2025 was 4.9%. Investment income on our fixed income portfolio is $15,300,000 for the 2025 compared to $15,000,000 for the same period last year. Current book yield on the fixed income portfolio is now 4.5% with a duration of one point two years at 06/30/2025 compared to 12/31/2024 of a 4.4% book yield and a duration of zero point eight years.

For further comparison, book yield was 2.2% with a duration of three point two years at 12/31/2021 before the company took action in early twenty twenty two to sell longer dated securities and shorten duration. The average credit quality of the fixed income portfolio remains at AA minus. As for the current year underwriting performance, current accident year underwriting income was $5,600,000 for the 2025, an increase of 61% compared to the same period in 2024 due to growth in earned premium and an improved combined ratio. The combined ratio improved 2.1 points to 94.6 in the 2025 compared to 96.7% in the same period, mainly driven by the loss ratio as the expense ratio is largely flat at 39%. The non cat loss ratio remained strong as we posted a 50.1 in 2025 compared to 54.1 in 2024.

The cat loss ratio was 5.5 for the quarter compared to 3.8 for the same period last year. Expenses remain elevated here in the short run as we run off our non core businesses and invest in agency and insurance services operations. We continue to target the expense ratio longer term at 37. Turning to premiums. Consolidated gross written premiums increased 6% to $106,800,000 in the 2025 compared to $100,700,000 in the same period last year.

As Jay mentioned, excluding terminated products, gross written premiums increased 18% to $109,900,000 in the 2025 compared to $93,400,000 in the same period last year. Let me add a little color at the divisional level. Wholesale commercial, which focuses on Main Street small business, grew 8% to $69,100,000 compared to $63,900,000 in the same period last year and includes average rate increases of about 4%. In aggregate, Bacon Express and Collectibles grew 20% to $16,600,000 in the 2025 compared to $13,700,000 in the same period last year. Let me break down those two products.

Bacon Express grew 27% to $12,400,000 driven by organic growth from existing agents and agency appointments. Collectibles grew 4% to $4,200,000 compared to $4,000,000 last year, predominantly driven by rate. Our assumed reinsurance gross premiums, excluding non core business, grew 86% to $12,000,000 resulting from eight new treaties we added during 2024 and two new treaties added here in 2025. Specialty Products, excluding the terminated products, was $12,300,000 in the 2025 compared to $9,300,000 in the same period last year. Overall, our outlook for 2025 is very positive.

For the first six months of twenty twenty five, our underwriting income ex impact of California wildfires was $10,900,000 compared to $8,700,000 for the same period last year. Our underlying underwriting performance for the last 2025 is expected to improve compared to the same period in 2024. We continue to expect premium growth of 10%. Book reserves remain solidly above our current actuarial indications. We believe premium pricing is continuing to track with loss inflation.

Our discretionary capital, which we consider the amount of consolidated equity in excess of that, the amounts required to maintain the strongest levels with our rating agencies is $265,000,000 at 06/30/2025. And as Jay mentioned earlier, this will support the efforts to invest in the growth of our Agency and Insurance Services segment. Lastly, our investment portfolio is well positioned to invest in longer duration maturities and higher yields. Thank you. We will now take your questions.

Tina, Conference Operator: And our first audio question comes from the line of Tom Kerr with Zacks Research. Please go ahead.

Tom Kerr, Analyst, Zacks Research: Good morning, guys. Good morning. Quick question on the corporate expenses. I think you said business development fees to find new opportunities. What is that exactly?

Jay Brown, Chief Executive, Global Indemnity Group: We’re looking to expand our agency operations with additional underwriting capabilities. And so we’ve been reviewing a number of different opportunities in the market. We’ve probably looked at a half a dozen to a dozen of some of which involved spending some money to do some due diligence. We haven’t yet gotten any conclusions on those at this point in time.

Tom Kerr, Analyst, Zacks Research: Okay. Thanks. Any comment on the overall E and S market? Where do you see cycle weakness and that sort of stuff?

Jay Brown, Chief Executive, Global Indemnity Group: Yes. It’s a tricky question because it differs depending on which segment you’re looking at. Our Bacon Express segment, for example, continues to have real growth opportunities because of what’s going on in the property market around the country. But in small commercial, we’re starting to see a little bit more headwinds than probably we saw the last two years. We continue to be pleased with the level of premium we’re obtaining for the business we’re writing, but we are seeing a little bit more price competition than we probably saw for the last two years.

Tom Kerr, Analyst, Zacks Research: What’s that? What was the time frame on that? Just recently? Or Yeah. Just in the

Jay Brown, Chief Executive, Global Indemnity Group: past in the past six months. It just you’d start to see it as a wobble first with a little bit lower hit ratio than we’ve been seeing, but not significant yet. It’s still we still believe strongly that we should see 8% to 10% growth in that segment this year and perhaps the same next year.

Tom Kerr, Analyst, Zacks Research: Got it. Thanks. One quick one. Do you still have any substantial business in California across the portfolio?

Brian Reilly, Chief Financial Officer, Global Indemnity Group: Yeah. As as mentioned in our last call is that we are we have business in California. So across all of our businesses, we are currently moving some of that from an admitted product to a non admitted product.

Tom Kerr, Analyst, Zacks Research: Got it. Okay. I’ll get back in the queue. Thanks.

Tina, Conference Operator: Our next audio question comes from the line of Ross Haberman with RLH Investments. Please go ahead.

Ross Haberman, Analyst, RLH Investments: Good morning, Jay. Thanks for taking the call. Quick question going back to the the administrative expenses. Do you see further growth from the level we saw this this quarter as as as you look for other lines of business?

Jay Brown, Chief Executive, Global Indemnity Group: Yeah. It it if you you know, we’ve engaged a couple of outside contractors to help with our internal staff to review financials for different things we’re looking at. That expense would not create anything. But if we actually get to the point of closing on any transactions, you’ll probably see a a potential bump in expenses when that occurs. We we’re not we’re not Sorry.

Brian Reilly, Chief Financial Officer, Global Indemnity Group: Sorry.

Jay Brown, Chief Executive, Global Indemnity Group: No problem. We aren’t we aren’t planning on any big expenditures, but we’re doing it incrementally. And if there’s any substantial change in the current level, it probably will be accompanied by us actually closing on a transaction, and we’ll we’ll obviously discuss that at that time.

Ross Haberman, Analyst, RLH Investments: And just a follow-up to the California fire exposure. Were there any further allowances that you came across besides the initial exposure you you expensed, I guess, in March? Yeah. No. And and and do you have any exposure to the new fires that are beginning to to come up in in California today?

Jay Brown, Chief Executive, Global Indemnity Group: Two part question. On the first part, the initial reserves that were established at the end of the first quarter have maintained spot on. There was very, very little movement, less than one or 2% in terms of our final estimates. In terms of the newest fires, we haven’t yet seen any significant exposure to our company.

Ross Haberman, Analyst, RLH Investments: Thank you. I’ll get back in queue.

Jay Brown, Chief Executive, Global Indemnity Group: Thank you.

Tina, Conference Operator: Our next question comes from Andrew Vindigny. Can you provide a tangible return on equity target a few years out? What kind of loss and expense ratios would that imply?

Jay Brown, Chief Executive, Global Indemnity Group: Sure. It depends on what level you’re looking at our return on equity. If we’re looking at Belmont, which is our essentially our balance sheet company and holding company, we would expect that the returns there will get into the 12% range in the next couple of years. That’s kind of the insurance operation underwriting side. I would say when you then look at the other side and the holding company expenses, we’re probably going to continue to target at 8% to 9%.

The loss ratio that we need for that, we’re actually at the right loss ratio. What we really need to see is our expense ratio come down another two points, and that should put us pretty close to those targets.

Evan Casowitz, President, Belmont Holdings: With that, we will thank you all again for joining us. This will conclude our twenty twenty five second quarter earnings call. We look forward to speaking with you about our third quarter twenty twenty five results. Thank you.

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