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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31 2017, 2023

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ___________ to ___________

001-34809

Commission File Number

GLOBAL INDEMNITY LIMITEDGROUP, LLC

(Exact name of registrant as specified in its charter)

Cayman Islands

Delaware

98-1304287

85-2619578

(State or other jurisdiction of

of incorporation or organization)

(I.R.S. Employer

Identification No.)

27 HOSPITAL ROAD

GEORGE TOWN, GRAND CAYMAN112 S. French Street, Suite 105

KY1-9008Wilmington, DE

CAYMAN ISLANDS19801

(Address of principal executive office including zip code)

Registrant’sRegistrant's telephone number, including area code: (345) 949-0100(302) 691-6276

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Classeach class

Trading Symbol

Name of Exchangeeach exchange on Which Registeredwhich registered

Class A Ordinary shares, $0.0001 Par Value

7.75% Subordinated Notes due 2045

7.875% Subordinated Notes due 2047Common Shares

The Nasdaq Global Select MarketGBLI

The Nasdaq Global Select Market

The Nasdaq Global Select MarketNew York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:NONE

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  Yes☐    NO  No☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES  Yes☐    NO  No☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  Yes☒     NO  No☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  Yes☒     NO  No☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer ☐; Accelerated filer☒; Non-accelerated filer ☐; Smaller reporting company ☐; Emerging growth company ☐

Large accelerated filer☐;Accelerated filer☒;
Non-accelerated filer☐;Smaller reporting company☐;
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES  Yes☐    NO  No☒

The aggregate market value of the common equity held by non-affiliates of the registrant, computed by reference to the price of the registrant’s class A ordinarycommon shares as of the last business day of the registrant’s most recently completed second fiscal quarter (based on the last reported sale price on the Nasdaq Global Select MarketNew York Stock Exchange as of such date), was $334,185,769.$230,791,045. There are no class B ordinarycommon shares held by non-affiliates of the registrant.

As of February 27, 2018,March 5, 2024, the registrant had outstanding 10,046,7379,785,318 class A ordinarycommon shares and 4,133,3663,793,612 class B ordinarycommon shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement relating to the 20172024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 20172023 are incorporated by reference into Part III of this report.

TABLE OF CONTENTS

Page

PART I

Item 1.

BUSINESS

PART I

2

Item 1A.

RISK FACTORS

32

Item 1.

BUSINESS

4

Item 1A.

RISK FACTORS

21

Item 1B.

UNRESOLVED STAFF COMMENTS

49

35

Item 2.

PROPERTIES

49

Item 3.1C.

LEGAL PROCEEDINGSCYBERSECURITY

49

35

Item 2.

PROPERTIES

37

Item 3.

LEGAL PROCEEDINGS

37

Item 4.

MINE SAFETY DISCLOSURES

49
PART II

37

PART II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

50

38

Item 6.

SELECTED FINANCIAL DATA

53

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

54

40

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

87

70

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

90

72

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

165

125

Item 9A.

CONTROLS AND PROCEDURES

165

125

Item 9B.

OTHER INFORMATION

168
PART III

Item 9B.

OTHER INFORMATION

127

Item 9C.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

127

PART III

Item 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

169

128

Item 11.

EXECUTIVE COMPENSATION

169

Item 11.

EXECUTIVE COMPENSATION

128

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS

169

128

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

169

128

Item 14.

PRINCIPAL ACCOUNTINGACCOUNTANT FEES AND SERVICES

169
PART IV

128

PART IV

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

170

129

Item 16.

FORM10-K SUMMARY

174

131

PART I

Item 1.BUSINESS

3

PART I

Item 1. BUSINESS

Some of the information contained in this Item 1 or set forth elsewhere in this report, including information with respect to the Company’s Global Indemnity Group, LLC and its subsidiaries’plans and strategy, constitutes forward-looking statements that involve risks and uncertainties. Please see “Cautionary"Cautionary Note Regarding Forward-Looking Statements”Statements" at the end of Item 7 of Part II and “Risk Factors” in Item 1A of Part I for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained herein.

References to the Company refer toHistory

Global Indemnity Group, LLC (“Global Indemnity” or “GBLI”), a Delaware limited liability company formed on June 23, 2020, replaced Global Indemnity Limited, and its subsidiaries or, prior to November 7, 2016, to Global Indemnity plc and its subsidiaries.

References to the acquisition of American Reliable refer to the January 1, 2015 acquisition of American Reliable Insurance Company (“American Reliable”).

History

Global Indemnity Limited (“Global Indemnity”) is a holding company formed on February 9, 2016 under the laws ofincorporated in the Cayman Islands. On November 7, 2016, Global Indemnity Limited replaced Global Indemnity plc,Islands as an Irishexempted company with limited liability, as the ultimate parent company pursuant to a scheme of arrangement whereby all ofthe Global Indemnity plc’s A ordinary shares were cancelled and replaced with one A ordinary sharegroup of companies as a result of a redomestication transaction completed on August 28, 2020. This transaction resulted in the redomestication of the Company to the United States. Global Indemnity Limited on a one for one basis and each B ordinary share of Global Indemnity plc was cancelled and replaced with one B ordinary share of Global Indemnity Limited on a one for one basis. Global Indemnity’sGroup, LLC’s class A ordinarycommon shares are publicly traded on the NASDAQNew York Stock Exchange (“NYSE”). Global Select Market underIndemnity Group, LLC’s predecessors have been publicly traded since 2003.

Effective August 28, 2020, Global Indemnity Group, LLC became a publicly traded partnership for U.S. federal income tax purposes. Since August 28, 2020, Global Indemnity Group, LLC believes that it has met in previous taxable years, and intends to manage its affairs so that it will continue to meet in the trading symbol “GBLI.” Please see Note 13 ofcurrent and subsequent taxable years, the notesqualifying income exception to consolidated financial statements in Item 8 of Part II of this reportmaintain partnership status for additional information on the cancellationU.S. federal income tax purposes. As a partnership, Global Indemnity Group, LLC is generally not subject to federal income tax and most state income taxes. For U.S. federal income tax purposes, a holder of Global Indemnity plc ordinaryGroup, LLC’s class A common shares and the replacement of these shares with ordinary sharesis treated as a partner in a partnership. Shareholders are required to take into account their allocable share of Global Indemnity Limited.

Subsequent to the completionGroup, LLC’s items of income, gains, losses, deductions, and other items of the redomestication, several of the Company’s subsidiaries, including Global Indemnity plc, were placed into liquidation, liquidated, or merged out of existence. In addition, substantially all of the assets of these companies, including intellectual property, were transferred to Global Indemnity Limited.

On September 30, 2016, one of the Company’s indirect wholly owned subsidiaries, Diamond State Insurance Company, sold all the outstanding shares of capital stock of one of its wholly owned subsidiaries, United National Specialty Insurance Company, to an unrelated party. Diamond State Insurance Company received aone-time payment of $18.7 million and recognized a pretax gain of $6.9 million which is reflected in other income in 2016. This transaction did not have an impact on the Company’s ongoing business operations. Subsequent to the sale, any business previously written by United National Specialty Insurance Company is being written by other companies within the Company’s U.S. Insurance Operations.

On January 1, 2015,partnership for Global Indemnity Group, Inc.,LLC’s taxable year ending within or with the shareholders’ taxable year, regardless of whether any cash or other distributions are made to shareholders. Global Indemnity Group, LLC will furnish to each shareholder, as soon as reasonably practical after the close of each calendar year, specific tax information, including a subsidiarySchedule K-1, which describes the shareholders’ share of Global Indemnity Group, LLC’s income, gains, losses, and deductions for Global Indemnity Group, LLC’s preceding taxable year. Income earned by the Company, acquired 100%subsidiaries of the voting equity interest of American Reliable Insurance Company from American Bankers InsuranceGlobal Indemnity Group, Inc., a subsidiary of Assurant,Inc., by paying $113.7 million in cash and assuming $283.9 million of customary insurance related liabilities, obligations, and mandates. Per the American Reliable Stock Purchase Agreement (“American Reliable SPA”), the ultimate purchase priceLLC is subject to (i) accounting procedures that were performedcorporate tax in 2015 to determine GAAP book valuethe United States and, (ii) indemnification on future development on recorded loss and loss adjustment expenses as of December 31, 2014. In accordance with the American Reliable SPA, on the third calendar year following the calendar year of the closing, if loss and loss adjustment expenses for accident years 2014 and prior are lower than recorded unpaid loss and loss adjustment expenses as of December 31, 2014, Global Indemnity Group, Inc. will pay the variance to American Bankers Group, Inc. Conversely, if loss and loss adjustment expenses for accident years 2014 and prior exceed recorded unpaid loss

and loss adjustment expenses as of December 31, 2014, American Bankers Group, Inc. will pay the variancetherefore, is not taxable to Global Indemnity Group, Inc. In accordance with a dispute resolution agreement betweenLLC’s shareholders until the income is distributed by the subsidiaries to Global Indemnity Group, Inc.LLC.

The Company operates its business through two segments, Penn-America and American Bankers Group, Inc., any variance paid relatedNon-Core Operations. The Penn-America segment is mainly comprised of what was the Commercial Specialty segment. Penn-America includes all core products which include Wholesale Commercial, Programs, Assumed Reinsurance, and the InsurTech products. InsurTech products are Collectibles, VacantExpress. and smaller products which are distributed via the internet. Penn-America’s gross premiums written in 2023 was $369.7 million. The other segment is Non-Core Operations. It includes business that has been de-emphasized or is no longer written.

During the fourth quarter of 2023, the Company restructured its insurance operations to strengthen its market presence and enhance GBLI's focus on core products and made the loss indemnification will be subjectdecision to interest of 5% compounded semi-annually. The Company’s current estimatemanage the business through two segments, Penn-America and Non-Core Operations. Management believes these segments allow users of the purchase price, based on available financial information, is approximately $99.8 million. Final settlement of the purchase price occurred in March, 2018. Please see Note 24 of the notes to consolidatedCompany’s financial statements in Item 8 of Part II of this reportto better understand the Company's performance, better assess prospects for additional information onfuture net cash flows, and make more informed judgments about the final settlement of the purchase price.Company as a whole. Segment results for prior years have been revised to reflect these changes.

Please see Note

4 of the notes to consolidated financial statements in Item 8 of Part II of this report for additional information on the acquisition of American Reliable.

General

General

Global IndemnityGBLI provides its insurance products across a distribution network that includes binding authority, program, brokerage,wholesale general agents, retail agents, and reinsurance.direct-to-consumer. The Company manages the distribution of these productsits core product offerings through three business segments:Penn-America (formerly known as Commercial LinesSpecialty). Penn-America offers specialty property and casualty products designed for GBLI's Wholesale Commercial, Programs, InsurTech, and Assumed Reinsurance product offerings. Penn-America’s products are offered primarily in the excess and surplus lines such as Small Business Binding Authority, Property Brokerage, Vacant Express,marketplace. The Company also has a Non-Core Operations segment that contains lines of business that have been de-emphasized or are no longer being written.

The Company's management team is experienced in the insurance industry and Programs; Personal Lines offers specialty personalthe excess and surplus lines marketplace and agricultural coverage;has long-standing relationships in the industry. The Company’s organizational structure allows it to be highly responsive and Reinsurance Operations provides reinsurance solutions through brokers and primary writers including insurance and reinsurance companies. The Commercial Lines and Personal Lines segments compriseflexible in interactions with its agents.

Collectively, the Company’s insurance subsidiaries are licensed in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

The Penn-America segment comprises the Company’s Insurance Operations (“Insurance Operations”).

Business Segments

See Note 2022 of the notes to consolidated financial statements in Item 8 of Part II of this report for gross and net written premiums, written, income, and total assets of each operating segment for the years ended December 31, 2017, 20162023, 2022 and 2015.2021. For a discussion of the variances between years, see “Results of Operations” in Item 7 of Part II of this report.

During the 1st quarter of 2017, the Companyre-evaluated its Commercial Lines and Personal Lines segments and determined that certain portions of business will be managed, operated and reported by including them in the other segment. As a result, the composition of the Company’s reportable segments changed slightly. Premium that is written through a wholly owned agency that mainly sells to individuals, which was previously included as part of the Commercial Lines

PENN-AMERICA

The Penn-America segment is now included within the Personal Lines segment. In addition, one of the small commercial programs written by American Reliable Insurance Company, which was previously included within the Personal Lines segment, is now aggregated within the Commercial Lines segment. Accordingly, the segment results for 2016 and 2015 have been revised to reflect these changes.

Personal Lines

The Company’s Personal Lines distributedistributes specialty property and casualty insurance products and operate primarily in the excess and surplus lines marketplace. Penn-America targets Main Street Specialty Excess & Surplus Lines focusing on small businesses such as Artisan Contractors, Habitational (Landlord), General Services, Vacant Properties, Mercantile & Restaurants, Bars & Taverns, Commercial Buildings, and Collectibles. Penn-America is one of the larger providers of insurance to Main Street businesses and built this position by focusing on this market for over 40 years. Penn-America underwrites commercial coverages for 900 classes of casualty business and 200 classes of property business. Companies within the Insurance Operations are eligible to write on a surplus lines (non-admitted) basis and others are licensed to write on an admitted markets. basis in all 50 U.S. States, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. This provides the Company with flexibility in designing products and in determining rates to meet emerging risks and discontinuities in the marketplace.

Penn-America’s insurance products target specific, defined groups of insureds with customized coverage to meet their needs. The primary business divisions within the Penn-America segment include:

•
Wholesale Commercial distributes property and general liability products for small commercial businesses through a select network of wholesale general agents with specific binding authority using company administered systems to rate, quote and issue policies.

•
Programs distributes property and general liability niche products through program administrators with specific binding authority. Program administrators generally use their own proprietary systems, for which the Company’s rates and underwriting criteria are integrated.

•
InsurTech offers property and general liability products distributed using company administered systems, and include Collectibles,digital direct-to-consumer insurance coverage for owners of collections, and VacantExpress, insurance coverage for owners of properties under construction, under renovation, vacant, or rented, distributed through wholesale general agents and retail agents.

•
Assumed Reinsurance is composed of individual treaties with small-to-medium sized financially sound insurers in niche product lines that are contracted through reinsurance brokers/intermediaries. These treaties are focused on the US property and casualty market and will typically involve risk sharing by either the carrier or the producer of the business. Assumed reinsurance treaties are acquired through brokers.

5

The following table sets forth the gross written premiums for each of the primary business divisions within Penn-America:

 

 

For the Years Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

(Dollars in thousands)

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

Wholesale Commercial

 

$

234,941

 

 

 

63.6

%

 

$

219,688

 

 

 

56.6

%

 

$

194,196

 

 

 

55.5

%

Programs

 

 

72,535

 

 

 

19.5

 

 

 

121,838

 

 

 

31.4

 

 

 

115,035

 

 

 

32.9

 

InsurTech

 

 

48,309

 

 

 

13.1

 

 

 

40,977

 

 

 

10.6

 

 

 

37,881

 

 

 

10.8

 

Assumed Reinsurance

 

 

13,875

 

 

 

3.8

 

 

 

5,464

 

 

 

1.4

 

 

 

2,850

 

 

 

0.8

 

Total

 

$

369,660

 

 

 

100.0

%

 

$

387,967

 

 

 

100.0

%

 

$

349,962

 

 

 

100.0

%

Excess and Surplus Lines Marketplace

Penn-America operates in the excess and surplus lines marketplace. The excess and surplus lines market provides coverage for businesses that often do not fit the underwriting criteria of an insurance company operating in the standard markets due to their relatively unpredictable loss patterns and unique niches of exposure requiring rate and policy form flexibility. Without the excess and surplus lines market, certain businesses would have to self-insure their exposures, or seek coverage outside the U.S. market.

Competition in the excess and surplus lines market tends to focus less on price and more on availability, service, and other considerations. While excess and surplus lines market exposures may have higher perceived insurance risk than their standard market counterparts, excess and surplus lines market underwriters historically have been able to generate underwriting profitability superior to standard market underwriters.

In the standard property and casualty insurance market, insurance rates and forms are highly regulated; products and coverage are largely uniform and have relatively predictable exposures. In the standard market, policies must be written by insurance companies that are admitted to transact business in the state in which the policy is issued. As a result, in the standard property and casualty insurance market, insurance companies tend to compete for customers primarily on the basis of price, coverage, value-added service, and financial strength.

The Company’s Personal Lines writes specialtyCompany offers several specialized products such as agriculture, mobile homes, manufactured homes, homeowners, collectibles, and watersports via American Reliable. These productsthat are distributed through retail agents, wholesale general agents, and brokers.sold in the admitted market. The insurance products required by these insureds are either underwritten via specific binding authority or by internal personnel.

See “Underwriting” below for additional discussion on how the Company’s insurance products are underwritten.

In 2017 and 2016, gross premiums written for the Personal Lines were $249.8 million and $302.9 million, respectively, and includes business written by American Reliable that is ceded to insurance companies owned by Assurant under a 100% quota share reinsurance agreement in the amount of ($1.3) million and $35.3 million, respectively.

Commercial Lines

The Company’s Commercial Lines distribute property and casualty insurance products and operate predominantly in the excess and surplus lines marketplace. The excess and surplus lines market differs significantlynot otherwise available from the standard property and casualty insurance market.

The excess and surplus lines market provides coverage for businesses that often do not fit the underwriting criteria of an insurance company operating in the standard markets due to their relatively greater unpredictable loss patterns and unique niches of exposure requiring rate and policy form flexibility. Without the excess and surplus lines market, certain businesses would have to self-insure their exposures, or seek coverage outside the U.S. market.

Competition in the excess and surplus lines market tends to focus less on price and more on availability, service, and other considerations. While excess and surplus lines market exposures may have higher perceived insurance risk than their standard market counterparts, excess and surplus lines market underwriters historically have been able to generate underwriting profitability superior to standard market underwriters.

A portion of the Company’s Commercial Lines is written on a specialty admitted basis. When writing on a specialty admitted basis, the Company’s focus is on writing insurance for insureds that engage in similar but often highly specialized types of activities. The specialty admitted market isinsurers. These policies are subject to greater state regulation than the surplus lines market, particularly with regardregards to rate and form filing requirements and the ability to enter and exit lines of business. Insureds purchasing coverage from specialty admitted insurance companies do so because the insurance product is not otherwise available from standard market insurers. Yet, for regulatory or marketing reasons, these insureds require productsVacantExpress represents a large majority of policies that are written byPenn-America writes in this manner.

In 2023, excluding Assumed Reinsurance, Penn-America wrote 89% of their business on a non-admitted basis and 11% on an admitted insurance company.basis.

The Commercial Lines’ insurance products target specific, defined groups of insureds with customized coverage to meet their needs. To manage operations, the Commercial Lines segment differentiates its products by product classification. These product classifications are as follows:

Penn-America Group distributes property and general liability products for small commercial businesses through a select network of wholesale general agents with specific binding authority;

United National Group distributes property, general liability, and professional lines products through program administrators with specific binding authority; and

Diamond State Group distributes property, casualty, and professional lines products through wholesale brokers that are underwritten by the Company’s personnel and selected brokers with specific binding authority.

Vacant Express primarily distributes products for dwellings which are currently vacant, undergoing renovations, or are under construction through aggregators, brokers, and retail agents.

These product classifications comprise the Commercial Lines business segment and are not considered individual business segments because each product has similar economic characteristics, distribution, and coverage.

The Company’s Commercial Lines provide property, casualty, and professional liability products utilizing customized guidelines, rates, and forms tailored to the Company’s risk and underwriting philosophy. See “Underwriting” below for a discussion on how the Company’s insurance products are underwritten.

In 2017, gross premiums written for the Commercial Lines were $212.7 million compared to $203.1 million for 2016. For 2017, surplus lines business accounts for approximately 83.7% of the business written while specialty admitted business accounts for the remaining 16.3%.

Reinsurance Operations

Global Indemnity Reinsurance Company, Ltd. (“Global Indemnity Reinsurance”), a direct subsidiary of the Company, is a Bermuda based treaty reinsurer of specialty property and casualty insurance and reinsurance companies. The Company’s Reinsurance Operations segment provides reinsurance solutions through brokers and primary writers including insurance and reinsurance companies, and consists solely of the operations of Global Indemnity Reinsurance.

The reinsurance markets face many of the same issues confronted in the primary insurance markets including excess capital capacity, low investment returns and increased pressure on generating acceptable return on investment.

The increased availability of capacity in the market has continued to put pressure on pricing levels and new opportunities. Global Indemnity Reinsurance is focused on using its capital capacity to write catastrophe-oriented placements and other niche or specialty-focused excess of loss contracts meeting the Company’s risk tolerance and return thresholds.

In 2017, gross premiums written from third parties were $53.9 million compared to $59.8 million for 2016.

Products and Product Development

The Company’s U.S. Insurance Operations distribute property and casualty insurance products. Its Personal Lines operate primarily in the admitted marketplace; whereas, its Commercial Lines operate predominantly in the excess and surplus lines marketplace. To manage its operations, the Company seeks to differentiate its products by product classification. See “Personal Lines” and “Commercial Lines” above for a description of these product classifications. The U.S. Insurance Operations are licensed to write on a surplus lines(non-admitted) basis and/or an admitted basis in all 50 U.S. States, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, which provides the Company with flexibility in designing products and programs, and in determining rates to meet emerging risks and discontinuities in the marketplace.

The Company’s Reinsurance Operations offer third party treaty reinsurance for specialty property and casualty insurance and reinsurance companies as well as professional liability products to companies. The Company’s Reinsurance Operations also provide reinsurance to its Insurance Operations in the form of quota share arrangements. As a result of the enactment of the Tax Cuts and Jobs Act (“TCJA”), effective January 1, 2018, premiums being ceded under the quota share arrangement may potentially be subject to a 10% base erosion minimum tax (“BEAT”). As a result, Global Indemnity Reinsurance and the Company’s U.S. insurance companies have agreed to terminate the quota share arrangement effective January 1, 2018. Regulatory approval is still pending.

Geographic Concentration

The following table sets forth the geographic distribution of gross premiums written for the periods indicated:

   For the Years Ended December 31, 
(Dollars in thousands)  2017  2016  2015 
   Amount   Percent  Amount   Percent  Amount   Percent 

California

  $58,669    11.4%  $62,010    11.0%  $56,142    9.5% 

Texas

   44,420    8.6   48,183    8.5   52,913    9.0 

Florida

   36,922    7.1   36,683    6.5   37,725    6.5 

Louisiana

   25,121    4.9   28,437    5.0   28,274    4.8 

New York

   24,317    4.7   26,040    4.6   28,329    4.8 

Arizona

   20,593    4.0   19,883    3.5   21,199    3.6 

North Carolina

   18,476    3.6   21,613    3.8   26,245    4.4 

Massachusetts

   14,909    2.9   14,352    2.5   15,352    2.6 

Georgia

   12,669    2.5   13,605    2.4   14,364    2.4 

New Jersey

   12,541    2.4   14,797    2.6   16,602    2.8 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Subtotal

   268,637    52.1   285,603    50.4   297,145    50.4 

All other states

   193,810    37.5   220,405    39.0   243,355    41.2 

Reinsurance Operations

   53,887    10.4   59,837    10.6   49,733    8.4 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $516,334    100.0%  $565,845    100.0%  $590,233    100.0% 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Marketing and Distribution

The Company providesoffers its insurance products across a fullwide distribution network — binding authority, program, brokerage, direct,that includes wholesale general agents, retail agents, and reinsurance. For its binding authority and program product classifications, the Company distributes its insurance products primarily through a group ofdirect-to-consumer. The Company’s primary distribution strategy is to maintain longstanding strong relationships with high-quality wholesale general agents and program administrators that have specific quotingretail agents. Penn-America’s average tenure with its wholesale agents is 15 years. The Company has an extensive process of selecting and binding authority. For its brokerageappointing agents qualified to distribute excess and surplus lines business based on their expertise, experience and reputation. Prior to appointing a new wholesale agent, the Company distributes its insurance products through wholesale insurance brokers who in turn sell the Company’s insurance products to insureds through retail insurance brokers. For its reinsurance business, theconducts financial and product expertise due diligence.

The Company distributes its products through brokers and on a direct basis.

The Company’s Commercial Lines distributes its insurance products primarily through a group of approximately 120grants wholesale general agents “trial period access” to its proprietary systems and program administrators. Ofunderwriting tools to “test quote” policies. The Company evaluates the ability of the agent to execute procedures properly before giving full authority to produce business. Contracts are executed for each agent reflecting key terms such as direct commissions and profit commissions. Agents are eligible for profit commissions for superior underwriting results.

For Wholesale Commercial Lines’non-affiliated professionaland Programs, the appointed agents’ performance is routinely monitored by Penn-America's internal underwriting staff. Production, loss results, findings from policy reviews, etc. are shared as part of Penn-America's agency management practices. Additionally, in-person visitations are conducted as needed by their assigned underwriter and/or manager with several additional visits conducted virtually to foster relationships. Agents are visited at various industry events.

6

Penn-America products, excluding assumed reinsurance, are distributed through approximately 360 wholesale general agents, 2,400 retail agents, and program administrators, the top five20,000 direct-to-consumer policies. One agent provided 10.1% of Penn-America’s gross written premiums. No other agent accounted for 32.1%more than 10% of gross written premiums within the Commercial Lines’ gross premiums writtenPenn-America segment for the year ended December 31, 2017. One agency represented 10.8%2023.

Penn-America’s assumed reinsurance treaties were acquired through 5 brokers. None of the Commercial Lines’ gross premiums written.

The Company’s Personal Lines distributes specialty personal and agricultural insurance products through a group of approximately 275 agents, primarily comprised of wholesale general agents. It also distributes its specialty personal insurance products on a retail basis in New Mexico and Arizona. Of the Personal Lines’non-affiliated professional wholesale general agents and retail agents, the top fivethese brokers accounted for 21.9%10% or more of the Personal Lines’Penn-America’s gross premiums written for the year ended December 31, 2017. No one agency represented more than 10% of the Personal Lines’ gross premiums written.

There is no agency which accounts for more than 10% of the Company’s consolidated revenues for the year ended December 31, 2017.

Global Indemnity Reinsurance assumed premiums on four treaties from two cedants which accounted for 90% of the Reinsurance Operations’ 2017 gross premiums written. There is no treaty that accounted forpremium or 10% or more of the Company’s consolidated revenues for the year ended December 31, 2017.

2023.

The Company’s primary distribution strategy isTechnology Platform

Penn-America provides its agents with rate, quote and policy issuance systems to seektransact business. These systems allow the Company to maintain strong relationships withand easily change rates, policy terms & conditions, and underwriting guidelines for its products. Penn-America's agents can typically transact a limited numberpiece of high-quality wholesale professional general agents and wholesale insurance brokers. business in 20 minutes or less.

The Company carefully selects distribution sources based on their expertise, experience and reputation. The Company believes that its distribution strategy enables it to effectively access numerous markets through the marketing,technology platform captures key underwriting and administrative supportrating elements. This enables the Company to perform profitability and predictive risk analytics. Proprietary automated reports, which monitor key business performance criteria, were developed by Penn-America’s underwriting team. They measure rate, retention, new business growth, and overall profitability. Analytics are performed over a multitude of dimensions such as geography, agent, class of business, policy limits, and coverages. Proprietary automated reports are also developed to monitor key attributes of risk exposures.

Pricing

Actuaries at Penn-America customize pricing for each product, contributing expertise in factors such as historical loss data, changes in rate levels over time, outputs from property catastrophe modeling, and individual risk and coverage attributes. Additionally, they draw valuable insights from industry data to refine pricing strategy. The company typically references actuarial loss costs provided by the Company’s professional general agenciesInsurance Services Office as a baseline for pricing across most products. For certain products, proprietary rating methods, including the use of machine learning, advanced statistical analyses, competitor comparison, and wholesale insurance brokers. The Company believes these wholesale general agentsrefined analytical techniques for risk segmentation and wholesale insurance brokers have local market knowledge and expertise that enables them to accesspricing, may be employed when deemed suitable. Penn-America prioritizes writing business in these markets more effectively.with the goal of achieving a satisfactory risk-adjusted rate of return.

Underwriting

For Commercial Lines, the Company’sUnderwriting

Penn-America’s insurance products are primarily underwritten via specific binding authority in which the Company grants delegated underwriting authority to its wholesale general agents and program administrators and via brokerage in which the Company’s internal personnel underwrites business submitted by wholesale insurance brokers.

For Personal Lines, the Company’s insurance products are distributed through retail agents, wholesale general agents, and brokers. The insurance products are either underwritten via specific binding authority or by internal personnel. Some of the Company’s specialized property business is submitted by retail agents or directly from insureds and is also underwritten by internal personnel.

Specific Binding Authority — Several of the Company’s wholesale general agents, retail agents, and program administrators for both Commercial Lines and Personal Lines have specific quoting and binding authority with respect to the lines they write and some have limited quoting and binding authority with respect to multiple products.

agents. The Company’s wholesale general agents, program administrators and retail agents and program administrators will either utilize company administered policy systemscontract to underwrite submissions received in accordance with the Company’s underwriting guidelines embedded within the system orguidelines.

Approximately 90% of Penn-America’s policies are fully automated and are processed by the agents will use their own proprietary systems. Whenutilizing the Company’s technology platform to rate, quote and issue policies. The Company’s underwriters have defined levels of authority that vary based on experience and performance. Agents have no authority to change forms or underwriting rules and have very limited discretionary pricing authority. The Company and its agents use their own proprietary systems,perform additional loss control activities through inspection of insured properties. Premiums audits are performed on the Company provides its wholesale general agents, retail agents,Company’s casualty business rated on revenue and program administrators with apayroll exposure.

A comprehensive, regularly updated underwriting manual that specifically outlines risk eligibility which is developed based on the type of insured, nature of exposure and overall expected profitability.profitability is used for underwriting. This manual also outlines (a) premium pricing,rates, (b) underwriting guidelines, including but not limited to policy forms, terms and conditions, and (c) policy issuance instructions.

The Company’s wholesale general agents, retail agents, and program administrators are appointed to underwrite submissions received in accordance with

Training on the Company’s underwriting manual. guidelines is done via in person agency visits, marketing calls, agency conferences, or webinars.

Risks that are not within the specific binding authority must be submitted to the Company’sPenn-America’s underwriting personnel directly for underwriting review and approval or denial of the application of the insured. The Company’s wholesale general agents provide all policy issuance services in accordance with the Company’s underwriting manuals.denial.

7

Agricultural partners are not provided with underwriting manuals. Rather, they are provided with letters of authority; whereby, policies and endorsement issuance rights are extended.

The Company regularly monitors the underwriting quality of its wholesale general agents and retail agents and program administrators through a disciplined system of controls, which includes one or more of the following:

•
automated system criteria edits and exception reports;

individual•
targeted policy reviews to measure adherence to the Company’s underwriting manual or letter of authority including: risk selection, underwriting compliance, policy issuance and pricing;

•
periodicon-site and virtual comprehensive audits to evaluate processes, controls, profitability and adherence to all aspects of the Company’s underwriting manual or letter of authority including: risk selection, underwriting compliance, policy issuance and pricing;

•
internal quarterly actuarial analysis of loss ratios produced by business underwritten by the Company’s wholesale general agents and retail agents,agents; and program administrators; and

•
internal quarterly analysis of financial results, including premium growth and overall profitability of business produced by the Company’s wholesale general agents and retail agents, and program administrators.agents.

The Company

Penn-America provides incentives to certain of its wholesale general agents and program administrators to produce profitable business through contingent profit commission structurescommissions that are tied directly to producing profitable business.

Geographic Concentration

The following table sets forth the achievementgeographic distribution of profitability targets.Penn-America’s gross written premiums for the periods indicated:

Brokerage—

 

 

For the Years Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

(Dollars in thousands)

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

California

 

$

56,361

 

 

 

15.2

%

 

$

65,048

 

 

 

16.7

%

 

$

59,478

 

 

 

16.9

%

Florida

 

 

46,859

 

 

 

12.7

 

 

 

49,902

 

 

 

12.9

 

 

 

39,752

 

 

 

11.4

 

New York

 

 

38,812

 

 

 

10.5

 

 

 

45,409

 

 

 

11.7

 

 

 

39,036

 

 

 

11.2

 

Texas

 

 

34,413

 

 

 

9.3

 

 

 

36,448

 

 

 

9.4

 

 

 

35,068

 

 

 

10.0

 

Massachusetts

 

 

17,940

 

 

 

4.9

 

 

 

19,283

 

 

 

5.0

 

 

 

16,022

 

 

 

4.6

 

Louisiana

 

 

13,188

 

 

 

3.6

 

 

 

11,811

 

 

 

3.0

 

 

 

11,022

 

 

 

3.1

 

North Carolina

 

 

12,338

 

 

 

3.3

 

 

 

13,891

 

 

 

3.6

 

 

 

13,978

 

 

 

4.0

 

Pennsylvania

 

 

11,413

 

 

 

3.1

 

 

 

12,289

 

 

 

3.2

 

 

 

10,404

 

 

 

3.0

 

Illinois

 

 

11,386

 

 

 

3.1

 

 

 

11,042

 

 

 

2.8

 

 

 

9,628

 

 

 

2.8

 

New Jersey

 

 

11,189

 

 

 

3.0

 

 

 

11,935

 

 

 

3.1

 

 

 

10,394

 

 

 

3.0

 

Subtotal

 

 

253,899

 

 

 

68.7

 

 

 

277,058

 

 

 

71.4

 

 

 

244,782

 

 

 

70.0

 

All other states

 

 

101,886

 

 

 

27.5

 

 

 

105,445

 

 

 

27.2

 

 

 

102,330

 

 

 

29.2

 

Assumed Reinsurance

 

 

13,875

 

 

 

3.8

 

 

 

5,464

 

 

 

1.4

 

 

 

2,850

 

 

 

0.8

 

Total

 

$

369,660

 

 

 

100.0

%

 

$

387,967

 

 

 

100.0

%

 

$

349,962

 

 

 

100.0

%

NON-CORE OPERATIONS

The wholesale insurance brokersCompany’s Non-Core Operations segment represents lines of business that have been de-emphasized or are within the Company’s Commercial Lines andno longer being written.

The two key activities of Non-Core Operations are subjectmanaging transition service agreements related to the same guidelines and monitoring as discussed above. The majoritysales of the Company’s wholesale insurance brokers do not have specific binding authority; therefore, these risksrenewal rights and handling claims activity and loss reserves on de-emphasized and terminated business.

At the end of 2022, the Company ceased writing new business and non-renewed existing policies for its four brokerage divisions: Professional Liability, Excess Casualty, Environmental, and Middle Market Property. On August 8, 2022, the Company sold the renewal rights related to its Farm, Ranch & Stable business for policies written on or after August 8, 2022 to Everett Cash Mutual Insurance Company. On October 26, 2021, the Company sold the renewal rights related to its manufactured and dwelling homes business. In 2021, the Company decided to cease writing certain Property Brokerage business which was part of the Commercial Specialty segment (now known as Penn-America), as well as non-renewing several treaties within the prior Reinsurance Operations segment which are submittednow included in Non-Core Operations.

8

See Note 2 of the notes to the Company’s underwriting personnelconsolidated financial statements in Item 8 of Part II of this report for review and processing. There is only one wholesale insurance broker with specific binding authority.

The Company provides its underwriters with a comprehensive, regularly updated underwriting manual that outlines risk eligibility which is developed basedadditional information on the type of insured, nature of exposure and overall expected profitability. This manual also outlines (a) premium pricing, (b) underwriting guidelines, including but not limited to policy forms, terms and conditions.

The Company’s underwriting personnel review submissions, issue all quotes and perform all policy issuance functions. The Company regularly monitors the underwriting quality of its underwriters through a disciplined system of controls, which includes the following:

individual policy reviews to measure the Company’s underwriters’ adherence to the underwriting manual including: risk selection, underwriting compliance, policy issuance and pricing;

periodic underwriting review to evaluate adherence to all aspectssales of the Company’s underwriting manual including: risk selection, underwriting compliance, policy issuancerenewal rights.

The manufactured home, dwelling, motorcycle, watercraft, certain homeowners products, and pricing;

farm, ranch & equine business within Non-Core Operations operated primarily in the standard or admitted markets and were distributed through retail agents, wholesale general agents, and brokers. These insurance products were either underwritten via limited binding authority, specific binding authority, or by internal quarterly actuarial analysis of loss ratios produced by businesspersonnel. The Property Brokerage product within Non-Core Operations operated predominantly in the excess and surplus lines or non-admitted markets and were distributed through wholesale brokers and underwritten by the Company’s underwriters;personnel and

internal quarterly analysis of financial results, including premium growth selected brokers with limited binding authority. The retrocessional reinsurance treaties within Non-Core Operations were distributed through brokers and overall profitability ofon a direct basis.

Information technology development initiatives related to business produced by the Company’s underwriters.

lines within Non-Core Operations have been discontinued.

Reinsurance—The Company’s Global Indemnity Reinsurance subsidiary primarily offers retrocessional coverage to Bermuda based reinsurance companies. The business assumed is primarily quota share treaties on property catastrophe, marine business

Additional capital has and mortgage insurance. The Company also writes a small amount of professional lines excess liability business. Prior to entering into any agreement, the Company evaluates a number of factors for each cedent including, but not limited to, reputation and financial condition, underwriting and claims practices and historical claims experience. The Company also models proposed treaties for both the catastrophe exposure and the marginal impact on the Company’s existing catastrophe portfolio.

Contingent Commissions

Certain professional general agencies of the U.S. Insurance Operations are paid special incentives, referred to as contingent commissions, when results of business produced by these agencies are more favorable than predetermined thresholds. Similarly, in some circumstances, companies that cede business to the Reinsurance Operations are paid a profit commission based on the profitability of the ceded portfolio. These commissions are charged to other underwriting expenses when incurred.

Pricing

Actuaries establish pricing tailored to each specific product the Company underwrites, taking into account historical loss experience, historical rate level changes, property catastrophe modeling output, and individual risk and coverage characteristics. The Company generally uses the actuarial loss costs promulgated by the Insurance Services Officewill become available as a benchmarkresult of de-emphasizing and exiting non-core business. This additional capital will support future growth in the developmentCompany's Penn-America segment and provide capital for business initiatives including share repurchases.

Geographic Concentration

The following table sets forth the geographic distribution of pricingNon-Core Operations’ gross written premiums for most products. Specific products will utilize proprietary rating when deemed appropriate. The Company will seek to only write business if it believes it can achieve an adequate risk adjusted rate of return.the periods indicated:

 

 

For the Years Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

(Dollars in thousands)

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

Arizona

 

$

2,264

 

 

 

4.9

%

 

$

20,134

 

 

 

5.9

%

 

$

20,141

 

 

 

6.1

%

Texas

 

 

460

 

 

 

1.0

 

 

 

13,530

 

 

 

4.0

 

 

 

17,773

 

 

 

5.4

 

Alabama

 

 

426

 

 

 

0.9

 

 

 

3,867

 

 

 

1.1

 

 

 

4,872

 

 

 

1.5

 

New York

 

 

382

 

 

 

0.8

 

 

 

9,144

 

 

 

2.7

 

 

 

11,381

 

 

 

3.4

 

Georgia

 

 

371

 

 

 

0.8

 

 

 

5,476

 

 

 

1.6

 

 

 

8,114

 

 

 

2.4

 

California

 

 

288

 

 

 

0.6

 

 

 

6,715

 

 

 

2.0

 

 

 

6,548

 

 

 

2.0

 

Colorado

 

 

89

 

 

 

0.2

 

 

 

3,594

 

 

 

1.1

 

 

 

4,476

 

 

 

1.3

 

Pennsylvania

 

 

73

 

 

 

0.2

 

 

 

2,768

 

 

 

0.8

 

 

 

3,931

 

 

 

1.2

 

Nevada

 

 

68

 

 

 

0.1

 

 

 

2,924

 

 

 

0.9

 

 

 

3,688

 

 

 

1.1

 

Massachusetts

 

 

66

 

 

 

0.1

 

 

 

3,537

 

 

 

1.0

 

 

 

3,648

 

 

 

1.1

 

Subtotal

 

 

4,487

 

 

 

9.6

 

 

 

71,689

 

 

 

21.1

 

 

 

84,572

 

 

 

25.5

 

All other states

 

 

242

 

 

 

0.5

 

 

 

109,236

 

 

 

32.2

 

 

 

143,898

 

 

 

43.3

 

Assumed Reinsurance

 

 

42,008

 

 

 

89.9

 

 

 

158,711

 

 

 

46.7

 

 

 

103,690

 

 

 

31.2

 

Total

 

$

46,737

 

 

 

100.0

%

 

$

339,636

 

 

 

100.0

%

 

$

332,160

 

 

 

100.0

%

Reinsurance of Underwriting Risk

The Company’s philosophy is to purchase reinsurance from third parties to limit its liability on individual risks and to protect against property catastrophe and casualty clash losses. Reinsurance assists the Company in controlling exposure to severe losses and protecting capital resources. The type, cost and limits of reinsurance it purchases can vary from year to year based upon the Company’s desired retention levels and the availability of quality reinsurance at an acceptable price. The Company purchases reinsurance based on guidelines established by management. Some of the Company’s reinsurance contracts renew on an annual basis. Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of limits on the policies it has written, it does make the assuming reinsurer liable to the insurer to the extent of the insurance ceded. The Company’s reinsurance contracts renew throughout the year and all of its reinsurance is purchased following guidelines established by management. The Company primarily utilizes treaty reinsurance products made up of proportional and excess of loss reinsurance. Additionally, the Company may purchase facultative reinsurance protection on single risks when deemed necessary.

The Company purchases specific types and structures of reinsurance depending upon the characteristics of the lines of business and specialty products underwritten. The Company will typically seek to place proportional reinsurance for umbrella and excess products, certain specialty products, or new products in the development stage. The Company believes that this approach allows it to control net exposure in these product areas most cost effectively.

9

The Company purchases reinsurance on an excess of loss basis to cover individual risk severity. These structures are utilized to protect the Company’s primary positions on property and casualty products. The excess of loss structures allow the Company to maximize underwriting profits over time by retaining a greater portionits desired amount of the risk in these products,each product written while helping to protect against the possibility of unforeseen volatility.

The Company analyzes its reinsurance contracts to ensure that they meet the risk transfer requirements of applicable accounting guidance, which requires that the reinsurer must assume significant insurance risk under the reinsured portions of the underlying insurance contracts and that there must be a reasonably possible chance that the reinsurer may realize a significant loss from the transaction.

The Company continually evaluates its retention levels across its entire line of business and specialty product portfolio seeking to ensure that the ultimate reinsurance structures are aligned with the Company’s corporate risk tolerance levels associated with such products. Any decision to decrease the Company’s reliance upon proportional reinsurance or to increase the Company’s excess of loss retentions could increase the Company’s earnings volatility. In cases where the Company decides to increase its excess of loss retentions, such decisions will be a result of a change or progression in the Company’s risk tolerance level. The Company endeavors to purchase reinsurance from financially strong reinsurers with which it has long-standing relationships. In addition, in certain circumstances, the Company holds collateral, including letters of credit, under reinsurance agreements.

The Company’s Insurance Operations’ material reinsurance treaties are as follows:

Property CatastropheExcess of Loss—– The Company’s current property writings create exposure to catastrophic events. To protect against these exposures, the Company purchases a property catastrophe

treaty. Effective June 1, 2017,2023, the Company renewed the toppurchased two layers of its property catastrophe excess of loss treaty, which provided occurrence coverage for losses of $260$50 million in excess of $40$25 million. The treatyfirst layer provides for one full reinstatementcoverage of 100% of $25 million in excess of $25 million and can be reinstated once at no additional charge. The second layer provides coverage of $25 million in excess of $50 million and can be reinstated once at 100%no additional premium as to time and pro rata as to the amount of limit reinstated.charge. This replaced the treaty which expired on May 31, 2017 and providedthat was effective June 1, 2022, where the Company purchased three layers of occurrence coverage for losses of $280$115 million in excess of $20$10 million. The expiring treaty was made upfirst layer provided coverage of three layers: $2040% of $10 million in excess of $10 million and could be reinstated once at no additional charge. The second layer provided coverage of $30 million in excess of $20 million which the Company participated in 25%and could be reinstated once for an additional charge. The third layer provided coverage of the placement, $60$75 million in excess of $40$50 million and $200 million in excess of $100 million. The expiring treaty providedcould be reinstated once for one full reinstatement of coverage at 100%an additional premium as to time and pro rata as to amount of limit reinstated.charge.

Location-Specific Quota Share — Effective May 1, 2016, the Company entered into an agreement, which is still in effect, to cede 50% of the net underwriting results for certain Personal Lines products in certain states, subject to an occurrence limit of $50 million for property coverages and $1.5 million for casualty coverages.

Catastrophe Quota Share — Effective April 15, 2017, the Company entered into an agreement to cede 50% of its catastrophe losses which are above $3 million, subject to an occurrence limit of $40 million and an aggregate limit of $120 million.

Property Per Risk Excess of Loss — – Effective January 1, 2018,2024, the Company renewed its property per risk excess of loss treaty. ThisFor property risks excluding cannabis property risks, this treaty provides coverage in two sections: $4of 100% of $2.5 million per risk in excess of $1$2.5 million per risk for all business except the Property Brokerage unit, and $885% of $5.0 million per risk in excess of $2$5.0 million per risk for Property Brokerage business, of which the Company participated on 25% of the placement. Thisentire Company. For cannabis property risks, this treaty also provides coverage of $2070% of $2.5 million per risk in excess of $10$2.5 million per risk and $2055% of $5.0 million per risk in excess of $30$5.0 million per risk for Property Brokerage business. This replaced the property treaty which expired on December 31, 2017 and2023 which provided coverage in three sections: 80% of $450% of $7.5 million per risk in excess of $1$2.5 million per risk for all business except the Property Brokerage unitentire Company and business written by American Reliable, 100%a cannabis quota share property treaty which ceded 65.45% of $4losses from $0 to $11 million per risk in excess of $1 million per risk for American Reliable business, and 75% of $8 million per risk in excess of $2 million per risk for Property Brokerage business. The expiring treaty also provided coverage of 100% of $20 million per risk in excess of $10 million per risk and 100% of $20 million per risk in excess of $30 million per risk for Property Brokerage business.occurrence.

Casualty and Professional Liability Excess of Loss — – Effective October 1, 2016,December 31, 2023, the Company renewed itsterminated the casualty and professional liability excess of loss treaty. The casualty section provides coverage for 50% of $2 million per occurrence in excess of $1 million per occurrence for general liability and auto liability. The professional liability section provides coverage for 50% of $4 million per policy/occurrence in excess of $1 million per policy/occurrence. For both sections, allocated loss adjustment expenses are included within limits. This treatycontract was terminated effective December 31, 2017 and replaced with the Casualty Excess of Loss.

Casualty Clash Excess of Loss —on a continuous basis. Effective OctoberJanuary 1, 2016,2024, the Company renewed its casualty clash excesspurchased a new treaty to provide coverage of loss treaty which provides coverage80% of $10 million per occurrence in excess of $3$2.5 million per occurrence subject to a $20 million limit for all loss occurrences. This treaty was terminated effective December 31, 2017 and replaced with the Casualty Excess of Loss.

Casualty Excess of Loss — Effective January 1, 2018, the Company entered into a casualty excess of loss treaty which provides coverage of $10 million per occurrence in excess of $2 million per occurrence for all casualty lines of business. The treaty is subject to an aggregate limit of $20 million.

100% Ceded Quota Share to American Bankers —

Amended & Restated Reinsurance Agreement – Effective December 1, 2014, American ReliableOctober 26, 2021, the company entered into four treatiesan agreement to cede 100% of its liabilitiesunderwriting results related to certain businesses to American Bankers Insurance Company that were not included inspecialty property business.

Reinsurance Agreement – Effective August 8th, 2022, the acquisition of American Reliable. These treaties are still in effect at December 31, 2017. American Reliable recorded ceded written premiums of ($1.3) million and $35.3 million, and ceded earned premiums of $13.5 million and $43.2 million to American Bankers Insurance Company for the years ended December 31, 2017 and 2016, respectively.

100% Assumed Quota Share from American Bankers — Effective December 1, 2014, American Reliablecompany entered into two treatiesan agreement to assumecede 100% of its liabilities from various insurers owned by Assurant, Inc. for business included in the acquisition but not written directly by American Reliable. These treaties are still in effect at December 31, 2017. American Reliable recorded assumed written premiums of $28.5 million and $38.1 million, and assumed earned premiums of $33.9 million and $55.8 million from insurance companies owned by Assurant, Inc. for the years ended December 31, 2017 and 2016, respectively.underwriting results related to certain agricultural business.

To the extent that there may be an increase or decrease in catastrophe or casualty clash exposure in the future, the Company may increase or decrease its reinsurance protection for these exposures commensurately. There were no other significant changes to any of the Company’s Insurance Operations’ reinsurance treaties during 2017.2023.

10

The following table sets forth the ten reinsurers for which the Company has the largest reinsurance receivables as of December 31, 2017.2023. Also shown are the amounts of premiums ceded by the Company to these reinsurers during the year ended December 31, 2017.2023.

(Dollars in millions)  A.M.
Best
Rating		   Gross
Reinsurance
Receivables		 Percent of
Total		 Ceded
Premiums
Written		 Percent of
Total		 

 

AM
Best
Rating

 

Gross
Reinsurance
Receivables

 

 

Percent
of Total

 

 

Ceded
Premiums
Written

 

 

Percent
of Total

 

Munich Re America Corp.

   A+   $48.2  42.2%  $25.8  39.0% 

 

A+

 

$

41.2

 

 

 

46.1

%

 

$

2.1

 

 

 

12.3

%

General Reinsurance Corp.

   A++    11.4  10.0  7.5  11.3 

 

A++

 

 

9.6

 

 

 

10.7

 

 

 

0.8

 

 

 

4.7

 

Transatlantic Reinsurance

   A+    8.2  7.2  1.1  1.7 

Swiss Reinsurance America Corp.

 

A+

 

 

5.8

 

 

 

6.5

 

 

 

1.4

 

 

 

8.1

 

Factory Mutual Insurance Company

 

A+

 

 

4.4

 

 

 

4.9

 

 

 

1.3

 

 

 

7.6

 

Allianz Risk Transfer

 

A+

 

 

4.2

 

 

 

4.7

 

 

 

—

 

 

 

—

 

Westport Insurance Corporation

   A+    6.4  5.6   —     —   

 

A+

 

 

3.0

 

 

 

3.4

 

 

 

—

 

 

 

—

 

Fl Hurricane Cat Fund

   NR    3.8  3.3  0.6  0.9 

Scor Switzerland AG

   A-    2.7  2.4   —     —   

American Bankers Insurance Company

   A    2.6  2.3  (1.3)  (2.0) 

Swiss Reinsurance America Corp.

   A+    2.5  2.2  1.0  1.5 

Everest Reinsurance Company

   A+    2.5  2.2  1.3  2.0 

Hartford Fire Insurance Company

   A+    2.2  1.8   —     —   
    

 

  

 

  

 

  

 

 

Clearwater Insurance Company

 

NR

 

 

2.6

 

 

 

2.9

 

 

 

—

 

 

 

—

 

Argo Re, Ltd

 

A

 

 

2.2

 

 

 

2.5

 

 

 

—

 

 

 

—

 

Scor Reinsurance Company

 

A

 

 

1.7

 

 

 

1.9

 

 

 

0.2

 

 

 

1.2

 

Hannover Rück SE

 

A+

 

 

1.7

 

 

 

1.9

 

 

 

2.5

 

 

 

14.6

 

Subtotal

     90.5  79.2  36.0  54.4 

 

 

 

$

76.4

 

 

 

85.5

%

 

$

8.3

 

 

 

48.5

%

All other reinsurers

     23.8  20.8  30.2  45.6 

 

 

 

 

13.0

 

 

 

14.5

 

 

 

8.8

 

 

 

51.5

 

    

 

  

 

  

 

  

 

 

Total reinsurance receivables before purchase accounting adjustments and allowance for uncollectible reinsurance

     114.3  100.0%  $66.2  100.0% 
    

 

  

 

  

 

  

 

 

Purchase accounting adjustments and allowance for uncollectible reinsurance

     (9.2)    
    

 

    

Total receivables, net of purchase accounting adjustments and allowance for uncollectible reinsurance

     105.1    

Total reinsurance receivables before allowance for expected credit losses

 

 

 

$

89.4

 

 

 

100.0

%

 

$

17.1

 

 

 

100.0

%

Allowance for expected credit losses

 

 

 

 

(9.0

)

 

 

 

 

 

 

 

 

 

Total receivables, net of allowance for expected credit losses

 

 

 

 

80.4

 

 

 

 

 

 

 

 

 

 

Collateral held in trust from reinsurers

     6.6    

 

 

 

 

(8.8

)

 

 

 

 

 

 

 

 

 

    

 

    

Net receivables

    $111.7    

 

 

 

$

71.6

 

 

 

 

 

 

 

 

 

 

    

 

    

At December 31, 2017,2023, the Company carried reinsurance receivables, net of collateral held in trust, of $111.7$71.6 million. This amount is net of a purchase accounting adjustment and an allowance for uncollectible reinsurance receivables. The purchase accounting adjustment resulted from the Company’s acquisitionexpected credit losses of Wind River Investment Corporation on September 5, 2003 and is related to discounting the acquired loss reserves to their present value and applying a risk margin to the discounted reserves. This adjustment was $1.2$9.0 million at December 31, 2017. The allowance for uncollectible reinsurance receivables was $8.0 million at December 31, 2017.2023.

Historically, there have been insolvencies following a period of competitive pricing in the industry. While the Company has recorded allowances for expected credit losses for reinsurance receivables based on relevant information about past events including historical experience, currently available information,

and supportable forecasts that affect the collectability, conditions may change or additional information might be obtained that may require the Company to record additional allowances. On a quarterly basis, the Company reviews its financial exposure to the reinsurance market and assesses the adequacy of its collateral and allowance for uncollectible reinsurance.expected credit losses. The Company continues to take actions to mitigate its exposure to possible loss.

Claims Management and Administration

The Company’s approach to claims management is designed to investigate reported incidents at the earliest juncture, to select, manage, and supervise all legal and adjustment aspects of claims, including settlement, for the mutual benefit of the Company, its professional general agents, wholesale brokers, reinsurers and insureds. The Company’s professional general agents and wholesale brokers have no authority to settle claims or otherwise exercise control over the claims process, with the exception of one statutory managing general agent and one general agent.process. The Insurance Operations’ claims management staff supervises or processes all claims. The Company’s Insurance OperationsCompany has a formal claims review process, and all claims greater than $200,000 for Personal Lines and $250,000 for Commercial Lines, gross of reinsurance, are reviewed by senior claims management and certain senior executives. Large loss trends and analysis are reviewed by a Large Loss committee.

To handle claims, the Company’s Insurance OperationsCompany utilizes its ownin-house claims department as well as third-party claims administrators (“TPAs”) and assuming reinsurers, to whom it delegates limited claims handling authority. The Insurance Operations’ experiencedin-house staff of claims management professionals are assigned to one of fivefour dedicated claim units: casualty, property, subrogation, and automobileconstruction defect. In-house claims latent exposuremanagement professionals are responsible for coverage confirmation, investigation, customer service, claims propertyadjustment, and disposition and use a network of Company-approved independent adjusters and attorneys to assist in the adjustment process.

Approximately 92% of claims TPA oversight, and a wholly owned subsidiary that administers construction defect claims. The dedicated claims units meet regularly to communicate current developments within their assigned areas of specialty.

As of December 31, 2017, the Company had $155.6 million of direct outstanding loss and loss adjustment expense case reserves at its Insurance Operations. Claims relating to approximately 91% of those reserves are handled byin-house claims management professionals while claims relating toand approximately 0.3% of those reserves are handled by TPAs, which send the Company detailed financial and claims information on a monthly basis. The Company also individually supervisesin-house any significant or complicated TPA handled claims, and conductson-site audits of material TPAs at least twice a year. Approximately 9% of its reserves8% are handled by the Company’s assuming reinsurers. The Company reviews and supervises the claims handled by its reinsurers seeking to protect its reputation and minimize exposure.

11

Reserves for Unpaid Losses and Loss Adjustment Expenses

Applicable insurance laws require the Company to maintain reserves to cover its estimated ultimate losses under insurance policies and reinsurance treaties that it writes and for loss adjustment expenses relating to the investigation and settlement of claims.

The Company establishes losslosses and loss adjustment expense reserves for individual claims by evaluating reported claims on the basis of:

•
knowledge of the circumstances surrounding the claim;

•
the severity of injury or damage;

•
jurisdiction of the occurrence;

•
the potential for ultimate exposure;

•
litigation related developments;

•
the type of loss; and

•
the Company’s experience with the insured and the line of business and policy provisions relating to the particular type of claim.

The Company generally estimates such losses and claims costs through an evaluation of individual reported claims. The Company also establishes reserves for incurred but not reported losses (“IBNR”). The Company’s IBNR reserves include provisions for development on known cases as well as provisions for claims that have occurred but not been reported. IBNR reserves are based in part on the Company's historical statistical information and in part on industry experience with respect to the expected number and nature of claims arising from occurrences that have not been reported.reported, supplemented with industry experience when deemed appropriate. The Company also establishes its reserves based on estimates of future trends in claims severity and other subjective factors. Insurance companies are not permitted to reserve for a catastrophe until it has occurred. Reserves are recorded on an undiscounted basis other than fair value adjustments recorded under purchase accounting. The Company’s Insurance Operations’ reserves are reviewed quarterly by thein-house actuarial staff. Loss reserve estimates for the Company’s Reinsurance Operations are developed by independent, external actuaries;staff; however, management is responsible for the final determination of loss reserve selections. The dataReserve reviews for this analysis is organized by treaty and treaty year. Reviews for both Insurance Operations and Reinsurance Operations are generally performedsummarized on both a gross and net of reinsurance and ceded reviews are also completed for most reserve categories.basis.

In addition to the Company’s internal reserve analysis, independent external actuaries perform a full, detailed review of the Insurance Operations’ reserves annually. The Company does not rely upon the review by the independent actuaries to develop its reserves; however, the datareview is used to corroborate the analysis performed by thein-house actuarial staff. The Company’s independent external actuaries also perform a full, detailed review of the Reinsurance Operations’ reserves annually. The results of the detailed reserve reviews by internal and external actuaries are summarized and discussed with the Company’s senior management to determine theManagement's best estimate of reserves.

With respect to some classes of risks, the period of time between the occurrence of an insured event and the final resolution of a claim may be many years, and during this period it often becomes necessary to adjust the claim estimates either upward or downward. Certain classes of umbrella and excess liability that the Company underwrites have historically had longer intervals between the occurrence of an insured event, reporting of the claim, and final resolution. In such cases, the Company must estimate reserves over long periods of time with the possibility of several adjustments to reserves. Other classes of insurance that the Company underwrites, such as most property insurance, historically have shorter intervals between the occurrence of an insured event, reporting of the claim, and final resolution. Reserves with respect to these classes are therefore inherently less likely to be adjusted.

The losslosses and loss adjustment expense reserving process is intended to reflect the impact of inflation and other factors affecting loss payments by taking into account changes in historical payment patterns and perceived trends. However, there is no precise method for the subsequent evaluation of the adequacy of the consideration given to inflation, or to any other specific factor, or to the way one factor may affect another.

See of the notes to consolidated financial statements in Item 8 of Part II of this report for a reconciliation of the Company’s liability for losses and loss adjustment expenses, net of reinsurance ceded, as well as further discussion surrounding changes to reserves for prior accident years.

12

Asbestos and Environmental (“A&E”) Exposure

The Company’s environmental exposure arises from the sale of general liability and commercial multi-peril insurance. Currently, the Company’s policies continue to exclude classic environmental contamination claims. However, in some states, the Company is required, depending on the circumstances, to provide coverage for certain bodily injury claims, such as an individual’sindividual's exposure to a release of chemicals. The Company has also issued policies that were intended to provide limited pollution and environmental coverage. These policies were specific to certain types of products underwritten by the Company. The Company has also received a number of asbestos-related claims, the majority of which are declined based on well-established exclusions. In establishing

the liability for unpaid losses and loss adjustment expenses related to A&E exposures, management considers facts currently known and the current state of the law and coverage litigations. Estimates of these liabilities are reviewed and updated continually.

Uncertainty remains as to the Company’s ultimate liability for asbestos-related claims due to such factors as the long latency period between asbestos exposure and disease manifestation and the resulting potential for involvement of multiple policy periods for individual claims,claims. Other emerging mass torts with long latency periods also contribute to the increaseuncertainty in the volume of claims made by plaintiffs who claim exposure but who have no symptoms of asbestos-related disease, and an increase in claims subject to coverage under general liability policies that do not contain aggregate limits ofestimated ultimate environmental liability.

The liability for unpaid losses and loss adjustment expenses, inclusive of A&E reserves, reflects the Company’sManagement’s best estimates for future amounts needed to pay losses and related loss adjustment expenses as of each of the balance sheet dates reflected in the financial statements herein in accordance with GAAP.generally accepted accounting principles ("GAAP"). As of December 31, 2017,2023, the Company had $15.8$10.7 million of net loss reserves for asbestos-related claims and $14.3$10.4 million for environmental claims. The Company attempts to estimate the full impact of the A&E exposures by establishing specific case reserves on all known losses. See Note 1112 of the notes to the consolidated financial statements in Item 8 of Part II of this report for tables showing the Company’s gross and net reserves for A&E losses.

In addition to the factors referenced above, establishing reserves for A&E and other mass tort claims involves considerably more judgment than other types of claims due to among other things,factors including, but not limited to, inconsistent court decisions, an increase in bankruptcy filings as a result of asbestos relatedasbestos-related liabilities, and judicial interpretations that often expand theories of recovery and broaden the scope of coverage.

See Note 1112 of the notes to the consolidated financial statements in Item 8 of Part II of this report for the survival ratios on a gross and net basis for the Company’s A&E claims.

Investments

The Company’s investment policy is determined by the Investment Committee of the Board of Directors. The Company engages third-party investment advisors to oversee and manage its investments and to make recommendations to the Investment Committee. The Company projects its cash flows from investments and operations to assure it has adequate liquidity to run its business. The Company’s investment policy allows it to invest in taxable andtax-exempt fixed income investments including corporate bonds as well as publicly traded equities and private equity and private debt investments. The insurance group holds $1,232.2 million of investments, of which, are comprised of 98.7% of fixed income and 1.3% of preferred stock. To provide diversification, the Company limits exposure to individual issuers. With respect to fixed income investments, the maximum exposure per issuer varies as a function of the credit quality of the security. The allocation between taxable andtax-exempt bonds is determined based on market conditions and tax considerations. The maximum allowable investment in equity securities under the Company’s investment policy is 30% of the Company’s GAAP equity, or $215.5 million at December 31, 2017. As of December 31, 2017,2023, the Company had $1,535.4$1,386.6 million of investments and cash and cash equivalent assets, including $140.2$16.5 million of equity investmentspreferred stock, and $77.8$38.2 million of limited partnership investments plus a $1.5 million receivable for securities sold.investments.

Insurance company investments must comply with applicable statutory regulations that prescribe the type, quality, and concentration of investments. These regulations permit investments, within specified limits and subject to certain qualifications, in federal, state, and municipal obligations, corporate bonds, and loans, and preferred and common equity securities.

13

The following table summarizes by type the estimated fair value of Global Indemnity’s investments and cash and cash equivalents as of December 31, 2017, 2016,2023, 2022, and 2015:2021:

  December 31, 2017 December 31, 2016 December 31, 2015 

 

December 31, 2023

 

 

December 31, 2022

 

 

December 31, 2021

 

(Dollars in thousands)  Estimated
Fair Value		   Percent of
Total		 Estimated
Fair Value		   Percent of
Total		 Estimated
Fair Value		   Percent of
Total		 

 

Estimated
Fair Value

 

 

Percent
of Total

 

 

Estimated
Fair Value

 

 

Percent
of Total

 

 

Estimated
Fair Value

 

 

Percent
of Total

 

Cash and cash equivalents

  $74,414    4.8%  $75,110    5.0%  $67,037    4.4% 

 

$

38,037

 

 

 

2.7

%

 

$

38,846

 

 

 

2.9

%

 

$

78,278

 

 

 

5.1

%

  

 

   

 

  

 

   

 

  

 

   

 

 

U.S. treasury and agency obligations

   104,680    6.8  72,047    4.8  107,122    7.1 

U.S. treasuries

 

 

494,223

 

 

 

35.6

 

 

 

344,103

 

 

 

25.6

 

 

 

150,118

 

 

 

9.8

 

Agency obligations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,630

 

 

 

0.4

 

Obligations of states and political subdivisions

   95,114    6.2  156,446    10.4  205,240    13.5 

 

 

26,150

 

 

 

1.9

 

 

 

31,595

 

 

 

2.4

 

 

 

54,721

 

 

 

3.6

 

Mortgage-backed securities (1)

   149,350    9.7  88,468    5.9  159,123    10.5 

 

 

58,927

 

 

 

4.3

 

 

 

62,116

 

 

 

4.6

 

 

 

250,341

 

 

 

16.3

 

Asset-backed securities

   203,701    13.3  233,991    15.6  260,022    17.2 

 

 

202,952

 

 

 

14.6

 

 

 

189,400

 

 

 

14.1

 

 

 

172,642

 

 

 

11.3

 

Commercial mortgage-backed securities

   139,795    9.1  183,192    12.2  140,390    9.3 

 

 

79,080

 

 

 

5.7

 

 

 

98,664

 

 

 

7.3

 

 

 

136,893

 

 

 

8.9

 

Corporate bonds and loans

   425,410    27.8  380,027    25.3  332,111    21.9 

Corporate bonds

 

 

291,713

 

 

 

21.0

 

 

 

338,780

 

 

 

25.3

 

 

 

292,383

 

 

 

19.0

 

Foreign corporate bonds

   123,387    8.0  125,860    8.4  102,141    6.7 

 

 

140,748

 

 

 

10.2

 

 

 

183,540

 

 

 

13.7

 

 

 

139,138

 

 

 

9.1

 

  

 

   

 

  

 

   

 

  

 

   

 

 

Total fixed maturities

   1,241,437    80.9  1,240,031    82.6  1,306,149    86.2 

 

 

1,293,793

 

 

 

93.3

 

 

 

1,248,198

 

 

 

93.0

 

 

 

1,201,866

 

 

 

78.4

 

Common stock

   140,229    9.2  120,557    8.0  110,315    7.3 

Equity securities

 

 

16,508

 

 

 

1.2

 

 

 

17,520

 

 

 

1.3

 

 

 

99,978

 

 

 

6.5

 

Other invested assets

   77,820    5.1  66,121    4.4  32,592    2.1 

 

 

38,236

 

 

 

2.8

 

 

 

38,176

 

 

 

2.8

 

 

 

152,651

 

 

 

10.0

 

  

 

   

 

  

 

   

 

  

 

   

 

 

Total investments and cash and cash equivalents (2)

  $1,533,900    100.0%  $1,501,819    100.0%  $1,516,093    100.0% 

 

$

1,386,574

 

 

 

100.0

%

 

$

1,342,740

 

 

 

100.0

%

 

$

1,532,773

 

 

 

100.0

%

  

 

   

 

  

 

   

 

  

 

   

 

 

(1)Includes collateralized mortgage obligations of $68,183, $28,608, and $57,330 for 2017, 2016, and 2015, respectively.
(2)Does not include net receivable (payable) for securities sold (purchased) of $1,543, ($3,717), and $172 for 2017, 2016, and 2015, respectively.
(1)
Includes collateralized mortgage obligations of $56,186, $58,773, and $101,698 for 2023, 2022, and 2021, respectively.
(2)
Does not include net receivable (payable) for securities sold (purchased) of $3,858, ($66), and ($794) for 2023, 2022, and 2021, respectively.

Although

The Company does not acquire fixed maturities with the intention to sell these securities in a short period of time. The Company generally intends tocan hold fixed maturities to recovery and/or maturity,maturity; however, the Company regularlyre-evaluates its position based uponpositions and will sell a security if warranted by market conditions. As

The overall weighted average duration of December 31, 2017, the Company’s fixed maturities portfolio was 1.1 years as of December 31, 2023 compared to 1.7 years at December 31, 2022. Duration was lowered in response to rising interest rates. The Company’s fixed maturities, excluding the asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations, had a weighted average maturity of 4.71.4 years and a weighted average duration, excluding mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations and including cash and short-term investments, of 2.7 years. 0.9 years as of December 31, 2023. The weighted average duration of the Company’s asset-backed, mortgage-backed and commercial mortgage-backed securities was 1.8 years as of December 31, 2023. At December 31, 2023, the Company’s embedded book yield on its fixed maturities, not including cash, was 4.0% compared with 3.5% at December 31, 2022.

The Company’s financial statements reflect a net unrealized loss on fixed maturities available for sale as of December 31, 20172023 of $1.7$28.3 million on apre-tax basis.

The following table shows the average amount of fixed maturities, income earned on fixed maturities, and the book yield thereon, as well as unrealized gainsgain (loss) for the periods indicated:

  Years Ended December 31, 

 

Years Ended December 31,

 

(Dollars in thousands)  2017 2016 2015 

 

2023

 

 

2022

 

 

2021

 

Average fixed maturities at book value

  $1,242,242  $1,274,836  $1,290,641 

 

$

1,311,908

 

 

$

1,247,735

 

 

$

1,171,378

 

Gross income on fixed maturities (1)

   33,020  30,337  32,091 

 

$

49,987

 

 

$

33,852

 

 

$

25,751

 

Book yield

   2.66%  2.38%  2.49% 

 

 

3.81

%

 

 

2.71

%

 

 

2.20

%

Fixed maturities at book value

  $1,243,144  $1,241,339  $1,308,333 

 

$

1,322,092

 

 

$

1,301,723

 

 

$

1,193,746

 

Unrealized gain (loss)

   (1,707)  (1,308)  (2,184) 

 

$

(28,299

)

 

$

(53,525

)

 

$

8,120

 

(1)Represents income earned by fixed maturities, gross of investment expenses and excluding realized gains and losses.
(1)
Represents income earned by fixed maturities, gross of investment expenses and excluding realized gains and losses.

The Company has sought to structure its portfolio to reduce the risk of default on collateralized commercial real estate obligations and asset-backed securities. Of the $149.4$58.9 million of mortgage-backed securities, $81.2$2.7 million

is invested in U.S. agency paper and $68.2$56.2 million is invested in collateralized mortgage obligations, of which $67.8$30.5 million, or 99.4%54.4%, are rated AA+AA- or better. In addition, the Company holds $203.7$203.0 million in asset-backed securities, of which 84.0%82.2% are rated AAA- or better and $139.8$79.1 million in commercial mortgaged-backed securities, of which 97.6%83.0% are ratedA- AA or better. The weighted

14

average credit enhancement for the Company’s asset-backed securities is 23.4.36.1. The Company also faces liquidity risk. Liquidity risk is when the fair value of an investment is not able to be realized due to lack of interest by outside parties in the marketplace. The Company attempts to diversify its investment holdings to minimize this risk. The Company’s investment managers run periodic analysis of liquidity costs to the fixed income portfolio. The Company also faces credit risk. 96.5%93.6% of the Company’s fixed income securities are investment grade securities. 17.2%25.9% of the Company’s fixed maturities are rated AAA. See “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of Part II of this report for a more detailed discussion of the credit market and the Company’s investment strategy.

The following table summarizes, by Standard & Poor’sPoor's rating classifications, the estimated fair value of Global Indemnity’s investments in fixed maturities, as of December 31, 20172023 and 2016:2022:

  December 31, 2017 December 31, 2016 

 

December 31, 2023

 

 

December 31, 2022

 

(Dollars in thousands)  Estimated
Fair Value		   Percent of
Total		 Estimated
Fair Value		   Percent of
Total		 

 

Estimated
Fair Value

 

 

Percent
of Total

 

 

Estimated
Fair Value

 

 

Percent
of Total

 

AAA

  $213,943    17.2%  $232,176    18.7% 

 

$

335,381

 

 

 

25.9

%

 

$

182,063

 

 

 

14.6

%

AA

   403,723    32.5  432,595    35.0 

 

 

391,983

 

 

 

30.3

 

 

 

442,731

 

 

 

35.4

 

A

   229,381    18.5  346,606    28.0 

 

 

257,714

 

 

 

19.9

 

 

 

240,697

 

 

 

19.3

 

BBB

   350,849    28.3  197,449    15.9 

 

 

225,934

 

 

 

17.5

 

 

 

296,680

 

 

 

23.8

 

BB

   24,363    2.0  15,967    1.3 

 

 

14,537

 

 

 

1.1

 

 

 

22,057

 

 

 

1.8

 

B

   10,730    0.9  7,866    0.6 

 

 

1,592

 

 

 

0.1

 

 

 

1,466

 

 

 

0.1

 

CCC

   383    —    447    —   

 

 

4,020

 

 

 

0.3

 

 

 

4,804

 

 

 

0.4

 

CC

   138    —    241    —   

 

 

2,779

 

 

 

0.2

 

 

 

2,914

 

 

 

0.2

 

C

   —      —     —      —   

 

 

2,338

 

 

 

0.2

 

 

 

2,622

 

 

 

0.2

 

D

 

 

2,420

 

 

 

0.2

 

 

 

2,555

 

 

 

0.2

 

Not rated

   7,927    0.6  6,684    0.5 

 

 

55,095

 

 

 

4.3

 

 

 

49,609

 

 

 

4.0

 

  

 

   

 

  

 

   

 

 

Total fixed maturities

  $1,241,437    100.0%  $1,240,031    100.0% 

 

$

1,293,793

 

 

 

100.0

%

 

$

1,248,198

 

 

 

100.0

%

  

 

   

 

  

 

   

 

 

The following table sets forth the expected maturity distribution of Global Indemnity’sthe Company’s fixed maturities portfolio at their estimated market value as of December 31, 20172023 and 2016:2022:

  December 31, 2017 December 31, 2016 

 

December 31, 2023

 

 

December 31, 2022

 

(Dollars in thousands)  Estimated
Market Value		   Percent of
Total		 Estimated
Market Value		   Percent of
Total		 

 

Estimated
Market Value

 

 

Percent
of Total

 

 

Estimated
Market Value

 

 

Percent
of Total

 

Due in one year or less

  $70,165    5.6%  $80,982    6.5% 

 

$

660,141

 

 

 

51.0

%

 

$

113,491

 

 

 

9.1

%

Due in one year through five years

   434,078    35.0  622,926    50.2 

 

 

270,667

 

 

 

20.9

 

 

 

747,197

 

 

 

59.8

 

Due in five years through ten years

   236,552    19.0  20,770    1.7 

 

 

11,619

 

 

 

0.9

 

 

 

25,594

 

 

 

2.1

 

Due in ten years through fifteen years

   2,205    0.2  3,252    0.3 

Due after fifteen years

   5,591    0.5  6,450    0.5 
  

 

   

 

  

 

   

 

 

Due after ten years

 

 

10,407

 

 

 

0.8

 

 

 

11,736

 

 

 

0.9

 

Securities with fixed maturities

   748,591    60.3%  734,380    59.2% 

 

 

952,834

 

 

 

73.6

 

 

 

898,018

 

 

 

71.9

 

Mortgaged-backed securities

   149,350    12.0  88,468    7.1 

 

 

58,927

 

 

 

4.6

 

 

 

62,116

 

 

 

5.0

 

Commercial mortgage-backed securities

   139,795    11.3  183,192    14.8 

 

 

79,080

 

 

 

6.1

 

 

 

98,664

 

 

 

7.9

 

Asset-backed securities

   203,701    16.4  233,991    18.9 

 

 

202,952

 

 

 

15.7

 

 

 

189,400

 

 

 

15.2

 

  

 

   

 

  

 

   

 

 

Total fixed maturities

  $1,241,437    100.0%  $1,240,031    100.0% 

 

$

1,293,793

 

 

 

100.0

%

 

$

1,248,198

 

 

 

100.0

%

  

 

   

 

  

 

   

 

 

The expected weighted average duration of the Company’s asset-backed, mortgage-backed and commercial mortgage-backed securities is 3.1 years.

The value of the Company’s portfolio of bonds is inversely correlatedrelated to changes in market interest rates. In addition, some of the Company’s bonds have call or prepayment options. This could subject the Company to

reinvestment risk should interest rates fall and issuers call their securities and the Company is forced to invest the proceeds at lower interest rates. The Company seeks to mitigate its reinvestment risk by investing in securities with varied maturity dates, so that only a portion of the portfolio will mature, be called, or be prepaid at any point in time.

As of December 31, 2017,2023, the Company had aggregate equity securities of $140.2$16.5 million that consisted entirely of commonpreferred stocks.

The Company’s investments in other invested assets is comprised of athree limited liability partnership investment where the partnership invests in distressed securities and assets, which was valued at $26.3 million atpartnerships. At December 31, 2017,2023, a limited liability partnership investment that invests in real estate, which was valued at zero at December 31, 2017, a limited liability partnership that provides financing for middle market companies, which was valued at $33.8 million at December 31, 2017, and a limited liability partnership investment that invests in stressed and distressed debt instruments which was valued at $17.8$4.0 million, a partnership that invests in Real Estate Investment Trust (“REIT”) qualifying assets was valued at December 31, 2017.$8.2 million, and a partnership comprised of performing, stressed or distressed securities and loans across the global fixed income markets was valued at $26.0 million. The carrying value of these investments approximates fair value. There is no readily available independent market price for these limited liability partnership investments. Theinvestments and the Company does not have access to daily valuations; therefore, the estimated fair value of these limited partnerships is based on the net asset value as a practical expedient for each limited partnership.valuations. The Company receives annual audited financial statements from each of the partnership investments it owns.

15

Net realized investment gains (losses), including other than temporary impairments, for the year ended December 31, 2017 were $1.6($2.1) million, compared with gains of $21.7($32.9) million, and losses of $3.4$15.9 million for the years ended December 31, 20162023, 2022 and 2015,2021, respectively.

Competition

The Company competes with numerous domestic and international insurance and reinsurance companies, mutual companies, specialty insurance companies, underwriting agencies, diversified financial services companies, Lloyd’sLloyd's syndicates, risk retention groups, insurance buying groups, risk securitization products and alternative self-insurance mechanisms. In particular, the Company competes against insurance subsidiaries of the groups in the specialty insurance market noted below, insurance companies, and others, including:

•
American International Group;Group

American Modern•
Ategrity Specialty Holdings LLC
•
Atlantic Casualty Insurance Company
•
Berkshire Hathaway
•
CapSpecialty Insurance Group

Argo•
Chubb Limited
•
IFG Companies
•
James River Group International Holdings Ltd.;

Berkshire Hathaway;

•
Everest ReKinsale Capital Group, Ltd.;Inc.

Foremost•
Markel Corporation
•
Nationwide Insurance
•
RLI Corporation
•
RSUI Group

Great American Insurance Group;

HCC Insurance Holdings, Inc.;

IFG Companies;

Markel Corporation;

Nationwide Insurance;

Navigators Insurance Group;

RLI Corporation;

•
Selective Insurance Group, Inc.;

•
The Hartford
•
The Travelers Companies, Inc.;

Validus Group; and

•
W.R. Berkley Corporation.Corporation

In addition to the companies mentioned above, the Company is facing competition from standard line companies who are continuing to write risks that traditionally had been written by excess and surplus lines carriers, Bermuda companies who are establishing relationships with wholesale brokers and purchasing carriers, and other excess and surplus lines competitors.

Competition may take the form of lower prices, broader coverage, greater product flexibility, higher quality services, reputation and financial strength or higher ratings by independent rating agencies. In all of the Company’s markets, it competes by developing insurance products to satisfy well-defined market needs and by maintaining relationships with brokerswholesale agents and insureds that rely on the Company’s expertise. For its program and specialty wholesale products, offerings and underwritingThe Company differentiates itself from the competition by distributing products that are not readily available isin the Company’s principal means of differentiating itself from its competition.market. Each of the Company’s products has its own distinct competitive environment. The Company seeks to compete through innovative products, appropriate pricing, niche underwriting expertise, and quality service to policyholders and general agencies and brokers.agencies.

16

Employees

Employees

At December 31, 2017, theThe Company had approximately 420 employees.266 employees at December 31, 2023 as compared with 355 employees at December 31, 2022. None of the Company’s employees are covered by collective bargaining agreements as of December 31, 2017.

Ratings

A.M. Best ratings for the industry range from “A++” (Superior) to “F” (In Liquidation) with some companies not being rated.2023. The Company’s Insurance Operations, which consistCompany focuses on attracting, developing and retaining a team of highly talented and motivated employees. The Company conducts regular assessments of its United Statescompensation and benefit practices and pay levels to help ensure that its employees are compensated fairly and competitively. The Company devotes resources to employee training and development. Individual objectives are set annually for each employee, and attainment of those objectives is an element of the employee’s performance assessment. The Company recognizes that its success is based on the talents and dedication of those it employs and is highly invested in its employees' success.

In the first quarter of 2023, the Company reduced its workforce by 54 employees in conjunction with the restructuring of its insurance operations. See Note 3 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the restructuring.

Ratings

AM Best has seven rating categories in the AM Best Financial Strength Rating Scale. The categories ranging from best to worst are Superior, Excellent, Good, Fair, Marginal, Weak, and Poor. Within each rating category, there are rating notches of plus or minus to show additional gradation of the ratings. AM Best currently assigns the Company’s insurance companies and Global Indemnity Reinsurance, are currently rated “A”with a financial strength rating of "A" (Excellent) by A.M. Best, the third highest of sixteen rating categories..

Publications of A.M.AM Best indicate that “A”"A" (Excellent) ratings are assigned to those companies that, in A.M. Best’sAM Best's opinion, have an excellent ability to meet their ongoing obligations to policyholders. InTo determine a credit rating, AM Best performs quantitative and qualitative analysis which includes evaluating a company’s financial andbalance sheet strength, operating performance, A.M. Best reviews its profitability, leverage and liquidity, as well as its spread ofenterprise risk the quality and appropriateness of its reinsurance, the quality and diversification of its assets, the adequacy of its policy and loss reserves, the adequacy of its surplus, its capital structuremanagement, and the experience and objectives of its management.business profile. These ratings are based on factors relevant to policyholders, general agencies, insurance brokers and intermediaries and are not directed to the protection of investors.

17

Regulation

RegulationGeneral

General

The business of insurance industry is regulated in most countries, although the degree and type of regulation varies significantly from one jurisdiction to another. AsGlobal Indemnity's companies are all U.S. companies or have made elections to be taxed as a holding company, Global Indemnity is not subject to any insurance regulation in the Cayman Islands which the Company redomesticated to in 2016. However, Global Indemnity is subject to various Cayman Island laws and regulations, including, but not limited to, laws and regulations governing interested directors, mergers and acquisitions, shareholder lawsuits and indemnification of directors.U.S. company.

U.S. Regulation

At December 31, 2017,2023, the Company had sixfive subsidiaries operating as insurance subsidiariescompanies domiciled in the United States; United National Insurance Company, Penn-America Insurance Company, and Penn-Star Insurance Company,

which are domiciled in Pennsylvania; Diamond State Insurance Company which is domiciled in Indiana; and Penn-Patriot Insurance Company, which is domiciled in Virginia; and American Reliable Insurance Company, which is domiciled in Arizona.Virginia.

As the indirect parent of these U.S. insurance companies, Global Indemnity is subject to the insurance holding company laws of Pennsylvania, Indiana, Virginia, and Arizona.Virginia. These laws generally require each of the U.S. insurance companies to register with its respective domestic state insurance department and to annually furnish financial and other information about the operations of the companies within the insurance holding company system. Generally, all material transactions among affiliated companies in the holding company system to which any of the U.S. insurance companies is a party must be fair, and, if material or of a specified category, require prior notice and approval or absence of disapproval by the insurance department where the subsidiary is domiciled. Material transactions include sales, loans, contributions, reinsurance agreements, certain types of dividends, and service agreements with thenon-insurance companies within Global Indemnity’s family of companies, the Insurance Operations, or the Reinsurance Operations.companies.

State Insurance Regulation

State insurance authorities have broad regulatory powers with respect to various aspects of the business of U.S. insurance companies, including, but not limited to, licensing companies to transact admitted business or determining eligibility to write surplus lines business, accreditation of reinsurers, admittance of assets to statutory surplus, regulating unfair trade and claims practices, establishing reserve requirements and solvency standards, management of enterprise risk, regulating investments and dividends, approving policy forms and related materials in certain instances and approving premium rates in certain instances. State insurance laws and regulations may require the Company’s U.S. insurance companies to file financial statements with insurance departments everywhere they will be licensed or eligible or accredited to conduct insurance business, and their operations are subject to review by those departments at any time. The Company’s U.S. insurance companies prepare statutory financial statements in accordance with statutory accounting principles (“SAP”("SAP") and procedures prescribed or permitted by these departments. State insurance departments also conduct periodic examinations of the books and records, financial reporting, policy filings and market conduct of insurance companies domiciled in their states, generally once every three to five years, although market conduct examinations may take place at any time. These examinations are generally carried out in cooperation with the insurance departments of other states under guidelines promulgated by the NAIC.National Association of Insurance Commissioners (“NAIC”). In addition, admitted insurers are subject to targeted market conduct examinations involving specific insurers by state insurance regulators in any state in which the insurer is admitted. The insurance departments for the states of Indiana, Virginia, and VirginiaPennsylvania completed their most recent financial examinations of the Company’s U.S. insurance subsidiaries excluding American Reliable, for the period ended December 31, 2012.2022. No material adverse findings were reported to the Company. Their final reports wereare expected to be issued in 2014, and there were no materially adverse findings. The insurance department for the state of Arizona completed its most recent financial examination of American Reliable for the period ending December 31, 2013. Their final report was issued in 2015, and there were no materially adverse findings. The Company has been notified by the Pennsylvania Insurance Department that the financial examination for the period ended December 31, 2017 will begin in 2018. The Company expect the examination to continue into 2019.2024.

Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance commissioner of the state where the insurer is domiciled. Prior to granting approval of an application to acquire control of a domestic insurer, the state insurance commissioner will consider factors such as the financial strength of the applicant, the integrity and management of the applicant’s Boardapplicant's board of Directorsdirectors and executive officers, the acquirer’s plans for the management, Boardboard of Directors,directors, executive officers, and employees of the company being acquired, the acquirer’s plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control. Generally, state statutes provide that control over a domestic insurer is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing 10% or more of the voting securities of the domestic insurer. Because a person acquiring 10% or more of the Company’s ordinaryGlobal Indemnity Group, LLC’s common shares would

indirectly control the same percentage of the stock of the U.S. insurance companies, the insurance change of control laws of Pennsylvania, Indiana, Virginia and ArizonaVirginia would likely apply to such a transaction. While the Company’s articles of association limit the voting power of any U.S. shareholder to less than 9.5%, there can be no assurance that the applicable state insurance regulator would agree that any shareholder did not control the applicable insurance company.

These laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control of Global Indemnity Group, LLC, including through transactions, and in particular unsolicited transactions, that some or all of the shareholders of Global Indemnity Group, LLC might consider desirable.

18

Insurance Regulatory Information System Ratios

The NAIC Insurance Regulatory Information System (“IRIS”("IRIS") was developed by a committee of the state insurance regulators and is intended primarily to assist state insurance departments in executing their statutory mandates to oversee the financial condition of insurance companies operating in their respective states. IRIS identifies twelvethirteen industry ratios and specifies “usual values”"usual values" for each ratio. Departure from the usual values of the ratios can lead to inquiries from individual state insurance commissioners asthat require the insurer to describe certain aspects of an insurer’s business. Insurersa business that report four or moreare causing such departures. It is not uncommon for companies to have ratios that fall outside of these usual values. Although the range of usual values are generally targeted for increased regulatory review.

The U.S.Company’s insurance subsidiaries have strong risk capital scores. The Company’s U.S.departures from usual values of certain IRIS ratios, the Company believes that its insurance subsidiaries have acceptable results for theadequate capital and liquidity to meet their operational needs.

The Company’s insurance subsidiaries' departures from usual values of certain IRIS ratios with the exception of the following:

are as follows:

Two-year operating ratio for Penn-America Insurance Company, Penn-Star Insurance Company, Penn-Patriot Insurance Company and American Reliable Insurance Company were outside of IRIS range due to catastrophe losses in 2016 and 2017.

•
Investment yields were lower than the IRIS range for Diamond StatePenn-Patriot Insurance Company and Penn-America Insurance Company. A high percentage of invested assets for both companies consisted of wholly-owned subsidiaries which did not distribute dividends to either Penn-Patriot Insurance Company or Penn-America Insurance Company Penn-Star Insurance Company and Penn-Patriot Insurance Company. The investment portfolios of these companies are invested in high quality short duration bonds.2023.

Investment yields were higher than the IRIS range for United National Insurance Company due to dividends from affiliates

Change in Surplus and Adjusted Surplus ratios for United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company and Penn-Patriot Insurance Company were outside of the IRIS range due to dividends to affiliates and catastrophe losses in 2017.

•Asset to liability liquidity ratio for Penn-America Insurance Company was outside of the IRIS range mainly due to intercompany payables to parents and affiliates that will be settled in the 1st quarter of 2018.

Estimated current reserve deficiency was outside of the range for Penn-Patriot Insurance Company due to changes in the intercompany pooling agreement in 2016.

Risk-Based Capital Regulations

The state insurance departments of Pennsylvania, Indiana, Virginia and ArizonaVirginia require that each domestic insurer report its risk-based capital based on a formula calculated by applying factors to various asset, premium and reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk. The respective state insurance regulators use the formula as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and generally not as a means to rank insurers. State insurance laws impose broad confidentiality requirements on those engaged in the insurance business (including insurers, general agencies,

brokers and others) and on state insurance departments as to the use and publication of risk-based capital data. The respective state insurance regulators have explicit regulatory authority to require various actions by, or to take various actions against, insurers whose total adjusted capital does not exceed certain company action level risk-based capital levels.

Based on the standards currently adopted, the U.S. insurance companies reported in their 20172023 statutory filings that their capital and surplus are above the prescribed risk-based capital requirements. The cancellation of the Quota Share arrangement between Global Indemnity Reinsurance and the U.S. Insurance Companies will increase the capital requirements of its U.S. Insurance Companies and additional capital may need to be allocated to these companies in the future. The Company will continue to manage capital levels in its U.S. Insurance Companies to ensure its capital and surplus will remain above the prescribed risk-based capital requirements. See Note 1921 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the NAIC’sNAIC's risk-based capital model for determining the levels of statutory capital and surplus an insurer must maintain.

Statutory Accounting Principles (“SAP”)

SAP is a basis of accounting developed to assist insurance regulators in monitoring and regulating the solvency of insurance companies. SAP is primarily concerned with measuring an insurer’sinsurer's surplus. Accordingly, statutory accounting focuses on valuing assets and liabilities of insurers at financial reporting dates in accordance with appropriate insurance laws, regulatory provisions, and practices prescribed or permitted by each insurer’sinsurer's domiciliary state.

GAAP is concerned with a company’scompany's solvency, but it is also concerned with other financial measurements, such as matching revenues and expenses, income, and cash flows. As a direct result, different line item groupings of assets and liabilities and different amounts of assets and liabilities are reflected in financial statements prepared in accordance with GAAP than financial statements prepared in accordance with SAP.

Statutory accounting practices established by the NAIC and adopted in part by the Pennsylvania, Indiana, Virginia, and ArizonaVirginia regulators determine, among other things, the amount of statutory surplus and statutory net income (loss) of the U.S. insurance companies and thus determine, in part, the amount of funds these subsidiaries have available to pay dividends.

State Dividend Limitations

The U.S. insurance companies are restricted by statute as to the amount of dividends that they may pay without the prior approval of the applicable state regulatory authorities. Dividends may be paid without advanced regulatory approval only out of unassigned surplus. The dividend limitations imposed by the applicable state laws are based on the statutory financial results of each company within the Insurance Operations that are determined using statutory accounting practices that differ in various respects from accounting principles used in financial statements prepared in conformity with GAAP. See “Regulation —– Statutory Accounting Principles.” Key differences relate to, among other items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes, if any.

19

See the “Liquidity and Capital Resources” section in Item 7 of Part II of this report for a more complete description of the state dividend limitations. See Note 1921 of the notes to consolidated financial statements in Item 8 of Part II of this report for the dividends declared and paid by Global Indemnity’s U.S. insurance companies in 2017 and the maximum amount of distributions that U.S.the Company’s insurance companies could pay as dividends in 2018.2024.

Guaranty Associations and Similar Arrangements

Most of the jurisdictions in which the U.S. insurance companies are admitted to transact business require property and casualty insurers doing business within that jurisdiction to participate in guaranty associations.

These associations are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent, or failed insurer is engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets or in limited circumstances by surcharging policyholders.

Federal Insurance Regulation

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) includes a number of provisions having a direct impact on the insurance industry, most notably, the creation of a Federal Insurance Office to monitor the insurance industry, streamlining of surplus lines insurance, credit for reinsurance, and systemic risk regulation. The Federal Insurance Office is empowered to gather data and information regarding the insurance industry and insurers, including conducting a study for submission to the U.S. Congress on how to modernize and improve insurance regulation in the United States. With respect to surplus lines insurance, the Dodd-Frank Act gives exclusive authority to regulate surplus lines transactions to the home state of the insured, and the requirement that a surplus lines broker must first attempt to place coverage in the admitted market is substantially softened with respect to large commercial policyholders. Significantly, the Dodd-Frank Act provides that a state may not prevent a surplus lines broker from placing surplus lines insurance with anon-U.S. insurer that appears on the quarterly listing ofnon-admitted insurers maintained by the International Insurers Department of the National Association of Insurance Commissioners (“NAIC”).NAIC. Regarding credit for reinsurance, the Dodd-Frank Act generally provides that the state of domicile of the ceding company (and no other state) may regulate financial statement credit for the ceded risk. The Dodd-Frank Act also provides the U.S. Federal Reserve with supervisory authority over insurance companies that are deemed to be “systemically important.” The Company continues to monitor the impact the Dodd-Frank Act orfederal insurance regulations and any changes thereto that may have onimpact operations.

Operations of Global Indemnity ReinsurancePrivacy, Data Protection and Cybersecurity

The insurance laws of the United States regulate or prohibit the sale of insurance and reinsurance within their jurisdictions bynon-domestic insurers and reinsurers that are not admitted to do business within such jurisdictions. Global Indemnity Reinsurance is not admitted to do business in the United States.

The Company does not intend for Global Indemnity Reinsurance to maintain offices or solicit, advertise, settle claims or conduct other insurance and reinsurance underwriting activities in any jurisdiction in the United States where the conduct of such activities would require that Global Indemnity Reinsurance be admitted or authorized.

As a reinsurer that is not licensed, accredited, or approved in any state in the United States, Global Indemnity Reinsurance is required to post collateral security with respect to the reinsurance liabilities it assumes from the Company’s Insurance Operations as well as other U.S. ceding companies. The posting of collateral security is generally required in order for U.S. ceding companies to obtain credit on their U.S. statutory financial statements with respect to reinsurance liabilities ceded to unlicensed or unaccredited reinsurers. Under applicable United States “credit for reinsurance” statutory provisions, the security arrangements generally may be in the form of letters of credit, reinsurance trusts maintained by third-party trustees or funds-withheld arrangements whereby the ceded premium is held by the ceding company. If “credit for reinsurance” laws or regulations are made more stringent in Pennsylvania, Indiana, Virginia and Arizona or other applicable states or any of the U.S. insurance companiesre-domesticate to one of the few states that do not allow credit for reinsurance ceded tonon-licensed reinsurers, the Company may be unable to realize some of the benefits expected from its business plan. Accordingly, Global Indemnity Reinsurance could be adversely affected.

Global Indemnity Reinsurance generally is not subject to regulation by U.S. jurisdictions. Specifically, rate and form regulations otherwise applicable to authorized insurers generally do not apply to Global Indemnity Reinsurance’s transactions.

Bermuda Insurance Regulation

The Bermuda Insurance Act 1978 and related regulations, as amended (the “Insurance Act”), regulates the insurance business of Global Indemnity Reinsurance and provides that no person may carry on any such business in or from within Bermuda unless registered as an insurer by the Bermuda Monetary Authority (the “BMA”) under the Insurance Act. Global Indemnity Reinsurance, which is incorporated to carry on general insurance and reinsurance business, is registered as a Class 3B insurer in Bermuda. A corporate body is registrable as a Class 3B insurer if it intends to carry on insurance business in circumstances where 50% or more of the net premiums written or 50% or more of the loss and loss expense provisions represent unrelated business, or its total net premiums written from unrelated business are $50.0 million or more. The continued registration of an applicant as an insurer is subject to it complyingnumerous U.S. federal and state laws governing the protection of personal and confidential information. These laws and regulations are increasing in complexity, and the requirements are extensive and detailed. Numerous states require the Company to certify its compliance with the termstheir data protection laws. Some examples of its registrationprivacy, data protection and such other conditions as the BMA may impose from time to time. An insurer’s registration may be canceledcybersecurity laws and regulations include:

The New York Department of Financial Services' (“NYDFS”) Cybersecurity Regulation which mandates detailed cybersecurity standards for all institutions, including insurance entities, authorized by the BMA on certain grounds specifiedNYDFS to operate in New York. Among the requirements are the maintenance of a cybersecurity program with governance controls, risk-based minimum data security standards for technology systems, cyber breach preparedness and response requirements, including reporting obligations, vendor oversight, training, program record keeping, and certification obligations.

The NAIC adopted an Insurance Act, including failure of the insurerData Security Model Law, which requires licensed insurance entities to comply with its obligations under the Insurance Act.

detailed information security requirements. The Insurance Act imposes solvency and liquidity standards, auditing and reporting requirements, and grants the BMA powers to supervise, investigate, require information and the production of documents, and to interveneNAIC model law is similar in the affairs of Bermuda insurance companies. The BMA continues to make amendmentsmany respects to the InsuranceNYDFS Cybersecurity Regulation.

The California Consumer Privacy Act, with a view to enhancing Bermuda’s insurance regulatory regime.

The BMA utilizes a risk-based approach when it comes to licensing and supervising insurance companies. As part of the BMA’s risk-based system, an assessment of the inherent risks within each particular class of insurer is used to determine the limitations and specific requirements which may be imposed. Thereafter the BMA keeps its analysis of relative risk within individual institutions under review on an ongoing basis, including through the scrutiny of regular audited statutory financial statements, and,took effect in January 2020, as appropriate, meeting with senior management during onsite visits.

On March 25, 2016, Bermuda’s prudential framework for (re)insurance and group supervision was confirmed as being fully equivalent to the regulatory standards applied to European reinsurance companies and insurance groups in accordance with the requirements of the Solvency II Directive. Bermuda was granted this full “Solvency II equivalence” for an unlimited periodamended by the European Commission based on an assessment conducted by the European Insurance and Occupational Pensions Authority, and the equivalence decision was applied retroactively toCalifornia Privacy Rights Act, which took effect in January 1, 2016.

Certain2023, adopted significant aspects of the Bermuda insurance regulatory framework are set forth as follows:

Cancellation of Insurer’s Registration

An insurer’s registration may be canceled by the BMA on certain grounds specified in the Bermuda Insurance Act, including failure of the insurer to comply with its obligations under the Bermuda Insurance Act or if, in the opinion of the BMA, the insurer has not been carrying oncompliance requirements for companies doing business in accordance with sound insurance principles.

Principal Representative and Principal Office

Every registered insurer or reinsurer is required to maintain a principal office in Bermuda and to appoint and maintain a principal representative in Bermuda, subject to certain prescribed requirements under the Bermuda Insurance Act. Further, any registered insurer that is a Class 3A insurer or above is required to maintain a head office in Bermuda and direct and manage its insurance business from Bermuda. The recent amendments to the Bermuda Insurance Act provide that in considering whether an insurer satisfies the requirements of having its head office in Bermuda, the BMA may consider (a) where the underwriting, risk management, and operational decision making occurs; (b) whether the presence of senior executives who are responsible for, and involved in,

the decision making are located in Bermuda; and (c) where meetings of the board of directors occur. The BMA will also consider (a) the location where management meets to effect policy decisions; (b) the residence of the officers, insurance managers or employees; and (c) the residence of one or more directors in Bermuda.

Global Indemnity Reinsurance maintains its principal office in Hamilton, Bermuda and its external management firm has been appointed as its principal representative.

It is the duty of the principal representative upon reaching the view that there is a likelihood of the insurer for which the principal representative acts becoming insolvent or that a reportable “event” has, to the principal representative’s knowledge, occurred or is believed to have occurred, to immediately notify the BMA and to make a report in writing to the BMA within 14 days of the prior notification setting out all the particulars of the case that are available to the principal representative.

Where there has been a significant loss which is reasonably likely to cause the insurer to fail to comply with its enhanced capital requirement (in respect of its general business, as described below under the Enhanced Capital Requirement (“ECR”) and Minimum Solvency Margin (“MSM”) section), the principal representative must also furnish the BMA with a capital and solvency return reflecting an enhanced capital requirement prepared using post-loss data. The principal representative must provide this within 45 days of notifying the BMA regarding the loss.

Furthermore, where a notification has been made to the BMA regarding a material change to an insurer’s business or structure (including a merger or amalgamation), the principal representative has 30 days from the date of such notification to furnish the BMA with unaudited interim statutory financial statements in relation to such period if so requested by the BMA, together with a general business solvency certificate in respect to those statements.

Independent Approved Auditor

Every registered insurer, such as Global Indemnity Reinsurance, must appoint independent auditors who will audit and report annually on the statutory financial statements, the statutory financial return of the insurer and U.S. GAAP statements, which are required to be filed annually with the BMA.

Loss Reserve Specialist

As a registered Class 3B insurer, Global Indemnity Reinsurance is required to submit an opinion of its approved loss reserve specialist in respect of its technical provisions contained within its Economic Balance Sheet (see below).

Annual Financial Statements and Annual Statutory Financial Return

As prescribed by the Insurance Act, Global Indemnity Reinsurance, a Class 3B insurer, must prepare annual statutory financial statements. The statutory financial return shall consist of an insurer information sheet, a report of the approved independent auditor on the GAAP financial statements, a statutory balance sheet, a statutory statement of income, a statutory statement of capital and surplus, notes to the statutory financial statements and a statutory declaration of compliance.

In addition to preparing statutory financial statements, Global Indemnity Reinsurance must file financial statements prepared in accordance with GAAP in respect of each financial year. Such statements must be filed with the BMA within a period of four months from the end of the financial year or such longer period, not exceeding seven months, as the BMA may determine. The audited financial statements will be published by the BMA.

For financial years after January 1, 2016, commercial insurers will also be required to prepare a Financial Condition Report providing details of, amongCalifornia. Among other things, measures governing the business operations, corporate governance framework, solvency and financial performance of the insurer.

Enhanced Capital Requirement (“ECR”) and Minimum Solvency Margin (“MSM”)

The BMA has promulgated the Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Amendment Rules 2008, as amended (the “Rules”) which, among other things, mandate that a Class 3B insurer’s ECR be calculated by either (a) the model set out in Schedule I to the Rules, or (b) an internal capital model which the BMA has approved for use for this purpose. For 2017, Global Indemnity Reinsurance used the BMA’s model to calculate its capital and solvency requirements.

The risk-based regulatory capital adequacy and solvency requirements implemented with effect from December 31, 2008 (termed the Bermuda Solvency Capital Requirement or “BSCR”) provide a risk-based capital model as a tool to assist the BMA both in measuring risk and in determining appropriate levels of capitalization. BSCR employs a standard mathematical model that correlates the risk underwritten by Bermuda insurers to the capital that is dedicated to their business. The framework that has been developed applies a standard measurement format to the risk associated with an insurer’s assets, liabilities and premiums, including a formula to take account of catastrophe risk exposure.

Where an insurer believes that its own internal model for measuring risk and determining appropriate levels of capital better reflects the inherent risk of its business, it may apply to the BMA for approval to use its internal capital model in substitution for the BSCR model. The BMA may approve an insurer’s internal model, provided certain conditions have been established, and may revoke approval of an internal model in the event that the conditions are no longer met or where it feels that the revocation is appropriate. The BMA will review the internal model regularly to confirm that the model continues to meet the conditions.

In order to minimize the risk of a shortfall in capital arising from an unexpected adverse deviation, the BMA seeks that insurers operate at or above a threshold capital level (termed the Target Capital Level or “TCL”), which exceeds the BSCR or approved internal model minimum amounts. The Rules provide prudential standards in relation to the ECR and Capital and Solvency Return (“CSR”). The ECR is determined using the BSCR or an approved internal model, provided that at all times the ECR must be an amount equal to, or exceeding the MSM. The CSR is the return setting out the insurer’s risk management practices and other information used by the insurer to calculate its approved internal model ECR. The capital requirements require Class 3B insurers to hold available statutory capital and surplus equal to, or exceeding ECR and set TCL at 120% of ECR. In circumstances where an insurer has failed to comply with an ECR given by the BMA, such insurer is prohibited from declaring or paying any dividends until the failure is rectified.

The risk-based solvency capital framework referred to above represents a modification of the minimum solvency margin test set out in the Insurance Returns and Solvency Amendment Regulations 1980 (as amended). While it must calculate its ECR annually by reference to either the BSCR or an approved internal model, Global Indemnity Reinsurance must also ensure at all times that its ECR is at least equal to the MSM for a Class 3B insurer in respect of its general business, which is the greater of:

(i)$1.0 million;

(ii)50% of net premiums written;

(iii)15% of net loss and loss adjustment expense reserves and other general business insurance reserves.

(iv)25% of the insurer’s enhanced capital requirement.

The BMA has also introduced a three-tiered capital system for Class 3B insurers designed to assess the quality of capital resources that an insurer has available to meet its capital requirements. The tiered capital system classifies

all capital instruments into one of three tiers based on their “loss absorbency” characteristics, with the highest quality capital classified as Tier 1 Capital and lesser quality capital classified as either Tier 2 or Tier 3 Capital. Only Tier 1 and Tier 2 Capital may be used to support an insurer’s MSM. Certain percentages of each of Tier 1, 2 and 3 Capital may be used to satisfy an insurer’s ECR. Any combination of Tier 1, 2 or 3 Capital may be used to meet the TCL.

The Rules introduced a regime that requires Class 3B insurers to perform an assessment of their own risk and solvency requirements, referred to as a Commercial Insurer’s Solvency Self Assessment (“CISSA”). The CISSA will allow the BMA to obtain an insurer’s view of the capital resources required to achieve its business objectives and to assess the company’s governance, risk management and controls surrounding this process. The Rules also introduced a Catastrophe Risk Return, which must be filed with the BMA, which assesses an insurer’s reliance on vendor models in assessing catastrophe exposure.

Economic Balance Sheet Framework

The Economic Balance Sheet (“EBS”) framework is an accounting balance sheet approach using market consistent values for all current assets and current obligations relating toin-force business which applies to Class 3B and 4 insurers and has been in effect since the 2016 financial year end. The EBS framework is embedded as part of the Capital and Solvency Return and forms the basis for the insurer’s ECR.

Minimum Liquidity Ratio

The InsuranceCalifornia Privacy Rights Act provides a minimum liquidity ratio for general business insurers, such as Global Indemnity Reinsurance. An insurer engaged in general business is required to maintain the value of its relevant assets at not less than 75% of the amount of its relevant liabilities; as such terms are defined in the Insurance Act.

Restrictions on Dividends and Distributions

Global Indemnity Reinsurance is prohibited from declaring or paying any dividends during any financial year if it is in breach of its minimum solvency margin or minimum liquidity ratio or if the declaration or payment of such dividends would cause it to fail to meet such margin or ratio. In addition, if it has failed to meet its minimum solvency margin or minimum liquidity ratio on the last day of any financial year, Global Indemnity Reinsurance will be prohibited, without the approval of the BMA, from declaring or paying any dividends during the next financial year.

Global Indemnity Reinsurance is prohibited, without the approval of the BMA, from reducing by 15% or more its total statutory capital or 25% or more of its total statutory capital and surplus as set out in its previous year’s financial statements, and any application for such approval must include such information as the BMA may require. In addition, if at any time it fails to meet its minimum margin of solvency, Global Indemnity Reinsurance is required within 30 days after becoming aware of such failure or having reason to believe that such failure has occurred, to file with the BMA a written report containing certain information.

Additionally, under the Companies Act, Global Indemnity Reinsurance may not declare or pay a dividend, or make a distribution from contributed surplus, if there are reasonable grounds for believing that it is, or would after the payment be, unable to pay its liabilities as they become due, or if the realizable value of its assets would be less than the aggregate of its liabilities and its issued share capital and share premium accounts.

Supervision, Investigation and Intervention

The BMA has wide powers of investigation and document production in relation to Bermuda insurers under the Insurance Act. For example, the BMA may appoint an inspector with extensive powers to investigate the affairs of Global Indemnity Reinsurance if the BMA believes that such an investigation is in the best interests of its

policyholders or persons who may become policyholders. Further, the BMA has the power to appoint a professional person to prepare a report on any aspect of any matter about which the BMA has or could require information. If it appears to the BMA that there is a risk of Global Indemnity Reinsurance becoming insolvent, or that Global Indemnity Reinsurance is in breach of the Insurance Act or any conditions imposed upon its registration, the BMA may, among other things, direct Global Indemnity Reinsurance not to take on any new business, not to vary any current treaties if the effect would be to increase its liabilities, not to make certain investments, to realize or not realize certain investments, to maintain in, or transfer to, the custody of a specified bank, certain assets, not to declare or pay any dividends or other distributions or to restrict the making of such payments, or to limit its premium income or remove an officer.

The BMA may also make additional rules prescribing prudential standards in relation to the ECR, CSR, insurance reserves and eligible capital which Global Indemnity Reinsurance must comply with.

Bermuda Code of Conduct

The BMA has implemented the Insurance Code of Conduct (the “Bermuda Code of Conduct”) which came into effect on July 1, 2010. The BMA established July 1, 2011 as the date of compliance for commercial insurers. The Bermuda Code of Conduct is divided into six categories: (i) Proportionality Principal, (ii) Corporate Governance, (iii) Risk Management, (iv) Governance Mechanism, (v) Outsourcing, and (vi) Market Discipline and Disclosure. These categories contain the duties, requirements and compliance standards to which all insurers must adhere. It stipulates that in order to achieve compliance with the Bermuda Code of Conduct, insurers are to develop and apply policies and procedures capable of assessment by the BMA. Global Indemnity Reinsurance is in compliance with the Bermuda Code of Conduct.

Group Supervision

Emerging international norms in the regulation of global insurance groups are trending increasingly towards the imposition of group-wide supervisory regimes by one principal “home” regulator over all the legal entities in the group, no matter where incorporated. Amendments to the Insurance Act in 2010 introduced such a regime into Bermuda insurance regulation.

The Insurance Act contains provisions regarding group supervision, the authority to exclude specified entities from group supervision, the power for the BMA to withdraw as a group supervisor, the functions of the BMA as group supervisor and the power of the BMA to make rules regarding group supervision.

The BMA has issued the Insurance (Group Supervision) Rules 2011 (the “Group Supervision Rules”) and the Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011 (the “Group Solvency Rules”) each effective December 31, 2011. The Group Supervision Rules set out the rules in respect of the assessment of the financial situation and solvency of an insurance group, the system of governance and risk management of the insurance group, and supervisory reporting and disclosures of the insurance group. The Group Solvency Rules set out the rules in respect of the capital and solvency return and enhanced capital requirements for an insurance group. The BMA also intends to publish an insurance code of conduct in relation to group supervision.

Global Indemnity Reinsurance was notified by the BMA that, having considered the matters set out in the 2010 amendments to the Insurance Act, it had determined that it would not be Global Indemnity Reinsurance’s group supervisor.

Notifications to the BMA

In the event that the share capital of an insurer (or its parent) is traded on any stock exchange recognized by the BMA, then any shareholder must notify the BMA within 45 days of becoming a 10%, 20%, 33% or 50%

shareholder of such insurer. An insurer must also provide written notice to the BMA that a person has become, or ceased to be, a “Controller” of that insurer. A Controller for this purpose means a managing director, chief executive or other person in accordance with whose directions or instructions the Directors of Global Indemnity Reinsurance are accustomed to act, including any person who holds, or is entitled to exercise, 10% or more of the voting shares or voting power or is otherwise able to exercise significant influence over the management of Global Indemnity Reinsurance.

Global Indemnity Reinsurance is also required to notify the BMA in writing in the event any person has become or ceased to be an officer of it, an officer being a director, chief executive or senior executive performing duties of underwriting, actuarial, risk management, compliance, internal audit, finance or investment matters. Failure to give required notice is an offense under the Insurance Act.

An insurer, or designated insurer in respect of the group of which it is a member, must notify the BMA in writing that it proposes to take measures that are likely to be of material significance for the discharge, in relation to the insurer or the group, of the BMA’s functions under the Insurance Act. Measures that are likely to be of material significance include:

acquisition or transfer of insurance business being part of a scheme falling within section 25 of the Insurance Act or section 99 of the Companies Act;

amalgamation with or acquisition of another firm; and

a material change in the insurer’s business plan not otherwise reported to the BMA.

In respect of the forgoing, the BMA will typically object to the material change unless it is satisfied that:

the interest of the policyholders and potential policyholders of the insurer or the group would not in any manner be threatened by the material change; and

without prejudice to the first point, that, having regard to the material change, the requirements of the Insurance Act would continue to be complied with, or, if any of those requirements are not complied with, that the insurer concerned is likely to undertake adequate remedial action.

Failure to give such notice constitutes an offence under the Insurance Act. It is possible to appeal a notice of objection served by the BMA.

Disclosure of Information

The BMA may assist other regulatory authorities, including foreign insurance regulatory authorities, with their investigations involving insurance and reinsurance companies in Bermuda, but subject to restrictions. For example, the BMA must be satisfied that the assistance being requested is in connection with the discharge of regulatory responsibilities of the foreign regulatory authority. Further, the BMA must consider whether cooperation is in the public interest. The grounds for disclosure are limited and the Insurance Act provides sanctions for breach of the statutory duty of confidentiality.

Under the Companies Act, the Minister of Finance may assist a foreign regulatory authority that has requested assistance in connection with inquiries being carried out by it in the performance of its regulatory functions. The Minster of Finance’s powers include requiring a person to furnish information to the Minister of Finance, to produce documents to the Minister of Finance, to attend and answer questions and to give assistance to the Minister of Finance in relation to inquiries. The Minister of Finance must be satisfied that the assistance requested by the foreign regulatory authority is for the purpose of its regulatory functions and that the request is in relation to information in Bermuda that a person has in his possession or under his control. The Minister of Finance must consider, among other things, whether it is in the public interest to give the information sought.

Certain Other Bermuda Law Considerations

Although Global Indemnity Reinsurance is incorporated in Bermuda, it is classified as anon-resident of Bermuda for exchange control purposes by the BMA. Pursuant to thenon-resident status, Global Indemnity Reinsurance may engage in transactions in currencies other than Bermuda dollars, and there are no restrictions on its ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to United States residents that are holders of its ordinary shares.

Under Bermuda law, exempted companies are companies formed for the purpose of conducting business outside Bermuda from a principal place of business in Bermuda. As an “exempted” company, Global Indemnity Reinsurance may not, without the express authorization of the Bermuda legislature or under a license or consent granted by the Minister of Finance, participate in certain business transactions, including transactions involving Bermuda landholdingexpanded consumer privacy rights and the carrying on of business of any kind for which it is not licensed in Bermuda.established a new privacy regulatory agency.

Taxation of Global Indemnity and Subsidiaries

Cayman Islands

The Cayman Islands currently have no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax.

Global Indemnity is an exempted company incorporated with limited liability under the laws of the Cayman Islands. Global Indemnity has received an undertaking from the Governor in Cabinet of the Cayman Islands to the effect that, for a period of twenty years from the date of the undertaking, which is February 9, 2016, no law that thereafter is enacted in the Cayman Islands imposing any tax or duty to be levied on profits, income or on gains or appreciation, or any tax in the nature of estate duty or inheritance tax, will apply to any property comprised in or any income arising in respect of Global Indemnity, or to the shareholders thereof, in respect of any such property or income.

Ireland

Global Indemnity Services Ltd., a direct wholly-owned subsidiary, is a company limited by shares incorporated under the laws of Ireland. The company is a resident taxpayer fully subject to Irish corporate income tax laws. Global Indemnity Services Ltd. has only trading income and is subject to corporate income tax of 12.5%.

U.A.I. (Ireland) Limited, U.A.I. (Ireland) II Unlimited Company, GBLI (Ireland) Limited, and Global Indemnity Group Limited, all indirect wholly-owned subsidiaries, are companies incorporated under the laws of Ireland. Each company is a resident taxpayer fully subject to Irish corporate income tax laws.

Bermuda

Under current Bermuda law, the Company and its Bermuda subsidiaries are not required to pay any taxes in Bermuda on income or capital gains. Currently, there is no Bermuda income, corporation or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by Global Indemnity Reinsurance or its shareholders, or GBLI (Bermuda) Limited, or its shareholders, other than shareholders ordinarily resident in Bermuda, if any. Currently, there is no Bermuda withholding or other tax on principal, interest, or dividends paid to holders of the ordinary shares of Global Indemnity Reinsurance or GBLI (Bermuda) Limited, other than holders ordinarily resident in Bermuda, if any. There can be no assurance that Global Indemnity Reinsurance or its shareholders or GBLI (Bermuda) Limited or its shareholders will not be subject to any such tax in the future.

The Company has received a written assurance from the Bermuda Minister of Finance under the Exempted Undertakings Tax Protection Act of 1966 of Bermuda, that if any legislation is enacted in Bermuda that would

impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of that tax would not be applicable to Global Indemnity Reinsurance or GBLI (Bermuda) Limited or to any of its operations, shares, debentures or obligations through March 31, 2035; provided that such assurance is subject to the condition that it will not be construed to prevent the application of such tax to people ordinarily resident in Bermuda, or to prevent the application of any taxes payable by Global Indemnity Reinsurance or GBLI (Bermuda) Limited in respect of real property or leasehold interests in Bermuda held by them. Given the limited duration of the assurance, the Company cannot be certain that the Company will not be subject to any Bermuda tax after March 31, 2035.

Luxembourg

U.A.I. (Luxembourg) I S.à.r.l., U.A.I. (Luxembourg) II S.à.r.l., U.A.I. (Luxembourg) III S.à.r.l., U.A.I. (Luxembourg) IV S.à.r.l., U.A.I. (Luxembourg) Investment S.à.r.l., and Wind River (Luxembourg) S.à.r.l. (the “Luxembourg Companies”) are indirect wholly-owned subsidiaries and private limited liability companies incorporated under the laws of Luxembourg. These are taxable companies, which may carry out any activities that fall within the scope of their corporate object clause. In accordance with Luxembourg regulations, the companies are resident taxpayers fully subject to Luxembourg corporate income tax at a rate of 27.08% and net worth tax at a rate of 0.5%. The companies are entitled to benefits of the tax treaties concluded between Luxembourg and other countries and European Union Directives.

Profit distributions (not in respect to liquidations) by the companies are generally subject to Luxembourg dividend withholding tax at a rate of 15%, unless a domestic law exemption or a lower tax treaty rate applies. Dividends paid by any of the Luxembourg Companies to their Luxembourg resident parent company are exempt from Luxembourg dividend withholding tax, provided that at the time of the dividend distribution, the resident parent company has held (or commits itself to continue to hold) 10% or more of the nominal paid up capital of the distributing entity or, in the event of a lower percentage participation, a participation having an acquisition price of Euro 1.2 million or more for a period of at least 12 months.

The Luxembourg Companies have received advance tax confirmations (“ATCs”) from the Luxembourg Administration des Contributions Directes (the “Luxembourg tax authorities”) that the financing activities of the Luxembourg Companies do not lead to taxation in Luxembourg except for the taxation as provided in the ATCs. Based on these confirmations received, the current financing activities of the Luxembourg Companies should not lead to taxation in Luxembourg other than for such tax as provided for in the financial statements. The Luxembourg Companies have in their files transfer pricing documentation substantiating the arm’s length nature of the financing activities. It is however not guaranteed that the Luxembourg Companies cannot be subject to higher Luxembourg taxes.

Barbados

GBLI (Barbados) Limited, an indirect wholly owned subsidiary, is incorporated under the Companies Act, Cap. 308 of the Laws of Barbados. It is a duly licensed international business company under the International Business Companies Act, Cap. 77 of the Laws of Barbados and subject to a corporate income tax rate as follows:

2.5% on all profits and gains up to $5,000,000;

2% on all profits and gains exceeding $5,000,000 but not exceeding $10,000,000;

1.5% on all profits and gains exceeding $10,000,000 but not exceeding $15,000,000; and

0.25% on all profits and gains exceeding $15,000,000.

United States

The following discussion is a summary of the material U.S. federal income tax considerations relating to the Company’s operations. The Company manages its business in a manner that seeks to mitigate the risk that either

Global Indemnity or Global Indemnity Reinsurance will be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes. However, whether business is being conducted in the United States is an inherently factual determination. Because the United States Internal Revenue Code (the “Code”), regulations and court decisions fail to identify definitively activities that constitute being engaged in a trade or business in the United States, the Company cannot be certain that the Internal Revenue Service (“IRS”) will not contend successfully that Global Indemnity or Global Indemnity Reinsurance is or has been engaged in a trade or business in the United States. Anon-U.S. corporation deemed to be so engaged would be subject to U.S. income tax at regular corporate rates, as well as the branch profits tax, on its income that is treated as effectively connected with the conduct of that trade or business unless the corporation is entitled to relief under the permanent establishment provision of an applicable tax treaty, as discussed below. Such income tax, if imposed, would be based on effectively connected income computed in a manner generally analogous to that applied to the income of a U.S. corporation, except that anon-U.S. corporation is generally entitled to deductions and credits only if it timely files a U.S. federal income tax return. Global Indemnity and Global Indemnity Reinsurance are filing protective U.S. federal income tax returns on a timely basis in order to preserve the right to claim income tax deductions and credits if it is ever determined that it is subject to U.S. federal income tax. The highest marginal federal income tax rates to take effect in 2018 are 21% for a corporation’s effectively connected income and 30% for the branch profits tax.

If Global Indemnity Reinsurance is entitled to the benefits under the tax treaty between Bermuda and the United States (the “Bermuda Treaty”), Global Indemnity Reinsurance would not be subject to U.S. income tax on any business profits of its insurance enterprise found to be effectively connected with a U.S. trade or business, unless that trade or business is conducted through a permanent establishment in the United States. No regulations interpreting the Bermuda Treaty have been issued. Global Indemnity Reinsurance currently conducts its activities to reduce the risk that it will have a permanent establishment in the United States, although the Company cannot be certain that it will achieve this result.

An insurance enterprise resident in Bermuda generally will be entitled to the benefits of the Bermuda Treaty if (1) more than 50% of its shares are owned beneficially, directly or indirectly, by individual residents of the United States or Bermuda or U.S. citizens and (2) its income is not used in substantial part, directly or indirectly, to make disproportionate distributions to, or to meet certain liabilities to, persons who are neither residents of either the United States or Bermuda nor U.S. citizens. The Company cannot be certain that Global Indemnity Reinsurance will be eligible for Bermuda Treaty benefits in the future because of factual and legal uncertainties regarding the residency and citizenship of the Company’s shareholders.

Foreign insurance companies carrying on an insurance business within the United States have a certain minimum amount of effectively connected net investment income, determined in accordance with a formula that depends, in part, on the amount of U.S. risk insured or reinsured by such companies. If Global Indemnity Reinsurance is considered to be engaged in the conduct of an insurance business in the United States and it is not entitled to the benefits of the Bermuda Treaty in general (because it fails to qualify under the limitations on treaty benefits discussed above), the Code could subject a significant portion of Global Indemnity Reinsurance’s investment income to U.S. income tax. In addition, while the Bermuda Treaty clearly applies to premium income, it is uncertain whether the Bermuda Treaty applies to other income such as investment income. If Global Indemnity Reinsurance is considered engaged in the conduct of an insurance business in the United States and is entitled to the benefits of the Bermuda Treaty in general, but the Bermuda Treaty is interpreted to not apply to investment income, a significant portion of Global Indemnity Reinsurance’s investment income could be subject to U.S. federal income tax.

The United States also imposes an excise tax on insurance and reinsurance premiums paid to foreign insurers or reinsurers with respect to risks located in the United States. The rates of tax applicable to premiums paid to Global Indemnity Reinsurance on such business are 4% for direct insurance premiums and 1% for reinsurance premiums. Foreign corporations not engaged in a trade or business in the United States are subject to 30% U.S. income tax imposed by withholding on the gross amount of certain “fixed or determinable annual or periodic

gains, profits and income” derived from sources within the United States (such as dividends and certain interest on investments), subject to exemption under the Code or reduction by applicable treaties. The Bermuda Treaty does not reduce the rate of tax in such circumstances.

Global Indemnity Group, Inc. is a Delaware corporation wholly owned by U.A.I. (Luxembourg) Investment S.à.r.l. Under U.S. federal income tax law, dividends and interest paid by a U.S. corporation to anon-U.S. shareholder are generally subject to a 30% withholding tax, unless reduced by treaty. The income tax treaty between Luxembourg and the United States (the “Luxembourg Treaty”) reduces the rate of withholding tax on interest payments to 0% and on dividends to 15%, or 5% (if the shareholder owns 10% or more of the company’s voting stock). There is a risk that interest paid by the Company’s U.S. subsidiary to a Luxembourg affiliate may be subject to a 30% withholding tax.

The Company’s U.S. subsidiaries are each subject to taxation in the United States at regular corporate rates. On December 22, 2017, the United States enacted the TCJA, which contains provisions that can materially affect the tax treatment of the Company’s U.S. subsidiaries. Although the TCJA reduced the U.S. corporate income tax rate to 21 percent, it also imposed a 10 percent base erosion minimum tax, or BEAT, on a U.S. corporation’s modified taxable income, which generally is the corporation’s taxable income calculated without regard to certain otherwise deductible payments made to certain foreign affiliates (including interest payments as well as gross premium or other consideration paid or accrued to a related foreign reinsurance company for reinsurance). In addition to BEAT, the TCJA limits the deductibility of interest expense and executive compensation by the Company’s U.S. subsidiaries. The Company is continuing to study the full extent of the impact of these and other provisions of the TCJA.

Available Information

The Company maintains a website at www.globalindemnity.ky.www.gbli.com. The information on the Company’s website is not incorporated herein by reference. The Company will make available, free of charge on its website, the most recent annual report on Form10-K and subsequently filed quarterly reports on Form10-Q, current reports on Form8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company files such material with, or furnishes it to, the United States Securities and Exchange Commission.Commission (“SEC”).

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The public may also read and copy any materials the Company files with the U.S. Securities and Exchange Commission (“SEC”) at the SEC’sSEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549 or by calling the SEC at1-800-SEC-0330. The SEC maintains, free of charge, an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Item 1A. RISK FACTORS

Item 1A.RISK FACTORS

The risks and uncertainties described below are those the Company believes to be material. If any of the following actually occur, the Company’s business, prospects, financial condition, results of operations and cash flows could be materially and adversely affected.

Risks Related to the Company’s Business

Restructuring of insurance operations may not yield the expected benefits.

The ability to execute the Company’s restructuring initiative is subject to significant challenges, uncertainties, and risks. The restructuring initiative may not produce the anticipated benefits and may result in unintended consequences which could have a material adverse impact on the Company’s financial condition and results of operations. The restructuring initiative could result in an unexpected loss of key personnel. This could have a material adverse impact on the Company’s business due to the loss of skill, knowledge of the Company’s product offerings, years of industry experience, and in some cases, the difficulty of promptly finding qualified replacement personnel. In addition, the restructuring could harm the Company’s relationships with its agents or it may not be able to execute its strategies as efficiently as before the restructuring.

The Company may not be able to effectively start up or integrate new product opportunities.

The Company's ability to grow the business depends, in part, on the creation, implementation or acquisition of new insurance products that are profitable and fit within the Company's business model. The Company's ability to grow profitably requires the identification of market opportunities, which may include acquisitions, and the ability to attract and retain underwriting and claims expertise to support that growth. New product launches, as well as resources to integrate business acquisitions, are subject to many obstacles, including ensuring the Company has sufficient business and systems processes, determining appropriate pricing, obtaining reinsurance, assessing opportunity costs and regulatory burdens, and planning for internal infrastructure needs. The Company's ability to grow profitably could be impaired if it cannot effectively overcome these obstacles or it improperly implement new insurance products.

If actual claims payments exceed the Company’s reserves for losses and loss adjustment expenses, the Company’s financial condition and results of operations could be adversely affected.

The Company’s success depends upon its ability to accurately assess the risks associated with the insurance and reinsurance policies that it writes. The Company establishes reserves on an undiscounted basis to cover its estimated liability for the payment of all losses and loss adjustment expenses incurred with respect to premiums

earned on the insurance policies that it writes. Reserves do not represent an exact calculation of liability. Rather, reserves are estimates of what the Company expects to be the ultimate cost of resolution and administration of claims under the insurance policies that it writes. These estimates are based upon actuarial and statistical projections, the Company’s assessment of currently available data, as well as estimates and assumptions as to future trends in claims severity and frequency, judicial theories of liability and other factors. The Company continually refines its reserve estimates in an ongoing process as experience develops and claims are reported and settled. The Company’s insurance subsidiaries obtain an annual statement of opinion from an independent actuarial firm on the reasonableness of these reserves.

Establishing an appropriate level of reserves is an inherently uncertain process. The following factors may have a substantial impact on the Company’s future actual losses and loss adjustment experience:

•
claim and expense payments;

•
frequency and severity of claims;

•
legislative and judicial developments; and

•
changes in economic conditions, including the effect of inflation.

For example, as industry practices and legal, judicial, social and other conditions change, unexpected and unintended exposures related to claims and coverage may emerge. Examples include claims relating to mold, asbestos and construction defects, as well as larger settlements and jury awards against professionals and corporate directors and officers. In addition, there is a growing trend of plaintiffs targeting property and casualty insurers in purported class action litigations relating to claims handling, insurance sales practices and other practices. These exposures may either extend coverage beyond the Company’s

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underwriting intent or increase the frequency or severity of claims. As a result, such developments could cause the Company’s level of reserves to be inadequate.

Actual losses and loss adjustment expenses the Company incurs under insurance policies that it writes may be different from the amount of reserves it establishes, and to the extent that actual losses and loss adjustment expenses exceed the Company’s expectations and the reserves reflected on its financial statements, the Company will be required to immediately reflect those changes by increasing its reserves. In addition, regulators could require that the Company increase its reserves if they determine that the reserves were understated in the past. When the Company increases reserves,pre-tax income for the period in which it does so will decrease by a corresponding amount. In addition to having an effect on reserves andpre-tax income, increasing or “strengthening”"strengthening" reserves causes a reduction in the Company’s insurance companies’companies' surplus and could cause the rating of its insurance company subsidiaries to be downgraded or placed on credit watch. Such a downgrade could, in turn, adversely affect the Company’s ability to sell insurance policies.

Catastrophic events can have a significant impact onThe failure of any of the Company’s financial and operational condition.

Results of operations of property and casualty insurers are subject toman-made and natural catastrophes. Theloss limitations or exclusions employed by the Company, has experienced, and expects to experienceor changes in the future, catastrophe losses. It is possible that a catastrophic eventother claims or a series of multiple catastrophic eventscoverage issues, could have a material adverse effect on the Company's financial condition or results of operations.

Although the Company seeks to mitigate its loss exposure through a variety of methods, the future is inherently unpredictable. It is difficult to predict the timing, frequency and severity of losses with statistical certainty. It is not possible to completely eliminate the Company's exposure to unforecasted or unpredictable events and, to the extent that losses from such risks occur, the Company's financial condition and results of operations could be materially adversely affected.

For instance, various provisions within policies issued by the Company, such as limitations or exclusions from coverage or choice of forum, which have been negotiated to limit the Company's risks, may not be enforceable in the manner intended by the Company.

In addition, policy terms are designed to manage the Company's exposure to expanding theories of legal liability like those which have given rise to claims for lead paint asbestos, mold, construction defects and environmental matters. Many of the policies issued by the Company also include conditions requiring the prompt reporting of claims to the Company and entitle the Company to decline coverage in the event of a violation of those conditions. Also, many of the Company's policies limit the period during which a policyholder may bring a claim under the policy, which in many cases is shorter than the statutory period under which such claims can be brought against the Company's policyholders.

While these exclusions and limitations help the Company to assess and reduce its loss exposure and help eliminate known exposures to certain risks, it is possible that a court or regulatory authority could nullify or void an exclusion or legislation could be enacted modifying or barring the use of such endorsements and limitations. These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on the Company's financial condition or results of operations.

As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge. An example is court decisions that read policy exclusions narrowly so as to expand coverage, thereby requiring insurers to create and write new exclusions.

These issues may adversely affect the Company's business by either broadening coverage beyond its underwriting intent or by increasing the number or size of claims. In some instances, these changes may not become apparent until sometime after the Company has issued insurance contracts that are affected by the changes. As a result, the full extent of liability under the Company's insurance contracts may not be known for many years after a contract is issued.

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The occurrence of natural or man-made disasters could adversely affect the Company’s operatingbusiness, financial condition and results of operations.

The Company is exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, fires, floods, landslides, tornadoes, typhoons, tsunamis, hailstorms, explosions, climate events or weather patterns, public health crises such as illness, epidemics or pandemic health events, as well as man-made disasters, including acts of terrorism, military actions, cyber-terrorism, explosions and biological, chemical or radiological events. The continued threat of terrorism and ongoing military actions may cause significant volatility in global financial markets, and a natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the disaster. These consequences could, among other things, result in a decline in business and increased claims from those areas. They could also result in reduced underwriting capacity making it more difficult for the Company’s agents to place business. In addition, there could be unanticipated problems with the Company’s disaster recovery processes, or a support failure from external providers, that could have an adverse effect on the Company’s ability to conduct business if a significant number of employees were unable to work in the event of a disaster. Disasters also could disrupt public and private infrastructure, including communications and financial condition. Theservices, which could disrupt the Company’s operating resultsordinary business operations.

A natural or man-made disaster could be negatively impacted if it experiences losses from catastrophes that are in excessalso disrupt the operations of the catastrophe reinsurance coverageCompany’s counterparties or result in increased prices for the products and services they provide to the Company. A natural or man-made disaster could increase the incidence or severity of E&O claims against the Company.

The Company may also experience disruptions to its Insurance Operations. The Company’s Reinsurance Operations also have exposure to losses from catastrophesbusiness as a result of a pandemic and any associated protective or preventative measures including but not limited to:

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clients choosing to limit purchases of insurance due to declining business conditions, which would inhibit the reinsurance treatiesCompany’s ability to generate earned premium;
•
travel restrictions and quarantines leading to a lack of in-person meetings, which would hinder the Company’s ability to establish relationships or originate new business;
•
cancellation, delays, or non-payment of premium could negatively impact the Company’s liquidity;
•
risk that it writes. Operating resultslegislation could be negatively impacted if lossespassed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions or other conditions included in policies that would otherwise preclude coverage;
•
significant volatility in financial markets affecting the market value and expensesliquidity of the Company’s investment portfolio.

As a result, it is possible that any, or a combination of all, of these factors related to property catastrophe events exceed premiums assumed. Catastrophes include windstorms, hurricanes, typhoons, floods, earthquakes, tornadoes, tsunamis, hail, severe winter weather, fires and may include terrorist events such as the attacks of September 11, 2001. The Company cannot predict how severe a particular catastrophe may be until after it occurs. The extent of losses from catastrophes is a function of the total amount and type of losses incurred, the number of insureds affected, the frequency of the events and the severity of the

particular catastrophe. Most catastrophes occur in small geographic areas. However, some catastrophes may produce significant damage in large, heavily populated areas.

The benefits of acquiring American Reliable may not be realized whichnatural or man-made disasters could have a material adverse effect on the Company’s business, operationsfinancial condition, and financial results.results of operations.

There may be difficulties

A decline in rating for any of the Company’s insurance subsidiaries could adversely affect its position in the continued integrationinsurance market; making it more difficult to market its insurance products and cause premiums and earnings to decrease.

If the rating of American Reliable business, whichany of the Company’s insurance companies is reduced from its current level of “A” (Excellent) by AM Best, the Company’s competitive position in the insurance industry could suffer, and it could be more difficult to market its insurance products. A downgrade could result in a failuresignificant reduction in the number of insurance contracts the Company writes and in a substantial loss of business; as such business could move to realizeother competitors with higher ratings, thus causing premiums and earnings to decrease.

These ratings are not an evaluation of, nor are they directed to, investors in Global Indemnity Group, LLC’s class A common shares and are not a recommendation to buy, sell or hold Global Indemnity Group, LLC’s class A common shares. Publications of AM Best indicate that companies are assigned "A" (Excellent) ratings if, in AM Best's opinion, they have an excellent ability to meet their ongoing obligations to policyholders. These ratings are subject to periodic review by, and may be revised downward or revoked at the potential benefitssole discretion of the acquisition. Achieving the anticipated benefits of the acquisition will depend in part upon whether the common aspects of the business can continue to be integrated in an efficient and effective manner with Global Indemnity’s existing businesses. Furthermore, the risk that the Company’s or American Reliable’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) could negatively impact the Company’s profitability and results of operations.AM Best.

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A failure in the Company’s operational systems or infrastructure or those of third parties, including security breaches or cyber-attacks, could disrupt the Company’s business, its reputation, and / or cause losses which would have a material effect on the Company’s business operations and financial results.

The Company’s business is dependent upon the secure processing, storage, and transmission of information over computer networks using applications, systems and other technologies. The business depends on effective information security and systems to perform accounting, policy administration, claims, underwriting, actuarial and all aspects of day to dayday-to-day operations necessary to service the Company’s customers and agents, to value the Company’s investments and to timely and accurately report the Company’s financial results.

The information systems the Company relies upon must ensure confidentiality, integrity and availability of the data, including systems maintained by the Company as well as data in and assets held through third-party service providers and systems. The Company employs various measures, systems, applications and software to address the data security. The Company reviews its existing security measures and systems on a continuing basis through internal and independent evaluations. The Company has implemented administrative and technical controls and takes protective actions in an attempt to reduce the risk of cyber incidents.

The Company’s internal and external controls, processes, and the vendors used to protect networks, systems and applications, individually or together, may be insufficient to prevent a security incident. Employee or third partythird-party vendor errors, malicious acts, unauthorized access, computer viruses, malware, the introduction of malicious code, system failures and disruptions, and or cyber-attacks can result in business interruption, compromise of data and loss of assets and that could have security consequences.assets. Complexity of the Company’s technology increases regularly and has increased the risk of a security incident involving data, network, systems and applications.

The Company has, from time

Third parties, including third party administrators and cloud-based systems, are also subject to time, experienced security incidents, nonecyber-attacks and breaches of confidential information, along with the other risks outlined above, any one of which hadmay result in the Company incurring substantial costs and other negative consequences, including a material adverse impacteffect on the Company’sCompany's business, reputation, financial condition, results of operations or financial condition. liquidity. The Company's increased use of open source software, cloud technology and software as a service can make it more difficult to identify and remedy such situations due to the disparate location of code utilized in its operations.

Security incidents have the potential to interrupt business, cause delays in processes and procedures directly affecting the Company, and jeopardize the Company’s, insureds, claimants, agentsinsureds’, claimants’, agents’ and othersothers’ confidential data resulting in data loss, and loss of assets, and reputational damages. If this occurs it could have a material adverse effect on the Company’s business operations and financial results.

Security incidents could require significant resources, both internal and external, to resolve or remediate and could result in financial losses that may not be covered by insurance or not fully recoverable under any insurance. The Company may be subject to litigation and damages or regulatory action under data protection and privacy laws and regulations enacted by federal, state and foreign governments, or other regulatory bodies. As a result, the Company’s ability to conduct its business and its results of operations might be materially and adversely affected.

The Company’s failurebusiness success and profitability depend, in part, on effective information technology systems and on continuing to adequately protect personal information could have a material adverse effectdevelop and implement improvements in technology, particularly as the Company’s business processes become more digital.

The Company depends in large part on its technology systems for conducting business and processing claims, as well as for providing the data and analytics the Company utilizes to manage its business.

A wide variety As a result, the Company’s business success is dependent on maintaining the effectiveness of local, state, national,existing technology systems and international lawson continuing to develop and regulations apply toenhance technology systems that support the collection, use, retention, protection, disclosure, transferCompany’s business processes and other processingstrategic initiatives in an efficient manner, particularly as business processes become more digital and certain of personal data, including laws mandating the privacy and security of personal health and financial data. These data protection and privacy-related laws and regulationsCompany’s products are evolvingmore technology-based. Some system development projects are long-term in nature and may result in ever-increasing regulatorynegatively impact the Company’s expense ratios and public scrutiny and escalating levels of enforcement and sanctions. The Company’s failuremay cost more than expected to comply with applicable laws and regulations,complete. In addition, system development projects may not deliver the benefits or to protect such data,perform as expected, or may be replaced or become obsolete more quickly than expected, which could result in enforcement action against it, including fines, imprisonmentoperational difficulties, additional costs or accelerated recognition of company officials and public censure, claims for damages by customers and other affected individuals, damage to the Company’s reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could have a material adverse effect on its operations, financial performance and business.

Evolving and changing definitions of personal data and personal information within the European Union, the United States, and elsewhere may limit or inhibit theexpenses. The Company’s ability to operate or expand itsprovide competitive services to, and conduct business including limiting technology alliance partners that may involve the sharing of data. Additionally, there iswith, new and existing customers in a risk that failures in systems designed to protect private, personal or proprietary data held by the Company will allow such data to be disclosed to or acquired or seen by others, resulting in potential regulatory investigations, enforcement actions, or penalties, remediation obligations and/or private litigation by parties whose data were improperly disclosed. There is also a risk that the Company could be found to have failed to comply with U.S. or foreign laws or regulations regarding the collection, consent, handling, transfer, or disposal of such privacy, personal or proprietary data, which could subject it to fines or other sanctions,cost effective manner as well as adverse reputational impact. Even the perception of privacy concerns, whether or not valid, may harm the Company’s reputation, inhibit adoption of its products by current and future customers, or adversely impact its ability to attract and retain workforce talent.

A decline in rating for any ofimplement the Company’s insurance or reinsurance subsidiaries could adversely affect its position in the insurance market; making it more difficult to market its insurance products and cause premiums and earnings to decrease.

If the rating of any of the companies in its Insurance Operations or Reinsurance Operations is reduced from its current level of “A” (Excellent) by A.M. Best, the Company’s competitive position in the insurance industry could suffer, and itstrategic initiatives could be more difficult to market its insurance products. A downgrade could result in a significant reduction in the number of insurance contractsadversely impacted if the Company writes and in a substantial loss of business; as such business could move to other competitors with higher ratings, thus causing premiums and earnings to decrease.

Ratings have become an increasingly important factor in establishing the competitive position for insurance companies. A.M. Best ratings currently range from “A++” (Superior) to “F” (In Liquidation), with a total of 16 separate ratings categories. A.M. Best currently assigns the companies in the Insurance Operations and Reinsurance Operations a financial strength rating of “A” (Excellent), the third highest of their 16 rating categories. The objective of A.M. Best’s rating system is to provide potential policyholders an opinion of an insurer’s financial strength and its ability to meet ongoing obligations, including paying claims. In evaluating a company’s financial and operating performance, A.M. Best reviews its profitability, leverage and liquidity, its spread of risk, the quality and appropriateness of its reinsurance, the quality and diversification of its assets, the adequacy of its policy and loss reserves, the adequacy of its surplus, its capital structure, and the experience and objectives of its management. These ratings are based on factors relevant to policyholders, general agencies, insurance brokers, reinsurers, and intermediaries and are not directed to the protection of investors. These ratings are not an evaluation of, nor are they directed to, investors in the Company’s A ordinary shares and are not a recommendation to buy, sell or hold the Company’s A ordinary shares. Publications of A.M. Best indicate that companies are assigned “A” (Excellent) ratings if, in A.M. Best’s opinion, they have an excellent ability to meet their ongoing obligations to policyholders. These ratings are subject to periodic review by, and may be revised downward or revoked at the sole discretion of A.M. Best.

The Company cannot guarantee that its reinsurers will pay in a timely fashion, if at all, and as a result, the Company could experience losses.

The Company cedes a portion of gross premiums written to third party reinsurers under reinsurance contracts. Although reinsurance makes the reinsurer liable to the Company to the extent the risk is transferred, it does not relieveeffectively and efficiently manage and upgrade its technology portfolio or if the Companycosts of its liability to its policyholders. Upon payment of claims, the Company will bill its reinsurers for their share of such claims. The reinsurers may not pay the reinsurance receivables that they owe to the Company or they may not pay such receivables on a timely basis. If the reinsurers fail to pay it or fail to pay on a timely basis, the Company’s financial results would be adversely affected. Lack of reinsurer liquidity, perceived improper underwriting, or claim handling by the Company, and other factors could cause a reinsurer not to pay. See “Business — Reinsurance of Underwriting Risk” in Item 1 of Part I of this report.doing so are higher than expected.

See Note 9 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s reinsurance receivable balances as of December 31, 2017 and 2016.

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Investment Related Risks

The Company’s investment performance may suffer as a result of adverse capital market developments or other factors, which would in turn adversely affect its financial condition and results of operations.

The Company derives a significant portion of its income from its invested assets. As a result, the Company’s operating results depend in part on the performance of its investment portfolio. The Company’s operating results are subject to a variety of investment risks, including risks relating to general economic conditions, market volatility, interest rate fluctuations, liquidity risk and credit and default risk. The fair value of fixed income investments can fluctuate depending on changes in interest rates and the credit quality of underlying issuers. Generally, the fair market value of these investments has an inverse relationship with changes in interest rates, while net investment income earned by the Company from future investments in fixed maturities will generally increase or decrease with changes in interest rates. Additionally, with respect to certain of its investments, the Company is subject topre-payment or reinvestment risk.

Credit tightening could negatively impact the Company’s future investment returns and limit the ability to invest in certain classes of investments. Credit tightening may cause opportunities that are marginally attractive to not be financed, which could cause a decrease in the number of bond issuances. If marginally attractive opportunities are financed, they may be at higher interest rates, which would cause credit risk of such opportunities to increase. If new debt supply is curtailed, it could cause interest rates on securities that are deemed to be credit-worthy to decline. Funds generated by operations, sales, and maturities will need to be invested. If the Company invests during a tight credit market, investment returns could be lower than the returns the Company is currently realizing and/or it may have to invest in higher risk securities.

With respect to its longer-term liabilities, the Company strives to structure its investments in a manner that recognizes liquidity needs for its future liabilities. However, if the Company’s liquidity needs or general and specific liability profile unexpectedly changes, it may not be successful in continuing to structure its investment portfolio in that manner. To the extent that the Company is unsuccessful in correlating its investment portfolio with its expected liabilities, the Company may be forced to liquidate its investments at times and prices that are not optimal, which could have a material adverse effect on the performance of its investment portfolio. The Company refers to this risk as liquidity risk, which is when the fair value of an investment is not able to be realized due to low demand by outside parties in the marketplace.

The Company is also subject to credit risk due tonon-payment of principal or interest. Several classes of securities that the Company holds have default risk. As interest rates rise for companies that are deemed to be less creditworthy, there is a greater risk that they will be unable to pay contractual interest or principal on their debt obligations.

Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond the Company’s control. Although the

Company attempts to take measures to manage the risks of investing in a changing interest rate environment, the Company may not be able to mitigate interest rate sensitivity effectively. A significant increase in interest rates could have a material adverse effect on the market value of the Company’s fixed maturities securities.

The Company also has an equity portfolio. The performance of the Company’s equity portfolio is dependent upon a number of factors, including many of the same factors that affect the performance of its fixed income investments, although those factors sometimes have the opposite effect on the performance of the equity portfolio. Individual equity securities have unsystemic risk. The Company could experience market declines on these investments. The Company also has systemic risk, which is the risk inherent in the general market due to broad macroeconomic factors that affect all companies in the market. If the market indexes were to decline, the Company anticipates that the value of its portfolio would be negatively affected.

The Company has investments in limited partnerships which are not liquid. TheFor several limited partnership investments, the Company does not have the contractual option to redeem its limited partnership interests but receives distributions based on the liquidation of the underlying assets. During the 3rd quarter of 2023, the Company provided the Global Debt Fund, LP with a formal withdrawal request in full. Going forward, one fifth of the partnership will be redeemed based on June 30th and December 31st fair values until the limited partnership investment is fully liquidated. The Company does not have the ability to sell or transfer its limited partnership interests without consent from the general partner. The Company’s returns could be negatively affected if the market valuevalues of the limited partnerships declines.decline. If the Company needs liquidity, it might be forced to liquidate other investments at a time when prices are not optimal.

See Note 5 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s investments as of December 31, 20172023 and 2016.2022.

Deterioration inRisks Related to the debt and equity markets could resultCompany’s Business Partners

The Company cannot guarantee that its reinsurers will pay in a margin call whichtimely fashion, if at all, and as a result, the Company could haveexperience losses.

The Company cedes a material adverse effectportion of gross written premiums to third-party reinsurers under reinsurance contracts. Although reinsurance makes the reinsurer liable to the Company to the extent the risk is transferred, it does not relieve the Company of

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its liability to its policyholders. Upon payment of claims, the Company will bill its reinsurers for their share of such claims. The reinsurers may not pay the reinsurance receivables that they owe to the Company or they may not pay such receivables on a timely basis. If the reinsurers fail to pay it or fail to pay on a timely basis, the Company’s financial condition and/results would be adversely affected. Lack of reinsurer liquidity, perceived improper underwriting or resultsclaim handling by the Company, and other factors could cause a reinsurer not to pay. See "Business – Reinsurance of operations.Underwriting Risk" in Item 1 of Part I of this report.

The collateral backingSee Note 10 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s margin borrowing facility currently consist of equity securities but could also include fixed income securities in the future. Declines in financial markets could negatively impact the value of the Company’s collateral. Adverse changes in market value could result in a margin call which would require the posting of additional collateral thereby reducing liquidity. Additionally, if such a margin call is not met, the Company could be required to liquidate securities and incur realized losses or it could potentially decrease the Company’s borrowing capacity.

Borrowings under the Company’s margin borrowing facility are based upon a variable rate of interest, which could result in higher expense in the event of increases in interest rates.

Asreinsurance receivable balances as of December 31, 2017, $72.2 million of the Company’s outstanding indebtedness bore interest at a rate that varies depending upon the Fed Funds Effective rate. If Fed Funds Effective rate rises, the interest rates on outstanding debt will increase resulting in increased interest payment obligations under the Company’s margin borrowing facility. This could have a negative effect on the Company’s cash flow2023 and financial condition.2022.

The Company’s outstanding indebtedness could adversely affect its financial flexibility and a failure to make periodic payments related to the Subordinated Notes could adversely affect the Company.

In 2015, the Company sold $100 million aggregate principal amount of its 7.75% Subordinated Notes due in 2045. In 2017, the Company sold $130 million aggregate principal amount of its 7.875% Subordinated Notes due in 2047. The level of debt outstanding could adversely affect the Company’s financial flexibility, including:

increasing vulnerability to changing economic, regulatory and industry conditions;

limiting the ability to borrow additional funds; and

requiring the Company to dedicate a substantial portion of cash flow from operations to debt payments, thereby, reducing funds available for working capital, capital expenditures, acquisitions and other purposes.

Furthermore, failure by the Company to make periodic payments related to its outstanding indebtedness could impact rating agencies and regulators assessment of the Company’s capital position, adequacy and flexibility and therefore, the financial strength ratings of rating agencies, and regulators’ assessment of the solvency of the Company and its subsidiaries.

The Company is dependent on its senior executives and the loss of any of these executives or the Company’s inability to attract and retain other key personnel could adversely affect its business.

The Company’s success depends upon its ability to attract and retain qualified employees and upon the ability of senior management and other key employees to implement the Company’s business strategy. The Company believes there are a limited number of available, qualified executives in the business lines in which it competes. The success of the Company’s initiatives and future performance depend, in significant part, upon the continued service of the senior management team. The future loss of any of the services of members of the Company’s senior management team or the inability to attract and retain other talented personnel could impede the further implementation of the Company’s business strategy, which could have a material adverse effect on its business. In addition, the Company does not currently maintain key man life insurance policies with respect to any of its employees.

Employee error and misconduct may be difficult to detect and prevent and could adversely affect the Company’s business, results of operations, financial condition and reputation.

Losses may result from, among other things, fraud, errors, failure to document transactions properly, failure to obtain proper internal authorization, or failure to comply with regulatory requirements. It is not always possible to deter or prevent employee misconduct and the precautions the Company takes to prevent and detect this activity may not be effective in all cases. Resultant losses could adversely affect the Company’s business, results of operations, financial condition and reputation.

Since the Company depends on professionalwholesale general agencies, brokers,agents and retail agents as wells as other insurance companies and other reinsurance companies for a significant portion of its revenue, a loss of any one of themor more could adversely affect the Company.

The Company markets and distributes its insuranceCompany’s Penn-America products are distributed through a group of approximately 395 professional360 wholesale general agenciesagents that have specific quoting and binding authority and that in turn sell the Company’s insurance products to insureds through retail insurance brokers. Penn-America also distributes its products through approximately 2,400 retail agents. The Company also markets and distributes its reinsurance products through third-party brokers, insurance companies and reinsurance companies. A loss of all or substantially all of the business produced by any one or more of these wholesale general agencies, brokers,agents or larger retail agents as well as other insurance companies or reinsurance companies could have an adverse effect on the Company’s results of operations.

If market conditions cause reinsurance to be more costly or unavailable, the Company may be required to bear increased risks or reduce the level of its underwriting commitments.

As part of the Company’s overall strategy of risk and capacity management, it purchases reinsurance for a portion of the risk underwritten by its insurance subsidiaries. Market conditions beyond the Company’s control determine the availability and cost of the reinsurance it purchases, which may affect the level of its business and profitability. The Company’s third partythird-party reinsurance facilities are generally subject to annual renewal. The Company may be unable to maintain its current reinsurance facilities or obtain other reinsurance facilities in adequate amounts and at favorable rates. If the Company is unable to renew expiring facilities or obtain new reinsurance facilities, either the net exposure to risk would increase or, if the Company is unwilling to bear an increase in net risk exposures, it would have to reduce the amount of risk it underwrites.

The Company’s financial and business results may fluctuate as a result of many factors, including cyclical changes in the insurance industry.

Historically, the results of companies in the property and casualty insurance industry have been subject to significant fluctuations and uncertainties. The industry’sindustry's profitability can be affected significantly by:

•
competition;

•
capital capacity;

•
rising levels of actual costs that are not foreseen by companies at the time they price their products;

•
volatile and unpredictable developments, includingman-made, weather-related and other natural catastrophes or terrorist attacks;

•
changes in loss reserves resulting from the general claims and legal environments as different types of claims arise and judicial interpretations relating to the scope of insurers’insurers' liability develop; and

•
fluctuations in interest rates, inflationary pressures and other changes in the investment environment, which affect returns on invested assets and may affect the ultimate payout of losses.

The demand for property and casualty insurance and reinsurance can also vary significantly, rising as the overall level of economic activity increases and falling as that activity decreases. The property and casualty insurance industry historically is cyclical in nature. These fluctuations in demand and competition could produce underwriting results that would have a negative impact on the Company’s consolidated results of operations and financial condition.

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The Company faces significant competitive pressures in its business that could cause demand for its products to fall and adversely affect the Company’s profitability.

The Company competes with a large number of other companies in its selected lines of business. The Company competes, and will continue to compete, with major U.S. andnon-U.S. insurers and other regional companies, as well as mutual companies, specialty insurance companies, reinsurance companies, underwriting agencies and diversified financial services companies. The Company’s competitors include, among others: American International Group, American Modern Insurance Group, Argo Group International Holdings, Ltd., Berkshire Hathaway, Everest Re Group, Ltd., Foremost Insurance Group, Great American Insurance Group, HCC Insurance Holdings, Inc., IFG Companies, Markel Corporation, Nationwide Insurance, Navigators Insurance Group, RLI Corporation, Selective Insurance Group, Inc., The Travelers Companies, Inc., Validus Group, and W.R. Berkley Corporation. Some of the Company’s competitors have greater financial and marketing resources than the Company does. The Company’s profitability could be adversely affected if it loses business to competitors offering similar products at or below the Company’s prices.

TheMany of the Company’s general agencies typically pay the insurance premiums on business they have bound to the Company on a monthly basis. This accumulation of balances due to the Company exposes it to credit risk.

Insurance premiums generally flow from the insured to their retail broker, then into a trust account controlled by the Company’s professional general agencies. TheSeveral of the Company’s professional general agencies are typically required to forward funds, net of commissions, to the Company following the end of each month. Consequently, the Company assumes a degree of credit risk on the aggregate amount of these balances that have been paid by the insured but have yet to reach the Company.

Brokers, insurance companies and reinsurance companies typically pay premiums on reinsurance treaties written with the Company on a quarterly basis. This accumulation of balances due to the Company exposes it to credit risk.

Assumed premiums on reinsurance treaties generally flow from the ceding companies to the Company on a quarterly basis. In some instances, the reinsurance treaties allow for funds to be withheld for longer periods as

specified in the treaties. Consequently, the Company assumes a degree of credit risk on the aggregate amount of these balances that have been collected by the reinsured but have yet to reach the Company.

Because the Company provides its general agencies with specific quoting and binding authority, if any of them fail to comply withpre-established guidelines, the Company’s results of operations could be adversely affected.

The Company markets and distributes its insurance products through professional general agencies that have limited quoting and binding authority and that in turn sell the Company’s insurance products to insureds through retail insurance brokers. These professional general agencies can bind certain risks without the Company’s initial approval. If any of these wholesale professional general agencies fail to comply with the Company’s underwriting guidelines and the terms of their appointment, the Company could be bound on a particular risk or number of risks that were not anticipated when it developed the insurance products or estimated losslosses and loss adjustment expenses. Such actions could adversely affect the Company’s results of operations.

The Company’sRisks Related to Regulation of the Company

Global Indemnity Group, LLC’s holding company structure and regulatory constraints limit its ability to receive dividends from subsidiaries in order to meet its cash requirements.

Global Indemnity Group, LLC is a holding company and, as such, has no substantial operations of its own. The Company’sGlobal Indemnity Group, LLC’s assets primarily consist of cash, an investment portfolio, and ownership of the shares of its direct and indirect subsidiaries. DividendsInvestment income generated by its investment portfolio as well as dividends and other permitted distributions from insurance subsidiaries which include payment for equity awards granted by Global Indemnity to employees of such subsidiaries, are expected to be Global Indemnity’s soleIndemnity Group, LLC's main source of funds to meet ongoing cash requirements including debt service payments and other expenses.

Due to its corporate structure, most of the dividends that Global Indemnity Group, LLC receives from its subsidiaries must pass through Global Indemnity Reinsurance.Penn-Patriot Insurance Company (“Penn-Patriot”). The inability of Global Indemnity ReinsurancePenn-Patriot to pay dividends in an amount sufficient to enable Global Indemnity Group, LLC to meet its cash requirements at the holding company level could have a material adverse effect on its operations.

Bermuda law does not permit payment of dividends or distributions of contributed surplus by a company if there are reasonable grounds for believing that the company, after the payment is made, would be unable to pay its liabilities as they become due, or the realizable value of the company’s assets would be less, as a result of the payment, than the aggregate of its liabilities and its issued share capital and share premium accounts. Furthermore, pursuant to the Bermuda Insurance Act 1978, an insurance company is prohibited from declaring or paying a dividend during the financial year if it is in breach of its minimum solvency margin or minimum liquidity ratio or if the declaration or payment of such dividends would cause it to fail to meet such margin or ratio. See “Regulation — Bermuda Insurance Regulation” in Item 1 of Part I of this report.

In addition, the Company’s U.S.inability of Penn-Patriot’s insurance subsidiaries which are indirect subsidiaries of Global Indemnity Reinsurance, are subject to significant regulatory restrictions limiting theirpay dividends to GBLI Holdings, LLC could limit GBLI Holdings, LLC’s ability to declaremeet its debt obligations and pay dividends, which must first pass through Global Indemnity Reinsurance before being paid to Global Indemnity. corporate expense obligations and could have a material adverse effect on its operations.

See “Regulation —"Regulation – U.S. Regulation” in Item 1 of Part I of this report.report and “Liquidity and Capital Resources” section in Item 7 of Part II of this report for more information on state dividend limitations. Also, see Note 1921 of the notes to consolidated

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financial statements in Item 8 of Part II of this report for the maximum amount of dividends that could be paid by the Company’s U.S. insurance subsidiaries in 2017.2024.

The Company’s businesses are heavily regulated and changes in regulation may limit the way it operates.

The Company is subject to extensive supervision and regulation in the U.S. states in which the Insurance Operations operate.it operates. This is particularly true in those states in which the Company’s insurance subsidiaries are licensed, as opposed to those states where its insurance subsidiaries write business on a surplus lines basis. The supervision and regulation relate to numerous aspects of the Company’s business and financial condition. The primary purpose of the supervision and regulation is the protection of the Company’s insurance policyholders and not its investors. The extent of regulation varies, but generally is governed by state statutes. These statutes

delegate regulatory, supervisory, and administrative authority to state insurance departments. This system of regulation covers, among other things:

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standards of solvency, including risk-based capital measurements;

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restrictions on the nature, quality and concentration of investments;

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restrictions on the types of terms that the Company can include or exclude in the insurance policies it offers;

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restrictions on the way rates are developed and the premiums the Company may charge;

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standards for the manner in which general agencies may be appointed or terminated;

•
credit for reinsurance;

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certain required methods of accounting;

•
reserves for unearned premiums, losses and other purposes; and

•
potential assessments for the provision of funds necessary for the settlement of covered claims under certain insurance policies provided by impaired, insolvent or failed insurance companies.

The statutes or the state insurance department regulations may affect the cost or demand for the Company’s products and may impede the Company from obtaining rate increases or taking other actions it might wish to take to increase profitability. Further, the Company may be unable to maintain all required licenses and approvals and its business may not fully comply with the wide variety of applicable laws and regulations or the relevant authority’sauthority's interpretation of the laws and regulations. Also, regulatory authorities have discretion to grant, renew or revoke licenses and approvals subject to the applicable state statutes and appeal process. If the Company does not have the requisite licenses and approvals (including in some states the requisite secretary of state registration) or do not comply with applicable regulatory requirements, the insurance regulatory authorities could stop or temporarily suspend the Company from carrying on some or all of its activities or monetarily penalize the Company.

The U.S. insurance regulatory framework has come under increased federal scrutiny and some state legislators have considered or enacted laws that may alter or increase state regulation of insurance and reinsurance companies and holding companies. Moreover, the NAIC, which is an association of the insurance commissioners of all 50 U.S. States and the District of Columbia, and state insurance regulators regularlyre-examine existing laws and regulations. Changes in these laws and regulations or the interpretation of these laws and regulations could have a material adverse effect on the Company’s business.

Although the U.S. federal government has not historically regulated the insurance business, there have been proposals from time to time to impose federal regulation on the insurance industry. In 2010, the President signed into law the Dodd-Frank Act. Among other things, theThe Dodd-Frank Act establishes a Federal Insurance Office within the U.S. Department of the Treasury. The Federal Insurance Office initially has limited regulatory authority and is empowered to gather data and information regarding the insurance industry and insurers, including conducting a study for submission to the U.S. Congress on how to modernize and improve insurance regulation in the U.S. Further, the Dodd-Frank Act gives the Federal Reserve supervisory authority over a number of financial services companies, including insurance companies, if they are designated by atwo-thirds vote of a Financial Stability Oversight Council as “systemically"systemically important.”" While the Company does not believe that it is “systemically"systemically important,”" as defined in the Dodd-Frank Act, it is possible that the Financial Stability Oversight Council may conclude that it is. If the Company were designated as “systemically"systemically important,”" the Federal Reserve’sReserve's supervisory authority could include the ability to impose heightened financial regulation and could impact requirements regarding the Company’s capital, liquidity, leverage, business and investment conduct. As a

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result of the foregoing, the Dodd-Frank Act, or other additional federal regulation that is adopted in the future, could impose significant burdens on the Company, including impacting the ways in which it conducts business, increasing compliance costs and duplicating state regulation, and could result in a competitive disadvantage, particularly relative to smaller insurers who may not be subject to the same level of regulation.

The Company’s business practices with respect to data could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.

If the Company fails to protect the privacy of third-party data or implement practices and procedures deemed necessary by regulators or consumers, the Company may be subject to fines, penalties, litigation, and reputational harm and its business may be seriously harmed. In addition, various government and consumer agencies and public advocacy groups have called for new regulation and changes in industry practices. It is possible that new laws, regulations, standards, recommendations, best practices or requirements will be adopted that would affect the Company’s business. To the extent that the Company is subject to new laws or recommendations or chooses to adopt new standards, recommendations, or other requirements, the Company may have greater compliance burdens. If the Company is perceived as not operating in accordance with industry best practices or any such guidelines or codes with regard to privacy, the Company’s reputation may suffer, and the Company could lose relationships with customers or partners.

Risks Related to Ownership of Global Indemnity Group, LLC’s Shares and Certain Limited Liability Company Agreement (“LLCA”) Provisions

The interests of holders of class A ordinarycommon shares may conflict with the interests of the Company’sGlobal Indemnity Group, LLC’s controlling shareholder.

Fox Paine Capital Fund II International L.P. (the “Fox Paine Fund”), an investment fund managed by Fox Paine & Company, LLC, (“together with Fox Mercury Investments, L.P. and certain of its affiliates (the “FM Entities”), and Fox Paine & Company”Company LLC (collectively, the “Fox Paine Entities”) beneficially ownsown shares havingrepresenting approximately 83%83.8% of the Company’sGlobal Indemnity Group, LLC’s total voting power. The percentage of the Company’sGlobal Indemnity Group, LLC’s total voting power that the Fox Paine & CompanyEntities may exercise is greater than the percentage of the Company’sGlobal Indemnity Group, LLC’s total shares that the Fox Paine & CompanyEntities beneficially ownsown because the Fox Paine & CompanyEntities beneficially ownsown all of the Company’sGlobal Indemnity Group, LLC’s class B ordinarycommon shares, which haveare entitled to ten votes per share as opposed to class A ordinarycommon shares, which haveare entitled to one vote per share. The class A ordinarycommon shares and the class B ordinarycommon shares generally vote together as a single class on matters presented to the Company’sGlobal Indemnity Group, LLC’s shareholders. Based on the ownership structure of the affiliates of Fox Paine & Company that own these shares, these affiliates are not subject to the voting restriction contained in the Company’s articles of association. As a result, the Fox Paine & Company hasEntities have and will continue to have control over the outcome of certain matters requiring shareholder approval, including the power to, among other things:

•
elect allany of Global Indemnity Group, LLC’s directors not otherwise appointed by the Fox Paine Entities pursuant to the provisions of the Company’s directors;

amendLLCA (as defined below) (which entitles the Company’s articles of associationFox Paine Entities, in their collective capacity as the “Class B Majority Shareholder” (as long as their voting power is greater than 66%)defined in the LLCA), to certain Director appointment rights);

•
approve changes to the LLCA that require shareholder approval; and
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ratify the appointment of the Company’s auditors;Global Indemnity Group, LLC’s auditors.

increase the Company’s share capital; and

resolve to pay dividends or distributions;

Subject to certain exceptions, the Fox Paine & CompanyEntities may also be able to prevent or cause (either by way of a sale of their own stake or by approving the merger or sale of Global Indemnity Group, LLC as a whole) a change of control.control of Global Indemnity Group, LLC. The Fox Paine & Company’sEntities’ control over Global Indemnity Group, LLC, and the Company, and Fox Paine & Company’sEntities’ ability in certain circumstances to prevent or cause a change of control of Global Indemnity Group, LLC, may delay or prevent a change of control, or cause a change of control to occur at a time when it is not favored by other shareholders. As a result, the trading price of the Company’sGlobal Indemnity Group, LLC’s class A ordinarycommon shares could be adversely affected.

In addition, the CompanyGlobal Indemnity Group, LLC has agreed to pay Fox Paine & Company, LLC an annual management fee of $1.9 million,which is adjusted annually to reflect change in the consumer price index published by the US Department of Labor Bureau of Labor Statistics“CPI-U” “CPI-U”, in exchange for management services. The Companycurrent fee charged for the twelve month period beginning September 5, 2023 was $3.2 million. Global Indemnity Group, LLC has also agreed to pay a termination fee of cash in an amount to be agreed upon, plus reimbursement of expenses, upon the termination of Fox Paine & Company’sCompany, LLC’s management services in connection with the consummation of a change of control transaction that does not involve Fox Paine & Company, LLC and its affiliates. The CompanyGlobal Indemnity Group, LLC has also agreed to pay Fox Paine & Company, LLC a transaction advisory fee of cash in an amount to be agreed upon, plus reimbursement of expenses upon the consummation

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of a change of control transaction that does not involve Fox Paine & Company, LLC and its affiliates in exchange for advisory services to be provided by Fox Paine & Company, LLC in connection therewith. These management services arrangements may make a change of control transaction for Global Indemnity Group, LLC less attractive to a potential acquiror and may affect any economic allocation of proceeds that a potential acquiror may pay in any such transaction as between the Fox Paine & CompanyEntities and the holders of class A common shares. The Fox Paine Entities may in the future make significant investments in other insurance or reinsurance companies. Some of these companies may compete with the CompanyGlobal Indemnity Group, LLC or its subsidiaries. The Fox Paine & Company isEntities are not obligated to advise the CompanyGlobal Indemnity Group, LLC of any investment or business opportunities of which they are aware, and they are not prohibited or restricted from competing with the CompanyGlobal Indemnity Group, LLC or its subsidiaries.

The Company’sGlobal Indemnity Group, LLC’s controlling shareholder has the contractual right to nominateappoint a certain number of the members of the Board of Directors proportionate to such shareholder’s ownership in Global Indemnity Group, LLC and also otherwise controls the election of Directors due to its share ownership.

While the Fox Paine & Company hasEntities have the right under the terms of the memorandum and articles of associationLLCA to nominateappoint a certain number of directors of the Board of Directors, dependent onequal in aggregate to the pro rata percentage of the voting power in Global Indemnity Group, LLC beneficially held by the Fox Paine & Company’s percentage ownership of voting shares in the CompanyEntities for so long as the Fox Paine & Company hold anEntities beneficially own (i) a majority of the outstanding class B common shares and (ii) shares representing, in the aggregate, at least 25% or more of the voting power in the Company,Global Indemnity Group, LLC, it also controls the election of all directors to the Board of Directors due to its controlling share ownership. The Company’s Board of Directors currently consists of nineseven directors, all of whom were either identified and proposed for consideration for the Board of Directors by the Fox Paine & Company.

Entities or appointed by the Fox Paine Entities.

Global Indemnity Group, LLC’s LLCA contains an exclusive forum provision that may discourage lawsuits against the Company orGlobal Indemnity Group, LLC’s directors and officers.

The Company’s BoardGlobal Indemnity Group, LLC’s LLCA requires that, unless Global Indemnity Group, LLC otherwise consents, the United States District Court for the District of Directors, in turn,Delaware shall be the sole and exclusive forum for any federal securities laws claims brought under the Securities Act or the Exchange Act, although, for the avoidance of doubt, all claims accompanying any such federal securities laws claim will be subject to its fiduciary dutiesthe mandatory arbitration provisions of Global Indemnity Group, LLC’s LLCA. Any person or entity purchasing or otherwise acquiring any interest in Global Indemnity Group, LLC’s capital stock is deemed to have received notice of and consented to these provisions.

Global Indemnity Group, LLC believes that these provisions are enforceable under Cayman Island law, appointsboth state and federal law. Nevertheless, federal courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the members ofSecurities Act or the Company’s senior management, who also have fiduciary dutiesrules and regulations thereunder. Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Accordingly, there is uncertainty as to the Company. Aswhether a result, Fox Paine & Company effectively has thecourt would enforce this provision.

These provisions may increase costs to bring a claim, discourage claims or limit a shareholder’s ability to control the appointment of the members of the Company’s senior management and to prevent any changesbring a claim in senior managementa judicial forum that other shareholdersit finds favorable for disputes with Global Indemnity Group, LLC or Global Indemnity Group, LLC’s directors, officers or other membersemployees, which may discourage such lawsuits against Global Indemnity Group, LLC or Global Indemnity Group, LLC’s directors, officers or other employees. If a court were to find Global Indemnity Group, LLC’s choice of the Board of Directorsforum provision to be inapplicable or unenforceable in an action, Global Indemnity Group, LLC may deem advisable.incur additional costs associated with resolving such action in other jurisdictions.

Because the Company relies on certain services provided by Fox Paine & Company, LLC, the loss of such services could adversely affect its business.

Fox Paine & Company, LLC provides certain management services to the Company. To the extent that Fox Paine & Company, LLC is unable or unwilling to provide similar services in the future, and the Company is unable to perform those services itself or is unable to secure replacement services, the Company’s business could be adversely affected.

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The Company's share repurchase program may affect or increase the volatility of the price of its class A common shares.

The U.S.

Since October 2022 and global economicthrough March 15, 2024, Global Indemnity Group, LLC repurchased and financial industry downturns could harmretired an aggregate of 1,357,082 shares of its class A common shares in the Company’s business, its liquidity and financial condition, and its stock price.

In past years, globalopen market and economic conditions were severely disrupted. New disruptions may potentially affect (among other aspectsin privately negotiated transactions at an aggregate price of $34.0 million or an average of $25.05 per share. As of such date, under its share repurchase program, Global Indemnity Group, LLC had a remaining authorization to purchase up to an additional $101.0 million of its class A common shares. Although Global Indemnity Group, LLC’s Board of Directors has determined that the repurchase program is in the best interests of its shareholders, the repurchases expose the Company to risks including:

•
the use of a substantial portion of the Company’s business) the demand for and claims made under the Company’s products, the ability of customers, counterparties and others to establish or maintain their relationships with the Company,cash reserves, which may reduce its ability to access and efficiently use internal and external capital resources, engage in significant cash acquisitions or to pursue other business opportunities that could create significant value to its shareholders;
•
the availability of reinsurance protection, the risksrisk that the Company assumes under reinsurance programs,may not be able to replenish its cash reserves by raising debt or equity financing in the future on terms acceptable to the Company, or at all; and
•
the risk that these repurchases have reduced the Company’s investment performance. Continued volatility“public float,” which is the number of Global Indemnity Group, LLC shares owned by non-affiliate shareholders and available for trading in the U.S. and other securities markets, and likely reduced the number of its shareholders, which may reduce the volume of trading in Global Indemnity Group, LLC shares and may result in lower share prices and reduced liquidity in the trading of Global Indemnity Group, LLC shares.

The existence of a share repurchase program may cause the Company's class A share price to be higher than it would be in the absence of the program. In addition, the program may be suspended or discontinued at any time, which could cause the market price of the Company's class A common shares to decline.

Risks Related to Taxation

Legislative and regulatory action by the U.S. Congress or other tax authorities in the jurisdictions in which we operate could materially and adversely affect the Company.

The Company’s tax position could be adversely impacted by changes in tax laws or tax regulations or the interpretation or enforcement thereof. Legislative action may be taken by the U.S. Congress or other tax authorities in the jurisdictions in which we operate which, if ultimately enacted, could, among other things, adversely affect the Company’s effective tax rate and cash tax position.

The Company may be subject to adverse foreign taxes related to its historic non-US subsidiaries.

Although the Company and its subsidiaries have eliminated most of their historic foreign subsidiaries, the statute of limitations remains open in certain foreign jurisdictions, and it is possible that the Company could be subject to materially adverse foreign taxes with respect to its historic operations. Such adverse foreign taxes could also potentially arise as a result of retroactive changes in law.

Holders of Global Indemnity Group, LLC’s common shares may be subject to U.S. federal income tax and state and local income taxes on their share of Global Indemnity Group, LLC’s taxable income, regardless of whether they receive any cash distributions from Global Indemnity Group, LLC.

Under current law, so long as Global Indemnity Group, LLC is not required to register as an investment company under the Investment Company Act and 90% of Global Indemnity Group, LLC’s gross income for each taxable year constitutes “qualifying income” within the meaning of the Internal Revenue Code on a continuing basis, Global Indemnity Group, LLC currently expects that it has been and will continue to be treated, for U.S. federal income tax purposes, as a partnership and not as an association or publicly traded partnership taxable as a corporation. Holders of Global Indemnity Group, LLC’s common shares may be subject to U.S. federal, state and local taxation on their allocable share of Global Indemnity Group, LLC’s items of income, gain, loss, deduction and credit, for each of Global Indemnity Group, LLC’s taxable years ending with or within their taxable year, regardless of whether they receive any cash distributions from Global Indemnity Group, LLC. Such holders may not receive cash distributions equal to their allocable share of Global Indemnity Group, LLC’s net taxable income or even the tax liability that results from that income. Accordingly, such holders may be required to make tax payments in connection with their ownership of Global Indemnity Group, LLC’s common shares that significantly exceed cash distributions received by them in any specific year. Income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions and, therefore, is not taxable to Global Indemnity Group, LLC’s shareholders until the income is distributed by the subsidiaries to Global Indemnity Group, LLC.

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There can be no assurance that amounts paid as distributions on Global Indemnity Group, LLC’s common shares will be sufficient to cover the tax liability arising from ownership of the common shares.

Any distributions paid on Global Indemnity Group, LLC’s common shares will not take into account a holder’s particular tax situation and, therefore, because of the foregoing as well as other possible reasons, may not be sufficient to pay their full amount of tax based upon such holder’s share of Global Indemnity Group, LLC’s net taxable income. In addition, the actual amount and timing of distributions will always be subject to the discretion of Global Indemnity Group, LLC’s board of directors. Even if Global Indemnity Group, LLC does not distribute cash in an amount that is sufficient to fund a holder’s tax liabilities, such holder will still be required to pay income taxes on their share of Global Indemnity Group, LLC’s taxable income.

If Global Indemnity Group, LLC is treated as a corporation for U.S. federal income tax purposes, the value of the shares could be adversely affected.

The value of an investment in Global Indemnity Group, LLC’s common shares may depend in part on Global Indemnity Group, LLC being treated as a partnership for U.S. federal income tax purposes. A publicly traded partnership will be treated as a partnership, and not as a corporation, for U.S. federal income tax purposes so long as 90% or more of its gross income for each taxable year constitutes “qualifying income” within the meaning of the Internal Revenue Code, and it is not required to register as an investment company under the Investment Company Act of 1940 and related rules. Qualifying income generally includes dividends, interest, capital gains from the sale or other disposition of stocks and securities and certain other forms of investment income.

Although Global Indemnity Group, LLC believes that it has met in previous taxable years, and intends to manage its affairs so that it will continue to meet in the current and subsequent taxable years, the 90% test described above in each taxable year, no assurance can be given as to the types of income that will be earned in any given year. Global Indemnity Group, LLC may not meet these requirements or Global Indemnity Group, LLC may determine it is prudent to change Global Indemnity Group, LLC’s structure. In either case, Global Indemnity Group, LLC may be treated as a corporation for U.S. federal income tax purposes in the future. Global Indemnity Group, LLC has not requested, and does not plan to request, a ruling from the Internal Revenue Service (the “IRS”) on its treatment as a partnership for U.S. federal income tax purposes, or on any other matter affecting the taxation of Global Indemnity Group, LLC and its subsidiaries.

Global Indemnity Group, LLC’s interests in certain businesses are held through entities that are treated as corporations for U.S. federal income tax purposes; such corporations may be liable for significant taxes and may create other adverse tax consequences, which could potentially adversely affect the value of an investment in Global Indemnity Group, LLC.

In light of the publicly traded partnership rules under U.S. federal income tax law and other requirements, Global Indemnity Group, LLC currently holds interests in certain businesses through entities that are treated as corporations for U.S. federal income tax purposes, including, in particular, each of Global Indemnity Group, LLC’s insurance company subsidiaries. Each such corporation could be liable for significant U.S. federal income taxes and applicable state, local and other taxes, which could adversely affect the value of an investment in Global Indemnity Group, LLC. Furthermore, it is possible that the IRS or other tax authority could challenge the manner in which such corporation’s taxable income is computed by the Company.

Taxable gain or loss on a sale or other disposition of Global Indemnity Group, LLC’s common shares could be more or less than expected.

If a sale or other disposition of Global Indemnity Group, LLC’s common shares by a holder of such shares is taxable in the United States, the holder will recognize gain or loss equal to the difference between the amount realized by such holder on the sale or other disposition and such holder’s adjusted tax basis in those shares. A holder’s adjusted tax basis in the shares at the time of sale or other disposition will generally be lower than the holder’s original tax basis in the shares to the extent that prior distributions to such holder exceed the total taxable income allocated to such holder. A holder of Global Indemnity Group, LLC’s common shares may therefore recognize a gain on a sale or other disposition of Global Indemnity Group, LLC’s common shares if the shares are sold or disposed of at a price that is less than their original cost. In addition, a portion of the amount realized, whether or not representing gain, may be treated as ordinary income to such holder to the extent attributable to the holder’s allocable share of unrealized gain or loss in Global Indemnity Group, LLC’s assets that consist of certain unrealized receivables or inventory (if any).

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Global Indemnity Group, LLC cannot match transferors and transferees ofGlobal Indemnity Group, LLC’s common shares, and therefore, Global Indemnity Group, LLC has adopted certain income tax accounting conventions that may not conform with all aspects of applicable tax requirements.

The Internal Revenue Code provides that items of partnership income and deductions must be allocated between transferors and transferees of Global Indemnity Group, LLC’s common shares. Because Global Indemnity Group, LLC cannot match transferors and transferees of Global Indemnity Group, LLC’s common shares, Global Indemnity Group, LLC will apply certain assumptions and conventions in an attempt to comply with applicable tax rules and to report income, gain, loss, deduction and credit to holders in a manner that reflects such holders’ beneficial shares of Global Indemnity Group, LLC’s items. These conventions are designed to more closely align the receipt of cash and the allocation of income between holders of Global Indemnity Group, LLC’s common shares, but these assumptions and conventions may not be in compliance with all aspects of applicable tax requirements. In addition, as a result of such allocation method, holders may be allocated income even if they do not receive any distributions.

If Global Indemnity Group, LLC’s conventions are not allowed by the Treasury Regulations (or only apply to transfers of less than all of a holder’s shares) or if the IRS otherwise does not accept Global Indemnity Group, LLC’s conventions, the IRS may contend that Global Indemnity Group, LLC’s income or losses must be reallocated among the holders of Global Indemnity Group, LLC’s common shares. If such a contention were sustained, certain holders’ respective tax liabilities would be adjusted to the possible detriment of certain other holders.

Tax-exempt shareholders may face certain adverse U.S. tax consequences from owning Global Indemnity Group, LLC’s common shares.

Global Indemnity Group, LLC is not required to manage its operations in a manner that would minimize the likelihood of generating income that would constitute “unrelated business taxable income” (“UBTI”) to the extent allocated to a tax-exempt shareholder. Although Global Indemnity Group, LLC’s insurance operations are conducted by subsidiaries that are treated as corporations for U.S. federal income tax purposes and the operations of such corporation would generally not result in an allocation of UBTI to a shareholder on account of the activities of those subsidiaries, Global Indemnity Group, LLC may make certain investments other than through a corporate subsidiary.

Moreover, UBTI also includes income attributable to debt-financed property, and Global Indemnity Group, LLC is not prohibited from incurring debt to finance its investments, including investments in subsidiaries. Furthermore, Global Indemnity Group, LLC is not prohibited from being (or causing a subsidiary to be) a guarantor of loans made to a subsidiary. If Global Indemnity Group, LLC (or certain of Global Indemnity Group, LLC’s subsidiaries) were treated as the borrower for U.S. tax purposes on account of such guarantees, some or all of Global Indemnity Group, LLC’s investments could be considered debt-financed property. The potential for income to be characterized as UBTI could make Global Indemnity Group, LLC’s common shares an unsuitable investment for a tax-exempt entity. Tax-exempt shareholders are urged to consult their own tax advisors regarding the tax consequences of an investment in Global Indemnity Group, LLC’s common shares.

The IRS Schedules K-1 Global Indemnity Group, LLC provides to holders of Global Indemnity Group, LLC’s common shares each year are more complicated than the IRS Forms 1099 provided by corporations to their stockholders. In addition, Global Indemnity Group, LLC may not be able to furnish to each holder of Global Indemnity Group, LLC’s common shares specific tax information within 90 days after the close of each calendar year and such holders may be required to request an extension of time to file their tax returns.

Holders of Global Indemnity Group, LLC’s common shares are required to take into account their allocable share of Global Indemnity Group, LLC’s items of income, gain, loss, deduction and other items of the partnership for Global Indemnity Group, LLC’s taxable year ending within or with their taxable year, regardless of whether they received cash distributions. As a publicly traded partnership, Global Indemnity Group, LLC’s operating results, including distributions of income, dividends, gains, losses or deductions and adjustments to carrying basis, for each year will be reported on IRS Schedules K-1 (and, if applicable, Schedules K-2 and K-3). Income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions and, therefore, is not taxable to Global Indemnity Group, LLC’s shareholders until the income is distributed by the subsidiaries to Global Indemnity Group, LLC. Global Indemnity Group, LLC intends to furnish holders of the common shares, as soon as reasonably practicable after the close of each calendar year, with tax information (including IRS Schedules K-1), which describes their allocable share of gross ordinary income for Global Indemnity Group, LLC’s preceding taxable year. However, it may require longer than 90 days after the end of Global Indemnity Group, LLC’s calendar year to obtain the requisite information so that IRS Schedules K-1 (and, if applicable, Schedules K-2 and K-3) may be prepared by Global Indemnity Group, LLC. Consequently, holders of Global

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Indemnity Group, LLC’s common shares who are U.S. taxpayers may need to file annually with the IRS (and certain states) a request for an extension past the April 15 or the otherwise applicable due date of their income tax return for the taxable year.

In addition, holders of Global Indemnity Group, LLC’s common shares are required to report for all tax purposes consistently with the information provided by Global Indemnity Group, LLC for each taxable year. As a result, it is possible that a holder of Global Indemnity Group, LLC’s common shares will be required to file amended income tax returns as a result of adjustments to items on the corresponding income tax returns of the partnership. Any obligation for a holder of Global Indemnity Group, LLC’s common shares to file amended income tax returns for that or any other reason, including any costs incurred in the preparation or filing of such returns, are the responsibility of each such holder.

Finally, because holders are required to report their allocable share of gross ordinary income, tax reporting for holders of Global Indemnity Group, LLC’s common shares is more complicated than for shareholders of a regular corporation.

Holders of Global Indemnity Group, LLC’s common shares may be subject to an additional U.S. federal income tax on net investment income allocated to such holder by Global Indemnity Group, LLC and on gain on the sale of Global Indemnity Group, LLC’s common shares.

Individuals, estates and trusts are currently subject to an additional 3.8% tax on “net investment income” (or undistributed “net investment income,” in the case of estates and trusts) for each taxable year, with such tax applying to the lesser of such income or the excess of such person’s adjusted gross income (with certain adjustments) over a specified amount. Net investment income includes net income from interest, dividends, annuities, royalties and rents and net gain attributable to the disposition of investment property. It is anticipated that net income and gain attributable to an investment in Global Indemnity Group, LLC will be included in a holder of Global Indemnity Group, LLC’s common share’s “net investment income” subject to this additional tax.

The ability of Global Indemnity Group, LLC’s corporate subsidiaries to use their net operating loss carryforwards to offset their future taxable income may be subject to limitations.

The ability of Global Indemnity Group, LLC’s corporate subsidiaries to use their federal net operating losses and built-in losses (“NOLs”) to offset potential future taxable income and related income taxes may be limited. The Internal Revenue Code imposes an annual limitation on the amount of taxable income that may be offset by loss carryforwards of a “loss corporation” if the corporation experiences an “ownership change” (generally, a cumulative change in ownership that exceeds 50% of the value of a corporation’s stock price.over a rolling three-year period). Global Indemnity Group, LLC’s corporate subsidiaries may experience an ownership change as a result of issuances or other changes in ownership of Global Indemnity Group, LLC’s shares. In addition, certain anti-avoidance rules could result in the application of similar limitations on the ability of Global Indemnity Group, LLC’s corporate subsidiaries to use their NOLs. To the extent Global Indemnity Group, LLC’s corporate subsidiaries experience an ownership change or the above rules otherwise become applicable, the ability of Global Indemnity Group, LLC’s corporate subsidiaries to utilize their federal NOLs could be significantly limited, and similar limitations may apply at the state level.

Risks Related to Employees

The Company is dependent on its senior executives and the loss of any of these executives or the Company’s inability to attract and retain other key personnel could adversely affect its business.

The Company’s success depends upon its ability to attract and retain qualified employees and upon the ability of senior management and other key employees to implement the Company’s business strategy. The Company believes there are a limited number of available, qualified executives in the business lines in which it competes. The success of the Company’s initiatives and future performance depend, in significant part, upon the continued service of the senior management team and transitions of senior management when new members come on and/or existing members leave. The future loss of any of the services of members of the Company’s senior management team or the inability to attract and retain other talented personnel could impede the further implementation of the Company’s business strategy, which could have a material adverse effect on its business. In addition, the Company does not currently maintain key man life insurance policies with respect to any of its employees.

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General Risk Factors

If the Company is unable to maintain effective internal control over financial reporting, the Company’s business may be adversely affected, investors may lose confidence in the accuracy and completeness of the Company’s financial reports and the market price of the Company’sGlobal Indemnity Group, LLC’s common stock could be adversely affected.

Global IndemnityThe Company is required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. The Sarbanes-Oxley Act requires that the Company evaluate and determine the effectiveness of its internal control over financial reporting,provide a management report on internal control over financial reporting and requires that the Company’s internal control over financial reporting be attested to by its independent registered public accounting firm. In 2014, the

The Company identified a material weakness in internal control over financial reporting, which was remediated in 2015.

Global Indemnity may discover other material weaknesses in the future which may lead to its financial statements being materially misstated. As a result, , the market price of the Company’sGlobal Indemnity Group, LLC’s common stock could be adversely affected, and the CompanyGlobal Indemnity Group, LLC could become subject to investigations by the stock exchange on which its securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources. The cost of remediating a potential material weakness could materially adversely affect the Company’s business and financial condition.

The Company’s operating results and shareholders’ equity may be adversely affected by currency fluctuations.

The Company’s functional currency is the U.S. dollar. The Reinsurance OperationsCompany conducts business with some customers in foreign currencies and several of the Company’s U.S. andnon-U.S. subsidiaries maintains investments andmaintain cash accounts in foreign currencies. Atperiod-end, the Companyre-measuresnon-U.S. re-measures non-U.S. currency financial assets to their current U.S. dollar equivalent. The resulting gain or loss for foreign denominated investments is reflected in accumulated other comprehensive income in shareholders’ equity; whereas, the gain or loss on foreign denominated cash accounts is reflected in income during the period. Financial liabilities, if any,

are generally adjusted within the reserving process. However, for known losses on claims to be paid in foreign currencies, the Companyre-measures the liabilities to their current U.S. dollar equivalent each period end with the resulting gain or loss reflected in income during the period. Foreign exchange risk is reviewed as part of the Company’s risk management process. The Company may experience losses resulting from fluctuations in the values ofnon-U.S. currencies relative to the strength of the U.S. dollar, which could adversely impact the Company’s results of operations and financial condition.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 1C. CYBERSECURITY

Risk Management and Strategy

The Company is incorporated inrecognizes the Cayman Islandsimportance of developing, implementing and somemaintaining cybersecurity measures to safeguard its information systems and protect the confidentiality, integrity, and availability of its assets are located outside the United States. As a result, it might not be possible for shareholders to enforce civil liability provisions of the federal or state securities laws of the United States.

data. The Company is organized undermaintains a cybersecurity program to assess, identify and manage cybersecurity threat risks. The Company assesses risks from cybersecurity threats, monitors its information systems for potential vulnerabilities and tests those systems pursuant to the laws ofCompany’s cybersecurity policies, processes, and practices, which are integrated into the Cayman Islands and some of its assets are located outsideCompany’s overall risk management process. To protect the United States. A judgment for the payment of money rendered by a court in the United States based on civil liability would not be automatically enforceable in the Cayman Islands. There is no treaty between the Cayman Islands, or the United Kingdom (of which the Cayman Islands is an Overseas Territory) and the United States providing for the reciprocal enforcement of foreign judgments. Similarly, judgments might not be enforceable in countries other than the United States whereCompany’s information systems from cybersecurity threats, the Company has assets.

Cayman Islands law differs from the laws in effect in the United Statesuses various security tools and might afford less protection to shareholders.

The Company’s shareholders could have more difficulty protecting their interests than would shareholders of a corporation incorporated in a jurisdiction of the United States. It may be difficult for a shareholder to effect service of process within the U.S. or to enforce judgments obtained againstpersonnel that help the Company in U.S. courts. identify, escalate, investigate, resolve, and recover from security incidents.

Managing Material Risks & Integrated Overall Risk Management

The Company has irrevocably agreed that it may be served with process with respect to actions based on offers and sales of securities made in the U.S. by having Global Indemnity Group, Inc. be the Company’s U.S. agent appointed for that purpose. A Cayman court may impose civil liability on the Company orincorporated cybersecurity risk management within its directors or officers in a suit brought in the Cayman courts against the Company or such persons with respect to a violation of U.S. federal securities laws, provided that the facts surrounding such violation would constitute or give rise to a cause of action under Cayman law.

Risks Related to Taxation

Legislative and regulatory action by the U.S. Congress could materially and adversely affect the Company.

The Company’s tax position could be adversely impacted by changes in tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof. Legislative action may be taken by the U.S. Congress which, if ultimately enacted, could, among other things, override tax treaties upon which the Company relies or could broaden the circumstances under which the Company would be considered a U.S. resident, any of which could materially and adversely affect the Company’s effective tax rate and cash tax position.

Recent changes in U.S. tax law may increase taxes of the Company’s U.S. Subsidiaries.

On December 22, 2017, the United States enacted a budget reconciliation act amending the Internal Revenue Code of 1986. The TCJA contains provisions that can materially affect the tax treatment of the Company’s U.S. subsidiaries. Among other things, the TCJA reduces the U.S. corporate income tax rate to 21 percent, imposes a 10 percent base erosion minimum tax (“BEAT”) on income of a U.S. corporation determined without regard to certain otherwise deductible payments made to certain foreign affiliates (including interest payments as well as gross premium or other consideration paid or accrued to a related foreign reinsurance company for reinsurance), and limits the deductibility of interest expense and executive compensation.

While the Company is continuing to study the impact of the TCJA, it is possible that the TCJA may reduce the benefits of lower effective tax rates enjoyed as anon-U.S. company, add expense and have an adverse effect on

the Company’s results of operations. Further, in absence of guidance on various uncertainties and ambiguities in the application of certain provisions of the TCJA, the Company will use what it believes are reasonable interpretations and assumptions in applying the TCJA, but it is possible that the Treasury or the IRS could issue subsequent regulations or guidance that differ from the Company’s prior interpretations and assumptions, which could materially affect the Company’s effective tax rate and cash tax position.

Interest paidEnterprise Risk Management framework. Led by the Company’s U.S. subsidiariesSenior Vice President of Operations, the Company's risk management team, comprised of senior management team members, integrates the evaluation of cybersecurity risks in accordance with its business objectives, operational needs, and legal requirements.

Acknowledging the intricate and dynamic landscape of cybersecurity threats, the Company collaborates with external experts, such as cybersecurity assessors, consultants, and auditors, to assess and test its risk mitigation tools. The Company’s

35

engagement with these external entities encompasses routine reviews, threat assessments, and ongoing consultations to enhance the Company’s security measures.

Prior to engagement, the Company undertakes security assessments of third-party providers that process or store confidential Company information, and monitors their foreign affiliates is subject to multipletax-related risks including risks thatactivities for alignment with the interest may become subject to a minimum U.S. federal income tax under BEAT, subject to a 30% U.S. withholding tax, subject to foreign income tax, andnon-deductible in whole or in part for U.S. federal income tax purposes.

The TCJA has created new rules that limit the deductibility of interest for U.S. federal income tax purposes, which may cause some or all of the deduction for interest paidCompany’s cybersecurity standards. This monitoring involves evaluations performed by the Company’s U.S. subsidiaries to be denied for U.S. federal income tax purposes. Second, to the extent interest paid is deductibleteam of security analysts, and annual review by the Company’s U.S. Subsidiaries, such U.S. subsidiaries may become subjectChief Information Security Officer (“CISO”).

Risks from Cybersecurity Threats

Refer to a minimum U.S. federal income tax charge under BEAT. Third, should interest paid bythe risk factor captioned “A failure in the Company’s U.S. subsidiaries to their foreign affiliates become ineligible under an applicable income tax treaty between the United States and the recipient’s jurisdictionoperational systems or infrastructure or those of tax residence, such interestthird parties, including security breaches or cyber-attacks, could become subject to a 30% U.S. withholding tax. Finally, interest paid bydisrupt the Company’s U.S. subsidiaries to their foreign affiliates may become subject to income tax in the recipient’s jurisdiction of tax residence, without regard to whether there is any corresponding tax deduction in the United States, potentially subjecting such interest payments to double taxation.

Global Indemnitybusiness, its reputation, and / or Global Indemnity Reinsurance may be subject to U.S. tax that maycause losses which would have a material adverse effect on Global Indemnity’s or Global Indemnity Reinsurance’s results of operations.

Global Indemnity is a Cayman company and Global Indemnity Reinsurance is a Bermuda company. The Company seeks to manage its business in a manner designed to reduce the risk that Global Indemnity and Global Indemnity Reinsurance will be treated as being engaged in a U.S. trade or business for U.S. federal income tax purposes. However, because there is considerable uncertainty as to the activities that constitute being engaged in a trade or business within the United States, the Company cannot be certain that the U.S. Internal Revenue Service will not contend successfully that Global Indemnity or Global Indemnity Reinsurance is or has been engaged in a trade or business in the United States. If Global Indemnity or Global Indemnity Reinsurance were considered to be engaged in a business in the United States, the Company could be subject to U.S. corporate income and branch profits taxes on the portion of its earnings effectively connected to such U.S. business, in which case its results of operations could be materially adversely affected.

U.S. persons who hold shares in the Company may be subject to U.S. income taxation at ordinary income rates on the Company’s undistributed earnings and profits.

Controlled Foreign Corporation (“CFC”) Status: The Company’s organizational documents provide, subject to certain exceptions applicable to Fox Paine Company and its affiliates, that if the shares owned, directly, indirectly or by attribution, by any person would otherwise represent more than 9.5% of the aggregate voting power of all the Company’s shares, the voting rights attached to those shares will be reduced so that such person may not exercise and is not attributed more than 9.5% of the total voting power of the shares. These provisions were intended to reduce the likelihood that a shareholder of the Company would be a “10 % U.S. Shareholder” as defined below, and that the Company and itsnon-US subsidiaries are treated as CFCs in any taxable year.

Prior to the enactment of the TCJA a “10 % U.S. Shareholder” was any shareholder that is a U.S. person that owns directly, indirectly or by attribution, 10% or more of the total voting power of the Company. However, for

taxable years beginning after December 31, 2017, the TCJA expands the definition of a “10 % U.S. Shareholder” to include U.S. persons that own directly, indirectly or by attribution, 10% or more of either the total voting power of the Company or total value of the stock of the Company. By expanding the definition to also reference value, the TCJA will increase the likelihood that the Company and itsnon-U.S. subsidiaries will be treated as CFCs in 2018 and in any subsequent taxable years.

If the Company were considered a CFC, any 10 % U.S. Shareholder may be subject to current U.S. income taxation at ordinary income tax rates on all or a portion of the Company’s undistributed earnings and profits attributable to the Company’s insurance and reinsurance income, including underwriting and investment income. Any gain realized on a sale of common shares by such shareholder may also be taxed as a dividend to the extent of the Company’s earnings and profits attributed to such shares during the period that the shareholder held the shares and while the Company was a CFC (with certain adjustments).

Related Person Insurance Income: If the related person insurance income (“RPII”) of any of the Company’snon-U.S. insurance subsidiaries were to equal or exceed 20% of that subsidiary’s gross insurance income in any taxable year, and U.S. persons were treated as owning 25% or more of the subsidiary’s stock, by vote or value, a U.S. person who directly or indirectly owns any common shares on the last day of such taxable year on which the 25% threshold is met would be required to include in income for U.S. federal income tax purposes that person’s ratable share of that subsidiary’s RPII for the taxable year. The amount to be included in income is determined as if the RPII were distributed proportionately to U.S. shareholders on that date, regardless of whether that income is distributed. The amount of RPII to be included in income is limited by such shareholder’s share of the subsidiary’s current-year earnings and profits, and possibly reduced by the shareholder’s share of prior year deficits in earnings and profits. The amount of RPII earned by a subsidiary will depend on several factors, including the identity of persons directly or indirectly insured or reinsured by that subsidiary. Although the Company does not believe that the 20% threshold will be met for itsnon-U.S. insurance subsidiaries, some of the factors that might affect that determination in any period may be beyond the Company’s control. Consequently, the Company cannot assure that it will not exceed the RPII threshold in any taxable year.

If a U.S. person disposes of shares in anon-U.S. insurance corporation that had RPII (even if the 20% threshold was not met) and the 25% threshold is met at any time during the five-year period ending on the date of disposition, and the U.S. person owned any shares at such time, any gain from the disposition will generally be treated as a dividend to the extent of the holder’s share of the corporation’s undistributed earnings and profits that were accumulated during the period that the holder owned the shares (possibly whether or not those earnings and profits are attributable to RPII). In addition, the shareholder will be required to comply with specified reporting requirements, regardless of the amount of shares owned. The Company believes that those rules should not apply to a disposition of common shares because the Company is not itself directly engaged in the insurance business. The Company cannot assure, however, that the IRS will not successfully assert that those rules apply to a disposition of its shares.

U.S. persons who hold shares in the Company could be subject to adverse tax consequences if the Company is considered a passive foreign investment company for U.S. federal income tax purposes.

If the Company is considered a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes, a U.S. holder who owns shares in the Company could be subject to adverse tax consequences, including a greater tax liability than might otherwise apply and an interest charge on certain taxes that are deferred as a result of the Company’snon-U.S. status. The Company does not believe that the it was a PFIC for U.S. federal income tax purposes for the taxable year ending on December 31, 2017 because the Company believes that it should be considered, through Global Indemnity Reinsurance Company, Ltd., to be engaged in the active conduct of a global insurance and reinsurance business. The Company cannot provide assurance that the Company will not be deemed to be a PFIC by the IRS.

Further, TCJA limited the exception applicable to corporations engaged in the active conduct of an insurance business by requiring that the applicable insurance liabilities of such corporation exceed 25 percent of its total

assets for the exception to apply. It is unclear regarding how liability reserves are measured and taken into account for purposes of determining the applicable insurance liabilities. In addition, there are no currently effective Treasury Regulations regarding the application of the PFIC provisions to an insurance company, although proposed regulations were published in April 2015, which do not take into account the recent changes to the PFIC provisions by the TCJA. Due to ambiguities in the application of the relevant provisions of the TCJA and the PFIC provisions in general, there can be no assurance with respect to the Company’s status as a PFIC for the current or any future taxable years of the Company.

The Organization for Economic Cooperation and Development (“OECD”) and the European Union (“EU”) are considering measures that might encourage countries to change their tax laws which could have a negative impact on the Company.

The OECD has published an action plan to address base erosion and profit shifting (“BEPS”) impacting its member countries and other jurisdictions. It is possible that jurisdictions in which the Company does business could react to the BEPS initiative or their own concerns by enacting tax legislation that could adversely affect the Company or its shareholders. In addition, the EU issued its Anti-Tax Avoidance Directive in 2016, which requires its member states to adopt specific tax reform measures by 2019. The implementation of these measures could have a negative impact on the Company.

A number of multilateral organizations, including the EU and the OECD have, in recent years, expressed concern about some countries not participating in adequate tax information exchange arrangements and have threatened those that do not agree to cooperate with punitive sanctions by member countries. It is as yet unclear what all of these sanctions might be, which countries might adopt them, and when or if they might be imposed. The Company cannot assure, however, that the Tax Information Exchange Agreements (TIEAs) that have been or will be entered into by the countries where the Company and its subsidiaries are located will be sufficient to preclude all of the sanctions described above, which, if ultimately adopted, could adversely affect the Company or its shareholders.

The Company may become subject to taxes in the Cayman Islands or Bermuda in the future, which may have a material adverse effect on its results of operations.

The Company and its subsidiaries which have been incorporated under the laws of the Cayman Islands as exempted companies and, as such, obtained an undertaking from the Governor in Council of the Cayman Islands substantially that, for a period of 20 years from the date of such undertaking, which is February 9, 2016, no law that is enacted in the Cayman Islands imposing any tax to be levied on profit or income or gains or appreciation shall apply to the Company and no such tax and no tax in the nature of estate duty or inheritance tax will be payable, either directly or by way of withholding, on the Company’s ordinary shares. This undertaking would not, however, prevent the imposition of taxes on any person ordinarily resident in the Cayman Islands or any company in respect of its ownership of real property or leasehold interests in the Cayman Islands. Given the limited duration of the undertaking, the Company cannot be certain that it will not be subject to Cayman Islands tax after the expiration of the20-year period.

Global Indemnity Reinsurance was formed in 2006 through the amalgamation of the Company’snon-U.S. operations. The Company received an assurance from the Bermuda Minister of Finance, under the Bermuda Exempted Undertakings Tax Protection Act of 1966, as amended, that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to Global Indemnity Reinsurance or any of its operations, shares, debentures or other obligations through March 31, 2035. Given the limited duration of the assurance, the Company cannot be certain that it will not be subject to any Bermuda tax after March 31, 2035.

Following the expiration of the periods described above, the Company may become subject to taxes in the Cayman Islands or Bermuda, which may have a material adverse effect on its results of operations.

Global Indemnity or Global Indemnity Reinsurance may be subject to U.S. tax that may have a material adverse effect on Global Indemnity’s or Global Indemnity Reinsurance’s results of operations.

Global Indemnity is a Cayman company and Global Indemnity Reinsurance is a Bermuda company. The Company seeks to manage its business in a manner designed to reduce the risk that Global Indemnity and Global Indemnity Reinsurance will be treated as being engaged in a U.S. trade or business for U.S. federal income tax purposes. However, because there is considerable uncertainty as to the activities that constitute being engaged in a trade or business within the United States, the Company cannot be certain that the U.S. Internal Revenue Service will not contend successfully that Global Indemnity or Global Indemnity Reinsurance is or has been engaged in a trade or business in the United States. If Global Indemnity or Global Indemnity Reinsurance were considered to be engaged in a business in the United States, the Company could be subject to U.S. corporate income and branch profits taxes on the portion of its earnings effectively connected to such U.S. business, in which case its results of operations could be materially adversely affected.

The impact of the Letters of Commitment by the Cayman Islands and Bermuda or other concessions to the Organization for EconomicCo-operation and Development to eliminate harmful tax practices is uncertain and could adversely affect the tax status of the Company’s subsidiaries in the Cayman Islands or Bermuda.

The Organization for EconomicCo-operation and Development, which is commonly referred to as the OECD, has published reports and launched a global dialogue among member andnon-member countries on measures to limit harmful tax competition. These measures are largely directed at counteracting the effects of tax havens and preferential tax regimes in countries around the world. The Cayman Islands and Bermuda are not listed as uncooperative tax haven jurisdictions because each had previously committed itself to eliminate harmful tax practices and to embrace international tax standards for transparency, exchange of information and the elimination of any aspects of the regimes for financial and other services that attract business with no substantial domestic activity. The Company is not able to predict what changes will arise from the OECD in the future or whether such changes will subject it to additional taxes.

There is a risk that interest paid by the Company’s U.S. subsidiary to a Luxembourg affiliate may be subject to 30% U.S. withholding tax.

U.A.I. (Luxembourg) Investment, S.à.r.l., an indirectly owned Luxembourg subsidiary of Global Indemnity Reinsurance, owns certain loans and notes issued by Global Indemnity Group, Inc., a Delaware corporation. Under U.S. federal income tax law, interest paid by a U.S. corporation to anon-U.S. shareholder is generally subject to a 30% withholding tax, unless reduced by treaty. The income tax treaty between the United States and Luxembourg (the “Luxembourg Treaty”) generally eliminates the withholding tax on interest paid to qualified residents of Luxembourg. Were the IRS to contend successfully that U.A.I. (Luxembourg) Investment, S.à.r.l. is not eligible for benefits under the Luxembourg Treaty, interest paid to U.A.I. (Luxembourg) Investment, S.à.r.l. by Global Indemnity Group, Inc. would be subject to the 30% withholding tax. Such tax may be applied retroactively to all previous years for which the statute of limitations has not expired, with interest and penalties. Such a result may have a material adverse effect on the Company’s business operations and financial condition andresults” in Part I, Item 1A. “Risk Factors” for additional description of cybersecurity risks that could materially impact the Company’s business strategy, results of operation.operations or financial condition.

There

Governance

Management’s Role Managing Risk

The CISO advises the Enterprise Risk Management Committee (the “ERM Committee”) of the Board of Directors on cybersecurity risks. The CISO provides the following information to the ERM Committee on a quarterly basis:

•
Company threat profile and emerging threats;
•
Status of cybersecurity initiatives and strategies;
•
Incident reports and learnings from any cybersecurity events; and
•
Compliance with regulatory requirements and industry standards.

The Company conducts an annual review of the Company’s cybersecurity posture and the effectiveness of its risk mitigation strategies. This review helps in identifying areas for improvement and aligning cybersecurity efforts with the overall risk management framework.

Risk Management Personnel

Primary responsibility for assessing, monitoring, and managing the Company’s cybersecurity risks rests with the CISO. The CISO has obtained cybersecurity credentials for the role, possesses expertise in the technical domain, and receives assistance from industry experts in decision-making. The CISO oversees the information security policies and data protection programs, implementation of protective and detective tools, tests the Company’s compliance with standards, and remediates known risks. These initiatives include phishing simulations, semi-annual cybersecurity education to employees, and competency assessments. Additionally, the Company conducts table-top incident response practices and other measures to enhance overall cybersecurity preparedness. These efforts underscore the organization's commitment to addressing a wide range of potential threats and cybersecurity challenges.

Monitoring Cybersecurity Incidents

The CISO is informed about the developments in cybersecurity, including potential threats and risk management techniques. This ongoing knowledge acquisition is crucial for the prevention, detection, mitigation, and remediation of cybersecurity incidents. In the event of a risk that interest income imputedcybersecurity incident, the CISO is equipped with a cyber incident response plan (“CIRP”) supported by a cross-functional cyber incident response team (“CIRT”). The CIRT oversees and responds to cybersecurity incidents. Its core objectives encompasses detection and response, conducting incident analysis and investigation, implementing containment and eradication measures, and facilitating recovery processes. It also entails coordinating and communicating with the Company's management, regulators, affected parties, and external security experts. The CIRT determines the materiality of the incident, maintains documentation and reporting practices, and fosters a culture of improvement.

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Reporting to Board of Directors

The ERM Committee is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this area. The CISO, in his capacity, informs the Chief Executive Officer, the Chief Financial Officer, the Chief Audit Executive, the Chief Information Officer, and the Legal Department of aspects related to cybersecurity risks and incidents. Furthermore, the CISO escalates significant cybersecurity matters to the ERM Committee.

The Board has established oversight mechanisms to govern risks associated with cybersecurity threats because they recognize the significance of these threats to the Company’s Irish affiliates may be subject to 25% Irish income tax.operational integrity and stakeholder confidence.

U.A.I. (Ireland) Limited, U.A.I. (Ireland) II Unlimited Company, GBLI (Ireland) Limited, and Global Indemnity Group Limited are companies incorporated under the laws of Ireland. The companies are resident taxpayers fully subject to Irish corporate income tax of 12.5% on any trading income and 25.0% on anynon-trading income, including interest and dividends from foreign companies. The Company believes it has, to date, managed its operations in such way that there will not be any material taxable income generated in Ireland under Irish law for these entities. However, there can be no assurance from the Irish authorities that a law may not be enacted that would impute income to U.A.I. (Ireland) Limited and U.A.I. (Ireland) II Unlimited Company in the future or retroactively arising out of the Companies’ current operations.

Item 2. PROPERTIES

Item 1B.UNRESOLVED STAFF COMMENTS

None.

Item 2.PROPERTIES

At December 31, 2017,2023, office space leased in Bala Cynwyd, Pennsylvania, holds the Commercial Lines’Penn-America segment’s principal executive offices and headquarters. Additional

A decision has been made for employees who do not work at the Bala Cynwyd, Pennsylvania office space leased in California, Georgia, Illinois,to work remotely. The Company exercised the early lease termination clauses for its Omaha, Nebraska and Texas, serve as field offices for Commercial Lines. Some of the office space in California also serves as office space for Commercial Lines’ claims operations. Office space in Hamilton, Bermuda used by Reinsurance Operations is shared with one of Global Indemnity Reinsurance’s service providers per an agreement between the two. Office space leased in Arizona, and Nebraska, is used by Personal Lines. Office space leased in Cavan, Ireland is usedleases and intends to supportexercise the operating needsearly termination clause for its Scottsdale, Arizona lease. As a result, the lease liability on the Company's consolidated balance sheet at December 31, 2023 and 2022 include $3.2 million and $4.6 million, respectively, which represents the present value of expected lease costs through the Insurance and Reinsurance Operations. The leases for the properties listed are held by various Company subsidiaries. early termination date.

The Company believes the properties listed areBala Cynwyd, Pennsylvania location is suitable and adequate to meet its needs. Additionally, a number of the Company’s personnel work remotely and almost all of the Company’s personnel have the ability to work remotely.

Item 3.LEGAL PROCEEDINGS

The Company is, from time to time, involved in various legal proceedings in the ordinary course of business. The Company purchased insurance and reinsurance coverage for risks in amounts that it considers adequate. However, there can be no assurance that the insurance and reinsurance coverage that the Company maintains is sufficient or will be available in adequate amounts or at a reasonable cost. The Company does not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on its business, results of operations, cash flows, or financial condition.

There is a greater potential for disputes with reinsurers who are in runoff. Some of the Company’s reinsurers’reinsurers have operations that are in runoff, and therefore, the Company closely monitors those relationships. The Company anticipates that, similar to the rest of the insurance and reinsurance industry, it will continue to be subject to litigation and arbitration proceedings in the ordinary course of business.

Item 4. MINE SAFETY DISCLOSURES

Item 4.MINE SAFETY DISCLOSURES

None.

37

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for the Company’s A Ordinary Shares

The Company’s A ordinary shares, par value $0.0001 per share, began trading on the NASDAQ Global Select Market, formerly the NASDAQ National Market, under the symbol “UNGL” on December 16, 2003. On March 14, 2005 the Company changed its symbol to “INDM.” On July 6, 2010, the Company changed its symbol to “GBLI” as part of a redomestication transaction whereby all shares of “INDM” were replaced with shares of “GBLI” on aone-for-two basis. On November 7, 2016, in connection with a redomestication from Ireland to Cayman Islands, all of Global Indemnity plc’s ordinary shares were cancelledGroup, LLC’s Class A Common Shares

On August 28, 2020, Global Indemnity Group, LLC completed a scheme of arrangement and replaced with one ordinary shareamalgamation that effected certain transactions that resulted in the shareholders of Global Indemnity Limited on a one for one basis. The ordinarybecoming the holders of all of the issued and outstanding common shares of Global Indemnity Limited continueGroup, LLC. Effective January 3, 2022, Global Indemnity Group, LLC voluntarily transferred the listing of its class A common shares from the NASDAQ to tradethe NYSE and is trading under the ticker symbol “GBLI”. The following table sets forth, for the periods indicated, the high and low intraday sales prices ofGBLI. Prior to January 3, 2022, the Company’s class A ordinarycommon shares as reported bytraded on the NASDAQNASDAQ. Global Select Market.Indemnity Group, LLC’s predecessors have been publicly traded since 2003.

   High   Low 

Fiscal Year Ended December 31, 2017:

    

First Quarter

  $40.96   $34.00 

Second Quarter

   41.55    36.04 

Third Quarter

   42.96    37.27 

Fourth Quarter

   49.91    40.11 

Fiscal Year Ended December 31, 2016:

    

First Quarter

  $32.07   $27.39 

Second Quarter

   32.09    20.96 

Third Quarter

   31.77    26.55 

Fourth Quarter

   38.97    29.00 

There is no established public trading market for the Company’sGlobal Indemnity Group, LLC’s class B ordinary shares, par value $0.0001 per share.common shares.

As of February 27, 2018, thereDecember 31, 2023, Global Indemnity Group, LLC’s class A common shares were 4held by approximately 140 shareholders of record. The Fox Paine Entities comprise the two holders of record of the Company’sGlobal Indemnity Group, LLC’s class B ordinarycommon shares all of whom are affiliates of Fox Paine & Company, LLC. The number of holders of record, including individual owners of the Company’s A ordinary shares, was 622 as of February 27, 2018. The Company believes that the actual number of beneficial owners of the Company’s A ordinary shares is much higher than the number of record holders as shares are held in “street name” by brokers and others on behalf of individual owners.December 31, 2023.

See Note 1618 to the consolidated financial statements in Item 8 of Part II of this report for information regarding securities authorized under the Company’sGlobal Indemnity Group, LLC’s equity compensation plans.

Performance of the Company’sGlobal Indemnity Group, LLC’s Class A OrdinaryCommon Shares

The following graph represents a five-year comparison of the cumulative total return to shareholders for the Company’s class A ordinarycommon shares and stock of companies included in the NASDAQ Insurance Index and NASDAQ Composite Index, which the Company believes are the most comparative indexes.Index.

img146351187_0.jpg 

 

 

12/31/18

 

 

12/31/19

 

 

12/31/20

 

 

12/31/21

 

 

12/31/22

 

 

12/31/23

 

GBLI

 

$

100.0

 

 

$

81.8

 

 

$

78.9

 

 

$

69.4

 

 

$

64.3

 

 

$

89.0

 

NASDAQ Insurance Index

 

 

100.0

 

 

 

126.7

 

 

 

127.9

 

 

 

144.8

 

 

 

147.6

 

 

 

159.8

 

NASDAQ Composite Index

 

 

100.0

 

 

 

135.2

 

 

 

194.2

 

 

 

235.8

 

 

 

157.7

 

 

 

226.2

 

   12/31/12   12/31/13   12/31/14   12/31/15   12/31/16   12/31/17 

Global Indemnity Limited

  $100.0   $114.3   $128.2   $131.1   $172.7   $189.9 

NASDAQ Insurance Index

   100.0    128.8    139.8    148.8    172.1    177.6 

NASDAQ Composite Index

   100.0    138.3    156.8    165.8    178.3    228.6 

38

Recent Sales of Unregistered Securities

None.

CompanyThere were no sales of unregistered equity securities during the year ended December 31, 2023.

Global Indemnity Group, LLC’s Purchases of OrdinaryClass A Common Shares

The Company’sGlobal Indemnity Group, LLC’s Share Incentive Plan allows employees to surrender class A ordinarycommon shares as payment for the tax liability incurred upon the vesting of restricted stock and restricted stock units that waswere issued under the Share Incentive Plan. During 2017, the Company2023, Global Indemnity Group, LLC purchased an aggregate 29,55118,860 of surrendered class A ordinarycommon shares from employees for $1.2$0.6 million.

All shares purchasedrepurchased from third parties and employees are held as treasury stock and recorded at cost until formally retired.

On December 29, 2017,October 21, 2022, Global Indemnity acquired 3,397,031Group, LLC announced it commenced a stock repurchase program beginning in the fourth quarter of its A ordinary shares for approximately $83.0 million2022. On January 3, 2023, Global Indemnity Group, LLC announced that it had authorized an increase in the aggregate (approximately $24.44stock purchase program from $32 million, which was authorized on October 21, 2022, to $60 million. On June 8, 2023, Global Indemnity Group, LLC's Board of Directors approved an additional increase in the existing share buyback authorization amount of $60 million to $135 million. The authorization to repurchase will expire on December 31, 2027. The timing and actual number of shares repurchased, if any, will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.

Under the repurchase program, repurchases may be made from time to time using a variety of methods, including open market purchases or privately negotiated transactions, all in compliance with Global Indemnity Group, LLC’s Insider Trading Policy, the United States Securities and Exchange Commission, and other applicable legal requirements. The repurchase program does not obligate Global Indemnity Group, LLC to acquire any particular amount of class A common shares, and the repurchase program may be suspended or discontinued at any time at Global Indemnity Group, LLC’s discretion.

Under the repurchase program, the Company repurchased 1,357,082 shares from third parties for an aggregate amount of $34.0 million, or $25.05 per share) from former investors in vehicles managedshare during the year ended December 31, 2023. As a result of these transactions, book value per share increased by Fox Paine & Company, LLC.$1.69 per share.

See Note 1315 to the consolidated financial statements in Item 8 of Part II of this report for additional information on the retirement of the Company’sGlobal Indemnity Group, LLC’s class A ordinarycommon shares as well as a tabular disclosure of the Company’sGlobal Indemnity Group, LLC’s share repurchases by month.

Dividend PolicyDistributions

On December 27, 2017, the Company announced the adoption of a dividend program with an anticipated initial dividend rate of $0.25 per share per quarter ($1.00 per share per year). Payment of

Future dividends isremain subject to future determinations bythe discretion of GBLI’s Board of Directors, including the Board of Directors based onDirector’s evaluation of the Company’s results,company’s financial conditions, amounts required to grow the Company’s business,performance, capital and reserve positions, liquidity, balance sheet, and other factors deemed relevant byfactors. See Note 15 of the Board.consolidated financial statements in Item 8 of Part II of this report for distributions declared during the years ended December 31, 2023, 2022, and 2021.

The Company did not declare or pay cash dividends on any class of its ordinary shares in 2017 or 2016.

The CompanyGlobal Indemnity Group, LLC is a holding company and has no direct operations. The ability of Global Indemnity Limited to pay dividendsdistributions is subject to Cayman Islands regulationsGlobal Indemnity Group, LLC’s Second Amended and Restated Limited Liability Company Agreement (the “LLCA”), and depends, in part, on the ability of its subsidiaries to pay

dividends. Global Indemnity Reinsurance and the U.S.The Company’s insurance subsidiaries are subject to significant regulatory restrictions limiting their ability to declare and pay dividends. See “Management’s Discussion and Analysis of Financial Condition —– Liquidity and Capital Resources —– Sources and Uses of Funds” in Item 7 of Part II of this report for dividend limitation and Note 1921 of the notes to the consolidated financial statement in Item 8 of Part II of this report for the dividends declared and paid by the U.S.Company’s insurance subsidiaries and Global Indemnity Reinsurance in 2017 and the maximum amount of distributions that they could pay as dividends in 2018.

Under the Companies Act, Global Indemnity Reinsurance may only declare or pay a dividend if it has no reasonable grounds for believing that it is, or would after the payment be, unable to pay its liabilities as they become due, or if the realizable value of its assets would not be less than the aggregate of its liabilities and its issued share capital and share premium accounts.

For 2018, the Company believes that Global Indemnity Reinsurance should have sufficient liquidity and solvency to pay dividends. In the future, the Company anticipates using dividends from Global Indemnity Reinsurance to fund obligations of Global Indemnity. Global Indemnity Reinsurance is prohibited, without the approval of the BMA, from reducing by 15% or more its total statutory capital or 25% or more of its total statutory capital and surplus as set out in its previous year’s statutory financial statements, and any application for such approval must include such information as the BMA may require. Based upon the total statutory capital plus the statutory surplus as set out in its 2017 statutory financial statements that will be filed in 2018, Global Indemnity Reinsurance could pay a dividend of up to $227.1 million in 2018 without requesting BMA approval. Global Indemnity Reinsurance is dependent on receiving distributions from its subsidiaries in order to pay the full dividend in cash. In 2017, Global Indemnity Reinsurance declared a dividend of $120.0 million to its parent, Global Indemnity. Of this amount, $100.0 million was paid to Global Indemnity in December, 2017. As of December 31, 2017, accrued dividends were $20.0 million.

Barbados resident companies are subject to a 15% withholding tax on dividends to a nonresident company or individual, with a 25% rate for dividends paid out oftax-exempt profits. Dividends paid by Barbados resident companies classified as International Business Companies (“IBCs”) to nonresidents are exempt from withholding tax. GBLI (Barbados) Limited is an IBC.

In 2017, profit distributions (not in respect to liquidations) by the Luxembourg Companies were generally subject to Luxembourg dividend withholding tax at a rate of 15%, unless a domestic law exemption or a lower tax treaty rate applies. Dividends paid by any of the Luxembourg Companies to their Luxembourg resident parent company are exempt from Luxembourg dividend withholding tax, provided that at the time of the dividend distribution, the resident parent company has held (or commits itself to continue to hold) 10% or more of the nominal paid up capital of the distributing entity or, in the event of a lower percentage participation, a participation having an acquisition price of EUR 1.2 million or more for a period of at least twelve months.

2023. For a discussion of factors affecting the Company’s ability to pay dividends,make distributions, see “Business —– Regulation” in Item 1 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations —– Liquidity and Capital Resources —– Sources and Uses of Funds” in Item 7 of Part II, and Note 1921 of the notes to the consolidated financial statements in Item 8 of Part II of this report.

39

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 6.SELECTED FINANCIAL DATA

The following table sets forth selected consolidated historical financial data for the Company and should be read together with the consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report. No cash dividends were declared on common stock in any year presented in the table.

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

  For the Years Ended December 31, 
  2017  2016   2015  2014   2013 

Consolidated Statements of Operations Data:

        

Gross premiums written

  $516,334  $565,845   $590,233  $291,253   $290,723 

Net premiums written

   450,180   470,940    501,244   273,181    271,984 

Net premiums earned

   438,034   468,465    504,143   268,519    248,722 

Net realized investment gains (losses)

   1,576   21,721    (3,374)   35,860    27,412 

Total revenues

   485,515   534,514    538,778   333,755    319,134 

Net income (loss)

   (9,551)   49,868    41,469   62,856    61,690 

Per share data:

        

Net income (loss) available to common shareholders (1)

  $(9,551)  $49,868   $41,469  $62,856   $61,690 

Basic

   (0.55)   2.89    1.71   2.50    2.46 

Diluted

   (0.55)   2.84    1.69   2.48    2.45 

Weighted-average number of shares outstanding

        

Basic

   17,308,663   17,246,717    24,253,657   25,131,811    25,072,712 

Diluted

   17,308,663   17,547,061    24,505,851   25,331,420    25,174,015 

(1)For the year ended December 31, 2017, “diluted” loss per share is the same as “basic” loss per share since there was a net loss for the period.

Consolidated Insurance Operating Ratios based on
the Company’s GAAP Results: (1)		  2017   2016   2015   2014   2013 

Loss ratio (2) (3)

   61.5    56.4    54.6    51.2    53.5 

Expense ratio

   41.9    42.0    39.9    40.8    42.5 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio (2) (3)

   103.4    98.4    94.5    92.0    96.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net/ gross premiums written

   87.2    83.2    84.9    93.8    93.6 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial Position as of Last Day of Period:

          

Total investments and cash and cash equivalents

  $1,533,900   $1,501,819   $1,516,093   $1,498,009   $1,567,415 

Reinsurance receivables, net of allowance

   105,060    143,774    115,594    125,718    197,887 

Total assets

   2,001,669    1,972,946    1,957,294    1,930,033    1,911,779 

7.75% Subordinated notes payable

   96,619    96,497    96,388    —      —   

7.875% Subordinated notes payable

   125,864    —      —      —      —   

Margin borrowing facility

   72,230    66,646    75,646    174,673    100,000 

Unpaid losses and loss adjustment expenses

   634,664    651,042    680,047    675,472    779,466 

Total shareholders’ equity

   718,394    797,951    749,926    908,290    873,280 

Book value per share

   50.57    45.42    42.98    35.86    34.65 

(1)The Company’s insurance operating ratios 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. The ratios presented here represent the consolidated results of the Company’s Commercial Lines, Personal Lines, and Reinsurance Operations.

(2)A summary of prior accident year adjustments is summarized as follows:

2017 loss and combined ratios reflect a $53.9 million reduction of net losses and loss adjustment expenses

2016 loss and combined ratios reflect a $57.3 million reduction of net losses and loss adjustment expenses

2015 loss and combined ratios reflect a $34.7 million reduction of net losses and loss adjustment expenses

2014 loss and combined ratios reflect a $16.4 million reduction of net losses and loss adjustment expenses

2013 loss and combined ratios reflect a $7.9 million reduction of net losses and loss adjustment expenses

See “Results of Operations” in Item 7 of Part II of this report for details of these items and their impact on the loss and combined ratios.

(3)The Company’s loss and combined ratios for 2017, 2016, 2015, 2014, and 2013 include $61.1 million, $72.1 million, $45.0 million, $14.0 million, and $10.0 million, respectively, of catastrophic losses on a current accident year basis from the Insurance Operations. See “Results of Operations” in Item 7 of Part II of this report for a discussion of the impact of these losses on the loss and combined ratios.

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes of Global Indemnity included elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to the Company’s plans and strategy, constitutes forward-looking statements that involve risks and uncertainties. Please see “Cautionary"Cautionary Note Regarding Forward-Looking Statements”Statements" at the end of this Item 7 and “Risk Factors” in Item 1A above for more information. You should review “Risk Factors” in Item 1A above for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained herein.

Recent Developments

On March 23, 2017,Financial Highlights

2023 Consolidated Results of Operations

•
Net income of $25.4 million, or $1.84 per share basic and $1.83 per share diluted
•
Net earned premium of $473.4 million; Property: 33% and Casualty: 67%
•
Penn-America accident year combined ratio of 95.1% for 2023 compared to 96.6% for 2022.
•
Net investment income of $55.4 million. Book yield on the fixed maturities portfolio was 4.0%.
•
Operating cash flows of $42.9 million

2023 Consolidated Financial Condition

•
Total investments of $1.3 billion; fixed maturities and short-term securities comprise 96% of total investments
•
Total assets of $1.7 billion
•
No debt
•
Since the Company's initial public offering in 2003, the total capital returned to shareholders was $609.5 million, comprising $522.2 million of share repurchases and $87.3 million of distributions / dividends. This includes $13.9 million of distributions during 2023.
•
Shareholders' equity of $648.8 million
•
Book value per common share of $47.53

Overview

The Company issued Subordinated Notes due in 2047operates and manages its business through two business segments: Penn-America and Non-Core Operations.

The Company’s Penn-America products are distributed through approximately 360 wholesale general agents, 2,400 retail agents, and 20,000 direct-to-consumer policies. The Company’s wholesale general agents have limited quoting and binding authority. Penn-America operates in the aggregate principal amountexcess and surplus lines marketplace. Penn-America offers specialty property and casualty products designed for GBLI's Wholesale Commercial, Programs, InsurTech, and Assumed Reinsurance product offerings.

The Company’s Non-Core Operations segment represents lines of $130.0 million through an underwritten public offering.business that have been de-emphasized or are no longer being written. Non-Core Operations includes manufactured and dwelling home business, farm, ranch and equine business, specialty personal lines products such as motorcycle, watercraft, and certain homeowners, property brokerage, non-renewed retrocessional reinsurance treaties, several smaller casualty lines, and terminated commercial programs. The two key activities of Non-Core Operations are managing transition service agreements related to the sales of the Company’s renewal rights and handling claims activity and loss reserves on de-emphasized and terminated business. See Note 122 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on this debt issuance.

In April, 2017, the Company entered into a $50 million commitment to purchase an alternative investment vehicle comprised of stressed and distressed debt instruments. As of December 31, 2017, the Company has funded $16.5 million of this commitment leaving $33.5 million as unfunded.

The Company was impacted by losses from Hurricanes Harvey, Irma, and Maria as well as the California wildfires during the third and fourth quarter of 2017. The Company’s current estimate of net loss is approximately $58.7 million from Hurricanes Harvey, Irma, and Maria and the California wildfires. Actual losses from these events may vary materially from the Company’s current estimate due to the inherent uncertainties resulting from several factors, including the preliminary nature of the loss data available and potential inaccuracies and inadequacies of the data provided.

Effective September 16, 2017, David J.W. Bruce, Jason B. Hurwitz, and Arik Rashkes were appointed to the Company’s Board of Directors.

On December 29, 2017, Global Indemnity acquired 3,397,031 of its A ordinary shares for approximately $83.0 million in the aggregate (approximately $24.44 per share) from former investors in vehicles managed by Fox Paine & Company, LLC. The Company paid an $11.0 million advisory fee to Fox Paine in connection with the redemption as well as other services performed. The Company sold $99.0 million of securities from its consolidated investment portfolio during December, 2017 to provide funding for the redemption and other obligations.

During the fourth quarter of 2017, Global Indemnity announced the adoption of a dividend program. Although subject to the absolute discretion of the Board of Directors and factors, conditions, and prospects as such may exist from time to time when the Board of Directors considers the advisability of declaring a quarterly dividend, the Company currently anticipates an initial dividend rate of $0.25 per share per quarter ($1.00 per share per year).

On December 21, 2017, A.M. Best affirmed the financial strength rating of “A” (Excellent) for Global Indemnity Reinsurance and its U.S. insurance subsidiaries.

On December 22, 2017, the United States enacted a budget reconciliation act amending the Internal Revenue Code of 1986. The TCJA contains provisions that can materially affect the tax treatmentsales of the Company’s U.S. subsidiaries. Among other things, the TCJA reduces the U.S. corporate income tax rate to 21 percent, imposes a 10 percent base erosion minimum tax on income of a U.S. corporation determined without regard to certain otherwise deductible payments made to certain foreign affiliates (including interest payments as well as gross premium or other consideration paid or accrued to a related foreign reinsurance company for reinsurance), and significantly limits the deductibility of interest expenses.renewal rights.

As a result of the enactment of the TCJA, effective January 1, 2018, premiums being ceded under the quota share arrangement may potentially be subject to a 10% BEAT tax. As a result, Global Indemnity Reinsurance and the Company’s U.S. insurance companies have agreed to terminate the quota share arrangement effective January 1, 2018. Regulatory approval is still pending.

Overview

The Company operates and manages its business through three business segments: Commercial Lines, Personal Lines, and Reinsurance Operations.

The Company’s Commercial Lines segment distribute property and casualty insurance products through a group of approximately 120 professional general agencies that have limited quoting and binding authority, as well as a number of wholesale insurance brokers who in turn sell the Company’s insurance products to insureds through retail insurance brokers. Commercial Lines operates predominantly in the excess and surplus lines marketplace. The Company manages its Commercial Lines segment via product classification. These product classifications are: 1) Penn-America, which includes property and general liability products for small commercial businesses40

distributed through a select network of wholesale general agents with specific binding authority; 2) United National, which includes property, general liability, and professional lines products distributed through program administrators with specific binding authority; 3) Diamond State, which includes property, casualty, and professional lines products distributed through wholesale brokers and program administrators with specific binding authority; and 4) Vacant Express, which primarily insures dwellings which are currently vacant, undergoing renovation, or are under construction and is distributed through aggregators, brokers, and retail agents.

The Company’s Personal Lines segment, via American Reliable, offers specialty personal lines and agricultural coverage through a group of approximately 275 agents, primarily comprised of wholesale general agents, with specific binding authority in the admitted marketplace.

The Company’s Reinsurance Operations, consisting solely of the operations of Global Indemnity Reinsurance, currently provides reinsurance solutions through brokers and on a direct basis. Global Indemnity Reinsurance is a Bermuda based treaty reinsurer for specialty property and casualty insurance and reinsurance companies. Global Indemnity Reinsurance conducts business in Bermuda and is focused on using its capital capacity to write catastrophe-oriented placements and other niche or specialty-focused treaties meeting the Company’s risk tolerance and return thresholds.

The Company derives its revenues primarily from premiums paid on insurance policies that it writes and from income generated by its investment portfolio, net of fees paid for investment management services. The amount of insurance premiums that the Company receives is a function of the amount and type of policies it writes, as well as prevailing market prices.

The Company’s expenses include losses and loss adjustment expenses, acquisition costs and other underwriting expenses, corporate and other operating expenses, interest, investment expenses, and income taxes. Losses and loss adjustment expenses are estimated by management and reflect the Company’s best estimate of ultimate losses and costs arising during the reporting period and revisions of prior period estimates. The Company records its best estimate of losses and loss adjustment expenses considering both internal and external actuarial analyses of the estimated losses the Company expects to incur on the insurance policies it writes. The ultimate losses and loss adjustment expenses will depend on the actual costs to resolve claims. Acquisition costs consist principally of commissions and premium taxes that are typically a percentage of the premiums on the insurance policies the Company writes, net of ceding commissions earned from reinsurers. Other underwriting expenses consist primarily of personnel expenses and general operating expenses related to underwriting activities. Corporate and other operating expenses are comprised primarily of outside legal fees, other professional and accounting fees, directors’ fees, management fees & advisory fees, and salaries and benefits for company personnel whose services relate to the support of corporate activities. Interest expense is primarily comprised of amounts due on outstanding debt.

Critical Accounting Estimates and Policies

The Company’s consolidated financial statements are prepared in conformity with GAAP, which require it to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. See Note 34 of the notes to consolidated financial statements contained in Item 8 of Part II of this report. Actual results could differ from those estimates and assumptions.

The Company believes that of the Company’s significant accounting policies, the following may involve a higher degree of judgment and estimation.

Liability for Unpaid Losses and Loss Adjustment Expenses

Although variability is inherent in estimates, the Company believes that the liability for unpaid losses and loss adjustment expenses reflects Management’s best estimate for future amounts needed to pay losses and related loss adjustment expenses and the impact of its reinsurance coverage with respect to insured events.

In developing losslosses and loss adjustment expense (“loss”("loss" or “losses”"losses") reserve estimates, for the U.S. Insurance Operations, the Company’s actuaries perform detailed reserve analyses each quarter. To perform the analysis, the data is organized at a “reserve category”"reserve category" level. A reserve category can be a line of business such as commercial automobile liability, or it can be a particular type of claim such as construction defect. The reserves within a reserve category level are characterized as long-tail or short-tail. For long-tail business, it will generally be several years between the time the business is written and the time when all claims are settled. The Company’s long-tail exposures include general liability, professional liability, products liability, commercial automobile liability, and excess and umbrella. Short-tail exposures include property, commercial automobile physical damage, and equine mortality. The Company also reviews assumed reinsurance segments each quarter by treaty and treaty year which is comprised primarily of long-tailed business. To manage its Insurance Operations, the Company's insurance operations, the Company differentiates by product classifications, which are Penn-America, United National, Diamond State, American Reliable, and Vacant Express.products target specific, defined groups of insureds with customized coverage to meet their needs. For further discussion about the Company’s product classifications,business divisions, see “General – Business Segments – Insurance Operations” in Item 1 of Part I of this report. Each of the Company’s product classificationsbusiness divisions contain both long-tail and short-tail exposures. Every reserve category is analyzed by the Company’s actuaries each quarter. Management is responsible for the final determination of loss reserve selections.

Loss reserve estimates for the Company’s Reinsurance Operations are developed by independent, external actuaries; at least annually; however, management is responsible for the final determination of loss reserve selections. The data for this analysis is organized by treaty and treaty year. As with the Company’s reserves for its Insurance Operations, reserves for its Reinsurance Operations are characterized as long-tail or short-tail. Long-tail exposures include workers compensation, professional liability, and excess and umbrella liability. Short-tail exposures are primarily catastrophe exposed property and marine accounts.

In addition to the Company’s internal reserve analysis, independent external actuaries perform a full, detailed review of the Insurance and Reinsurance Operations’ reserves annually. The Company reviews both the internal and external actuarial analyses in determining its reserve position.

The actuarial methods used to project ultimate losses for both long-tail and short-tail reserve categories include, but are not limited to, the following:

•
Paid Development method;

•
Incurred Development method;

•
Expected Loss Ratio method;

41

•
Bornhuetter-Ferguson method using premiums and paid loss;

•
Bornhuetter-Ferguson method using premiums and incurred loss; and

•
Average Loss method.

The Paid Development method estimates ultimate losses by reviewing paid loss patterns and applying them to accident years with further expected changes in paid loss. Selection of the paid loss pattern requires analysis of several factors including the impact of inflation on claims costs, the rate at which claims professionals make claim payments and close claims, the impact of judicial decisions, the impact of underwriting changes, the impact of large claim payments, and other factors. Claim cost inflation itself requires evaluation of changes in the cost of repairing or replacing property, changes in the cost of medical care, changes in the cost of wage replacement, judicial decisions, legislative changes, and other factors. Because this method assumes that losses are paid at a consistent rate, changes in any of these factors can impact the results. Since the method does not rely on case reserves, it is not directly influenced by changes in the adequacy of case reserves.

For many reserve categories, paid loss data for recent periods may be too immature or erratic for reliable loss projections. This situation often exists for long-tail exposures. In addition, changes in the factors described above may result in inconsistent payment patterns. Finally, estimating the paid loss pattern subsequent to the most mature point available in the data analyzed often involves considerable uncertainty for long-tail reserve categories.

The Incurred Development method is similar to the Paid Development method, but it uses case incurred losses instead of paid losses. Since this method uses more data (case reserves in addition to paid losses) than the Paid Development method, the incurred development patterns may be less variable than paid development patterns. However, selection of the incurred loss pattern requires analysis of all of the factors listed in the description of the Paid Development method. In addition, the inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place and the use of case incurred losses may not eliminate the issues associated with estimating the incurred loss pattern subsequent to the most mature point available.

The Expected Loss Ratio method multiplies premiums by an expected loss ratio to produce ultimate loss estimates for each accident year. This method may be useful if loss development patterns are inconsistent, losses emerge very slowly, or there is relatively little loss history from which to estimate future losses. The selection of the expected loss ratio requires analysis of loss ratios from earlier accident years or pricing studies and analysis of inflationary trends, frequency trends, rate changes, underwriting changes, and other applicable factors.

The Bornhuetter-Ferguson method using premiums and paid losses is a combination of the Paid Development method and the Expected Loss Ratio method. This method normally determines expected loss ratios similar to the method used for the Expected Loss Ratio method and requires analysis of the same factors described above. The method assumes that only future losses will develop at the expected loss ratio level. The percent of paid loss to ultimate loss implied from the Paid Development method is used to determine what percentage of ultimate loss is yet to be paid. The use of the pattern from the Paid Development method requires consideration of all factors listed in the description of the Paid Development method. The estimate of losses yet to be paid is added to current paid losses to estimate the ultimate loss for each accident year. This method will react very slowly if actual ultimate loss ratios are different from expectations due to changes not accounted for by the Expected Loss Ratio calculation.

The Bornhuetter-Ferguson method using premiums and incurred losses is similar to the Bornhuetter-Ferguson method using premiums and paid losses except that it uses case incurred losses. The use of case incurred losses instead of paid losses can result in development patterns that are less variable than paid development patterns. However, the inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place. The method requires analysis of all the factors that need to be reviewed for the Expected Loss Ratio and Incurred Development methods.

42

The Average Loss method multiplies a projected number of ultimate incurred claims by an estimated ultimate average loss for each accident year to produce ultimate loss estimates. Since projections of the ultimate number of claims are often less variable than projections of ultimate loss, this method can provide more reliable results for reserve categories where loss development patterns are inconsistent or too variable to be relied on exclusively. In addition, this method can more directly account for changes in coverage that impact the number and size of claims. However, this method can be difficult to apply to situations where very large claims or a substantial number of unusual claims result in volatile average claim sizes. Projecting the ultimate number of claims requires analysis of several factors including the rate at which policyholders report claims to the Company, the impact of judicial decisions, the impact of underwriting changes, and other factors. Estimating the ultimate average loss requires analysis of the impact of large losses and claim cost trends based on changes in the cost of repairing or replacing property, changes in the cost of medical care, changes in the cost of wage replacement, judicial decisions, legislative changes, and other factors.

For many reserve categories, especially those that can be considered long-tail, a particular accident year may not have a sufficient volume of paid losses to produce a statistically reliable estimate of ultimate losses. In such a

case, the Company’s actuaries typically assign more weight to the Incurred Development method than to the Paid Development method. As claims continue to settle and the volume of paid losses increases, the Company's actuaries may assign additional weight to the Paid Development method. For most of the Company’s reserve categories, even the case incurred losses for accident years that are early in the claim settlement process will not be of sufficient volume to produce a reliable estimate of ultimate losses. In these cases, the CompanyCompany's actuaries will not assign any weight to the Paid and Incurred Development methods and will use the Bornhuetter-Ferguson and Expected Loss Ratio methods. For short-tail exposures, the Paid and Incurred Development methods can often be relied on sooner primarily because the Company’s history includes a sufficient number of accident years to cover the entire period over which paid and incurred losses are expected to change. However, the CompanyCompany's actuaries may also assign weights to the Expected Loss Ratio, Bornhuetter-Ferguson, and Average Loss methods for short-tail exposures when developing estimates of ultimate losses.

Generally, reserves for long-tail lines give more weight to the Expected Loss Ratio method in the more recent immature years. As the accident years mature, weight shifts to the Bornhuetter-Ferguson methods and eventually to the Incurred and/or Paid Development method. Claims related to umbrella business are usually reported later than claims for other long-tail lines. For umbrella business, the shift from the Expected Loss Ratio method to the Bornhuetter-Ferguson methods to the Loss Development method may be more protracted than for most long-tailed lines. Reserves for short-tail lines tend to make the shift across methods more quickly than the long-tail lines.

For other more complex reserve categories where the above methods may not produce reliable indications, the Company usesCompany's actuaries use additional methods tailored to the characteristics of the specific situation. Such reserve categories include losses from construction defect and A&E claims.

For construction defect losses, the Company’s actuaries organize losses by the year in which they were reported to develop an IBNR provision for development on known cases. To estimate losses from claims that have occurred but have not yet been reported to the Company, (pure IBNR), various extrapolation techniques are applied to the pattern of claims that have been reported to estimate the number of claims yet to be reported.reported which will ultimately pay positive loss amounts. This process requires analysis of several factors including the rate at which policyholders report claims to the Company, the rate at which reported claims close with payment, the impact of judicial decisions, the impact of underwriting changes, and other factors. An estimated average claim size is determined from past experience and applied to the estimated number of unreported claims to estimate reserves for these claims.

Establishing reserves for A&E and other mass tort claims involves considerably more judgment than other types of claims due to among other things,factors including, but not limited to, inconsistent court decisions, bankruptcy filings as a result of asbestos-related liabilities, and judicial interpretations that often expand theories of recovery and broaden the scope of coverage. The insurance industry continues to receive a substantial number of asbestos-related bodily injury claims, with an increasing focus being directed toward other parties, including installers of products containing asbestos rather than against asbestos manufacturers. This shift has resulted in significant insurance coverage litigation implicating applicable coverage defenses or determinations, if any, including but not limited to, determinations as to whether or not an asbestos-related bodily injury claim is subject to aggregate limits of liability found in most comprehensive general liability policies. The Company continues to closely monitor its asbestos exposure and make adjustments where they are warranted.

43

Reserve analyses performed by the Company’s internal and external actuaries result in actuarial point estimates. The results of the detailed reserve reviews were summarized and discussed with the Company’s senior management to determine theManagement's best estimate of reserves. This groupManagement considered many factors in making this decision. The factors included, but were not limited to, the historical pattern and volatility of the actuarial indications, the sensitivity of the actuarial indications to changes in paid and incurred loss patterns, the consistency of claims handling processes, the consistency of case reserving practices, changes in the Company’s pricing and underwriting, and overall pricing and underwriting trends in the insurance market.

Management’s best estimate at December 31, 20172023 was recorded as the loss reserve. Management’s best estimate is as of a particular point in time and is based upon known facts, the Company’s actuarial analyses, current law, and the Company’s judgment. This resulted in carried gross and net reserves of $634.7$850.6 million and $537.4$777.8 million, respectively, as of December 31, 2017.2023. A breakout of the Company’s gross and net reserves excluding the effects of the Company’s intercompany pooling arrangements and intercompany stop loss and quota share reinsurance agreements, as of December 31, 20172023 is as follows:

   Gross Reserves 
(Dollars in thousands)  Case   IBNR (1)   Total 

Commercial Lines

  $116,222   $302,820   $419,042 

Personal Lines

   40,443    79,812    120,255 

Reinsurance Operations

   31,100    64,267    95,367 
  

 

 

   

 

 

   

 

 

 

Total

  $187,765   $446,899   $634,664 
  

 

 

   

 

 

   

 

 

 

 

 

Gross Reserves

 

(Dollars in thousands)

 

Case

 

 

IBNR (1)

 

 

Total

 

Penn-America

 

$

128,404

 

 

$

280,316

 

 

$

408,720

 

Non-Core Operations

 

 

118,111

 

 

 

323,768

 

 

 

441,879

 

Total

 

$

246,515

 

 

$

604,084

 

 

$

850,599

 

   Net Reserves (2) 
(Dollars in thousands)  Case   IBNR (1)   Total 

Commercial Lines

  $92,313   $250,636   $342,949 

Personal Lines

   32,792    66,384    99,176 

Reinsurance Operations

   31,099    64,197    95,296 
  

 

 

   

 

 

   

 

 

 

Total

  $156,204   $381,217   $537,421 
  

 

 

   

 

 

   

 

 

 

 

 

Net Reserves (2)

 

(Dollars in thousands)

 

Case

 

 

IBNR (1)

 

 

Total

 

Penn-America

 

$

127,267

 

 

$

271,118

 

 

$

398,385

 

Non-Core Operations

 

 

84,564

 

 

 

294,821

 

 

 

379,385

 

Total

 

$

211,831

 

 

$

565,939

 

 

$

777,770

 

(1)Losses incurred but not reported, including the expected future emergence of case reserves.
(2)Does not include reinsurance receivable on paid losses.
(1)
Losses incurred but not reported, including the expected future emergence of case reserves.
(2)
Does not include reinsurance receivables on paid losses.

The Company continuallyregularly reviews these estimates and, based on new developments and information, includes adjustments of the estimated ultimate liability in the operating results for the periods in which the adjustments are made. The establishment of losslosses and loss adjustment expense reserves makes no provision for the possible broadening of coverage by legislative action or judicial interpretation, or the emergence of new types of losses not sufficiently represented in the Company’s historical experience or that cannot yet be quantified or estimated. The Company regularly analyzes its reserves and reviews reserving methodologies so that future adjustments to prior accident year reserves can be minimized. However, given the complexity of this process, reserves require continual updates and the ultimate liability may be higher or lower than previously indicated. Changes in estimates for losslosses and loss adjustment expense reserves are recorded in the period that the change in these estimates is made. See Note 1112 to the consolidated financial statements in Item 8 of Part II of this report for details concerning the changes in the estimate for incurred losslosses and loss adjustment expenses related to prior accident years.

The detailed reserve analyses that the Company’s internal and external actuaries complete use a variety of generally accepted actuarial methods and techniques to produce a number of estimates of ultimate loss. The Company determines its best estimate of ultimate loss by reviewing the various estimates provided by its actuaries and other relevant information. The reserve estimate is the difference between the estimated ultimate loss and the losses paid to date. The difference between the estimated ultimate loss and the case incurred loss (paid loss plus case reserve) is considered to be IBNR. IBNR calculated as suchwhich includes a provision for development on known cases (supplemental development) as well as a provision for claims that have occurred but have not yet been reported to the Company (pure IBNR).Company.

In light of the many uncertainties associated with establishing the estimates and making the assumptions necessary to establish reserve levels, the Company reviews its reserve estimates on a regular basis and makes adjustments in the period that the need for such adjustments is determined.

44

The key assumptions fundamental to the reserving process are often different for various reserve categories and accident years. Some of these assumptions are explicit assumptions that are required of a particular method, but most of the assumptions are implicit and cannot be precisely quantified. An example of an explicit assumption is the pattern employed in the Paid Development method. However, the assumed pattern is itself based on several implicit assumptions such as the impact of inflation on medical costs and the rate at which claim professionals close claims. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Each reserve category has an implicit frequency and severity for each accident year as a result of the various assumptions made.

Previous reserve analyses have resulted in the Company’s identification of information and trends that have caused it to increase or decrease frequency and severity assumptions in prior periods and could lead to the identification of a need for additional material changes in losslosses and loss adjustment expense reserves, which could materially affect results of operations, equity, business and insurer financial strength and debt ratings. Factors affecting loss frequency include, among other things,but are not limited to, the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns. Factors affecting loss severity include, among other things,but are not limited to, changes in policy limits and deductibles, rate of inflation, and judicial interpretations. Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects the Company’s ability to accurately predict loss frequency (loss frequencies are more predictable for short-tail lines) as well as the amount of reserves needed for IBNR.

If the actual levels of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’sManagement’s best estimate. For most of its reserve categories, the Company believes that frequency can be predicted with greater accuracy than severity. Therefore, the Company believes management’sManagement’s best estimate is more likely influenced by changes in severity than frequency. The following table, which the Company believes reflects a reasonable range of variability around its best estimate based on historical loss experience and management’sManagement’s judgment, reflects the impact of changes (which could be favorable or unfavorable) in frequency and severity on the Company’s current accident year net loss estimate of $323.1$279.6 million for claims occurring during the year ended December 31, 2017:2023:

    Severity Change 

 

Severity Change

 

(Dollars in thousands)    -10% -5% 0% 5% 10% 

 

-10%

 

-5%

 

0%

 

5%

 

10%

 

Frequency Change

   -5%�� $(46,850)  $(31,502)  $(16,155)  $(808)  $14,540 

 

-5%

 

 

(40,543

)

 

 

(27,262

)

 

 

(13,980

)

 

 

(699

)

 

 

12,582

 

   -3%  (41,034)  (25,363)  (9,693)  5,977  21,648 

 

-3%

 

 

(35,510

)

 

 

(21,949

)

 

 

(8,388

)

 

 

5,173

 

 

 

18,734

 

   -2%  (38,126)  (22,294)  (6,462)  9,370  25,202 

 

-2%

 

 

(32,994

)

 

 

(19,293

)

 

 

(5,592

)

 

 

8,109

 

 

 

21,810

 

   -1%  (35,218)  (19,224)  (3,231)  12,762  28,756 

 

-1%

 

 

(30,477

)

 

 

(16,637

)

 

 

(2,796

)

 

 

11,045

 

 

 

24,885

 

   0%  (32,310)  (16,155)   —    16,155  32,310 

 

0%

 

 

(27,961

)

 

 

(13,980

)

 

 

—

 

 

 

13,980

 

 

 

27,961

 

   1%  (29,402)  (13,086)  3,231  19,548  35,864 

 

1%

 

 

(25,444

)

 

 

(11,324

)

 

 

2,796

 

 

 

16,916

 

 

 

31,037

 

   2%  (26,494)  (10,016)  6,462  22,940  39,418 

 

2%

 

 

(22,928

)

 

 

(8,668

)

 

 

5,592

 

 

 

19,852

 

 

 

34,112

 

   3%  (23,586)  (6,947)  9,693  26,333  42,972 

 

3%

 

 

(20,411

)

 

 

(6,012

)

 

 

8,388

 

 

 

22,788

 

 

 

37,188

 

   5%  (17,771)  (808)  16,155  33,118  50,081 

 

5%

 

 

(15,378

)

 

 

(699

)

 

 

13,980

 

 

 

28,660

 

 

 

43,339

 

The Company’s net reserves for losses and loss adjustment expenses of $537.4$777.8 million as of December 31, 20172023 relate to multiple accident years. Therefore, the impact of changes in frequency and severity for more than one accident year could be higher or lower than the amounts reflected above.

Recoverability of Reinsurance Receivables

The Company regularly reviews the collectability of its reinsurance receivables, and includes adjustments resulting from this review in earnings in the period in which the adjustment arises. A.M.An allowance for expected credit losses for reinsurance receivables is recognized based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, disputes, applicable coverage defenses, insolvent reinsurers, financial strength of solvent reinsurers based on AM Best ratings, financial history, available collateral,Ratings and payment history with the reinsurers are several of the factors that the Company considers when judging collectability.other relevant factors. Changes in loss reserves can also affect the valuation of reinsurance

receivables if the change is related to loss reserves that are ceded to reinsurers. Certain amounts may be uncollectible if the Company’s reinsurers dispute a loss or if the reinsurer is unable to pay. If its reinsurers do not pay, the Company remains legally obligated to pay the loss.

See Note 910 of the notes to consolidated financial statements in Item 8 of Part II of this report for further information surrounding the Company’s reinsurance receivable balances and collectability as of December 31, 20172023 and 2016. 2022.For a listing of the ten reinsurers for which the Company has the largest reinsurance asset amounts as of December 31, 2017,2023, see “Reinsurance of Underwriting Risk” in Item 1 of Part I of this report.

45

Investments

Investments

The carrying amount of the Company’s investments approximates their fair value. The Company regularly performs various analytical valuation procedures with respect to investments, including reviewing each fixed maturity security in an unrealized loss position to determine whether the amount of unrealized loss related todecline in fair value below amortized cost basis has resulted from a credit loss and the amount related to allor other factors, such as changes in interest rates. TheIn assessing whether a credit loss representsexists, the portion ofCompany compares the amortized book value in excess of the net present value of the projected future cash flows discounted atexpected to be collected from the effective interest rate implicitsecurity to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for expected credit losses is recorded. Subsequent changes in the debt security prior to impairment. Theallowances are recorded in the period of change as either credit loss componentexpense or reversal of the other than temporary impairment is recorded through earnings, whereas the amount relatingcredit loss expense. Any impairments related to factors other than credit losses or the intent to sell are recorded inthrough other comprehensive income, net of taxes. During its review, the Company considers credit rating, market price, and issuer specific financial information, among other factors, to assess the likelihood of collection of all principal and interest as contractually due. Securities for which the Company determines that a credit loss is likely are subjected to further analysis to estimate the credit loss to be recognized in earnings, if any. See Note 35 of the notes to consolidated financial statements in Item 8 of Part II of this report for the specific methodologies and significant assumptions used by asset class. Upon identification of such securities and periodically thereafter, a detailed review is performed to determine whether the decline is considered other than temporary. This review includes an analysis of several factors, including but not limited to, the credit ratings and cash flows of the securities, and the magnitude and length of time that the fair value of such securities is below cost.

Forclass as well as an analysis of the Company’s securities with gross unrealized losses as of December 31, 20172023 and 2016, and for other than temporary impairment losses that the Company recorded for the years ended December 31, 2017, 2016, and 2015, please see Note 5 of the notes to the consolidated financial statements in Item 8 of Part II of this report.2022.

Fair Value Measurements

The Company categorizes its invested assets and derivative instruments that are accounted for at fair value in the consolidated statements into a fair value hierarchy. The fair value hierarchy is directly related to the amount of subjectivity associated with the inputs utilized to determine the fair value of these assets. The reported value of financial instruments not carried at fair value, principally cash and cash equivalents, and margin borrowing facility approximate fair value. See Note 7 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further information about the fair value hierarchy and the Company’s assets that are accounted for at fair value.

Goodwill and Intangible Assets

The Company tests for impairment of goodwill at least annually and more frequently as circumstances warrant in accordance with applicable accounting guidance. Accounting guidance allows for the testing of goodwill for impairment using both qualitative and quantitative factors. Impairment of goodwill is recognized only if the carrying amount of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. The amount of the impairment loss would be equal to the excess carrying value of the goodwill over the implied fair value of the reporting unit goodwill. Based on the qualitative assessment performed, there was no impairment of goodwill as of December 31, 2017.

Impairment of intangible assets with indefinite useful lives is tested at least annually and more frequently as circumstances warrant in accordance with applicable accounting guidance. Accounting guidance allows for the testing of intangible assets for impairment using both qualitative and quantitative factors. Impairment of indefinite lived intangible assets is recognized only if the carrying amount of the intangible assets exceeds the fair value of said assets. The amount of the impairment loss would be equal to the excess carrying value of the assets over the fair value of said assets. Based on the qualitative assessment performed, there were no impairments of indefinite lived intangible assets as of December 31, 2017.

Intangible assets that are not deemed to have an indefinite useful life are amortized over their estimated useful lives. The carrying amounts of definite lived intangible assets are regularly reviewed for indicators of impairment in accordance with applicable accounting guidance. Impairment is recognized only if the carrying amount of the intangible asset is in excess of its undiscounted projected cash flows. The impairment is measured as the difference between the carrying amount and the estimated fair value of the asset. As of December 31, 2017, there were no triggering events that occurred during the year that would result in an impairment of definite lived intangible assets.

See Note 8 of the notes to the consolidated financial statements in Item 8 of Part II of this report for more details concerning the Company’s goodwill and intangible assets.assets as well as the result of its impairment testing.

Deferred Acquisition Costs

The costs of acquiring new and renewal insurance and reinsurance contracts primarily include commissions, premium taxes and certain other costs that are directly related to the successful acquisition of new and renewal insurance and reinsurance contracts. The excess of the Company’s costs of acquiring new and renewal insurance and reinsurance contracts over the related ceding commissions earned from reinsurers is capitalized as deferred acquisition costs and amortized over the period in which the related premiums are earned.

46

In accordance with accounting guidance for insurance enterprises, the method followed in computing such amounts limits them to amounts recoverable from premium to be earned, related investment income, losses and loss adjustment expenses, and certain other costs expected to be incurred as the premium is earned. A premium deficiency is recognized if the sum of expected losslosses and loss adjustment expenses and unamortized acquisition costs exceeds related unearned premium. This evaluation is done at a distribution and product line level in Insurance Operations and at a line/treaty level in Reinsurance Operations.level. Any future expected loss on the related unearned premium is recorded first by impairing the unamortized acquisition costs on the related unearned premium followed by an increase to losslosses and loss adjustment expense reserves on additional expected loss in excess of unamortized acquisition costs. The Company calculates deferred acquisition costs for InsurancePenn-America and Non-Core Operations separately by product lines and for its Reinsurance Operationsdistribution lines. For reinsurance treaties, the Company calculates deferred acquisition costs separately for each treaty.

Taxation

The Company provides for income taxes in accordance with applicable accounting guidance. The Company’s deferred tax assets and liabilities primarily result from temporary differences between the amounts recorded in the consolidated financial statements and the tax basis of the Company’s assets and liabilities.

At each balance sheet date, management assesses the need to establish a valuation allowance that reduces deferred tax assets when it is more likely than not that all, or some portion, of the deferred tax assets will not be realized. A valuation allowance would be based on all available information including the Company’s assessment of uncertain tax positions and projections of future taxable income from eachtax-paying component in each jurisdiction, principally derived from business plans and available tax planning strategies.

As of December 31, 2023, the Company had a deferred tax asset of approximately $5.6 million related to net unrealized losses on fixed maturity available for sale securities. In the assessment of the future realizability of this deferred tax asset, management considered tax planning strategies and concluded that unrealized losses were caused by factors other than credit loss, and the Company have the intent and ability to hold these securities to recovery and collect all of the contractual cash flows.

There are no valuation allowances as of December 31, 20172023 and 2016.2022. The deferred tax asset balance is analyzed regularly by management. This assessment requires significant judgment and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of

carryforward periods, and tax planning strategies and/or actions. Based on these analyses, the Company has determined that its deferred tax asset is recoverable. Projections of future taxable income incorporate several assumptions of future business and operations that are apt to differ from actual experience. If, in the future, the Company’s assumptions and estimates that resulted in the forecast of future taxable income for eachtax-paying component prove to be incorrect, a valuation allowance may be required. This could have a material adverse effect on the Company’s financial condition, results of operations, and liquidity.

The Company applies a more likely than not recognition threshold for all tax uncertainties, only allowing the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by therelevant taxing authorities. Please see Note 1011 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a discussion of the Company’s tax uncertainties.

Leases

The Company determines if an arrangement is a lease at inception. Leases with a term of 12 months or less are not recorded on the consolidated balance sheets. Lease right-of-use assets (“ROU”) and lease liabilities are included on the consolidated balance sheets.

Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company’s leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate at the commencement date in determining the present value of future payments. The ROU asset is calculated using the initial lease liability amount, plus any lease payments made at or before the commencement date, minus any lease incentives received, plus any initial direct costs incurred. Lease expenses for minimum lease payments are recognized on a straight-line basis over the lease term.

47

The Company’s lease agreements may contain both lease and non-lease components which are accounted separately. The Company elected the practical expedient on not separating lease components from non-lease components for its equipment leases.

Rental income derived from subleases are recognized on a straight-line basis over the operating lease term.

48

Business Segments

The Company manages the distribution of its businesscore product offerings through three business segments: Personal Lines,its Penn-America segment (formerly known as Commercial Lines, and Reinsurance Operations.Specialty). The Personal Lines and Commercial Lines segments comprisePenn-America segment comprises the Company’s U.S. Insurance Operations, which currently includes the operations of United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, Penn-Patriot Insurance Company, American Reliable Insurance Company, American Insurance Adjustment Agency, Inc., Collectibles Insurance Services, LLC, Global Indemnity Insurance Agency, LLC, and J.H. Ferguson & Associates, LLC. ReinsuranceThe Company also has a Non-Core Operations includes the operationssegment that contains lines of Global Indemnity Reinsurance Company, Ltd.business that have been de-emphasized or are no longer being written.

The Company evaluates the performance of these three segments based on gross and net written premiums, written, revenues in the form of net earned premiums, earned, and expenses in the form of (1) net losses and loss adjustment expenses, (2) acquisition costs, and (3) other underwriting expenses.

During the 1stfourth quarter of 2017,2023, the Companyre-evaluated restructured its Commercial Linesinsurance operations to strengthen its market presence and Personal Linesenhance GBLI's focus on core products and made the decision to manage the business through two segments, Penn-America and determined that certain portions of business will be managed, operated and reported by including them in the other segment. As a result, the compositionNon-Core Operations. Management believes these segments allow users of the Company’s reportable segments changed slightly. Premium that is written throughfinancial statements to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a wholly owned agency that mainly sells to individuals, which was previously included as part of the Commercial Lines segment, is now included within the Personal Lines segment. In addition, one of the small commercial programs written by American Reliable Insurance Company, which was previously included within the Personal Lines segment, is now aggregated within the Commercial Lines segment. Accordingly, the segmentwhole. Segment results for theprior years ended December 31, 2016 and 2015 have been revised to reflect these changes.

See “Business Segments” in Item 1 of Part I of this report for a description of the Company’s segments.

Results of Operations

The Company realized net income (loss) of $25.4 million, ($0.9) million, and $29.4 million during the years ended December 31, 2023, 2022, and 2021, respectively. Excluding the gain from the sale of the Manufactured Home and Dwelling renewal rights in 2021 and the sale of the Company’s Farm, Ranch, & Stable renewal rights, net loss(1) would have been $17.3 million in 2022 and net income would have been $12.9 million in 2021.

Net investment income was $55.4 million, $27.6 million, and $37.0 million for the years ended December 31, 2023, 2022, and 2021, respectively. Excluding investment income from alternative investments, investment income was $51.0 million, $33.6 million and $26.2 million during the years ended December 31, 2023, 2022, and 2021, respectively. The increase in investment income in 2023 compared to 2022 is mainly due to increases in book yield and good performance from alternative investments. Book yield for the fixed income investment portfolio was 4.0% at December 31, 2023 compared to 2.2% at December 31, 2021.

The Company's primary business, Penn-America, generated strong accident year results. Penn-America's accident year underwriting income(2) was $18.5 million, $13.5 million, and $14.1 million for the years ended December 31, 2023, 2022, and 2021, respectively, and the accident year combined ratio(2) was 95.2%, 96.5%, and 95.8% for the years ended December 31, 2023, 2022, and 2021, respectively.

49

The following table summarizes the Company’s results for the years ended December 31, 2017, 2016,2023, 2022, and 2015:2021:

 Years Ended
December 31,		 %
Change		  Years Ended
December 31,		 %
Change		 

 

Years Ended
December 31,

 

 

%

 

 

Years Ended
December 31,

 

 

%

 

(Dollars in thousands) 2017 2016 (4) 2016 (4) 2015 (4) 

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Gross premiums written

 $516,334  $565,845  (8.7%)  $565,845  $590,233  (4.1%) 

Gross written premiums

 

$

416,397

 

 

$

727,603

 

 

 

(42.8

%)

 

$

727,603

 

 

$

682,122

 

 

 

6.7

%

Net written premiums

 

$

399,319

 

 

$

591,331

 

 

 

(32.5

%)

 

$

591,331

 

 

$

580,068

 

 

 

1.9

%

 

 

  

 

  

 

  

 

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums written

 $450,180  $470,940  (4.4%)  $470,940  $501,244  (6.0%) 
 

 

  

 

  

 

  

 

  

 

  

 

 

Net premiums earned

 $438,034  $468,465  (6.5%)  $468,465  $504,143  (7.1%) 

Net earned premiums

 

$

473,357

 

 

$

602,471

 

 

 

(21.4

%)

 

$

602,471

 

 

$

595,610

 

 

 

1.2

%

Other income

 6,582  10,345  (36.4%)  10,345  3,400  204.3% 

 

 

1,435

 

 

 

1,462

 

 

 

(1.8

%)

 

 

1,462

 

 

 

1,815

 

 

 

(19.4

%)

 

 

  

 

  

 

  

 

  

 

  

 

 

Total revenues

 444,616  478,810  (7.1%)  478,810  507,543  (5.7%) 

 

 

474,792

 

 

 

603,933

 

 

 

(21.4

%)

 

 

603,933

 

 

 

597,425

 

 

 

1.1

%

Losses and expenses:

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net losses and loss adjustment expenses

 269,212  264,003  2.0%  264,003  275,368  (4.1%) 

 

 

289,153

 

 

 

359,228

 

 

 

(19.5

%)

 

 

359,228

 

 

 

384,964

 

 

 

(6.7

%)

Acquisition costs and other underwriting expenses

 183,733  196,650  (6.6%)  196,650  201,303  (2.3%) 

 

 

182,617

 

 

 

236,381

 

 

 

(22.7

%)

 

 

236,381

 

 

 

222,841

 

 

 

6.1

%

 

 

  

 

  

 

  

 

  

 

  

 

 

Underwriting income (loss)

 (8,329)  18,157  (145.9%)  18,157  30,872  (41.2%) 

 

 

3,022

 

 

 

8,324

 

 

 

(63.7

%)

 

 

8,324

 

 

 

(10,380

)

 

 

(180.2

%)

Net investment income

 39,323  33,983  15.7%  33,983  34,609  (1.8%) 

 

 

55,444

 

 

 

27,627

 

 

 

100.7

%

 

 

27,627

 

 

 

37,020

 

 

 

(25.4

%)

Net realized investment gains (losses)

 1,576  21,721  (92.7%)  21,721  (3,374)  NM 

 

 

(2,107

)

 

 

(32,929

)

 

 

(93.6

%)

 

 

(32,929

)

 

 

15,887

 

 

NM

 

Other income

 

 

—

 

 

 

29,903

 

 

 

(100.0

%)

 

 

29,903

 

 

 

27,936

 

 

 

7.0

%

Corporate and other operating expenses

 (25,714)  (17,338)  48.3%  (17,338)  (24,448)  (29.1%) 

 

 

(23,383

)

 

 

(24,421

)

 

 

(4.3

%)

 

 

(24,421

)

 

 

(27,179

)

 

 

(10.1

%)

Interest expense

 (16,906)  (8,905)  89.8%  (8,905)  (4,913)  81.3% 

 

 

—

 

 

 

(3,004

)

 

 

(100.0

%)

 

 

(3,004

)

 

 

(10,481

)

 

 

(71.3

%)

 

 

  

 

  

 

  

 

  

 

  

 

 

Income (loss) before income taxes

 (10,050)  47,618  (121.1%)  47,618  32,746  45.4% 

Income tax benefit

 499  2,250  (77.8%)  2,250  8,723  (74.2%) 
 

 

  

 

  

 

  

 

  

 

  

 

 

Loss on extinguishment of debt

 

 

—

 

 

 

(3,529

)

 

 

(100.0

%)

 

 

(3,529

)

 

 

—

 

 

 

100.0

%

Income before income taxes

 

 

32,976

 

 

 

1,971

 

 

NM

 

 

 

1,971

 

 

 

32,803

 

 

 

(94.0

%)

Income tax expense

 

 

(7,547

)

 

 

(2,821

)

 

 

167.5

%

 

 

(2,821

)

 

 

(3,449

)

 

 

(18.2

%)

Net income (loss)

 $(9,551)  $49,868  (119.2%)  $49,868  $41,469  20.3% 

 

$

25,429

 

 

$

(850

)

 

NM

 

 

$

(850

)

 

$

29,354

 

 

 

(102.9

%)

 

 

  

 

  

 

  

 

  

 

  

 

 

Underwriting Ratios:

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss ratio (1):

 61.5%  56.4%   56.4%  54.6%  

Expense ratio (2)

 41.9%  42.0%   42.0%  39.9%  
 

 

  

 

   

 

  

 

  

Combined ratio (3)

 103.4%  98.4%   98.4%  94.5%  
 

 

  

 

   

 

  

 

  

Loss ratio (3)

 

 

61.1

%

 

 

59.6

%

 

 

 

 

 

59.6

%

 

 

64.7

%

 

 

 

Expense ratio (4)

 

 

38.6

%

 

 

39.2

%

 

 

 

 

 

39.2

%

 

 

37.4

%

 

 

 

Combined ratio (5)

 

 

99.7

%

 

 

98.8

%

 

 

 

 

 

98.8

%

 

 

102.1

%

 

 

 

NM —– not meaningful

(1)The loss ratio is a GAAP financial measure that is generally viewed in the insurance industry as an indicator of underwriting profitability and is calculated by dividing net losses and loss adjustment expenses by net premiums earned.
(2)The expense ratio is a GAAP financial measure that is calculated by dividing the sum of acquisition costs and other underwriting expenses by net premiums earned.
(3)The combined ratio is a GAAP financial measure and is the sum of the Company’s loss and expense ratios.
(4)On September 30, 2016, Diamond State Insurance Company sold all the outstanding shares of capital stock of one of its wholly owned subsidiaries, United National Specialty Insurance Company. Financial results for 2016 and 2015 include United National Specialty Insurance. Company. This transaction did not have a significant impact on the Company’s ongoing business operations. Subsequent to the sale, any business previously written by United National Specialty Insurance Company is being written by other companies within the Company’s U.S. Insurance Operations.

Premiums

The following table summarizes(1)

Net income (loss) excluding the change in premium volume by business segment:

  Years Ended
December 31,		  %
Change		  Years Ended
December 31,		  %
Change		 
(Dollars in thousands) 2017  2016   2016  2015  

Gross premiums written (1)

      

Personal Lines (3) (4)

 $249,777  $302,947   (17.6%)  $302,947  $327,147   (7.4%) 

Commercial Lines (4)

  212,670   203,061   4.7%   203,061   213,353   (4.8%) 

Reinsurance (5)

  53,887   59,837   (9.9%)   59,837   49,733   20.3% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total gross premiums written

 $516,334  $565,845   (8.7%)  $565,845  $590,233   (4.1%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ceded premiums written

      

Personal Lines (4)

 $39,978  $74,764   (46.5%)  $74,764  $73,990   1.0% 

Commercial Lines (4)

  26,222   20,105   30.4%   20,105   14,949   34.5% 

Reinsurance (5)

  (46)   36   (227.8%)   36   50   (28.0%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total ceded premiums written

 $66,154  $94,905   (30.3%)  $94,905  $88,989   6.6% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums written (2)

      

Personal Lines (4)

 $209,799  $228,183   (8.1%)  $228,183  $253,157   (9.9%) 

Commercial Lines (4)

  186,448   182,956   1.9%   182,956   198,404   (7.8%) 

Reinsurance (5)

  53,933   59,801   (9.8%)   59,801   49,683   20.4% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total net premiums written

 $450,180  $470,940   (4.4%)  $470,940  $501,244   (6.0%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums earned

      

Personal Lines (4)

 $215,983  $237,555   (9.1%)  $237,555  $253,948   (6.5%) 

Commercial Lines (4)

  178,798   189,342   (5.6%)   189,342   198,404   (4.6%) 

Reinsurance (5)

  43,253   41,568   4.1%   41,568   51,791   (19.7%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total net premiums earned

 $438,034  $468,465   (6.5%)  $468,465  $504,143   (7.1%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NM — not meaningful

(1)Gross premiums written represent the amount received or to be received for insurance policies written without reduction for reinsurance costs or other deductions.
(2)Net premiums written equal gross premiums written less ceded premiums written.
(3)Includes business written by American Reliable that is ceded to insurance companies owned by Assurant under a 100% quota share reinsurance agreement of ($1.3) million, $35.3 million, and $55.8net gain on the sale of the Company’s Manufactured Home and Dwelling renewal rights and the Company's Farm, Ranch & Stable renewal rights of ($17.3) million and $12.9 million during the years ended December 31, 2017, 2016, and 2015, respectively.
(4)Includes business ceded to the Company’s Reinsurance Operations.
(5)External business only, excluding business assumed from affiliates.

Gross premiums written decreased by 8.7% for year ended December 31, 2017 as compared to 2016. Gross premiums written include business written by American Reliable that2022 and 2021, respectively, is ceded to insurance entities owned by Assurant under a 100% quota share reinsurance agreement innon-GAAP measure which excludes the amountimpact of ($1.3)gross proceeds of $30.0 million, impairments and expenses of $9.2 million, and $35.3tax expense of $4.4 million related to sale of Farm, Ranch & Stable renewal rights in 2022 and excludes the impact of gross proceeds of $28.0 million, impairments and expenses of $7.2 million, and tax expense of $4.4 million related to the sale of Manufactured Home and Dwelling renewal rights in 2021. The Company’s most directly comparable GAAP measure is net income (loss) of ($0.9) million, and $29.4 million during the years ended December 31, 2022 and 2021, respectively. The Company believes the non-GAAP measure is useful to investors when evaluating the Company's performance as trends may be obscured by this one time transaction. This non-GAAP measure should not be considered as a substitute for its most directly comparable GAAP measure and does not reflect the overall profitability of the Company.

(2)
Penn-America's accident year underwriting income of $18.5 million, $13.5 million, and $14.1 million for the years ended December 31, 20172023, 2022, and 2016, respectively. Excluding2021, respectively, is a non-GAAP measure which excludes the business that is ceded 100% to insurance entities owned by Assurant, gross premiums written decreased by 2.4% for theimpact of prior accident year ended December 31, 2017 as compared to 2016. The decline is mainly due to the discontinuance of one unprofitable program within the Company’s Commercial Lines, underwriting actions taken within the Company’s Personal Lines to improve profitability,losses and a reduction in premiums written within the Company’s Reinsurance Operations related to cancellation of a treaty. This decline was partially offset by an increase in gross premiums written within the Company’s Commercial Lines due to the introduction of a new program as well as increased production as a result of providing additionalloss adjustment expenses and prior accident year contingent commission incentives for increased business.

Gross premiums written decreased by 4.1% for year ended December 31, 2016 as compared to 2015. Gross premiums written include business written by American Reliable that is ceded to insurance entities owned by Assurant under a 100% quota share reinsurance agreement in the amount of $35.3expenses totaling $30.1 million, $2.9 million, and $55.8$1.6 million for the years ended December 31, 20162023, 2022, and 2015,2021, respectively. ExcludingThe Company's most directly comparable GAAP measure is the business that is ceded 100% to insurance entities owned by Assurant, gross premiums written decreased by 0.7% for the year ended December 31, 2016 as compared to 2015. The decline is mainly due to targeted reductions in catastrophe exposed business within the Company’s U.S. Insurance Operations offset by an increase in gross premiums written within the Company’s Reinsurance Operations due to a new mortgage insurance treaty written in the fourth quarterPenn-America's underwriting income (loss) of 2016. This new mortgage insurance treaty contributed $22.4($11.6) million, to gross premiums written in 2016 and is expected to earn over an eight year period.

Net Retention

The ratio of net premiums written to gross premiums written is referred to as the Company’s net premium retention. The Company’s net premium retention is summarized by segments as follows:

  Years Ended
December 31,		  Change  Years Ended
December 31,		  Change 
(Dollars in thousands) 2017  2016   2016  2015  

Personal Lines (1)

  83.5%   85.3%   (1.8%)   85.3%   93.3%   (8.0%) 

Commercial Lines

  87.7%   90.1%   (2.4%)   90.1%   93.0%   (2.9%) 

Reinsurance

  100.1%   99.9%   0.2%   99.9%   99.9%   0.0% 
 

 

 

  

 

 

   

 

 

  

 

 

  

Total (1)

  87.0%   88.8%   (1.8%)   88.8%   93.8%   (5.0%) 
 

 

 

  

 

 

   

 

 

  

 

 

  

(1)Excludes business written by American Reliable that is ceded to insurance companies owned by Assurant under a 100% quota share reinsurance agreement of ($1.3) million and $35.3 million during the years ended December 31, 2017 and 2016, respectively.

The net premium retention for the year ended December 31, 2017 decreased by 1.7 points for Personal Lines and decreased by 2.4 points for Commercial Lines as compared to 2016 primarily due to the Property Catastrophe Quota ShareTreatythat became effective on April 15, 2017. Please see the Liquidity and Capital Resource section below for additional information on the Property Catastrophe Quota Share.

The net premium retention for the Personal Lines segment for the year ended December 31, 2016 decreased by 8.0 points compared to the same period in 2015. The reduction in the Personal Lines’ retention rate for the year ended December 31, 2016 was primarily due to an increase in catastrophe reinsurance as well as the quota share arrangement that was put in place during the second quarter of 2016.

Net Premiums earned

Net premiums earned within the Personal Lines segment decreased by 9.1% for the year ended December 31, 2017 as compared to the same period in 2016 primarily due to a decline in gross premiums written as well as the ceding of additional premiums under the property catastrophe treaties. Property net premiums earned were $183.5$10.6 million, and $203.1$12.5 million for the years ended December 31, 20172023, 2022, and 2016,2021, respectively. Casualty net premiums earned were $32.5 millionPenn-America's accident year combined ratio of 95.2%, 96.5%, and $34.4 million95.8% for the years ended December 31, 20172023, 2022, and 2016, respectively.

Net premiums earned within2021, respectively, is a non-GAAP ratio which excludes the Personal Lines segment decreased by 6.5% for theimpact of prior accident year ended December 31, 2016 as compared to the same period in 2015. This decline was due to the purchase of additional catastrophe

reinsurance. In addition, net premiums earned also decreased due to incurring a reinstatement premium of

$7.1 million in connection with wildfires that occurred in Tennessee during the 4th quarter of 2016 . These wildfires resulted in the Company incurring $25.0 million in net losses in 2016. Property net premiums earned were $203.1 million and $223.6 millionloss adjustment expenses and prior accident year contingent commission expenses totaling 8.4%, 0.8%, and 0.5% for the years ended December 31, 20162023, 2022, and 2015,2021, respectively. Casualty net premiums earned were $34.4 millionThe Company's most directly comparable GAAP ratio is the Penn-America combined ratio of 103.6%, 97.4%, and $30.3 million96.3% for the years ended December 31, 20162023, 2022, and 2015,2021, respectively.

Net premiums earned within the Commercial Lines segment decreased by 5.6% for the year ended December 31, 2017 as compared to the same period in 2016. The decline in net premiums earned was primarily due to the Company discontinuing one of its programs within the Commercial Lines as well as the Company ceding additional premiums under the new Property Catastrophe Quota Share Treaty which was effective April 15, 2017. This decline was partially offset by an increase in gross premiums due to the introduction of a new program. Property net premiums earned were $90.0 million and $102.4 million for the years ended December 31, 2017 and 2016, respectively. Casualty net premiums earned were $88.8 million and $87.0 million for the years ended December 31, 2017 and 2016, respectively.

Net premiums earned within the Commercial Lines segment decreased by 4.6% for the year ended December 31, 2016 as compared to the same period in 2015. The decline in net premiums earned was primarily due to decreasing the Company’s property retention, the purchase of additional property excess of loss reinsurance, and a slight reduction in gross premiums written. Property net premiums earned were $102.4 million and $112.6 million for the years ended December 31, 2016 and 2015, respectively. Casualty net premiums earned were $87.0 million and $85.8 million for the years ended December 31, 2016 and 2015, respectively.

Net premiums earned within the Reinsurance Operations segment increased by 4.1% for the year ended December 31, 2017 as compared to the same period in 2016. This increase was primarily due to a new mortgage treaty written in the fourth quarter of 2016 which is expected to earn out over an eight year period. This new mortgage insurance treaty will not be renewed. Property net premiums earned were $38.4 million and $37.6 million for the years ended December 31, 2017 and 2016, respectively. Casualty net premiums earned were $4.8 million and $4.0 million for the years ended December 31, 2017 and 2016, respectively.

Net premiums earned within the Reinsurance Operations segment decreased by 19.7% for the year ended December 31, 2016 as compared to the same period in 2015. The decline in net premiums earned was primarily due to one treaty beingnon-renewed in 2016 in an effort to reduce catastrophe exposure. Property net premiums earned were $37.6 million and $49.5 million for the years ended December 31, 2016 and 2015, respectively. Casualty net premiums earned were $4.0 million and $2.3 million for the years ended December 31, 2016 and 2015, respectively.

Underwriting Results

Personal Lines

The components of income from the Company’s Personal Lines segment and corresponding underwriting ratios are as follows:

  Years Ended
December 31,		  %
Change		  Years Ended
December 31,		  %
Change		 
(Dollars in thousands) 2017 (3)  2016 (3)   2016 (3)  2015 (3)  

Gross premiums written (1)

 $249,777  $302,947   (17.6%)  $302,947  $327,147   (7.4%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums written

 $209,799  $228,183   (8.1%)  $228,183  $253,157   (9.9%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums earned

 $215,983  $237,555   (9.1%)  $237,555  $253,948   (6.5%) 

Other income

  6,288   3,712   69.4%   3,712   3,493   6.3% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues

  222,271   241,267   (7.9%)   241,267   257,441   (6.3%) 

Losses and expenses:

      

Net losses and loss adjustment expenses

  165,798   174,528   (5.0%)   174,528   163,045   7.0% 

Acquisition costs and other underwriting expenses (2)

  93,113   99,109   (6.0%)   99,109   97,687   1.5% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Underwriting income (loss)

 $(36,640)  $(32,370)   (13.2%)  $(32,370)  $(3,291)   NM 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

   Years Ended
December 31,		  Point
Change		  Years Ended
December 31,		  Point
Change		 
   2017 (3)  2016 (3)   2016 (3)  2015 (3)  

Underwriting Ratios:

       

Loss ratio:

       

Current accident year

   79.8%   73.5%   6.3   73.5%   64.4%   9.1 

Prior accident year

   (3.1%)   0.0%   (3.1)   0.0%   (0.2%)   0.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Calendar year loss ratio

   76.7%   73.5%   3.2   73.5%   64.2%   9.3 

Expense ratio

   43.1%   41.7%   1.4   41.7%   38.5%   3.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Combined ratio

   119.8%   115.2%   4.6   115.2%   102.7%   12.5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NM — not meaningful

(1)Includes business written by American Reliable that is ceded to insurance companies owned by Assurant under a 100% quota share reinsurance agreement of ($1.3) million, $35.3 million, and $55.8 during the years ended December 31, 2017, 2016, and 2015, respectively.
(2)Includes excise tax related to cessions from the Company’s Personal Lines to its Reinsurance Operations of $0.9 million, $0.9 million, and $1.3 million for the years ended December 31, 2017, 2016, and 2015, respectively.
(3)Includes business ceded to the Company’s Reinsurance Operations.

Premiums

See “Result of Operations” above for a discussion on consolidated premiums for 2017.

Other Income

Other income was $6.3 million, $3.7 million and $3.5 million for the years ended December 31, 2017, 2016, and 2015, respectively. Other income is primarily comprised of fee income on installments, commission income, and accrued interest on the anticipated indemnification of unpaid loss and loss adjustment expense reserves. In accordance with a dispute resolution agreement between Global Indemnity Group, Inc. and American Bankers Group, Inc., any variance paid related to the loss indemnification will be subject to interest of 5% compounded

semi-annually. The increase in other income is primarily the result of the Company increasing its estimate of unpaid losses and loss adjustment expenses that would be indemnified by $19.4 million and $1.5 million during 2017 and 2016, respectively.

Loss Ratio

The current accident year losses and loss ratio is summarized as follows:

   Years Ended
December 31,		   %
Change		  Years Ended
December 31,		   %
Change		 
(Dollars in thousands)  2017   2016    2016   2015   

Property losses

           

Catastrophe

  $51,015   $58,590    (12.9%)  $58,590   $33,961    72.5% 

Non-catastrophe

   98,676    91,521    7.8%   91,521    110,225    (17.0%) 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Property losses

   149,691    150,111    (0.3%)   150,111    144,186    4.1% 

Casualty losses

   22,711    24,398    (6.9%)   24,398    19,285    26.5% 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total accident year losses

  $172,402   $174,509    (1.2%)  $174,509   $163,471    6.8% 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

   Years Ended
December 31,		  Point
Change		  Years Ended
December 31,		  Point
Change		 
   2017  2016   2016  2015  

Current accident year loss ratio:

       

Property

       

Catastrophe

   27.8%   28.8%   (1.0)   28.8%   15.2%   13.6 

Non-catastrophe

   53.8%   45.1%   8.7   45.1%   49.3%   (4.2) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Property loss ratio

   81.6%   73.9%   7.7   73.9%   64.5%   9.4 

Casualty loss ratio

   69.8%   70.9%   (1.1)   70.9%   63.6%   7.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total accident year loss ratio

   79.8%   73.5%   6.3   73.5%   64.4%   9.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The current accident year catastrophe loss ratio for 2017 improved by 1.0 point compared to 2016. 2016 included net losses from the Tennessee wildfires as well as some smaller catastrophes. 2017 included catastrophe losses from hurricanes Harvey, Irma, and Maria as well as losses from the California wildfires. The current accident year catastrophe loss ratio for 2016 increased by 13.6 points compared to 2015 primarily due to the higher catastrophe losses experienced during the fourth accident quarter of 2016, particularly from the Tennessee Wildfires.

The current accident yearnon-catastrophe loss ratio for 2017 increased by 8.7 point compared to 2016 mainly due to higher claims frequency and severity compared to last year. The current accident yearnon-catastrophe loss ratio for 2016 improved by 4.2 point compared to 2015 mainly due to lower case incurred emergence resulting from a decrease in reported claim frequency.

The current accident year casualty loss ratio for 2017 improved by 1.1 points compared to 2016 driven primarily by lower reported claims frequency as compared to the same period last year. The current accident year casualty loss ratio for 2016 increased by 7.3 points compared to 2015 mainly due to an increase in claims severity compared to the previous year.

The calendar year loss ratio for the years ended December 31, 2017, 2016, and 2015 includes a decrease of $6.6 million, or 3.1 percentage points, an increase of $0.02 million, or less than 0.1 percentage points, and a decrease of $0.4 million, or 0.2 percentage points, respectively, related to reserve development on prior accident years. There were no changes to net prior accident year losses during the year ended December 31, 2015. Please see Note 11 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further discussion on prior accident year development.

Reconciliation ofnon-GAAP financial measures and ratios

The table below reconciles thenon-GAAP measures or ratios to its most directly comparable GAAP measure or ratio. The Company believes thenon-GAAP measures or ratios are useful to investors when evaluating the Company’sCompany's underwriting performance as trends in the Company’s Personal Lineswithin Penn-America may be obscured by prior accident year adjustments. Thesenon-GAAP measures or ratios should not be considered as a substitute for its most directly comparable GAAP measure or ratio and does not reflect the overall underwriting profitability of the Company.

  Years Ended December 31, 
  2017  2016  2015 
  Losses $  Loss
Ratio		  Losses $  Loss
Ratio		  Losses $  Loss
Ratio		 

Property

      

Non catastrophe property losses and ratio excluding the effect of prior accident year (1)

 $98,676   53.8%  $91,521   45.1%  $110,225   49.3% 

Effect of prior accident year

  (3,933)   (2.1%)   39   —     (314)   (0.1%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Non catastrophe property losses and ratio (2)

 $94,743   51.6%  $91,560   45.1%  $109,911   49.2% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Catastrophe losses and ratio excluding the effect of prior accident year (1)

 $51,015   27.8%  $58,590   28.8%  $33,961   15.2% 

Effect of prior accident year

  (2,188)   (1.2%)   (20)   —     (112)   (0.1%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Catastrophe losses and ratio (2)

 $48,827   26.6%  $58,570   28.8%  $33,849   15.1% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total property losses and ratio excluding the effect of prior accident year (1)

 $149,691   81.6%  $150,111   73.9%  $144,186   64.5% 

Effect of prior accident year

  (6,121)   (3.3%)   19   —     (426)   (0.2%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total property losses and ratio (2)

 $143,570   78.3%  $150,130   73.9%  $143,760   64.3% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Casualty

      

Total Casualty losses and ratio excluding the effect of prior accident year (1)

 $22,711   69.8%  $24,398   70.9%  $19,285   63.6% 

Effect of prior accident year

  (483)   (1.5%)   —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Casualty losses and ratio (2)

 $22,228   68.4%  $24,398   70.9%  $19,285   63.6% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

      

Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1)

 $172,402   79.8%  $174,509   73.5%  $163,471   64.4% 

Effect of prior accident year

  (6,604)   (3.1%)   19   —     (426)   (0.2%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total net losses and loss adjustment expense and total loss ratio (2)

 $165,798   76.7%  $174,528   73.5%  $163,045   64.2% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Non-GAAP measure / ratio
(2)Most directly comparable GAAP measure / ratio

Expense Ratios

(3)
The loss ratio is a GAAP financial measure that is generally viewed in the insurance industry as an indicator of underwriting profitability and is calculated by dividing net losses and loss adjustment expenses by net earned premiums.
(4)
The expense ratio increased 1.4 pointsis a GAAP financial measure that is calculated by dividing the sum of acquisition costs and other underwriting expenses by net earned premiums.
(5)
The combined ratio is a GAAP financial measure and is the sum of the Company’s loss and expense ratios.

50

Selected Financial Data by Business Segment

Premiums

The following table summarizes the change in premium volume by business segment:

 

 

Years Ended
December 31,

 

 

%

 

 

Years Ended
December 31,

 

 

%

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Gross written premiums (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

369,660

 

 

$

387,967

 

 

 

(4.7

%)

 

$

387,967

 

 

$

349,962

 

 

 

10.9

%

Non-Core Operations

 

 

46,737

 

 

 

339,636

 

 

 

(86.2

%)

 

 

339,636

 

 

 

332,160

 

 

 

2.3

%

Total gross written premiums

 

$

416,397

 

 

$

727,603

 

 

 

(42.8

%)

 

$

727,603

 

 

$

682,122

 

 

 

6.7

%

Ceded premiums written

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

12,864

 

 

$

17,661

 

 

 

(27.2

%)

 

$

17,661

 

 

$

21,303

 

 

 

(17.1

%)

Non-Core Operations

 

 

4,214

 

 

 

118,611

 

 

 

(96.4

%)

 

 

118,611

 

 

 

80,751

 

 

 

46.9

%

Total ceded premiums written

 

$

17,078

 

 

$

136,272

 

 

 

(87.5

%)

 

$

136,272

 

 

$

102,054

 

 

 

33.5

%

Net written premiums (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

356,796

 

 

$

370,306

 

 

 

(3.6

%)

 

$

370,306

 

 

$

328,659

 

 

 

12.7

%

Non-Core Operations

 

 

42,523

 

 

 

221,025

 

 

 

(80.8

%)

 

 

221,025

 

 

 

251,409

 

 

 

(12.1

%)

Total net written premiums

 

$

399,319

 

 

$

591,331

 

 

 

(32.5

%)

 

$

591,331

 

 

$

580,068

 

 

 

1.9

%

Net earned premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

354,518

 

 

$

359,597

 

 

 

(1.4

%)

 

$

359,597

 

 

$

308,676

 

 

 

16.5

%

Non-Core Operations

 

 

118,839

 

 

 

242,874

 

 

 

(51.1

%)

 

 

242,874

 

 

 

286,934

 

 

 

(15.4

%)

Total net earned premiums

 

$

473,357

 

 

$

602,471

 

 

 

(21.4

%)

 

$

602,471

 

 

$

595,610

 

 

 

1.2

%

(1)
Gross written premiums represent the amount received or to be received for insurance policies written without reduction for reinsurance costs or other deductions.
(2)
Net written premiums equal gross written premiums less ceded premiums written.
(3)
External business only, excluding business assumed from 41.7%affiliates.

Gross written premiums decreased by 42.8% for 2016year ended December 31, 2023 as compared to 43.1% for 20172022. The decrease in gross written premiums is mainly due to a reduction in Personal Lines’ net premiums earned in 2017 as comparedwithin Non-Core Operations for lines of business that have been de-emphasized or no longer written. In addition, within Penn-America, the gross written premiums for Programs decreased primarily due to 2016; as a result of underwriting actions taken to improve profitability.

underwriting results through increased rates and form changes. These reductions in premiums were partially offset by continued growth in Penn-America's Wholesale Commercial, InsurTech, and Assumed Reinsurance divisions. The expense ratio increased 3.2 points from 38.5% for 2015 to 41.7% for 2016growth in Wholesale Commercial is driven by new agency appointments, strong rate increases as well as exposure growth in both property and general liability. The growth in InsurTech is primarily due to the reductionnew agent appointments and focused marketing efforts. The growth in earnedAssumed Reinsurance is primarily due to new treaties assumed in 2023.

Gross written premiums in 2016increased by 6.7% for year ended December 31, 2022 as a result of the quota share arrangement and the purchase of additional reinsurance.

compared to 2021. The increase in the expense ratio was alsogross written premiums is mainly due to the 2015 expensecontinued growth from existing wholesale agent relationships and increased pricing from both rate and exposure growth within Penn-America. The growth in Non-Core Operations' premiums is primarily due to organic growth of existing casualty treaties partially offset by a reduction in premiums due to lines of business that have been de-emphasized or no longer written.

51

Net Retention

The ratio benefitting from accounting adjustments relatedof net written premiums to the purchase of American Reliable.

Commercial Lines

The components of income fromgross written premiums is referred to as the Company’s Commercial Lines segment and corresponding underwriting ratios arenet premium retention. The Company’s net premium retention is summarized by segments as follows:

  Years Ended
December 31,		  %
Change		  Years Ended
December 31,		  %
Change		 
(Dollars in thousands) 2017 (2)  2016 (2)   2016 (2)  2015 (2)  

Gross premiums written

 $212,670  $203,061   4.7%  $203,061  $213,353   (4.8%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums written

 $186,448  $182,956   1.9%  $182,956  $198,404   (7.8%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums earned

 $178,798  $189,342   (5.6%)  $189,342  $198,404   (4.6%) 

Other income

  78   6,857   (98.9%)   6,857   —     NM 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues

  178,876   196,199   (8.8%)   196,199   198,404   (1.1%) 

Losses and expenses:

      

Net losses and loss adjustment expenses

  62,834   75,401   (16.7%)   75,401   98,471   (23.4%) 

Acquisition costs and other underwriting expenses (1)

  75,990   81,477   (6.7%)   81,477   84,623   (3.7%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Underwriting income (loss)

 $40,052  $39,321   1.9%  $39,321  $15,310   156.8% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

Years Ended
December 31,

 

 

 

 

 

Years Ended
December 31,

 

 

 

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Penn-America

 

 

96.5

%

 

 

95.4

%

 

 

1.1

 

 

 

95.4

%

 

 

93.9

%

 

 

1.5

 

Non-Core Operations

 

 

91.0

%

 

 

65.1

%

 

 

25.9

 

 

 

65.1

%

 

 

75.7

%

 

 

(10.6

)

Total

 

 

95.9

%

 

 

81.3

%

 

 

14.6

 

 

 

81.3

%

 

 

85.0

%

 

 

(3.7

)

   Years Ended
December 31,		  Point
Change		  Years Ended
December 31,		  Point
Change		 
   2017 (2)  2016 (2)   2016 (2)  2015 (2)  

Underwriting Ratios:

       

Loss ratio:

       

Current accident year

   57.2%   63.0%   (5.8)   63.0%   62.3%   0.7 

Prior accident year

   (22.0%)   (23.1%)   1.1   (23.1%)   (12.7%)   (10.4) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Calendar year loss ratio

   35.2%   39.9%   (4.7)   39.9%   49.6%   (9.7) 

Expense ratio

   42.5%   43.0%   (0.5)   43.0%   42.7%   0.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Combined ratio

   77.7%   82.9%   (5.2)   82.9%   92.3%   (9.4) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NM — not meaningful

(1)Includes excise tax related to cessions from the Company’s Commercial Lines to its Reinsurance Operations of $0.7 million, $0.8 million, and $1.0 million for the years ended December 31, 2017, 2016, and 2015, respectively.
(2)Includes business ceded to the Company’s Reinsurance Operations.

Premiums

See “Result of Operations” aboveThe net premium retention for a discussion on consolidated premiums.

Other Income

Other income was $0.1 million and $6.9 million for the years ended December 31, 2017 and 2016, respectively. There was no other income in 2015. For the years ended December 31, 2017, other income is primarily comprised of fee income. For the year ended December 31, 2016, other income is comprised2023 increased by 14.6 points as compared to 2022. Retention has increased due to less impact from cessions of the net gain onmanufactured home and dwelling business which was sold in 2021 and the asset sale of the Company’s wholly owned subsidiary, United National Specialty Insurance Company.

Loss Ratio

The current accident year lossesFarm, Ranch and loss ratio is summarized as follows:

  Years Ended
December 31,		  %
Change		  Years Ended
December 31,		  %
Change		 
(Dollars in thousands) 2017  2016   2016  2015  

Property losses

      

Catastrophe

 $10,081  $13,550   (25.6%)  $13,550  $11,037   22.8% 

Non-catastrophe

  35,879   49,812   (28.0%)   49,812   53,865   (7.5%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Property losses

  45,960   63,362   (27.5%)   63,362   64,902   (2.4%) 

Casualty losses

  56,229   55,842   0.7%   55,842   58,771   (5.0%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total accident year losses

 $102,189  $119,204   (14.3%)  $119,204  $123,673   (3.6%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  Years Ended
December 31,		  Point
Change		  Years Ended
December 31,		  Point
Change		 
  2017  2016   2016  2015  

Current accident year loss ratio:

      

Property

      

Catastrophe

  11.2%   13.2%   (2.0)   13.2%   9.8%   3.4 

Non-catastrophe

  39.8%   48.7%   (8.9)   48.7%   47.9%   0.8 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Property loss ratio

  51.0%   61.9%   (10.9)   61.9%   57.7%   4.2 

Casualty loss ratio

  63.4%   64.2%   (0.8)   64.2%   68.5%   (4.3) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total accident year loss ratio

  57.2%   63.0%   (5.8)   63.0%   62.3%   0.7 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The current accident year catastrophe loss ratio for 2017 improved by 2.0 points compared to 2016 primarily due to lower claims severityStable business in 2017. The current accident year catastrophe loss ratio for 2016 increased by 3.4 points compared to 2015 primarily due to losses from convective storms occurring during the first six months2022. Quota share reinsurance agreements were in place. All of the year.

The current accidentCompany's manufactured and dwelling homes policies, except for Florida and Louisiana which have been fully run-off, were ceded to American Family Mutual Insurance Company in 2022 and all policies written with an effective date of August 8, 2022 and later within the Company's Farm, Ranch & Stable business were ceded to Everett Cash Mutual Insurance Company. As a result, the net premium retention for the year propertynon-catastrophe loss ratio for 2017 improvedended December 31, 2022 decreased by 8.93.7 points compared to 2016 primarily due to Property Brokerage having several large losses in 2016. The current accident year propertynon-catastrophe loss ratio for 2016 increased by 0.8 points compared to 2015.

The current accident year casualty loss ratio for 2017 improved by 0.8 points compared to 2016 driven primarily by lower reported claims frequency as compared to the same period last year. The current accident year casualty loss ratio for 2016 improved by 4.3 points compared to 2015 mainly due to the decrease in reported claim frequency which reflects the milder winter weather experienced during 2016. Also, underwriting actions and rate increases over the past several years have contributed to the improvement experienced to date.2021.

The calendar year loss ratio for the years ended December 31, 2017, 2016, and 2015 includes a decrease of $39.4 million, or 22.0 percentage points, a decrease of $43.8 million or 23.1 percentage points, and a decrease of $25.2 million or 12.7 percentage points, respectively, related to reserve development on prior accident years. Please seeSee Note 112 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further discussionadditional information on the sale of renewal rights related to the Company’s manufactured and dwelling homes business and the Company's Farm, Ranch & Stable business.

Net Earned Premiums

Net earned premiums within the Penn-America segment decreased by 1.4% for the year ended December 31, 2023 as compared to the same period in 2022. Penn-America experienced continued growth in earned premiums within its Wholesale Commercial, InsurTech, and Assumed Reinsurance divisions due to new agency appointments, strong rate increases, exposure growth, and focused marketing efforts as well as the assumption of several new treaties. This growth was offset by a decrease in net earned premiums for Programs as a result of actions taken to improve underwriting results through increased rates and form changes. Property net earned premiums were $140.5 million and $142.4 million for the years ended December 31, 2023 and 2022, respectively. Casualty net earned premiums were $214.0 million and $217.2 million for the years ended December 31, 2023 and 2022, respectively.

Net earned premiums within the Penn-America segment increased by 16.5% for the year ended December 31, 2022 as compared to the same period in 2021. The increase in net earned premiums was primarily due to a growth in premiums written as a result of organic growth from existing agents and pricing increases. Property net earned premiums were $142.4 million and $138.6 million for the years ended December 31, 2022 and 2021, respectively. Casualty net earned premiums were $217.2 million and $170.1 million for the years ended December 31, 2022 and 2021, respectively.

Net earned premiums within the Non-Core Operations segment decreased by 51.1% for the year ended December 31, 2023 as compared to the same period in 2022 primarily due to the sale of renewal rights related to the Company's Farm, Ranch & Stable business on August 8, 2022, non-renewal of a casualty treaty, and the reduction of premiums written for lines of business that have been de-emphasized or no longer written. Property net earned premiums were $14.2 million and $64.6 million for the years ended December 31, 2023 and 2022, respectively. Casualty net earned premiums were $104.6 million and $178.3 million for the years ended December 31, 2023 and 2022, respectively.

Net earned premiums within the Non-Core Operations segment decreased by 15.4% for the year ended December 31, 2022 as compared to the same period in 2021 primarily due to the sale of the renewal rights related to the Company’s manufactured and dwelling homes business on October 26, 2021 and the reduction of premiums written for lines of business that have been de-emphasized or no longer written partially offset by organic growth of an existing casualty treaty. Property net earned premiums were $64.6 million and $164.4 million for the years ended December 31, 2022 and 2021, respectively. Casualty net earned premiums were $178.3 million and $122.6 million for the years ended December 31, 2022 and 2021, respectively.

52

Underwriting Results

Penn-America

Penn-America's accident year underwriting income(1) was $18.5 million, $13.5 million, and $14.1 million for the years ended December 31, 2023, 2022, and 2021, respectively. Results for 2023 include $29.9 million of strengthening of prior accident year development.reserves. Penn-America has taken actions to improve underwriting results through increased rates and form changes.

The components of income (loss) from the Company’s Penn-America segment and corresponding underwriting ratios are as follows:

 

 

Years Ended
December 31,

 

 

%

 

 

Years Ended
December 31,

 

 

%

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Gross written premiums

 

$

369,660

 

 

$

387,967

 

 

 

(4.7

%)

 

$

387,967

 

 

$

349,962

 

 

 

10.9

%

Net written premiums

 

$

356,796

 

 

$

370,306

 

 

 

(3.6

%)

 

$

370,306

 

 

$

328,659

 

 

 

12.7

%

Net earned premiums

 

$

354,518

 

 

$

359,597

 

 

 

(1.4

%)

 

$

359,597

 

 

$

308,676

 

 

 

16.5

%

Other income

 

$

1,257

 

 

$

1,029

 

 

 

22.2

%

 

$

1,029

 

 

$

1,028

 

 

 

0.1

%

Total revenues

 

 

355,775

 

 

 

360,626

 

 

 

(1.3

%)

 

 

360,626

 

 

 

309,704

 

 

 

16.4

%

Losses and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net losses and loss adjustment expenses

 

 

233,239

 

 

 

214,854

 

 

 

8.6

%

 

 

214,854

 

 

 

184,163

 

 

 

16.7

%

Acquisition costs and other underwriting expenses

 

 

134,155

 

 

 

135,145

 

 

 

(0.7

%)

 

 

135,145

 

 

 

113,038

 

 

 

19.6

%

Underwriting income (loss)

 

$

(11,619

)

 

$

10,627

 

 

 

(209.3

%)

 

$

10,627

 

 

$

12,503

 

 

 

(15.0

%)

 

 

Years Ended
December 31,

 

 

Point

 

 

Years Ended
December 31,

 

 

Point

 

 

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Underwriting Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss ratio:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current accident year

 

 

57.4

%

 

 

59.0

%

 

 

(1.6

)

 

 

59.0

%

 

 

59.1

%

 

 

(0.1

)

Prior accident year

 

 

8.4

%

 

 

0.8

%

 

 

7.6

 

 

 

0.8

%

 

 

0.6

%

 

 

0.2

 

Calendar year loss ratio

 

 

65.8

%

 

 

59.8

%

 

 

6.0

 

 

 

59.8

%

 

 

59.7

%

 

 

0.1

 

Expense ratio

 

 

37.8

%

 

 

37.6

%

 

 

0.2

 

 

 

37.6

%

 

 

36.6

%

 

 

1.0

 

Combined ratio

 

 

103.6

%

 

 

97.4

%

 

 

6.2

 

 

 

97.4

%

 

 

96.3

%

 

 

1.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident year combined ratio (2)

 

 

95.2

%

 

 

96.5

%

 

 

 

 

 

96.5

%

 

 

95.8

%

 

 

 

(1)
Penn-America's accident year underwriting income of $18.5 million, $13.5 million, and $14.1 million for the years ended December 31, 2023, 2022, and 2021, respectively, is a non-GAAP measure which excludes the impact of prior accident year losses and loss adjustment expenses and prior accident year contingent commission expenses totaling $30.1 million, $2.9 million, and $1.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. The Company's most directly comparable GAAP measure is the Penn-America's underwriting income (loss) of ($11.6) million, $10.6 million, and $12.5 million for the years ended December 31, 2023, 2022, and 2021, respectively. The Company believes the non-GAAP measures are useful to investors when evaluating the Company's underwriting performance as trends within Penn-America may be obscured by prior accident year adjustments. These non-GAAP measures should not be considered as a substitute for its most directly comparable GAAP measure and does not reflect the overall underwriting profitability of the Company.
(2)
The accident year combined ratio excludes the impact of prior accident year losses and loss adjustment expenses and prior accident year contingent commission expenses.

53

Reconciliation ofnon-GAAP financial measures and ratios

The table below reconciles thenon-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio. The Company believes thenon-GAAP measures or ratios are useful to investors when evaluating the Company’sCompany's underwriting performance as trends in

the Company’s Commercial LinesCompany's Penn-America segment may be obscured by prior accident year adjustments. Thesenon-GAAP measures or ratios should not be considered as a substitute for its most directly comparable GAAP measure or ratio and does not reflect the overall underwriting profitability of the Company.

 Years Ended December 31, 

 

Years Ended December 31,

 

 2017 2016 2015 

 

2023

 

 

2022

 

 

2021

 

 Losses $ Loss
Ratio		 Losses $ Loss
Ratio		 Losses $ Loss
Ratio		 

 

Losses

 

 

Loss
Ratio

 

 

Losses

 

 

Loss
Ratio

 

 

Losses

 

 

Loss
Ratio

 

Property

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non catastrophe property losses and ratio excluding the effect of prior accident year (1)

 $35,879  39.8%  $49,812  48.7%  $53,865  47.9% 

 

$

61,231

 

 

 

43.6

%

 

$

71,907

 

 

 

50.5

%

 

$

64,409

 

 

 

46.5

%

Effect of prior accident year

 (4,903)  (5.4%)  926  0.9%  (887)  (0.8%) 

 

 

(2,143

)

 

 

(1.5

%)

 

 

(3,624

)

 

 

(2.5

%)

 

 

2,794

 

 

 

2.0

%

 

 

  

 

  

 

  

 

  

 

  

 

 

Non catastrophe property losses and ratio (2)

 $30,976  34.4%  $50,738  49.6%  $52,978  47.1% 

 

$

59,088

 

 

 

42.1

%

 

$

68,283

 

 

 

48.0

%

 

$

67,203

 

 

 

48.5

%

 

 

  

 

  

 

  

 

  

 

  

 

 

Catastrophe losses and ratio excluding the effect of prior accident year (1)

 $10,081  11.2%  $13,550  13.2%  $11,037  9.8% 

 

$

13,839

 

 

 

9.8

%

 

$

10,979

 

 

 

7.7

%

 

$

18,970

 

 

 

13.7

%

Effect of prior accident year

 (1,351)  (1.5%)  (482)  (0.5%)  361  0.3% 

 

 

3,400

 

 

 

2.4

%

 

 

431

 

 

 

0.3

%

 

 

254

 

 

 

0.2

%

 

 

  

 

  

 

  

 

  

 

  

 

 

Catastrophe losses and ratio (2)

 $8,730  9.7%  $13,068  12.7%  $11,398  10.1% 

 

$

17,239

 

 

 

12.2

%

 

$

11,410

 

 

 

8.0

%

 

$

19,224

 

 

 

13.9

%

 

 

  

 

  

 

  

 

  

 

  

 

 

Total property losses and ratio excluding the effect of prior accident year (1)

 $45,960  51.0%  $63,362  61.9%  $64,902  57.7% 

 

$

75,070

 

 

 

53.4

%

 

$

82,886

 

 

 

58.2

%

 

$

83,379

 

 

 

60.2

%

Effect of prior accident year

 (6,255)  (6.9%)  444  0.4%  (526)  (0.5%) 

 

 

1,257

 

 

 

0.9

%

 

 

(3,193

)

 

 

(2.2

%)

 

 

3,048

 

 

 

2.2

%

 

 

  

 

  

 

  

 

  

 

  

 

 

Total property losses and ratio (2)

 $39,705  44.1%  $63,806  62.3%  $64,376  57.2% 

 

$

76,327

 

 

 

54.3

%

 

$

79,693

 

 

 

56.0

%

 

$

86,427

 

 

 

62.4

%

 

 

  

 

  

 

  

 

  

 

  

 

 

Casualty

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Casualty losses and ratio excluding the effect of prior accident year (1)

 $56,229  63.4%  $55,842  64.2%  $58,771  68.5% 

 

$

128,289

 

 

 

59.9

%

 

$

129,172

 

 

 

59.5

%

 

$

98,936

 

 

 

58.2

%

Effect of prior accident year

 (33,100)  (37.3%)  (44,247)  (50.9%)  (24,676)  (28.7%) 

 

 

28,623

 

 

 

13.4

%

 

 

5,989

 

 

 

2.8

%

 

 

(1,200

)

 

 

(0.7

%)

 

 

  

 

  

 

  

 

  

 

  

 

 

Total Casualty losses and ratio (2)

 $23,129  26.1%  $11,595  13.3%  $34,095  39.8% 

 

$

156,912

 

 

 

73.3

%

 

$

135,161

 

 

 

62.3

%

 

$

97,736

 

 

 

57.5

%

 

 

  

 

  

 

  

 

  

 

  

 

 

Total

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1)

 $102,189  57.2%  $119,204  63.0%  $123,673  62.3% 

 

$

203,359

 

 

 

57.4

%

 

$

212,058

 

 

 

59.0

%

 

$

182,315

 

 

 

59.1

%

Effect of prior accident year

 (39,355)  (22.0%)  (43,803)  (23.1%)  (25,202)  (12.7%) 

 

 

29,880

 

 

 

8.4

%

 

 

2,796

 

 

 

0.8

%

 

 

1,848

 

 

 

0.6

%

 

 

  

 

  

 

  

 

  

 

  

 

 

Total net losses and loss adjustment expense and total loss ratio (2)

 $62,834  35.2%  $75,401  39.9%  $98,471  49.6% 

 

$

233,239

 

 

 

65.8

%

 

$

214,854

 

 

 

59.8

%

 

$

184,163

 

 

 

59.7

%

 

 

  

 

  

 

  

 

  

 

  

 

 

(3)Non-GAAP measure / ratio
(4)
(1)
Non-GAAP measure / ratio
(2)
Most directly comparable GAAP measure / ratio

Expense Ratios

The expense ratio improved 0.5 points from 43.0% for 2016 to 42.5% for 2017.

The expense ratio increased 0.3 points from 42.7% for 2015 to 43.0% for 2016.

Reinsurance Operations

The components of income from the Company’s Reinsurance Operations segment and corresponding underwriting ratios are as follows:

  Years Ended
December 31,		  %
Change		  Years Ended
December 31,		  %
Change		 
(Dollars in thousands) 2017 (1)  2016 (1)   2016 (1)  2015 (1)  

Gross premiums written

 $53,887  $59,837   (9.9%)  $59,837  $49,733   20.3% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums written

 $53,933  $59,801   (9.8%)  $59,801  $49,683   20.4% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums earned

 $43,253  $41,568   4.1%  $41,568  $51,791   (19.7%) 

Other income (loss)

  216   (224)   (196.4%)   (224)   (93)   140.9% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues

  43,469   41,344   5.1%   41,344   51,698   (20.0%) 

Losses and expenses:

      

Net losses and loss adjustment expenses

  40,580   14,074   188.3%   14,074   13,852   1.6% 

Acquisition costs and other underwriting expenses

  14,630   16,064   (8.9%)   16,064   18,993   (15.4%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Underwriting income (loss)

 $(11,741)  $11,206   (204.8%)  $11,206  $18,853   (40.6%) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  Years Ended
December 31,		  Point
Change		  Years Ended
December 31,		  Point
Change		 
  2017 (1)  2016 (1)   2016 (1)  2015 (1)  

Underwriting Ratios:

      

Loss ratio:

      

Current accident year (2)

  112.2%   66.3%   45.9   66.3%   44.3%   22.0 

Prior accident year

  (18.4%)   (32.4%)   14.0   (32.4%)   (17.5%)   (14.9) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Calendar year loss ratio (3)

  93.8%   33.9%   59.9   33.9%   26.8%   7.1 

Expense ratio

  33.8%   38.6%   (4.8)   38.6%   36.7%   1.9 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Combined ratio

  127.6%   72.5%   55.1   72.5%   63.5%   9.0 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(1)External business only, excluding business assumed from affiliates
(2)Non-GAAP ratio
(3)Most directly comparable GAAP ratio

Reconciliation ofnon-GAAP financial ratios

The table above includes a reconciliation of the current accident year loss ratio, which is anon-GAAP ratio, to its calendar year loss ratio, which is its most directly comparable GAAP ratio. The Company believes thisnon-GAAPmeasure / ratio is useful to investors when evaluating the Company’s underwriting performance as trends in the Company’s Reinsurance Operations may be obscured by prior accident year adjustments. Thisnon-GAAP ratio should not be considered as a substitute for its most directly comparable GAAP ratio and does not reflect the overall underwriting profitability of the Company.

Premiums

Premiums

See “Result of Operations” above for a discussion on consolidated premiums.

Other Income (Loss)

Reinsurance Operations recognized other income of $0.2 million in 2017, a loss of $0.2 million in 2016, and a loss of $0.1 million in 2015. Other income (loss)was $1.3 million, $1.0 million, and $1.0 million for the years ended December 31, 2023, 2022, and 2021, respectively. Other income is primarily comprised of foreign exchange gains and losses.fee income.

54

Loss Ratio

The current accident year losses and loss ratio for 2017 increased by 45.9 points compared to 2016. The increase in the loss ratio was mainly attributable to the higher impact from catastrophes, primarily hurricanes Harvey, Irma, and Mariais summarized as well as the California wildfires, as compared to the same period last year. follows:

 

 

Years Ended
December 31,

 

 

%

 

 

Years Ended
December 31,

 

 

%

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Property losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-catastrophe

 

$

61,231

 

 

$

71,907

 

 

 

(14.8

%)

 

$

71,907

 

 

$

64,409

 

 

 

11.6

%

Catastrophe

 

 

13,839

 

 

 

10,979

 

 

 

26.0

%

 

 

10,979

 

 

 

18,970

 

 

 

(42.1

%)

Property losses

 

 

75,070

 

 

 

82,886

 

 

 

(9.4

%)

 

 

82,886

 

 

 

83,379

 

 

 

(0.6

%)

Casualty losses

 

 

128,289

 

 

 

129,172

 

 

 

(0.7

%)

 

 

129,172

 

 

 

98,936

 

 

 

30.6

%

Total accident year losses

 

$

203,359

 

 

$

212,058

 

 

 

(4.1

%)

 

$

212,058

 

 

$

182,315

 

 

 

16.3

%

 

 

Years Ended
December 31,

 

 

Point

 

 

Years Ended
December 31,

 

 

Point

 

 

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Current accident year loss ratio:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-catastrophe

 

 

43.6

%

 

 

50.5

%

 

 

(6.9

)

 

 

50.5

%

 

 

46.5

%

 

 

4.0

 

Catastrophe

 

 

9.8

%

 

 

7.7

%

 

 

2.1

 

 

 

7.7

%

 

 

13.7

%

 

 

(6.0

)

Property loss ratio

 

 

53.4

%

 

 

58.2

%

 

 

(4.8

)

 

 

58.2

%

 

 

60.2

%

 

 

(2.0

)

Casualty loss ratio

 

 

59.9

%

 

 

59.5

%

 

 

0.4

 

 

 

59.5

%

 

 

58.2

%

 

 

1.3

 

Total accident year loss ratio

 

 

57.4

%

 

 

59.0

%

 

 

(1.6

)

 

 

59.0

%

 

 

59.1

%

 

 

(0.1

)

The current accident year property non-catastrophe loss ratio for 2016 increased2023 improved by 22.06.9 points compared to 2015 primarily in the2022 recognizing lower claims frequency and severity. The current accident year property linesnon-catastrophe loss ratio for both2022 increased by 4.0 points compared to 2021 mainly due to higher claims severity.

The current accident year property catastrophe andnon-catastrophe contracts.loss ratio for 2023 increased by 2.1 points compared to 2022 reflecting higher claims frequency. The current accident year property catastrophe loss ratio for 2022 improved by 6.0 points compared to 2021 due to lower claims frequency and severity.

The current accident year casualty loss ratio for 2023 increased by 0.4 points compared to 2022 recognizing higher catastrophe losses were being drivenclaims severity. The current accident year casualty loss ratio for 2022 increased by the Fort McMurray fires in Canada, Hurricane Matthew, and the New Zealand earthquake. The1.3 points compared to 2021 due to highernon-catastrophe experience reflects the impact of the Jubilee platform breakdown in Africa. claims severity.

The calendar year loss ratio for the years ended December 31, 2017, 2016,2023, 2022, and 20152021 includes a decreasean increase of $7.9$29.9 million, or 18.4 percentage points, a decrease8.4%, an increase of $13.5$2.8 million or 32.4 percentage points,0.8%, and a decreasean increase of $9.1$1.8 million or 17.5 percentage points,0.6%, respectively, related to reserve development on prior accident years. Please see Note 1112 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further discussion on prior accident year development.

Expense RatioRatios

The expense ratio increased 0.2 points from 37.6% for 2022 to 37.8% for 2023 primarily due to a change in the mix of business where Penn-America wrote a slightly higher amount of admitted business.

The expense ratio increased 1.0 points from 36.6% for 2021 to 37.6% for 2022 primarily due to higher compensation and advertising costs.

55

Non-Core Operations

The components of income (loss) from the Company’s Non-Core Operations segment and corresponding underwriting ratios are as follows:

 

 

Years Ended
December 31,

 

 

%

 

 

Years Ended
December 31,

 

 

%

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Gross written premiums

 

$

46,737

 

 

$

339,636

 

 

 

(86.2

%)

 

$

339,636

 

 

$

332,160

 

 

 

2.3

%

Net written premiums

 

$

42,523

 

 

$

221,025

 

 

 

(80.8

%)

 

$

221,025

 

 

$

251,409

 

 

 

(12.1

%)

Net earned premiums

 

$

118,839

 

 

$

242,874

 

 

 

(51.1

%)

 

$

242,874

 

 

$

286,934

 

 

 

(15.4

%)

Other income

 

 

178

 

 

 

433

 

 

 

(58.9

%)

 

 

433

 

 

 

787

 

 

 

(45.0

%)

Total revenues

 

 

119,017

 

 

 

243,307

 

 

 

(51.1

%)

 

 

243,307

 

 

 

287,721

 

 

 

(15.4

%)

Losses and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net losses and loss adjustment expenses

 

 

55,914

 

 

 

144,374

 

 

 

(61.3

%)

 

 

144,374

 

 

 

200,801

 

 

 

(28.1

%)

Acquisition costs and other underwriting expenses

 

 

48,462

 

 

 

101,236

 

 

 

(52.1

%)

 

 

101,236

 

 

 

109,803

 

 

 

(7.8

%)

Underwriting income (loss)

 

$

14,641

 

 

$

(2,303

)

 

NM

 

 

$

(2,303

)

 

$

(22,883

)

 

 

(89.9

%)

 

 

Years Ended
December 31,

 

 

Point

 

 

Years Ended
December 31,

 

 

Point

 

 

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Underwriting Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss ratio:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current accident year

 

 

64.2

%

 

 

63.9

%

 

 

0.3

 

 

 

63.9

%

 

 

67.6

%

 

 

(3.7

)

Prior accident year

 

 

(17.1

%)

 

 

(4.5

%)

 

 

(12.6

)

 

 

(4.5

%)

 

 

2.4

%

 

 

(6.9

)

Calendar year loss ratio

 

 

47.1

%

 

 

59.4

%

 

 

(12.3

)

 

 

59.4

%

 

 

70.0

%

 

 

(10.6

)

Expense ratio

 

 

40.8

%

 

 

41.7

%

 

 

(0.9

)

 

 

41.7

%

 

 

38.3

%

 

 

3.4

 

Combined ratio

 

 

87.9

%

 

 

101.1

%

 

 

(13.2

)

 

 

101.1

%

 

 

108.3

%

 

 

(7.2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident year combined ratio (1)

 

 

103.7

%

 

 

104.1

%

 

 

 

 

 

104.1

%

 

 

105.8

%

 

 

 

(1)
The accident year combined ratio excludes the impact of prior accident year losses and loss adjustment expenses and prior accident year contingent commission expenses.

NM - not meaningful

56

Reconciliation of non-GAAP financial measures and ratios

The table below reconciles the non-GAAP measures or ratios, which excludes the impact of prior accident year adjustments, to its most directly comparable GAAP measure or ratio. The Company believes the non-GAAP measures or ratios are useful to investors when evaluating the Company's underwriting performance as trends in the Company's Non-Core Operations segment may be obscured by prior accident year adjustments. These non-GAAP measures or ratios should not be considered as a substitute for its most directly comparable GAAP measure or ratio and does not reflect the overall underwriting profitability of the Company.

 

 

Years Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

 

 

Losses

 

 

Loss
Ratio

 

 

Losses

 

 

Loss
Ratio

 

 

Losses

 

 

Loss
Ratio

 

Property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non catastrophe property losses and ratio excluding the effect of prior accident year (1)

 

$

6,588

 

 

 

46.3

%

 

$

33,713

 

 

 

52.2

%

 

$

80,214

 

 

 

48.8

%

Effect of prior accident year

 

 

(9,506

)

 

 

(66.8

%)

 

 

(4,096

)

 

 

(6.3

%)

 

 

4,222

 

 

 

2.6

%

Non catastrophe property losses and ratio (2)

 

$

(2,918

)

 

 

(20.5

%)

 

$

29,617

 

 

 

45.9

%

 

$

84,436

 

 

 

51.4

%

Catastrophe losses and ratio excluding the effect of prior accident year (1)

 

$

3,393

 

 

 

23.8

%

 

$

11,012

 

 

 

17.0

%

 

$

35,421

 

 

 

21.5

%

Effect of prior accident year

 

 

(7,416

)

 

 

(52.1

%)

 

 

(868

)

 

 

(1.3

%)

 

 

5,392

 

 

 

3.3

%

Catastrophe losses and ratio (2)

 

$

(4,023

)

 

 

(28.3

%)

 

$

10,144

 

 

 

15.7

%

 

$

40,813

 

 

 

24.8

%

Total property losses and ratio excluding the effect of prior accident year (1)

 

$

9,981

 

 

 

70.1

%

 

$

44,725

 

 

 

69.2

%

 

$

115,635

 

 

 

70.3

%

Effect of prior accident year

 

 

(16,922

)

 

 

(118.9

%)

 

 

(4,964

)

 

 

(7.6

%)

 

 

9,614

 

 

 

5.9

%

Total property losses and ratio (2)

 

$

(6,941

)

 

 

(48.8

%)

 

$

39,761

 

 

 

61.6

%

 

$

125,249

 

 

 

76.2

%

Casualty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Casualty losses and ratio excluding the effect of prior accident year (1)

 

$

66,269

 

 

 

63.3

%

 

$

110,515

 

 

 

62.0

%

 

$

78,356

 

 

 

63.9

%

Effect of prior accident year

 

 

(3,414

)

 

 

(3.3

%)

 

 

(5,902

)

 

 

(3.3

%)

 

 

(2,804

)

 

 

(2.3

%)

Total Casualty losses and ratio (2)

 

$

62,855

 

 

 

60.0

%

 

$

104,613

 

 

 

58.7

%

 

$

75,552

 

 

 

61.6

%

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1)

 

$

76,250

 

 

 

64.2

%

 

$

155,240

 

 

 

63.9

%

 

$

193,991

 

 

 

67.6

%

Effect of prior accident year

 

 

(20,336

)

 

 

(17.1

%)

 

 

(10,866

)

 

 

(4.5

%)

 

 

6,810

 

 

 

2.4

%

Total net losses and loss adjustment expense and total loss ratio (2)

 

$

55,914

 

 

 

47.1

%

 

$

144,374

 

 

 

59.4

%

 

$

200,801

 

 

 

70.0

%

(1)
Non-GAAP measure / ratio
(2)
Most directly comparable GAAP measure / ratio

Premiums

See “Result of Operations” above for a discussion on consolidated premiums for 2023.

Other Income

Other income was $0.2 million, $0.4 million, and $0.8 million for the years ended December 31, 2023, 2022, and 2021, respectively. Other income is primarily comprised of fee income.

57

Loss Ratio

The current accident year losses and loss ratio is summarized as follows:

 

 

Years Ended
December 31,

 

 

%

 

 

Years Ended
December 31,

 

 

%

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Property losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-catastrophe

 

$

6,588

 

 

$

33,713

 

 

 

(80.5

%)

 

$

33,713

 

 

$

80,214

 

 

 

(58.0

%)

Catastrophe

 

 

3,393

 

 

 

11,012

 

 

 

(69.2

%)

 

 

11,012

 

 

 

35,421

 

 

 

(68.9

%)

Property losses

 

 

9,981

 

 

 

44,725

 

 

 

(77.7

%)

 

 

44,725

 

 

 

115,635

 

 

 

(61.3

%)

Casualty losses

 

 

66,269

 

 

 

110,515

 

 

 

(40.0

%)

 

 

110,515

 

 

 

78,356

 

 

 

41.0

%

Total accident year losses

 

$

76,250

 

 

$

155,240

 

 

 

(50.9

%)

 

$

155,240

 

 

$

193,991

 

 

 

(20.0

%)

 

 

Years Ended
December 31,

 

 

Point

 

 

Years Ended
December 31,

 

 

Point

 

 

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Current accident year loss ratio:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-catastrophe

 

 

46.3

%

 

 

52.2

%

 

 

(5.9

)

 

 

52.2

%

 

 

48.8

%

 

 

3.4

 

Catastrophe

 

 

23.8

%

 

 

17.0

%

 

 

6.8

 

 

 

17.0

%

 

 

21.5

%

 

 

(4.5

)

Property loss ratio

 

 

70.1

%

 

 

69.2

%

 

 

0.9

 

 

 

69.2

%

 

 

70.3

%

 

 

(1.1

)

Casualty loss ratio

 

 

63.3

%

 

 

62.0

%

 

 

1.3

 

 

 

62.0

%

 

 

63.9

%

 

 

(1.9

)

Total accident year loss ratio

 

 

64.2

%

 

 

63.9

%

 

 

0.3

 

 

 

63.9

%

 

 

67.6

%

 

 

(3.7

)

The current accident year property non-catastrophe loss ratio for 2023 improved by 5.9 points compared to 2022 primarily due to lower claims frequency. The current accident year property non-catastrophe loss ratio for 2022 increased by 3.4 points compared to 2021 primarily reflecting higher claims frequency.

The current accident year property catastrophe loss ratio for 2023 increased by 6.8 points compared to 2022 mainly recognizing higher claims frequency. The current accident year property catastrophe loss ratio for 2022 improved by 4.5 points compared to 2021 reflecting lower claims frequency.

The current accident year casualty loss ratio for 2023 increased by 1.3 points compared to 2022 mainly due to higher claims severity in non-reinsurance lines of business and a higher mix of assumed reinsurance business that has a higher loss ratio. The current accident year casualty loss ratio for 2022 improved by 1.9 points compared to 2021 primarily due to lower claims severity in non-reinsurance lines of business as well as a mix of business change and growth in a treaty that has a lower expected loss ratio for the Company's reinsurance business.

The calendar year loss ratio for the years ended December 31, 2023, 2022, and 2021 includes a decrease of $20.3 million, or 17.1%, a decrease of $10.9 million, or 4.5%, and an increase of $6.8 million, or 2.4%, respectively, related to reserve development on prior accident years. Please see Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further discussion on prior accident year development.

Expense Ratios

The expense ratio improved 4.80.9 points from 38.6%41.7% for 20162022 to 33.8%40.8% for 2017. The improvement in the expense ratio is2023 primarily due to receiving a federal excise tax refund relatedreduction in operating expenses due to prior years as well as lower contingent commission.the sale of renewal rights partially offset by an increase in commission expense.

The expense ratio increased 1.93.4 points from 36.7%38.3% for 20152021 to 38.6%41.7% for 2016. The increase is2022 primarily due to a change in the mix of business where reinsurance, which has a higher ceding commission on business written as well as improvementsrate, comprised a larger portion of Non-Core Operations in prior year losses resulting in higher contingent commission partially offset by a reduction in profit sharing commissions2022.

58

Unallocated Corporate Items

The Company’s fixed income portfolio, excluding cash, continues to maintain high quality with an A+ average rating and a recovery of prior year cascading excise tax.

Unallocated Corporate Items

The Company’s investments are managed distinctly according to assets supporting future insurance obligations and assets in excess of those supporting future insurance obligations. Assets supporting insurance obligations are referred to as the Insurance Obligations Portfolio. The Insurance Obligations Portfolio consists of cash and high-quality fixed income investments. Assets in excess of insurance obligations are referred to as the Surplus Portfolio. The Surplus Portfolio targets higher returns and is comprised of cash, fixed income, common stocks, and alternative investments.

The Insurance Obligations Portfolio has a market value of $845.2 million. Of this amount, $845.2 million are fixed income securities with a credit quality ofAA- and duration of 3.11.1 years. The Surplus Portfolio has a market value of $690.2 million. Of this amount, $425.7 million are fixed income securities with a credit quality ofA- and duration of 3.5 years.

Since the Company began managing its investments as two portfolios during the 2nd quarter of 2017, year to date

performance metrics are an approximation. The Insurance Obligations Portfolio returned 2.2% for the year ended December 31, 2017 with net investment income of $18.7 million and realized gains of $0.8 million. The Surplus Portfolio returned 4.7% for the year ended December 31, 2017 with net investment income of $20.6 million and realized gains of $0.9 million.

Net Investment Income

  Years Ended
December 31,		 %
Change		  Years Ended
December 31,		 %
Change		 

 

Years Ended
December 31,

 

 

%

 

 

Years Ended
December 31,

 

 

%

 

(Dollars in thousands)  2017 2016 2016 2015 

 

2023

 

 

2022

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Gross investment income (1)

  $42,250  $39,151  7.9%  $39,151  $37,918  3.3% 

 

$

56,960

 

 

$

29,776

 

 

 

91.3

%

 

$

29,776

 

 

$

39,662

 

 

 

(24.9

%)

Investment expenses

   (2,927)  (5,168)  (43.4%)  (5,168)  (3,309)  56.2% 

 

 

(1,516

)

 

 

(2,149

)

 

 

(29.5

%)

 

 

(2,149

)

 

 

(2,642

)

 

 

(18.7

%)

  

 

  

 

  

 

  

 

  

 

  

 

 

Net investment income

  $39,323  $33,983  15.7%  $33,983  $34,609  (1.8%) 

 

$

55,444

 

 

$

27,627

 

 

 

100.7

%

 

$

27,627

 

 

$

37,020

 

 

 

(25.4

%)

  

 

  

 

  

 

  

 

  

 

  

 

 

(1)Excludes realized gains and losses
(1)
Excludes realized gains and losses

Gross investment income for 20172023 increased by 7.9%91.3% and net investment income for 2023 increased by 100.7% compared to 2016.2022. The increase was primarily due to an increase in yield and a largerwithin the fixed maturities portfolio resultingdue to the rise in rates and increased returns from $130.0 million in borrowings offset by a reduction in the investment portfolio of $83.0 million for the redemption in December, 2017.alternative investments. Gross investment income for 2016 increased2022 decreased by 3.3%24.9% and net investment income for 2022 decreased by 25.4% compared to 2015.2021. The increasedecrease was primarily due to the increase in income relateddecreased returns from alternative investments and lowered invested assets due to the liquidation of the Company’s limited liability investments during 2016common stock portfolio and a portion of the bond portfolio in order to raise funds to retire the 2047 Notes in April 2022. This decrease was partially offset by a reductionan increase in yield within the size of the investmentfixed maturities portfolio due to redeeming $190.0 million of A ordinary shares during the fourth quarter of 2015.rise in rates.

Investment expenses for 2017 decreased by 43.4% compared to 2016. Investment expenses for 2016 increased by 56.2% compared to 2015. The increase in investment expense in 2016 and subsequent decrease in 2017 is mainly attributable to $1.5 million in upfront fees paid in 2016 to enter into a new investment in middle market corporate debt and equity investments in limited liability companies.

At December 31, 2017,2023, the Company held agencyasset-backed, mortgage-backed, securitiescommercial mortgage-backed and collateralized mortgage obligations with a market value of $81.2$341.0 million. Excluding the agencyasset-backed, mortgage-backed, securities,commercial mortgage-backed and collateralized mortgage obligations, the average duration of the Company’s fixed maturities portfolio was 3.20.9 years as of December 31, 2017,2023, compared with 1.91.5 years as of December 31, 2016. Including2022. Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration. See Note 5 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on security classes held at December 31, 2023. At December 31, 2023, the Company’s embedded book yield on its fixed maturities, not including cash, was 4.0% compared with 3.5% at December 31, 2022. The embedded book yield on the $26.2 million of taxable municipal bonds in the Company’s portfolio was 3.0% at December 31, 2023, compared to an embedded book yield of 3.1% on the Company’s taxable municipal bonds of $31.6 million at December 31, 2022.

At December 31, 2022, the Company held asset-backed, mortgage-backed, commercial mortgage-backed and short-term investments,collateralized mortgage obligations with a market value of $350.2 million. Excluding the asset-backed, mortgage-backed, commercial mortgage-backed and collateralized mortgage obligations, the average duration of the Company’s fixed maturities portfolio excluding agency mortgage-backed securities, was 3.01.5 years as of December 31, 20172022, compared with 1.84.0 years as of December 31, 2016.2021. Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration. At December 31, 2017,2022, the Company’s embedded book yield on its fixed maturities, not including cash, was 2.7%3.5% compared with 2.1%2.2% at December 31, 2016.2021. The embedded book yield on the $95.1$31.6 million of taxable municipal bonds in the Company’s portfolio which includes $93.5 million of taxable municipal bonds, was 3.0%3.1% at December 31, 2017,2022, compared to an embedded book yield of 2.7%2.8% on the Company’s taxable municipal bond portfoliobonds of $156.4$54.6 million at December 31, 2016.2021.

At December 31, 2016, the Company held agency mortgage-backed securities with a market value of $59.9 million. Excluding the agency mortgage-backed securities, the average duration of the Company’s fixed maturities portfolio was 1.9 years as of December 31, 2016, compared with 2.4 years as of December 31, 2015. Including cash and short-term investments, the average duration of the Company’s fixed maturities portfolio, excluding agency mortgage-backed securities, was 1.8 years as of December 31, 2016 compared with 2.3 years as of December 31, 2015. Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration. At December 31, 2016, the Company’s embedded book yield on its fixed maturities, not including cash, was 2.1% compared with 2.2% at December 31, 2015. The embedded book yield on the $156.4 million of municipal bonds in the Company’s portfolio, which includes $103.6 million of taxable municipal bonds, was 2.7% at December 31, 2016, compared to an embedded book yield of 2.7% on the Company’s municipal bond portfolio of $205.2 million at December 31, 2015.

Net Realized Investment Gains (Losses)

The components of net realized investment gains (losses) for the years ended December 31, 2017, 2016,2023, 2022, and 20152021 were as follows:

  Years Ended December 31, 

 

Years Ended December 31,

 

(Dollars in thousands)  2017   2016   2015 

 

2023

 

 

2022

 

 

2021

 

Common stock

  $3,547   $27,049   $9,444 

Equity securities

 

$

(453

)

 

$

(3,392

)

 

$

13,440

 

Fixed maturities

   710    2,515    1,505 

 

 

(1,654

)

 

 

(13,405

)

 

 

342

 

Interest rate swap

   (75)    (1,110)    (6,988) 

Other than temporary impairment losses

   (2,606)    (6,733)    (7,335) 
  

 

   

 

   

 

 

Derivatives

 

 

—

 

 

 

10,073

 

 

 

2,105

 

Other-than-temporary impairment losses

 

 

—

 

 

 

(26,205

)

 

 

—

 

Net realized investment gains (losses)

  $1,576   $21,721   $(3,374) 

 

$

(2,107

)

 

$

(32,929

)

 

$

15,887

 

  

 

 �� 

 

   

 

 

In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio. In connection with these actions, the Company identified fixed maturities securities with a

59

weighted average life of five years or greater as having an intent to sell, the majority of which were sold in the 2nd quarter of 2022. Most of the proceeds from the sale of these securities were reinvested into fixed income investments with maturities of approximately two years. As a result of these actions, the Company's book yield rose over time. Book yield was approximately 2.2% at December 31, 2021 and 4.0% at December 31, 2023.

See Note 45 of the notes to the consolidated financial statements in Item 8 of Part II of this report for an analysis of total investment return on apre-tax basis for the years ended December 31, 2017, 2016,2023, 2022, and 2015.2021.

Corporate and Other Operating Expenses

 

 

Years Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Corporate expenses - nondisposition related

 

$

23,383

 

 

$

13,959

 

 

$

19,977

 

Impairments and expenses related to dispositions within Non-Core Operations

 

 

—

 

 

 

10,462

 

 

 

7,202

 

Corporate and Other Operating Expenses

 

$

23,383

 

 

$

24,421

 

 

$

27,179

 

Corporate and other operating expenses - nondisposition related consist of outside legal fees, other professional fees, directors’ fees, management fees & advisory fees, salaries and benefits for holding company personnel, development costs for new products, impairment losses, and taxes incurred which are not directly related to operations. CorporateThe increase in corporate expenses - nondisposition related for 2023 as compared to 2022 was primarily due to incurring $2.0 million in restructuring expenses in first quarter of 2023 and other operatingincurring $1.6 million to settle an employment related matter in 2023. In addition, corporate expenses in 2022 were $25.7reduced by $5.5 million $17.3due to the Company receiving an employee retention credit under the CARES Act. The decrease in corporate expenses - nondisposition related for 2022 as compared to 2021 was primarily due to the Company receiving an employee retention credit under the CARES Act of $5.5 million.

Impairments and expenses related to dispositions within Non-Core Operations represent impairments of goodwill, intangible assets, software, and lease costs as well as legal expenses and merger and acquisition fees related to the sale of renewal rights related to the Company's Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business. Impairments and expenses related to dispositions within Non-Core Operations were $10.5 million and $24.4$7.2 million during the years ended December 31, 2017, 2016,2022 and 2015,2021, respectively. The increaseThere were no impairments and expenses related to dispositions within Non-Core Operations during the year ended December 31, 2023. See Note 2 of the notes to the consolidated financial statements in 2017 as compared to 2016 is primarily due to incurring a $11.0 million advisory feeItem 8 of Part II of this report for additional information on the sale of the renewal rights related to the redemptionCompany’s Farm, Ranch & Stable business and other services performed, whereas, 2016 included cost incurred in connection with there-domestication in 2016 of $4.2 million. The decrease in 2016 as compared to 2015 is primarily due to 2015 including costs incurred in connection with the American Reliable acquisition of $8.3 million; whereas, 2016 included costs incurred in connection with the redomestication of $4.2 million.Company's manufactured and dwelling homes business.

Interest Expense

The Company had no interest expense for the year ended December 31, 2023. Interest expense was $16.9 million, $8.9$3.0 million and $4.9$10.5 million during the years ended December 31, 2017, 2016,2022 and 2015,2021, respectively. The increasereduction in 2017 as compared to 2016interest expense is primarily due to the Company’s $130 million debt offering in March, 2017. The increase in 2016 as compared to 2015 is primarily due toredemption of the Company’s $100 million debt offering in August 2015 offset by a reduction in interest expenseCompany's 7.875% subordinated notes on margin borrowing facility due to decreased borrowings.April 15, 2022.

See Note 1213 of the notes to the consolidated financial statements in Item 8 of Part II of this report for details on the Company’s debt.

Income Tax Benefit/Expense

The income tax benefitexpense was $0.5$7.5 million for the year ended December 31, 20172023 compared with income tax benefitexpense of $2.3$2.8 million for the year ended December 31, 2016.2022. The decreaseincrease in the income tax benefitexpense is primarily due to incurring a provisional tax expense of $17.5 million related to the reductionhigher taxable income in the deferred tax asset as a result of the TCJA enacted on December 22, 2017 which lowered theCompany's U.S. tax rate from 35% to 21% offset by a $18.4 million tax benefit primarily due to an increase in losses incurred in the Company’s U.S. operations for 2017 compared to 2016. subsidiaries.

The income tax benefitexpense was $2.3$2.8 million for the year ended December 31, 20162022 compared with income tax benefitexpense of $8.7$3.4 million for the year ended December 31, 2015.2021. The decrease in income tax benefitexpense is primarily due to capital gains andlower taxable income in the gain on the sale of United National Specialty Insurance Company during the year ended December 31, 2016.Company's U.S. subsidiaries.

See Note 1011 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a comparison of income tax between periods.

60

Net Income (Loss)

The factors described above resulted in anet income of $25.4 million, net loss of $9.6 million, net income of $49.9$0.9 million, and net income of $41.5$29.4 million for the years ended December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively.

Liquidity and Capital Resources

Sources and Uses of Funds

Global Indemnity Group, LLC is a holding company. Its principal asset is its ownership of the shares of its direct and indirect subsidiaries, including those of its U.S. insurance companies: United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, and Penn-Patriot Insurance Company, and American Reliable Insurance Company; and its Reinsurance Operations: Company.

Global Indemnity Reinsurance.

The principal sources of cash that Global Indemnity requires to meet its short termGroup, LLC’s current short-term and long termlong-term liquidity needs includinginclude but are not limited to the payment of corporate expenses, debt service payments,distributions to shareholders, and share repurchases,repurchases. The Company also has commitments in the form of operating leases, commitments to fund limited liability investments, and unpaid losses and loss expense obligations. See the contractual obligation table below for additional information on these commitments.

In order to meet its current short-term and long-term needs, Global Indemnity Group, LLC’s principal sources of cash includes investment income, dividends from subsidiaries, other permitted disbursements from its direct and indirect subsidiaries, reimbursement for equity awards granted to employees and intercompany borrowings. The principal sources of funds at these direct and indirect subsidiaries include underwriting operations, investment income, and proceeds from sales and redemptions of investments.investments, capital contributions, intercompany borrowings, and dividends from subsidiaries. Funds are used principally by these operating subsidiaries to pay claims and operating expenses, to make intercompany debt payments, fund margin requirements on interest rate swap agreements, to purchase investments, and to make dividend payments.pay dividends. In addition, the Company periodically reviews opportunities related to business acquisitions and as a result, liquidity may be needed in the future.

On March 23, 2017, the Company issued 7.875% Subordinated Notes due in 2047 in the aggregateGBLI Holdings, LLC is a holding company which is a wholly-owned subsidiary of Penn-Patriot Insurance Company. GBLI Holdings, LLC’s principal amount of $130.0 million through an underwritten public offering. See Note 12asset is its ownership of the notes to consolidated financial statements in Item 8 of Part II of this report for additional information on this debt issuance.

On December 29, 2017, Global Indemnity acquired 3,397,031shares of its A ordinary shares for approximately $83.0 million in the aggregate (approximately $24.44 per share) from former investors in vehicles managed by Fox Paine &direct and indirect subsidiaries which include United National Insurance Company, LLC. TheDiamond State Insurance Company, sold $99.0 million of securitiesPenn-America Insurance Company, and Penn-Star Insurance Company. GBLI Holdings, LLC is dependent on dividends from its consolidated investment portfolio during December, 2017subsidiaries as well as reimbursements from its subsidiaries for utilization of net operating losses in order to provide funding for the redemptionmeet its corporate expense obligations and otherintercompany financing obligations.

During the fourth quarter of 2017, Global Indemnity announced the adoption of a dividend program. Although subject to the absolute discretion of the Board of Directors and factors, conditions, and prospects as such may exist from time to time when the Board of Directors considers the advisability of declaring a quarterly dividend, the Company currently anticipates an initial dividend rate of $0.25 per share per quarter ($1.00 per share per year). As of December 31, 2017, there are currently 14,206,742 shares issued and outstanding.

As of December 31, 2017, the Company also had future funding commitments of $57.7 million related to investments. The timing of commitments related to investments is uncertain.

The future liquidity of Global Indemnity Group, LLC is dependent on the ability of its subsidiaries to generate income to pay dividends.dividends and to pay intercompany debt due to Global Indemnity’s U.S.Indemnity Group, LLC. The future liquidity of GBLI Holdings, LLC is dependent on the ability of its subsidiaries to generate income to pay dividends as well as receiving reimbursements from its subsidiaries for utilization of net operating losses. Global Indemnity Group, LLC and GBLI Holdings, LLC’s insurance companies are restricted by statute as to the amount of dividends that they may pay without the prior approval of regulatory authorities. The dividend limitations imposed by state laws are based on the statutory financial results of each insurance company within the Insurance Operations that are determined by using statutory accounting practices that differ in various respects from accounting principles used in financial statements prepared in conformity with GAAP. See “Regulation — “Regulation—Statutory Accounting Principles.” Key differences relate to, among other items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes.

Under IndianaVirginia law, Diamond StatePenn-Patriot Insurance Company may not pay any dividend or make any distribution of cash or other property, the fair market value of which, together with that of any other dividends or distributions made within the preceding 12 consecutive months ending on the date on which the proposed dividend or distribution is scheduled to be made, exceeds the greater of either (1) 10% of its surplus as of the 31st day of December of the last preceding year, or (2) its net income, not including net realized capital gains, for the 12 month period ending on the 31st day of December of the last preceding year, not including pro rata distributions of any class of its securities, unless the commissioner approves the proposed payment or fails to disapprove such payment within 30 days after receiving notice of such payment. An additional limitation is that Indiana does not permit a domestic insurer to declare or pay a dividend except out of unassigned surplus unless otherwise approved by the commissioner beforeIn determining whether the dividend is paid.must be approved, undistributed net income from the second and third preceding years, not including net realized capital gains, may be carried forward.

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Under Pennsylvania law, United National Insurance Company, Penn-America Insurance Company, and Penn-Star Insurance Company may not pay any dividend or make any distribution that, together with other dividends or distributions made within the preceding 12 consecutive months, exceeds the greater of (1) 10% of its surplus as shown on its last annual statement on file with the commissioner or (2) its net income for the period covered by such statement, not including pro rata distributions of any class of its own securities, unless the commissioner has received notice from the insurer of the declaration of the dividend and the commissioner approves the proposed payment or fails to disapprove such payment within 30 days after receiving notice of such payment. An additional limitation is that Pennsylvania does not permit a domestic insurer to declare or pay a dividend except out of unassigned funds (surplus) unless otherwise approved by the commissioner before the dividend is paid. Furthermore, no dividend or other distribution may be declared or paid by a Pennsylvania insurance company that would reduce its total capital and surplus to an amount that is less than the amount required by the Insurance Department for the kind or kinds of business that it is authorized to transact. Pennsylvania law allows loans to affiliates up to 10% of statutory surplus without prior regulatory approval.

Under VirginiaIndiana law, Penn-PatriotDiamond State Insurance Company may not pay any dividend or make any distribution of cash or other property, the fair market value of which, together with that of any other dividends or distributions made within the preceding 12 consecutive months ending on the date on which the proposed dividend or distribution is scheduled to be made, exceeds the lessergreater of either (1) 10% of its surplus as of the 31st day of December of the last preceding year, or (2) its net income not including net realized capital gains, for the 12 month period ending on the 31st day of December of the last preceding year, not including pro rata distributions of any class of its securities, unless the commissioner approves the proposed payment or fails to disapprove such payment within 30 days after receiving notice of such payment. In determining whetherAn additional limitation is that Indiana does not permit a domestic insurer to declare or pay a dividend except out of unassigned surplus unless otherwise approved by the commissioner before the dividend must be approved, undistributed net income from the second and third preceding years,is paid.

The Company’s insurance subsidiaries did not including net realized capital gains, may be carried forward.

Under Arizona law, American Reliable Insurance Company may notdeclare or pay any dividend or make any distribution of cash or other property, the fair market value of which, together with that of any other dividends or distributions made within the preceding 12 months exceeds the lesser of either (1) 10% of its surplus as of the 31st day of December of the last preceding year, or (2) its net income for the 12 month period ending on the 31st day of December of the last preceding year, not including pro rata distributions of any class of its securities, unless the commissioner approves the proposed payment or fails to disapprove such payment within 30 days after receiving notice of such payment.

in 2023. See Note 1921 of the notes to consolidated financial statements in Item 8 of Part II of this report for the dividends declared and paid by Global Indemnity’s U.S. insurance companies in 2017 and the maximum amount of distributions that U.S. insurance companies could pay as dividends in 2018.2024.

Global Indemnity Reinsurance is prohibited, without the approval of the BMA, from reducing by 15% or more its total statutory capital or 25% or more of its total statutory capital and surplus as set out in its previous year’s statutory financial statements, and any application for such approval must include such information as the BMA may require. Based upon the total statutory capital plus the statutory surplus as set out in its 2017 statutory financial statements that will be filed in 2018, the Company believes Global Indemnity Reinsurance could pay a dividend of up to $227.1 million without requesting BMA approval. For 2018, the Company believes that Global

Indemnity Reinsurance, including distributions it could receive from its subsidiaries, should have sufficient liquidity and solvency to pay dividends. In 2017, Global Indemnity Reinsurance declared a dividend of $120.0 million to its parent, Global Indemnity. Of this amount, $100.0 million was paid to Global Indemnity in December, 2017. As of December 31, 2017, accrued dividends were $20.0 million.

Surplus Levels

Global Indemnity’s U.S. insurance companies are required by law to maintain a certain minimum level of policyholders’ surplus on a statutory basis. Policyholders’ surplus is calculated by subtracting total liabilities from total assets. The NAIC has risk-based capital standards that are designed to identify property and casualty insurers that may be inadequately capitalized based on the inherent risks of each insurer’s assets and liabilities and mix of net premiums written.written premiums. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action. Based on the standards currently adopted, the policyholders’ surplus of each of the U.S. insurance companies is in excess of the prescribed minimum company action level risk-based capital requirements.

Sources of operating funds consist primarily of net written premiums written and investment income. Funds are used primarily to pay claims and operating expenses and to purchase investments. As a result of the new dividenddistribution policy, funds may also be used in the future to pay dividendsdistributions to shareholders of Global Indemnity Limited.the Company.

The Company’s reconciliation of net income (loss) to net cash provided from (used for)by operations is generally influenced by the following:

•
the fact that the Company collectcollects premiums, net of commission,commissions, in advance of losses paid;

•
the timing of the Company’s settlements with its reinsurers; and

•
the timing of the Company’s loss payments.

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Net cash provided by (used for) operating activities in 2017, 2016,2023, 2022, and 20152021 was ($23.7)$42.9 million, ($24.4)$44.2 million and $3.8$90.8 million, respectively.

In 2017,2023, the increasedecrease in operating cash flows of approximately $0.7$1.4 million from the prior year was primarily a net result of the following items:

   2017   2016   Change 

Net premiums collected

  $422,075   $480,799   $(58,724) 

Net losses paid

   (266,238)    (321,188)    54,950 

Underwriting and corporate expenses

   (202,055)    (217,845)    15,790 

Net investment income

   37,186    37,915    (729) 

Net federal income taxes recovered (paid)

   (114)    4,694    (4,808) 

Interest paid

   (14,504)    (8,771)    (5,733) 
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) operating activities

  $(23,650)   $(24,396)   $746 
  

 

 

   

 

 

   

 

 

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

Change

 

Net premiums collected

 

$

454,139

 

 

$

541,087

 

 

$

(86,948

)

Net losses paid

 

 

(265,676

)

 

 

(272,585

)

 

 

6,909

 

Underwriting and corporate expenses

 

 

(192,226

)

 

 

(251,031

)

 

 

58,805

 

Net investment income

 

 

47,262

 

 

 

32,316

 

 

 

14,946

 

Net federal income taxes paid

 

 

(613

)

 

 

(426

)

 

 

(187

)

Interest paid

 

 

—

 

 

 

(5,125

)

 

 

5,125

 

Net cash provided by operating activities

 

$

42,886

 

 

$

44,236

 

 

$

(1,350

)

In 2016,2022, the decrease in operating cash flows of approximately $28.1$46.6 million from the prior year was primarily a net result of the following items:

  2016   2015   Change 

(Dollars in thousands)

 

2022

 

 

2021

 

 

Change

 

Net premiums collected

  $480,799   $527,123   $(46,324) 

 

$

541,087

 

 

$

599,870

 

 

$

(58,783

)

Net losses paid

   (321,188)    (336,316)    15,128 

 

 

(272,585

)

 

 

(299,027

)

 

 

26,442

 

Underwriting and corporate expenses

   (217,845)    (229,738)    11,893 

 

 

(251,031

)

 

 

(241,017

)

 

 

(10,014

)

Net investment income

   37,915    46,709    (8,794) 

 

 

32,316

 

 

 

41,367

 

 

 

(9,051

)

Net federal income taxes recovered (paid)

   4,694    (102)    4,796 

Net federal income taxes paid

 

 

(426

)

 

 

(54

)

 

 

(372

)

Interest paid

   (8,771)    (3,926)    (4,845) 

 

 

(5,125

)

 

 

(10,340

)

 

 

5,215

 

  

 

   

 

   

 

 

Net cash provided by (used for) operating activities

  $(24,396)   $3,750   $(28,146) 
  

 

   

 

   

 

 

Net cash provided by operating activities

 

$

44,236

 

 

$

90,799

 

 

$

(46,563

)

See the consolidated statements of cash flows in the consolidated financial statements in Item 8 of Part II of this report for details concerning the Company’s investing and financing activities.

Liquidity

Currently, the Company believes each company inof its Insurance Operations and Reinsurance Operationsinsurance companies maintains sufficient liquidity to pay claims through cash generated by operations and liquid investments. The holding companies also maintain sufficient liquidity to meet their obligations. The Company monitors its investment portfolios to assure liability and investment durations are closely matched.

Prospectively, as fixed income investments mature and new cash is obtained, the cash available to invest will be invested in accordance with the Company’s investment policy. The Company’s investment policy allows the Company to invest in taxable andtax-exempt fixed income investments as well as publicly traded and private equity investments. With respect to bonds, the Company’s credit exposure limit for each issuer varies with the issuer’s credit quality. The allocation between taxable andtax-exempt bonds is determined based on market conditions and tax considerations. The fixed income portfolio currently has a duration of 3.23 years which allows1.1 years.

As of December 31, 2023, the Company also had future funding commitments of $14.2 million related to defensively position itself during the current low interest rate environment.investments that are currently in their harvest period and it is unlikely that a capital call will be made.

The Company has access to various capital sources including dividends from insurance subsidiaries, invested assets in itsnon-U.S. subsidiaries and access to the debt and equity capital markets. The Company believes it has sufficient liquidity to meet its capital needs. See Note 1921 of the notes to the consolidated financial statements in Item 8 of Part II of this report for a discussion of the Company’s dividend capacity. However, the Company’s future capital requirements depend on many factors, including the amount of premium it writes, the amount of loss reserves by lines of business, and catastrophe exposure. To the extent that the Company needs to raise additional funds, any equity or debt financing for this purpose, if available at all, may be on terms that are not favorable to the Company. If the Company cannot obtain adequate capital, its business, results of operations and financial condition could be adversely affected.

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Stock Repurchase

On December 29, 2017,October 21, 2022, Global Indemnity acquired 3,397,031 of its A ordinary shares for approximately $83.0 millionGroup, LLC announced it commenced a stock repurchase program beginning in the aggregate (approximately $24.44 per share) from former investors in vehicles managed by Fox Paine & Company, LLC. The Company sold $99.0 million of securities from its consolidated investment portfolio during December, 2017 to provide funding for the redemption and other obligations.

During the fourth quarter of 2017,2022. On January 3, 2023, Global Indemnity Group, LLC announced that it had authorized an increase in the adoptionaggregate stock purchase program from $32 million, which was authorized on October 21, 2022, to $60 million. On June 8, 2023, Global Indemnity Group, LLC's Board of Directors approved an additional increase in the existing share buyback authorization amount of $60 million to $135 million. The authorization to repurchase will expire on December 31, 2027. The timing and actual number of shares repurchased, if any, will depend on a dividend program. Although subjectvariety of factors, including price, general business and market conditions, and alternative investment opportunities.

Under the repurchase program, repurchases may be made from time to time using a variety of methods, including open market purchases or privately negotiated transactions, all in compliance with Global Indemnity Group, LLC’s Insider Trading Policy, the absolute discretionUnited States Securities and Exchange Commission, and other applicable legal requirements. The repurchase program does not obligate Global Indemnity Group, LLC to acquire any particular amount of class A common shares, and the repurchase program may be suspended or discontinued at any time at Global Indemnity Group, LLC’s discretion.

From the time of the initial announcement on October 21, 2022, a total of 1,357,082 shares were repurchased for approximately $34.0 million at an average purchase price of $25.05 per share. 138,151 shares that were acquired were reissued in December 2022 at an average price per share of $24.17. As a result of these transactions, book value per share increased by $1.69 per share since inception of the stock repurchase program in October 2022.

Restructuring

The Company restructured its insurance operations to strengthen its market presence and enhance its focus on GBLI’s core products. The restructuring plan was initiated in the fourth quarter of 2022 and was completed in the first quarter of 2023. The Company incurred restructuring charges of $3.4 million in 2022 and $2.0 million in 2023 for a total of $5.4 million. The Company anticipates recurring annual expense savings of $16.0 million.

Distributions

On March 6, 2024, the Board of Directors and factors, conditions, and prospectsapproved a dividend rate of $0.35 per common share payable on March 28, 2024 to all shareholders of record as such may exist from time to time whenof the Boardclose of Directors considersbusiness on March 21, 2024, a 40% increase over the advisability of declaring aprior quarterly dividend, the Company currently anticipates an initial dividend rate of $0.25 per share per quarter ($1.00 per share per year).common share. Future dividends remain subject to the discretion of GBLI’s Board of Directors, including the Board of Director’s evaluation of the company’s financial performance, capital and reserve positions, liquidity, balance sheet, and other factors. As of December 31, 2017,2023, there are currently 14,206,74213,565,041 shares issuedoutstanding.

During 2023, Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 24, 2023, June 23, 2023, October 9, 2023, and outstanding.

December 22, 2023. Distributions paid to common shareholders were $14.2 million during the year ended December 31, 2023. In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the year ended December 31, 2023.

OnDuring 2022, the Board of Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 21, 2022, June 20, 2022, October 4, 2022, and December 23, 2017,2022. Distributions paid to common shareholders were $14.4 million during the Company issued 7.875% Subordinated Notes due in 2047 inyear ended December 31, 2022. In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the aggregate principal amountyear ended December 31, 2022.

During 2021, the Board of $130.0Directors approved a distribution payment of $0.25 per common share to all shareholders of record on the close of business on March 22, 2021, June 21, 2021, September 23, 2021, and December 20, 2021. Distributions paid to common shareholders were $14.4 million through an underwritten public offering. See Note 12during the year ended December 31, 2021. In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the notes to consolidated financial statements in Item 8 of Part II of this report for additional information on this debt issuance.year ended December 31, 2021.

Property Catastrophe Quota Share

Effective April 15, 2017, the Company entered into an agreement to cede 50% of its property catastrophe losses for all single occurrences over $3 million up to a loss of $40 million. This treaty has an aggregate limit of $60 million and will expire on June 1, 2018.Investment Portfolio

As a result of entering into this treaty,duration shortening, the Company didsignificantly reduced its interest rate risk with more than 80% of the fixed maturity portfolio maturing over the next three years. With a shorter duration, the investment portfolio is well positioned to increase book yield by investing maturities in higher yielding bonds. At December 31, 2023, the Company's embedded book

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yield on its fixed maturities, not renewincluding cash, was 4.0% compared with 3.5% at December 31, 2022 and 2.2% at December 31, 2021.

On July 31, 2023, the $20Company provided the Global Debt Fund, LP with a formal withdrawal request in full. Withdrawal proceeds are expected to be received starting in 2024. The Global Debt Fund, LP had a fair market value of $26.0 million at December 31, 2023.

On May 18, 2022, the Company provided the Credit Fund, LLC with formal withdrawal request in full. Proceeds of $99.6 million were received on July 29, 2022 and were invested in fixed income investments with maturities of two years and less.

Sale of Renewal Rights related to Farm, Ranch & Stable and Sale of American Reliable Insurance Company

On August 8, 2022, the Company sold the renewal rights related to its Farm, Ranch & Stable business for policies written on or after August 8, 2022 to Everett Cash Mutual Insurance Company for $30.0 million. The Company retained the unearned premium reserves for business written prior to August 8, 2022. Everett Cash Mutual Insurance Company also acquired the Company’s wholly-owned subsidiary, American Reliable Insurance Company, on December 31, 2022 for an amount equal to book value, which was $10.0 million, at the time of closing.

Sale of Renewal Rights Related to Manufactured & Dwelling Homes Business

On October 26, 2021, the Company sold the renewal rights related to its manufactured and dwelling homes business to K2 Insurance Services (“K2”) and American Family Mutual Insurance Company (“American Family”). Pursuant to the tripartite transaction, the Company received $28.0 million in excesscash in October 2021. The Company also retained the American Reliable 50-state licensed operating unit, $65 million of $20net capital supporting the business, and a related $42 million layerunearned premium reserve. The Company currently leases office space in Scottsdale, Arizona. As part of this sale, K2 is subleasing approximately one third of the Scottsdale, Arizona office space. Currently, the Company intends to exercise the early termination clause in its Scottsdale, Arizona lease. The Company expects it will receive $1.6 million in sublease payments from K2 between October 2021 and October 2026.

To facilitate the transaction, American Reliable retained the specialty residential property catastrophe treatybusiness in Florida and Louisiana and also retained business that was previously placed in runoff. American Reliable commenced the non-renewal of manufactured home insurance in Florida beginning on June 1, 2017.March 11, 2022, for policies expiring on or after July 10, 2022. American Reliable and United National non-renewed manufactured home and dwelling insurance in Louisiana beginning on or about January 31, 2022, for policies renewing on or after March 7, 2022. American Family assumed 100% of the risks for all policies covered under the renewal rights agreement which are written or renewed after October 26, 2021, except for policies covering properties in the state of Florida. The Company also retained risk for business previously placed in runoff and policies in Louisiana. There were no specialty residential property policies in-force in Florida and Louisiana as of December 31, 2023.

Stop Loss Agreement, Quota Share Arrangements

In addition, effective November 30, 2021, the Company and Intercompany Pooling Arrangement

Global Indemnity’s U.S. insurance companies, excluding Personal Lines, and Global Indemnity Reinsurance participated in a stop lossAmerican Family reached an agreement that provided protectionwhere American Family agreed to the U.S. insurance companies, excluding Personal Lines, in a loss corridor from 70% to 90% subject to certain restrictions. This agreement was terminated on a prospective basis on January 1, 2016.

During 2015,reinsure 100% of the Company’s U.S. insurance companies participated in quota share reinsurance agreements with Global Indemnity Reinsurance whereby 50%unearned premium reserves of the net retainedsame types as the policies comprising the manufactured and dwelling homes business lines noted above that were in force as of November 30, 2021. The approximate amount of the U.S. insurance companiesunearned premium reserves at November 30, 2021 was ceded$33.8 million. The Company received a 40% ceding commission which included a provision for a 4% claims administration fee to Global Indemnity Reinsurance. Effective January 1, 2016, the cession percentage was lowered to 40% from 50%. These agreements exclude named storms. As a result of the enactment of the TCJA, effective January 1, 2018, premiums being ceded under the quota share arrangement may potentially be subject to a 10% BEAT tax. As a result, Global Indemnity Reinsurance and the Company’s U.S. insurance companies have agreed to terminate the quota share arrangement effective January 1, 2018. Regulatory approval is still pending.

Global Indemnity Reinsurance is an unauthorized reinsurer. As a result, any losses and unearned premiums that are ceded to Global Indemnity Reinsurancepaid by the U.S. insurance companies must be collateralized. To satisfy this requirement, Global Indemnity Reinsurance has set up custodialCompany directly to K2 Claims.

Trust accounts

The Company established trust accounts, on behalf of the U.S. insurance companies.

Global Indemnity Reinsurance also has established trust accountswhich are held by Penn-Patriot Insurance Company, to collateralize exposure it hashad to certain third partythird-party ceding companies. The Company invests the funds in securities that have durations that closely match the expected duration of the liabilities assumed. The Company believes that Global Indemnity ReinsurancePenn-Patriot Insurance Company will have sufficient liquidity to pay claims prospectively.

Global Indemnity’sCapital Resources

Investment Portfolio

In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio. In connection with these actions, the Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell. Most of the proceeds from the sale of these securities were reinvested into fixed income investments with maturities of two years. As a result of these actions, the

65

Company's book yield rose over time. Book yield was approximately 2.2% at December 31, 2021 and 4.0% at December 31, 2023.

Redemption of Debt

On April 15, 2022, the Company redeemed the entire $130 million in aggregate principal amount of the outstanding 2047 Notes plus accrued and unpaid interest on the 2047 Notes redeemed to, but not including the Redemption Date of April 15, 2022. The funds to redeem the debt were primarily obtained through the sale of the Company’s equity portfolio in the amount of $75.9 million, $32.0 million in dividends from insurance company subsidiaries, $18.4 million from distributions received from private equity investments, and the remainder from its subsidiary, GBLI Holdings, LLC.

As a result of this redemption, the Company no longer has any outstanding debt with third parties.

Intercompany Pooling Arrangement

The Company’s U.S. insurance companies participate in an intercompany pooling arrangement whereby premiums, losses, and expenses are shared pro rata amongst the U.S. insurance companies.

Capital Resources

As a result Prior to completion of the changes in the worldwide tax environment, severalsale of American Reliable, American Reliable comprised 30% of the intercompany financing structures are expected to be restructured.

On January 18, 2006, U.A.I. (Luxembourg) Investment S.à.r.l. loaned $6.0 million to United America Indemnity, Ltd. The loan was used to pay operating expenses that arise in the normal course of business. The loan is a demand loan and bears interest at 4.38%.pool. Due to the liquidationsale of United America Indemnity, Ltd.American Reliable on December 31, 2022, the intercompany pooling agreement was amended. American Reliable was removed from the pool and its 30% participation in 2016, this loanthe business and capital was assumed byallocated to the Company’s remaining five insurance companies.

The intercompany reinsurance agreement was updated in 2022 to require each company in the reinsurance pool to fund its proportionate share of collateral required to fund certain third party ceding companies.

For additional information on the Sale of American Reliable, please see the liquidity section above.

Intercompany Loan

On August 28, 2020, Global Indemnity Limited. At December 31, 2017, there was $1.0 million outstanding on this loanInvestments, Inc. entered into a promissory note with accrued interest of $1.9 million. Global Indemnity Limited is dependent on its subsidiaries to pay its dividends and operating expenses.

In February, 2010,Group, LLC for the lineprincipal amount of credit between$11.3 million. This note was issued in conjunction with Global Indemnity Reinsurance and United America Indemnity, Limited was converted to anon-interest bearing note payable for the full amountInvestment Inc.’s purchase of principal and accrued interest to date totaling $53.0 million. In May, 2014, United America Indemnity, Ltd. repaid $20 million of the outstanding balance due under this note. In November, 2016, this note was assumed by Global Indemnity Limited. As of December 31, 2017, there was $33.0 million outstanding on the note payable.

U.A.I. (Luxembourg) Investment S.à.r.l. holds two promissory notes in the amounts of $175.0 million and $110.0 million and three loans in the amount of $125.0 million, $100.0 million, and $120.0 millionlimited liability partnership interests from Global Indemnity Group, Inc.LLC. The $175.0 million and $110.0 million notes bearnote bears interest at a rate of 6.64%1.47% and 6.20%, respectively, and mature in 2018 and 2020, respectively. The $125.0 million, $100.0 million, and $120.0 million loans bears interestis due on August 28, 2030. This loan was fully repaid at 5.78%, 8.06%, and 8.15%, respectively, and matures in 2024, 2045, and 2047, respectively. Interest on these agreements is paid annually. At December 31, 2017, accrued interest on these notes and loans was $19.6 million. Other than its investment portfolio,2021.

On December 15, 2021, Global Indemnity Investments, Inc. entered into a $10.0 million discretionary line of credit demand note with Global Indemnity Group, Inc. hasLLC, as borrower. Each advance outstanding under this note will bear interest at an annual interest rate equal to the short-term applicable federal rate in effect at the time the advance was granted and will reset once a month. The outstanding principal amount of each advance shall be payable on the last day of the applicable interest period of such advance and on demand. There is no income producing operations. The ability of Global Indemnity Group, Inc. to generate cash to repay the notes and loan is dependentbalance outstanding on dividends that it receives from its subsidiaries or using other assets it holds.this note at December 31, 2023.

In November, 2011, U.A.I. (Luxembourg) Investment S.à.r.l.

On April 13, 2022, GBLI Holdings, LLC issued a $100.0 million demand line of credit to Global Indemnity (Cayman) Ltd. which bears interest at 1.2%. The proceeds of the line were loaned from Global Indemnity (Cayman) Ltd. to Global Indemnity plc, bearing interest at 1.2%, to fund purchases of the Company’s A ordinary shares as part of the $100.0 million share repurchase program announced in September, 2011. In August, 2012, the demand line of credit was increased to $125.0 million to fund additional purchases under the Company’s $25.0 million share repurchase authorization. In September, 2015, U.A.I. (Luxembourg) Investment S.à.r.l. increased the demand line of credit that it previously issued to Global Indemnity (Cayman) Limited from $125.0 million to $225.0 million. In 2016, the amounts owed by Global Indemnity plc were assigned to Global Indemnity Limited. On May 5, 2017, Global Indemnity (Cayman) Limited was merged into Global Indemnity Limited. As a result, the loan between Global Indemnity (Cayman) Limited and Global Indemnity Limited was expunged and Global Indemnity Limited assumed the loan payable to U.A.I. (Luxembourg) Investment S.à.r.l. As of December 31, 2017, Global Indemnity Limited had $181.5 million outstanding on the line of credit with U.A.I. (Luxembourg) Investment S.à.r.l., with accrued interest of $9.1 million.

In November, 2012, American Insurance Service, Inc. (“AIS”) issued a $35.0 million loan to Global Indemnity Reinsurance, bearing interest at the six month London Interbank Offered Rate (“LIBOR”) plus 3.5%. The proceeds of the loan were used to fund trust accounts in the normal course of business. Effective October 31, 2013, American Insurance Service, Inc. (“AIS”) assigned all of its rights, obligations, duties, and liabilities under thepromissory note to Global Indemnity Group, Inc. AsLLC for the principal amount of $69.4 million. This note bears interest at a rate equal to the short-term, annual compound Applicable Federal Rate ("AFR") in effect for April 2022 which was 1.26%. On each third anniversary of this Note, the interest rate shall reset to the then applicable short-term, annual compounded AFR for such month. The Note is due on April 13, 2031. The outstanding balance on this note was $69.4 million at December 31, 2017, there was $5.0 million outstanding on the2023.

On April 13, 2022, GBLI Holdings, LLC issued a promissory note payable, with accrued interest of $0.2 million payable to AIS and $1.3 million payable to Global Indemnity Group,Investment Inc.

As for the principal amount of December 31, 2017, the Company had available$18.4 million. This note bears interest at a margin borrowing facility. At December 31, 2017, the borrowing rate for this facility was tiedequal to the Fed Funds Effectiveshort-term, annual compound AFR in effect for April 2022 which was 1.26%. On each third anniversary of this Note, the interest rate and was approximately 1.6%. At December 31, 2016,shall reset to the borrowing ratethen applicable short-term, annual compounded AFR for this facility was tied to LIBOR and was approximately 1.6%. This facilitysuch month. The Note is due on demand.April 13, 2031. The borrowings are subject to maintenance margin, which is a minimum accountoutstanding balance that must be maintained. A decline in market conditions could require an additional deposit of collateral. As of December 31, 2017, approximately $88.0 million in securities were deposited as collateral to support borrowings. The amount borrowed against the margin account may fluctuate as routine investment transactions, such as dividends received, investment income received, maturities and pay-downs, impact cash balances. The margin facility contains customary events of default, including, without limitation, insolvency, failure to make required payments, failure to comply with any representations or warranties, failure to adequately assure future performance, and failure of a guarantor to perform under its guarantee. The amount outstanding on the Company’s margin borrowing facility was $72.2 million and $66.6 million as of December 31, 2017 and 2016, respectively.

On May 12, 2014, Global Indemnity Group, Inc. entered into an agreement to loan $200 million to Global Indemnity (Cayman) Limited. In December, 2014, Global Indemnity (Cayman) Limited repaid $125.0 million of the outstanding principal. On May 5, 2017, Global Indemnity (Cayman) Limited was merged into Global Indemnity Limited. In 2017, this note was refinanced$18.4 million at the Applicable Federal Rate of 1.11%. As of December 31, 2017, Global Indemnity Limited owed $75.02023.

Intercompany Dividends and Capital Contributions

In addition to intercompany dividends that are paid in the ordinary course of business, American Reliable Insurance Company paid an extraordinary dividend in December 2022, which was approved by the Arizona Department of Insurance, in the amount of $102.3 million under this loan agreementwhich was treated as one of a series of liquidating distributions of American Reliable Insurance Company. In conjunction with accrued interestthe liquidation of $1.4 million.American Reliable Insurance Company, a series of capital contributions were made downstream within GBLI Holdings, LLC and subsidiaries in an effort to reallocate the capital from the sale of American Reliable Insurance Company.

66

All of the intercompany transactions discussed above eliminate in consolidation and have no impact on the consolidating financial statements.

Derivative Instruments

The Company entered into two $100 million derivative instruments.instruments related to interest rate swaps. Due to fluctuations in interest rates, the Company received $1.5$12.7 million and paid $1.0$2.7 million in connection with these derivative instruments for the years ended December 31, 20172022 and 2016,2021, respectively.

During The Company terminated its outstanding interest rate swaps in the firstfourth quarter of 2017, Global Indemnity made a capital contribution2022. No amounts related to the derivative instruments were received in the amount2023. The Company has no interest rate swap agreements as of $96.0 million to its subsidiary, Global Indemnity (Gibraltar) Limited. Through a series of additional capital contributions and repayment of certain intercompany balances, U.A.I. (Luxembourg) IV S.à.r.l. was the ultimate recipient of this capital contribution in the amount of $93.5 million.December 31, 2023.

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Contractual Obligations

The Company has commitments in the form of operating leases, commitments to fund limited liability investments, subordinated notes, and unpaid losses and loss expense obligations. As of December 31, 2017,2023, contractual obligations related to Global Indemnity’s commitments including any principal and interest payments, were as follows:

     Payment Due by Period 
(Dollars in thousands) Total  Less than 1
year		  1 – 3 years  3 – 5 years  More than
5 years		 

Operating leases (1)

 $5,466  $3,147  $2,319  $—    $—   

Commitments to fund limited liability investments (2)

  57,714   57,714   —     —     —   

Subordinated notes due 2045 (3)

  315,063   7,750   15,500   15,500   276,313 

Subordinated notes due 2047 (4)

  432,006   10,238   20,475   20,475   380,818 

Unpaid losses and loss adjustment expenses obligations (5)

  634,664   281,791   219,593   74,256   59,024 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $1,444,913  $360,640  $257,887  $110,231  $716,155 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

Payment Due by Period

 

(Dollars in thousands)

 

Total

 

 

Less than 1 year

 

 

1 – 3
years

 

 

3 – 5
years

 

 

More than
5 years

 

Operating leases (1)

 

$

13,006

 

 

$

2,729

 

 

$

5,444

 

 

$

3,202

 

 

$

1,631

 

Commitments to fund limited partnership investment (2)

 

 

14,214

 

 

 

14,214

 

 

 

—

 

 

 

—

 

 

 

—

 

Unpaid losses and loss adjustment expenses obligations (3)

 

 

850,599

 

 

 

291,756

 

 

 

299,410

 

 

 

130,992

 

 

 

128,441

 

Total

 

$

877,819

 

 

$

308,699

 

 

$

304,854

 

 

$

134,194

 

 

$

130,072

 

(1)The Company leases office space and equipment as part of its normal operations. The amounts shown above represent future commitments under such operating leases.
(2)Represents future funding commitment of the Company’s participation in three separate limited partnership investments. See Note 10 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on these commitments.
(3)Represents the Subordinated Notes due in 2045 in the aggregate principal amount of $100.0 million through an underwritten public offering. The notes bear interest at an annual rate equal to 7.75% payable quarterly. See Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the 2045 Subordinated Notes.
(4)Represents the Subordinated Notes due in 2047 in the aggregate principal amount of $130.0 million through an underwritten public offering. The notes bear interest at an annual rate equal to 7.875% payable quarterly. See Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on the 2047 Subordinated Notes.
(5)These amounts represent the gross future amounts needed to pay losses and related loss adjustment expenses and do not reflect amounts that are expected to be recovered from the Company’s reinsurers. See discussion in “Liability for Unpaid Losses and Loss Adjustment Expenses” for more details.

Off Balance Sheet Arrangements

(1)

The Company has no off balance sheet arrangements.leases office space and equipment as part of its normal operations. The amounts shown above represent future commitments under such operating leases.
(2)
Represents future funding commitment of the Company’s participation in a limited partnership investment. See Note 17 of the notes to the consolidated financial statements in Item 8 of Part II of this report for additional information on this commitment.
(3)
These amounts represent the gross future amounts needed to pay losses and related loss adjustment expenses and do not reflect amounts that are expected to be recovered from the Company’s reinsurers. See discussion in “Liability for Unpaid Losses and Loss Adjustment Expenses” for more details.

Inflation

Inflation

Property and casualty insurance premiums are established before the Company knows the amount of losses and loss adjustment expenses or the extent to which inflation may affect such amounts. The Company attempts to anticipate the potential impact of inflation in establishing its reserves.

Future increases in inflation could result in future increases in interest rates, which in turn are likely to result in a decline in the market value of the investment portfolio and resulting in unrealized losses and reductions in shareholders’shareholders' equity.

Cautionary Note Regarding Forward-Looking Statements

Some of the statements under “Business,” “Management’s“Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report may include forward-looking statements within the meaning of Section 21E of the Security Exchange Act of 1934, as amended, that reflect the Company’s current views with respect to future events and financial performance. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend,”"believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or “anticipate”"anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, expectations or consequences of identified transactions or natural disasters, and statements about the future performance, operations, products and services of the companies.

The Company’s business and operations are and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. See “Risk Factors” in Item 1A of Part I of this report for risks, uncertainties and other factors that could cause actual results and experience to differ from those projected.

The forward-looking statements contained in this report are primarily based on the Company’s current expectations and projections about future events and trends that it believes may affect the Company’s business, financial condition, results of operations, prospects, business strategy and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions and other factors described in the section captioned “Risk Factors” and elsewhere in this report. These risks are not exhaustive. Other sections of this report include additional factors that could adversely impact the Company’s business and financial performance. Moreover, the Company operates in a very competitive environment. New risks and uncertainties emerge from time to time and it is not possible for the Company to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. The Company cannot provide assurance that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

68

In addition, statements that “the Company believes” and similar statements reflect the Company’s beliefs and opinions on the relevant subject. These statements are based upon information available to the Company as of the date of this report, and while the Company believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that the Company have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

This report and the documents that are referenced in this report and have filed as exhibits to this report should be read with the understanding that actual future results, levels of activity, performance and achievements may be materially different from what the Company expects. The Company qualifies all of its forward-looking statements by these cautionary statements.

The Company’s forward-looking statements speak only as of the date of this report or as of the date they were made. The Company undertakeundertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

69

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in interest rates, equity prices, credit risk, illiquidity, foreign exchange rates and commodity prices. The Company’s consolidated balance sheetsheets includes the estimated fair values of assets that are subject to market risk. The Company’s primary market risks are interest rate risk and credit risks associated with investments in fixed maturities, equity price risk associated with investments in equity securities, and foreign exchange risk associated with premium received that is denominated in foreign currencies. Each of these risks is discussed in more detail below. The Company has no commodity risk.

Interest Rate Risk

The Company’s primary market risk exposure is to changes in interest rates. The Company’s fixed income investments are exposed to interest rate risk. Fluctuations in interest rates have a direct impact on the market valuation of these securities. As interest rates rise, the market value of the Company’s fixed income investments fall, and the converse is also true. The Company seeks to manage interest rate risk through an active portfolio management strategy that involves the selection, by the Company’s managers, of investments with appropriate characteristics, such as duration, yield, currency, and liquidity that are tailored to the anticipated cash outflow characteristics of the Company’s liabilities. The Company’s strategy for managing interest rate risk also includes maintaining a high quality bond portfolio with a relatively short duration to reduce the effect of interest rate changes on book value. A significant portion of the Company’s investment portfolio matures each year, allowing for reinvestment at current market rates.

As of December 31, 2017,2023, assuming identical shifts in interest rates for securities of all maturities, the table below illustrates the sensitivity of market value in Global Indemnity’s bonds to selected hypothetical changes in basis point increases and decreases:

(Dollars in thousands)(Dollars in thousands)   Change in Market Value 

(Dollars in thousands)

 

Change in Market Value

 

Basis Point Change

  Market Value   $   % 

 

Market Value

 

 

 

 

 

%

 

(200)

  $1,317,538   $76,101    6.1% 

 

$

1,322,494

 

 

 

28,701

 

 

 

2.2

%

(100)

   1,279,357    37,920    3.1% 

 

 

1,308,143

 

 

 

14,350

 

 

 

1.1

%

No change

   1,241,437    —      0% 

 

 

1,293,793

 

 

 

—

 

 

 

—

 

100

   1,204,561    (36,876)    (3.0%) 

 

 

1,279,448

 

 

 

(14,345

)

 

 

(1.1

%)

200

   1,168,582    (72,855)    (5.9%) 

 

 

1,265,106

 

 

 

(28,687

)

 

 

(2.2

%)

The Company’s interest rate swaps are also exposed to interest rate risk. Fluctuations in interest rates have a direct impact on the market valuation of these financial instruments. As interest rates decline, the market value of the Company’s interest rate swaps fall, and the converse is also true. Since the Company has designated the

interest rate swaps asnon-hedge instruments, the changes in the fair value is recognized as net realized investment gains / losses in the consolidated statements of operations. Therefore, changes in interest rates will have a direct impact to the Company’s results of operations. In addition, on a daily basis, a margin requirement is calculated. If interest rates decline, the Company is required to pay a margin call equal to the change in the fair market value of the interest rate swap. When interest rates rise, the counterparty is required to pay to the Company a margin call equal to the change in fair market value of the interest rate swap.

As of December 31, 2017, the table below illustrates the sensitivity of market value of the Company’s interest rate swaps as well as the impact on the consolidated statements of operation to selected hypothetical changes in basis point increases and decreases:

(Dollars in thousands) 

Basis Point Change

  Market Value   Change in Market
Value and Impact to
Consolidated
Statements of
Operations		 

(200)

  $(32,108)   $(24,140) 

(100)

   (19,645)    (11,677) 

No change

   (7,968)    —   

100

   2,973    10,941 

200

   13,225    21,193 

Credit Risk

The Company’s investment policy requires that its investments in debt instruments are of high credit quality issuers and limit the amount of credit exposure to any one issuer based upon the rating of the security.

As of December 31, 2017,2023, the Company had approximately $29.6$27.8 million worth of investment exposure to subprime andAlt-A investments. As of December 31, 2017,2023, approximately $29.2$15.1 million of those investments have been rated BBB+BBB to AAA by Standard & Poor’s and $0.4$12.7 million were rated below investment grade. As of December 31, 2016,2022, the Company had approximately $25.7$24.3 million worth of investment exposure to subprime andAlt-A investments. As of December 31, 2016,2022, approximately $25.2$10.1 million of those investments have been rated BBB+BBB to AAA by Standard & Poor’s and $0.5$14.2 million were rated below investment grade. There werewas no impairments recognizedcredit loss recorded on these investments during the years ended December 31, 20172023 or 2016.2022.

In addition, the Company has credit risk exposure to its general agencies and reinsurers. The Company seeks to mitigate and control its risks to producers by typically requiring its general agencies to render payments within no more than 45 days after the month in which a policy is effective and including provisions within the Company’s general agency contracts that allow it to terminate a general agency’sagency's authority in the event ofnon-payment.

With respect to its credit exposure to reinsurers, the Company seeks to mitigate and control its risk by ceding business to only those reinsurers having adequate financial strength and sufficient capital to fund their obligation. In addition, the Company seeks to mitigate credit risk to reinsurers through the use of trusts and letters of credit for collateral.

70

Equity Price Risk

In 2017,The Company exited its investment in the strategy for the Company’sstable dividend equity portfolio followed a large cap value approach. This investment style placed primary emphasis on selectingduring the best relative values from those issues having a projected normalized price-earnings ratio at a discount to the market multiple.

The Company compares the resultsfirst quarter of the Company’s equity portfolio to a customized benchmark which is the S&P 500 Value excluding financials. To protect against equity price risk, the sector exposures within the Company’s equity portfolio closely correlate to the sector exposures within the custom benchmark index. In 2017, the Company’s common stock portfolio returned a total return of 15.0%, not including investment advisor fees, compared to the benchmark gain of 13.3%.

The carrying values of investments subject to equity price risk are based on quoted market prices as of the balance sheet dates. Market prices are subject to fluctuation and thus the amount realized in the subsequent sale of an investment may differ from the reported market value. Fluctuation in the market price of an equity security results from perceived changes in the underlying economic makeup of a stock, the price of alternative investments and overall market conditions.

The Company attempts to mitigate its unsystemic risk, which is the risk that is associated with holding a particular security, by holding a large number of securities in that market. At year end, no security represented more than 5.2% of the market value of the equity portfolio.2022. The Company continues to have systemic risk, which is the risk inherent in the general market due to broad macroeconomic factors that affect all companies in the market.

Ashold a minimal amount of preferred stocks as of December 31, 2017,2023, however, the table below summarizes the Company’spositions do not pose a significant equity price risk and reflects the effect of a hypothetical 10% and 20% increase or decrease in market prices. The selected hypothetical changes do not indicate what could be the potential best or worst scenarios.risk.

(Dollars in thousands) 

Hypothetical Price

Change

  Estimated Fair Value
after Hypothetical
Change in Prices		   Hypothetical Percentage
Increase (Decrease) in
Shareholders’ Equity (1)		 

(20%)

  $112,183    (2.5%) 

(10%)

   126,206    (1.3%) 

No change

   140,229    —   

10%

   154,252    1.3% 

20%

   168,274    2.5% 

(1)Net of 35% tax

Foreign Currency Exchange Risk

The Company has foreign currency exchange risk associated with a portion of the business previously written at Global Indemnity Reinsurance, as well as a small portion of expenses related to corporate overhead in its Ireland and Luxembourg offices.office. The Company also maintains investments in foreign denominated securities and cash accounts in foreign currencies in order to pay expenses in foreign countries. Atperiod-end, the Companyre-measures thosenon-U.S. currency financial assets to their current U.S. dollar equivalent. Financial liabilities, if any, are generally adjusted within the reserving process. However, for known losses on claims to be paid in foreign currencies, the Companyre-measures the liabilities to their current U.S. dollar equivalent each period end.

71

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GLOBAL INDEMNITY LIMITEDGROUP, LLC

Index to Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)

73

91

Consolidated Balance Sheets

75

92

Consolidated Statements of Operations

76

93

Consolidated Statements of Comprehensive Income (Loss)

77

94

Consolidated Statements of Changes in Shareholders’ Equity

78

95

Consolidated Statements of Cash Flows

79

96

Notes to Consolidated Financial Statements

97

80

Index to Financial Statement Schedules

Schedule I

Summary of Investments —– Other Than Investments in Related Parties

S-1

Schedule II

Condensed Financial Information of Registrant

S-2

Schedule III

Supplementary Insurance Information

S-7

S-5

Schedule IV

Reinsurance Earned Premiums

S-8

S-6

Schedule V

Valuation and Qualifying Accounts and Reserves

S-9

S-7

Schedule VI

Supplementary Information for Property Casualty Underwriters

S-10

S-8

72

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Global Indemnity LimitedGroup, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Global Indemnity LimitedGroup, LLC (the Company) as of December 31, 20172023 and 2016,2022, the related consolidated statements of operations, comprehensive income shareholders’(loss), changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2017,2023, and the related notes and the financial statement schedules listed in the Index at Item 1515(a) (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sCompany's internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control-IntegratedControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 9, 2018,15, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Valuation of Unpaid Losses and Loss Adjustment Expenses

Description of the Matter

At December 31, 2023, the Company’s liability for unpaid losses and loss adjustment expenses was $851 million, of which a significant portion represents incurred but not reported reserves. As described in Note 4 of the consolidated financial statements, the liability for unpaid losses and loss adjustment expenses represents the Company’s best estimate of future amounts needed to pay losses and related settlement expenses with respect to events insured by the Company. The difference between the estimated ultimate loss and loss adjustment expenses and the case incurred loss (paid loss plus case reserve) is considered to be incurred but not reported. There is significant uncertainty inherent in determining management’s best estimate of the ultimate loss and loss adjustment expenses, requiring the use of informed actuarially based estimates and management’s judgment. In particular, the Company’s long-tail reserve categories (such as general liability, construction defect and environmental exposures) are influenced by factors that are subject to significant variation over a long period of time or have high potential severities within the selection and weighting of actuarial methods and assumptions. Assumptions fundamental to the reserving process include claims frequency and severity as well as the review of historical payment and claim reporting patterns and expected loss ratios.

73

Auditing management’s best estimate of the liability for unpaid losses and loss adjustment expenses was complex and involved the use of our actuarial specialists due to the significant estimation uncertainty associated with evaluating management’s methods and assumptions in determining the Company’s recorded loss and loss adjustment expense reserves.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over management’s process for estimating loss and loss adjustment expense reserves. This included, among others, the review and approval processes management has in place for the methods and assumptions used in estimating the loss and loss adjustment expense reserves.

To test the Company’s estimate of loss and loss adjustment expense reserves, our audit procedures included among others, the use of our actuarial specialists to evaluate the selection and the weighting of actuarial methods used by management with those methods used in prior periods and those used in the industry. In addition, we also used our actuarial specialists to evaluate the assumptions used in the actuarial methods, by comparing the significant assumptions, including claims frequency and severity, historical payment and claims reporting patterns and expected loss ratios to the Company’s historical experience. We developed a range of reserve estimates which included performing independent projections for a sample of lines of business and compared the range of reserve estimates to the Company’s recorded reserves. We also performed an analysis of historical results of the development of the loss and loss adjustment expense reserves related to prior years.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2015.

Philadelphia, PAPennsylvania

March 9, 201815, 2024

74

GLOBAL INDEMNITY LIMITEDGROUP, LLC

Consolidated Balance Sheets

(In thousands, except share amounts)

  December 31,
2017		 December 31,
2016		 

ASSETS

   

 

December 31, 2023

 

 

December 31, 2022

 

Fixed maturities:

   

 

 

 

 

 

 

Available for sale, at fair value (amortized cost: $1,243,144 and $1,241,339)

  $1,241,437  $1,240,031 

Equity securities:

   

Available for sale, at fair value (cost: $124,915 and $119,515)

   140,229  120,557 

Available for sale, at fair value (amortized cost: $1,322,092 and $1,301,723; net of allowance for expected credit losses of: $0 at December 31, 2023 and 2022

 

$

1,293,793

 

 

$

1,248,198

 

Equity securities, at fair value

 

 

16,508

 

 

 

17,520

 

Other invested assets

   77,820  66,121 

 

 

38,236

 

 

 

38,176

 

  

 

  

 

 

Total investments

   1,459,486  1,426,709 

 

 

1,348,537

 

 

 

1,303,894

 

Cash and cash equivalents

   74,414  75,110 

 

 

38,037

 

 

 

38,846

 

Premiums receivable, net

   84,386  92,094 

Reinsurance receivables, net

   105,060  143,774 

Premium receivables, net of allowance for expected credit losses of $4,796 and $3,322 at December 31, 2023 and 2022, respectively

 

 

102,158

 

 

 

168,743

 

Reinsurance receivables, net of allowance for expected credit losses of $8,992
at December 31, 2023 and 2022

 

 

80,439

 

 

 

85,721

 

Funds held by ceding insurers

   45,300  13,114 

 

 

16,989

 

 

 

19,191

 

Federal income taxes receivable

   10,332   —   

Deferred federal income taxes

   26,196  40,957 

 

 

36,802

 

 

 

47,099

 

Deferred acquisition costs

   61,647  57,901 

 

 

42,445

 

 

 

64,894

 

Intangible assets

   22,549  23,079 

 

 

14,456

 

 

 

14,810

 

Goodwill

   6,521  6,521 

 

 

4,820

 

 

 

4,820

 

Prepaid reinsurance premiums

   28,851  42,583 

 

 

4,958

 

 

 

17,421

 

Receivable for securities sold

   1,543   —   

 

 

3,858

 

 

 

—

 

Lease right of use assets

 

 

9,715

 

 

 

11,739

 

Other assets

   75,384  51,104 

 

 

26,362

 

 

 

23,597

 

  

 

  

 

 

Total assets

  $2,001,669  $1,972,946 

 

$

1,729,576

 

 

$

1,800,775

 

  

 

  

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

   

 

 

 

 

 

 

Liabilities:

   

 

 

 

 

 

 

Unpaid losses and loss adjustment expenses

  $634,664  $651,042 

 

$

850,599

 

 

$

832,404

 

Unearned premiums

   285,397  286,984 

 

 

182,852

 

 

 

269,353

 

Federal income taxes payable

   —    219 

Ceded balances payable

   10,851  14,675 

 

 

2,642

 

 

 

17,241

 

Payable for securities purchased

   —    3,717 

 

 

—

 

 

 

66

 

Federal income tax payable

 

 

1,595

 

 

 

—

 

Contingent commissions

   7,984  9,454 

 

 

5,632

 

 

 

8,816

 

Debt

   294,713  163,143 

Lease liabilities

 

 

12,733

 

 

 

15,701

 

Other liabilities

   49,666  45,761 

 

 

24,770

 

 

 

30,965

 

  

 

  

 

 

Total liabilities

   1,283,275  $1,174,995 

 

 

1,080,823

 

 

 

1,174,546

 

  

 

  

 

 

Commitments and contingencies (Note 15)

   —     —   

Commitments and contingencies (Note 17)

 

 

—

 

 

 

—

 

Shareholders’ equity:

   

 

 

 

 

 

 

Ordinary shares, $0.0001 par value, 900,000,000 ordinary shares authorized; A ordinary shares issued: 10,102,927 and 13,436,548, respectively; A ordinary shares outstanding: 10,073,376 and 13,436,548, respectively; B ordinary shares issued and outstanding: 4,133,366 and 4,133,366, respectively

   2  2 

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 per share and $1,000 per share, respectively

 

 

4,000

 

 

 

4,000

 

Common shares: no par value; 900,000,000 common shares authorized; class A common shares issued: 11,042,670 and 10,876,041, respectively; class A common shares outstanding: 9,771,429 and 10,073,660, respectively; class B common shares issued and outstanding: 3,793,612 and 3,793,612, respectively

 

 

—

 

 

 

—

 

Additionalpaid-in capital

   434,730  430,283 

 

 

454,791

 

 

 

451,305

 

Accumulated other comprehensive income, net of taxes

   8,983  (618) 

Accumulated other comprehensive income (loss), net of tax

 

 

(22,863

)

 

 

(43,058

)

Retained earnings

   275,838  368,284 

 

 

244,988

 

 

 

233,468

 

A ordinary shares in treasury, at cost: 29,551 and 0 shares, respectively

   (1,159)   —   
  

 

  

 

 

Class A common shares in treasury, at cost: 1,271,241 and 802,381 shares, respectively

 

 

(32,163

)

 

 

(19,486

)

Total shareholders’ equity

   718,394  797,951 

 

 

648,753

 

 

 

626,229

 

  

 

  

 

 

Total liabilities and shareholders’ equity

  $2,001,669  $1,972,946 

 

$

1,729,576

 

 

$

1,800,775

 

  

 

  

 

 

See accompanying notes to consolidated financial statements.

75

GLOBAL INDEMNITY LIMITEDGROUP, LLC

Consolidated Statements of Operations

(In thousands, except shares and per share data)

  Years Ended December 31, 

 

Years Ended December 31,

 

  2017 2016 2015 

 

2023

 

 

2022

 

 

2021

 

Revenues:

    

 

 

 

 

 

 

 

 

 

Gross premiums written

  $516,334  $565,845  $590,233 
  

 

  

 

  

 

 

Net premiums written

  $450,180  $470,940  $501,244 
  

 

  

 

  

 

 

Net premiums earned

  $438,034  $468,465  $504,143 

Gross written premiums

 

$

416,397

 

 

$

727,603

 

 

$

682,122

 

Ceded written premiums

 

 

(17,078

)

 

 

(136,272

)

 

 

(102,054

)

Net written premiums

 

 

399,319

 

 

 

591,331

 

 

 

580,068

 

Change in net unearned premiums

 

 

74,038

 

 

 

11,140

 

 

 

15,542

 

Net earned premiums

 

 

473,357

 

 

 

602,471

 

 

 

595,610

 

Net investment income

   39,323  33,983  34,609 

 

 

55,444

 

 

 

27,627

 

 

 

37,020

 

Net realized investment gains (losses):

    

Other than temporary impairment losses on investments

   (2,606)  (6,733)  (7,335) 

Other net realized investment gains

   4,182  28,454  3,961 
  

 

  

 

  

 

 

Total net realized investment gains (losses)

   1,576  21,721  (3,374) 

Net realized investment gains (losses)

 

 

(2,107

)

 

 

(32,929

)

 

 

15,887

 

Other income

   6,582  10,345  3,400 

 

 

1,435

 

 

 

31,365

 

 

 

29,751

 

  

 

  

 

  

 

 

Total revenues

   485,515  534,514  538,778 

 

 

528,129

 

 

 

628,534

 

 

 

678,268

 

Losses and Expenses:

    

 

 

 

 

 

 

 

 

 

Net losses and loss adjustment expenses

   269,212  264,003  275,368 

 

 

289,153

 

 

 

359,228

 

 

 

384,964

 

Acquisition costs and other underwriting expenses

   183,733  196,650  201,303 

 

 

182,617

 

 

 

236,381

 

 

 

222,841

 

Corporate and other operating expenses

   25,714  17,338  24,448 

 

 

23,383

 

 

 

24,421

 

 

 

27,179

 

Interest expense

   16,906  8,905  4,913 

 

 

—

 

 

 

3,004

 

 

 

10,481

 

  

 

  

 

  

 

 

Income (loss) before income taxes

   (10,050)  47,618  32,746 

Income tax benefit

   (499)  (2,250)  (8,723) 
  

 

  

 

  

 

 

Loss on extinguishment of debt

 

 

—

 

 

 

3,529

 

 

 

—

 

Income before income taxes

 

 

32,976

 

 

 

1,971

 

 

 

32,803

 

Income tax expense

 

 

7,547

 

 

 

2,821

 

 

 

3,449

 

Net income (loss)

  $(9,551)  $49,868  $41,469 

 

 

25,429

 

 

 

(850

)

 

 

29,354

 

  

 

  

 

  

 

 

Less: preferred stock distributions

 

 

440

 

 

 

440

 

 

 

440

 

Net income (loss) available to common shareholders

 

$

24,989

 

 

$

(1,290

)

 

$

28,914

 

Per share data:

    

 

 

 

 

 

 

 

 

 

Net income (loss) (1)

    

Net income (loss) available to common shareholders (1)

 

 

 

 

 

 

 

 

 

Basic

  $(0.55)  $2.89  $1.71 

 

$

1.84

 

 

$

(0.09

)

 

$

2.00

 

  

 

  

 

  

 

 

Diluted

  $(0.55)  $2.84  $1.69 

 

$

1.83

 

 

$

(0.09

)

 

$

1.97

 

  

 

  

 

  

 

 

Weighted-average number of shares outstanding

    

 

 

 

 

 

 

 

 

 

Basic

   17,308,663  17,246,717  24,253,657 

 

 

13,553,168

 

 

 

14,482,164

 

 

 

14,426,739

 

  

 

  

 

  

 

 

Diluted

   17,308,663  17,547,061  24,505,851 

 

 

13,666,408

 

 

 

14,482,164

 

 

 

14,664,330

 

  

 

  

 

  

 

 

Cash distributions declared per common share

 

$

1.00

 

 

$

1.00

 

 

$

1.00

 

(1)For the year ended December 31, 2017, “diluted” loss per share is the same as “basic” loss per share since there was a net loss for the period.
(1)
For the year 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.

See accompanying notes to consolidated financial statements.

76

GLOBAL INDEMNITY LIMITEDGROUP, LLC

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

  Years Ended December 31, 

 

Years Ended December 31,

 

  2017 2016 2015 

 

2023

 

 

2022

 

 

2021

 

Net income (loss)

  $(9,551)  $49,868  $41,469 

 

$

25,429

 

 

$

(850

)

 

$

29,354

 

  

 

  

 

  

 

 

Other comprehensive income (loss), net of tax:

    

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses)

   9,677  10,058  (17,457) 

 

 

18,892

 

 

 

(81,729

)

 

 

(27,384

)

Portion of other than temporary impairment losses recognized in other comprehensive income (loss)

   (3)  (3)  (4) 

Reclassification adjustment for gains included in net income

   (848)  (14,809)  (1,985) 

Unrealized foreign currency translation gains

   775  58  140 
  

 

  

 

  

 

 

Reclassification adjustment for (gains) losses included in net income (loss)

 

 

1,350

 

 

 

32,253

 

 

 

(278

)

Unrealized foreign currency translation gains (losses)

 

 

(47

)

 

 

14

 

 

 

(242

)

Other comprehensive income (loss), net of tax

   9,601  (4,696)  (19,306) 

 

 

20,195

 

 

 

(49,462

)

 

 

(27,904

)

  

 

  

 

  

 

 

Comprehensive income, net of tax

  $50  $45,172  $22,163 
 ��

 

  

 

  

 

 

Comprehensive income (loss), net of tax

 

$

45,624

 

 

$

(50,312

)

 

$

1,450

 

See accompanying notes to consolidated financial statements.

77

GLOBAL INDEMNITY LIMITEDGROUP, LLC

Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except share amounts)

  Years Ended December 31, 
  2017  2016  2015 

Number of A ordinary shares issued:

   

Number at beginning of period

  13,436,548   16,424,546   16,331,577 

Ordinary shares issued under share incentive plans

  2,204   115,711   121,812 

Ordinary shares issued to directors

  27,121   35,185   36,321 

B ordinary shares converted to A ordinary shares

  —     —     7,928,004 

Ordinary shares redeemed

  (3,397,031)   —     (8,260,870) 

Adjustment for shares redeemed indirectly owned by subsidiary

  34,085   

Ordinary shares issued in connection with American Reliable acquisition

  —     —     267,702 

Reduction in treasury shares due to redomestication

  —     (3,138,894)   —   
 

 

 

  

 

 

  

 

 

 

Number at end of period

  10,102,927   13,436,548   16,424,546 
 

 

 

  

 

 

  

 

 

 

Number of B ordinary shares issued:

   

Number at beginning and end of period

  4,133,366   4,133,366   12,061,370 

B Ordinary shares converted to A ordinary shares

  —     —     (7,928,004) 
 

 

 

  

 

 

  

 

 

 

Number at end of period

  4,133,366   4,133,366   4,133,366 
 

 

 

  

 

 

  

 

 

 

Par value of A ordinary shares:

   

Balance at beginning of period

 $1  $2  $2 

Reduction in treasury shares due to redomestication

  —     (1)   —   
 

 

 

  

 

 

  

 

 

 

Balance at end of period

 $1  $1  $2 
 

 

 

  

 

 

  

 

 

 

Par value of B ordinary shares:

   

Balance at beginning and end of period

 $1  $1  $1 
 

 

 

  

 

 

  

 

 

 

Additionalpaid-in capital:

   

Balance at beginning of period

 $430,283  $529,872  $519,590 

Reduction in treasury shares due to redomestication

  —     (103,248)   —   

Adjustment for shares redeemed indirectly owned by subsidiary

  706   

Share compensation plans

  3,741   3,532   10,272 

Tax benefit on share-based compensation expense

  —     127   10 
 

 

 

  

 

 

  

 

 

 

Balance at end of period

 $434,730  $430,283  $529,872 
 

 

 

  

 

 

  

 

 

 

Accumulated other comprehensive income, net of deferred income tax:

   

Balance at beginning of period

 $(618)  $4,078  $23,384 

Other comprehensive income (loss):

   

Change in unrealized holding gains (losses)

  8,829   (4,751)   (19,436) 

Change in other than temporary impairment losses recognized in other comprehensive income (loss)

  (3)   (3)   (10) 

Unrealized foreign currency translation gains

  775   58   140 
 

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss)

  9,601   (4,696)   (19,306) 
 

 

 

  

 

 

  

 

 

 

Balance at end of period

 $8,983  $(618)  $4,078 
 

 

 

  

 

 

  

 

 

 

Retained earnings:

   

Balance at beginning of period

 $368,284  $318,416  $466,717 

Ordinary shares redeemed

  (83,015)   —     (189,770) 

Adjustment for gain on shares redeemed indirectly owned by subsidiary

  120   

Net income (loss)

  (9,551)   49,868   41,469 
 

 

 

  

 

 

  

 

 

 

Balance at end of period

 $275,838  $368,284  $318,416 
 

 

 

  

 

 

  

 

 

 

Number of treasury shares:

   

Number at beginning of period

  —     3,110,795   3,064,815 

A ordinary shares purchased

  29,551   28,099   11,895 

Elimination of shares indirectly owned by subsidiary

  —     —     34,085 

Reduction in treasury shares due to redomestication

  —     (3,138,894)   —   
 

 

 

  

 

 

  

 

 

 

Number at end of period

  29,551   —     3,110,795 
 

 

 

  

 

 

  

 

 

 

Treasury shares, at cost:

   

Balance at beginning of period

 $—    $(102,443)  $(101,404) 

A ordinary shares purchased, at cost

  (1,159)   (805)   (333) 

Elimination of shares indirectly owned by subsidiary

  —     —     (706) 

Reduction in treasury shares due to redomestication

  —     103,248   —   
 

 

 

  

 

 

  

 

 

 

Balance at end of period

 $(1,159)  $—    $(102,443) 
 

 

 

  

 

 

  

 

 

 

Total shareholders’ equity

 $718,394  $797,951  $749,926 
 

 

 

  

 

 

  

 

 

 

 

 

Years Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Number of Series A Cumulative Fixed Rate Preferred Shares

 

 

 

 

 

 

 

 

 

Number at beginning and end of period

 

 

4,000

 

 

 

4,000

 

 

 

4,000

 

Number of class A common shares issued:

 

 

 

 

 

 

 

 

 

Number at beginning of period

 

 

10,876,041

 

 

 

10,574,589

 

 

 

10,263,722

 

Common shares issued under share incentive plans, net of forfeitures

 

 

75,541

 

 

 

50,598

 

 

 

41,508

 

Common shares issued to directors

 

 

91,088

 

 

 

97,260

 

 

 

83,199

 

Share conversion

 

 

—

 

 

 

153,594

 

 

 

186,160

 

Number at end of period

 

 

11,042,670

 

 

 

10,876,041

 

 

 

10,574,589

 

Number of class B common shares issued:

 

 

 

 

 

 

 

 

 

Number at beginning of period

 

 

3,793,612

 

 

 

3,947,206

 

 

 

4,133,366

 

Share conversion

 

 

—

 

 

 

(153,594

)

 

 

(186,160

)

Number at end of period

 

 

3,793,612

 

 

 

3,793,612

 

 

 

3,947,206

 

Par value of Series A Cumulative Fixed Rate Preferred Shares:

 

 

 

 

 

 

 

 

 

Balance at beginning and end of period

 

$

4,000

 

 

$

4,000

 

 

$

4,000

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

451,305

 

 

$

447,406

 

 

$

445,051

 

Share compensation plans

 

 

3,486

 

 

 

3,899

 

 

 

2,355

 

Balance at end of period

 

$

454,791

 

 

$

451,305

 

 

$

447,406

 

Accumulated other comprehensive income (loss), net of deferred income tax:

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(43,058

)

 

$

6,404

 

 

$

34,308

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Change in unrealized holding gains (losses)

 

 

20,242

 

 

 

(49,476

)

 

 

(27,662

)

Unrealized foreign currency translation gains (losses)

 

 

(47

)

 

 

14

 

 

 

(242

)

Other comprehensive income (loss)

 

 

20,195

 

 

 

(49,462

)

 

 

(27,904

)

Balance at end of period

 

$

(22,863

)

 

$

(43,058

)

 

$

6,404

 

Retained earnings:

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

233,468

 

 

$

249,301

 

 

$

234,965

 

Net income (loss)

 

 

25,429

 

 

 

(850

)

 

 

29,354

 

Preferred share distributions

 

 

(440

)

 

 

(440

)

 

 

(440

)

Distributions to shareholders

 

 

(13,469

)

 

 

(14,543

)

 

 

(14,578

)

Balance at end of period

 

$

244,988

 

 

$

233,468

 

 

$

249,301

 

Number of treasury shares:

 

 

 

 

 

 

 

 

 

Number at beginning of period

 

 

802,381

 

 

 

17,496

 

 

 

—

 

Class A common shares purchased

 

 

468,860

 

 

 

923,036

 

 

 

17,318

 

Class A common shares purchased by GBLI director

 

 

—

 

 

 

(138,151

)

 

 

—

 

Forfeited shares

 

 

—

 

 

 

—

 

 

 

178

 

Number at end of period

 

 

1,271,241

 

 

 

802,381

 

 

 

17,496

 

Treasury shares, at cost:

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(19,486

)

 

$

(490

)

 

$

—

 

Class A common shares purchased, at cost

 

 

(12,677

)

 

 

(22,335

)

 

 

(490

)

Class A common shares purchased by GBLI director

 

 

—

 

 

 

3,339

 

 

 

—

 

Balance at end of period

 

$

(32,163

)

 

$

(19,486

)

 

$

(490

)

Total shareholders’ equity

 

$

648,753

 

 

$

626,229

 

 

$

706,621

 

See accompanying notes to consolidated financial statements.

78

GLOBAL INDEMNITY LIMITEDGROUP, LLC

Consolidated Statements of Cash Flows

(In thousands)

  Years Ended December 31, 

 

Years Ended December 31,

 

  2017 2016 2015 

 

2023

 

 

2022

 

 

2021

 

Cash flows from operating activities:

    

 

 

 

 

 

 

 

 

 

Net income (loss)

  $(9,551)  $49,868  $41,469 

 

$

25,429

 

 

$

(850

)

 

$

29,354

 

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

    

Amortization of the value of business acquired

   —     —    25,500 

Adjustments to reconcile net income (loss) to net cash provided by operating
activities:

 

 

 

 

 

 

 

 

 

Amortization and depreciation

   6,505  6,312  5,284 

 

 

6,199

 

 

 

8,398

 

 

 

10,414

 

Amortization of debt issuance costs

   232  123  47 

 

 

—

 

 

 

41

 

 

 

142

 

Gross proceeds from sale of renewal rights

 

 

—

 

 

 

(30,000

)

 

 

(28,000

)

Impairment loss on right of use lease assets

 

 

—

 

 

 

488

 

 

 

1,515

 

Impairment loss on software

 

 

—

 

 

 

508

 

 

 

2,000

 

Impairment loss on goodwill and intangible assets

 

 

—

 

 

 

5,657

 

 

 

1,295

 

Restricted stock and stock option expense

   3,741  3,531  10,271 

 

 

3,486

 

 

 

3,899

 

 

 

2,355

 

Deferred federal income taxes

   (1,018)  (2,727)  (7,201) 

 

 

5,326

 

 

 

2,395

 

 

 

3,395

 

Amortization of bond premium and discount, net

   7,899  9,828  13,643 

 

 

(6,749

)

 

 

1,267

 

 

 

6,509

 

Net realized investment (gains) losses

   (1,576)  (21,721)  3,374 

 

 

2,107

 

 

 

32,929

 

 

 

(15,887

)

Equity in the earnings of equity method limited liability investments

   (4,741)  (5,190)  (2,533) 

Gain on the disposition of subsidiary

   —    (6,857)   —   

Loss on extinguishment of debt

 

 

—

 

 

 

3,529

 

 

 

—

 

(Income) loss from equity method investments, net of distributions

 

 

(2,369

)

 

 

6,549

 

 

 

(2,716

)

Changes in:

    

 

 

 

 

 

 

 

 

 

Premiums receivable, net

   7,708  (2,849)  25,325 

Premium receivables, net

 

 

66,585

 

 

 

(40,299

)

 

 

(19,013

)

Reinsurance receivables, net

   38,714  (28,180)  23,966 

 

 

5,282

 

 

 

14,143

 

 

 

(11,156

)

Funds held by ceding insurers

   (31,635)  2,923  9,147 

 

 

2,142

 

 

 

8,785

 

 

 

17,216

 

Unpaid losses and loss adjustment expenses

   (16,378)  (29,005)  (84,914) 

 

 

18,195

 

 

 

72,500

 

 

 

97,093

 

Unearned premiums

   (1,587)  699  (6,764) 

 

 

(86,501

)

 

 

(47,213

)

 

 

25,071

 

Ceded balances payable

   (3,824)  10,086  (11,430) 

 

 

(14,599

)

 

 

(18,099

)

 

 

26,397

 

Other assets and liabilities, net

   (27,061)  (15,065)  (6,070) 

Other assets and liabilities

 

 

(14,970

)

 

 

(12,814

)

 

 

(16,507

)

Contingent commissions

   (1,470)  (1,615)  (6,264) 

 

 

(3,184

)

 

 

913

 

 

 

(2,929

)

Federal income tax receivable/payable

   406  5,047  (1,689) 

Deferred acquisition costs, net

   (3,746)  (1,384)  (31,279) 

Federal income tax payable

 

 

1,595

 

 

 

—

 

 

 

—

 

Deferred acquisition costs

 

 

22,449

 

 

 

(4,563

)

 

 

4,864

 

Prepaid reinsurance premiums

   13,732  1,780  3,868 

 

 

12,463

 

 

 

36,073

 

 

 

(40,613

)

  

 

  

 

  

 

 

Net cash provided by (used for) operating activities

   (23,650)  (24,396)  3,750 
  

 

  

 

  

 

 

Net cash provided by operating activities

 

 

42,886

 

 

 

44,236

 

 

 

90,799

 

Cash flows from investing activities:

    

 

 

 

 

 

 

 

 

 

Cash release from escrow for business acquisition

   —     —    113,696 

Acquisition of business, net of cash acquired

   —     —    (92,336) 

Proceeds from sale of fixed maturities

   918,439  381,389  647,404 

 

 

148,164

 

 

 

933,554

 

 

 

1,065,398

 

Proceeds from sale of equity securities

   32,218  111,156  39,723 

 

 

1,158

 

 

 

88,726

 

 

 

54,691

 

Proceeds from sale of preferred stock

   —     —    1,540 

Proceeds from maturity of fixed maturities

   145,475  86,009  157,845 

 

 

280,115

 

 

 

81,546

 

 

 

87,057

 

Proceeds from limited partnership distribution

   17,040  9,450  5,959 

Proceeds from disposition of subsidiary, net of cash and cash equivalents disposed of $1,269

   —    16,922   —   

Amount received (paid) in connection with derivatives

   1,464  (1,010)  (6,604) 

Proceeds from maturity of preferred stock

 

 

500

 

 

 

1,000

 

 

 

666

 

Proceeds from other invested assets

 

 

2,309

 

 

 

107,925

 

 

 

17,082

 

Amounts received (paid) in connection with derivatives

 

 

—

 

 

 

12,726

 

 

 

2,723

 

Purchases of fixed maturities

   (1,078,199)  (437,690)  (627,983) 

 

 

(448,465

)

 

 

(1,164,683

)

 

 

(1,207,231

)

Purchases of equity securities

   (36,647)  (109,940)  (38,451) 

 

 

(111

)

 

 

(10,660

)

 

 

(42,905

)

Purchases of other invested assets

   (24,000)  (14,125)  (3,550) 

 

 

—

 

 

 

—

 

 

 

(70,000

)

  

 

  

 

  

 

 

Gross proceeds from sale of renewal rights

 

 

—

 

 

 

30,000

 

 

 

28,000

 

Net cash provided by (used for) investing activities

   (24,210)  42,161  197,243 

 

 

(16,330

)

 

 

80,134

 

 

 

(64,519

)

  

 

  

 

  

 

 

Cash flows from financing activities:

    

 

 

 

 

 

 

 

 

 

Net borrowings (repayments) under margin borrowing facility

   5,584  (9,000)  (99,027) 

Redemption of ordinary shares

   (83,015)   —    (189,770) 

Proceeds from issuance of subordinated notes

   130,000   —    100,000 

Debt issuance cost

   (4,246)  (14)  (3,659) 

Purchases of A ordinary shares

   (1,159)  (805)  (333) 

Tax benefit on share-based compensation expense

   —    127  10 
  

 

  

 

  

 

 

Net cash provided by (used for) financing activities

   47,164  (9,692)  (192,779) 
  

 

  

 

  

 

 

Distributions paid to common shareholders

 

 

(14,248

)

 

 

(14,366

)

 

 

(14,431

)

Distributions paid to preferred shareholders

 

 

(440

)

 

 

(440

)

 

 

(440

)

Purchases of class A common shares

 

 

(12,677

)

 

 

(22,335

)

 

 

(490

)

Issuance of class A common shares

 

 

—

 

 

 

3,339

 

 

 

—

 

Redemption of subordinated notes

 

 

—

 

 

 

(130,000

)

 

 

—

 

Net cash used for financing activities

 

 

(27,365

)

 

 

(163,802

)

 

 

(15,361

)

Net change in cash and cash equivalents

   (696)  8,073  8,214 

 

 

(809

)

 

 

(39,432

)

 

 

10,919

 

Cash and cash equivalents at beginning of period

   75,110  67,037  58,823 

 

 

38,846

 

 

 

78,278

 

 

 

67,359

 

  

 

  

 

  

 

 

Cash and cash equivalents at end of period

  $74,414  $75,110  $67,037 

 

$

38,037

 

 

$

38,846

 

 

$

78,278

 

  

 

  

 

  

 

 

See accompanying notes to consolidated financial statements.

79

1.
Principles of Consolidation and Basis of Presentation

Global Indemnity LimitedGroup, LLC (“Global Indemnity” or “the Company”"the Company"), incorporateda Delaware limited liability company formed on February 9, 2016, is domiciledJune 23, 2020, replaced Global Indemnity Limited, incorporated in the Cayman Islands. On November 7, 2016, Global Indemnity replaced Global Indemnity plcIslands as an exempted company with limited liability, as the ultimate parent company of the Global Indemnity group of companies as a result of a redomestication transaction. The Company’stransaction completed on August 28, 2020. This transaction resulted in the redomestication of the Company to the United States. Global Indemnity Group, LLC’s class A ordinarycommon shares are publicly traded on the NASDAQ Global Select MarketNew York Stock Exchange under the ticker symbol GBLI. Global Indemnity Group, LLC’s predecessors have been publicly traded since 2003.

During the fourth quarter of 2023, the Company restructured its insurance operations to strengthen its market presence and enhance GBLI's focus on core products and made the decision to manage the business through two segments, Penn-America and Non-Core Operations. Management believes these segments allow users of the Company’s financial statements to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a whole. Segment results for prior years have been revised to reflect these changes. See Note 2 below22 for detailsadditional information regarding the redomestication. In connection with the redomestication, segments.

Global Indemnity plc was convertedGroup, LLC is a holding company that is classified as a publicly traded partnership for U.S. federal income tax purposes and meets the qualifying income exception to maintain partnership status.

Global Indemnity Group, LLC owns all shares of its direct and indirect subsidiaries, including those of its insurance companies: United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, and Penn-Patriot Insurance Company.

The insurance companies’ primary activity is providing insurance products across a private unlimited companydistribution network that includes wholesale general agents, retail agents, and was placed into liquidation. The liquidation was finalized in 2017.

direct-to-consumer. The Company manages the distribution of its businesscore product offerings through three business segments:Penn-America (formerly known as Commercial Lines, Personal Lines, and Reinsurance Operations. The Company’s Commercial LinesSpecialty). Penn-America offers specialty property and casualty insurance products designed for GBLI's Wholesale Commercial, Programs, InsurTech, and Assumed Reinsurance product offerings. These product lines are offered in the excess and surplus lines marketplace. The Company manages its Commercial Lines by differentiating them into four product classifications: Penn-America, which markets property and general liability products to small commercial businesses throughalso has a select network of wholesale general agents with specific binding authority; United National, which markets insurance products for targeted insured segments, including specialty products, such as property, general liability, and professional lines through program administrators with specific binding authority; Diamond State, which markets property, casualty, and professional lines products, which are developed by the Company’s underwriting department by individuals with expertise in thoseNon-Core Operations segment that contains lines of business through wholesale brokers and also markets through program administrators having specific binding authority; and Vacant Express, which primarily insures dwellings which are currently vacant, undergoing renovation,that have been de-emphasized or are under construction and is distributed through aggregators, brokers, and retail agents. These product classifications comprise the Company’s Commercial Lines business segment and are not considered individual business segments because each product has similar economic characteristics, distribution, and coverage. The Company’s Personal Lines segment offers specialty personal lines and agricultural coverage through general and specialty agents with specific binding authority on an admitted basis.no longer being written. Collectively, the Company’s U.S. insurance subsidiaries are licensed in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The Company’s Reinsurance Operations consist solely of the operations of its Bermuda-based wholly-owned subsidiary, Global Indemnity Reinsurance. Global Indemnity Reinsurance is a treaty reinsurer of specialty property and casualty insurance and reinsurance companies. The Company’s Reinsurance Operations segment provides reinsurance solutions through brokers and primary writers including insurance and reinsurance companies.

During the 1st quarter of 2017, the Companyre-evaluated its Commercial Lines and Personal Lines segments and determined that certain portions of business will be managed, operated and reported by including them in the other segment. As a result, the composition of the Company’s reportable segments changed slightly. Premium that is written through a wholly owned agency that mainly sells to individuals, which was previously included as part of the Commercial Lines segment, is now included within the Personal Lines segment. In addition, one of the small commercial programs written by American Reliable Insurance Company (“American Reliable”), which was previously included within the Personal Lines segment, is now aggregated within the Commercial Lines segment. Accordingly, the segment results for 2016 and 2015 have been revised to reflect these changes. See Note 20 for additional information regarding segments.

The consolidated financial statements have been prepared in conformity with United States of America generally accepted accounting principles (“GAAP”), which differs in certain respects from those principles followed in reports to insurance regulatory authorities. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The consolidated financial statements include the accounts of Global Indemnity Group, LLC and its wholly ownedwholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Certain amounts not reported in the Consolidated Statements of Operations for 2021 have been reported to conform to the presentation adopted in 2022. Specifically, the Company reported ceded written premiums and change in net unearned premiums in the presentation for 2022 and 2023. This change had no effect on total revenues, total expenses, or net income (loss) reported for the prior years.

2.
Sale of Renewal Rights

Manufactured & Dwelling Homes Business

On October 26, 2021, the Company sold the renewal rights related to its manufactured and dwelling homes business to K2 Insurance Services (“K2”) and American Family Mutual Insurance Company (“American Family”). Pursuant to the tripartite transaction, the Company received $28.0 million in cash in October 2021. The Company also retained the American Reliable 50-state licensed operating unit, $65 million of net capital supporting the business, and a related $42 million unearned premium reserve. The Company currently leases office space in Scottsdale, Arizona. As part of this sale, K2 is subleasing approximately one third of the Scottsdale, Arizona office space. Currently, the Company intends to exercise the early termination clause in its Scottsdale, Arizona lease. The Company expects it will receive $1.6 million in sublease payments from K2 between October 2021 and October 2026.

2.    Redomestication80

On June 20, 2016,

To facilitate the transaction, American Reliable retained the specialty residential property business in Florida and Louisiana and also retained business that was previously placed in runoff. American Reliable commenced the non-renewal of manufactured home insurance in Florida beginning on March 11, 2022, for policies expiring on or after July 10, 2022. American Reliable and United National non-renewed manufactured home and dwelling insurance in Louisiana beginning on or about January 31, 2022, for policies renewing on or after March 7, 2022. American Family assumed 100% of the risks for all policies covered under the renewal rights agreement which are written or renewed after October 26, 2021, except for policies covering properties in the state of Florida. The Company also retained risk for business previously placed in runoff and policies in Louisiana. There were no specialty residential property policies in-force in Florida and Louisiana as of December 31, 2023.

In addition, effective November 30, 2021, the Company and American Family reached an agreement where American Family agreed to reinsure 100% of the Company’s Boardunearned premium reserves of Directors unanimously approvedthe same types as the policies comprising the manufactured and dwelling homes business lines noted above that were in force as of November 30, 2021. The approximate amount of the unearned premium reserves at November 30, 2021 was $33.8 million. The Company received a plan40% ceding commission which included a provision for a 4% claims administration fee to be paid by the Company directly to K2 Claims.

The gross proceeds from this sale of $28.0 million are included in other income on the Company’s consolidated statements of operations for the Company to redomicile from Ireland to the Cayman Islands. On September 14, 2016, the Company held a special meeting of the holders of its A ordinary sharesyear ended December 31, 2021. Legal expenses and B ordinary sharesmerger and an extraordinary general meeting of its shareholders. All resolutions required to effectuate the redomestication were approved by the requisite shareholder vote. On October 21, 2016, the High Court of Ireland sanctioned Global Indemnity plc’s scheme of arrangementacquisition fees related to the redomesticationsale were $2.4 million for the year ended December 31, 2021. In addition, the Company recorded an impairment of goodwill, intangible assets, software, and lease costs in the amount of $1.1 million, $0.2 million, $2.0 million, and $1.5 million, respectively, for the year ended December 31, 2021. The Company also recorded an additional impairment of lease cost in the amount of $0.6 million for the year ended December 31, 2022. The impairments and expenses related to sale are included on the Company’s consolidated statements of operations as follows:

 

 

Years Ended December 31,

 

 (Dollars in thousands)

2023

 

 

2022

 

 

2021

 

Acquisition costs and other underwriting expenses

$

—

 

 

$

644

 

 

$

—

 

Corporate and other operating expenses

 

 

—

 

 

 

—

 

 

 

7,202

 

Total impairments and expenses related to sale

$

—

 

 

$

644

 

$

7,202

 

See Note 8 for additional information on the impairment of goodwill and intangible assets and Note 14 for additional information on impairment of leases.

Farm, Ranch & Stable

On August 8, 2022, the Company sold the renewal rights related to its Farm, Ranch & Stable business for policies written on or after August 8, 2022 to Everett Cash Mutual Insurance Company for $30.0 million. The Company retained the unearned premium reserves for business written prior to August 8, 2022.

The gross proceeds from Irelandthis sale of $30.0 million are included in other income on the Company’s consolidated statements of operations for the year ended December 31, 2022. In addition, the Company also recorded an impairment of goodwill, intangible assets, software, and lease costs in the amount of $0.6 million, $5.1 million, $0.5 million, and $0.5 million, respectively, for the year ended December 31, 2022. Legal expenses and merger and acquisition fees related to Cayman Islands. the sale were $2.5 million for the year ended December 31, 2022. The redomestication transactionimpairments and expenses related to sale are included on the Company’s consolidated statements of operations as follows:

 

 

Years Ended December 31,

 

 (Dollars in thousands)

2023

 

 

2022

 

 

2021

 

Acquisition costs and other underwriting expenses

$

—

 

 

$

1,034

 

 

$

—

 

Corporate and other operating expenses

 

 

—

 

 

 

8,142

 

 

 

—

 

Total impairments and expenses related to sale

$

—

 

 

$

9,176

 

$

—

 

See Note 8 for additional information on the impairment of goodwill and intangible assets and Note 14 for additional information on impairment of leases.

In conjunction with this sale, Everett Cash Mutual Insurance Company also acquired the Company’s wholly-owned subsidiary, American Reliable Insurance Company, on December 31, 2022 for an amount equal to book value, which was $10.0 million, at the time of closing.

81

3.
Restructuring

The Company restructured its insurance operations to strengthen its market presence and enhance its focus on GBLI’s core products. As a result, the Company exited its four brokerage divisions: Professional Liability, Excess Casualty, Environmental, and Middle Market Property. The Company ceased writing new business and non-renewed existing policies for these four divisions. The restructuring plan, which was initiated in the fourth quarter of 2022, was completed on November 7, 2016 and as a result, Global Indemnity Limited, a Cayman Islands exempted company, replaced Global Indemnity plc asin the ultimate holding companyfirst quarter of the Global Indemnity group of companies.2023.

In connection with the redomesticationrestructuring plan, the Company incurred restructuring costs of $3.4 million in 2022 and $2.0 million in 2023 for total restructuring costs of $5.4 million.

The following table summarizes charges incurred by expense type and the remaining liability as of December 31, 2023 and 2022:

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Consolidated Statements of Operations Line

 

Employee Termination

 

 

Lease Right of Use Asset Impairment

 

 

Total

 

Charges incurred in 2022

 

Corporate and other operating expenses

 

$

2,635

 

 

$

—

 

 

$

2,635

 

Charges incurred in 2022

 

Acquisition costs and other underwriting expenses (1)

 

 

—

 

 

 

812

 

 

 

812

 

Non-cash asset charges

 

 

 

 

—

 

 

 

(812

)

 

 

(812

)

Liability at December 31, 2022

 

 

 

 

2,635

 

 

 

—

 

 

 

2,635

 

Charges incurred in 2023

 

Corporate and other operating expenses

 

 

1,997

 

 

—

 

 

 

1,997

 

Cash payments in 2023

 

 

 

 

(4,554

)

 

 

—

 

 

 

(4,554

)

Liability at December 31, 2023

 

 

 

$

78

 

 

$

—

 

 

$

78

 

(1) These charges were recorded within the Company's Non-Core Operations segment.

Any information technology development initiatives related to the Cayman Islands, each A ordinary share of Global Indemnity plc was cancelled and replaced with one A ordinary share of Global Indemnity Limited and each B ordinary share of Global Indemnity plc was cancelled and replaced with one B ordinary share of Global Indemnity Limited. The Global Indemnity Limited A ordinary shares trade on the NASDAQ Global Select Market (“NASDAQ”) under the ticker symbol GBLI, the same symbol under which Global Indemnity plc’s A ordinary shares were previously listed.business lines within Non-Core Operations have been discontinued.

3.    

4.
Summary of Significant Accounting Policies

Investments

Investments

The Company’s investments in fixed maturities, and equity securitieswhich are classified as available for sale, and equity securities are carried at their fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of the Company’s available for sale portfolio, excluding interests in limited liability companiesCompany's fixed maturities and limited partnerships,equity securities are determined on the basis of quoted market prices where available. If quoted market prices are not available, the Company uses third partythird-party pricing services to assist in determining fair value. In many instances, these services examine the pricing of similar instruments to estimate fair value. The Company purchases bonds with the expectation of holding them to their maturity; however, changes to the portfolio are sometimes required to assure it is appropriately matched to liabilities. In addition, changes in financial market conditions and tax considerations may cause the Company to sell an investment before it matures. The difference between amortized cost and fair value of the Company’s available for sale investments,fixed maturity portfolio, net of the effect of deferred income taxes, is reflected in accumulated other comprehensive income in(loss) within shareholders’ equity and, accordingly, has no effect on net income (loss) other than for the credit loss component of impairments deemedand losses recognized as a result of the intent to be other than temporary.sell. Equity securities are measured at fair value with the changes in fair value recognized in net income (loss).

For investments in limited liability companiespartnerships and limited partnershipsliability companies where the ownership interest is less than 3%, the Company carries these investments at fair value, and the change in the difference between cost and the fair value of the partnershipthese interests, net of the effect of deferred income taxes, is reflected in accumulated other comprehensive income in shareholders’(loss) within shareholders' equity and, accordingly, has no effect on net income other than for impairments deemed to be other than temporary.(loss). The Company uses the equity method to account for an investments in limited liability companiespartnerships and limited partnershipsliability companies where its ownership interest exceeds 3%3%. The equity method of accounting for an investment in a limited partnership and limited liability company or limited partnership requires that its cost basis be updated to account for the income or loss earned on the investment. The receipt of results for investments in limited partnerships and limited liability companies may vary. If results are received on a timely basis, they are included in current results. If they are not received on a timely basis, they are recorded on a one quarter lag. The recording of such results are applied consistently for each investment once the timing of receiving the results has been established. The income or loss associated with the limited partnerships and limited liability companies or limited partnerships is reflected in the consolidated statements of operations, and the adjusted cost basis approximates fair value.

The Company’s investments in other invested assets were valued at $77.8 million and $66.1$38.2 million as of December 31, 20172023 and 2016, respectively.2022. These amounts relate to investments in limited liability companiespartnerships and limited partnerships. The Company does not have access to daily valuations, therefore; the estimated fair value of the limited liability companies and limited partnerships are based on net assetwhose carrying value as a practical expedient for the limited liability companies and limited partnerships.approximates fair value.

82

Net realized gains and losses on investments are determined based on thefirst-in,first-out method.

The Company regularly performs various analytical valuation procedures with respect to its investments, including reviewing each fixed maturityavailable for sale debt security in an unrealized loss position to assess whether the securitydecline in fair value below amortized cost basis has a credit loss. Specifically, the Company considers credit rating, market price, and issuer specific financial information, among other factors, to assess the likelihood of collection of all principal and interest as contractually due. Securities for which the Company determines thatresulted from a credit loss is likely are subjected to further analysis through discounted cash flow testing to estimate theor other factors. In assessing whether a credit loss exists, the Company compares the present value of the cash flows expected to be recognizedcollected from the security to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for expected credit losses is recorded. Subsequent changes in earnings, if any. The specific methodologies and significant assumptions used by asset classthe allowances are discussed below. Upon identificationrecorded in the period of such securities and periodically thereafter, a detailed review is performedchange as either credit loss expense or reversal of credit loss expense. Any impairments related to determine whether the decline is consideredfactors other than temporary. This review includes an analysis of several factors, including but not limited to, the credit ratings and cash flows of the securitieslosses and the magnitude and lengthintent to sell are recorded through other comprehensive income, net of time that the fair value of such securities is below cost.taxes.

For fixed maturities, the factors considered in reaching the conclusion that a decline below cost is other than temporarycredit loss exists include, among others, whether:

(1)the issuer is in financial distress;
(1)
the extent to which the fair value is less than the amortized cost basis;
(2)
the issuer is in financial distress;
(3)
the investment is secured;
(4)
a significant credit rating action occurred;
(5)
scheduled interest payments were delayed or missed;
(6)
changes in laws or regulations have affected an issuer or industry;
(7)
the investment has an unrealized loss and was identified by the Company’s investment manager as an investment to be sold before recovery or maturity;
(8)
the investment failed cash flow projection testing to determine if anticipated principal and interest payments will be realized; and
(9)
changes in US Treasury rates and/or credit spreads since original purchase to identify whether the unrealized loss is simply due to interest rate movement.

(2)the investment is secured;

(3)a significant credit rating action occurred;

(4)scheduled interest payments were delayed or missed;

(5)changes in laws or regulations have affected an issuer or industry;

(6)the investment has an unrealized loss and was identified by the Company’s investment manager as an investment to be sold before recovery or maturity; and

(7)the investment failed cash flow projection testing to determine if anticipated principal and interest payments will be realized.

According to accounting guidance for debt securities in an unrealized loss position, the Company is required to assess whether it has the intent to sell the debt security or more likely than not will be required to sell the debt security before the anticipated recovery. If either of these conditions is met, the Company must recognize an other than temporary impairment with the entire unrealized loss being recorded through earnings. For debt securities in an unrealized loss position not meeting these conditions, the Company assesses whether the impairment of a securityany allowance for expected credit losses is other than temporary. If the impairment is deemed to be other than temporary, the Company must separate the other than temporary impairment into two components: the amount representing the credit losswritten off and the amount relatedamortized cost basis is written down to all other factors, such as changes in interest rates. The credit loss represents the portion of the amortized book value in excess of the net presentfair value of the projected future cash flows discountedfixed maturity security with any incremental impairment reported in earnings. That new amortized cost basis shall not be adjusted for subsequent recoveries in fair value.

The Company elected the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of the available for sale debt securities for the purposes of identifying and measuring an impairment and to not measure an allowance for expected credit losses for accrued interest receivables. Accrued interest receivable is written off through net realized investment gains (losses) at the effective interest rate implicit intime the debt security prior to impairment. The credit loss componentissuer of the bond defaults or is expected to default on payment. The Company made an accounting policy election to present the accrued interest receivable balance with other than temporary impairment is recorded through earnings, whereasassets on the amount relatingCompany’s consolidated statements of financial position. Accrued interest receivable related to factors other than credit losses is recorded in other comprehensive income, netfixed maturities was $7.5 million and $8.4 million as of taxes.

For equity securities, management carefully reviews all securities with unrealized losses to determine if a security should be impaired and further focuses on securities that have either:

(1)persisted with unrealized losses for more than twelve consecutive months or

(2)the value of the investment has been 20% or more below cost for six continuous months or more.

The amount of any write-down, including those that are deemed to be other than temporary, is included in earnings as a realized loss in the period in which the impairment arose.

For an analysis of other than temporary losses that were recorded for the years ended December 31, 2017, 2016,2023 and 2015, please see Note 5 below.2022, respectively.

Variable Interest Entities

A Variable Interest Entity (“VIE”) refers to an investment in which an investor holds a controlling interest that is not based on the majority of voting rights. Under the VIE model, the party that has the power to exercise significant management influence and maintain a controlling financial interest in the entity’s economics is said to be the primary beneficiary, and is required to consolidate the entity within their results. Other entities that participate in a VIE, for which their financial interests fluctuate with changes in the fair value of the investment entity’s net assets but do not have significant management influence and the ability to direct the VIE’s significant economic activities are said to have a variable interest in the VIE but do not consolidate the VIE in their financial results.

The Company has variable interests in threetwo VIEs for which it is not the primary beneficiary. These investments are accounted for under the equity method of accounting as their ownership interest exceeds 3%3% of their respective investments.

83

Cash and Cash Equivalents

For the purpose of the statements of cash flows, the Company considers all liquid instruments with an original maturity of three months or less to be cash equivalents. The Company has a cash management program that provides for the investment of excess cash balances primarily in short-term money market instruments. Generally, bank balances exceed federally insured limits. The carrying amount of cash and cash equivalents approximates fair value.

At December 31, 20172023 and 2016,2022, the Company had approximately $67.1$36.9 million and $52.0$26.0 million, respectively, of cash and cash equivalents that was invested in a diversified portfolio of high quality short-term debt securities.

Valuation of Premium ReceivableReceivables

The Company evaluates the collectability of premium receivablereceivables based on a combination of factors. In instances in which the Company is aware of a specific circumstance where a party may be unable to meet its financial obligations to the Company, a specific allowance for bad debtsexpected credit losses against amounts due is recorded to reduce the net receivable to the amount reasonably believed by management to be collectible. For all remaining balances, allowances are recognized for bad debtsthe allowance is based onupon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of time the receivables are past due.collection periods, direct placement with collection agencies, solvency of insured or agent, terminated agents, and other relevant factors. The allowance for bad debtsexpected credit losses was $2.2$4.8 million and $1.9$3.3 million as of December 31, 20172023 and 2016,2022, respectively.

Goodwill and Intangible Assets

The Company tests for impairment of goodwill at least annually and more frequently as circumstances warrant in accordance with applicable accounting guidance. Accounting guidance allows for the testing of goodwill for impairment using both qualitative and quantitative factors. Impairment of goodwill is recognized only if the carrying amount of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. The amount of the impairment loss would be equal to the excess carrying value of the goodwill over the implied fair value of the reporting unit goodwill. Based on the qualitative assessment performed, there was no impairment of goodwill as of December 31, 2017.

Impairment of intangible assets with an indefinite useful life is tested at least annually and more frequently as circumstances warrant in accordance with applicable accounting guidance. Accounting guidance allows for the testing of indefinite lived intangible assets for impairment using both qualitative and quantitative factors. Impairment of indefinite lived intangible assets is recognized only if the carrying amount of the intangible assets exceeds the fair value of said assets. The amount of the impairment loss would be equal to the excess carrying value of the assets over the fair value of said assets. Based on the qualitative assessment performed, there were no impairments of indefinite lived intangible assets as of December 31, 2017.

Intangible assets that are not deemed to have an indefinite useful life are amortized over their estimated useful lives. The carrying amounts of definite lived intangible assets are regularly reviewed for indicators of impairment in accordance with applicable accounting guidance. Impairment is recognized only if the carrying amount of the intangible asset is in excess of its undiscounted projected cash flows. The impairment is measured as the difference between the carrying amount and the estimated fair value of the asset. As of December 31, 2017, there were no triggering events that occurred during the year that would result in an impairment of definite lived intangible assets.

See Note 8 for additional information on goodwill and intangible assets.assets as well as the results of qualitative impairment assessments performed.

Reinsurance

Reinsurance

In the normal course of business, the Company seeks to reduce the loss that may arise from events that cause unfavorable underwriting results by reinsuring certain levels of risk from various areas of exposure with reinsurers. Amounts receivable from reinsurers are estimated in a manner consistent with the reinsured policy and the reinsurance contract.

The Company regularly reviews the collectability of reinsurance receivables. An allowance for uncollectible reinsurance receivablereceivables is recognized based onupon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, disputes, applicable coverage defenses, insolvent reinsurers, financial strength of thesolvent reinsurers based on AM Best Ratings and the length of time any balances are past due.other relevant factors. Any changes in the allowance resulting from this review are included in net losses and loss adjustment expenses on the consolidated statements of operations during the period in which the determination is

made. The allowance for uncollectible reinsuranceexpected credit losses was $8.0$9.0 millionas of December 31, 20172023 and 2016.2022,.

The applicable accounting guidance requires that the reinsurer must assume significant insurance risk under the reinsured portions of the underlying insurance contracts and that there must be a reasonably possible chance that the reinsurer may realize a significant loss from the transaction. The Company has evaluated its reinsurance contracts and concluded that each contract qualifies for reinsurance accounting treatment pursuant to this guidance.

84

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. The deferred tax asset balance is analyzed regularly by management. This assessment requires significant judgment and considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of carryforward periods, and tax planning strategies and/or actions. Management believes that it is more likely than not that the results of future operations can generate sufficient taxable income to realize the remaining deferred income tax assets, and accordingly, the Company has not established any valuation allowances.

Deferred Acquisition Costs

The costs of acquiring new and renewal insurance and reinsurance contracts primarily include commissions, premium taxes and certain other costs that are directly related to the successful acquisition of new and renewal insurance and reinsurance contracts. The excess of the Company’s costs of acquiring new and renewal insurance and reinsurance contracts over the related ceding commissions earned from reinsurers is capitalized as deferred acquisition costs and amortized over the period in which the related premiums are earned.

The amortization of deferred acquisition costs for the years ended December 31, 2017, 2016,2023, 2022, and 20152021 was $109.0$120.9 million, $114.3$150.9 million, and $86.2$144.9 million, respectively.

Premium Deficiency

A premium deficiency is recognized if the sum of expected loss and loss adjustment expenses and unamortized acquisition costs exceeds related unearned premium after consideration of investment income. This evaluation is done at a distribution and product line level in Insurance Operations and at a line/treaty level in Reinsurance Operations.level. Any future expected loss on the related unearned premium is recorded first by impairing the unamortized acquisition costs on the related unearned premium followed by an increase to loss and loss adjustment expense reserves on additional expected loss in excess of unamortized acquisition costs.

For the years ended December 31, 2017, 2016, and 2015, the total premium deficiency charges were $0.3 million, $0.3 million, and $0.2 million, respectively, comprised solely of reductions to unamortized deferred acquisition costs within the commercial automobile lines in the Commercial Lines Segment. Based on the Company’s analysis, the Company expensed acquisition cost as incurred for the remainder of 2017, 2016 and 2015 for the commercial automobile lines in the Commercial Lines Segment. As the charges were a reduction of unamortized deferred acquisition costs in each respective period, noNo premium deficiency reserve existed as of December 31, 20172023 or 2016.2022.

Derivative Instruments

The Company usesused derivative instruments to manage its exposure to cash flow variability from interest rate risk.risk and limit exposure to severe equity market changes. The derivative instruments arewere carried on the balance sheet at fair value and included in other assets and other liabilities. Changes in the fair value of the derivative instruments and the periodic net interest settlements under the derivatives instruments arewere recognized as net realized investment gains (losses) on the consolidated statements of operations.

Subordinated Notes

Margin Borrowing Facility

The carrying amounts reported in the balance sheet, represent the outstanding borrowings. The outstanding borrowings are due on demand; therefore, the cash receipts and cash payments related to the margin borrowing facility are shown net in the consolidated statements of cash flows.

Subordinated Notes

The carrying amounts reported in the balance sheetif any, represent the outstanding balances, net of deferred issuance cost. See Note 1213 for details.

Unpaid Losses and Loss Adjustment Expenses

The liability for unpaid losses and loss adjustment expenses represents the Company’s best estimate of future amounts needed to pay losses and related settlement expenses with respect to events insured by the Company. This liability is based upon the accumulation of individual case estimates for losses reported prior to the close of the accounting period with respect to direct business, estimates received from ceding companies with respect to assumed reinsurance, and estimates of unreported losses.

The process of establishing the liability for unpaid losses and loss adjustment is complex, requiring the use of informed actuarially based estimates and management’sManagement’s judgment. In some cases, significant periods of time, up to several years or more, may elapse between the occurrence of an insured loss and the reporting of that loss to the Company. To establish this liability, the Company regularly reviews and updates the methods of making such estimates and establishing the resulting liabilities. Any resulting adjustments are recorded in consolidated statements of operations during the period in which the determination is made.

Share Repurchases

Shares repurchased from employees or third parties by Global Indemnity Group, LLC are held as treasury stock and recorded at cost until formally retired by Global Indemnity Group, LLC.

85

Retirement of Treasury Stock

Upon the formal retirement of treasury stock, the CompanyGlobal Indemnity Group, LLC offsets the par value of the treasury stock that is being retired against Ordinary Sharescommon shares and reflects any excess of cost over par value as a deduction from AdditionalPaid-in Capital.

Share Redemptions

When shares are redeemed, the CompanyGlobal Indemnity Group, LLC offsets the par value of the redeemed shares against Ordinary Sharescommon shares and reflects any excess of cost over par value as a deduction from Retained Earnings.

Premiums

Premiums

Premiums are recognized as revenue ratably over the term of the respective policies and treaties. Unearned premiums are computed on a pro rata basis to the day of expiration.

Mandatory reinstatement premiums assessed on reinsurance policies are earned in the period of the loss event that gave rise to the reinstatement premiums.

Contingent Commissions

Certain professional general agencies of the Insurance OperationsGBLI are paid special incentives, referred to as contingent commissions, when results of business produced by these agencies are more favorable than predetermined thresholds. Similarly, in some circumstances, companies that cede business to the Reinsurance OperationsGBLI are paid profit commissions based on the profitability of the ceded portfolio. These commissions are charged to other underwriting expenses when incurred.

Share-Based Compensation

The Company accounts for stock options and other equity based compensation using the modified prospective application of the fair value-based method permitted by the appropriate accounting guidance. See Note 1618 for details.

Earnings per Share

Basic earnings per share have been calculated by dividing net income (loss) available to common shareholders by the weighted-average ordinarycommon shares outstanding. In periods of net income, diluted earnings per share have been calculated by dividing net income available to common shareholders by the sum of the weighted-average ordinarycommon shares outstanding and the weighted-average common share equivalents outstanding, which include options and other equity awards. In periods of net loss, diluted earnings per share is the same as basic earnings per share. See Note 1820 for details.

Foreign Currency

TheAt times, the Company maintains investments and cash accounts in foreign currencies related to the operations of its business. Atperiod-end, the Companyre-measuresnon-U.S. re-measures non-U.S. currency financial assets to their current U.S. dollar equivalent. The resulting gain or loss for foreign denominated fixed maturity investments, if any, is reflected in accumulated other comprehensive income in(loss) within shareholders’ equity; whereas, the gain or loss on foreign denominated cash accounts and equity securities is reflected in income during the period. Financial liabilities, if any, are generally adjusted within the reserving process. However, for known losses on claims to be paid in foreign currencies, the Companyre-measures the liabilities to their current U.S. dollar equivalent each period end with the resulting gain or loss reflected in income during the period. Net transaction gains and losses, primarily comprised ofre-measurement of known losses on claims to be paid in foreign currencies, were a gain lossof $2.1$0.5 million, a gainof $0.3 million, and $0.4a gainof $0.5 million for the years ended December 31, 20172023, 2022, and 2015, respectively, and2021, respectively.

Leases

The Company determines if an arrangement is a loss $0.7 million for the year ended December 31, 2016.

Other Income

On September 30, 2016, Diamond State Insurance Company sold all the outstanding shareslease at inception. Leases with a term of capital stock of one of its wholly owned subsidiaries, United National Specialty Insurance Company, to an unrelated party. Diamond State Insurance Company received aone-time payment of $18.7 million and recognized a pretax gain of $6.9 million which is reflected in other income in 2016. This transaction did12 months or less are not have an impactrecorded on the consolidated balance sheets. For leases with a term of greater than 12 months, lease right-of-use assets (“ROU”) and lease liabilities are included on the consolidated balance sheets.

Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company’s ongoing business operations. Subsequent toleases do not provide an implicit rate; therefore, the sale,Company uses its incremental borrowing rate at the commencement date in determining the present value of future payments. The ROU asset is calculated using the initial lease liability amount, plus any business previously written by United National Specialty Insurancelease payments made at or before the commencement date, minus any lease incentives received, plus any initial direct costs incurred. Lease expenses for minimum lease payments are recognized on a straight-line basis over the lease term.

86

The Company’s lease agreements may contain both lease and non-lease components which are accounted separately. The Company is being written by other companies withinelected the Company’s U.S. Insurance Operations.practical expedient on not separating lease components from non-lease components for its equipment leases.

In addition, other

Rental income derived from subleases are recognized on a straight-line basis over the operating lease term.

Other Income

Other income is primarily comprised of fee income, on policies issued, commission income, accrued interest on the anticipated indemnification of unpaid loss and loss adjustment expense reserve, and foreign exchange gains and losses.

4.    Acquisition

On January 1, 2015, Global Indemnity Group, Inc., a subsidiarylosses, and gain on sale of the Company, acquired 100% of the voting equity interest of American Reliable from American Bankers Insurance Group, Inc. by paying $113.7 million in cash and assuming $283.9 million of customary insurance related liabilities, obligations, and mandates. Per the American Reliable Share Purchase Agreement (“SPA”), the ultimate purchase price is subject to (i) accounting procedures that were performed in 2015 to determine GAAP book value and (ii) indemnification on future development on recorded loss and loss adjustment expenses as of December 31, 2014. In accordance with the SPA, on the third calendar year following the calendar year of the closing, if loss and loss adjustment expenses for accident years 2014 and prior are lower than recorded unpaid loss and loss adjustment expenses as of December 31, 2014, Global Indemnity Group, Inc. will pay the variance to American Bankers Group, Inc. Conversely, if loss and loss adjustment expenses for accident years 2014 and prior exceed recorded unpaid loss and loss adjustment expenses as of December 31, 2014, American Bankers Group, Inc. will pay the variance to Global Indemnity Group, Inc. In accordance with a dispute resolution agreement between Global Indemnity Group, Inc. and American Bankers Group, Inc., any variance paidrenewal rights.

Capitalized Software Costs

Capitalized software costs, which represent costs directly related to obtaining, developing or upgrading internal use software, are capitalized during the loss indemnification will be subject to interestapplication development stage. These costs generally consist of 5% compounded semi-annually. The Company’s purchase price, based on available financial information at the date of acquisition, was $99.8 million.

The results of American Reliable’s operations have been included in the Company’s consolidated financial statements since the date of the acquisition on January 1, 2015.

The purchase of American Reliable expanded Global Indemnity’s product offerings. American Reliable is a specialty company that distributes personal lines products written on an admitted basis that are unusualinternal personnel costs and harder to place. It complements Global Indemnity’s existing U.S. Insurance Operations that primarily distribute commercial lines products on an excess and surplus lines basis.

American Reliable is domiciled in Arizona and as such is subject to its state insurance department regulations.

For the year ended December 31, 2015, American Reliable had total revenues of $259.0 million andpre-tax loss of $4.2 million. These amountsexternal consulting fees. Capitalized software costs, which are included in the Company’s results of operations for the year ended December 31, 2015.

The Company has finalized its process of valuing theother assets acquired and liabilities assumed. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of the acquisition.

(Dollars in thousands)    

ASSETS:

  

Investments

  $226,458 

Cash and cash equivalents

   21,360 

Premiums receivables, net

   26,102 

Accounts receivable

   11,311 

Reinsurance receivables

   13,842 

Prepaid reinsurance premiums

   43,506 

Intangible assets

   32,000 

Deferred federal income taxes

   915 

Other assets

   6,473 
  

 

 

 

Total assets

   381,967 
  

 

 

 

LIABILITIES:

  

Unearned premiums

   172,234 

Unpaid losses and loss adjustment expenses

   89,489 

Reinsurance balances payable

   13,219 

Contingent commissions

   3,903 

Other liabilities

   5,026 
  

 

 

 

Total liabilities

   283,871 
  

 

 

 

Estimated fair value of net assets acquired

   98,096 

Purchase price

   99,797 
  

 

 

 

Goodwill

  $1,701 
  

 

 

 

The transaction was accounted for using the purchase method of accounting. The assets and liabilities acquired by the Company were adjusted to estimated fair value. The $1.7 million excess of cash and acquisition cost over the estimated fair value of assets acquired was recognized as goodwill. Under the purchase method of accounting, goodwill is not amortized but is tested for impairment at least annually.

Goodwill of $1.7 million, arising from the acquisition, consists largely of the synergies and economies of scales expected from combining the operations of Global Indemnity and American Reliable. The Company has assigned goodwill of $1.7 million to the Personal Lines segment. There is no tax goodwill.

An identification and valuation of intangible assets was performed that resulted in the recognition of intangible assets of $32.0 million with values assigned as follows:

(Dollars in thousands)

Description

  Useful Life   Amount 

State insurance licenses

   Indefinite   $5,000 

Value of business acquired

   < 1 year    25,500 

Agent relationships

   10 years    900 

Trade name

   7 years    600 
    

 

 

 
    $32,000 
    

 

 

 

Intangible assets arising from the acquisition are deductible for income tax purposes over 15 years.

The following table presents details of the Company’s intangible assets arising from the American Reliable acquisition as of December 31, 2015:

(Dollars in thousands)

Description

  Useful Life   Cost   Accumulated
Amortization		   Net
Value		 

State insurance licenses

   Indefinite   $5,000   $—     $5,000 

Value of business acquired

   < 1 year    25,500    25,500    0 

Agent relationships

   10 years    900    90    810 

Trade name

   7 years    600    86    514 
    

 

 

   

 

 

   

 

 

 
    $32,000   $25,676   $6,324 
    

 

 

   

 

 

   

 

 

 

Amortization related to the Company’s definite lived intangible assets resulting from American Reliable acquisition was $25.7 million for the year ended December 31, 2015.

As of December 31, 2015, the Company expected that amortization expense for the next five years related to the American Reliable acquisition will be as follows:

(Dollars in thousands)    

2016

  $176 

2017

   176 

2018

   176 

2019

   176 

2020

   176 

As of December 31, 2015, the fair value, gross contractual amounts due, and contractual cash flows not expected to be collected of acquired receivables were as follows:

(Dollars in thousands)  Fair Value   Gross
Contractual
Amounts Due		   Contractual
cash flows not
expected to be
collected		 

Premium receivables

  $26,102   $26,896   $794 

Accounts receivable

   11,311    11,311    —   

Reinsurance receivables

   13,842    13,842    —   

In connection with the acquisition, the Company agreed to pay to Fox Paine & Company an investment banking fee of 3% of the amount paid plus the additional capital required to operate American Reliable on a standalone basis and a $1.5 million investment advisory fee, which in the aggregate, totaled $6.5 million. This amount was included in corporate and other operating expenses on the Company’s Consolidated Statements of OperationsBalance Sheets, are amortized using the straight-line method over its estimated useful life beginning when the software is put into production. Internal and external costs incurred during the year endedpreliminary project stage, training costs, most data conversion costs, and maintenance costs are charged to expense as incurred.

Capitalized software costs were $4.0 million and $4.1 million at December 31, 2015. As payment2023 and 2022, respectively. Amortization expense related to capitalized software for these fees, 267,702 A ordinary shares of Global Indemnity were issued under the Global Indemnity plc Share Incentive Plan in May, 2015. These shares were registered but cannot be sold until the earlier of five years or a change of control. See Note 16 for additional information on the Company’s share incentive plan, including the Global Indemnity plc Share Incentive Plan.

Additional costs, mainly professional fees, of $5.1 million were incurred in connection with the acquisition of American Reliable. Of this amount, $1.8 million and $3.3 million was recorded as corporate and other operating expenses on the Company’s Consolidated Statements of Operations during the years ended December 31, 20152023, 2022, and 2014,2021 was $4.9 million, $6.1 million, and $7.1 million, respectively.

During the year ended December 31, 2015, the Company paid approximately $1.6 million in employee compensation related costs, which were related to periods prior to the Acquisition. These costs were accrued by American Reliable and were included in the fair value of net assets acquired by Global Indemnity Group, Inc. on January 1, 2015.

5.
Investments

5.    Investments

The amortized cost and estimated fair value of investmentsthe Company’s fixed maturities securities were as follows as of December 31, 20172023 and 2016:2022:

(Dollars in thousands)

 

Amortized
Cost

 

 

Allowance for Expected Credit Losses

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair Value

 

As of December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

497,099

 

 

$

—

 

 

$

515

 

 

$

(3,391

)

 

$

494,223

 

Obligations of states and political subdivisions

 

 

27,326

 

 

 

—

 

 

 

—

 

 

 

(1,176

)

 

 

26,150

 

Mortgage-backed securities

 

 

63,173

 

 

 

—

 

 

 

229

 

 

 

(4,475

)

 

 

58,927

 

Asset-backed securities

 

 

207,375

 

 

 

—

 

 

 

668

 

 

 

(5,091

)

 

 

202,952

 

Commercial mortgage-backed securities

 

 

84,062

 

 

 

—

 

 

 

12

 

 

 

(4,994

)

 

 

79,080

 

Corporate bonds

 

 

298,526

 

 

 

—

 

 

 

116

 

 

 

(6,929

)

 

 

291,713

 

Foreign corporate bonds

 

 

144,531

 

 

 

—

 

 

 

40

 

 

 

(3,823

)

 

 

140,748

 

Total fixed maturities

 

$

1,322,092

 

 

$

—

 

 

$

1,580

 

 

$

(29,879

)

 

$

1,293,793

 

(Dollars in thousands)  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		 Estimated
Fair Value		   Other than
temporary
impairments
recognized in
AOCI (1)		 

 

Amortized
Cost

 

 

Allowance for Expected Credit Losses

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair Value

 

As of December 31, 2017

         

As of December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities:

         

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and agency obligations

  $105,311   $562   $(1,193)  $104,680   $—   

U.S. treasuries

 

$

352,533

 

 

$

—

 

 

$

—

 

 

$

(8,430

)

 

$

344,103

 

Obligations of states and political subdivisions

   94,947    441    (274)  95,114    —   

 

 

33,471

 

 

 

—

 

 

 

—

 

 

 

(1,876

)

 

 

31,595

 

Mortgage-backed securities

   150,237    404    (1,291)  149,350    —   

 

 

67,560

 

 

 

—

 

 

 

165

 

 

 

(5,609

)

 

 

62,116

 

Asset-backed securities

   203,827    267    (393)  203,701    (1) 

 

 

198,161

 

 

 

—

 

 

 

390

 

 

 

(9,151

)

 

 

189,400

 

Commercial mortgage-backed securities

   140,761    101    (1,067)  139,795    —   

 

 

104,777

 

 

 

—

 

 

 

20

 

 

 

(6,133

)

 

 

98,664

 

Corporate bonds

   422,486    2,295    (1,391)  423,390    —   

 

 

353,622

 

 

 

—

 

 

 

16

 

 

 

(14,858

)

 

 

338,780

 

Foreign corporate bonds

   125,575    377    (545)  125,407    —   

 

 

191,599

 

 

 

—

 

 

 

—

 

 

 

(8,059

)

 

 

183,540

 

  

 

   

 

   

 

  

 

   

 

 

Total fixed maturities

   1,243,144    4,447    (6,154)  1,241,437    (1) 

 

$

1,301,723

 

 

$

—

 

 

$

591

 

 

$

(54,116

)

 

$

1,248,198

 

Common stock

   124,915    18,574    (3,260)  140,229    —   

Other invested assets

   77,820    —      —    77,820    —   
  

 

   

 

   

 

  

 

   

 

 

Total

  $1,445,879   $23,021   $(9,414)  $1,459,486   $(1) 
  

 

   

 

   

 

  

 

   

 

 

(1)Represents the total amount of other than temporary impairment losses relating to factors other than credit losses recognized in accumulated other comprehensive income (“AOCI”).

As of December 31, 2023 and 2022, the Company’s investments in equity securities consist of the following:

(Dollars in thousands)  Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		  Estimated
Fair Value		   Other than
temporary
impairments
recognized in
AOCI (1)		 

As of December 31, 2016

         

Fixed maturities:

         

U.S. treasury and agency obligations

  $71,517   $763   $(233)  $72,047   $—   

Obligations of states and political subdivisions

   155,402    1,423    (379)   156,446    —   

Mortgage-backed securities

   88,131    895    (558)   88,468    —   

Asset-backed securities

   233,890    684    (583)   233,991    (4) 

Commercial mortgage-backed securities

   184,821    118    (1,747)   183,192    —   

Corporate bonds

   381,209    1,666    (2,848)   380,027    —   

Foreign corporate bonds

   126,369    164    (673)   125,860    —   
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Total fixed maturities

   1,241,339    5,713    (7,021)   1,240,031    (4) 

Common stock

   119,515    3,445    (2,403)   120,557    —   

Other invested assets

   66,121    —      —     66,121    —   
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $1,426,975   $9,158   $(9,424)  $1,426,709   $(4) 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

(1)Represents the total amount of other than temporary impairment losses relating to factors other than credit losses recognized in accumulated other comprehensive income (“AOCI”).

 

 

December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Common stock

 

$

—

 

 

$

1,271

 

Preferred stock

 

 

16,508

 

 

 

16,249

 

Total

 

$

16,508

 

 

$

17,520

 

87

Excluding U.S. treasuries and agency bonds,limited partnerships, the Company did not hold any debt or equity investments in a single issuer that was in excess of 5%2.1% and 2.4% of shareholders’shareholders' equity at December 31, 20172023 and 2016.2022, respectively.

The amortized cost and estimated fair value of the Company’s fixed maturities portfolio classified as available for sale at December 31, 2017,2023, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in thousands)  Amortized
Cost		   Estimated
Fair Value		 

 

Amortized
Cost

 

 

Estimated
Fair Value

 

Due in one year or less

  $70,222   $70,165 

 

$

663,046

 

 

$

660,141

 

Due in one year through five years

   435,122    434,078 

 

 

279,876

 

 

 

270,667

 

Due in five years through ten years

   235,233    236,552 

 

 

13,018

 

 

 

11,619

 

Due in ten years through fifteen years

   2,187    2,205 

Due after fifteen years

   5,555    5,591 

Due after ten years

 

 

11,542

 

 

 

10,407

 

Mortgage-backed securities

   150,237    149,350 

 

 

63,173

 

 

 

58,927

 

Asset-backed securities

   203,827    203,701 

 

 

207,375

 

 

 

202,952

 

Commercial mortgage-backed securities

   140,761    139,795 

 

 

84,062

 

 

 

79,080

 

  

 

   

 

 

Total

  $1,243,144   $1,241,437 

 

$

1,322,092

 

 

$

1,293,793

 

  

 

   

 

 

The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses that are not deemed to have credit losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2017:2023. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 7.

   Less than 12 months  12 months or longer (1)  Total 
(Dollars in thousands)  Fair Value   Gross
Unrealized
Losses		  Fair Value   Gross
Unrealized
Losses		  Fair Value   Gross
Unrealized
Losses		 

Fixed maturities:

          

U.S. treasury and agency obligations

  $79,403   $(962)  $17,469   $(231)  $96,872   $(1,193) 

Obligations of states and political subdivisions

   34,537    (149)   12,060    (125)   46,597    (274) 

Mortgage-backed securities

   127,991    (1,247)   1,866    (44)   129,857    (1,291) 

Asset-backed securities

   97,817    (371)   6,423    (22)   104,240    (393) 

Commercial mortgage-backed securities

   83,051    (523)   27,976    (544)   111,027    (1,067) 

Corporate bonds

   147,064    (754)   53,024    (637)   200,088    (1,391) 

Foreign corporate bonds

   53,320    (305)   20,582    (240)   73,902    (545) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total fixed maturities

   623,183    (4,311)   139,400    (1,843)   762,583    (6,154) 

Common stock

   32,759    (3,260)   —      —     32,759    (3,260) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $655,942   $(7,571)  $139,400   $(1,843)  $795,342   $(9,414) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

(1)Fixed maturities in a gross unrealized loss position for twelve months or longer are primarily comprised ofnon-credit losses on investment grade securities where management does not intend to sell, and it is more likely than not that the Company will not be forced to sell the security before recovery. The Company has analyzed these securities and has determined that they are not other than temporarily impaired.

 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

(Dollars in thousands)

 

Fair Value

 

 

Gross
Unrealized
Losses

 

 

Fair Value

 

 

Gross
Unrealized
Losses

 

 

Fair Value

 

 

Gross
Unrealized
Losses

 

Fixed maturities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

 

55,447

 

 

 

(342

)

 

 

239,254

 

 

 

(3,049

)

 

 

294,701

 

 

 

(3,391

)

Obligations of states and political subdivisions

 

 

-

 

 

 

-

 

 

 

26,150

 

 

 

(1,176

)

 

 

26,150

 

 

 

(1,176

)

Mortgage-backed securities

 

 

12,432

 

 

 

(406

)

 

 

39,734

 

 

 

(4,069

)

 

 

52,166

 

 

 

(4,475

)

Asset-backed securities

 

 

38,828

 

 

 

(469

)

 

 

108,947

 

 

 

(4,622

)

 

 

147,775

 

 

 

(5,091

)

Commercial mortgage-backed securities

 

 

13

 

 

 

(2

)

 

 

76,467

 

 

 

(4,992

)

 

 

76,480

 

 

 

(4,994

)

Corporate bonds

 

 

34,658

 

 

 

(264

)

 

 

231,816

 

 

 

(6,665

)

 

 

266,474

 

 

 

(6,929

)

Foreign corporate bonds

 

 

7,096

 

 

 

(13

)

 

 

111,750

 

 

 

(3,810

)

 

 

118,846

 

 

 

(3,823

)

Total fixed maturities

 

$

148,474

 

 

$

(1,496

)

 

$

834,118

 

 

$

(28,383

)

 

$

982,592

 

 

$

(29,879

)

The following table contains an analysis of the Company’s fixed income securities with gross unrealized losses that are not deemed to have credit losses, categorized by the period that the securities were in a continuous loss position as of December 31, 2016:2022. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 7.

  Less than 12 months 12 months or longer (1) Total 

 

Less than 12 months

 

 

12 months or longer

 

 

Total

 

(Dollars in thousands)  Fair Value   Gross
Unrealized
Losses		 Fair Value   Gross
Unrealized
Losses		 Fair Value   Gross
Unrealized
Losses		 

 

Fair Value

 

 

Gross
Unrealized
Losses

 

 

Fair Value

 

 

Gross
Unrealized
Losses

 

 

Fair Value

 

 

Gross
Unrealized
Losses

 

Fixed maturities:

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and agency obligations

  $39,570   $(233)  $—     $—    $39,570   $(233) 

U.S. treasuries

 

$

335,781

 

 

$

(7,518

)

 

$

8,322

 

 

$

(912

)

 

$

344,103

 

 

$

(8,430

)

Obligations of states and political subdivisions

   46,861    (369)  670    (10)  47,531    (379) 

 

 

27,772

 

 

 

(1,378

)

 

 

3,778

 

 

 

(498

)

 

 

31,550

 

 

 

(1,876

)

Mortgage-backed securities

   52,780    (541)  298    (17)  53,078    (558) 

 

 

51,517

 

 

 

(4,228

)

 

 

7,860

 

 

 

(1,381

)

 

 

59,377

 

 

 

(5,609

)

Asset-backed securities

   62,737    (493)  23,937    (90)  86,674    (583) 

 

 

97,857

 

 

 

(3,610

)

 

 

62,689

 

 

 

(5,541

)

 

 

160,546

 

 

 

(9,151

)

Commercial mortgage-backed securities

   94,366    (1,090)  69,747    (657)  164,113    (1,747) 

 

 

67,926

 

 

 

(4,072

)

 

 

27,907

 

 

 

(2,061

)

 

 

95,833

 

 

 

(6,133

)

Corporate bonds

   171,621    (2,731)  9,218    (117)  180,839    (2,848) 

 

 

261,123

 

 

 

(8,480

)

 

 

71,192

 

 

 

(6,378

)

 

 

332,315

 

 

 

(14,858

)

Foreign corporate bonds

   76,036    (673)   —      —    76,036    (673) 

 

 

150,308

 

 

 

(5,469

)

 

 

31,232

 

 

 

(2,590

)

 

 

181,540

 

 

 

(8,059

)

  

 

   

 

  

 

   

 

  

 

   

 

 

Total fixed maturities

   543,971    (6,130)  103,870    (891)  647,841    (7,021) 

 

$

992,284

 

 

$

(34,755

)

 

$

212,980

 

 

$

(19,361

)

 

$

1,205,264

 

 

$

(54,116

)

Common stock

   57,439    (2,403)   —      —    57,439    (2,403) 
  

 

   

 

  

 

   

 

  

 

   

 

 

Total

  $601,410   $(8,533)  $103,870   $(891)  $705,280   $(9,424) 
  

 

   

 

  

 

   

 

  

 

   

 

 

(1)Fixed maturities in a gross unrealized loss position for twelve months or longer are primarily comprised ofnon-credit losses on investment grade securities where management does not intend to sell, and it is more likely than not that the Company will not be forced to sell the security before recovery. The Company has analyzed these securities and has determined that they are not other than temporarily impaired.

88

Subject to the risks and uncertainties in evaluating the potential impairment of a security’s value, the impairment evaluation conducted by the Company as of December 31, 20172023 concluded the unrealized losses discussed above are non-credit losses on securities where management does not otherintend to sell, and it is more likely than temporary impairments.not that the Company will not be forced to sell the security before recovery. The impairment evaluation process is discussed in the “Investment” section of Note 34 (“Summary of Significant Accounting Policies”).

The following is a description, by asset type, of the methodology and significant inputs that the Company used to measure the amount of credit loss recognized in earnings, if any:

U.S. treasury and agency obligations —treasuries – As of December 31, 2017,2023, gross unrealized losses related to U.S. treasury and agency obligationstreasuries were $1.193$3.391 million. Of this amount, $0.231 million have beenTo assess whether the decline in an unrealizedfair value below amortized cost has resulted from a credit loss position for twelve months or greater and rated AA+. Macroeconomicother factors, macroeconomic and market analysis is conducted in evaluating these securities. Consideration is given to the interest rate environment, duration and yield curve management of the portfolio, sector allocation and security selection. Based on the analysis performed, the Company did not recognize a credit loss on U.S. treasuries during the period.

Obligations of states and political subdivisions— – As of December 31, 2017,2023, gross unrealized losses related to obligations of states and political subdivisions were $0.274$1.176 million. Of this amount, $0.125 million have beenTo assess whether the decline in an unrealizedfair value below amortized cost has resulted from a credit loss position for twelve months or greater and are rated investment grade or better. Allother factors, elements that may influence the performance of the municipal bond market are considered in evaluating these securities. The aforementioned factors includesecurities such as investor expectations, supply and demand patterns, and current versus historical yield and spread relationships. The analysis relies on the output of fixed income credit analysts, as well as dedicated municipal bond analysts who perform extensivein-house fundamental analysis on each issuer, regardless of their rating by the major agencies. Based on the analysis performed, the Company did not recognize a credit loss on obligations of states and political subdivisions during the period.

Mortgage-backed securities (“MBS”)— – As of December 31, 2017,2023, gross unrealized losses related to mortgage-backed securities were $1.291$4.475 million. Of this amount, $0.044 million have beenTo assess whether the decline in an unrealizedfair value below amortized cost has resulted from a credit loss

position for twelve months or greater. 95.5% of the unrealized losses for twelve months or greater are related to securities rated AA+ or better. Mortgage-backedother factors, mortgage-backed securities are modeled to project principal losses under downside, base, and upside scenarios for the economy and home prices. The primary assumption that drives the security and loan level modeling is the Home Price Index (“HPI”) projection. These forecasts incorporate not just national macro-economic trends, but also regional impacts to arrive at the most granular and accurate projections. These assumptions are incorporated into the model as a basis to generate delinquency probabilities, default curves, loss severity curves, and voluntary prepayment curves at the loan level within each deal. The model utilizesHPI-adjusted current LTV,loan to value, payment history, loan terms, loan modification history, and borrower characteristics as inputs to generate expected cash flows and principal loss for each bond under various scenarios. Based on the analysis performed, the Company did not recognize a credit loss on mortgage-backed securities during the period.

Asset backed securities (“ABS”)— - As of December 31, 2017,2023, gross unrealized losses related to asset backed securities were $0.393$5.091 million. Of this amount, $0.022 million have been in an unrealized loss position for twelve months or greater and are rated AA or better. The weighted average credit enhancement for the Company’s asset backed portfolio is 23.4.36.1. This represents the percentage of pool losses that can occur before an asset backed security will incur its first dollar of principal losses. EveryTo assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, every ABS transaction is analyzed on a stand-alone basis. This analysis involves a thorough review of the collateral, prepayment, and structural risk in each transaction. Additionally, the analysis includes anin-depth credit analysis of the originator and servicer of the collateral. The analysis projects an expected loss for a deal given a set of assumptions specific to the asset type. These assumptions are used to calculate at what level of losses the deal will incur its first dollar of principal loss. The major assumptions used to calculate this ratio are loss severities, recovery lags, and no advances on principal and interest. Based on the analysis performed, the Company did not recognize a credit loss on asset backed securities during the period.

Commercial mortgage-backed securities (“CMBS”)— - As of December 31, 2017,2023, gross unrealized losses related to the CMBS portfolio were $1.067$4.994 million. Of this amount, $0.544 million have been in an unrealized loss position for twelve months or greater and are rated AA+ or better. The weighted average credit enhancement for the Company’s CMBS portfolio is 24.7.47.3. This represents the percentage of pool losses that can occur before a commercial mortgage-backed security will incur its first dollar of principal loss. ForTo assess whether the Company’s CMBS portfolio,decline in fair value below amortized cost has resulted from a credit loss or other factors, a loan level analysis is utilized where every underlying CMBS loan isre-underwritten based on a set of assumptions reflecting expectations for the future path of the economy. Each loan is analyzed over time using a series of tests to determine if a credit event will occur during the life of the loan. Inherent in this process are several economic scenarios and their corresponding rent/vacancy and capital market states. The five primary credit events that frame the analysis include loan modifications, term default, balloon default, extension, and ability to pay off at balloon. The resulting output is the expected loss adjusted cash flows for each bond under the base case and distressed scenarios. Based on the analysis performed, the Company did not recognize a credit loss on commercial mortgage-backed securities during the period.

Corporate bonds— - As of December 31, 2017,2023, gross unrealized losses related to corporate bonds were $1.391$6.929 million. Of this amount, $0.637 million have beenTo assess whether the decline in an unrealizedfair value below amortized cost has resulted from a credit loss position for twelve months or greater and are rated investment grade or better. Theother factors, analysis for this asset class includes maintaining detailed financial models that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its

89

vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default. Based on the analysis performed, the Company did not recognize a credit loss on corporate bonds during the period.

Foreign bonds – As of December 31, 2023, gross unrealized losses related to foreign bonds were $3.823 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, detailed financial models are maintained that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, and the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default.

Foreign bonds— As of December 31, 2017, gross unrealized losses related to Based on the analysis performed, the Company did not recognize a credit loss on foreign bonds were $0.545 million. Of this amount, $0.240 million have been in an unrealized loss position for twelve months or greater and are rated investment grade or better. For this asset class, detailed financial models are maintained that include a projection of each issuer’s future financial performance, including prospective debt servicing capabilities, capital structure composition, andduring the value of the collateral. The analysis incorporates the macroeconomic environment, industry conditions in which the issuer operates, the issuer’s current competitive

period.

position, its vulnerability to changes in the competitive and regulatory environment, issuer liquidity, issuer commitment to bondholders, issuer creditworthiness, and asset protection. Part of the process also includes running downside scenarios to evaluate the expected likelihood of default as well as potential losses in the event of default.

Common stock— As of December 31, 2017, gross unrealized losses related to common stock were $3.260 million. All unrealized losses have been in an unrealized loss position for less than twelve months. To determine if an other than temporary impairment of an equity security has occurred, the Company considers, among other things, the severity and duration of the decline in fair value of the equity security. The Company also examines other factors to determine if the equity security could recoverhas evaluated its value in a reasonable period of time.investment portfolio and has determined that an allowance for expected credit losses on its investments is not required.

The Company recorded the following other than temporary impairments (“OTTI”) on its investment portfolio for the years ended December 31, 2017, 2016,2023, 2022, and 2015:2021 and are related to securities in an unrealized loss position where the Company had an intent to sell the securities:

   Years Ended December 31, 
(Dollars in thousands)  2017   2016   2015 

Fixed maturities:

      

OTTI losses, gross

  $(31)   $(259)   $(24) 

Portion of loss recognized in other comprehensive income(pre-tax)

   —      —      —   
  

 

 

   

 

 

   

 

 

 

Net impairment losses on fixed maturities recognized in earnings

   (31)    (259)    (24) 

Equity securities

   (2,575)    (6,474)    (7,311) 
  

 

 

   

 

 

   

 

 

 

Total

  $(2,606)   $(6,733)   $(7,335) 
  

 

 

   

 

 

   

 

 

 

 

 

Years Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022 (1)

 

 

2021

 

Fixed maturities:

 

 

 

 

 

 

 

 

 

Impairment related to intent to sell

 

$

—

 

 

$

(26,205

)

 

$

—

 

Total

 

$

—

 

 

$

(26,205

)

 

$

—

 

(1) In response to a rising interest rate environment, the Company took action early in April 2022 to shorten the duration of its fixed maturities portfolio. In connection with these actions, the Company identified fixed maturities securities with a weighted average life of five years or greater as having an intent to sell resulting in other-than-temporary impairment losses. The following table is an analysismajority of which were sold in the 2nd quarter of 2022. Most of the credit losses recognized in earnings onproceeds from the sale of these securities were reinvested into fixed income investments with maturities held byof two years. As a result of these actions, the Company as ofCompany's book yield rose over time. Book yield was approximately 2.2% at December 31, 2017, 2016,2021 and 2015 for which a portion of the OTTI loss was recognized in other comprehensive income.4.0% at December 31, 2023.

   Years Ended
December 31,		 
(Dollars in thousands)  2017   2016   2015 

Balance at beginning of period

  $31   $31   $50 

Additions where no OTTI was previously recorded

   —      —      —   

Additions where an OTTI was previously recorded

   —      —      —   

Reductions for securities for which the company intends to sell or more likely than not will be required to sell before recovery

   —      —      —   

Reductions reflecting increases in expected cash flows to be collected

   —      —      —   

Reductions for securities sold during the period

   (18)    —      (19) 
  

 

 

   

 

 

   

 

 

 

Balance at end of period

  $13   $31   $31 
  

 

 

   

 

 

   

 

 

 

Accumulated Other Comprehensive Income (Loss), Net of Tax

Accumulated other comprehensive income (loss), net of tax, as of December 31, 20172023 and 20162022 was as follows:

  December 31, 

 

December 31,

 

(Dollars in thousands)  2017   2016 

 

2023

 

 

2022

 

Net unrealized gains (losses) from:

    

Net unrealized gains (losses) from:

 

 

 

 

 

 

Fixed maturities

  $(1,707)   $(1,308) 

 

$

(28,299

)

 

$

(53,525

)

Common stock

   15,314    1,042 

Foreign currency fluctuations

   551    —   

 

 

(187

)

 

 

(127

)

Deferred taxes

   (5,175)    (352) 

 

 

5,623

 

 

 

10,594

 

  

 

   

 

 

Accumulated other comprehensive income, net of tax

  $8,983   $(618) 
  

 

   

 

 

Accumulated other comprehensive income (loss), net of tax

 

$

(22,863

)

 

$

(43,058

)

The following tables present the changes in accumulated other comprehensive income net of tax,(loss) by componentcomponents, for the years ended December 31, 20172023 and 2016:2022:

Year Ended December 31, 2017

(Dollars in thousands)

  Unrealized Gains
and Losses on
Available for
Sale Securities,
Net of Tax		   Foreign Currency
Items, Net of Tax		   Accumulated Other
Comprehensive
Income, Net of Tax		 

Beginning balance

  $(554)   $(64)   $(618) 

Other comprehensive income (loss) before reclassification

   9,455    994    10,449 

Amounts reclassified from accumulated other comprehensive income (loss)

   (629)    (219)    (848) 
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   8,826    775    9,601 
  

 

 

   

 

 

   

 

 

 

Ending balance

  $8,272   $711   $8,983 
  

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2023
(Dollars in thousands)

 

Unrealized Gains
and Losses on
Available for Sale
Securities

 

 

Foreign Currency
Items

 

 

Accumulated Other
Comprehensive
Income (Loss)

 

Beginning balance, net of tax

 

$

(42,958

)

 

$

(100

)

 

$

(43,058

)

Other comprehensive income (loss) before reclassification, before tax

 

 

23,572

 

 

 

(60

)

 

 

23,512

 

Amounts reclassified from accumulated other comprehensive income, before tax

 

 

1,654

 

 

 

—

 

 

 

1,654

 

Other comprehensive income (loss), before tax

 

 

25,226

 

 

 

(60

)

 

 

25,166

 

Income tax benefit (expense)

 

 

(4,983

)

 

 

12

 

 

 

(4,971

)

Ending balance, net of tax

 

$

(22,715

)

 

$

(148

)

 

$

(22,863

)

Year Ended December 31, 2016

(Dollars in thousands)

  Unrealized Gains
and Losses on
Available for
Sale Securities,
Net of Tax		   Foreign Currency
Items, Net of Tax		   Accumulated Other
Comprehensive
Income, Net of Tax		 

Beginning balance

  $4,200   $(122)   $4,078 

Other comprehensive income (loss) before reclassification

   10,374    (261)    10,113 

Amounts reclassified from accumulated other comprehensive income (loss)

   (15,128)    319    (14,809) 
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

   (4,754)    58    (4,696) 
  

 

 

   

 

 

   

 

 

 

Ending balance

  $(554)   $(64)   $(618) 
  

 

 

   

 

 

   

 

 

 

90

Year Ended December 31, 2022
(Dollars in thousands)

 

Unrealized Gains
and Losses on
Available for Sale
Securities

 

 

Foreign Currency
Items

 

 

Accumulated Other
Comprehensive
Income (Loss)

 

Beginning balance, net of tax

 

$

6,519

 

 

$

(115

)

 

$

6,404

 

Other comprehensive income (loss) before reclassification, before tax

 

 

(101,255

)

 

 

18

 

 

 

(101,237

)

Amounts reclassified from accumulated other comprehensive income, before tax

 

 

39,610

 

 

 

—

 

 

 

39,610

 

Other comprehensive income (loss), before tax

 

 

(61,645

)

 

 

18

 

 

 

(61,627

)

Income tax benefit (expense)

 

 

12,168

 

 

 

(3

)

 

 

12,165

 

Ending balance, net of tax

 

$

(42,958

)

 

$

(100

)

 

$

(43,058

)

The reclassifications out of accumulated other comprehensive income (loss) for the years ended December 31, 20172023 and 20162022 were as follows:

(Dollars in thousands)     Amounts Reclassified
from Accumulated
Other Comprehensive
Income Years Ended
December 31,		 

 

Amounts Reclassified from
Accumulated Other
Comprehensive Income

 

 

Years Ended December 31,

 

Details about Accumulated Other

Comprehensive Income Components

  

Affected Line Item in the Consolidated
Statements of Operations

  2017 2016 

 

Affected Line Item in the Consolidated Statements of Operations

 

2023

 

 

2022

 

Unrealized gains and losses on available for sale securities

  Other net realized investment (gains)  $(3,921)  $(30,055) 

 

Other net realized investment (gains) losses

 

$

1,654

 

 

$

13,405

 

  Other than temporary impairment losses on investments   2,606  6,733 

 

Other than temporary impairment losses on investments

 

 

—

 

 

 

26,205

 

    

 

  

 

 

 

Total before tax

 

$

1,654

 

 

$

39,610

 

  Total before tax   (1,315)  (23,322) 

 

Income tax expense (benefit)

 

 

(304

)

 

 

(7,357

)

  Income tax expense   686  8,194 

 

Total reclassifications, net of tax

 

$

1,350

 

 

$

32,253

 

    

 

  

 

 
  Unrealized gains and losses on available for sale securities, net of tax   (629)  (15,128) 
    

 

  

 

 

Foreign currency items

  Other net realized investment (gains) losses   (336)  491 
  Income tax expense (benefit)   117  (172) 
    

 

  

 

 
  Foreign currency items, net of tax   (219)  319 
    

 

  

 

 

Total reclassifications

  Total reclassifications, net of tax  $(848)  $(14,809) 
    

 

  

 

 

Net Realized Investment Gains (Losses)

The components of net realized investment gains (losses) for the years ended December 31, 2017, 2016,2023, 2022, and 20152021 were as follows:

  Years Ended December 31, 

 

Years Ended December 31,

 

(Dollars in thousands)  2017   2016   2015 

 

2023

 

 

2022

 

 

2021

 

Fixed maturities:

      

 

 

 

 

 

 

 

 

 

Gross realized gains

  $4,066   $2,947   $3,565 

 

$

49

 

 

$

688

 

 

$

11,390

 

Gross realized losses

   (3,387)    (691)    (2,180) 

 

 

(1,703

)

 

 

(40,298

)

 

 

(11,048

)

  

 

   

 

   

 

 

Net realized gains

   679    2,256    1,385 
  

 

   

 

   

 

 

Common stock:

      

Net realized gains (losses)

 

 

(1,654

)

 

 

(39,610

)

 

 

342

 

Equity securities:

 

 

 

 

 

 

 

 

 

Gross realized gains

   4,178    28,785    10,379 

 

 

1,061

 

 

 

2,289

 

 

 

15,350

 

Gross realized losses

   (3,206)    (8,210)    (8,246) 

 

 

(1,514

)

 

 

(5,681

)

 

 

(1,910

)

  

 

   

 

   

 

 

Net realized gains

   972    20,575    2,133 
  

 

   

 

   

 

 

Preferred stock:

      

Gross realized gains

   —      —      96 

Gross realized losses

   —      —      —   
  

 

   

 

   

 

 

Net realized gains

   —      —      96 
  

 

   

 

   

 

 

Net realized gains (losses)

 

 

(453

)

 

 

(3,392

)

 

 

13,440

 

Derivatives:

      

 

 

 

 

 

 

 

 

 

Gross realized gains

   3,555    3,733    —   

 

 

—

 

 

 

12,844

 

 

 

8,035

 

Gross realized losses

   (3,630)    (4,843)    (6,988) 

 

 

—

 

 

 

(2,771

)

 

 

(5,930

)

  

 

   

 

   

 

 

Net realized gains (losses) (1)

   (75)    (1,110)    (6,988) 

 

 

—

 

 

 

10,073

 

 

 

2,105

 

  

 

   

 

   

 

 

Total net realized investment gains (losses)

  $1,576   $21,721   $(3,374) 

 

$

(2,107

)

 

$

(32,929

)

 

$

15,887

 

  

 

   

 

   

 

 

(1)
Includes periodic net interest settlements related to the derivatives of $3.0 million and $5.6 million for the years ended December 31, 2022 and 2021, respectively.

The following table shows the calculation of the portion of realized gains and losses related to equity securities held as of December 31, 2023, 2022, and 2021:

 

 

Years Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Net gains (losses) recognized during the period on equity securities

 

$

(453

)

 

$

(3,392

)

 

$

13,440

 

Less: net gains (losses) recognized during the period on equity securities sold during the period

 

 

(36

)

 

 

10,577

 

 

 

4,058

 

Unrealized gains (losses) recognized during the reporting period on equity securities

 

$

(417

)

 

$

(13,969

)

 

$

9,382

 

(1)Includes $3.6 million, $4.8 million, and $5.4 million of periodic net interest settlements related to the derivatives for the years ended December 31, 2017, 2016, and 2015, respectively.

91

The proceeds from sales and redemptions of available for sale and equity securities resulting in net realized investment gains (losses) for the years ended December 31, 2017, 2016,2023, 2022, and 20152021 were as follows:

  Years Ended December 31, 

 

Years Ended December 31,

 

(Dollars in thousands)  2017   2016   2015 

 

2023

 

 

2022

 

 

2021

 

Fixed maturities

  $918,439   $381,389   $647,404 

 

$

148,164

 

 

$

933,554

 

 

$

1,065,398

 

Equity securities

   32,218    111,156    39,723 

 

 

1,158

 

 

 

88,726

 

 

 

54,691

 

Preferred stock

   —      —      1,540 

Net Investment Income

The sources of net investment income for the years ended December 31, 2017, 2016,2023, 2022, and 20152021 were as follows:

  Years Ended December 31, 

 

Years Ended December 31,

 

(Dollars in thousands)  2017   2016   2015 

 

2023

 

 

2022

 

 

2021

 

Fixed maturities

  $33,020   $30,337   $32,091 

 

$

49,987

 

 

$

33,852

 

 

$

25,751

 

Equity securities

   3,595    3,302    3,125 

 

 

917

 

 

 

1,100

 

 

 

2,692

 

Cash and cash equivalents

   894    217    82 

 

 

1,593

 

 

 

790

 

 

 

363

 

Other invested assets

   4,741    5,295    2,620 

 

 

4,463

 

 

 

(5,966

)

 

 

10,856

 

  

 

   

 

   

 

 

Total investment income

   42,250    39,151    37,918 

 

 

56,960

 

 

 

29,776

 

 

 

39,662

 

Investment expense (1)

   (2,927)    (5,168)    (3,309) 
  

 

   

 

   

 

 

Investment expense

 

 

(1,516

)

 

 

(2,149

)

 

 

(2,642

)

Net investment income

  $39,323   $33,983   $34,609 

 

$

55,444

 

 

$

27,627

 

 

$

37,020

 

  

 

   

 

   

 

 

(1)Investment expense for the year ended December 31, 2016 includes $1.5 million in upfront fees necessary to enter into a new investment. See Note 15 for additional information on the Company’s $40 million commitment related to this investment.

As of December 31, 2023 and 2022, the Company did not own any fixed maturity securities that were non-income producing for the preceding twelve months.

The Company’s total investment return on apre-tax basis for the years ended December 31, 2017, 2016,2023, 2022, and 20152021 were as follows:

  Years Ended December 31, 

 

Years Ended December 31,

 

(Dollars in thousands)  2017 2016 2015 

 

2023

 

 

2022

 

 

2021

 

Net investment income

  $39,323  $33,983  $34,609 

 

$

55,444

 

 

$

27,627

 

 

$

37,020

 

  

 

  

 

  

 

 

Net realized investment gains (losses)

   1,576  21,721  (3,374) 

 

 

(2,107

)

 

 

(32,929

)

 

 

15,887

 

Change in unrealized holding gains and losses

   14,424  (8,240)  (25,673) 
  

 

  

 

  

 

 

Change in unrealized holding gains (losses)

 

 

25,166

 

 

 

(61,627

)

 

 

(34,363

)

Net realized and unrealized investment returns

   16,000  13,481  (29,047) 

 

 

23,059

 

 

 

(94,556

)

 

 

(18,476

)

  

 

  

 

  

 

 

Total investment return

  $55,323  $47,464  $5,562 

 

$

78,503

 

 

$

(66,929

)

 

$

18,544

 

  

 

  

 

  

 

 

Total investment return %

   3.5%  3.1%  0.3% 

 

 

5.7

%

 

 

(4.7

%)

 

 

1.2

%

  

 

  

 

  

 

 

Average investment portfolio

  $1,597,487  $1,507,184  $1,752,785 
  

 

  

 

  

 

 

Average investment portfolio (1)

 

$

1,366,553

 

 

$

1,437,327

 

 

$

1,490,933

 

(1)
Average of total cash and invested assets, net of receivable/payable for securities purchased and sold, as of the beginning and end of the period.

Insurance Enhanced Asset-Backed and Credit Securities

As of December 31, 2017,2023, the Company held insurance enhanced asset-backed, commercial mortgage-backed, and credit securitiesmunicipal bonds with a market value of approximately $33.9 million. Approximately $1.6$4.9 million, of these

securities weretax-free municipal bonds, which represented approximately 0.1%0.4% of the Company’s total cash and invested assets, net of payable/receivable for securities purchased and sold. These securities had an average rating of “AA.” None of these bonds arepre-refunded with U.S. treasury securities, nor would they have carried a lower credit rating had they not been insured.

A summary of the Company’s insurance enhanced municipal bonds that are backed by financial guarantors, including thepre-refunded bonds that are escrowed in U.S. government obligations, as of December 31, 2017, is as follows:

(Dollars in thousands)

Financial Guarantor

  Total   Pre-refunded
Securities		   Government
Guaranteed
Securities		   Exposure Net
of Pre-refunded
& Government
Guaranteed
Securities		 

Municipal Bond Insurance Association

  $1,157   $—     $—     $1,157 

Gov’t National Housing Association

   425    —      425    —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total backed by financial guarantors

   1,582    —      425    1,157 

Other credit enhanced municipal bonds

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1,582    —      425    1,157 
  

 

 

   

 

 

   

 

 

   

 

 

 

In addition to thetax-free municipal bonds, the Company held $32.3 million of insurance enhanced bonds, which represented approximately 2.1% of the Company’s total invested assets, net of receivable/payable for securities purchased and sold. The insurance enhanced bonds are comprised of $21.8 million of taxable municipal bonds, $10.4 million of commercial mortgage-backed securities, and $0.1 million of asset-backed securities. The financial guarantors of the Company’s $32.3$4.9 million of insurance enhanced asset-backed, commercial-mortgage-backed, and taxable municipal securitiesbonds include Municipal Bond Insurance Association ($6.4 million), Assured Guaranty Corporation ($15.53.7 million), and Federal Home Loan Mortgage CorporationAmbac Financial Group ($10.41.2 million).

The Company had no direct investments in the entities that have provided financial guarantees or other credit support to any security held by the Company at December 31, 2017.2023.

Bonds Held on Deposit

Certain cash balances,and cash equivalents equity securities, and bonds available for sale were deposited with various governmental authorities in accordance with statutory requirements, were held as collateral, pursuant to borrowing arrangements, or were held in trust pursuant to intercompany reinsurance agreements. trust. The fair values were as follows as of December 31, 20172023 and 2016:2022:

 

 

Estimated Fair Value

 

(Dollars in thousands)

 

December 31, 2023

 

 

December 31, 2022

 

On deposit with governmental authorities

 

$

19,262

 

 

$

19,290

 

Held in trust pursuant to third-party requirements

 

 

150,796

 

 

 

161,901

 

Total (1)

 

$

170,058

 

 

$

181,191

 

92

(1)
Includes cash and cash equivalents of $9.0 million and $3.7 million at December 31, 2023 and December 31, 2022, respectively, with the remainder related to bonds available for sale.

   Estimated Fair Value 
(Dollars in thousands)  December 31,
2017		   December 31,
2016		 

On deposit with governmental authorities

  $26,852   $29,079 

Intercompany trusts held for the benefit of U.S. policyholders

   328,494    351,002 

Held in trust pursuant to third party requirements

   94,098    88,178 

Letter of credit held for third party requirements

   3,944    4,871 

Securities held as collateral for borrowing arrangements (1)

   88,040    85,939 
  

 

 

   

 

 

 

Total

  $541,428   $559,069 
  

 

 

   

 

 

 

(1)Amount required to collateralize margin borrowing facility.

Variable Interest Entities

A Variable Interest Entity (VIE)(“VIE”) refers to an investment in which an investor holds a controlling interest that is not based on the majority of voting rights. Under the VIE model, the party that has the power to exercise significant management influence and maintain a controlling financial interest in the entity’s economics is said to be the primary beneficiary, and is required to consolidate the entity within their results. Other entities that participate in a VIE, for which their financial interests fluctuate with changes in the fair value of the investment entity’s net assets but do not have significant management influence and the ability to direct the VIE’s significant economic activities are said to have a variable interest in the VIE but do not consolidate the VIE in their financial results.

The Company has variable interests in threetwo VIE’s for which it is not the primary beneficiary. These investments are accounted for under the equity method of accounting as their ownership interest exceeds 3%3% of their respective investments.

The faircarrying value of one of the Company’s VIE’s, which invests in distressed securities and assets, was $26.3$4.0 million and $32.9$4.8 million as of December 31, 20172023 and 2016,2022, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $40.5$18.3 million and $48.6$19.0 million atas of December 31, 20172023 and 2016,2022, respectively. The faircarrying value and maximum exposure to loss of a second VIE that provides financing for middle market companies,invests in Real Estate Investment Trust (“REIT”) qualifying assets was $33.8$8.2 million and $33.2 million at December 31, 2017 and 2016, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $43.8 million and $42.3 million at December 31, 2017 and 2016, respectively. During the 2nd quarter of 2017, the Company invested in a new limited partnership that also invests in distressed securities and assets and is considered a VIE. The Company’s investment in this partnership has a fair value of $17.8$9.8 million as of December 31, 2017. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $51.3 million at December 31, 2017. 2023 and 2022, respectively.The Company’s investment in VIEs is included in other invested assets on the consolidated balance sheetsheets with changes in faircarrying value recorded in the consolidated statements of operations.

6.
Derivative Instruments

Interest rate swaps areDerivatives were used by the Company primarily to reduce risks from changes in interest rates. Under the terms of therates and limit exposure to severe equity market changes. The Company used interest rate swaps the Company agrees with another partyterms to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount.

The Company accountshas also used exchange-traded futures contracts, which gave the holder the right and obligation to participate in market movements at a future date, to allow the Company to react faster to market conditions. When using derivatives, the Company posted collateral and settled variation margin in cash on a daily basis equal to the amount of the derivatives’ change in value.

The Company accounted for the interest rate swaps and futures asnon-hedge instruments and recognizesrecognized the fair value of the interest rate swaps in other assets or other liabilities on the consolidated balance sheets with the changes in fair value recognized as net realized investment gains or losses in the consolidated statements of operations. The Company iswas ultimately responsible for the valuation of the interest rate swaps. To aid in determining the estimated fair value of the interest rate swaps, the Company reliesrelied on the forward interest rate curve and information obtained from a third partythird-party financial institution.

The following table summarizes information on the location and the gross amount of the derivatives’ fair value on the consolidated balance sheets as of December 31, 2017 and 2016:

(Dollars in thousands)      December 31, 2017  December 31, 2016 

Derivatives Not Designated as Hedging

Instruments under ASC 815

  Balance Sheet
Location		   Notional
Amount		   Fair Value  Notional
Amount		   Fair Value 

Interest rate swap agreements

   Other liabilities   $200,000   $(7,968)  $200,000   $(11,524) 

The following table summarizes the net gains (losses) included in the consolidated statements of operations for changes in the fair value of the derivatives and the periodic net interest settlements under the derivatives for the years ended December 31, 2017, 2016,2023, 2022, and 2015:2021:

     Years Ended December 31, 

 

Consolidated Statements of

 

Years Ended December 31,

 

(Dollars in thousands)  Consolidated Statements of
Operations Line		  2017   2016   2015 

 

Operations Line

 

2023

 

 

2022

 

 

2021

 

Interest rate swap agreements

  Net realized investment gains

(losses)

  $(75)   $(1,110)   $(6,988) 

 

Net realized investment gains (losses)

 

$

—

 

 

$

10,073

 

 

$

2,424

 

Futures contracts on bonds

 

Net realized investment gains (losses)

 

 

—

 

 

 

—

 

 

 

(319

)

 

$

—

 

 

$

10,073

 

 

$

2,105

 

The Company terminated its outstanding interest rate swaps in the fourthquarter of 2022 and was not utilizing interest rate swap agreements as of December 31, 2022. As of December 31, 2017 and 2016,2021, the Company iswas due $3.1$1.8 million and $5.3 million, respectively, for funds it needed to post to execute the swap transaction and $9.5$9.8 million and $12.6 million, respectively, for margin calls made in connection with the interest rate swaps. These amounts are included in other assets on the consolidated balance sheets. There are no outstanding amounts related to the interest rate swap agreements on the consolidated balance sheets as of December 31, 2023 or 2022.

7.Fair Value Measurements
7.
Fair Value Measurements

The accounting standards related to fair value measurements define fair value, establish a framework for measuring fair value, outline a fair value hierarchy based on inputs used to measure fair value, and enhance disclosure requirements for fair value measurements. These standards do not change existing guidance as to whether or not an instrument is carried at fair value. The Company has determined that its fair value measurements are in accordance with the requirements of these accounting standards.

93

The Company’s invested assets and derivative instruments are carried at their fair value and are categorized based upon a fair value hierarchy:

•
Level 1 —– inputs utilize quoted prices (unadjusted) in active markets for identical assets that the Company has the ability to access at the measurement date.

•
Level 2 —– inputs utilize other than quoted prices included in Level 1 that are observable for similar assets, either directly or indirectly.

•
Level 3 —– inputs are unobservable for the asset, and include situations where there is little, if any, market activity for the asset.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset.

The following table presents information about the Company’s invested assets and derivative instruments measured at fair value on a recurring basis as of December 31, 20172023 and 2016,2022 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

As of December 31, 2017 Fair Value Measurements 

As of December 31, 2023

 

Fair Value Measurements

 

(Dollars in thousands) Level 1 Level 2 Level 3 Total 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

    

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities:

    

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and agency obligations

 $104,680  $—    $—    $104,680 

U.S. treasuries

 

$

494,223

 

 

$

—

 

 

$

—

 

 

$

494,223

 

Obligations of states and political subdivisions

  —    95,114   —    95,114 

 

 

—

 

 

 

26,150

 

 

 

—

 

 

 

26,150

 

Mortgage-backed securities

  —    149,350   —    149,350 

 

 

—

 

 

 

58,927

 

 

 

—

 

 

 

58,927

 

Commercial mortgage-backed securities

  —    139,795   —    139,795 

 

 

—

 

 

 

79,080

 

 

 

—

 

 

 

79,080

 

Asset-backed securities

  —    203,701   —    203,701 

 

 

—

 

 

 

202,952

 

 

 

—

 

 

 

202,952

 

Corporate bonds

  —    423,390   —    423,390 

 

 

—

 

 

 

291,713

 

 

 

—

 

 

 

291,713

 

Foreign corporate bonds

  —    125,407   —    125,407 

 

 

—

 

 

 

140,748

 

 

 

—

 

 

 

140,748

 

 

 

  

 

  

 

  

 

 

Total fixed maturities

 104,680  1,136,757   —    1,241,437 

 

 

494,223

 

 

 

799,570

 

 

 

—

 

 

 

1,293,793

 

Common stock

 140,229   —     —    140,229 
 

 

  

 

  

 

  

 

 

Total assets measured at fair value (1)

 $244,909  $1,136,757  $—    $1,381,666 
 

 

  

 

  

 

  

 

 

Liabilities:

    

Derivative instruments

 $—    $7,968  $—    $7,968 
 

 

  

 

  

 

  

 

 

Total liabilities measured at fair value

 $—    $7,968  $—    $7,968 
 

 

  

 

  

 

  

 

 

Equity securities

 

 

—

 

 

 

16,508

 

 

 

—

 

 

 

16,508

 

Total assets measured at fair value

 

$

494,223

 

 

$

816,078

 

 

$

—

 

 

$

1,310,301

 

(1)Excluded from the table above are limited partnerships of $77.8 million at December 31, 2017 whose fair value is based on net asset value as a practical expedient.

As of December 31, 2016 Fair Value Measurements 

As of December 31, 2022

 

Fair Value Measurements

 

(Dollars in thousands) Level 1 Level 2 Level 3 Total 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

    

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturities:

    

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and agency obligations

 $72,047  $—    $—    $72,047 

U.S. treasuries

 

$

344,103

 

 

$

—

 

 

$

—

 

 

$

344,103

 

Obligations of states and political subdivisions

  —    156,446   —    156,446 

 

 

—

 

 

 

31,595

 

 

 

—

 

 

 

31,595

 

Mortgage-backed securities

  —    88,468   —    88,468 

 

 

—

 

 

 

61,156

 

 

 

960

 

 

 

62,116

 

Commercial mortgage-backed securities

  —    183,192   —    183,192 

 

 

—

 

 

 

98,664

 

 

 

—

 

 

 

98,664

 

Asset-backed securities

  —    233,991   —    233,991 

 

 

—

 

 

 

189,073

 

 

 

327

 

 

 

189,400

 

Corporate bonds

  —    380,027   —    380,027 

 

 

—

 

 

 

336,767

 

 

 

2,013

 

 

 

338,780

 

Foreign corporate bonds

  —    125,860   —    125,860 

 

 

—

 

 

 

183,540

 

 

 

—

 

 

 

183,540

 

 

 

  

 

  

 

  

 

 

Total fixed maturities

 72,047  1,167,984   —    1,240,031 

 

 

344,103

 

 

 

900,795

 

 

 

3,300

 

 

 

1,248,198

 

Common stock

 120,557   —     —    120,557 
 

 

  

 

  

 

  

 

 

Total assets measured at fair value (1)

 $192,604  $1,167,984  $—    $1,360,588 
 

 

  

 

  

 

  

 

 

Liabilities:

    

Derivative instruments

 $—    $11,524  $—    $11,524 
 

 

  

 

  

 

  

 

 

Total liabilities measured at fair value

 $—    $11,524  $—    $11,524 
 

 

  

 

  

 

  

 

 

Equity securities

 

 

—

 

 

 

16,249

 

 

 

1,271

 

 

 

17,520

 

Total assets measured at fair value

 

$

344,103

 

 

$

917,044

 

 

$

4,571

 

 

$

1,265,718

 

(1)Excluded from the table above are limited partnerships of $66.1 million at December 31, 2016 whose fair value is based on net asset value as a practical expedient.

The securities classified as Level 1 in the above tabletables consist of U.S. Treasuries and equity securitiestreasuries actively traded on an exchange.

The securities classified as Level 2 in the above tabletables consist primarily of fixed maturity securitiesmaturities and derivative instruments.preferred stocks. Based on the typical trading volumes and the lack of quoted market prices for fixed maturities and preferred stocks, security prices are derived through recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information. If there are no recent reported trades, matrix or model processes are used to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Included in the pricing of asset-backed securities, collateralized mortgage obligations, and mortgage-backed securities are estimates of the rate of future prepayments of principal over the remaining life of the securities. Such estimates are derived based on the characteristics of the underlying structure and prepayment speeds previously experienced at the interest rate levels projected for the underlying collateral.

94

The estimated fair value of the derivative instruments, consisting of interest rate swaps, is obtained from a third party financial institution that utilizes observable inputs such as the forward interest rate curve.

For the Company’s material debt arrangements, the current fair value of the Company’s debt at December 31, 2017 and 2016 was as follows:

   December 31, 2017   December 31, 2016 
(Dollars in thousands)  Carrying
Value		   Fair Value   Carrying
Value		   Fair Value 

Margin Borrowing Facility

  $72,230   $72,230   $66,646   $66,646 

7.75% Subordinated Notes due 2045 (1)

   96,619    100,059    96,497    95,697 

7.875% Subordinated Notes due 2047 (2)

   125,864    130,429    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $294,713   $302,718   $163,143   $162,343 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)As of December 31,2017 and 2016, the carrying value and fair value of the 7.75% Subordinated Notes due 2045 are net of unamortized debt issuance cost of $3.4 million and $3.5 million, respectively.
(2)As of December 31, 2017, the carrying value and fair value of the 7.875% Subordinated Notes due 2047 are net of unamortized debt issuance cost of $4.1 million.

The fair value of the margin borrowing facility approximates its carrying value due to the facility being due on demand. The subordinated notes due 2045 and 2047 are publicly traded instruments and areinvestments classified as Level 13 in the fair value hierarchy.above table consist of fixed maturities and equity securities with unobservable inputs.

There were no transfers between Level 1 and Level 2 during the years ended December 31, 2017, 2016, and 2015.

The following table presents changes in Level 3 investments measured at fair value on a recurring basis for the year ended December 31, 2017 and 2016:

   Years Ended
December 31,		 
(Dollars in thousands)  2017   2016 

Beginning balance

  $—     $—   

Total gains (realized / unrealized):

    

Amortization of bond premium and discount, net

   —      75 

Included in realized gains (losses)

   —      486 

Purchases

   —      27,303 

Sales

   —      (27,864) 
  

 

 

   

 

 

 

Ending balance

  $—     $—   
  

 

 

   

 

 

 

The investments classified as Level 3 in the above table consist of privately placed debt instruments purchased in 2017 with unobservable inputs. The Company does not have access to daily valuations; therefore, market trades,

performance of the underlying assets, and key risks are considered in order to estimate fair values of these middle market corporate debt instruments. In the fourth quarter of 2016, the Company exchanged the debt instruments purchased in previous quarters of 2016, along with cash and equity related to the debt instruments, for a single interest in the Private Middle Market Loan Fund, LP, which is considered a VIE. As this investment is priced using a Net Asset Value (“NAV”) it is excluded from the level 3 investment table above. See Note 4 of the notes to the consolidated financial statements in Item 8 of Part II of this report for further information regarding the Company’s investment in VIEs for the years ended December 31, 20172023, 2022, and 2016.2021:

 

 

Years Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Beginning balance

 

$

4,571

 

 

$

2,769

 

 

$

—

 

Total gains (realized / unrealized):

 

 

 

 

 

 

 

 

 

Included in accumulated other comprehensive income

 

 

30

 

 

 

(21

)

 

 

(35

)

Included in earnings attributable to realized gains / losses

 

 

(290

)

 

 

(61

)

 

 

60

 

Transfers into level 3

 

 

—

 

 

 

857

 

 

 

1,400

 

Transfers out of level 3

 

 

—

 

 

 

—

 

 

 

(1,815

)

Amortization of bond premium and discount, net

 

 

5

 

 

 

6

 

 

 

1

 

Purchases

 

 

332

 

 

 

2,304

 

 

 

3,286

 

Sales

 

 

(4,648

)

 

 

(1,283

)

 

 

(128

)

Ending balance

 

 

—

 

 

 

4,571

 

 

 

2,769

 

Gains (losses) included in earnings attributable to the change in unrealized gains (losses) related to assets still held at end of reporting period

 

$

(155

)

 

$

95

 

 

$

—

 

Fair Value of Alternative Investments

Other invested assets consist of limited liability partnerships whose carrying value approximates fair value is based on net asset value per share practical expedient. value.

The following table provides the fair value and future funding commitments related to these investments at December 31, 20172023 and 2016.2022.

  December 31, 2017  December 31, 2016 
(Dollars in thousands) Fair
Value		  Future Funding
Commitment		  Fair
Value		  Future Funding
Commitment		 

Real Estate Fund, LP (1)

 $—    $—    $—    $—   

EuropeanNon-Performing Loan Fund, LP (2)

  26,262   14,214   32,922   15,714 

Private Middle Market Loan Fund, LP (3)

  33,760   10,000   33,199   9,054 

Distressed Debt Fund, LP (4)

  17,798   33,500   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $77,820  $57,714  $66,121  $24,768 
 

 

 

  

 

 

  

 

 

  

 

 

 

 

 

December 31, 2023

 

 

December 31, 2022

 

(Dollars in thousands)

 

Fair Value

 

 

Future Funding
Commitment

 

 

Fair Value

 

 

Future Funding
Commitment

 

European Non-Performing Loan Fund, LP (1)

 

$

4,048

 

 

$

14,214

 

 

$

4,832

 

 

$

14,214

 

Mortgage Debt Fund, LP (2)

 

 

8,172

 

 

 

—

 

 

 

9,771

 

 

 

—

 

Global Debt Fund, LP (3)

 

 

26,016

 

 

 

—

 

 

 

23,573

 

 

 

—

 

Total

 

$

38,236

 

 

$

14,214

 

 

$

38,176

 

 

$

14,214

 

(1)This limited partnership invests in real estate assets through a combination of direct or indirect investments in partnerships, limited liability companies, mortgage loans, and lines of credit. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company continues to hold an investment in this limited partnership and has written the fair value down to zero.
(2)This limited partnership invests in distressed securities and assets through senior and subordinated, secured and unsecured debt and equity, in both public and privatelarge-cap and middle-market companies. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. Based on the terms of the partnership agreement, the Company anticipates its interest in this partnership to be redeemed by 2020.
(3)This limited partnership provides financing for middle market companies. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. Based on the terms of the investment management agreement, the Company anticipates its interest to be redeemed no later than 2024.
(4)This limited partnership invests in stressed and distressed debt instruments. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. Based on the terms of the partnership agreement, the Company anticipates its interest to be redeemed no later than 2027.
(1)
This limited partnership invests in distressed securities and assets through senior and subordinated, secured and unsecured debt and equity, in both public and private large-cap and middle-market companies. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets.
(2)
This limited partnership invests in REIT qualifying assets such as mortgage loans, investor property loans, and commercial mortgage loans. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets.
(3)
This limited partnership invests in performing, stressed or distressed securities and loans across the global fixed income markets. The Company does have the contractual option to withdraw all or a portion of its limited partnership interest by providing notice to the fund.

Limited Liability Companies and Limited Partnerships with ownership interest exceeding 3%

The Company uses the equity method to account for investments in limited liability companies and limited partnerships where its ownership interest exceeds 3%3%. The equity method of accounting for an investment in a limited liability companycompanies and limited partnershippartnerships requires that its cost basis be updated to account for the income

or loss earned on the investment. In the Fair Value of Alternative Investments table above, all of the investments are booked on a one quarter lag due to non-availability of data at the time the financial statements are prepared. The investment income (loss) associated with thesethe limited liability companies orand limited partnerships whichwhose ownership interest exceeds 3% is reflected in the consolidated statements of operations was $4.7in the amounts of $0.8 million, $5.2($5.0) million, and $2.5$10.0 million for the years ended December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively.

Pricing

The Company’s pricing vendors provide prices for all investment categories except for investments in limited partnerships whose fair value is based on net asset values as a practical expedient.liability companies and limited partnerships. Two primary vendors are utilized to provide prices for equity and fixed maturity securities.

95

The following is a description of the valuation methodologies used by the Company’s pricing vendors for investment securities carried at fair value:

Common stock•
Equity security prices are received from all primary and secondary exchanges.

•
Corporate and agency bonds, as well as preferred stock, are evaluated by utilizing terms and conditions sourced from commercial vendors.a spread to a benchmark curve. Bonds with similar characteristics are grouped into specific sectors. BothInputs for both asset classes use standard inputsconsist of trade prices, broker quotes, the new issue market, and utilize bid price or spread, quotes, benchmark yields, discount rates, market data feeds, and financial statements.prices on comparable securities.

•
Data from commercial vendors is aggregated with market information, then converted into a prepayment/spread/LIBOR curvean option adjusted spread (“OAS”) matrix and prepayment model used for commercialcollateralized mortgage obligations (“CMO”). CMOs are categorized with mortgage-backed securities in the tables listed above. For asset-backed securities, spread data is derived from market information along with trusteetrade prices, dealer quotations, and servicer reports is converted into spreads to interpolated benchmark curve.research reports. For both asset classes, evaluations utilize standard inputs plus new issue data, monthly payment information, and collateral performance. The evaluated pricing models incorporate discount rates, loan level information,cash flows, broker quotes, market trades, historical prepayment speeds, treasury benchmarks, and LIBOR and swap curves.dealer projected speeds.

•
For obligations of state and political subdivisions, an integrated evaluationattribute-based modeling system is used. The pricing models incorporatemodel incorporates trades, spreads, benchmark curves, market data feeds, new issue data,clearing yields, market color, and trustee reports.fundamental credit research.

•
U.S. treasuries are evaluated by obtaining feeds from a number of live data sources including active market makersprimary and secondary dealers as well as inter-dealer brokers.

•
For mortgage-backed securities, various external analytical products are utilized and purchased from commercial vendors.

The Company performs certain procedures to validate whether the pricing information received from the pricing vendors is reasonable, to ensure that the fair value determination is consistent with accounting guidance, and to ensure that its assets are properly classified in the fair value hierarchy. The Company’s procedures include, but are not limited to:

•
Reviewing periodic reports provided by the Investment Manager that provides information regarding rating changes and securities placed on watch. This procedure allows the Company to understand why a particular security’s market value may have changed or may potentially change.

•
Understanding and periodically evaluating the various pricing methods and procedures used by the Company’s pricing vendors to ensure that investments are properly classified within the fair value hierarchy.

•
On a quarterly basis, the Company corroborates investment security prices received from its pricing vendors by obtaining pricing from a second pricing vendor for a sample of securities.

During 20172023 and 2016,2022, the Company has not adjusted quotes or prices obtained from the pricing vendors.

8.
Goodwill and Intangible Assets

Goodwill

8.Goodwill and Intangible Assets

Goodwill

As a result of acquisitionsan acquisition in 2015 and 2010, the Company has goodwill of $4.8 million within the Personal Lines segment, of $6.5 million as of December 31, 2017 and 2016.Penn-America segment. The goodwill represents the excess purchase price over the Company’s best estimate of the fair value of the assets acquired.

As a result of an acquisition in 2015, the Company had goodwill of $1.7 million. Of this amount, $0.6 million was allocated to its Farm, Ranch & Stable business and $1.1 million was allocated to its specialty property business. This goodwill, which was part of the Non-Core Operations segment, was impaired due to the sale of the renewal rights related to Farm, Ranch & Stable business and manufactured and dwelling homes business. An impairment loss of $0.6 million and $1.1 million was included in corporate and other operating expenses on the Company’s consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively. Please see Note 2 for additional information on the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business and the Company's manufactured and dwelling homes business.

Impairment testing performed in 2017 and 20162023 did notnot result in an impairment of the goodwill acquired.

96

The changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022 are as follows:

(Dollars in thousands)

 

Penn-America

 

 

Non-Core Operations

 

 

Total

 

Balance as of January 1, 2022

 

$

4,820

 

 

$

578

 

 

$

5,398

 

Impairment

 

 

—

 

 

 

(578

)

 

 

(578

)

Balance as of December 31, 2022

 

 

4,820

 

 

 

—

 

 

 

4,820

 

Impairment

 

 

—

 

 

 

—

 

 

 

—

 

Balance as of December 31, 2023

 

$

4,820

 

 

$

—

 

 

$

4,820

 

Accumulated impairment losses were $0.6 million at December 31, 2022. There were no accumulated impairment losses at December 31, 2023.

Intangible assets

The following table presents details of the Company’s intangible assets as of December 31, 2017:2023:

(Dollars in thousands)

Description

  Useful Life   Cost   Accumulated
Amortization		   Net
Value		 

 

Weighted Average Amortization Period

 

Cost

 

 

Accumulated
Amortization

 

 

Impairment

 

 

Net Value

 

Trademarks

   Indefinite   $4,800   $—     $4,800 

 

Indefinite

 

$

4,800

 

 

$

—

 

 

$

—

 

 

$

4,800

 

Tradenames

   Indefinite    4,200    —      4,200 

 

Indefinite

 

 

4,200

 

 

 

—

 

 

 

—

 

 

 

4,200

 

State insurance licenses

   Indefinite    10,000    —      10,000 

 

Indefinite

 

 

5,000

 

 

 

—

 

 

 

—

 

 

 

5,000

 

Customer relationships

   15 years    5,300    2,724    2,576 

 

15 years

 

 

5,300

 

 

 

4,844

 

 

 

—

 

 

 

456

 

Agent relationships

   10 years    900    270    630 

Trade names

   7 years    600    257    343 
    

 

   

 

   

 

 

 

 

 

$

19,300

 

 

$

4,844

 

 

$

—

 

 

$

14,456

 

    $25,800   $3,251   $22,549 
    

 

   

 

   

 

 

The following table presents details of the Company’s intangible assets as of December 31, 2016:2022:

(Dollars in thousands)

Description

  Useful Life   Cost   Accumulated
Amortization		   Net
Value		 

 

Weighted Average Amortization Period

 

Cost

 

 

Accumulated
Amortization

 

 

Impairment

 

 

Net Value

 

Trademarks

   Indefinite   $4,800   $—     $4,800 

 

Indefinite

 

$

4,800

 

 

$

—

 

 

$

—

 

 

$

4,800

 

Tradenames

   Indefinite    4,200    —      4,200 

 

Indefinite

 

 

4,200

 

 

 

—

 

 

 

—

 

 

 

4,200

 

State insurance licenses

   Indefinite    10,000    —      10,000 

 

Indefinite

 

 

10,000

 

 

 

—

 

 

 

5,000

 

 

 

5,000

 

Customer relationships

   15 years    5,300    2,369    2,931 

 

15 years

 

 

5,300

 

 

 

4,490

 

 

 

—

 

 

 

810

 

Agent relationships

   10 years    900    179    721 

 

10 years

 

 

900

 

 

 

649

 

 

 

251

 

 

 

—

 

Trade names

   7 years    600    173    427 

Tradenames

 

7 years

 

 

600

 

 

 

600

 

 

 

—

 

 

 

—

 

    

 

   

 

   

 

 

 

 

 

$

25,800

 

 

$

5,739

 

 

$

5,251

 

 

$

14,810

 

    $25,800   $2,721   $23,079 
    

 

   

 

   

 

 

Amortization related to the Company’s definite lived intangible assets other than VOBA, was $0.5$0.4 million, $0.4 million, and $0.5 million for each of the years ended December 31, 2017, 20162023, 2022, and 2015. Amortization related to the Value of Business Added (“VOBA”)2021, respectively. The weighted average amortization period for total definite lived intangible assets was $25.5 million for the year ended15.0 years and 13.6 years at December 31, 2015. The Company did not have any amortization related to VOBA during the years ended December 31, 2017 or 2016.2023 and 2022, respectively.

The Company expects that amortization expense for the next five years will be as follows:

(Dollars in thousands)    

2018

  $529 

2019

   529 

2020

   529 

2021

   529 

2022

   443 

(Dollars in thousands)

 

 

 

2024

 

$

353

 

2025

 

 

103

 

2026

 

 

—

 

2027

 

 

—

 

2028

 

 

—

 

Intangible assets with indefinite lives

As of both December 31, 20172023 and 2016,2022, indefinite lived intangible assets, which are comprised of tradenames, trademarks, and state insurance licenses, was $14.0 million.

State licenses with a net value of $5.0 million, within the Company’s Non-Core Operations segment, were $19.0 million. The Company reviewed internal business unitimpaired due to the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business. This impairment loss of $5.0 million was included in

97

corporate and other operating expenses on the Company’s consolidated statements of operations for the year ended December 31, 2022. Please see Note 2 for additional information on the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business.

results,Other than the growth of competitors and the overall property and casualty insurance market for indicators of impairment of its indefinite lived intangible assets. Impairment testing performed in 2017 and 2016 indicated thatstate insurance licenses due to the sale of the Farm, Ranch & Stable renewal rights, there was no impairment of these assets.intangible assets with indefinite lives in 2023, 2022, and 2021.

Intangible assets with definite lives

As of December 31, 20172023 and 2016,2022, definite lived intangible assets, net of accumulated amortization, were $3.5$0.5 million and $4.1$0.8 million, respectively, and were comprised of customer relationships, agent relationships, and tradenames. The Company reviewed internal

Agent relationships with a net value of $0.1 million were impaired due to the sale of the renewal rights related to the Company's Farm, Ranch & Stable business unit results,and agent relationships with a net value of $0.2 million were impaired due to the growthsale of competitorsrenewal rights related to the Company’s manufactured and dwelling homes business. Both of these impairments were within the Company’s Non-Core Operations segment. These impairment losses of $0.1 million and $0.2 million was included in corporate and other operating expenses on the Company’s consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively. Please see Note 2 for additional information on the sale of the renewal rights related to the Company’s Farm, Ranch & Stable business and the overall propertyCompany's manufactured and casualty insurance market for indicatorsdwelling homes business.

Other than the impairments of agent relationships due to the sales of renewal rights, there was no impairment of itsintangible assets with definite lived intangible assets. Therelives in 2023, 2022, and 2021.

9.
Allowance for Expected Credit Losses - Premium Receivables and Reinsurance Receivables

For premium receivables, the allowance is based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, direct placement with collection agencies, solvency of insured or agent, terminated agents, and other relevant factors.

The following table is an analysis of the allowance for expected credit losses related to the Company's premium receivables for the years ended December 31, 2023 and 2022:

 

 

Years Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

Beginning balance

 

$

3,322

 

 

$

2,996

 

Current period provision for expected credit losses

 

 

1,636

 

 

 

1,796

 

Write-offs

 

 

(162

)

 

 

(1,470

)

Ending balance

 

$

4,796

 

 

$

3,322

 

For reinsurance receivables, the allowance is based upon the Company’s ongoing review of key aspects of amounts outstanding, including but not limited to, length of collection periods, disputes, applicable coverage defenses, insolvent reinsurers, financial strength of solvent reinsurers based on AM Best Ratings and other relevant factors.

The Company's allowance for expected credit losses related to the reinsurance receivables was no impairment of these assets in 2017 or 2016.$9.0 million at December 31, 2023 and 2022.

9.Reinsurance
10.
Reinsurance

The Company cedes risk to unrelated reinsurers on a pro rata (“quota share”) and excess of loss basis in the ordinary course of business to limit its net loss exposure on insurance contracts. Reinsurance ceded arrangements do not discharge the Company of primary liability. Moreover, reinsurers may fail to pay the Company due to a lack of reinsurer liquidity, perceived improper underwriting, and losses for risks that are excluded from reinsurance coverage and other similar factors, all of which could adversely affect the Company’s financial results.

The Company had the following reinsurance balances as of December 31, 20172023 and 2016:2022:

(Dollars in thousands)  December 31,
2017		   December 31,
2016		 

 

December 31, 2023

 

 

December 31, 2022

 

Reinsurance receivables, net

  $105,060   $143,774 

 

$

80,439

 

 

$

85,721

 

Collateral securing reinsurance receivables

   (6,584)    (13,865) 

 

 

(8,752

)

 

 

(8,937

)

  

 

   

 

 

Reinsurance receivables, net of collateral

  $98,476   $129,909 

 

$

71,687

 

 

$

76,784

 

  

 

   

 

 

Allowance for uncollectible reinsurance receivables

  $8,040   $8,040 

Allowance for expected credit losses

 

$

8,992

 

 

$

8,992

 

Prepaid reinsurance premiums

   28,851    42,583 

 

 

4,958

 

 

 

17,421

 

The reinsurance receivables above are net of a purchase accounting adjustment related to discounting acquired loss reserves to their present value and applying a risk margin to the discounted reserves. This adjustment was $1.2 million and $2.0 million at December 31, 2017 and 2016, respectively.

98

As of December 31, 2017,2023, the Company had one aggregatethe following aggregated unsecured reinsurance receivablereceivables from one reinsurer that exceeded 3%3% of shareholders’ equity from the following reinsurer. equity. Unsecured reinsurance receivables include amounts receivable for paid and unpaid losses and loss adjustment expenses, less amounts secured by collateral.

(Dollars in thousands)  Reinsurance
Receivables		   A.M. Best Ratings
(As of December 31, 2017)		 

Munich Re America Corporation

  $48,222    A+ 

(Dollars in thousands)

 

Reinsurance Receivables

 

 

AM Best Ratings
 (As of December 31, 2023)

Munich Re America Corporation

 

$

41,213

 

 

A+

The effect of reinsurance on premiums written and earned is as follows:

(Dollars in thousands)  Written   Earned 

 

Written

 

 

Earned

 

For the year ended December 31, 2017:

    

For the year ended December 31, 2023:

 

 

 

 

 

 

Direct business

  $433,922   $440,109 

 

$

350,748

 

 

$

376,288

 

Reinsurance assumed

   82,412    77,811 

 

 

65,649

 

 

 

126,611

 

Reinsurance ceded (1)

   (66,154)    (79,886) 
  

 

   

 

 

Reinsurance ceded

 

 

(17,078

)

 

 

(29,542

)

Net premiums

  $450,180   $438,034 

 

$

399,319

 

 

$

473,357

 

  

 

   

 

 

For the year ended December 31, 2016:

    

For the year ended December 31, 2022:

 

 

 

 

 

 

Direct business

  $468,046   $466,750 

 

$

573,412

 

 

$

589,131

 

Reinsurance assumed

   97,799    98,267 

 

 

154,191

 

 

 

135,896

 

Reinsurance ceded (1)

   (94,905)    (96,552) 
  

 

   

 

 

Reinsurance ceded

 

 

(136,272

)

 

 

(122,556

)

Net premiums

  $470,940   $468,465 

 

$

591,331

 

 

$

602,471

 

  

 

   

 

 

For the year ended December 31, 2015:

    

For the year ended December 31, 2021:

 

 

 

 

 

 

Direct business

  $458,185   $452,441 

 

$

584,467

 

 

$

578,171

 

Reinsurance assumed

   132,048    144,554 

 

 

97,655

 

 

 

78,880

 

Reinsurance ceded (1)

   (88,989)    (92,852) 
  

 

   

 

 

Reinsurance ceded

 

 

(102,054

)

 

 

(61,441

)

Net premiums

  $501,244   $504,143 

 

$

580,068

 

 

$

595,610

 

  

 

   

 

 

(1)Includes ceded written premiums of ($1.3) million, $35.3 million, and $55.8 million and ceded earned premiums of $13.5 million, $43.2 million and $59.5 million to American Bankers Insurance Company for the years ended December 31, 2017, 2016, and 2015, respectively.

Ceded losses and loss adjustment expenses incurred were $27.6 million, $48.7 million, and $34.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

10.Income Taxes

11.
Income Taxes

Global Indemnity Group, LLC is a publicly traded partnership for U.S. federal income tax purposes and meets the qualifying income exception to maintain partnership status. As a publicly traded partnership, Global Indemnity Group, LLC is generally not subject to federal income tax and most state income taxes. However, income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions.

As of December 31, 2017,2023, the statutory income tax rates of the countries where the Company conducts or conducted business are 35%21% in the United States, 0%0% in Bermuda, 0% in the Cayman Islands, 0% in Gibraltar, 27.08% in the Duchy of Luxembourg (for Luxembourg City), 0.25% to 2.5% in Barbados, and 25%25% onnon-trading income, 33%33% on capital gains and 12.5%12.5% on trading income in the Republic of Ireland. The statutory income tax rate of each country is applied against the expected annual taxable income of the Company in each country to calculateestimate the annual income tax expense.

The Company’sCompany's income before income taxes is derived from itsnon-U.S. subsidiaries and U.S. subsidiaries including the results of the quota share between Global Indemnity Reinsurance and the Insurance Operations, for the years ended December 31, 2017, 2016,2023, 2022 and 2015 were as follows:2021.

Year Ended December 31, 2017:

(Dollars in thousands)

  Non-U.S.
Subsidiaries		   U.S.
Subsidiaries		   Eliminations   Total 

Revenues:

        

Gross premiums written

  $212,386   $462,453   $(158,505)   $516,334 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

  $212,432   $237,748   $—     $450,180 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

  $201,165   $236,869   $—     $438,034 

Net investment income

   56,890    24,609    (42,176)    39,323 

Net realized investment gains (losses)

   (641)    2,217    —      1,576 

Other income

   216    6,366    —      6,582 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   257,630    270,061    (42,176)    485,515 

Losses and Expenses:

        

Net losses and loss adjustment expenses

   94,903    174,309    —      269,212 

Acquisition costs and other underwriting expenses

   89,153    94,580    —      183,733 

Corporate and other operating expenses

   17,399    8,315    —      25,714 

Interest expense

   16,740    42,342    (42,176)    16,906 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  $39,435   $(49,485)   $—     $(10,050) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2016:

(Dollars in thousands)

  Non-U.S.
Subsidiaries		   U.S.
Subsidiaries		   Eliminations   Total 

Revenues:

        

Gross premiums written

  $201,726   $506,061   $(141,942)   $565,845 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

  $201,690   $269,250   $—     $470,940 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

  $212,325   $256,140   $—     $468,465 

Net investment income

   48,807    19,341    (34,165)    33,983 

Net realized investment gains (losses)

   (89)    21,810    —      21,721 

Other income (loss)

   (224)    10,569    —      10,345 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   260,819    307,860    (34,165)    534,514 

Losses and Expenses:

        

Net losses and loss adjustment expenses

   95,812    168,191    —      264,003 

Acquisition costs and other underwriting expenses

   94,749    101,901    —      196,650 

Corporate and other operating expenses

   9,035    8,303    —      17,338 

Interest expense

   8,312    34,758    (34,165)    8,905 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  $52,911   $(5,293)   $—     $47,618 
  

 

 

   

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2015:

(Dollars in thousands)

  Non-U.S.
Subsidiaries		   U.S.
Subsidiaries		   Eliminations   Total 

Revenues:

        

Gross premiums written

  $345,392   $540,500   $(295,659)   $590,233 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

  $345,342   $155,902   $—     $501,244 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

  $283,448   $220,695   $—     $504,143 

Net investment income

   44,534    18,011    (27,936)    34,609 

Net realized investment losses

   (1,039)    (2,335)    —      (3,374) 

Other income (loss)

   (93)    3,493    —      3,400 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   326,850    239,864    (27,936)    538,778 

Losses and Expenses:

        

Net losses and loss adjustment expenses

   141,444    133,924    —      275,368 

Acquisition costs and other underwriting expenses

   122,999    78,304    —      201,303 

Corporate and other operating expenses

   5,928    18,520    —      24,448 

Interest expense

   4,492    28,357    (27,936)    4,913 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  $51,987   $(19,241)   $—     $32,746 
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table summarizes the components of income tax expense (benefit):expense:

   Years Ended December 31, 
(Dollars in thousands)  2017   2016   2015 

Current income tax expense (benefit):

      

Foreign

  $392   $330   $263 

U.S. Federal

   127    147    (1,785) 
  

 

 

   

 

 

   

 

 

 

Total current income tax expense (benefit)

   519    477    (1,522) 

Deferred income tax expense (benefit):

      

U.S. tax rate change

   17,524    —      —   

U.S. Federal

   (18,542)    (2,727)    (7,201) 
  

 

 

   

 

 

   

 

 

 

Total deferred income tax (benefit)

   (1,018)    (2,727)    (7,201) 
  

 

 

   

 

 

   

 

 

 

Total income tax (benefit)

  $(499)   $(2,250)   $(8,723) 
  

 

 

   

 

 

   

 

 

 

 

 

Years Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Current income tax expense:

 

 

 

 

 

 

 

 

 

Foreign

 

$

14

 

 

$

4

 

 

$

54

 

U.S. Federal

 

 

2,207

 

 

 

422

 

 

 

—

 

Total current income tax expense

 

 

2,221

 

 

 

426

 

 

 

54

 

Deferred income tax expense:

 

 

 

 

 

 

 

 

 

U.S. Federal

 

 

5,326

 

 

 

2,395

 

 

 

3,395

 

Total deferred income tax expense

 

 

5,326

 

 

 

2,395

 

 

 

3,395

 

Total income tax expense

 

$

7,547

 

 

$

2,821

 

 

$

3,449

 

The weighted average expected tax provision has been calculated using income (loss) before income taxes in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate.

99

The following table summarizes the differences between the tax provision for financial statement purposes and the expected tax provision at the weighted average tax rate:

  Years Ended December 31, 

 

Years Ended December 31,

 

  2017 2016 2015 

 

2023

 

 

2022

 

 

2021

 

(Dollars in thousands)  Amount % of Pre-
Tax Income		 Amount % of Pre-
Tax Income		 Amount % of Pre-
Tax Income		 

 

Amount

 

 

% of Pre-
Tax Income

 

 

Amount

 

 

% of Pre-
Tax Income

 

 

Amount

 

 

% of Pre-
Tax Income

 

Expected tax provision at weighted average

  $(16,928)  (168.4%)  $(1,496)  (3.1%)  $(6,434)  (19.6%) 

Expected tax provision at weighted average tax rate

 

$

6,925

 

 

 

21.0

%

 

$

414

 

 

 

21.0

%

 

$

6,889

 

 

 

21.0

%

Adjustments:

       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax exempt interest

   (213)  (2.1)  (394)  (0.8)  (441)  (1.3) 

Non-deductible executive compensation

 

 

1,753

 

 

 

5.3

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Dividend exclusion

   (571)  (5.7)  (617)  (1.3)  (784)  (2.4) 

 

 

(76

)

 

 

(0.2

)

 

 

(89

)

 

 

(4.5

)

 

 

(78

)

 

 

(0.2

)

Tax rate change

   17,524  174.4   —     —     —     —   

Change in tax status

 

 

—

 

 

 

—

 

 

 

700

 

 

 

35.5

 

 

 

—

 

 

 

—

 

Parent income treated as partnership for tax

 

 

(1,260

)

 

 

(3.8

)

 

 

2,156

 

 

 

109.4

 

 

 

(4,057

)

 

 

(12.4

)

Other

   (311)  (3.2)  257  0.5  (1,064)  (3.3) 

 

 

205

 

 

 

0.6

 

 

 

(360

)

 

 

(18.3

)

 

 

695

 

 

 

2.1

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Effective income tax benefit

  $(499)  (5.0%)  $(2,250)  (4.7%)  $(8,723)  (26.6%) 
  

 

  

 

  

 

  

 

  

 

  

 

 

Effective income tax expense

 

$

7,547

 

 

 

22.9

%

 

$

2,821

 

 

 

143.1

%

 

$

3,449

 

 

 

10.5

%

The effective income tax benefitexpense rate for 20172023 was 5.0%22.9%, compared with an effective income tax benefitexpense rate of 4.7%143.1% for 2022 and 26.6% for 2016 and 2015, respectively. The increase in thean effective income tax benefitexpense rate in 2017 compared to 2016 is due to incurring a provisional tax expense of $17.5 million related to the reduction in the deferred tax asset as a result of the TCJA enacted on December 22, 2017 which lowered the U.S. tax rate from 35% to 21% offset by $18.4 million tax benefit due to an increase in losses incurred in the Company’s U.S. operations10.5% for 2017 compared to 2016.2021. The decrease in the effective income tax benefit rate in 2016 compared to 2015difference between years is primarily due to capital gainsa change in 2016.

Financial resultsincome or loss at the parent company which is treated as a partnership for the year ended December 31, 2017 reflect provisional amounts related to the December 22, 2017 enactment of the TCJA. These provisional estimates are based on the Company’s initial analysis and current interpretation of the legislation. Given the complexity of the legislation, anticipated guidance from the U.S. Treasury, and the potential for additional guidance from the Securities and Exchange Commission or the Financial Accounting Standards Board, these estimates may be adjusted during 2018.tax.

The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets at December 31, 20172023 and 20162022 are presented below:

(Dollars in thousands)  2017   2016 

 

2023

 

 

2022

 

Deferred tax assets:

    

 

 

 

 

 

 

Discounted unpaid losses and loss adjustment expenses

  $3,625   $7,015 

 

$

9,668

 

 

$

9,522

 

Unearned premiums

   5,318    8,802 

 

 

7,472

 

 

 

10,581

 

Section 163(j) carryforward

   7,906    8,075 

Alternative minimum tax credit carryover

   —      10,957 

Net operating loss carryforward

   16,323    3,205 

 

 

16,540

 

 

 

24,454

 

Partnership K1 basis differences

   130    238 

 

 

753

 

 

 

1,234

 

Capital gain on derivative instruments

   1,673    4,033 

Capital loss carryforwards

 

 

4,241

 

 

 

2,338

 

Investment impairments

   1,742    3,419 

 

 

337

 

 

 

124

 

Stock options

   1,740    2,820 

 

 

416

 

 

 

1,465

 

Stat-to-GAAP reinsurance reserve

   1,014    1,337 

 

 

1,668

 

 

 

1,668

 

Intercompany transfers

   317    808 

Unrealized loss on securities available-for-sale

 

 

5,583

 

 

 

10,568

 

Depreciation and amortization

 

 

1,368

 

 

 

1,211

 

Software

 

 

1,260

 

 

 

—

 

Other

   3,249    4,986 

 

 

998

 

 

 

1,353

 

  

 

   

 

 

Total deferred tax assets

   43,037    55,695 

 

 

50,304

 

 

 

64,518

 

  

 

   

 

 

Deferred tax liabilities:

    

 

 

 

 

 

 

Purchase accounting adjustment for American Reliable

   7,723    6,095 

Intangible assets

   2,394    3,942 

 

 

3,036

 

 

 

3,146

 

Unrealized gain on securitiesavailable-for-sale and investments in limited partnerships included in accumulated other comprehensive income

   3,105    352 

Investment basis differences

   211    484 

Deferred acquisition costs

   1,921    2,941 

 

 

8,914

 

 

 

13,628

 

Depreciation and amortization

   285    119 

Other

   1,202    805 

 

 

1,552

 

 

 

645

 

  

 

   

 

 

Total deferred tax liabilities

   16,841    14,738 

 

 

13,502

 

 

 

17,419

 

  

 

   

 

 

Total net deferred tax assets

  $26,196   $40,957 

 

$

36,802

 

 

$

47,099

 

  

 

   

 

 

The deferred tax assets and deferred tax liabilities listed in the table above relate to temporary differences between the Company’s accounting and tax carrying values and carryforwards for its companies in the United States. The net deferred tax asset at December 31, 2017 includes a $17.5 million reduction as a result of the TCJA enacted on December 22, 2017. The new tax law reduces the Company’s U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, the Company reduced its net deferred tax assets at December 31, 2017 and recorded a provisional deferred tax expense of $17.5 million increasing the effective tax rate for the year ending December 31, 2017 by 174.4%.

Management believes it is more likely than not that the remaining deferred tax assets will be completely utilized in future years. As a result, the Company has not recorded a valuation allowance at December 31, 20172023 and 2016.2022.

The Company has an alternative minimum tax (“AMT”) credit carryforward of $11.0 million as of December 31, 2017 and 2016. The TCJA repealed the corporate AMT. The AMT credit carryforward of $11.0 million was reclassed to federal income taxes receivable at December 31, 2017 and will be fully refunded by the end of 2021. The Company has a net operating loss (“NOL”) carryforward of $16.3$78.8 million as of December 31, 2017,2023, which begins to expire in 20352038 based on when the original NOL was generated. The Company’s NOL carryforward as of December 31, 20162022 was $3.2$116.4 million.

The Company has adid not have any Section 163(j) (“("163(j)”") carryforward of

$7.9 million and $8.1 million as of December 31, 2017 and 2016, respectively, which can be carried forward indefinitely.2023 or 2022. The 163(j) carryforward isrelates to the limitation on the deduction for disqualifiedbusiness interest expense paid or accrued to a related entity that is not subject to U.S. tax.accrued.

The Company and some of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various U.S. states and certain foreign jurisdictions. The Company is no longer subject to U.S. federal tax examinations by tax authorities for tax years before 2014.2020.

Should the Company’s subsidiaries that are subject to income taxes imposed by the U.S. authorities pay a dividend to their foreign affiliates, withholding taxes would apply. The Company has not recorded deferred taxes for potential withholding tax on undistributed earnings. The Company believes, although there can be no assurances, that it qualifies for treaty benefits under the Tax Convention with Luxembourg and would be subject to a 5% withholding tax if it were to pay a dividend. Determination of the unrecognized deferred tax liability related to these undistributed earnings is not practicable because of the complexities with its hypothetical calculation. The Company did not pay any dividends from a U.S. subsidiary to a foreign affiliate during 2017, 2016, or 2015.100

The Company applies amore-likely-than-not recognition threshold for all tax uncertainties whereby it only recognizes those tax benefits that have a greater than 50% likelihood of being sustained upon examination by therelevant taxing authorities. The Company had no unrecognized All tax benefits during 2017 or 2016.recognized by the Company in 2023, 2022, and 2021 have a greater than 50% likelihood of being sustained upon examination by relevant taxing authorities.

The Company classifies all interest and penalties related to uncertain tax positions as income tax expense. The Company did notnot incur any interest and penalties related to uncertain tax positions during the years ended December 31, 2017, 20162023, 2022 and 2015.2021. As of December 31, 2017,2023, the Company did notnot record any significant liabilities fortax-related interest and penalties on its consolidated balance sheets.

12.
Liability for Unpaid Losses and Loss Adjustment Expenses

11.Liability for Unpaid Losses and Loss Adjustment Expenses

Consolidated Activity

Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:

 Years Ended December 31, 

 

Years Ended December 31,

 

(Dollars in thousands) 2017 2016 2015 

 

2023

 

 

2022

 

 

2021

 

Balance at beginning of period

 $651,042  $680,047  $675,472 

 

$

832,404

 

 

$

759,904

 

 

$

662,811

 

Less: Ceded reinsurance receivables

 130,439  108,130  123,201 

 

 

73,021

 

 

 

94,443

 

 

 

82,158

 

 

 

  

 

  

 

 

Net balance at beginning of period

 520,603  571,917  552,271 

 

 

759,383

 

 

 

665,461

 

 

 

580,653

 

Purchased reserves, gross

 19,333  2,007  89,489 

Less: Purchased reserves ceded

 (29)  (45)  12,800 
 

 

  

 

  

 

 

Purchase reserves, net of third party reinsurance

 19,362  2,052  76,689 
 

 

  

 

  

 

 

Incurred losses and loss adjustment expenses related to:

   

 

 

 

 

 

 

 

 

 

Current year

 323,112  321,255  310,066 

 

 

279,609

 

 

 

367,298

 

 

 

376,306

 

Prior years

 (53,900)  (57,252)  (34,698) 

 

 

9,544

 

 

 

(8,070

)

 

 

8,658

 

 

 

  

 

  

 

 

Total incurred losses and loss adjustment expenses

 269,212  264,003  275,368 

 

 

289,153

 

 

 

359,228

 

 

 

384,964

 

 

 

  

 

  

 

 

Paid losses and loss adjustment expenses related to:

   

 

 

 

 

 

 

 

 

 

Current year

 156,325  177,006  164,058 

 

 

72,717

 

 

 

103,442

 

 

 

149,092

 

Prior years

 115,431  140,363  168,353 

 

 

198,049

 

 

 

161,864

 

 

 

151,064

 

 

 

  

 

  

 

 

Total paid losses and loss adjustment expenses

 271,756  317,369  332,411 

 

 

270,766

 

 

 

265,306

 

 

 

300,156

 

 

 

  

 

  

 

 

Net balance at end of period

 537,421  520,603  571,917 

 

 

777,770

 

 

 

759,383

 

 

 

665,461

 

Plus: Ceded reinsurance receivables

 97,243  130,439  108,130 

 

 

72,829

 

 

 

73,021

 

 

 

94,443

 

 

 

  

 

  

 

 

Balance at end of period

 $634,664  $651,042  $680,047 

 

$

850,599

 

 

$

832,404

 

 

$

759,904

 

 

 

  

 

  

 

 

When analyzing loss reserves and prior year development, the Company considers many factors, including the frequency and severity of claims, loss trends, case reserve settlements that may have resulted in significant development, and any other additional or pertinent factors that may impact reserve estimates.

During 2017,2023, the Company reducedincreased its prior accident year loss reserves by $53.9$9.5 million, which consisted of a $39.4$29.9 million increase related to Penn-America and a $20.3 million decrease related to Commercial Lines, $6.6Non-Core Operations.

The $29.9 million decrease related to Personal Lines, and a $7.9 million decrease related to Reinsurance Operations.

The $39.4 million reduction ofincrease in prior accident year loss reserves related to Commercial LinesPenn-America primarily consisted of the following:

•
General Liability:A $26.9$28.6 million reductionincrease mainly reflects higher than expected claims severity in aggregate with $6.9 million of favorable developmentaccident years 2018 through 2022, partially offset by decreases in the construction defect reserve category1998, 2000 through 2010, 2012 and $20.02014 through 2017 accident years.
•
Property: A $1.3 million of favorable developmentincrease primarily recognizes higher than expected claims severity in the other2016, 2019, 2020 and 2022 accident years, partially offset by decreases in the 2015 and 2021 accident years.

The $20.3 million decrease in prior accident year loss reserves related to Non-Core Operations primarily consisted of the following:

•
Property: A $0.8 million increase mainly recognizes higher than expected claims severity in the 2021 and 2022 accident years, partially offset by decreases in the 2016, 2018 and 2020 accident years.
•
General Liability: A $10.2 million increase primarily recognizes higher than expected claims severity in accident years prior to 1990 and 2019 through 2022, partially offset by decreases in the 1995, 2013, 2014 and 2016 through 2018 accident years.
•
Reinsurance: A $31.2 million decrease in total is comprised of a $17.7 million decrease in the property lines in the 2013 through 2021 accident years; a$7.2 million decrease was recognized in professional lines in the 2017 and 2019 through 2021 accident years, partially offset by increases in the 2016 and 2022 accident years; and a $6.3 million decrease in general liability reserve categories. The favorable developmentmainly in the construction defect reserve category recognizes lower2012 and 2019 through 2022 accident years.

101

During 2022, the Company decreased its prior accident year loss reserves by $8.1 million, which consisted of a $2.8 million increase related to Penn-America and a $10.9 million decrease related to Non-Core Operations.

The $2.8 million increase in prior accident year loss reserves related to Penn-America primarily consisted of the following:

•
General Liability: A $6.0 million increase mainly reflects higher than anticipatedexpected claims frequencyseverity in accident years prior to 1990, 1998, 2000, 2002, 2010 and severity which led to reductions primarily2016 through 2020 accident years, partially offset by decreases in the 20052006, 2007, 2009 and 2011 through 20162015 accident years. For the other general liability reserve categories,
•
Property: A $3.2 million decrease primarily recognizes lower than expected claims severity wasin the primary driver2010, 2012, 2016, 2020 and 2021 accident years, partially offset by increases in the 2011, 2015 and 2018 accident years.

The $10.9 million decrease in prior accident year loss reserves related to Non-Core Operations primarily consisted of the favorable developmentfollowing:

•
Property: A $1.4 million increase mainly reflects higher than expected claims severity in the 2016 through 2018 and 2020 accident years, partially offset by decreases in the 2019 and 2021 accident years.
•
General Liability: A $2.4 million decrease primarily recognizes lower than expected claims severity in the 1992, 2001 through 2003, 2007 through 2012 and 2014 through 2017 accident years, partially offset by increases in accident years prior to 1990 and 2018 through 2021 accident years.

•
Professional: A $2.1million decrease primarily in 2008 through 2010 and 2012 through 2015 accident years.
•
Reinsurance: A $7.6 million decrease in total is comprised of a $6.3 million decrease in the property lines primarily in the 2017 through 2021 accident years, partially offset by an increase in the 2016 accident year; a$3.6 million decrease was recognized in professional lines in the 2016 accident year; and a $2.3 million increase in general liability mainly in the 20052019 through 20142021 accident years.

During 2021, the Company increased its prior accident year loss reserves by $8.7 million, which consisted of a $1.8 million increase related to Penn-America and a $6.8 million increase related to Non-Core Operations.

The $1.8 million increase in prior accident year loss reserves related to Penn-America primarily consisted of the following:

Professional•
General Liability:A $5.8$1.2 million decrease in aggregatereduction primarily reflects lower than expected claims severity in the 20062004 through 20082009, 2014 through 2016, 2018 and 2011 through 20122020 accident years.

Property: A $6.3 million reduction in aggregate with $4.0 million of favorable developmentyears, partially offset by increases in the property excluding catastrophe reserve categories2017 and $2.32019 accident years.

•
Property: A $3.0 million of favorable development in the

property catastrophe reserve categories. The favorable development in the reserve categories excluding catastrophe experience reflects lower than expected claims severity in the 2011 through 2015 accident years. For the property catastrophe reserve categories, lower than anticipated claims severity was the driver of the favorable development in the 2011 through 2016 accident years.

Workers Compensation: A $0.5 million reductionincrease primarily due to lowerrecognizes higher than expected case incurred emergenceclaims severity mainly in the 2010, 2012, 2016, 2018 and 2020 accident years, partially offset by a decrease in the 2011, 2015, 2017, and 2019 accident year.years.
•
Professional Liability: A $0.1 million increase mainly in the 2018 accident years mainly reflecting higher than anticipated claims severity.

The $6.6$6.8 million reductionincrease of prior accident year loss reserves related to Personal LinesNon-Core Operations primarily consisted of the following:

•
Property: A $6.1$11.3 million reductionincrease in total which is primarily due to case incurred emergence on a Property Brokerage claim in the property reserve categories. The2018 accident year reflecting a higher estimated ultimate for Hurricane Michael. In addition, there were increases in the 2015, 2016, 2019 and 2020 accident years which reflects higher than expected claims severity; the increases were partially offset by a decrease in the 2017 accident year.

•
General Liability: A $1.6 million decrease primarily reflects lower than expected case incurred emergenceclaims severity in accident years prior to 1990, 2000 through 2002, 2011, 2012 and 2014 through 2017 accident years, partially offset by increases in the 1992, 2007, 2009 and 2018 through 2020 accident years.
•
Professional Liability: A $0.1 million decrease primarily in the 20162018 accident year.

•
Reinsurance: A $2.8 million decrease in total is comprised of a $1.7 million decrease in the property lines primarily in the 2015, 2017, 2018 and 2020 accident years, partially offset by an increase in the 2019 accident year and favorable development from the Butte wildfire subrogation recoverya$1.1 million decrease was recognized in the 2015 accident year.

General Liability:A $0.5 million reduction reflects lower than expected case incurred emergence in the 2016 accident year, primarily in the agriculture reserve category, partially offset by adverse developmentprofessional lines mainly in the 2015 accident year, reflecting higher than anticipatedthat the inception-to-date case incurred emergence mainlyremained zero for this claims-made segment in the dwelling reserve category.this year.

102

The $7.9 million reduction of prior accident year loss reserves related to Reinsurance Operations was primarily from the property lines for accident years 2008 through 2016. Ultimate losses were lowered in these accident years based on review of the experience reported from cedants.

During 2016, the Company reduced its prior accident year loss reserves by $57.3 million, which consisted of a $43.8 million decrease related to Commercial Lines and a $13.5 million decrease related to Reinsurance Operations.

The $43.8 million reduction of prior accident year loss reserves related to Commercial Lines primarily consisted of the following:

Property: A $0.8 million increase in aggregate with a $0.5 million increase in thenon-catastrophe segments and $0.3 million increase in the catastrophe segments. The increases reflect higher than expected case incurred emergence, primarily in the 2009, 2012, and 2015 accident years. The increases were partially offset by decreases in the 2008, 2011, and 2013 accident years due to better than expected case incurred emergence in those accident years.

General Liability:A $43.8 million reduction in aggregate, within the casualty lines, with $9.4 million of favorable development in the construction defect reserve category and $34.4 million of favorable development in the other general liability reserve categories. For the construction defect reserve category, lower than expected frequency and severity led to favorable development in accident years 2005 through 2015. Lower than expected claims severity was the driver of the favorable development in the other general liability reserve categories, primarily in the 2004 through 2014 accident years.

Marine: A $1.4 million decrease in accident years 2010 through 2012 was driven by less than expected case incurred emergence in these years which is primarily within the casualty lines.

The $13.5 million reduction of prior accident year loss reserves related to Reinsurance Operations was primarily from the property lines for accident years 2010 through 2015. Ultimate losses were lowered in these accident years based on reviews of the experience reported from cedants.

During 2015, the Company reduced its prior accident year loss reserves by $34.7 million, which consisted of a $25.2 million decrease related to Commercial Lines, a $0.4 million decrease related to Personal Lines, and a $9.1 million decrease related to Reinsurance Operations.

The $25.2 million reduction of prior accident year loss reserves related to Commercial Lines primarily consisted of the following:

General Liability: A $20.4 million reduction in aggregate, within the casualty lines, with $5.9 million of favorable development in the construction defect reserve category and $14.5 million of favorable development in the other general liability reserve categories. In the construction defect reserve category, a reduction in both claims frequency and severity was observed across several accident years which contributed to the recognition of favorable development primarily in accident years 2008 through 2014. For general liability excluding construction defect, lower than expected claims severity was experienced across multiple accident years leading to the recognition of favorable development in accident years 2004 through 2014.

Professional: A $6.2 million decrease in aggregate primarily related to better than anticipated claims frequency and severity in accident years 2006 through 2011 which is within the casualty lines.

Umbrella: A $1.6 million increase related to late case incurred emergence which contributed to the recognition of adverse development primarily in accident years 1990, 1995, 2001, 2007, and 2013. There is a small portion that is related to accidents years prior to 1990.

The $0.4 million reduction of prior accident year loss reserves related to Personal Lines primarily consisted of lower than expected case incurred emergence in the 2013 accident year.

The $9.1 million reduction of prior accident year loss reserves related to Reinsurance Operations was primarily driven by $6.8 million of favorable development in property mainly due to accident years 2011 through 2014 and $2.8 million of favorable development in the marine product mainly due to accident years 2010 and 2011, partially offset by adverse development of $1.0 million in workers compensation mainly due to accident year 2010. Ultimate losses from quota share underwriting years 2013 and prior were booked to the amount reported from cedants and reserve releases on legacy contracts due to better than anticipated case incurred emergence led to the recognition of favorable development.

Prior to 2001, the Company underwrote multi-peril business insuring general contractors, developers, andsub-contractors primarily involved in residential construction that has resulted in significant exposure to construction defect (“CD”) claims. The Company’s reserves for CD claims are established based upon management’sManagement’s best estimate in consideration of known facts, existing case law, and generally accepted actuarial methodologies. However, due to the inherent uncertainty concerning this type of business, the ultimate exposure for these claims may vary significantly from the amounts currently recorded. As of December 31, 20172023 and 2016,2022, gross reserves for CD claims were $43.8$30.4 million and $54.5$34.8 million, respectively, and net reserves for CD claims were $40.2$28.8 million and $48.6$33.4 million, respectively.

The Company has exposure to asbestos and environmental (“A&E”) claims. The asbestos exposure primarily arises from the sale of product liability insurance, and the environmental exposure arises from the sale of general liability and commercial multi-peril insurance. In establishing the liability for unpaid losses and loss adjustment expenses related to A&E exposures, management considers facts currently known and the current state of the law and coverage litigation. Liabilities are recognized for known claims (including the cost of related litigation) when sufficient information has been developed to indicate the involvement of a specific insurance policy, and management can reasonably estimate its liability. In addition, liabilities have been established to cover additional exposures on both known and unasserted claims. Estimates of the liabilities are reviewed and updated regularly. Case law continues to evolve for such claims, and uncertainty exists about the outcome of coverage litigation and whether past claim experience will be representative of future claim experience. Included in net unpaid losses and loss adjustment expenses as of December 31, 2017, 2016,2023, 2022, and 20152021 were IBNR reserves of $26.9$17.3 million, $26.7$18.9 million, and $26.0$20.1 million, respectively, and case reserves of approximately $3.3$3.8 million, $3.2$2.8 million, and $4.5$1.9 million, respectively, for knownA&E-related claims.

The following table shows the Company’s gross reserves for A&E losses:

   Years Ended December 31, 
(Dollars in thousands)  2017   2016   2015 

Gross reserve for A&E losses and loss adjustment expenses — beginning of period

  $51,919   $53,824   $56,535 

Plus: Incurred losses and loss adjustment expenses — case reserves

   542    (669)    2,666 

Plus: Incurred losses and loss adjustment expenses — IBNR

   928    2,064    (2,663) 

Less: Payments

   1,516    3,300    2,714 
  

 

 

   

 

 

   

 

 

 

Gross reserves for A&E losses and loss adjustment expenses — end of period

  $51,873   $51,919   $53,824 
  

 

 

   

 

 

   

 

 

 

 

 

Years Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Gross reserve for A&E losses and loss adjustment expenses – beginning of period

 

$

37,142

 

 

$

39,153

 

 

$

47,593

 

Plus: Change in incurred losses and loss adjustment expenses

 

 

1,419

 

 

 

2,658

 

 

 

(7,500

)

Less: Payments

 

 

1,730

 

 

 

4,669

 

 

 

940

 

Gross reserves for A&E losses and loss adjustment expenses – end of period

 

$

36,831

 

 

$

37,142

 

 

$

39,153

 

The following table shows the Company’s net reserves for A&E losses:

   Years Ended December 31, 
(Dollars in thousands)  2017   2016   2015 

Net reserve for A&E losses and loss adjustment expenses — beginning of period

  $29,890   $30,529   $31,185 

Plus: Incurred losses and loss adjustment expenses — case reserves

   769    (125)    395 

Plus: Incurred losses and loss adjustment expenses — IBNR

   198    631    (394) 

Less: Payments

   733    1,145    657 
  

 

 

   

 

 

   

 

 

 

Net reserves for A&E losses and loss adjustment expenses — end of period

  $30,124   $29,890   $30,529 
  

 

 

   

 

 

   

 

 

 

 

 

Years Ended December 31,

 

(Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Net reserve for A&E losses and loss adjustment expenses – beginning of period

 

$

21,647

 

 

$

21,985

 

 

$

28,679

 

Plus: Change in incurred losses and loss adjustment expenses

 

 

(1

)

 

 

1,962

 

 

 

(6,500

)

Less: Payments

 

 

539

 

 

 

2,300

 

 

 

194

 

Net reserves for A&E losses and loss adjustment expenses – end of period

 

$

21,107

 

 

$

21,647

 

 

$

21,985

 

Establishing reserves for A&E and other mass tort claims involves more judgment than other types of claims due to among other things,factors including, but not limited to, inconsistent court decisions, an increase in bankruptcy filings as a result of asbestos-related liabilities, and judicial interpretations that often expand theories of recovery and broaden the scope of coverage. The insurance industry continues to receive a substantial number of asbestos-related bodily injury claims, with an increasing focus being directed toward other parties, including installers of products containing asbestos rather than against asbestos manufacturers. This shift has resulted in significant insurance coverage litigation implicating applicable coverage defenses or determinations, if any, including but not limited to, determinations as to whether or not an asbestos-related bodily injury claim is subject to aggregate limits of liability found in most comprehensive general liability policies.

As of December 31, 2017, 2016,2023, 2022, and 2015,2021, the survival ratio on a gross basis for the Company’s open A&E claims was 20.715.1 years, 13.816.9 years, and 15.033.3 years, respectively. As of December 31, 2017, 2016,2023, 2022, and 2015,2021, the survival ratio on a net basis for the Company’s open A&E claims was 35.620.9 years, 19.322.8 years, and 16.863.5 years, respectively. The survival ratio, which is the ratio of gross or net reserves to the3-year average of annual paid claims, is a financial measure that indicates how long the current amount of gross or net reserves are expected to last based on the current rate of paid claims.

Line of Business Categories

The following is information, presented by lines of business with similar characteristics including similar payout patterns, about incurred and paid claims development as of December 31, 2017,2023, net of reinsurance, as well as cumulative claim frequency and the total ofincurred-but-not-reported liabilities included within the net incurred claims amounts. The years included represent the number of years for which claims incurred typically remain outstanding but need not exceed 10 years including the most recent report period presented.

103

The information about incurred and paid claims development for the years ended December 31, 20082014 to 2015,2022, is presented as required supplementary unaudited information.

Commercial LinesPenn-America

Property and Casualty Methodologies

Commercial LinesPenn-America’s internal actuarial reserve reviews were completed for loss and allocated loss adjustment expenses (“ALAE”) separately for property excluding catastrophe experience, property catastrophes, and casualty reserve categories. The internal actuarialreserve reviews were completed with data through December 2017.2023. Actuarial methodologies, such as the Loss Development and Bornhuetter-Ferguson methods, were employed to develop estimates of ultimate Lossloss & ALAE for most reserve categories. Additional actuarial methodologies were employed to develop estimates of ultimate Lossloss & ALAE for mass tort and constructions defect reserve categories due to the unique characteristics of the exposures involved. Management’s ultimate selections were based onconsidered the internal actuarial review and a third partythird-party actuarial review completed during the 4thfourth quarter of 2017.2023. Case incurred is subtracted from the management selected ultimates to obtain the booked IBNR reserves. These methodologies are consistent with last year.

Commercial LinesPenn-America’s cumulative claim frequency has been calculated at the claim level and includes claims closed without payment.

Penn-America – Property

Commercial Lines — Property

(Dollars in thousands)

   Incurred Claims and Allocated
Claims Adjustment Expenses,
Net of Reinsurance For the Years
Ended December 31,		   As of December 31, 2017 

Accident

Year

  2015   2016   2017   IBNR (1)   Cumulative
Number of Reported
Claims		 
   (unaudited)                 

2015

  $63,574   $64,722   $62,575   $2,868    4,649 

2016

     61,990    61,014    5,097    4,104 

2017

       44,785    8,583    2,778 
      

 

 

     

Total

      $168,374     
      

 

 

     

 

 

Incurred Claims and Allocated Claims Adjustment Expenses,
Net of Reinsurance

 

 

 

 

 

 

 

 

 

For the Years Ended December 31,

 

 

As of December 31, 2023

 

Accident
Year

 

2021

 

 

2022

 

 

2023

 

 

IBNR (1)

 

 

Cumulative Number
of Reported Claims

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

2021

 

$

81,703

 

 

$

80,477

 

 

$

79,278

 

 

$

2,476

 

 

 

3,599

 

2022

 

 

 

 

 

80,485

 

 

 

81,232

 

 

 

6,979

 

 

 

3,040

 

2023

 

 

 

 

 

 

 

 

72,862

 

 

 

12,067

 

 

 

2,339

 

Total

 

 

$

233,372

 

 

 

 

 

 

 

(1)Incurred-but-not-reported liabilities plus expected development on reported claims
(1)
Incurred-but-not-reported liabilities plus expected development on reported claims

Penn-America – Property

Commercial Lines — Property

(Dollars in thousands)

   Cumulative Paid Claims and Allocated
Claims Adjustment Expenses, Net of
Reinsurance For the Years Ended
December 31,		 

Accident

Year

  2015   2016   2017 
   (unaudited)         

2015

  $41,942   $57,653   $58,926 

2016

     39,643    51,967 

2017

       28,541 
      

 

 

 

Total

       139,434 

All outstanding liabilities before 2015, net of reinsurance

       7,635 
  

 

 

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

      $36,575 
  

 

 

 

 

 

Cumulative Paid Claims and Allocated Claims Adjustment Expenses,
Net of Reinsurance

 

 

 

For the Years Ended December 31,

 

Accident
Year

 

2021

 

 

2022

 

 

2023

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

2021

 

$

49,041

 

 

$

72,804

 

 

$

74,982

 

2022

 

 

 

 

 

48,646

 

 

 

71,530

 

2023

 

 

 

 

 

 

 

 

50,543

 

Total

 

 

 

197,055

 

All outstanding liabilities before 2021, net of reinsurance

 

 

 

4,560

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

 

 

$

40,877

 

The following is required supplementary information about average historical claims duration as of December 31, 2017:2023:

  Average Annual Percentage
Payout of Incurred Claims
by Age, Net of Reinsurance
(Unaudited)		 

 

Average Annual Percentage Payout of Incurred Claims by Age,
Net of Reinsurance (Unaudited)

 

Year

      1         2         3     

 

1

 

 

2

 

 

3

 

Commercial Lines — Property

   65.2%  22.7%  2.0% 

Penn-America - Property

 

 

63.7

%

 

 

29.1

%

 

 

2.7

%

Commercial Lines —

104

Penn-America – Casualty

(Dollars in thousands)

  Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,		  As of December 31,
2017		 

Accident

Year

 2008  2009  2010  2011  2012  2013  2014  2015  2016  2017  IBNR (1)  Cumulative
Number of
Reported
Claims		 
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)             

2008

 $138,417  $170,855  $160,325  $149,564  $148,019  $146,142  $138,558  $134,514  $129,894  $126,924  $7,096   6,191 

2009

   93,748   96,956   104,518   104,803   104,392   96,206   94,016   91,297   88,384   7,444   3,896 

2010

    79,188   101,830   102,252   101,113   94,484   91,368   84,681   82,824   10,785   3,503 

2011

     115,441   117,602   117,288   115,193   108,720   96,361   84,269   5,701   3,741 

2012

      61,340   65,911   65,637   63,359   55,137   52,504   11,346   2,379 

2013

       63,807   68,089  ��67,702   66,301   64,877   11,435   2,519 

2014

        61,325   60,227   58,042   56,837   15,139   2,307 

2015

         57,262   56,620   57,775   17,359   2,010 

2016

          54,130   53,776   25,895   1,750 

2017

           54,338   37,994   1,283 
          

 

 

   

Total

          $722,508   
          

 

 

   

 

 

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance

 

 

 

 

 

 

 

 

 

For the Years Ended December 31,

 

 

As of December 31, 2023

 

Accident
Year

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

IBNR (1)

 

 

Cumulative
Number of
Reported
Claims

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

2014

 

$

43,587

 

 

$

42,841

 

 

$

41,817

 

 

$

41,530

 

 

$

41,038

 

 

$

39,516

 

 

$

37,336

 

 

$

37,034

 

 

$

35,944

 

 

$

35,632

 

 

$

747

 

 

 

1,744

 

2015

 

 

 

 

 

47,299

 

 

 

46,306

 

 

 

47,055

 

 

 

46,958

 

 

 

48,462

 

 

 

45,968

 

 

 

45,439

 

 

 

45,254

 

 

 

43,764

 

 

 

1,389

 

 

 

1,774

 

2016

 

 

 

 

 

 

 

 

45,684

 

 

 

45,230

 

 

 

44,758

 

 

 

43,055

 

 

 

42,798

 

 

 

42,237

 

 

 

42,291

 

 

 

42,166

 

 

 

1,505

 

 

 

1,630

 

2017

 

 

 

 

 

 

 

 

 

 

 

46,050

 

 

 

45,970

 

 

 

44,720

 

 

 

44,078

 

 

 

45,071

 

 

 

45,581

 

 

 

45,212

 

 

 

2,031

 

 

 

1,645

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48,830

 

 

 

48,450

 

 

 

47,783

 

 

 

47,175

 

 

 

47,726

 

 

 

47,721

 

 

 

2,812

 

 

 

1,993

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

59,512

 

 

 

59,384

 

 

 

61,055

 

 

 

63,139

 

 

 

69,013

 

 

 

6,184

 

 

 

2,315

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72,149

 

 

 

71,693

 

 

 

75,412

 

 

 

86,132

 

 

 

12,837

 

 

 

2,429

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

96,705

 

 

 

96,268

 

 

 

108,042

 

 

 

33,181

 

 

 

2,998

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

123,985

 

 

 

129,796

 

 

 

72,604

 

 

 

2,947

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

122,770

 

 

 

100,176

 

 

 

1,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

$

730,248

 

 

 

 

 

 

 

(1)Incurred-but-not-reported liabilities plus expected development on reported claims
(1)
Incurred-but-not-reported liabilities plus expected development on reported claims

Penn-America – Casualty

Commercial Lines — Casualty

(Dollars in thousands)

 

Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance

 

 Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,		 

 

For the Years Ended December 31,

 

Accident

Year

 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 

 

2014

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)     

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

2008

 $7,844  $34,172  $65,700  $86,889  $100,369  $110,145  $114,546  $116,246  $117,797  $118,254 

2009

  5,564  19,154  37,653  53,738  65,721  71,108  75,181  77,771  79,896 

2010

   5,503  19,926  34,659  50,520  58,913  65,377  67,277  69,615 

2011

    5,451  21,325  41,282  56,562  64,722  72,087  74,839 

2012

   �� 3,500  11,884  22,456  31,231  36,360  39,596 

2013

      6,400  17,881  29,510  38,438  46,272 

2014

       3,968  15,690  26,268  33,697 

 

$

2,103

 

 

$

10,583

 

 

$

17,457

 

 

$

24,113

 

 

$

29,152

 

 

$

31,725

 

 

$

33,669

 

 

$

34,020

 

 

$

34,255

 

 

$

34,639

 

2015

        3,336  14,584  25,147 

 

 

 

 

 

2,903

 

 

 

11,999

 

 

 

20,459

 

 

 

28,579

 

 

 

34,932

 

 

 

37,850

 

 

 

39,078

 

 

 

40,596

 

 

 

41,655

 

2016

         4,135  14,027 

 

 

 

 

 

 

 

 

3,478

 

 

 

11,130

 

 

 

17,314

 

 

 

28,601

 

 

 

33,734

 

 

 

36,472

 

 

 

38,597

 

 

 

39,466

 

2017

          4,914 

 

 

 

 

 

 

 

 

 

 

 

4,412

 

 

 

10,286

 

 

 

19,818

 

 

 

26,834

 

 

 

31,766

 

 

 

36,672

 

 

 

39,833

 

          

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,575

 

 

 

11,622

 

 

 

17,714

 

 

 

27,571

 

 

 

34,019

 

 

 

41,133

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,818

 

 

 

12,015

 

 

 

24,082

 

 

 

38,153

 

 

 

51,672

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,795

 

 

 

14,672

 

 

 

33,882

 

 

 

55,914

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,639

 

 

 

20,405

 

 

 

44,663

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,346

 

 

 

29,358

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,378

 

Total

          506,257 

Total

 

 

 

385,711

 

All outstanding liabilities before 2008, net of reinsurance

 

 64,830 
 

 

 

All outstanding liabilities before 2014, net of reinsurance

All outstanding liabilities before 2014, net of reinsurance

 

 

 

6,948

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

 

 $281,081 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

 

 

$

351,485

 

 

 

 

The following is required supplementary information about average historical claims duration as of December 31, 2017:2023:

  Average Annual Percentage Payout of Incurred Claims by Age,
Net of Reinsurance (Unaudited)		 

 

Average Annual Percentage Payout of Incurred Claims by Age,
Net of Reinsurance (Unaudited)

 

Year

  1 2 3 4 5 6 7 8 9 10 

 

1

 

 

2

 

 

3

 

 

4

 

 

5

 

 

6

 

 

7

 

 

8

 

 

9

 

 

10

 

Commercial Lines — Casualty

   7.2%  18.3%  20.3%  16.5%  11.0%  7.3%  3.4%  2.4%  1.8%  0.4% 

Penn-America - Casualty

 

 

6.9

%

 

 

16.0

%

 

 

18.7

%

 

 

20.9

%

 

 

14.1

%

 

 

9.2

%

 

 

5.1

%

 

 

2.2

%

 

 

1.5

%

 

 

1.1

%

Personal Lines

Non-Core Operations

Property and Casualty Methodologies

Personal LinesNon-Core Operations’ internal actuarial reserve reviews were completed for loss and allocated loss adjustment expenses (ALAE)(“ALAE”) separately for property excluding catastrophe experience, property catastrophes, and casualty reserve categories. The internal actuarialreserve reviews were completed with data through December 2017.2023. Actuarial methodologies, such as the Loss Development and Bornhuetter-Ferguson methods, were employed to develop estimates of ultimate Lossloss & ALAE. Management’s ultimate selections were based onconsidered the internal actuarial review and a third partythird-party actuarial review completed during the 4thfourth quarter of 2017.2023. Case incurred is subtracted from the management selected ultimates to obtain the booked IBNR reserves. These methodologies are consistent with last year.

Personal lines are primarily comprised ofNon-Core Operations includes business acquired in the purchase of American Reliable, which occurred on January 1, 2015. The acquisition included the purchase of the business of the legal entity as well as additional books of business written by other Assurant entities. In addition, ceding arrangements subsequent to the date of the acquisition are not consistent with years prior to the

105

acquisition. As a result, it is not practical, nor would it be consistent, to include information for years prior to 2015 in the development tables for Personal Lines.

Personal Lines cumulativeNon-Core Operations. It also includes experience for reinsurance contracts which the Company does not have direct access to claim frequency has been calculated atinformation, so claim frequency information will not be provided for Non-Core Operations as it is not available for all the claim level and includes claims closed without payment.experience contained within this category.

Non-Core Operations – Property

Personal Lines — Property

(Dollars in thousands)

 

Incurred Claims and Allocated Claims Adjustment Expenses,
Net of Reinsurance

 

 

 

 

 

 

 

  Incurred Claims and Allocated Claims
Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,		   As of December 31, 2017 

 

For the Years Ended December 31,

 

 

As of December 31, 2023

 

Accident

Year

          2016                   2017           IBNR (1)   Cumulative
Number of Reported
Claims		 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

IBNR (1)

 

 

Cumulative Number
of Reported Claims

 

2016

  $146,571   $144,787    5,418    17,356 

2017

     148,016    15,743    16,384 
    

 

     

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

2020

 

$

161,353

 

 

$

164,648

 

 

$

166,076

 

 

$

160,082

 

 

$

4,502

 

 

 

—

 

2021

 

 

 

 

 

111,042

 

 

 

108,443

 

 

 

109,047

 

 

 

4,530

 

 

 

—

 

2022

 

 

 

 

 

 

 

 

44,668

 

 

 

47,558

 

 

 

1,689

 

 

 

—

 

2023

 

 

 

 

 

 

 

 

 

 

 

10,105

 

 

 

1,882

 

 

 

—

 

Total

    $292,803     

Total

 

 

 

 

$

326,792

 

 

 

 

 

 

 

    

 

     

(1)Incurred-but-not-reported liabilities plus expected development on reported claims
(1)
Incurred-but-not-reported liabilities plus expected development on reported claims

Personal Lines —Non-Core Operations – Property

(Dollars in thousands)

  Cumulative Paid Claims
and Allocated Claims
Adjustment Expenses, Net
of Reinsurance		 

 

Cumulative Paid Claims and Allocated Claims Adjustment Expenses,
Net of Reinsurance

 

  For the Years Ended
December 31,		 

 

For the Years Ended December 31,

 

Accident

Year

  2016   2017 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

2016

  $121,899   $138,289 

2017

     114,360 
    

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

2020

 

$

125,136

 

 

$

148,167

 

 

$

153,421

 

 

$

155,690

 

2021

 

 

 

 

 

84,333

 

 

 

100,865

 

 

 

102,420

 

2022

 

 

 

 

 

 

 

 

35,635

 

 

 

43,468

 

2023

 

 

 

 

 

 

 

 

 

 

 

7,802

 

Total

     252,649 

Total

 

 

 

 

 

309,380

 

All outstanding liabilities before 2016, net of reinsurance

     4,206 
    

 

 

All outstanding liabilities before 2020, net of reinsurance

All outstanding liabilities before 2020, net of reinsurance

 

 

 

34,927

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

    $44,360 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

 

 

$

52,339

 

    

 

 

The following is required supplementary information about average historical claims duration as of December 31, 2017.2023.

  Average Annual Percentage Payout of
Incurred Claims by Age, Net of
Reinsurance (Unaudited)		 

 

Average Annual Percentage Payout of Incurred Claims by Age,
Net of Reinsurance (Unaudited)

 

Year

  1 2 

 

1

 

 

2

 

 

3

 

 

4

 

Personal Lines — Property

   80.7%  11.3% 

Non-Core Operations - Property

 

 

76.9

%

 

 

15.3

%

 

 

2.4

%

 

 

1.4

%

106

Non-Core Operations – Casualty

Personal Lines — Casualty

(Dollars in thousands)

 

Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance

 

 

 

 

 

 

  Incurred Claims and Allocated
Claims Adjustment
Expenses, Net of Reinsurance
For the Years Ended December 31,		   As of December 31, 2017 

 

For the Years Ended December 31,

 

 

As of December 31, 2023

 

Accident

Year

  2015   2016   2017   IBNR (1)   Cumulative
Number of Reported
Claims		 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

IBNR (1)

 

 

Cumulative
Number of
Reported
Claims

 

  (unaudited)                 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

2015

  $18,930   $20,506   $21,850   $5,059    1,317 

 

$

31,802

 

 

$

33,731

 

 

$

35,350

 

 

$

36,534

 

 

$

35,081

 

 

$

32,297

 

 

$

30,885

 

 

$

29,905

 

 

$

29,820

 

 

$

585

 

 

 

—

 

2016

     21,476    21,073    11,345    1,370 

 

 

 

 

33,548

 

 

 

33,246

 

 

 

32,042

 

 

 

29,685

 

 

 

30,308

 

 

 

30,047

 

 

 

26,130

 

 

 

29,460

 

 

 

1,374

 

 

 

—

 

2017

       19,999    15,334    878 

 

 

 

 

 

 

 

32,645

 

 

 

32,097

 

 

 

31,138

 

 

 

32,040

 

 

 

31,077

 

 

 

31,260

 

 

 

26,168

 

 

 

1,947

 

 

 

—

 

      

 

     

2018

 

 

 

 

 

 

 

 

 

29,798

 

 

 

30,168

 

 

 

31,126

 

 

 

34,749

 

 

 

35,067

 

 

 

34,131

 

 

 

2,701

 

 

 

—

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

36,892

 

 

 

36,933

 

 

 

40,469

 

 

 

41,398

 

 

 

37,619

 

 

 

9,286

 

 

 

—

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

55,088

 

 

 

56,041

 

 

 

57,890

 

 

 

53,765

 

 

 

19,119

 

 

 

—

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76,971

 

 

 

79,396

 

 

 

81,538

 

 

 

43,560

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

109,182

 

 

 

114,189

 

 

 

83,462

 

 

 

—

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

66,102

 

 

 

58,333

 

 

 

—

 

Total

      $62,922     

Total

 

 

$

472,792

 

 

 

 

 

 

 

      

 

     

(1)Incurred-but-not-reported liabilities plus expected development on reported claims
(1)
Incurred-but-not-reported liabilities plus expected development on reported claims

Personal Lines —

Non-Core Operations – Casualty

(Dollars in thousands)

 

 

Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance

 

 

 

 

 

 

 

 

 

 

 

 

For the Years Ended December 31,

 

 

 

 

 

 

 

 

 

 

Accident
Year

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

2015

 

$

3,979

 

 

$

11,470

 

 

$

17,615

 

 

$

23,354

 

 

$

26,144

 

 

$

27,005

 

 

$

28,231

 

 

$

28,379

 

 

$

28,445

 

2016

 

 

 

 

 

4,164

 

 

 

9,782

 

 

 

14,495

 

 

 

18,196

 

 

 

19,383

 

 

 

22,005

 

 

 

23,539

 

 

 

25,791

 

2017

 

 

 

 

 

 

 

 

2,633

 

 

 

7,230

 

 

 

11,915

 

 

 

18,263

 

 

 

20,183

 

 

 

21,912

 

 

 

22,904

 

2018

 

 

 

 

 

 

 

 

 

 

 

2,063

 

 

 

6,769

 

 

 

13,320

 

 

 

19,773

 

 

 

23,041

 

 

 

25,403

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,406

 

 

 

7,814

 

 

 

15,271

 

 

 

21,877

 

 

 

25,553

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,346

 

 

 

12,074

 

 

 

18,816

 

 

 

27,235

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,820

 

 

 

11,121

 

 

 

23,355

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,517

 

 

 

14,607

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,000

 

Total

 

 

 

197,293

 

All outstanding liabilities before 2015, net of reinsurance

 

 

 

32,413

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

 

 

$

307,912

 

   Cumulative Paid Claims and
Allocated Claims Adjustment
Expenses, Net of Reinsurance		 
   For the Years Ended December 31, 

Accident

Year

  2015   2016   2017 
   (unaudited)         

2015

  $3,439   $8,757   $12,926 

2016

     3,507    6,885 

2017

       2,132 
      

 

 

 

Total

       21,943 

All outstanding liabilities before 2015, net of reinsurance

       11,672 
      

 

 

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

      $52,651 
      

 

 

 

The following is required supplementary information about average historical claims duration as of December 31, 2017:2023:

  Average Annual Percentage Payout of
Incurred Claims by Age, Net of
Reinsurance (Unaudited)		 

 

Average Annual Percentage Payout of Incurred Claims
by Age, Net of Reinsurance (Unaudited)

 

Year

  1 2 3 

 

1

 

 

2

 

 

3

 

 

4

 

 

5

 

 

6

 

 

7

 

 

8

 

 

9

 

Personal Lines — Casualty

   14.3%  20.2%  19.1% 

Non-Core Operations - Casualty

 

 

8.0

%

 

 

15.3

%

 

 

17.3

%

 

 

18.0

%

 

 

8.0

%

 

 

6.3

%

 

 

4.4

%

 

 

4.1

%

 

 

0.2

%

Reinsurance Lines

Property & Casualty Methodologies

Reinsurance Operations internal reserve reviews were completed for loss and allocated loss adjustment expenses (ALAE) combined for run off treaties and the current book of business. The current book of business is constituted of professional liability portfolios and retrocessions from Bermuda based companies for property107

catastrophe, marine business, and mortgage insurance. The reserve reviews were completed based on the latest data reported from the cedants which is typically on a quarter lag. Paid loss, ALAE and Case reserves, shown in the reinsurance category tables below, which are originally based in a foreign currency, are remeasured in U.S. dollars based on the Foreign Exchange (FX) rate at the date the cedant’s report. Management’s ultimate selections were based on a review of ultimates reported from the cedants, including loss emergence during the reporting period, and a third party actuarial review completed during the 4th quarter of 2017. Case incurred is subtracted from the management selected ultimates to obtain the booked IBNR reserves. These methodologies are consistent with last year.

The Company does not have direct access to claim frequency information underlying certain reinsurance contracts. As a result, the Company does not believe providing claim frequency information is practicable.

Reinsurance Lines — Property

(Dollars in thousands)

  Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,		  As of December 31,
2017		 

Accident

Year

 2011  2012  2013  2014  2015  2016  2017  IBNR (1)  Cumulative
Number of
Reported
Claims		 
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)             

2011

 $30,963  $28,547  $26,916  $25,994  $24,994  $24,912  $24,786  $1,028   —   

2012

   10,388   10,578   9,279   8,579   8,497   8,397   539   —   

2013

    15,153   9,948   8,197   6,698   6,345   753   —   

2014

     21,787   18,861   14,139   13,590   1,264   —   

2015

      19,877   16,738   12,526   2,977   —   

2016

       23,646   22,485   10,433   —   

2017

        43,782   26,239   —   
       

 

 

   

Total

       $131,911   
       

 

 

   

(1)Incurred-but-not-reported liabilities plus expected development on reported claims

Reinsurance Lines — Property

(Dollars in thousands)

   Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance 
   For the Years Ended December 31, 

Accident

Year

  2011   2012   2013   2014   2015   2016   2017 
   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)         

2011

  $12,044   $19,274   $20,698   $22,060   $22,426   $22,771   $23,096 

2012

     1,127    5,481    7,221    7,648    7,527    7,584 

2013

       723    4,008    5,835    5,111    5,255 

2014

         2,243    9,035    10,460    11,182 

2015

           742    5,163    6,768 

2016

             2,071    5,704 

2017

               2,152 
              

 

 

 

Total

               61,741 

All outstanding liabilities before 2011, net of reinsurance

               322 
  

 

 

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

              $70,492 
  

 

 

 

The following is required supplementary information about average historical claims duration as of December 31, 2017:

   Average Annual Percentage Payout of Incurred Claims by Age,
Net of Reinsurance (Unaudited)		 

Year

  1  2  3  4  5  6  7 

Reinsurance Lines — Property

   15.7%   39.0%   15.7%   1.1%   0.8%   1.0%   1.3% 

Reinsurance Lines — Casualty

(Dollars in thousands)

  Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,		  As of December 31,
2017		 

Accident

Year

 2008  2009  2010  2011  2012  2013  2014  2015  2016  2017  IBNR (1)  Cumulative
Number of
Reported
Claims		 
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)             

2008

 $8,906  $8,758  $8,988  $8,997  $10,167  $10,340  $10,340  $9,435  $9,835  $9,768  $291   —   

2009

   20,706   23,818   25,444   30,533   30,850   31,340   31,419   31,453   31,514   386   —   

2010

    41,831   53,279   57,916   62,628   61,062   61,792   60,701   60,573   2,015   —   

2011

     45,726   48,846   44,692   47,980   46,510   43,657   42,968   2,122   —   

2012

      15,865   15,624   17,123   17,579   17,360   17,348   1,113   —   

2013

       1,224   1,262   1,172   1,013   974   870   —   

2014

        1,988   2,095   2,060   1,957   1,954   —   

2015

         2,908   2,911   2,780   2,779   —   

2016

          3,627   3,627   3,627   —   

2017

           4,358   4,358   —   
          

 

 

   

Total

          $175,867   
          

 

 

   

(1)Incurred-but-not-reported liabilities plus expected development on reported claims

Reinsurance Lines — Casualty

(Dollars in thousands)

  Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,		 

Accident

Year

 2008  2009  2010  2011  2012  2013  2014  2015  2016  2017 
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)       

2008

 $—    $627  $1,955  $5,149  $5,648  $6,832  $8,713  $8,875  $8,919  $8,981 

2009

   1,986   9,759   11,064   12,597   13,652   15,104   30,141   31,019   31,128 

2010

    10,185   21,447   30,754   36,090   39,123   55,315   55,848   56,960 

2011

     7,968   20,072   28,495   36,020   38,907   39,815   40,079 

2012

      5,312   9,435   11,658   15,534   15,696   15,790 

2013

       123   50   62   65   65 

2014

        88   47   50   1 

2015

         107   128   1 

2016

          —     —   

2017

           —   
          

 

 

 

Total

           153,005 

All outstanding liabilities before 2008, net of reinsurance

           1,210 
 

 

 

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

          $24,072 
 

 

 

 

The following is required supplementary information about average historical claims duration as of December 31, 2017:

   Average Annual Percentage Payout of Incurred Claims by Age,
Net of Reinsurance (Unaudited)		 

Year

  1  2  3  4  5  6  7  8  9  10 

Reinsurance Lines — Casualty

   9.3%   10.3%   7.8%   12.0%   3.5%   9.2%   17.1%   2.1%   0.4%   0.6% 

The reconciliation of the net incurred and paid claims development tables to the liability for unpaid losses and loss adjustment expenses in the consolidated balance sheets as of December 31, 20172023 is as follows:

Net outstanding liabilities

  

Commercial Lines — Property

  $36,575 

Commercial Lines — Casualty

   281,081 

Personal Lines — Property

   44,360 

Personal Lines — Casualty

   52,651 

Reinsurance Lines — Property

   70,492 

Reinsurance Lines — Casualty

   24,072 
  

 

 

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

   509,231 
  

 

 

 

Reinsurance recoverable on unpaid claims

  

Commercial Lines — Property

   8,508 

Commercial Lines — Casualty

   68,786 

Personal Lines — Property

   10,608 

Personal Lines — Casualty

   7,718 

Reinsurance Lines — Property

   —   

Reinsurance Lines — Casualty

   71 
  

 

 

 

Total reinsurance recoverable on unpaid claims

   95,691 
  

 

 

 

Other outstanding liabilities

  

Commercial Lines

  

Ceded Allowance

   8,040 

Unallocated claims adjustment expenses

   16,930 

Purchase accounting adjustment

   (1,200) 

Loss Clearing

   322 

Personal Lines

  

Fronted business ceded to Assurant

   2,752 

Unallocated claims adjustment expenses

   2,190 

Loss Clearing

   (25) 

Reinsurance Lines

  

Unallocated claims adjustment expenses

   987 

Other

   (254) 
  

 

 

 

Total other outstanding liabilities

   29,742 
  

 

 

 

Total gross liability for unpaid losses and loss adjustment expenses

  $634,664 
  

 

 

 

Net outstanding liabilities

 

 

 

Penn-America – Property

 

$

40,877

 

Penn-America – Casualty

 

 

351,485

 

Non-Core Operations – Property

 

 

52,339

 

Non-Core Operations – Casualty

 

 

307,912

 

Liabilities for unpaid losses and loss adjustment expenses, net of reinsurance

 

 

752,613

 

Reinsurance recoverable on unpaid claims

 

 

 

Penn-America – Property

 

 

3,592

 

Penn-America – Casualty

 

 

22,693

 

Non-Core Operations – Property

 

 

22,100

 

Non-Core Operations – Casualty

 

 

24,446

 

Total reinsurance recoverable on unpaid claims

 

 

72,831

 

Other outstanding liabilities

 

 

 

Penn-America

 

 

 

Ceded Allowance

 

 

—

 

Unallocated claims adjustment expenses

 

 

11,654

 

Loss Clearing

 

 

(881

)

Non-Core Operations

 

 

 

Ceded Allowance

 

 

8,992

 

Unallocated claims adjustment expenses

 

 

7,016

 

Other

 

 

(1,626

)

Total other outstanding liabilities

 

 

25,155

 

Total gross liability for unpaid losses and loss adjustment expenses

 

$

850,599

 

12.Debt
13.
Debt

The Company’s outstanding debt consisted of the following at December 31, 2017 and 2016:

   December 31, 
(Dollars in thousands)  2017   2016 

Margin Borrowing Facility

  $72,230   $66,646 

7.75% Subordinated Notes due 2045

   96,619    96,497 

7.875% Subordinated Notes due 2047

   125,864    —   
  

 

 

   

 

 

 

Total

  $294,713   $163,143 
  

 

 

   

 

 

 

Margin Borrowing Facility

The Company has available a margin borrowing facility. At December 31, 2017, the borrowing rate for this facility was tied to the Fed Funds Effective rate and was approximately 1.6%. At December 31, 2016, the borrowing rate for this facility was tied to LIBOR and was approximately 1.6%. This facility is due on demand. The borrowings are subject to maintenance margin, which is a minimum account balance that must be maintained. A decline in market conditions could require an additional deposit of collateral. As of December 31, 2017, approximately $88.0 million in securities were deposited as collateral to support borrowings. The amount borrowed against the margin account may fluctuate as routine investment transactions, such as dividends received, investment income received, maturities andpay-downs, impact cash balances. The margin facility contains customary events of default, including, without limitation, insolvency, failure to make required payments, failure to comply with any representations or warranties, failure to adequately assure future performance, and failure of a guarantor to perform under its guarantee. The amount outstanding on the Company’s margin borrowing facility was $72.2 million and $66.6 million as of December 31, 2017 and 2016, respectively.

The Company recorded interest expense related to the Margin Borrowing Facility of approximately $1.0 million, $1.0 million, and $1.9 million for the years ended December 31, 2017, 2016, and 2015, respectively.

7.75%7.875% Subordinated Notes due 20452047

On August 12, 2015,April 15, 2022, the Company issued $100.0redeemed the entire $130.0 million in aggregate principal amount of its 2045 Subordinatedthe outstanding 2047 Notes through an underwritten public offering (the “2045 Notes”).

The 2045 Notes bear interest at an annual rate equal to 7.75%, payable quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, commencing November 15, 2015. The 2045 Notes mature on August 15, 2045. The Company has the right to redeem the 2045 Notes in $25 increments, in whole or in part, on and after August 15, 2020, or on any interest payment date thereafter, at a redemption price equal to 100% of the principal amount of the 2045 Notes being redeemed plus accrued and unpaid interest on the 2047 Notes redeemed to, but not including the dateRedemption Date of redemption.

The 2045 Notes are subordinated unsecured obligations and rank (i) senior toApril 15, 2022. In connection with the Company’s existing and future capital stock, (ii) senior in right of payment to future junior subordinated debt, (iii) equally in right of payment with any unsecured, subordinated debt thatredemption, the Company incurs in the future that ranks equally with the 2045 Notes, and (iv) subordinate in right of payment to any of the Company’s existing and future senior debt. In addition, the 2045 Notes are structurally subordinated to all existing and future indebtedness, liabilities and other obligations of the Company’s subsidiaries.

The 2045 Notes do not require the maintenance of any financial ratios or specified levels of net worth or liquidity, and do not contain provisions that would afford holders of the 2045 Notes protection in the event of a sudden and dramatic decline in the Company’s credit quality resulting from any highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect holders. The 2045 Notes do not restrict the Company in any way, now or in the future, from incurring additional indebtedness, including senior indebtedness that would rank senior in right of payment to the 2045 Notes. There is no right of acceleration of maturity of the 2045 Notes in the case of default in the payment of principal, premium, if any, or interest on, the 2045 Notes or in the performance of any other obligation of the Company under the 2045 Notes or if the Company defaults on any other debt securities. Holders may accelerate payment of indebtedness on the 2045 Notes only upon the Company’s bankruptcy, insolvency or reorganization.

The Company incurred $3.7 million inwrote off deferred issuance costs associated withof $3.5 million which was recognized as a loss on extinguishment of debt in its consolidated statements of operations for the 2045 Notes, which is being amortized over the term of the 2045 Notes. year ended December 31, 2022.

Interest expense, including amortization of deferred issuance costs through the date of redemption, recognized on the 20452047 Notes was $7.9 million, $7.9$3.0 million and $3.0$10.4 million for the years ended December 31, 2017, 2016,2022, and 2015,2021, respectively.

7.875% Subordinated Notes due 2047

On March 23, 2017, the Company issued Subordinated Notes due in 2047 in the aggregate principal amount of $120.0 million through an underwritten public offering (the “2047 Notes”). Pursuant to the underwriting agreement, the Company granted the underwriters a 30 day option to purchase up to an additional $18 million aggregate principal amount of the 2047 Notes solely to cover over-allotments, if any. On March 30, 2017, the underwriters exercised their over-allotment option in the amount of $10 million principal amount of the 2047 Notes. As a result, the aggregate principal amount of the 2047 Notes increased to $130.0 million. The sale of the 2047 Notes pursuant to the over-allotment option closed on March 30, 2017.

The 2047 Notes bear interest at an annual rate equal to 7.875%, payable quarterly in arrears on January 15, April 15, July 15, and October 15 of each year, commencing July 15, 2017. The 2047 Notes mature on April 15, 2047. The Company has the right to redeem the 2047 Notes in $25 increments, in whole or in part, on and after April 15, 2022, or ondid not incur any interest payment date thereafter, at a redemption price equal to 100% of the principal amount of the 2047 Notes being redeemed plus accrued and unpaid interest to, but not including, the date of redemption. If the Company redeems only a portion of the 2047 Notes on any date of redemption, the Company may subsequently redeem additional 2047 Notes.

The 2047 Notes are subordinated unsecured obligations and rank (i) senior to the Company’s existing and future capital stock, (ii) senior in right of payment to future junior subordinated debt, (iii) equally in right of payment with any existing unsecured, subordinated debt that the Company has issued or may issue in the future that ranks equally with the 2047 Notes, including the Company’s 2045 Notes and (iv) subordinate in right of payment to any of the Company’s future senior debt. In addition, the 2047 Notes are structurally subordinated to all existing and future indebtedness, liabilities and other obligations of the Company’s subsidiaries including the Company’s margin borrowing facility.

The 2047 Notes do not require the maintenance of any financial ratios or specified levels of net worth or liquidity, and do not contain provisions that would afford holders of the 2047 Notes protection in the event of a sudden and dramatic decline in the Company’s credit quality resulting from any highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect holders. The 2047 Notes do not restrict the Company in any way, now or in the future, from incurring additional indebtedness, including senior indebtedness that would rank senior in right of paymentexpense related to the 2047 Notes. There is no right of acceleration of maturity of the 2047 Notes in the case of default in the payment of principal, premium, if any, or interest on, the 2047 Notes or in the performance of any other obligation of the Company under the notes or if the Company defaults on any other debt securities. Holders may accelerate payment of indebtedness on the 2047 Notes only upon the Company’s bankruptcy, insolvency or reorganization.

The Company incurred $4.2 million in deferred issuance costs associated with the 2047 Notes, which is being amortized over the term of the 2047 Notes. Interest expense, including amortization of deferred issuance costs, recognized on the 2047 Notes was $8.0 million for the year ended December 31, 2017.

2023.

The following table represents the amounts recorded for the subordinated notes as of December 31, 2017 and 2016:

   December 31, 2017 
   Outstanding
Principal		   Unamortized
Debt Issuance
Costs		   Net
Carrying
Amount		 

7.75% Subordinated Notes due 2045

  $100,000   $(3,381)   $96,619 

7.875% Subordinated Notes due 2047

   130,000    (4,136)    125,864 
  

 

 

   

 

 

   

 

 

 
  $230,000   $(7,517)   $222,483 
  

 

 

   

 

 

   

 

 

 

   December 31, 2016 
   Outstanding
Principal		   Unamortized
Debt Issuance
Costs		   Net
Carrying
Amount		 

7.75% Subordinated Notes due 2045

  $100,000   $(3,503)   $96,497 
  

 

 

   

 

 

   

 

 

 

13.Shareholders’ Equity

On November 7, 2016, Global Indemnity plc, an Irish public limited company, and Global Indemnity Limited, a Cayman Islands exempted company, completed the previously disclosed scheme of arrangement under Irish law (the “Scheme of Arrangement”) that effected a transaction (the “Redomestication”) that resulted in the shareholders of Global Indemnity plc becoming shareholders of Global Indemnity Limited, and Global Indemnity plc becoming a subsidiary of Global Indemnity Limited until it was liquidated in 2017. In accordance with the terms of the Scheme of Arrangement, the following steps occurred effectively simultaneously on November 7, 2016:

1.13,463,864 shares of Global Indemnity plc A ordinary shares, par value $0.0001 per share, which represent all of the existing A ordinary shares excluding the treasury shares held by Global Indemnity plc and A shares held by Global Indemnity Limited, and 4,133,366 Global Indemnity plc B ordinary shares, par value $0.0001 per share, (together, the “Global Indemnity plc ordinary shares”) were cancelled. The treasury shares of Global Indemnity plc were not subject to the scheme. The carrying value of the Global Indemnity plc treasury shares, $103.2 million, were offset against the AdditionalPaid-in Capital account of Global Indemnity Limited, according to the Company’s policy regarding the treatment of treasury shares;

2.the reserves created on the cancellation of the Global Indemnity plc ordinary shares were used to issue 17,597,230 Global Indemnity plc ordinary shares to Global Indemnity Limited; and

3.in return for such issuance of new Global Indemnity plc ordinary shares to Global Indemnity Limited, Global Indemnity Limited issued 13,463,864 A ordinary shares, par value $0.0001 per share, and 4,133,366 Global Indemnity Limited B ordinary shares, par value $0.0001 per share (together the “Global Indemnity Limited ordinary shares”), to the former stockholders of Global Indemnity plc. Each shareholder received one Global Indemnity Limited A ordinary share for each Global Indemnity plc A ordinary share owned by such shareholder prior to the Scheme of Arrangement and one Global Indemnity Limited B ordinary share for each Global Indemnity plc B ordinary share owned by such shareholder prior to the Scheme of Arrangement.

Prior to the Redomestication, the Global Indemnity plc A ordinary shares were listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “GBLI” and registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In connection with the Redomestication, Global Indemnity plc requested that Nasdaq fileredemption of the 2047 Notes, the Supplemental Indenture and the co-obligor transaction are no longer effective. Please see Note 13 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2021 Annual Report on Form 10-K for more information on the Supplemental Indenture and the co-obligor transaction.

As a result of this redemption, the Company no longer has any outstanding debt with third parties.

14.
Leases

The Company leases office space and equipment under various operating lease arrangements. The Company’s leases have remaining lease terms ranging from 3 months to 6 years. Some building leases have options to extend, terminate, or retract the leased area.

108

In conjunction with the U.S. Securities and Exchange Commission (the “SEC”) an applicationsale of the renewal rights related to strikeboth the Global Indemnity plc A ordinary shares from listing on NasdaqCompany's Farm, Ranch & Stable business and the Global Indemnity plc A ordinary shares from registration underCompany's manufactured and dwelling homes business as well as the Exchange Act.Company's decision to terminate its lease in Cavan, Ireland due to employees in Ireland working remotely, the Company recognized the following impairment losses:

 

 

 

 

Years Ended December 31,

 

 (Dollars in thousands)

 

Consolidated Statements of Operations Line

2023

 

 

2022

 

 

2021

 

Scottsdale, Arizona

 

Corporate and other operating expenses

$

—

 

 

$

—

 

 

$

1,515

 

Scottsdale, Arizona

 

Acquisition costs and other underwriting expenses

 

 

—

 

 

 

681

 

 

 

—

 

Omaha, Nebraska

 

Acquisition costs and other underwriting expenses

 

—

 

 

 

488

 

 

 

—

 

Cavan, Ireland

 

Acquisition costs and other underwriting expenses

 

 

—

 

 

 

168

 

 

 

—

 

Total lease impairment

 

 

$

—

 

 

$

1,337

 

$

1,515

 

Please see Note 2 for additional information on the sale of the renewal rights.

The components of lease expenses were as follows:

 

 

Years Ended December 31,

 

 (Dollars in thousands)

2023

 

 

2022

 

 

2021

 

Operating lease expenses

$

2,052

 

 

$

2,372

 

 

$

2,789

 

Short-term lease expenses

 

12

 

 

 

15

 

 

 

8

 

Sublease income (1)

 

 

(331

)

 

 

(331

)

 

 

(55

)

Total lease expenses

$

1,733

 

 

$

2,056

 

$

2,742

 

(1) In connection with the sale of the renewal rights related to the Company's manufactured and dwelling homes business, K2 is subleasing approximately one third of the Company's Scottsdale, Arizona office. The Company intends to exercise its early termination clause in the Scottsdale, Arizona lease and expects to receive $1.6 million in sublease payments between October 2021 through October 2026.

Supplemental cash flow information related to leases was as follows:

 

 

Years Ended December 31,

 

 (Dollars in thousands)

 

2023

 

 

2022

 

 

2021

 

Cash paid for amounts included in the measurement of liabilities:

 

 

 

 

 

 

 

 

 

Operating leases

 

$

1,852

 

 

$

2,056

 

 

$

2,797

 

Right-of-use assets obtained in exchange for new lease obligations:

 

 

 

 

 

 

 

 

 

Operating leases

 

$

—

 

 

$

—

 

 

$

783

 

109

Supplemental balance sheet information related to leases was as follows:

The Global Indemnity Limited ordinary shares are deemed registered undertable below presents the Exchange Act. The Global Indemnity Limited A ordinary shares began tradinglease-related assets and liabilities recorded on Nasdaq under the symbol “GBLI,”consolidated balance sheets.

 

 

 

 

December 31,

 

(Dollars in thousands)

Classification on the
consolidated balance sheets

2023

 

 

2022

 

Assets:

 

 

 

Operating lease assets

Lease right of use assets

$

9,715

 

 

$

11,739

 

 

 

 

Liabilities:

 

 

 

Operating lease liabilities

Lease liabilities

$

12,733

 

 

$

15,701

 

 

 

 

Weighted-average remaining lease term

 

 

 

Operating leases

5.0 years

 

 

6.6 years

 

 

 

 

Weighted-average discount rate

 

 

 

Operating leases (1)

 

0.8

%

 

 

0.9

%

(1) Represents the same symbol under which the Global Indemnity plc ordinary shares previously traded,Company’s incremental borrowing rate at the openingtime the leases were contracted.

At December 31, 2023, future minimum lease payments under non-cancelable operating leases were as follows.

 (Dollars in thousands)

Operating Leases (1)

 

 

Expected Sublease Income

 

2024

$

2,729

 

 

$

297

 

2025

 

2,794

 

 

 

388

 

2026

 

2,650

 

 

 

342

 

2027

 

1,591

 

 

 

—

 

2028

 

1,611

 

 

 

—

 

Thereafter

 

1,631

 

 

 

—

 

Total future minimum lease payments

 

13,006

 

 

 

1,027

 

Less: amount representing interest

 

273

 

 

 

—

 

Present value of minimum lease payments

$

12,733

 

 

$

1,027

 

(1)
Includes future minimum lease payments of Nasdaq$3.2 million on November 7, 2016.leases that have been impaired because the property is no longer in use.

15.
Shareholders’ Equity

Distribution Restrictions

Dividend Restriction

The ability of Global Indemnity LimitedGroup, LLC to pay dividendsdistributions is subject to Cayman Island regulations. Under Cayman Islands law, dividendsapplicable federal and distributions may only be made from distributable reservesstate laws and Global Indemnity Group, LLC’s LLCA. Distributions of cash or from amounts standing to the credit of the Company’s share premium account, together with any reserve established by the revaluation of the Company’s asset, subject to the ability of the Company to meet its obligations in the ordinary course as they fall due. Distributable reserves represents the accumulated realized profits and lossesother assets of Global Indemnity Limited onGroup, LLC may be paid to Global Indemnity Group, LLC’s shareholders out of Global Indemnity Group, LLC’s assets legally available therefor only when, and if determined by the Board. Each Series A Preferred Shareholder is entitled to a standalone basis, which is $275.8 million as of December 31, 2017.“Priority Return” (as defined in the applicable Share premium represents the excessDesignation). On each Distribution Date, Global Indemnity Group, LLC shall make a distribution to each holder of the consideration paid upon the initial issuanceSeries A Preferred Shares out of, any share over the par value. As of December 31, 2017, share premium was $434.7 million. Reserves establishedand subject to a determination by the revaluationBoard that the Company has on the applicable Distribution Date, funds legally available therefor, payable in cash only, in an amount equal to the estimated amount necessary to reduce the Unpaid Priority Return of the Company’s asset were $9.0 million as of December 31, 2017. As of December 31, 2017, the maximum dividends andeach Series A Preferred Share immediately after such Distribution Date to zero. All such distributions allowable under Cayman Island law is $719.6 million.shall be made pro rata in relation to each such Series A Preferred Share’s Unpaid Priority Return.

Since the CompanyGlobal Indemnity Group, LLC is a holding company and has no direct operations, its ability to pay dividendsdistributions depends, in part, on the ability of its subsidiaries to generate income to pay dividends. Global Indemnity ReinsurancePenn-Patriot Insurance Company and the U.S.its insurance subsidiaries are subject to significant regulatory restrictions limiting their ability to declare and pay dividends. Global Indemnity Investments, Inc. is dependent on generating investment income in order to pay a dividend to Global Indemnity Group, LLC. See Note 1921 for additional information regarding dividend limitations imposed on Global Indemnity ReinsurancePenn-Patriot Insurance Company and the U.S. insuranceits subsidiaries.

Dividend Program

During the fourth quarter110

Distributions

Distribution payments of 2017, Global Indemnity announced the adoption of a dividend program. Although subject to the absolute discretion of the Board of Directors and factors, conditions, and prospects as such may exist from time to time when the Board of Directors considers the advisability of declaring a quarterly dividend, the Company currently anticipates an initial dividend rate of $0.25$0.25 per common share per quarter ($1.00were declared during the year ended December 31, 2023 as follows:

Approval Date

 

Record Date

 

Payment Date

 

Total Distributions Declared
(Dollars in thousands)

 

March 2, 2023

 

March 24, 2023

 

March 31, 2023

 

$

3,410

 

June 1, 2023

 

June 23, 2023

 

June 30, 2023

 

 

3,375

 

September 28, 2023

 

October 9, 2023

 

October 16, 2023

 

 

3,385

 

December 7, 2023

 

December 22, 2023

 

December 29, 2023

 

 

3,385

 

Various (1)

 

Various

 

Various

 

 

(86

)

Total

 

 

 

 

 

$

13,469

 

(1)
Represents distributions declared on unvested shares, net of forfeitures

Distribution payments of $0.25 per common share per year).quarter were declared during the year ended December 31, 2022 as follows:

Approval Date

 

Record Date

 

Payment Date

 

Total Distributions Declared
(Dollars in thousands)

 

March 3, 2022

 

March 21, 2022

 

March 31, 2022

 

$

3,597

 

June 2, 2022

 

June 20, 2022

 

June 30, 2022

 

 

3,602

 

September 23, 2022

 

October 4, 2022

 

October 11, 2022

 

 

3,616

 

December 8, 2022

 

December 23, 2022

 

December 30, 2022

 

 

3,389

 

Various (1)

 

Various

 

Various

 

 

339

 

Total

 

 

 

 

 

$

14,543

 

(1)
Represents distributions declared on unvested shares, net of forfeitures

Distribution payments of $0.25 per common share per quarter were declared during the year ended December 31, 2021 as follows:

Approval Date

 

Record Date

 

Payment Date

 

Total Distributions Declared
(Dollars in thousands)

 

February 14, 2021

 

March 22, 2021

 

March 31, 2021

 

$

3,570

 

June 5, 2021

 

June 21, 2021

 

June 30, 2021

 

 

3,579

 

September 11, 2021

 

September 23, 2021

 

September 30, 2021

 

 

3,583

 

December 4, 2021

 

December 20, 2021

 

December 31, 2021

 

 

3,587

 

Various (1)

 

Various

 

Various

 

 

259

 

Total

 

 

 

 

 

$

14,578

 

(1)
Represents distributions declared on unvested shares, net of forfeitures

In addition, distributions of $0.4 million were paid to Global Indemnity Group, LLC’s preferred shareholder during each of the years ended December 31, 2023, 2022, and 2021.

As of December 31, 2023 and 2022, accrued distributions on unvested common shares, which were included in other liabilities on the consolidated balance sheets, were $0.3 million and $1.1 million, respectively. Accrued preferred distributions were less than $0.1 million as of December 31, 2023 and 2022 and were also included in other liabilities on the consolidated balance sheets.

Repurchases and Redemptions of the Company’s OrdinaryGlobal Indemnity Group, LLC’s Common Shares

The CompanyGlobal Indemnity Group, LLC allows employees to surrender class A ordinarycommon shares as payment for the tax liability incurred upon the vesting of restricted stock that was issued under the Company’s share incentive plan in effect at the time of issuance. During 2017, 2016,2023, 2022, and 2015, the Company2021, Global Indemnity purchased an aggregate of 29,551, 28,09918,860, 15,954 and 11,895,17,318, respectively, of surrendered class A ordinarycommon shares from its employees for $1.2$0.6 million, $0.8$0.4 million, and $0.3$0.5 million, respectively. All

On October 21, 2022, Global Indemnity Group, LLC announced it commenced a stock repurchase program beginning in the fourth quarter of 2022. On January 3, 2023, Global Indemnity Group, LLC announced that it had authorized an increase in the aggregate stock repurchase program from $32 million, which was authorized on October 21, 2022, to $60 million. On June 8, 2023, Global Indemnity Group, LLC's Board of Directors approved an additional increase in the existing share buyback authorization amount of $60 million to $135 million. The authorization to repurchase will expire on December 31, 2027. The timing and actual number of shares repurchased, if any, will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.

111

Under the repurchase program, repurchases may be made from time to time using a variety of methods, including open market purchases or privately negotiated transactions, all in compliance with Global Indemnity Group, LLC’s Insider Trading Policy, the United States Securities and Exchange Commission, and other applicable legal requirements. The repurchase program does not obligate Global Indemnity Group, LLC to acquire any particular amount of class A common shares, and the repurchase program may be suspended or discontinued at any time at Global Indemnity Group, LLC’s discretion.

From the time of the initial announcement, a total of 1,357,082 shares were repurchased for approximately $34.0 million at an average purchase price of $25.05 per share. 138,151 shares that were acquired were reissued in December 2022 to one of the Directors of Global Indemnity Group, LLC at an average price per share of $24.17. As a result of these transactions, book value per share increased by $1.69 per share since inception of the stock repurchase program in October 2022.

Shares purchased from employees or third parties by the CompanyGlobal Indemnity Group, LLC are held as treasury stock and recorded at cost until formally retired by the company.

In 2015, the Company entered into a redemption agreement with certain affiliates of Fox Paine & Company to redeem 8,260,870 of its ordinary shares. In conjunction with the 2015 redemption, the Company acquired rights, expiring year end 2019, to redeem an additional 3,397,031 ordinary shares for $78.1 million, which amount was subject to an annual 3% increase. On December 29, 2017, Global Indemnity acquired 3,397,031 of its A ordinary shares for approximately $83.0 million in the aggregate (approximately $24.44 per share) from former investors in vehicles managed by Fox Paine & Company,Group, LLC. See Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2015 Annual Report on Form10-K for more information on the 2015 redemption.

The following table provides information with respect to the class A ordinarycommon shares that were surrendered, repurchased, or redeemed in 2017:2023:

Period (1)

  Total Number
of Shares
Purchased or
Redeemed		  Average
Price Paid
Per Share		   Total Number of Shares
Purchased as Part of
Publicly Announced
Plan or Program		   Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs		 

A ordinary shares:

       

January1-31, 2017

   13,656(2)  $38.21    —      —   

February1-28, 2017

   15,309(2)  $40.18    —      —   

May1-31, 2017

   586(2)  $38.49    —      —   

December 1-31, 2017

   3,397,031  $24.44     
  

 

 

  

 

 

   

 

 

   

 

 

 

Total

   3,426,582  $24.57    —     
  

 

 

  

 

 

   

 

 

   

Period (1)

 

Total Number
of Shares
Purchased or
Redeemed

 

 

Average
Price Paid
Per Share

 

 

Total Number of Shares
Purchased as Part of
Publicly Announced
Plan or Program

 

 

Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs (2)

 

Class A common shares:

 

 

 

 

 

 

 

 

 

 

 

 

January 1-31, 2023

 

 

3,302

 

(3)

$

23.31

 

 

 

—

 

 

 

—

 

January 1-31, 2023

 

 

250,000

 

(4)

$

25.90

 

 

 

250,000

 

 

$

106,604,066

 

April 1-30, 2023

 

 

200,000

 

(4)

$

28.00

 

 

 

200,000

 

 

$

101,004,066

 

June 1-30, 2023

 

 

15,558

 

(3)

$

33.74

 

 

 

—

 

 

$

101,004,066

 

Total

 

 

468,860

 

 

$

27.04

 

 

 

450,000

 

 

 

 

(1)Based on settlement date.
(2)Surrendered by employees as payment of taxes withheld on the vesting of restricted stock.

There were no B ordinary shares that were surrendered

(1)
Based on settlement date.
(2)
Based on the $135 million share repurchase authorization.
(3)
Surrendered by employees as payment of taxes withheld on the vesting of restricted stock and/or repurchasedrestricted stock units.
(4)
Purchased as part of the stock repurchase program which commenced in 2017.

4th quarter of 2022.

The following table provides information with respect to the class A ordinarycommon shares that were surrendered, repurchased, or repurchasedredeemed in 2016:2022:

Period (1)

  Total Number
of Shares
Purchased		  Average
Price Paid
Per Share		   Total Number of Shares
Purchased as Part of
Publicly Announced
Plan or Program		   Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs		 

A ordinary shares:

       

January1-31, 2016

   12,410(2)  $29.02    —      —   

February1-29, 2016

   15,093(2)  $28.25    —      —   

May1-31, 2016

   596(2)  $30.56    —      —   
  

 

 

  

 

 

   

 

 

   

Total

   28,099  $28.64    —     
  

 

 

  

 

 

   

 

 

   

Period (1)

 

Total Number
of Shares
Purchased or
Redeemed

 

 

Average
Price Paid
Per Share

 

 

Total Number of Shares
Purchased as Part of
Publicly Announced
Plan or Program

 

 

Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs (2)

 

Class A common shares:

 

 

 

 

 

 

 

 

 

 

 

 

January 1-31, 2022

 

 

4,781

 

(3)

$

25.13

 

 

 

—

 

 

 

—

 

June 1-30, 2022

 

 

11,173

 

(3)

$

26.28

 

 

 

—

 

 

 

—

 

October 1-31, 2022

 

 

200,000

 

(4)

$

23.49

 

 

 

200,000

 

 

 

27,302,000

 

November 1-30, 2022

 

 

250,000

 

(4)

$

24.50

 

 

 

250,000

 

 

 

21,177,000

 

December 1-31, 2022

 

 

457,082

 

(4)

$

24.28

 

 

 

457,082

 

 

 

10,079,066

 

Total

 

 

923,036

 

 

$

24.20

 

 

 

907,082

 

 

 

 

(1)Based on settlement date.
(2)Surrendered by employees as payment of taxes withheld on the vesting of restricted stock.
(1)
Based on settlement date.
(2)
Based on the $32 million share repurchase authorization.
(3)
Surrendered by employees as payment of taxes withheld on the vesting of restricted stock and/or restricted stock units.
(4)
Purchased as part of the stock repurchase program which commenced in 4th quarter of 2022.

Global Indemnity Group, LLC converted 153,594 of class B common shares to class A common shares on November 14, 2022. There were no other class B ordinarycommon shares that were surrendered, repurchased, or repurchasedredeemed in 2016.2023 or 2022.

14.Related Party Transactions

Fox Paine & CompanyEach class A common share has one vote and each class B common share has ten votes.

As of December 31, 2017,2023, Global Indemnity Group, LLC’s class A common shares were held by approximately 140 shareholders of record. The Fox Paine Entities comprise the two holders of record of Global Indemnity Group, LLC’s class B common shares as of December 31, 2023. Global Indemnity Group, LLC’s preferred shares were held by 1 holder of record, an affiliate of Fox Paine & Company, beneficially owned shares having approximately 83%LLC, as of the Company’s total outstanding voting power.December 31, 2023.

112

16.
Related Party Transactions

Fox Paine Entities

Pursuant to Global Indemnity Group, LLC’s LLCA, Fox Paine Capital Fund II International, L.P. (the “Fox Paine Fund”), together with Fox Mercury Investments, L.P. and certain of its affiliates (the “FM Entities”), and Fox Paine & Company hasLLC (collectively, the “Fox Paine Entities”) currently constitute a Class B Majority Shareholder (as defined in the LLCA) and, as such, have the right to appoint a number of the Company’s DirectorsGlobal Indemnity Group, LLC’s directors equal in aggregate to the pro rata percentage of the voting power in Global Indemnity Group, LLC beneficially held by the Fox Paine Entities, rounded up to the nearest whole number of directors. The Fox Paine Entities beneficially own shares representing approximately 83.8% of the Company beneficially held byvoting power of Global Indemnity Group, LLC as of December 31, 2023. The Fox Paine Entities control the appointment or election of all of Global Indemnity Group, LLC’s Directors due to the LLCA and their controlling share ownership. Global Indemnity Group, LLC’s Chairman is the chief executive and founder of Fox Paine & Company, for so long asLLC.

On August 27, 2020, Global Indemnity Group, LLC issued and sold to Wyncote LLC, an affiliate of Fox Paine & Company, holds anLLC, 4,000 Series A Cumulative Fixed Rate Preferred Interests at a price of $1,000 per Series A Preferred Interest, for the aggregate purchase price of 25%$4,000,000. While these preferred interests are non-voting, the preferred shareholders are entitled to appoint two additional members to Global Indemnity Group, LLC’s Board of Directors whenever the “Unpaid Targeted Priority Return” with respect to the preferred interests exceed zero immediately following six or more “Distribution Dates”, whether or not such Distribution Dates occur consecutively. Global Indemnity Group, LLC’s Board of Directors is obligated to take, and cause Global Indemnity Group, LLC’s officers to take, any necessary actions to effectuate such appointments, including expanding the size of the voting powerBoard of Directors, in connection with any exercise of the Company.foregoing provisions. See Note 15 of the notes to consolidated financial statements in Item 8 of Part II of this report for additional information on the Series A Cumulative Fixed Rate Preferred Interests.

Pursuant to the Third Amended and Restated Management Agreement, (“Management Agreement”) dated August 28, 2020, between Global Indemnity Group, LLC and Fox Paine & Company, controls the electionLLC, Global Indemnity Group, LLC agrees to pay, or to cause one of all of the Company’s Directors dueits affiliates to its controlling share ownership. The Company’s Chairman is a member of Fox Paine & Company.

The Company relies onpay, an annual service fee (“Annual Service Fee”) as compensation for Fox Paine & Company, to provide management servicesLLC’s ongoing provision of certain financial and strategic consulting, advisory and other services related to the operationsGlobal Indemnity Group, LLC and its affiliates, and to reimburse all direct and indirect expenses paid or incurred in connection with such services upon request, excluding expenses for travel, lodging, meals, and other items relating to attendance at regularly scheduled meetings of the Company. Starting in 2014, this feeBoard of Directors. The Annual Service Fee is adjusted annually to reflect the percentage changeaggregate increase in theCPI-U. Payment of The current fee charged for the annual management feetwelve month period beginning September 5, 2023 was $3.2 million. Should Global Indemnity Group, LLC and Fox Paine & Company, LLC agree that the Annual Service Fee will be deferred, until a change of control or September, 2018, whichever occurs first, and isthe Annual Service Fee will become subject to an annual adjustment equal to the percentage rate of return the Company earns on its investment portfolio. portfolio multiplied by the aggregate Annual Service Fees and adjustment amounts accumulated and unpaid through such date.

Management fee expense of $3.1 million, $2.9 million, and $2.7 million was incurred during the years ended December 31, 2023, 2022, and 2021, respectively. Prepaid management fees, which were included in other assets on the consolidated balance sheets, were $2.1 million as of December 31, 2023 and 2022.

In addition, Fox Paine & Company, LLC may also propose and negotiate transaction fees with the Company

subject to the provisions of the Company’s related party transaction and conflict matter policies, including approval of the Company’s AuditGlobal Indemnity Group, LLC’s Conflicts Committee of the Board of Directors, for those services from time to time. Management fee expenseEach of $2.2 million, $2.1 million, and $1.9 million was incurred during the years ended December 31, 2017, 2016, and 2015, respectively. As of December 31, 2017 and 2016, unpaid management fees, which were included in other liabilities on the consolidated balance sheets, were $6.8 million and $4.6 million, respectively. In addition, the Company paid an $11.0 million advisory fee to Fox Paine in connectionCompany’s transactions with the redemption of 3,397,031 shares on December 29, 2017 as well as other services performed.    See Note 13 for additional information on the share redemption.

During 2015, the Company reimbursed Fox Paine & Company, $1.2 million for expensesLLC are reviewed and approved by Global Indemnity Group, LLC’s Conflicts Committee, which is composed of independent directors, and the Board of Directors (other than Saul A. Fox, Chairman of the Board of Directors of Global Indemnity Group, LLC and Chief Executive of Fox Paine & Company, LLC, who is not a member of the Conflicts Committee and recuses himself from the Board of Directors’ deliberations related to the 2015 redemption of the Company’s ordinary shares. See Note 12 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2015 Annual Report on Form10-K for more information on the 2015 redemption.

On September 17, 2017, the Company and Fox Paine entered into a confidentiality agreement whereby Fox Paine agrees to keep confidential proprietary information, as defined in the confidentiality agreement, it receives regarding the Company from time to time, including proprietary information it may receive from director or director nominees appointed by Fox Paine.

In connection with the acquisition of American Reliable, the Company agreed to payfees paid to Fox Paine & Company, an investment banking fee of 3% of the amount paid plus the additional capital required to operate American Reliable on a standalone basisLLC or its affiliates).

17.
Commitments and a $1.5 million investment advisory fee, which in the aggregate, totaled $6.5 million. This amount was included in corporate and other operating expenses on the Company’s Consolidated Statements of Operations during the year ended December 31, 2015. As payment for these fees, 267,702 A ordinary shares of Global Indemnity were issued under the Global Indemnity plc Share Incentive Plan in May, 2015. These shares cannot be sold until the earlier of five years after January 1, 2015 or a change of control. See Note 16 for additional information on the Company’s share incentive plans including the Global Indemnity plc Share Incentive Plan which was replaced with the Global Indemnity Limited Share Incentive Plan.

Contingencies

Cozen O’Connor

The Company incurred $0.7 million for legal services rendered by Cozen O’Connor during the year ended December 31, 2015. Stephen A. Cozen, the chairman of Cozen O’Connor, was a member of the Company’s Board of Directors until he resigned on December 31, 2015.

Crystal & Company

During each of the years ended December 31, 2016 and 2015, the Company incurred $0.2 million in brokerage fees to Crystal & Company, an insurance broker. James W. Crystal, the chairman and chief executive officer of Crystal & Company, was a member of the Company’s Board of Directors until he resigned on July 24, 2016.

Hiscox Insurance Company (Bermuda) Ltd.

Global Indemnity Reinsurance is a participant in two reinsurance agreements with Hiscox Insurance Company (Bermuda) Ltd. (“Hiscox Bermuda”) while Steve Green, the President of Global Indemnity Reinsurance, was a member of Hiscox Bermuda’s Board of Directors. Steve Green was a member of the Hiscox Bermuda’s Board of Directors until May, 2014. The Company estimated that the following earned premium and incurred losses related to these agreements have been assumed by Global Indemnity Reinsurance from Hiscox Bermuda:

   Years Ended December 31, 
(Dollars in thousands)  2017   2016   2015 

Assumed earned premium

  $4   $27   $2,266 

Assumed losses and loss adjustment expenses

   (130)    (527)    509 

Net payable balances due from Global Indemnity Reinsurance under this agreement are as follows:

   As of December 31, 
(Dollars in thousands)      2017           2016     

Net payable balance

  $(10)   $(107) 

15.Commitments and Contingencies

Legal Proceedings

The Company is, from time to time, involved in various legal proceedings in the ordinary course of business. The Company maintains insurance and reinsurance coverage for such risks in amounts that it considers adequate. However, there can be no assurance that the insurance and reinsurance coverage that the Company maintains is sufficient or will be available in adequate amounts or at a reasonable cost. The Company does not believe that the resolution of any currently pending legal proceedings, either individually or taken as a whole, will have a material adverse effect on its business, results of operations, cash flows, or financial condition.

There is a greater potential for disputes with reinsurers who are in runoff. Some of the Company’s reinsurers’reinsurers have operations that are in runoff, and therefore, the Company closely monitors those relationships. The Company anticipates that, similar to the rest of the

113

insurance and reinsurance industry, it will continue to be subject to litigation and arbitration proceedings in the ordinary course of business.

Commitments

In 2014, the Company entered into a $50$50 million commitment to purchase an alternative investment vehicle which is comprised of Europeannon-performing loans. As of December 31, 2017,2023, the Company has funded $35.8$35.8 million of this commitment leaving $14.2$14.2 million as unfunded.

In 2016, Since the investment period has concluded, the Company entered into a $40 million commitment with an investment manager that provides financing for middle market companies. As of December 31, 2017, the Company has funded $30.0 million of this commitment leaving $10.0 million as unfunded.expects minimal capital calls will be made prospectively.

In 2017, the Company entered into a $50 million commitment to purchase an alternative investment vehicle comprised of stressed and distressed debt instruments. As of December 31, 2017, the Company has funded $16.5 million of this commitment leaving $33.5 million as unfunded.

Lease Commitments

Total rental expense under operating leases for the years ended December 31, 2017, 2016, and 2015 was $3.5 million, $3.7 million, and $3.5 million, respectively. Rent expense was net of sublease income of $0.02 million and $0.07 million for the years ended December 31, 2016 and 2015, respectively. There was no sublease income for the year ended December 31, 2017. At December 31, 2017, future minimum cash payments undernon-cancelable operating leases were as follows:

(Dollars in thousands)    

2018

  $3,147 

2019

   2,192 

2020

   127 
  

 

 

 

Total

  $5,466 
  

 

 

 

Other Commitments

The Company is party to a Management Agreement, as amended, with Fox Paine & Company, LLC, whereby in connection with certain management services provided to it by Fox Paine & Company, LLC, the Company agreed to

pay an annual management fee to Fox Paine & Company.Company, LLC. See Note 1416 above for additional information pertaining to this management agreement.

16.Share-Based Compensation Plans
18.
Share-Based Compensation Plans

Effective January 1, 2017, the Company adopted new accounting guidance which changed several aspects of the accounting for share-based payment transactions. Under the new guidance, all excess tax benefits and tax deficiencies associated with share-based payment awards are required to be recognized as an income tax benefit or expense in net income with the corresponding cash flows recognized as an operating activity in the Consolidated Statement of Cash Flow as opposed to being reported separately as a financing activity. Excess tax benefits and deficiencies are no longer recognized in additionalpaid-in-capital. The new guidance removes the requirement to delay recognition of any excess tax benefit when there is no current taxes payable to which the benefit would be applied. The new guidance also allows an employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur, rather than estimating forfeitures upon issuance of the award.

Upon adoption of this new accounting guidance, the Company elected to retain its policy of accruing the compensation cost based on the number of awards that are expected to vest. The adoption of this accounting guidance did not result in any cumulative adjustment or restatement. The provisions of this new guidance were adopted on a prospective basis and did not have a material impact on the Company’s financial position, results of operations or cash flows.

The fair value method of accounting recognizes share-based compensation to employees andnon-employee directors in the consolidated statements of operations using the grant-date fair value of the stock options and other equity-based compensation expensed over the requisite service and vesting period.

For the purpose of determining the fair value of stock option awards, the Company uses the Black-Scholes option-pricing model. The Company elected a policy to accrue for compensation cost based on the number of awards that are expected to vest. An estimation of forfeitures is required when recognizing compensation expense which is then adjusted over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment to compensation in the period of change.

Prior to January 1, 2017, the prescribed accounting guidance required

Excess tax benefits relating to excess stock-based compensation deductionsand tax deficiencies associated with share-based payment awards are required to be prospectively presentedrecognized as an income tax benefit or expense in net income (loss) with the corresponding cash flows recognized as an operating activity in the consolidated statementsConsolidated Statement of cash flows as financing cash inflows. The tax benefit resulting from stock-based compensation deductions in excess of amounts reported for financial reporting purposes was $0.1 million and $0.05 million for the years ended December 31, 2016 and 2015, respectively.Cash Flow.

Share Incentive Plan

On June 11, 2014,14, 2023, the Company’s Shareholders approved the Global Indemnity plcGroup, LLC 2023 Share Incentive Plan (the “Plan”(“the 2023 Plan”). The previous share incentive plan, which became effective in 2003, expired per its terms on September 5, 2013. As a result of the redomestication, the Global Indemnity plc Share Incentive Plan’s sponsorship and existing obligations with respect to awards granted and outstanding were assumed by the Company and the Global Indemnity plc Share Incentive Plan was replaced with the Global Indemnity Limited Share Incentive Plan (collectively, the “Plan”). Theprimary purpose of the 2023 Plan is to give the Companyprovide Global Indemnity a competitive advantage in attracting, retaining, and retainingmotivating officers, employees, consultants andnon-employee directors, by offering stock options, restricted shares and other stock-based awards.to position Global Indemnity to offer incentives linked to the financial results of the Company’s business and increases in shareholder value. Under the 2023 Plan, the Company may grantissue up to 2.02.5 million class A ordinarycommon shares pursuant to grantsawards granted under the Plan. The 2023 Plan replaced the Global Indemnity Group, LLC 2018 Share Incentive Plan, as amended and restated on August 28, 2020, which expired pursuant to its terms on March 4, 2023.

114

Options

Award activity for stock options granted under the Plan and the weighted average exercise price per share are summarized as follows:

  Time-Based
Options		 Performance-
Based Options		 Total
Options		 Weighted
Average
Exercise Price
Per Share		 

 

Time-Based
Options

 

 

Performance-
Based Options

 

 

Total
Options

 

 

Weighted
Average Exercise
Price Per Share

 

Options outstanding at January 1, 2015

   612,500   —    612,500  $25.38 

Options outstanding at January 1, 2021

 

 

900,000

 

 

 

100,000

 

 

 

1,000,000

 

 

 

40.04

 

Options issued

   —    200,000  200,000  $28.37 

 

 

—

 

 

 

140,000

 

 

 

140,000

 

 

 

28.70

 

Options forfeited

   —     —     —     —   

 

 

(300,000

)

 

 

(146,667

)

 

 

(446,667

)

 

 

47.06

 

Options exercised

   —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options expired

   (12,500)   —    (12,500)  $37.70 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options purchased by the Company

   —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

  

 

  

 

  

 

  

 

 

Options outstanding at December 31, 2015

   600,000  200,000  800,000  $25.94 

Options outstanding at December 31, 2021

 

 

600,000

 

 

 

93,333

 

 

 

693,333

 

 

 

33.23

 

Options issued

   —     —     —     —   

 

 

200,000

 

 

 

—

 

 

 

200,000

 

 

 

20.77

 

Options forfeited

   —    (200,000)  (200,000)  $28.37 

 

 

—

 

 

 

(46,666

)

 

 

(46,666

)

 

 

28.70

 

Options exercised

   —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options expired

   —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options purchased by the Company

   —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

  

 

  

 

  

 

  

 

 

Options outstanding at December 31, 2016

   600,000   —    600,000  $25.13 

Options outstanding at December 31, 2022

 

 

800,000

 

 

 

46,667

 

 

 

846,667

 

 

 

30.54

 

Options issued

   —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options forfeited

   —     —     —     —   

 

 

(600,000

)

 

 

(46,667

)

 

 

(646,667

)

 

 

33.56

 

Options exercised

   —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options expired

   —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Options purchased by the Company

   —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

  

 

  

 

  

 

  

 

 

Options outstanding at December 31, 2017

   600,000   —    600,000  25.13 
  

 

  

 

  

 

  

 

 

Options exercisable at December 31, 2017

   300,000   —    300,000  17.87 
  

 

  

 

  

 

  

 

 

Options outstanding at December 31, 2023 (1)

 

 

200,000

 

 

 

—

 

 

 

200,000

 

 

$

20.77

 

Options exercisable at December 31, 2023 (1)

 

 

200,000

 

 

 

—

 

 

 

200,000

 

 

$

20.77

 

Of the

(1)
Represents stock options outstanding, there are 300,000 options that are not yet exercisable. Vesting of the options is dependent on meeting or exceeding underwriting targets. 60,000 options are relatedgranted to the 2015 accident year. These options are subject to remeasurement of 2015 accident year results on December 31, 2018. As of December 31, 2017, the written premium target was not met but the targeted 2015 accident year results were met. 90,000 options are related to the 2016 accident year and are subject to remeasurement of accident year results on December 31, 2019. 150,000 options are related to the 2017 accident year and are subject to remeasurement of accident year results on December 31, 2020. As of December 31, 2017 the targeted accident year resultsCompany's Chief Executive Officer. See note below under Chief Executive Officer for 2016 and 2017 were not met.

additional information.

During the year ended December 31, 2015, the Company awarded 200,000 options with a strike price of $28.37 which were subsequently forfeited during the year ended December 31, 2016. There were no stock options issued in 2016 or 2017.

The Company recorded ($0.4)$0.2 million, $0.3$0.3 million, and $0.4($1.1) million of compensation expense for stock options outstanding under the Plan during the years ended December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively.

The Company did notnot receive any proceeds from the exercise of options during 2017, 20162023, 2022 or 20152021 under the Plan.

AllThe Company does not anticipate any additional compensation expense related to options outstanding are fully amortized as ofunder the Plan at December 31, 2017.2023.

Option intrinsic values, which are the differences between the fair value of $42.02$32.24 at December 31, 20172023 and the weighted average strike price of the option, are as follows:

  Number
of Shares		   Weighted
Average
Strike Price		 Intrinsic Value 

 

Number
of Shares

 

 

Weighted Average Strike Price

 

 

Intrinsic Value

 

Outstanding

   600,000    25.13   10.1 million 

 

 

200,000

 

 

 

20.77

 

 

$2.3 Million

 

Exercisable

   300,000    17.87(1)   7.2 million 

 

 

200,000

 

 

 

20.77

 

 

$2.3 Million

 

Exercised (1)

   —      —     —   

 

 

—

 

 

 

—

 

 

 

—

 

(1)The intrinsic value of the exercised options is the difference between the fair market value at time of exercise and the strike price of the option.

(1)
The intrinsic value of the exercised options exercisableis the difference between the fair market value at December 31, 2017 includetime of exercise and the following:strike price of the option.

Option Price

  Number of options
exercisable		 

$17.87

   300,000 
  

 

 

 

Options exercisable at December 31, 2017

   300,000 
  

 

 

 

There were no options granted under the Plan in 2017 or 2016. 2023. The weighted average fair value of options granted under the Plan was $8.69$2.98 in 20152022 and $6.95 in 2021 using a Black-Scholes option-pricing model and the following weighted average assumptions.

2015

Dividend yield

0.0%

Expected volatility

31.59%

Risk-free interest rate

1.7%

Expected option life

5.0 years

 

 

2022

 

2021

Dividend yield

 

2.0%

 

2.0%

Expected volatility

 

22.56%

 

38.64%

Risk-free interest rate

 

4.49%

 

0.2%

Expected option life

 

2.0 years

 

3.5 years

115

The following tables summarize the range of exercise prices of options outstanding at December 31, 2017, 2016,2023, 2022, and 2015:2021:

Ranges of

Exercise Prices

  Outstanding at
December 31, 2017		 Weighted Average Per
Share Exercise Price		  Weighted Average
Remaining Life

 

Outstanding at December 31, 2023

 

 

 

Weighted Average Per
Share Exercise Price

 

 

Weighted Average
Remaining Life

$17.87 — $19.99

  300,000 $17.87  3.7 years

$30.00 — $37.70

  300,000 (1) $32.38  6.1 years
  

 

   

$20.00 - $24.99

 

 

200,000

 

 

 

$

20.77

 

 

5.8 years

Total

  600,000   

 

 

200,000

 

 

 

 

 

 

 

  

 

   

(1)— the weighted average per share exercise price on these shares outstanding is variable. See note below under Chief Executive Officer for additional information.

Ranges of
Exercise Prices

 

Outstanding at December 31, 2022

 

 

 

Weighted Average Per
Share Exercise Price

 

 

Weighted Average
Remaining Life

$15.00 - $19.99

 

 

300,000

 

 

 

$

17.87

 

 

0.0 years

$20.00 - $24.99

 

 

200,000

 

 

 

$

20.77

 

 

6.8 years

$25.00 - $39.99

 

 

46,667

 

 

 

$

28.70

 

 

8.1 years

$50.00 - $59.99

 

 

300,000

 

 

 

$

50.00

 

 

5.0 years

Total

 

 

846,667

 

 

 

 

 

 

 

Ranges of

Exercise Prices

  Outstanding at
December 31, 2016		 Weighted Average Per
Share Exercise Price		  Weighted Average
Remaining Life

 

Outstanding at December 31, 2021

 

 

 

Weighted Average Per
Share Exercise Price

 

 

Weighted Average
Remaining Life

$17.87 — $19.99

   300,000  $17.87  4.7 years

$30.00 — $37.70

   300,000 (1)  $32.38  7.1 years
  

 

    

$15.00 - $19.99

 

 

300,000

 

 

$

17.87

 

 

0.0 years

$25.00 - $39.99

 

 

93,333

 

 

$

28.70

 

 

9.0 years

$50.00 - $59.99

 

 

300,000

 

 

 

$

50.00

 

 

6.0 years

Total

   600,000    

 

 

693,333

 

 

 

 

 

 

 

  

 

    

(1)— the weighted average per share exercise price on these shares outstanding is variable. See note below under Chief Executive Officer for additional information.

Ranges of

Exercise Prices

  Outstanding at
December 31, 2015		 Weighted Average Per
Share Exercise Price		  Weighted Average
Remaining Life

$17.87 — $19.99

  300,000 $17.87  5.7 years

$20.00 — $29.99

  200,000 $28.37  9.0 years

$30.00 — $37.70

  300,000 (1) $32.38  8.1 years
  

 

   

Total

  800,000   
  

 

   

(1)— the weighted average per share exercise price on these shares outstanding is variable. See note below under Chief Executive Officer for additional information.

Restricted Shares / Restricted Stock Units

In addition to stock option grants, the Plan also provides for the granting of restricted shares and restricted stock units to employees andnon-employee Directors. The Company recognized compensation expense for restricted stock of $4.1$2.7 million, $3.2$2.0 million, and $3.5$2.5 million for 2017, 2016,2023, 2022, and 2015,2021, respectively. There is no unrecognized compensation expense for the non-vested restricted stock at December 31, 2023. The Company recognized compensation expense for restricted stock units of $0.5 million, $1.5 million, and $0.9 million for 2023, 2022 and 2021, respectively. The total unrecognized compensation expense for thenon-vested restricted stock units is $1.7$0.1 million at December 31, 2017,2023, which will be recognized over a weighted average life of 1.50.5 years.

The following table summarizes the restricted stock grants since the 2003 inception of the original share incentive plan.plan:

   Restricted Stock Awards 

Year

  Employees   Directors   Total 

Inception through 2014

   806,762    441,888    1,248,650 

2015

   138,507    36,321    174,828 

2016

   121,346    35,185    156,531 

2017

   22,503    27,121    49,624 
  

 

 

   

 

 

   

 

 

 
   1,089,118    540,515    1,629,633 
  

 

 

   

 

 

   

 

 

 

 

 

Restricted Stock Awards

 

Year

 

Employees

 

 

Directors

 

 

Total

 

Inception through 2020

 

 

1,171,576

 

 

 

747,601

 

 

 

1,919,177

 

2021

 

 

—

 

 

 

83,199

 

 

 

83,199

 

2022

 

 

—

 

 

 

97,260

 

 

 

97,260

 

2023

 

 

—

 

 

 

91,088

 

 

 

91,088

 

 

 

1,171,576

 

 

 

1,019,148

 

 

 

2,190,724

 

The following table summarizes thenon-vested restricted shares activity for the years ended December 31, 2017, 2016,2023, 2022, and 2015:2021:

  Number of
Shares		   Weighted
Average
Price
Per Share		 

 

Number of
Shares

 

 

Weighted
Average
Price Per
Share

 

Non-vested Restricted Shares at January 1, 2015

   172,275   $23.76 

Non-vested Restricted Shares at January 1, 2021

 

 

35,403

 

 

 

38.45

 

Shares issued

   174,828   $28.24 

 

 

83,199

 

 

 

27.24

 

Shares vested

   (70,503)   $25.31 

 

 

(101,048

)

 

 

29.59

 

Shares forfeited

   (16,695)   $24.11 

 

 

(2,915

)

 

 

36.58

 

  

 

   

Non-vested Restricted Shares at December 31, 2015

   259,905   $26.33 

Non-vested Restricted Shares at December 31, 2021

 

 

14,639

 

 

 

36.23

 

Shares issued

   156,531   $29.44 

 

 

97,260

 

 

 

25.08

 

Shares vested

   (111,205)   $26.11 

 

 

(100,975

)

 

 

25.49

 

Shares forfeited

   (5,633)   $27.25 

 

 

(10,924

)

 

 

36.23

 

  

 

   

Non-vested Restricted Shares at December 31, 2016

   299,598   $28.02 

Non-vested Restricted Shares at December 31, 2022

 

 

—

 

 

 

—

 

Shares issued

   49,624   $39.42 

 

 

91,088

 

 

 

29.83

 

Shares vested

   (116,111)   $29.75 

 

 

(91,088

)

 

 

29.83

 

Shares forfeited

   (20,299)   $28.63 

 

 

—

 

 

 

—

 

  

 

   

Non-vested Restricted Shares at December 31, 2017

   212,812   $29.67 
  

 

   

Non-vested Restricted Shares at December 31, 2023

 

 

—

 

 

$

—

 

116

The following table summarizes the restricted stock unit grants since the 2003 inception of the original share incentive plan:

 

 

Restricted Stock Unit Awards

 

Year

 

Employees

 

 

Directors

 

 

Total

 

Inception through 2020

 

 

336,736

 

 

 

41,667

 

 

 

378,403

 

2021

 

 

—

 

 

 

—

 

 

 

—

 

2022

 

 

—

 

 

 

—

 

 

 

—

 

2023

 

 

—

 

 

 

—

 

 

 

—

 

 

 

336,736

 

 

 

41,667

 

 

 

378,403

 

The following table summarizes the non-vested restricted stock units activity for the years ended December 31, 2023, 2022, and 2021:

 

 

Number
of Restricted
Stock Units

 

 

Weighted Average Price Per Restricted Stock Unit

 

Non-vested Restricted Stock Units at January 1, 2021

 

 

315,026

 

 

$

30.26

 

Restricted Stock Units issued

 

 

—

 

 

 

—

 

Restricted Stock Units vested

 

 

(44,245

)

 

 

30.08

 

Restricted Stock Units forfeited

 

 

(43,425

)

 

 

30.06

 

Non-vested Restricted Stock Units at December 31, 2021

 

 

227,356

 

 

$

30.33

 

Restricted Stock Units issued

 

 

—

 

 

 

—

 

Restricted Stock Units vested

 

 

(47,633

)

 

 

30.35

 

Restricted Stock Units forfeited

 

 

(51,885

)

 

 

29.82

 

Non-vested Restricted Stock Units at December 31, 2022

 

 

127,838

 

 

$

30.53

 

Restricted Stock Units issued

 

 

—

 

 

 

—

 

Restricted Stock Units vested

 

 

(61,652

)

 

 

30.43

 

Restricted Stock Units forfeited

 

 

(14,893

)

 

 

30.18

 

Non-vested Restricted Stock Units at December 31, 2023

 

 

51,293

 

 

$

30.75

 

Upon vesting, the restricted stock units are converted to restricted class A common shares. Based on the terms of the Restricted Sharerestricted share and restricted stock unit grants, all forfeited shares revert back to the Company.

During 2015,2023, 2022, and 2021, the Company granted an aggregate of 138,50791,088, 97,260, and 83,199 class A ordinarycommon shares, to key employeesrespectively, at a weighted average grant date fair value of $28.37$29.83, $25.08, and $27.24 per share, under the Plan. Of the shares granted in 2015, 10,574 were grantedrespectively, to the Company’s Chief Executive Officer and vest 33 1/3% on each subsequent anniversary date of the grant for a period of three years subject to an accident yeartrue-up of bonus year underwriting results as of the third anniversary of the grant and an additional 44,058 shares were granted to the Company’s Chief Executive Officer and other key employees which vest 100% on January 1, 2018. The remaining 83,875 shares were granted to key employees and will vest as follows:

16.5% vested on January 1, 2016, 16.5% vested on January 1, 2017, and 17.0% of the granted stock will vest on January 1, 2018.

Subject to Board approval, 50% of granted stock vests 100%, no later than March 15, 2018, following are-measurement of 2014 results as of December 31, 2017.

During 2015, the Company granted 36,321 A ordinary shares, at a weighted average grant date fair value of $27.73 per share, tonon-employee directors of the Company under the Plan.

During 2016, the The Company previously granted an aggregate of 121,346 A ordinary157,139 shares to key employees at a weighted average grant date fair value of $28.97 per share under the Plan. Of thenon-employee director with deferred vesting. These shares vested on January 13, 2023. All other shares granted in 2016, 11,199 were granted to the Company’s Chief Executive Officer and vest 33 1/3% on each subsequent anniversary date of the grant for a period of three years subject to atrue-up of bonus year underwriting results as of the third anniversary of the grant. 5,309 shares were granted to another key employee and were due to vest 100% on February 7, 2019. These shares were forfeited during 2017 as the key employee is no longer employed by the company. 8,253 shares were granted to other key employees and vest 33% on the first and second anniversary of the grant and vest 34% on the third anniversary of the grant contingent on meeting certain performance objectives and subject to Board approval. The remaining 96,585 shares were granted to key employees and will vest as follows:

16.5% vested on January 1, 2017. 16.5% and 17.0% of the granted stock will vest on January 1, 2018 and January 1, 2019, respectively.

Subject to Board approval, 50% of granted stock vests 100%, no later than March 15, 2019, following are-measurement of 2015 results as of December 31, 2018.

During 2016, the Company granted 35,185 A ordinary shares, at a weighted average grant date fair value of $31.05 per share, tonon-employee directors of the Company under the Plan.

During 2017, the Company granted an aggregate of 22,503 A ordinary shares to key employees at a weighted average grant date fair value of $38.21 per share under the Plan. These shares will vest as follows:

16.5%, 16.5%, and 17.0% of the granted stock vest on January 1, 2018, January 1, 2019, and January 1, 2020, respectively.

Subject to Board approval, 50% of granted stock vests 100%, no later than March 15, 2020, following are-measurement of 2016 results as of December 31, 2019.

During 2017, the Company granted 27,121 A ordinary shares, at a weighted average grant date fair value of $40.42 per share, tonon-employee directors of the Company under the Plan.

All of the shares granted tonon-employee directors in 2017, 2016, and 2015 wereare fully vested but subject to certain restrictions.

There were no restricted class A common shares or restricted stock units granted to key employees during the years ended December 31, 2023, 2022, or 2021.

Book Value Appreciation Rights (“BVAR”)

In 2021, the Company granted 2,500,000 Penn-Patriot BVARs with an aggregate initial notional value equal to approximately 5% of Penn-Patriot’s book value, which entitled the holder to a payment based on the value of the per-BVAR appreciation in Penn-Patriot’s book value over the initial notional value. These BVARs were forfeited in 2022.

In 2021, the Company also granted 400,000 Penn-Patriot BVARS with an aggregate initial notional value equal to approximately 0.8% of Penn-Patriot’s book value, which entitled the holder to a payment based on the value of the per-BVAR appreciation in Penn-Patriot’s book value over the initial notional value. These BVARs were forfeited in 2022.

There were no BVARs granted during the years ended December 31, 2023 and 2022.

The Company recorded $2.3 million in compensation expense during the year ended December 31, 2021. This expense was reversed in 2022 when the BVARs were forfeited. There was no compensation expense related to BVARs during the year ended December 31, 2023. There were no accrued expenses related to BVARs as of December 31, 2023 or 2022.

117

Book Value Rights ("BVR")

Book Value Rights are awards issued to employees which are indexed to Penn-Patriot Insurance Company's equity. Penn-Patriot Insurance Company is a wholly owned subsidiary of the Company. The BVRs are payable in either cash or Global Indemnity Group, LLC's class A common shares at the discretion of Global Indemnity Group, LLC's Board of Directors.

In 2023, the Company granted 177,045 Penn-Patriot Book Value Rights. These BVR will vest 50% on March 3, 2025 and 50% on March 3, 2026.

In 2022, the Company granted 179,096 Penn-Patriot Book Value Rights. Of these BVR, 69,034 BVR have a three year cliff vesting period. 34,463 BVR will vest on December 31, 2024. 20,855 BVR will vest 50% on April 18, 2025 and 50% on April 18, 2027. The remaining 54,745 BVR will vest as follows:

•
16.5% vested on January 1, 2023, 16.5% will vest on January 1, 2024, and 17.0% of the book value rights will vest on January 1, 2025.
•
Subject to Board approval, 50% of the book value rights will vest 100%, no later than March 15, 2026, following a re-measurement of 2022 results as of December 31, 2025.

In 2021, the Company granted 131,438 Penn-Patriot Book Value Rights. Of these BVR, 97,432 BVR have a three year cliff vesting period. Of the remaining 34,006 BVR, 50% vested on October 26, 2022 and 50% will be paid in January 2024.

The Company recorded $0.6 million, $0.8 million, and $0.1 million in compensation expense during the years ended December 31, 2023, 2022, and 2021, respectively, and had $1.3 million and $0.7 million accrued as of December 31, 2023, and 2022, respectively, related to the book value rights.

Chief Executive Officer

Effective September 19, 2011, Cynthia Y. Valko was hiredOctober 21, 2022, Global Indemnity Group, LLC's Board of Directors appointed Joseph W. Brown as the Company’sits Chief Executive Officer.

Ms. Valko’s termsOfficer ("CEO"). The CEO Agreement provides for a grant of employment included two equity components including the granting of 300,000200,000 stock options to acquire GBLI class A common shares with a strikean exercise price equal to the closing price of the Company’sGBLI’s class A common shares on the trading day preceding the start date or $17.87 per share, and an annual bonus opportunity of which 50% shall be paid in restricted shares based on the market value of the Company’s sharesgrant. The options vested in four equal tranches as follows: 25% on each of December 31November 1, 2022, February 1, 2023, May 1, 2023 and August 1, 2023 and are exercisable within 7 years of the subject bonus year.grant notwithstanding any earlier termination of employment. The stock options vested 33 1/3% on December 31, 2012, 2013, and 2014. The restricted shares vest 33 1/3% on each anniversary of the subject bonus year. All equity components based on performance are subject to accident yeartrue-up of bonus year underwriting results and are subject to Board approval.

In 2014, Ms. Valko was awarded an additional 300,000 stock options. The stock options which vested as follows: 20% vested on December 31, 2015, 30% vested on December 31, 2016, and the remaining 50% vested on December 31, 2017 were based on achieving underwriting income, premium volume, and underwriting profitability targets, subject to an accident year true up on the 3rd anniversary of each such year. Vesting of the stock options is subject to continued employment. The exercise price applicable to the Stock Options is $25.00 subject to adjustment based on the Company’s averageyear-end tangible book value per share, the average interest rate of certain Treasury bonds and the time period elapsed between January 1, 2014 and the date the stock options are exercised. The stock options were granted under and are subject to the terms ofand conditions for stock options as reflected in the Company’s 2018 Share Incentive Plan as amended, subject to shareholder approval of such plan toand written option agreement.

See Note 26 for additional information on stock options granted in connection with new CEO Agreement entered into on January 18, 2024.

Rule 10b5-1 Trading Plans

The Company did not have any Rule 10b5-1 Trading Plans in place during the extent required to affect such grant under the plan.years ended December 31, 2023, 2022, and 2021.

17.401(k) Plan
19.
401(k) Plan

The Company maintains a 401(k) defined contribution plan that covers all eligible U.S. employees. Under this plan, the Company matches 100%100% of the first 6%6% contributed by an employee. Vesting on contributions made by the Company is immediate. Total expenses for the plan were $1.9$1.6 million, $1.9$2.0 million, and $2.0$1.9 million for the three years ended December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively.

118

18.Earnings Per Share

20.
Earnings Per Share

Earnings per share have been computed using the weighted average number of ordinarycommon shares and ordinarycommon share equivalents outstanding during the period.

The following table sets forth the computation of basic and diluted earnings per share.share:

   Years Ended December 31, 
(Dollars in thousands, except share and per share
data)		  2017   2016   2015 

Net income (loss)

  $(9,551)   $49,868   $41,469 
  

 

 

   

 

 

   

 

 

 

Basic earnings per share:

      

Weighted average shares outstanding — basic

   17,308,663    17,246,717    24,253,657 
  

 

 

   

 

 

   

 

 

 

Net income (loss) per share

  $(0.55)   $2.89   $1.71 
  

 

 

   

 

 

   

 

 

 

Diluted earnings per share:

      

Weighted average shares outstanding — diluted (1)

   17,308,663    17,547,061    24,505,851 
  

 

 

   

 

 

   

 

 

 

Net income (loss) per share

  $(0.55)   $2.84   $1.69 
  

 

 

   

 

 

   

 

 

 

 

 

Years Ended December 31,

 

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

 

2023

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

25,429

 

 

$

(850

)

 

$

29,354

 

Less: preferred stock distributions

 

 

440

 

 

 

440

 

 

 

440

 

Net income (loss) available to common shareholders

 

$

24,989

 

 

$

(1,290

)

 

$

28,914

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Weighted average shares for basic earnings per share

 

 

13,553,168

 

 

 

14,482,164

 

 

 

14,426,739

 

Non-vested restricted stock

 

 

—

 

 

 

—

 

 

 

11,016

 

Non-vested restricted stock units

 

 

49,616

 

 

 

—

 

 

 

120,936

 

Options

 

 

63,624

 

 

 

—

 

 

 

105,639

 

Weighted average shares for diluted earnings per share (1)

 

 

13,666,408

 

 

 

14,482,164

 

 

 

14,664,330

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - Basic

 

$

1.84

 

 

$

(0.09

)

 

$

2.00

 

Earnings per share - Diluted

 

$

1.83

 

 

$

(0.09

)

 

$

1.97

 

(1)For the year ended December 31, 2017,
(1)
For the year 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.

A reconciliation of weighted average shares for basicoutstanding – basic” was used to calculate “diluted earnings per shareshare” due to weighted average sharesa net loss for diluted earnings per share is as follows:the period.

   Years Ended December 31, 
   2017   2016   2015 

Weighted average shares for basic earnings per share

   17,308,663    17,246,717    24,253,657 

Non-vested restricted stock

   —      187,526    148,669 

Options

   —      112,818    103,525 
  

 

 

   

 

 

   

 

 

 

Weighted average shares for diluted earnings per share

   17,308,663    17,547,061    24,505,851 
  

 

 

   

 

 

   

 

 

 

If the Company had not incurred a loss induring the year ended December 31, 2017, 17,680,2092022, 14,644,274 weighted average shares would have been used to compute the diluted loss per share calculation. In addition to the basic shares, weighted average shares for the diluted calculation for the year ended December 31, 2022 would have included 157,441 shares ofnon-vested74,987 restricted stock units and 214,10587,124 share equivalents for options.

The weighted average shares outstanding used to determine dilutive earnings per share for the years ended December 31, 20162022 and 2015 do2021 does not include 300,000346,667 and 500,000393,333 options, respectively, which were deemed to be anti-dilutive. The year ended December 31, 20172023 did notnot have any options that were deemed to be anti-dilutive.

21.
Statutory Financial Information

19.Statutory Financial Information

GAAP differs in certain respects from Statutory Accounting Principles (“SAP”) as prescribed or permitted by the various U.S. state insurance departments. The principal differences between SAP and GAAP are as follows:

•
Under SAP, investments in debt securities are primarily carried at amortized cost, while under GAAP the Company records its debt securities at estimated fair value.

•
Under SAP, policy acquisition costs, such as commissions, premium taxes, fees and other costs of underwriting policies are charged to current operations as incurred, while under GAAP such costs are deferred and amortized on a pro rata basis over the period covered by the policy.

•
Under SAP, certain assets designated as“Non-admitted assets” "Non-admitted assets" (such as prepaid expenses) are charged against surplus.

•
Under SAP, net deferred income tax assets are admitted following the application of specified criteria, with the resulting admitted deferred tax amount being credited directly to surplus.

•
Under SAP, certain premium receivables arenon-admitted and are charged against surplus based upon aging criteria.

•
Under SAP, the costs and related receivables for guaranty funds and other assessments are recorded based on management’sManagement's estimate of the ultimate liability and related receivable settlement, while under GAAP such costs are accrued when the

119

liability is probable and reasonably estimable and the related receivable amount is based on future premium collections or policy surcharges fromin-force policies.

•
Under SAP, unpaid losses and loss adjustment expenses and unearned premiums are reported net of the effects of reinsurance transactions, whereas under GAAP, unpaid losses and loss adjustment expenses and unearned premiums are reported gross of reinsurance.

•
Under SAP, a provision for reinsurance is charged to surplus based on the authorized status of reinsurers, available collateral, and certain aging criteria, whereas under GAAP, an allowance for uncollectible reinsurance is established based on management’sManagement’s best estimate of the collectability of reinsurance receivables.

•
Under SAP, the tax impact of the Tax Cuts and Jobs Act enacted on December 22, 2017 is recorded through surplus, whereas under GAAP, the tax impact is recorded in the Consolidated Statements of Operations.

The National Association of Insurance Commissioners (“NAIC”) issues model laws and regulations, many of which have been adopted by state insurance regulators, relating to: (a) risk-based capital (“RBC”("RBC") standards; (b) codification of insurance accounting principles; (c) investment restrictions; and (d) restrictions on the ability of insurance companies to pay dividends.

The Company’s U.S. insurance subsidiaries are required by law to maintain certain minimum surplus on a statutory basis, and are subject to regulations under which payment of a dividend from statutory surplus is restricted and may require prior approval of regulatory authorities. Applying the current regulatory restrictions as of December 31, 2017,2023, the maximum amount of distributions that could be paid in 20182024 by Penn-Patriot Insurance Company, the United National insurance companies, and the Penn-America insurance companies under applicable laws and regulations without regulatory approval is approximately $21.0$40.2 million, $29.8 million, and $6.3$12.6 million, respectively. The Penn-America insurance companies limitation includes $2.1$4.1 million that would be distributed to United National Insurance Company or its subsidiary, Penn Independent Corporation, based on the December 31, 20172023 ownership percentages. American Reliable is unable toThe Company’s insurance subsidiaries did not declare or pay a distributionany dividends in 2018 without regulatory approval. During 2017, the United National Insurance Company, the Penn-America Insurance Company, and American Reliable declared and paid dividends of $17.8 million, $7.9 million, and $3.3 million, respectively. In addition, United National Insurance Company paid a $35.0 million dividend, which was previously declared in 2015, to its parent company, American Insurance Services, Inc. during the year ended December 31, 2017.2023.

The NAIC’sNAIC's RBC model provides a tool for insurance regulators to determine the levels of statutory capital and surplus an insurer must maintain in relation to its insurance and investment risks, as well as its reinsurance exposures, to assess the potential need for regulatory attention. The model provides four levels of regulatory attention, varying with the ratio of an insurance company’scompany's total adjusted capital to its authorized control level RBC (“ACLRBC”("ACLRBC"). If a company’s total adjusted capital is:

(a)
less than or equal to 200%, but greater than 150% of its ACLRBC (the "Company Action Level"), the company must submit a comprehensive plan to the regulatory authority proposing corrective actions aimed at improving its capital position;
(b)
less than or equal to 150%, but greater than 100% of its ACLRBC (the "Regulatory Action Level"), the regulatory authority will perform a special examination of the company and issue an order specifying the corrective actions that must be followed;
(c)
less than or equal to 100%, but greater than 70% of its ACLRBC (the "Authorized Control Level"), the regulatory authority may take any action it deems necessary, including placing the company under regulatory control; and
(d)
less than or equal to 70% of its ACLRBC (the "Mandatory Control Level"), the regulatory authority must place the company under its control.

(a)less than or equal to 200%, but greater than 150% of its ACLRBC (the “Company Action Level”), the company must submit a comprehensive plan to the regulatory authority proposing corrective actions aimed at improving its capital position;

(b)less than or equal to 150%, but greater than 100% of its ACLRBC (the “Regulatory Action Level”), the regulatory authority will perform a special examination of the company and issue an order specifying the corrective actions that must be followed;

(c)less than or equal to 100%, but greater than 70% of its ACLRBC (the “Authorized Control Level”), the regulatory authority may take any action it deems necessary, including placing the company under regulatory control; and

(d)less than or equal to 70% of its ACLRBC (the “Mandatory Control Level”), the regulatory authority must place the company under its control.

Based on the standards currently adopted, the Company reported in its 20172023 statutory filings that the capital and surplus of the U.S. insurance companies are above the prescribed Company Action Level RBC requirements.

The following is selected information for the Company’s U.S. insurance companies, net of intercompany eliminations, where applicable, as determined in accordance with SAP:

  Years Ended December 31, 

 

Years Ended December 31,

 

(Dollars in thousands)  2017   2016   2015 

 

2023

 

 

2022

 

 

2021

 

Statutory capital and surplus, as of end of period

  $274,586   $323,144   $318,101 

 

$

402,838

 

 

$

367,275

 

 

$

359,471

 

Statutory net income (loss)

  ($19,019)    35,618    48,633 

Statutory net income

 

 

60,976

 

 

 

23,044

 

 

 

29,696

 

120

22.
Segment Information

Global Indemnity Reinsurance must also prepare annual statutory financial statements. The Bermuda Insurance Act 1978 (the “Insurance Act”) prescribes rules forDuring the preparationfourth quarter of 2023, the Company restructured its insurance operations to strengthen its market presence and substanceenhance GBLI's focus on core products and made the decision to manage the business through two segments, Penn-America and Non-Core Operations. Management believes these segments allow users of these statutorythe Company’s financial statements which include, in statutory form,to better understand the Company's performance, better assess prospects for future net cash flows, and make more informed judgments about the Company as a balance sheet, an income statement, a statement of capital and surplus and notes thereto. The statutory financial statements are not prepared in accordance with GAAP or SAP and are distinct from the financial statements preparedwhole. Segment results for presentationprior years have been revised to Global Indemnity Reinsurance’s shareholders and under the Bermuda Companies Act 1981 (the “Companies Act”), which financial statements will be prepared in accordance with GAAP.reflect these changes.

The principal differences between statutory financial statements prepared under the Insurance Act and GAAP are as follows:

Under the Insurance Act, policy acquisition costs, such as commissions, premium taxes, fees and other costs of underwriting policies are charged to current operations as incurred, while under GAAP such costs are deferred and amortized on a pro rata basis over the period covered by the policy.

Under the Insurance Act, prepaid expenses and intangible assets are charged to current operations as incurred, while under GAAP such costs are deferred and amortized on a pro rata basis.

Under the Insurance Act, unpaid losses and loss adjustment expenses and unearned premiums are reported net of the effects of reinsurance transactions, whereas under GAAP, unpaid losses and loss adjustment expenses and unearned premiums are reported gross of reinsurance.

Under the Companies Act, Global Indemnity Reinsurance may only declare or pay a dividend if it has no reasonable grounds for believing that it is, or would after the payment be, unable to pay its liabilities as they become due, or if the realizable value of its assets would not be less than the aggregate of its liabilities and its issued share capital and share premium accounts. Global Indemnity Reinsurance is also prohibited, without the approval of the BMA, from reducing by 15% or more its total statutory capital or 25% or more of its total statutory capital and surplus as set out in its previous year’s statutory financial statements, and any application for such approval must include such information as the BMA may require. Based upon the total statutory capital plus the statutory surplus as set out in its 2017 statutory financial statements that will be filed in 2018, Global Indemnity Reinsurance could pay a dividend of up to $227.1 million without requesting BMA approval. Global Indemnity Reinsurance is dependent on receiving distributions from its subsidiaries in order to pay the full dividend in cash. In 2017, Global Indemnity Reinsurance declared a dividend of $120.0 million to its parent, Global Indemnity. Of this amount, $100.0 million was paid to Global Indemnity in December, 2017. As of December 31, 2017, accrued dividends were $20.0 million.

The following is selected information for Global Indemnity Reinsurance, net of intercompany eliminations, where applicable, as determined in accordance with the Bermuda Insurance Act 1978:

   Years Ended December 31, 
(Dollars in thousands)  2017   2016   2015 

Statutory capital and surplus, as of end of period

  $908,433   $838,923   $713,842 

Statutory net income

   29,647    32,768    864 

20.Segment Information

The Company manages its business through three business segments. Commercial Lines offers specialty property and casualty products designed for product lines such as Small Business Binding Authority, Property Brokerage, and Programs. Personal Lines offers specialty personal lines and agricultural coverage. Reinsurance Operations provides reinsurance solutions through brokers and primary writers including insurance and reinsurance companies.

All threeBoth segments follow the same accounting policies used for the Company’s consolidated financial statements. For further disclosure regarding the Company’s accounting policies, please see Note 3.

4.

DuringThe Company manage the 1st quarterdistribution of 2017, theits core product offerings through its Penn-America segment (formerly known as Commercial Specialty). Penn-America offers specialty property and casualty products designed for GBLI's Wholesale Commercial, Programs, InsurTech, and Assumed Reinsurance product offerings. The Companyre-evaluated its Commercial Lines and Personal Lines segments and determined also has a Non-Core Operations segment that certain portionscontains lines of business will be managed, operated and reported by including them in the other segment. As a result, the composition of the Company’s reportable segments changed slightly. Premium that is written through a wholly owned agency that mainly sells to individuals, which was previously included as part of the Commercial Lines segment, is now included within the Personal Lines segment. In addition, one of the small commercial programs written by American Reliable Insurance Company, which was previously included within the Personal Lines segment, is now aggregated within the Commercial Lines segment. Accordingly, the segment results for 2016 and 2015 have been revised to reflect these changes.

On September 30, 2016, Diamond State Insurance Company sold all the outstanding shares of capital stock of one of its wholly owned subsidiaries, United National Specialty Insurance Company, to an unrelated party. Diamond State Insurance Company received aone-time payment of $18.7 million and recognized a pretax gain of $6.9 million which is reflected in other income in 2016. This transaction did not have an impact on the Company’s ongoing business operations. Subsequent to the sale, any business previously written by United National Specialty Insurance Company isde-emphasized or are no longer being written by other companies within the Company’s U.S. Insurance Operations.written.

The following are tabulations of business segment information for the years ended December 31, 2017, 2016,2023, 2022, and 2015.2021. Corporate information is included to reconcile segment data to the consolidated financial statements.

2017:

(Dollars in thousands)

  Commercial
Lines (1)		 Personal
Lines (1)		 Reinsurance
Operations (2)		 Total 

2023:
(Dollars in thousands)

 

Penn-
America

 

 

Non-Core Operations

 

 

Total

 

Revenues:

     

 

 

 

 

 

 

 

 

 

Gross premiums written

  $212,670  $249,777(6)  $53,887  $516,334 
  

 

  

 

  

 

  

 

 

Net premiums written

  $186,448  $209,799  $53,933  $450,180 
  

 

  

 

  

 

  

 

 

Net premiums earned

  $178,798  $215,983  $43,253  $438,034 

Gross written premiums

 

$

369,660

 

 

$

46,737

 

 

$

416,397

 

Net written premiums

 

$

356,796

 

 

$

42,523

 

 

$

399,319

 

Net earned premiums

 

$

354,518

 

 

$

118,839

 

 

$

473,357

 

Other income

   78  6,288  216  6,582 

 

 

1,257

 

 

 

178

 

 

 

1,435

 

  

 

  

 

  

 

  

 

 

Total revenues

   178,876  222,271  43,469  444,616 

 

 

355,775

 

 

 

119,017

 

 

 

474,792

 

  

 

  

 

  

 

  

 

 

Losses and Expenses:

     

 

 

 

 

 

 

 

 

 

Net losses and loss adjustment expenses

   62,834  165,798  40,580  269,212 

 

 

233,239

 

 

 

55,914

 

 

 

289,153

 

Acquisition costs and other underwriting expenses

   75,990(3)  93,113(4)  14,630  183,733 

 

 

134,155

 

 

 

48,462

 

 

 

182,617

 

  

 

  

 

  

 

  

 

 

Income (loss) from segments

  $40,052  $(36,640)  $(11,741)  (8,329) 

 

$

(11,619

)

 

$

14,641

 

 

 

3,022

 

  

 

  

 

  

 

  

Unallocated Items:

     

 

 

 

 

 

 

 

 

 

Net investment income

     39,323 

 

 

 

 

 

 

 

 

55,444

 

Net realized investment gains

     1,576 

Net realized investment losses

 

 

 

 

 

 

 

 

(2,107

)

Corporate and other operating expenses

     (25,714) 

 

 

 

 

 

 

 

 

(23,383

)

Interest expense

     (16,906) 

Income before income taxes

 

 

 

 

 

 

 

 

32,976

 

Income tax expense

 

 

 

 

 

 

 

 

(7,547

)

Net income

 

 

 

 

 

 

 

$

25,429

 

     

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

     (10,050) 

Income tax benefit

     499 
     

 

 

Net loss

     $(9,551) 
     

 

 

Segment assets

 

$

982,083

 

 

$

603,433

 

 

$

1,585,516

 

Corporate assets

 

 

 

 

 

 

 

 

144,060

 

Total assets

  $905,184  $467,525  $628,960(5)  $2,001,669 

 

 

 

 

 

 

 

$

1,729,576

 

  

 

  

 

  

 

  

 

 

(1)Includes business ceded to the Company’s Reinsurance Operations.
(2)External business only, excluding business assumed from affiliates.
(3)Includes federal excise tax of $714 relating to cessions from Commercial Lines to Reinsurance Operations.
(4)Includes federal excise tax of $862 relating to cessions from Personal Lines to Reinsurance Operations.
(5)Comprised of Global Indemnity Reinsurance’s total assets less its investment in subsidiaries

(6)Includes ($1,338) of business written by American Reliable that is ceded to insurance companies owned by Assurant under a 100% quota share reinsurance agreement.

121

2016:

(Dollars in thousands)

  Commercial
Lines (1)		  Personal
Lines (1)		  Reinsurance
Operations (2)		  Total 

Revenues:

     

Gross premiums written

  $203,061  $302,947(6)  $59,837  $565,845 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums written

  $182,956  $228,183  $59,801  $470,940 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums earned

  $189,342  $237,555  $41,568  $468,465 

Other income (loss)

   6,857   3,712   (224)   10,345 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues

   196,199   241,267   41,344   478,810 
  

 

 

  

 

 

  

 

 

  

 

 

 

Losses and Expenses:

     

Net losses and loss adjustment expenses

   75,401   174,528   14,074   264,003 

Acquisition costs and other underwriting expenses

   81,477(3)   99,109(4)   16,064   196,650 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) from segments

  $39,321  $(32,370)  $11,206   18,157 
  

 

 

  

 

 

  

 

 

  

Unallocated Items:

     

Net investment income

      33,983 

Net realized investment gains

      21,721 

Corporate and other operating expenses

      (17,338) 

Interest expense

      (8,905) 
     

 

 

 

Income before income taxes

      47,618 

Income tax benefit

      2,250 
     

 

 

 

Net income

     $49,868 
     

 

 

 

Total assets

  $790,564  $470,508  $711,874(5)  $1,972,946 
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Includes business ceded to the Company’s Reinsurance Operations.
(2)External business only, excluding business assumed from affiliates.
(3)Includes federal excise tax of $756 relating to cessions from Commercial Lines to Reinsurance Operations.
(4)Includes federal excise tax of $948 relating to cessions from Personal Lines to Reinsurance Operations.
(5)Comprised of Global Indemnity Reinsurance’s total assets less its investment in subsidiaries

2022:
 (Dollars in thousands)

 

Penn-
America

 

 

Non-Core Operations

 

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

387,967

 

 

$

339,636

 

 

$

727,603

 

Net written premiums

 

$

370,306

 

 

$

221,025

 

 

$

591,331

 

Net earned premiums

 

$

359,597

 

 

$

242,874

 

 

$

602,471

 

Other income

 

 

1,029

 

 

 

433

 

 

 

1,462

 

Total revenues

 

 

360,626

 

 

 

243,307

 

 

 

603,933

 

Losses and Expenses:

 

 

 

 

 

 

 

 

 

Net losses and loss adjustment expenses

 

 

214,854

 

 

 

144,374

 

 

 

359,228

 

Acquisition costs and other underwriting expenses

 

 

135,145

 

 

 

101,236

 

 

 

236,381

 

Income (loss) from segments

 

$

10,627

 

 

$

(2,303

)

 

 

8,324

 

Unallocated Items:

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

27,627

 

Net realized investment losses

 

 

 

 

 

 

 

 

(32,929

)

Other income

 

 

 

 

 

 

 

 

29,903

 

Corporate and other operating expenses

 

 

 

 

 

 

 

 

(24,421

)

Interest expense

 

 

 

 

 

 

 

 

(3,004

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(3,529

)

Income before income taxes

 

 

 

 

 

 

 

 

1,971

 

Income tax expense

 

 

 

 

 

 

 

 

(2,821

)

Net loss

 

 

 

 

 

 

 

$

(850

)

 

 

 

 

 

 

 

 

 

 

Segment assets

 

$

937,919

 

 

$

824,256

 

 

$

1,762,175

 

Corporate assets

 

 

 

 

 

 

 

 

38,600

 

Total assets

 

 

 

 

 

 

 

$

1,800,775

 

(6)Includes $35,334 of business written by American Reliable that is ceded to insurance companies owned by Assurant under a 100% quota share reinsurance agreement.

122

2015:

(Dollars in thousands)

  Commercial
Lines (1)		  Personal
Lines (1)		  Reinsurance
Operations (2)		  Total 

Revenues:

     

Gross premiums written

  $213,353  $327,147(6)  $49,733  $590,233 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums written

  $198,404  $253,157  $49,683  $501,244 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums earned

  $198,404  $253,948  $51,791  $504,143 

Other income (loss)

   —     3,493   (93)   3,400 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues

   198,404   257,441   51,698   507,543 
  

 

 

  

 

 

  

 

 

  

 

 

 

Losses and Expenses:

     

Net losses and loss adjustment expenses

   98,471   163,045   13,852   275,368 

Acquisition costs and other underwriting expenses

   84,623(3)   97,687(4)   18,993   201,303 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) from segments

  $15,310  $(3,291)  $18,853   30,872 
  

 

 

  

 

 

  

 

 

  

Unallocated Items:

     

Net investment income

      34,609 

Net realized investment losses

      (3,374) 

Corporate and other operating expenses

      (24,448) 

Interest expense

      (4,913) 
     

 

 

 

Income before income taxes

      32,746 

Income tax benefit

      8,723 
     

 

 

 

Net income

     $41,469 
     

 

 

 

Total assets

  $714,688  $524,912  $717,694(5)  $1,957,294 
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Includes business ceded to the Company’s Reinsurance Operations.
(2)External business only, excluding business assumed from affiliates.
(3)Includes federal excise tax of $1,047 relating to cessions from Commercial Lines to Reinsurance Operations.
(4)Includes federal excise tax of $1,270 relating to cessions from Personal Lines to Reinsurance Operations.
(5)Comprised of Global Indemnity Reinsurance’s total assets less its investment in subsidiaries
(6)Includes $55,829 of business written by American Reliable that is ceded to insurance companies owned by Assurant under a 100% quota share reinsurance agreement.

21.Supplemental Cash Flow Information

2021:
 (Dollars in thousands)

 

Penn-
America

 

 

Non-Core Operations

 

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

349,962

 

 

$

332,160

 

 

$

682,122

 

Net written premiums

 

$

328,659

 

 

$

251,409

 

 

$

580,068

 

Net earned premiums

 

$

308,676

 

 

$

286,934

 

 

$

595,610

 

Other income

 

 

1,028

 

 

 

787

 

 

 

1,815

 

Total revenues

 

 

309,704

 

 

 

287,721

 

 

 

597,425

 

Losses and Expenses:

 

 

 

 

 

 

 

 

 

Net losses and loss adjustment expenses

 

 

184,163

 

 

 

200,801

 

 

 

384,964

 

Acquisition costs and other underwriting expenses

 

 

113,038

 

 

 

109,803

 

 

 

222,841

 

Income (loss) from segments

 

$

12,503

 

 

$

(22,883

)

 

 

(10,380

)

Unallocated Items:

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

 

 

 

 

37,020

 

Net realized investment gains

 

 

 

 

 

 

 

 

15,887

 

Other income

 

 

 

 

 

 

 

 

27,936

 

Corporate and other operating expenses

 

 

 

 

 

 

 

 

(27,179

)

Interest expense

 

 

 

 

 

 

 

 

(10,481

)

Income before income taxes

 

 

 

 

 

 

 

 

32,803

 

Income tax expense

 

 

 

 

 

 

 

 

(3,449

)

Net income

 

 

 

 

 

 

 

$

29,354

 

 

 

 

 

 

 

 

 

 

 

Segment assets

 

$

837,108

 

 

$

920,734

 

 

$

1,757,842

 

Corporate assets

 

 

 

 

 

 

 

 

254,967

 

Total assets

 

 

 

 

 

 

 

$

2,012,809

 

23.
Supplemental Cash Flow Information

Taxes and Interest Paid

The Company paid the following net federal income taxes and interest for 2017, 2016,2023, 2022, and 2015:2021:

  Years Ended December 31, 

 

Years Ended December 31,

 

(Dollars in thousands)  2017   2016   2015 

 

2023

 

 

2022

 

 

2021

 

Federal income taxes paid

  $133   $195   $104 

 

$

613

 

 

$

426

 

 

$

54

 

Federal income taxes recovered

   19    4,889    2 

Interest paid

   14,504    8,771    3,926 

 

 

—

 

 

 

5,125

 

 

 

10,340

 

24.
Government Assistance

Non-Cash Activities

On January 1, 2015, Global Indemnity Group, Inc. acquired 100%Enacted in March 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") provides tax relief and incentives to help in the recovery of businesses that partially or fully suspended operations during the coronavirus (“COVID-19”) pandemic in 2020. The CARES Act contains numerous benefits, one of which is the Employee Retention Credit for Employers Subject to Closure Due to COVID-19 (the “COVID-19 Employee Retention Credit” or “ERC”). The ERC was further enhanced with the passage of the voting equity interest of American Reliable. In conjunction with the acquisition, fair value of assets acquired and liabilities assumedConsolidated Appropriation Act (“CAA”) in December 2020.

The Company qualified for a $5.3 million credit in 2021 by the Companycontinuing to pay employees at locations that were fully or partially suspended as follows:

(Dollars in thousands)    

Fair value of assets acquired (including goodwill)

  $383,668 

Liabilities assumed

   283,871 

22.New Accounting Pronouncements

The following are new accounting guidance which have not yet been adopted.

In May, 2017, the Financial Accounting Standards Board (“FASB”) issued updated accounting guidance which clarifies whether changes to the terms or conditionsa result of a share-based payment award requireCOVID-19 related government order. In 2021, qualified wages paid by employers with an entityaverage of 500 or less full time employees is defined as all wages paid during any quarter in which the employer is eligible for the ERC. In 2021, the credit was 70% of qualified wages up to apply modification accounting. This guidancea maximum credit of $7,000 per employee per quarter.

The Company received $5.5 million during the year ended December 31, 2022. Of this amount, $5.3 million was recorded as a reduction to compensation cost, which is a component of corporate and other operating expenses, and $0.2 million was recorded as interest income on the Company’s consolidated statements of operations during the year ended December 31, 2022. The Company did not receive any amounts during the years ended December 31, 2023 and 2021.

123

25.
New Accounting Pronouncements

Recently Issued Accounting Guidance Not Yet Adopted

In December 2023, the FASB issued an accounting standard update to address improvements to income tax disclosures. The standard requires disaggregated information about a company’s effective tax rate reconciliation as well as information on income taxes paid. The standard is effective for all entitiespublic companies for annual periods, and interim periods within those annual periods beginning after December 15, 2017. Early2024, with early adoption is permitted. AlthoughThe standard will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is still evaluatingdoes not expect the impactadoption of this new accounting guidance the Company does not anticipate it willto have a material impact on itsthe Company's financial condition, results of operations, or cash flows.

In March, 2017,November 2023, the FASB issued newan accounting guidance which amendsstandard update to address improvements to reportable segment disclosures. The standard primarily requires the amortization period for certain purchased callable debt securities held atfollowing disclosure on an annual and interim basis: (i) significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss; and (ii) other segment items and description of its composition. The standard also requires current annual disclosures about a premium. Under current generally accepted accounting principles, entities generally amortizereportable segment's profits or losses and assets to be disclosed in interim periods and the premium as an adjustment of yield over the contractual lifetitle and position of the instruments. UnderCODM with an explanation of how the new guidance,CODM uses the amortization period would be shortenedreported measure(s) of segment profits or losses in assessing segment performance and deciding how to the earliest call date. Thisallocate resources. The guidance is effective for public business entitiescompanies for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years beginning after December 15, 2018. Early2024, with early adoption is permitted. The amendment is applied retrospectively to all prior periods presented. The Company is still evaluatingdoes not expect the impact of this guidance on its financial condition, results of operations, and cash flows.

In January, 2017, the FASB issued updated guidance that simplifies how an entity is required to test goodwill for impairment by eliminating the requirement to calculate the implied fair value of goodwill (i.e. Step 2 of the current goodwill impairment test). Under the new amendments, an entity may still first assess qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized, if any. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. This guidance is effective for public business entities’ annual or interim goodwill impairment testing in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Although the Company is still evaluating the impact of this new accounting guidance the Company does not anticipate it willto have a material impact on itsthe Company's financial condition, results of operations, or cash flows.

26.
Subsequent Events

Chief Executive Officer Agreement

In October, 2016, the FASB issuedThe Company entered into a new accounting guidance regarding intra-entity transfersChief Executive Officer Agreement ("2024 CEO Agreement") with Joseph W. Brown on January 18, 2024. The 2024 CEO agreement provides for a grant of assets other than inventory. Under current GAAP, the tax effects of intra-entity asset transfers (intercompany sales) are deferred until the transferred asset is sold200,000 stock options to a third party or otherwise recovered through use. This isacquire GBLI Class A common shares with an exceptionexercise price equal to the principle in ASC 740, Income Taxes, that generally requires comprehensive recognitionclosing price of current and deferred income taxes. The new guidance eliminatesGBLI's Class A common shares on the exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the tax expense from the saledate of the assetgrant. The options vest in the seller’s tax jurisdiction when the transfer occurs, even though thepre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance does not apply to intra-entity transfers of inventory. The income tax consequences from the sale of inventory from one member of a consolidated entity to another will continue to be deferred until the inventory is sold to a third party. Upon adoptionfour equal tranches as follows: 25% on January 1, 2018, there will be a cumulative

adjustment to retained earnings which the Company does not expect to be material to its overall financial condition.

In August, 2016, the FASB issued new accounting guidance regarding the classification of certain cash receipts and cash payments within the statements of cash flows. The new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This guidance is effective for public business entities for fiscal periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. Although the Company is still evaluating the impact of this new guidance, the Company does not anticipate it will have a material impact on its financial condition, results of operations, or cash flows.

In June, 2016, the FASB issued new accounting guidance addressing the measurement of credit losses on financial instruments. For assets held at amortized cost basis, the new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of information for credit loss estimates. For available for sale debt securities, credit losses should be measured similar to current GAAP; however, the new guidance requires that credit losses be presented as an allowance rather than as a write-down and allows for the reversal of credit losses in the current period net income. This guidance is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application of this new guidance is permitted as of the fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. This guidance will be applied using a modified-retrospective approach through a cumulative effect adjustment to retained earnings as of the beginningeach of the first reporting periodbusiness day of each quarter in which2024 (subject to Mr. Brown remaining employed with the guidance is effective. Company through each vesting date), and to the extent vested, are exercisable within 7 years of the grant notwithstanding any earlier termination of employment.

The Company is still evaluating the impact of this guidance on its financial condition, results of operations, and cash flows.

In February, 2016, the FASB issued new accounting guidance regarding leases. The new guidance increases transparency and comparability among organizations by recognizing lease assets and lease liabilities2024 CEO Agreement further provides that on the balance sheet and disclosing key information about leasing arrangements. This guidancefirst business day of each year, beginning in 2025 through 2028, if Mr. Brown is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Upon adoption,employed by the Company, expectshe shall be granted 50,000 stock options to report higher assets and liabilities as a resultacquire GBLI Class A common shares with an exercise price equal to the closing price of recognizingright-of-use assets and corresponding lease liabilitiesGBLI's Class A common shares on the Consolidated Balance Sheets.date of the grant. The options, if granted, will vest on December 31, 2028 (subject to Mr. Brown remaining employed with the Company expects the new guidance to have minimal impactor serving on the Consolidated StatementCompany's Board of Operations or Consolidated Statement of Cash Flows.

In January, 2016,Directors through the FASB issued new accounting guidance surroundingvesting date), and to the accounting for financial instruments. The new guidance addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. In particular, the guidance requires equity investments, except for those accounted for under the equity method of accounting or those that result in consolidationextent vested, are exercisable within 7 years of the investee, to be measured at fair value withgrant notwithstanding any earlier termination of employment.

Distribution

On March 6, 2024, the changes in fair value recognized in net income. It also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. This guidance is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application of this new guidance is permitted as of the beginning of the fiscal year of adoption. Upon adoption on January 1, 2018, the Company estimates that a cumulative effect adjustment, net of tax, of approximately $10.0 million will be reclassified from accumulated other comprehensive income and increase retained earnings. However, there will be no net impact to overall equity.

In May, 2014, the FASB issued new accounting guidance regarding the recognition of revenue from customers arising from the transfer of goods and services. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Long and short duration insurance contracts, which comprise the majority of the Company’s revenues, are excluded from this

accounting guidance. While insurance contracts are not within the scope of this guidance, the Company reviewed the requirement of the new guidance to determine whether its revenue recognition policy for fee income will be impacted by this updated guidance. Based on this review, the Company does not believe its accounting policies will be impacted by this new revenue recognition guidance. This guidance is effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.

23.Summary of Quarterly Financial Information (Unaudited)

An unaudited summary of the Company’s 2017 and 2016 quarterly performance is as follows:

   Year Ended December 31, 2017 
(Dollars in thousands, except per share data)  First
Quarter		   Second
Quarter		   Third
Quarter		   Fourth
Quarter		 

Net premiums earned

  $113,126   $107,073   $108,619   $109,216 

Net investment income

   8,644    8,840    10,134    11,705 

Net realized investment gains (losses)

   775    (662)    (963)    2,426 

Net losses and loss adjustment expenses

   62,561    57,700    82,395    66,556 

Acquisition costs and other underwriting expenses

   46,551    43,457    45,002    48,723 

Income (loss) before income taxes

   9,280    7,753    (16,779)    (10,304) 

Net income (loss)

   12,282    10,089    (8,924)    (22,998) 

Per share data — Diluted:

        

Net income (loss)

  $0.70   $0.57   $(0.51)   $(1.33) 

   Year Ended December 31, 2016 
(Dollars in thousands, except per share data)  First
Quarter		   Second
Quarter		   Third
Quarter		   Fourth
Quarter		 

Net premiums earned

  $121,636   $117,804   $119,553   $109,472 

Net investment income

   9,746    6,562    8,795    8,880 

Net realized investment gains (losses)

   (7,493)    (3,492)    1,928    30,778 

Net losses and loss adjustment expenses

   64,784    78,111    72,162    48,946 

Acquisition costs and other underwriting expenses

   52,090    48,542    48,129    47,889 

Income (loss) before income taxes

   1,953    (11,468)    10,598    46,535 

Net income (loss)

   7,125    (5,165)    9,535    38,373 

Per share data — Diluted:

        

Net income (loss)

  $0.41   $( 0.30)   $0.54   $2.18 

24.Subsequent events

On March 4, 2018, the Company’s Board of Directors approved a dividend paymentrate of $0.25$0.35 per ordinarycommon share to be paidpayable on March 29, 201828, 2024 to all shareholders of record as of the close of business on March 21, 2018.2024, a 40% increase over the prior quarterly dividend rate of $0.25 per common share. Future dividends remain subject to the discretion of GBLI’s Board of Directors, including the Board of Director’s evaluation of the company’s financial performance, capital and reserve positions, liquidity, balance sheet, and other factors.

On March 8, 2018, the Company settled its final reserve calculation which resulted in $41.5 million being due to Global Indemnity Group, Inc. in accordance with the Stock Purchase Agreement between Global Indemnity Group, Inc. and American Bankers Insurance Group, Inc. for the purchase of American Reliable. The settlement is comprised of (i) receipt of $38.8 million for loss and loss adjustment expenses paid on or after January 1, 2015 or payable as of December 31, 2017 with respect to losses incurred prior to January 1, 2015, (ii) receipt of $6.2 million for accrued interest and (iii) payment of $3.5 million for the difference between the agreed upon purchase price and actual settlement on January 1, 2015. These amounts are included in other assets on the consolidated balance sheets as of December 31, 2017.

124

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

Item 9A. CONTROLS AND PROCEDURES

Item 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as that term is defined in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’sCompany's reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’sCommission's rules and forms, and that such information is accumulated and communicated to the Company’sCompany's management, including its ChiefPrincipal Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’sCompany's management, with the participation of its ChiefPrincipal Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of disclosure controls and procedures as of December 31, 2017.2023. Based upon that evaluation and subject to the foregoing, the ChiefPrincipal Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017,2023, the design and operation of the Company’sCompany's disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’sCompany's internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of the consolidated financial statements of the Company in accordance with U.S. generally accepted accounting principles.

The Company’sCompany's internal control over financial reporting includes those policies and procedures that:

•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Company’sCompany's management and Directors; and

•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the Company’sCompany's internal control over financial reporting as of December 31, 2017.2023. The standard measures adopted by management in making its evaluation are the measures in the Internal Control Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Based upon its assessment, management has concluded that the Company’sCompany's internal control over financial reporting was effective at December 31, 2017,2023, and that there were no material weaknesses in the Company’sCompany's internal control over financial reporting as of that date.

Ernst & Young, LLP, an independent registered public accounting firm, which has audited and reported on the consolidated financial statements contained in this Form10-K, has issued its report on the effectiveness of the Company’sCompany's internal control over financial reporting. See “Report of Independent Registered Public Accounting Firm” on page 167.126.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended December 31, 20172023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

125

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Global Indemnity LimitedGroup, LLC

Opinion on Internal Control overOver Financial Reporting

We have audited Global Indemnity Limited’sGroup, LLC’s internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control — Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Global Indemnity LimitedGroup, LLC (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on the COSO criteria.criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20172023 and 2016,2022, the related consolidated statements of operations, comprehensive income shareholders’(loss), changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2017,2023, and the related notes and the financial statement schedules listed in the Index at Item 1515(a) and our report dated March 9, 201815, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Philadelphia, PAPennsylvania

March 9, 201815, 2024

126

Item 9B. OTHER INFORMATION

Item 9B.OTHER INFORMATION

CEO Employment Agreement.None

On March 6, 2018 Global Indemnity entered into a Chief Executive Agreement (the “Employment Agreement”) with Cynthia Y. Valko, the Chief Executive Officer (“CEO”). The Employment Agreement provides for an employment term of three years, from January 1, 2018 through December 31, 2020.Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Under the Employment Agreement, Ms. Valko is eligible to receive a cash Return on Equity Bonus of up to $600,000 for each fiscal year of the Employment Agreement that Ms. Valko served as the CEO (the “ROE Bonus”). Ms. Valko is eligible to receive a preliminary ROE Bonus (the “Preliminary ROE Bonus”) for each such fiscal year if Global Indemnity’s return on equity percentage for such fiscal year exceeds 85% of the targeted return on equity percentage (as established by the Company’s Compensation Committee) for such fiscal year. If Ms. Valko is still employed by the Company and in good standing through the date of payment she will receive 50% of the Preliminary ROE Bonus, payable no later than April 1 of the calendar year immediately following the year to which such Preliminary ROE Bonus relates. Global Indemnity will retain the remaining 50% unpaid balance of the Preliminary ROE Bonus, which will be paid to Ms. Valko within 90 days after the end of the third full calendar year following a Bonus Year (as defined in the Employment Agreement), regardless of Ms. Valko’s then-current employment status with the Company, but subject to adjustment based on an actuarial assessment of incurred but not reported underwriting losses and loss adjustment expenses and actual underwriting losses and loss adjustment expenses.Not applicable

Additionally, under the Employment Agreement, Ms. Valko is eligible to receive an annual cash Performance Incentive Bonus of up to $200,000, based on an assessment of her performance during the Bonus Year (as defined by the Employment Agreement) by the Company’s Compensation Committee, in its sole discretion, based upon the assessment of the Company’s Chairman of the Board of Directors, in his sole discretion.

Under the Employment Agreement, Ms. Valko is restricted from selling any A Ordinary Shares of Global Indemnity unless Ms. Valko retains vested Global Indemnity stock options and shares having an aggregate value of at least equal to the lesser of (i) $5,000,000 or (ii) $5,000,000 multiplied by a fraction, the numerator of which is the volume weighted trading price of Global Indemnity’s shares for the30-day period ending on the relevant measurement date and the denominator of which is $50, and Ms. Valko retains at least 75% of the Global Indemnity options and restricted shares granted to her. Ms. Valko must provide Global Indemnity’s Chairman with advance notice, and receive approval of, any proposed sale.

In addition, Ms. Valko will be granted 300,000 options (“Tranche 3 Options”) to buy Global Indemnity A Ordinary Shares with an exercise price of $50.00 per share. Tranche 3 Options vest 1/3 on December 31 of 2018, 2019 and 2020, if Ms. Valko remains employed and in good standing as of such date. Tranche 3 Options expire on the earlier of December 31, 2027 and 90 calendar days after Ms. Valko is neither employed by Global Indemnity nor a member of the Board of Directors. In 2014, Ms. Valko was granted 300,000 options to buy Global A Ordinary Shares (“Tranche 2 Options”). The Tranche 2 Options will vest on each December 31 of 2018, 2019 and 2020 in an amount based on Ms. Valko’s attainment of the ROE Bonus criteria described above.

In the event of Ms. Valko’s termination by the Company (other than for a Cause Event, as defined in the Employment Agreement), before the expiration of the term, she will receive one month of then-current Base Salary for every completed 12 months of employment prior to the date of termination.

The foregoing description of the Employment Agreement is qualified by reference to the full text of the Chief Executive Agreement, which is filed as Exhibit 10.41 to this Annual Report on Form10-K and incorporated herein by reference.127

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Item 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference to, and will be contained in, the Company’s definitive proxy statement relating to the 20182024 Annual Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 20172023 (“20182024 Proxy Statement”).

Item 11. EXECUTIVE COMPENSATION

Item 11.EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to, and will be contained in, the Company’s 20182024 Proxy Statement.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference to, and will be contained in, the Company’s 20182024 Proxy Statement.

Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference to, and will be contained in, the Company’s 20182024 Proxy Statement.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference to, and will be contained in, the Company’s 20182024 Proxy Statement.

128

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Item 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

The following documents are filed as part of this report:

(a)(1) The Financial Statements listed in the accompanying index on page 9072 are filed as part of this report.

(a)(2) The Financial Statement Schedules listed in the accompanying index on page 9072 are filed as part of this report.

Exhibit

No.

Description

Exhibit
No.

Description

2.1

    3.1

American Reliable SPA dated as of October  16, 2014 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form8-K dated October 21, 2014 (FileNo. 001-34809)).

3.1Certificate of Incorporation of Global Indemnity LimitedShare Designation (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form8-K12B dated November 7, 2016August 28, 2020 (FileNo. 001-34809)).

3.2

Certificate of Incorporation of Change on NameSecond Amended and Restated LLC Agreement of Global Indemnity LimitedGroup, LLC (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form8-K12B dated November 7, 2016August 28, 2020 (FileNo. no. 001-34809)).

3.3

    4.1+

Amended and Restated Memorandum and ArticlesDescription of Association of Global Indemnity Limited (incorporated by reference to Exhibit 3.3 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).Securities

4.1

    4.2

Specimen Share Certificate (evidencing the common shares of Global Indemnity Limited) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).

4.2Indenture, dated as of August 12, 2015, by and between the Company and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form8-K dated August 12, 2015) (FileNo. 001-34809)).

4.3

First Supplemental Indenture, dated November 7, 2016, among Global Indemnity Limited, Global Indemnity plc and Wells Fargo Bank, National Association, as Trustee, to the Indenture dated as of August 12, 2015 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report onForm 8-K12B dated November 7, 2016 (FileNo. 001-34809)).

4.4

Officers’ Certificate, dated August 12, 2015 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form8-K dated August 12, 2015 (FileNo. 001-34809)).

4.5

Form of 7.75% Subordinated Notes due 2045 (included in Exhibit 4.2) (incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Form8-K dated August 12, 2015 (FileNo. 001-34809)).

4.6Second Supplemental Indenture, dated as of March 23, 2017, among Global Indemnity Limited, Wells Fargo Bank, National Association, and U.S. Bank National Association (incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Form8-K dated March 23, 2017(File (File No. 001-34809)).

  4.7

    4.6

Form of 7.875% Subordinated Notes due 2047 (included in Exhibit 4.6) (incorporated by reference to Exhibit 4.44.7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (File No. 001-34809)).

    4.7

Third Supplemental Indenture, dated as of April 25, 2018, by and among the Company, Wells Fargo Bank, National Association, and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form8-K dated March 23, 2017April 25, 2018 (FileNo. 001-34809)).

10.1*

    4.8

Fourth Supplemental Indenture, dated as of August 28, 2020, among Global Indemnity Limited, GBLI Holdings, LLC, New CayCo, Wells Fargo Bank, National Association, as trustee and U.S. Bank, National Association, as trustee, to the Indenture dated as of August 12, 2015 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K12B dated August 28, 2020 (File no. 001-34809)).

    4.9

Fifth Supplemental Indenture, dated as of August 28, 2020, among New CayCo, GBLI Holdings, LLC, Global Indemnity Group, LLC, Wells Fargo Bank, National Association, as trustee and U.S. Bank, National Association, as trustee, to the Indenture dated as of August 12, 2015 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K12B dated August 28, 2020 (File no. 001-34809)).

  10.1*

Second Amended and Restated Management Agreement, dated May 6, 2020, by and among Global Indemnity Limited and Fox Paine & Company, LLC (incorporated by reference to Exhibit 10.1 of the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2020 (File No. 001-34809)).

  10.2*

Third Amended and Restated Management Agreement, dated as of August 28, 2020, by and between Global Indemnity Group, LLC and Fox Paine & Company, LLC (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K12B dated August 28, 2020 (File no. 001-34809)).

129

  10.3*

Management Agreement, dated as of September 5, 2003, by and among United National Group, Ltd., Fox Paine & Company, LLC and The AMC Group, L.P. with related Indemnity Letter (incorporated by reference to Exhibit 10.3 of Amendment No. 1 to the Company’s Registration Statement onForm S-1 (RegistrationNo. 333-108857) filed on October 28, 2003) (File(File No. 000-50511)).

10.2*

  10.4*

Amendment No. 1 to the Management Agreement, dated as of May 25, 2006, by and among United America Indemnity, Ltd., Fox Paine  & Company, LLC and Wind River Holdings, L.P., formerly The AMC Group, L.P. (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form8-K filed on June 1, 2006) (FileNo. 000-50511)).

10.3*Letter Agreement, dated March  16, 2011, assigning the 2003 Management Agreement (as amended) and related indemnity agreement, by and among United America Indemnity, Ltd., Global Indemnity (Cayman) Ltd. and Fox Paine  & Company, LLC (incorporated by reference to Exhibit 10.26 of the Company’s annual report on Form10-K for the fiscal year ended December 31, 2010 (FileNo.  000-34809)).
10.4*Guaranties, dated March  15, 2011, provided by each of United America Indemnity, Ltd., Global Indemnity Reinsurance Company, Ltd., and Global Indemnity Group, Inc., in each case in favor of Fox Paine  & Company, LLC, relating to the obligations of Global Indemnity (Cayman) Ltd. under the Letter Agreement, dated March 15, 2011 (incorporated by reference to Exhibit 10.27 of the Company’s annual report on Form10-K for the fiscal year ended December 31, 2010 (FileNo. 000-34809)).
10.5*Amendment No. 3 to the Management Agreement, dated as of April  10, 2011, by and among Global Indemnity (Cayman) Ltd. and Fox Paine & Company, LLC (incorporated by reference to Exhibit  10.5 of the Company’s annual report on Form10-K for the fiscal year ended December 31, 2012 (FileNo. 001-34809)).
10.6*Amended and Restated Management Agreement, dated as of October  31, 2013, by and among Global Indemnity (Cayman) Ltd. and Fox Paine & Company, LLC (incorporated by reference to Exhibit  10.1 of the Company’s quarterly report on Form10-Q for the quarter ended September 30, 2013(File No. 001-34809)).
10.7*Confirmation Letter, dated as of November  7, 2016, between Global Indemnity Limited, Global Indemnity plc, Global Indemnity (Cayman) Limited and Fox Paine & Company, LLC (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).
10.8*Reaffirmation Agreements, dated as of October  31, 2013, provided by each of United America Indemnity, Ltd., Global Indemnity Reinsurance Company, Ltd., and Global Indemnity Group, Inc. reaffirming the March  15, 2011 Guaranty Agreements (incorporated by reference to Exhibit 10.2 of the Company’s quarterly report on Form10-Q for the quarter ended September  30, 2013(File No. 001-34809)).
10.9*Reaffirmation Agreement, dated as of November  7, 2016, by Global Indemnity Group, Inc. (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form8-K12B dated November  7, 2016 (FileNo. 001-34809)).
10.10*Reaffirmation Agreement, dated as of November  7, 2016, by Global Indemnity Reinsurance Company, Ltd. (incorporated by reference to Exhibit 10.5 of the Company’s Current Report onForm 8K-12B dated November 7, 2016 (FileNo. 001-34809)).

10.11*Amendment No.  1 and the Global Indemnity plc Share Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form8-K dated May  28, 2015 (FileNo. 001-34809)).
10.12*Global Indemnity Limited Share Incentive Plan, as amended and restated and effective as of November 7, 2016 (incorporated by reference to Exhibit 10.15 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).

10.13*

  10.5*

Global Indemnity plc AnnualLimited 2018 Share Incentive Award Program, amended and restated effective July  2, 2010Plan (incorporated by reference to Exhibit 10.410.2 of the Company’s current Report on Form 8-K dated June 14, 2018 (File No. 001-34809)).

  10.6*

Amended and Restated Global Indemnity Group, LLC 2018 Share Incentive Plan, dated as of August 28, 2020 (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form8-K12B dated July 2, 2010August 28, 2020 (FileNo. no. 001-34809)).

10.14*

  10.7*

Deed Poll of Assumption for United America Indemnity, Ltd. Annual Incentive Award Program by Global Indemnity plc,Group, LLC 2023 Share Incentive Plan, dated July  2, 2010as of April 4, 2023 (incorporated by reference to Exhibit 10.5Appendix A of the Company’s Current ReportDefinitive Proxy Statement on Form8-K12B dated July 2, 2010 (FileNo. 001-34809))Schedule 14A, filed on April 28, 2023).

10.15*

  10.8*

Global Indemnity Limited Annual Incentive Awards Program, as amended and restated and effective as of November 7, 2016 (incorporated by reference to Exhibit 10.16 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).

10.16*

  10.9*

Amended and Restated Global Indemnity Group, LLC Annual Incentive Awards Program, dated as of August 28, 2020 (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K12B dated August 28, 2020 (File no. 001-34809)).

  10.10*

Amended and Restated Shareholders Agreement, dated July 2, 2010, by and among Global Indemnity plc (as successor to United America Indemnity, Ltd.) and the signatories thereto (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form8-K12B dated July 2, 2010(File (File No. 001-34809)).

10.17*

  10.11*

Assignment and Assumption Agreement relating to the Amended and Restated Shareholders Agreement, dated July 2, 2010 (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form8-K12B dated July 2, 2010 (FileNo. 001-34809)).

10.18*

  10.12*

Amendment to the Amended and Restated Shareholders Agreement, dated as of October 31, 2013, by and among Global Indemnity plc and the signatories thereto (incorporated by reference to Exhibit 10.3 of the Company’s quarterly report on Form10-Q for the fiscal quarter ended September 30, 2013 (FileNo. 001-34809)).

10.19*

  10.13*

Assignment and Assumption Agreement, dated as of November 7, 2016, between Global Indemnity Limited and Global Indemnity plc (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).

10.20*

  10.14*

Indemnification Agreement between United America Indemnity, Ltd. and Fox Paine Capital Fund II International L.P., dated July 2, 2010 (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form8-K12b dated July 2, 2010 (FileNo. 001-34809)).

10.21*

  10.15*

Assignment and Assumption Agreement, dated as of November 7, 2016, between Global Indemnity Limited, Global Indemnity plc and Fox Paine Capital Fund II International L.P. (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).

10.22*

  10.16*

Form of Indemnification Agreement between United America Indemnity, Ltd. and certain directors and officers of Global Indemnity plc, dated July 2, 2010 (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on form8-K12B dated July 2, 2010 (FileNo. 001-34809)).

10.23*Form of Assignment and Assumption Agreement, dated as of , 2016, between Global Indemnity Limited, Global Indemnity plc, United America Indemnity, Ltd. and certain directors and officers of who may become a party thereto (incorporated by reference to Exhibit 10.14 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).
10.24*Employment Agreement, as amended, for William J. Devlin, Jr., dated October  24, 2005 (incorporated by reference to exhibit 10.14 of the Company’s amended Annual Report onForm 10-K/A for the fiscal year ended December 31, 2011 dated September 5, 2012(File No. 001-34809)).

10.25*Amendment to Executive Employment Agreement with William J. Devlin, Jr., dated November  7, 2016 (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form8-K12B (FileNo. 001-34809)).
10.26*Amendment to the Executive Employment Agreement with William J. Devlin, Jr., dated August  8, 2017 ((incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2017 (FileNo.  001-34809)).
10.27*Executive Employment Agreement, dated as of June  8, 2009, between Penn-America Insurance Company and Matthew B. Scott (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form10-K for the fiscal year ended December  31, 2009 (FileNo. 000-50511)).
10.28*Amendment to Executive Employment Agreement with Matthew B. Scott, dated November  7, 2016 (incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).
10.29*Executive Employment Agreement, dated as of December 8, 2009, between United America Indemnity, Ltd. and Thomas M. McGeehan (incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2009 (FileNo. 000-50511)).

10.30*

  10.17*

Amendment to Executive Employment Agreement with Thomas M. McGeehan, dated November 7, 2016 (incorporated by reference to exhibitExhibit 10.10 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).

10.31*

  10.18*

Amendment to the Executive Employment Agreement with Cynthia Y. Valko,Thomas M. McGeehan, dated November  7, 2016as of August 28, 2020 (incorporated by reference to exhibit 10.7Exhibit 10.6 of the Company’s Current Report on Form8-K12B dated November 7, 2016August 28, 2020 (FileNo. no. 001-34809)).

10.32*

  10.19*

ExecutiveTerms of Employment Term Sheet with Stephen Green, dated February  18, 2015Jonathan E. Oltman effective January 19, 2021. (incorporated by reference to exhibit 10.20Exhibit 10.24 of the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 20142020 (FileNo. 001-34809)).

130

10.33*

  10.20*

Amendment to the Executive Employment Term Sheet with Stephen Green, dated November  7, 2016 (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form8-K12B dated November 7, 2016 (FileNo. 001-34809)).

10.34*Amendment to the Executive EmploymentSeparation Agreement with Stephen Green, dated August  8, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2017 (FileNo.  001-34809)).
10.35Redemption Agreement, dated October  29, 2015, by and between Global Indemnity plc and the parties listed on Annex A thereto (incorporated by reference to Exhibit 1.1 of the Company’s Current Report on Form8-K dated October  29, 2015) (FileNo. 001-34809)).
10.36Amended and Restated Additional Redemption Agreement, dated as of November  7, 2016, between Global Indemnity Limited, Global Indemnity plc and other parties listed thereinJonathan E. Oltman effective January 17, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form8-K12B 8-K dated January 19, 2024 (File No. 001-34809)).

  10.21*

Chief Executive Officer Agreement with Joseph W. Brown dated November 7, 2016 (FileNo. 001-34809)).

10.37Assignment and Assumption Agreement, dated as of November  7, 2016, among Global Indemnity Limited, Global Indemnity plc, Global Indemnity Group, Inc., American Bankers Insurance Group, Inc. and Assurant, Inc.16, 2022 (incorporated by reference to Exhibit 10.610.1 of the Company’s Current Report on Form8K-12B 8-K dated November 7, 201622, 2022 (FileNo. 001-34809)).

10.38

  10.22+

Deed Poll,Chief Executive Officer Agreement with Joseph W. Brown dated as of November  7, 2016, by Global Indemnity Limited (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form8-K12B dated November 7, 2016(File  No. 001-34809)).January 18, 2024.

  10.39

  10.23

Institutional Services Customer Agreement dated as of December 12, 2016 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form10-Q for the quarter ended March 31, 2017 (FileNo. 001-34809)).

  10.40

  10.24

Confidentiality Agreement between Fox Paine & Company, LLC and Global Indemnity Limited, dated September 17, 2017 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form10-Q for the quarter ended September 30, 2017 (FileNo. 001-34809)).

  10.41*+

  10.25

Cynthia Valko Chief Executive Agreement.Preferred Interest Purchase Agreement, dated as of August 27, 2020, by and between Global Indemnity Group, LLC and Wyncote LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K12B dated August 28, 2020 (File No. 001-34809)).

  21.1+

List of Subsidiaries.

  23.1+

Consent of Ernst and Young LLP.Independent Registered Public Accounting Firm.

  31.1+

Certification of ChiefPrincipal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  31.2+

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  32.1+

Certification of ChiefPrincipal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  32.2+

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.1+

  97.1+

The following financial information from Global Indemnity’s Annual Report on Form10-K for

Clawback Policy.

101.INS

Inline XBRL Instance Document – the Year Ended December 31, 2017 formattedinstance document does not appear in XBRL: (i) Consolidated Balance Sheets for the years ended December 31, 2017 and 2016; (ii) Consolidated Statements of Operations forInteractive Data File because its XBRL tags are embedded within the years ended December 31, 2017, 2016 and 2015; (iii) Consolidated Statements of Comprehensive Income forInline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document

104

Cover Page Interactive Data File (embedded within the years ended December 31, 2017, 2016 and 2015; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2017, 2016 and 2015; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015; (vi) Notes to Consolidated Financial Statements; and (vii) Financial Statement Schedules.Inline XBRL document)

+

+

Filed or furnished herewith.

*

*

Management contract or compensatory plan or arrangement required to be filed as an exhibit to thisForm 10-K.

Item 16.Form10-K Summary

Item 16. Form 10-K Summary

None.

131

SIGNATURES

SIGNATURES

Pursuant to the requirements of the Section 13 or 15 (d) of the Securities Exchange Act of 1934, Global Indemnity has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GLOBAL INDEMNITY LIMITEDGROUP, LLC

By:

/s/ Cynthia Y. ValkoJoseph W. Brown

Name:

Cynthia Y. ValkoJoseph W. Brown

Title:

Chief Executive Officer

Date:

March 9, 201815, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated below on March 9, 2018.15, 2024.

SIGNATURE

TITLE

SIGNATURE

TITLE

/s/ Saul A. Fox

Chairman

Saul A. Fox

Chairman and Director

/s/ Cynthia Y. Valko

Cynthia Y. ValkoJoseph W. Brown

Chief Executive Officer (Principal Executive Officer) and Director

Joseph W. Brown

/s/ Thomas M. McGeehan

Thomas M. McGeehan

Chief Financial Officer (Principal Financial and Accounting Officer)

Thomas M. McGeehan

/s/ Fred R. Donner

Director

Fred R. Donner

/s/ Seth J. Gersch

Director

Seth J. Gersch

Director

/s/ John H. Howes

John H. Howes

Director

/s/ Bruce Lederman

Bruce Lederman

Director

/s/ Raphael de Balmann

Raphael de Balmann

Director

/s/ Joseph W. Brown

Joseph W. Brown

Director

/s/ David J. W. Bruce

David J. W. Bruce

Director

/s/ Jason B. Hurwitz

Director

Jason B. Hurwitz

Director

/s/ Arik Rashkes

Arik RashkesFred E. Karlinsky

Director

Fred E. Karlinsky

/s/ Gary C. Tolman

Director

Gary C. Tolman

132

GLOBAL INDEMNITY LIMITEDGROUP, LLC

SCHEDULE I —-- SUMMARY OF INVESTMENTS —-- OTHER THAN INVESTMENTS

IN RELATED PARTIES

(In thousands)

  As of December 31, 2017 

 

As of December 31, 2023

 

  Cost*   Value   Amount
Included in the
Balance Sheet		 

 

Cost *

 

 

Value

 

 

Amount
Included in the
Balance Sheet

 

Type of Investment:

      

 

 

 

 

 

 

 

 

 

Fixed maturities:

      

 

 

 

 

 

 

 

 

 

United States government and government agencies and authorities

  $105,311   $104,680   $104,680 

 

$

497,099

 

$

494,223

 

 

$

494,223

 

States, municipalities, and political subdivisions

   94,947    95,114    95,114 

 

 

27,326

 

 

26,150

 

 

 

26,150

 

Mortgage-backed and asset-backed securities

   494,825    492,846    492,846 

 

 

354,610

 

 

340,959

 

 

 

340,959

 

Public utilities

   23,467    23,504    23,504 

 

 

27,346

 

 

26,629

 

 

 

26,629

 

All other corporate bonds

   524,594    525,293    525,293 

 

 

415,711

 

 

405,832

 

 

 

405,832

 

  

 

   

 

   

 

 

Total fixed maturities

   1,243,144    1,241,437    1,241,437 

 

 

1,322,092

 

 

 

1,293,793

 

 

 

1,293,793

 

  

 

   

 

   

 

 

Equity securities:

      

 

 

 

 

 

 

 

Common stocks:

      

Public utilities

   9,444    9,748    9,748 

 

 

—

 

 

—

 

 

 

—

 

Industrial and miscellaneous

   115,471    130,481    130,481 

 

 

16,508

 

 

16,508

 

 

 

16,508

 

  

 

   

 

   

 

 

Total equity securities

   124,915    140,229    140,229 

 

 

16,508

 

 

 

16,508

 

 

 

16,508

 

  

 

   

 

   

 

 

Other long-term investments

   77,820    77,820    77,820 

 

 

38,236

 

 

38,236

 

 

 

38,236

 

  

 

   

 

   

 

 

Total investments

  $1,445,879   $1,459,486   $1,459,486 

 

$

1,376,836

 

 

$

1,348,537

 

 

$

1,348,537

 

  

 

   

 

   

 

 

*Original cost of equity securities; original cost of fixed maturities adjusted for amortization of premiums and accretion of discounts; original cost for other long-term investments adjusted for income or loss earned on investments in accordance with equity method of accounting. All amounts are shown net of impairment losses.

* Original cost of fixed maturities adjusted for amortization of premiums and accretion of discounts; original cost of equity securities and other long-term investments adjusted for income or loss earned on investments in accordance with equity method of accounting. All amounts are shown net of impairment losses.

S-1

GLOBAL INDEMNITY LIMITEDGROUP, LLC

SCHEDULE II —– Condensed Financial Information of Registrant

(Parent Only)

Balance Sheets

(Dollars in thousands, except share data)

ASSETS

 

December 31, 2023

 

 

December 31, 2022

 

Fixed maturities

 

$

70,464

 

 

$

86,310

 

Equity securities, at fair value

 

 

436

 

 

 

1,694

 

Other invested assets

 

 

26,016

 

 

 

23,573

 

Total investments

 

 

96,916

 

 

 

111,577

 

Cash and cash equivalents

 

 

40

 

 

 

4,775

 

Intercompany note receivable (1)

 

 

69,400

 

 

 

69,400

 

Interest receivable – affiliates

 

 

1,501

 

 

 

627

 

Equity in unconsolidated subsidiaries (1)

 

 

482,653

 

 

 

444,517

 

Other assets

 

 

997

 

 

 

1,130

 

Total assets

 

$

651,507

 

 

$

632,026

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Payable for securities

 

$

—

 

 

$

49

 

Due to affiliates (1)

 

 

2,411

 

 

 

4,623

 

Other liabilities

 

 

343

 

 

 

1,125

 

Total liabilities

 

 

2,754

 

 

 

5,797

 

Commitments and contingencies

 

 

—

 

 

 

—

 

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 per share and $1,000 per share, respectively

 

 

4,000

 

 

 

4,000

 

Common shares: no par value; 900,000,000 common shares authorized; class A common shares issued: 11,042,670 and 10,876,041, respectively; class A common shares outstanding: 9,771,429 and 10,073,660, respectively; class B common shares issued and outstanding: 3,793,612 and 3,793,612, respectively

 

 

—

 

 

 

—

 

Additional paid-in capital

 

 

454,791

 

 

 

451,305

 

Accumulated other comprehensive income (loss), net of tax

 

 

(22,863

)

 

 

(43,058

)

Retained earnings

 

 

244,988

 

 

 

233,468

 

Class A common shares in treasury, at cost: 1,271,241 and 802,381 shares, respectively

 

 

(32,163

)

 

 

(19,486

)

Total shareholders' equity

 

 

648,753

 

 

 

626,229

 

Total liabilities and shareholders’ equity

 

$

651,507

 

 

$

632,026

 

 

   Years Ended December 31, 
   2017  2016 

ASSETS

   

Fixed maturities

  $13,118  $3,770 

Cash and cash equivalents

   11,089   91 

Intercompany note receivable (1)

   —     750,397 

Equity in unconsolidated subsidiaries (1)

   1,207,590   292,195 

Receivable for securities (1)

   —     1 

Due from affiliates

   4,618   —   

Other assets

   20,681   59 
  

 

 

  

 

 

 

Total assets

  $1,257,096  $1,046,513 
  

 

 

  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

   

Liabilities:

   

Debt

  $222,483  $96,497 

Intercompany notes payable (1)

   290,498   141,998 

Interest payable

   3,152   990 

Due to affiliates (1)

   12,465   8,759 

Other liabilities

   10,104   318 
  

 

 

  

 

 

 

Total liabilities

   538,702   248,562 
  

 

 

  

 

 

 

Commitments and contingencies

   —     —   

Shareholders’ equity:

   

Ordinary shares, $0.0001 par value, 900,000,000 ordinary shares authorized; A ordinary shares issued: 10,102,927 and 13,436,548, respectively; A ordinary shares outstanding: 10,073,376 and 13,436,548, respectively; B ordinary shares issued and outstanding: 4,133,366 and 4,133,366, respectively

   2   2 

Preferred shares, $0.0001 par value, 100,000,000 shares authorized, none issued and outstanding

   —     —   

Additionalpaid-in capital

   434,730   430,283 

Accumulated other comprehensive income, net of tax

   8,983   (618) 

Retained earnings

   275,838   368,284 

A ordinary shares in treasury, at cost: 29,551 and 0 shares, respectively

   (1,159)   —   
  

 

 

  

 

 

 

Total shareholders’ equity

   718,394   797,951 
  

 

 

  

 

 

 

Total liabilities and shareholders’ equity

  $1,257,096  $1,046,513 
  

 

 

  

 

 

 
(1)
This item has been eliminated in the Company’s Consolidated Financial Statements.

(1)This item has been eliminated in the Company’s Consolidated Financial Statements.

See Notes to Consolidated Financial Statements included in Item 8.

S-2

GLOBAL INDEMNITY LIMITEDGROUP, LLC

SCHEDULE II —– Condensed Financial Information of Registrant (continued)

(Parent Only)

Statement of Operations and Comprehensive Income

(Dollars in thousands)

  Years Ended
December 31,		 

 

Years Ended December 31,

 

  2017 2016 

 

2023

 

 

2022

 

 

2021

 

Revenues:

   

Revenues:

 

 

 

 

 

 

 

 

 

Net investment income

  $361  $28 

 

$

6,141

 

 

$

(1,980

)

 

$

6,763

 

Net realized investment losses

   (368)   —   
  

 

  

 

 

Intercompany interest income (1)

 

 

874

 

 

 

627

 

 

 

—

 

Net realized investment gains (losses)

 

 

(416

)

 

 

(4,620

)

 

 

13,563

 

Total revenues

   (7)  28 

 

 

6,599

 

 

 

(5,973

)

 

 

20,326

 

Expenses:

   

 

 

 

 

 

 

 

 

 

Intercompany interest expense (1)

   2,477  198 

 

 

—

 

 

 

2

 

 

 

1

 

Interest expense

   15,872  1,172 

 

 

—

 

 

 

41

 

 

 

142

 

Other expenses

   16,801  661 
  

 

  

 

 

Loss before equity in earnings of unconsolidated subsidiaries

   (35,157)  (2,003) 

Corporate and other operating expenses

 

 

601

 

 

 

723

 

 

 

864

 

Loss on extinguishment of debt

 

 

—

 

 

 

3,529

 

 

 

—

 

Income (loss) before equity in earnings of unconsolidated subsidiaries

 

 

5,998

 

 

 

(10,268

)

 

 

19,319

 

Equity in earnings of unconsolidated subsidiaries (1)

   25,606  51,871 

 

 

19,431

 

 

 

9,418

 

 

 

10,035

 

  

 

  

 

 

Net income

   (9,551)  49,868 
  

 

  

 

 

Net income (loss)

 

 

25,429

 

 

 

(850

)

 

 

29,354

 

Other comprehensive income (loss), net of tax:

   

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses)

   43  (17) 

Equity in other comprehensive loss of unconsolidated subsidiaries (1)

   9,558  (4,679) 
  

 

  

 

 

Other comprehensive loss, net of tax

   9,601  (4,696) 
  

 

  

 

 

Comprehensive income, net of tax

  $50  $45,172 
  

 

  

 

 

Unrealized holdings gain (losses) arising during the period

 

 

1,287

 

 

 

(8,274

)

 

 

(3,568

)

Equity in other comprehensive income (loss) of unconsolidated subsidiaries (1)

 

 

18,703

 

 

 

(45,764

)

 

 

(24,300

)

Recognition of previously unrealized holding (gains) losses

 

 

205

 

 

 

4,576

 

 

 

(36

)

Other comprehensive income (loss), net of tax

 

 

20,195

 

 

 

(49,462

)

 

 

(27,904

)

Comprehensive income (loss), net of tax

 

$

45,624

 

 

$

(50,312

)

 

$

1,450

 

(1)This item has been eliminated in the Company’s Consolidated Financial Statements.
(1)
This item has been eliminated in the Company’s Consolidated Financial Statements.

See Notes to Consolidated Financial Statements included in Item 8.

S-3

GLOBAL INDEMNITY PLCGROUP, LLC

SCHEDULE II — Condensed Financial Information of Registrant – (continued)

(Parent Only)

Statements of Operations and Comprehensive IncomeCash Flows

(Dollars in thousands)

   Year Ended
December 31, 2015		 

Revenues:

  

Total revenues

  $—   

Expenses:

  

Intercompany interest expense (1)

   1,296 

Other expenses

   8,203 
  

 

 

 

Loss before equity in earnings of unconsolidated subsidiaries

   (9,499) 

Equity in earnings of unconsolidated subsidiaries (1)

   50,968 
  

 

 

 

Net income

   41,469 
  

 

 

 

Other comprehensive income (loss), net of tax:

  

Equity in other comprehensive loss of unconsolidated subsidiaries (1)

   (19,306) 
  

 

 

 

Other comprehensive loss, net of tax

   (19,306) 
  

 

 

 

Comprehensive income, net of tax

  $22,163 
  

 

 

 
(1)This item has been eliminated in the Company’s Consolidated Financial Statements.

 

 

Years Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Net cash provided by operating activities

 

$

4,388

 

 

$

7,720

 

 

$

7,264

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Proceeds from sale of fixed maturities

 

 

17,226

 

 

 

70,151

 

 

 

84,070

 

Proceeds from sale of equity securities

 

 

1,158

 

 

 

76,466

 

 

 

27,600

 

Proceeds from maturity of fixed maturities

 

 

240

 

 

 

438

 

 

 

1,087

 

Proceeds from other invested assets

 

 

—

 

 

 

58,577

 

 

 

—

 

Purchases of fixed maturities

 

 

(271

)

 

 

(105,025

)

 

 

(60,800

)

Purchases of equity securities

 

 

(111

)

 

 

(939

)

 

 

(30,956

)

Purchases of other invested assets

 

 

—

 

 

 

—

 

 

 

(25,000

)

Net cash provided by (used in) investing activities

 

 

18,242

 

 

 

99,668

 

 

 

(3,999

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Distributions paid to common shareholders

 

 

(14,248

)

 

 

(14,366

)

 

 

(14,431

)

Distributions paid to preferred shareholders

 

 

(440

)

 

 

(440

)

 

 

(440

)

Issuance of note receivable to affiliates

 

 

—

 

 

 

(69,400

)

 

 

—

 

Proceeds from the repayment of a note receivable from affiliate

 

 

—

 

 

 

—

 

 

 

11,283

 

Proceeds from issuance of note payable to affiliates

 

 

—

 

 

 

—

 

 

 

2,800

 

Repayment of note payable to affiliates

 

 

—

 

 

 

(2,800

)

 

 

—

 

Purchase of class A common shares

 

 

(12,677

)

 

 

(22,335

)

 

 

(490

)

Issuance of class A common shares

 

 

—

 

 

 

3,339

 

 

 

—

 

Net cash used in financing activities

 

 

(27,365

)

 

 

(106,002

)

 

 

(1,278

)

Net change in cash and equivalents

 

 

(4,735

)

 

 

1,386

 

 

 

1,987

 

Cash and cash equivalents at beginning of period

 

 

4,775

 

 

 

3,389

 

 

 

1,402

 

Cash and cash equivalents at end of period

 

$

40

 

 

$

4,775

 

 

$

3,389

 

See Notes to Consolidated Financial Statements included in Item 8.

S-4

GLOBAL INDEMNITY LIMITEDGROUP, LLC

SCHEDULE II — Condensed Financial Information of Registrant — (continued)III -- SUPPLEMENTARY INSURANCE INFORMATION

(Parent Only)

Statements of Cash Flows

(Dollars in thousands)

   Years Ended
December 31,		 
   2017  2016 

Net cash provided by (used in) operating activities

  $(24,927)  $1 
  

 

 

  

 

 

 

Cash flows from investing activities:

   

Proceeds from disposition of subsidiaries

   —     456 

Dividend received from subsidiary

   100,000   —   

Capital contribution to a subsidiary

   (96,000)   (450) 

Proceeds from sale of fixed maturities

   12,389   84 

Proceeds from maturity of fixed maturities

   10,000   —   

Purchase of fixed maturities

   (32,044)   —   
  

 

 

  

 

 

 

Net cash provided by (used in) investing activities

   (5,655)   90 
  

 

 

  

 

 

 

Cash flows from financing activities:

   

Redemption of ordinary shares

   (83,015)   —   

Proceeds from issuance of subordinated notes

   130,000   —   

Debt issuance cost

   (4,246)   —   

Purchase of A ordinary shares

   (1,159)   —   
  

 

 

  

 

 

 

Net cash provided by financing activities

   41,580   —   
  

 

 

  

 

 

 

Net change in cash and equivalents

   10,998   91 

Cash and cash equivalents at beginning of period

   91   —   
  

 

 

  

 

 

 

Cash and cash equivalents at end of period

  $11,089  $91 
  

 

 

  

 

 

 

Segment

 

Deferred
Policy
Acquisition
Costs

 

 

Future Policy
Benefits,
Losses, Claims
And Loss
Expenses

 

 

Unearned
Premiums

 

 

Other Policy
and Benefits
Payable

 

At December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

34,908

 

 

$

408,720

 

 

$

161,135

 

 

$

-

 

Non-Core Operations

 

 

7,537

 

 

 

441,879

 

 

 

21,717

 

 

 

-

 

At December 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

34,290

 

 

$

366,133

 

 

$

159,554

 

 

$

-

 

Non-Core Operations

 

 

30,604

 

 

 

466,271

 

 

 

109,799

 

 

 

-

 

At December 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

31,370

 

 

$

319,085

 

 

$

147,999

 

 

$

-

 

Non-Core Operations

 

 

28,961

 

 

 

440,819

 

 

 

168,567

 

 

 

-

 

See Notes to Consolidated Financial Statements included in Item 8.

Segment

 

Premium
Revenue

 

 

Benefits, Claims,
Losses And
Settlement
Expenses

 

 

Amortization of
Deferred Policy
Acquisition Costs

 

 

Net
Written
Premium

 

For the year ended December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

354,518

 

 

$

233,239

 

 

$

80,226

 

 

$

356,796

 

Non-Core Operations

 

 

118,839

 

 

 

55,914

 

 

 

40,657

 

 

 

42,523

 

Total

 

$

473,357

 

 

$

289,153

 

 

$

120,883

 

 

$

399,319

 

For the year ended December 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

359,597

 

 

$

214,854

 

 

$

81,638

 

 

$

370,306

 

Non-Core Operations

 

 

242,874

 

 

 

144,374

 

 

 

69,308

 

 

 

221,025

 

Total

 

$

602,471

 

 

$

359,228

 

 

$

150,946

 

 

$

591,331

 

For the year ended December 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

Penn-America

 

$

308,676

 

 

$

184,163

 

 

$

74,494

 

 

$

328,659

 

Non-Core Operations

 

 

286,934

 

 

 

200,801

 

 

 

70,450

 

 

 

251,409

 

Total

 

$

595,610

 

 

$

384,964

 

 

$

144,944

 

 

$

580,068

 

Unallocated Corporate Items

 

Net
Investment
Income

 

 

Corporate and
Other Operating
Expenses

 

For the year ended December 31, 2023:

 

$

55,444

 

 

$

23,383

 

For the year ended December 31, 2022:

 

 

27,627

 

 

 

24,421

 

For the year ended December 31, 2021:

 

 

37,020

 

 

 

27,179

 

S-5

GLOBAL INDEMNITY PLCGROUP, LLC

SCHEDULE II — Condensed Financial Information of Registrant — (continued)IV -- REINSURANCE

(Parent Only)EARNED PREMIUMS

Statement of Cash Flows

(Dollars in thousands)

   Year Ended
December 31, 2015		 

Net cash provided by operating activities

  $95,891 
  

 

 

 

Cash flows from financing activities:

  

Proceeds from issuance of subordinated notes

   100,000 

Debt issuance cost

   (3,659) 

Purchases of A ordinary shares

   (333) 

Tax benefit on share-based compensation expense

   10 

Redemption of ordinary shares

   (189,770) 
  

 

 

 

Net cash used for financing activities

   (93,752) 
  

 

 

 

Net change in cash and equivalents

   2,139 

Cash and cash equivalents at beginning of period

   46 
  

 

 

 

Cash and cash equivalents at end of period

  $2,185 
  

 

 

 

 

 

Direct
Amount

 

 

Ceded to
Other
Companies

 

 

Assumed from
Other
Companies

 

 

Net
Amount

 

 

Percentage
of Amount
Assumed to Net

For the year ended December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property & Liability Insurance

 

$

376,288

 

 

$

29,542

 

 

$

126,611

 

 

$

473,357

 

 

26.7%

For the year ended December 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property & Liability Insurance

 

$

589,131

 

 

$

122,556

 

 

$

135,896

 

 

$

602,471

 

 

22.6%

For the year ended December 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property & Liability Insurance

 

$

578,171

 

 

$

61,441

 

 

$

78,880

 

 

$

595,610

 

 

13.2%

See Notes to Consolidated Financial Statements included in Item 8.

S-6

GLOBAL INDEMNITY LIMITEDGROUP, LLC

SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION

(Dollars in thousands)

Segment

  Deferred Policy
Acquisition Costs		   Future
Policy Benefits,
Losses, Claims And
Loss Expenses		   Unearned
Premiums		   Other Policy
and Benefits
Payable		 

At December 31, 2017:

        

Commercial Lines

  $21,222   $419,042   $102,191   $—   

Personal Lines

   27,563    120,255    137,704    —   

Reinsurance Operations

   12,862    95,367    45,502    —   

At December 31, 2016:

        

Commercial Lines

  $19,755   $458,645   $94,698   $—   

Personal Lines

   28,381    127,350    157,464    —   

Reinsurance Operations

   9,765    65,047    34,822    —   

At December 31, 2015:

        

Commercial Lines

  $20,784   $524,607   $100,027   $—   

Personal Lines

   31,900    94,359    169,669    —   

Reinsurance Operations

   3,833    61,081    16,589    —   

Segment

  Premium
Revenue		   Benefits, Claims,
Losses And
Settlement
Expenses		   Amortization of
Deferred Policy
Acquisition Costs		   Net
Written
Premium		 

For the year ended December 31, 2017:

        

Commercial Lines

  $178,798   $62,834   $42,008   $186,448 

Personal Lines

   215,983    165,798    56,616    209,799 

Reinsurance Operations

   43,253    40,580    10,340    53,933 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $438,034   $269,212   $108,964   $450,180 
  

 

 

   

 

 

   

 

 

   

 

 

 

For the year ended December 31, 2016:

        

Commercial Lines

  $189,342   $75,401   $42,361   $182,956 

Personal Lines

   237,555    174,528    61,416    228,183 

Reinsurance Operations

   41,568    14,074    10,540    59,801 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $468,465   $264,003   $114,317   $470,940 
  

 

 

   

 

 

   

 

 

   

 

 

 

For the year ended December 31, 2015:

        

Commercial Lines

  $198,404   $98,471   $43,821   $198,404 

Personal Lines

   253,948    163,045    31,291    253,157 

Reinsurance Operations

   51,791    13,852    11,058    49,683 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $504,143   $275,368   $86,170   $501,244 
  

 

 

   

 

 

   

 

 

   

 

 

 

Unallocated Corporate Items

  Net
Investment
Income		   Corporate
and Other
Operating
Expenses		 

For the year ended December 31, 2017

  $39,323   $25,714 

For the year ended December 31, 2016

   33,983    17,338 

For the year ended December 31, 2015

   34,609    24,448 

GLOBAL INDEMNITY LIMITED

SCHEDULE IV — REINSURANCE

EARNED PREMIUMS

(Dollars in thousands)

   Direct
Amount		   Ceded to Other
Companies		   Assumed from
Other Companies		   Net Amount   Percentage
of Amount
Assumed to Net		 

For the year ended December 31, 2017:

          

Property & Liability Insurance

  $440,109   $79,886   $77,811   $438,034    17.8% 

For the year ended December 31, 2016:

          

Property & Liability Insurance

  $466,750   $96,552   $98,267   $468,465    21.0% 

For the year ended December 31, 2015:

          

Property & Liability Insurance

  $452,441   $92,852   $144,554   $504,143    28.7% 

GLOBAL INDEMNITY LIMITED

SCHEDULE V—V - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

(Dollars in thousands)

Description

 Balance at
Beginning of
Period		 Charged
(Credited) to Costs
and Expenses		 Charged
(Credited)
to Other
Accounts		 Other
Deductions		 Balance at
End of Period		 

 

Balance at Beginning of Period

 

 

Charged (Credited) to Costs and Expenses

 

 

Charged (Credited) to Other Accounts

 

 

Other Deductions

 

 

Balance at End of Period

 

For the year ended December 31, 2017:

     

For the year ended December 31, 2023:

For the year ended December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment asset valuation reserves:

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans

 $—    $—    $—    $—    $—   

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Real estate

  —     —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Allowance for doubtful accounts:

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums, accounts and notes receivable

 $1,928  $251  $—    $—    $2,179 

 

$

3,322

 

 

$

1,474

 

 

$

—

 

 

$

—

 

 

$

4,796

 

Deferred tax asset valuation allowance

  —     —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Reinsurance receivables

 8,040   —     —     —    8,040 

 

 

8,992

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

8,992

 

For the year ended December 31, 2016:

     

For the year ended December 31, 2022:

For the year ended December 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment asset valuation reserves:

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans

 $—    $—    $—    $—    $—   

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Real estate

  —     —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Allowance for doubtful accounts:

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums, accounts and notes receivable

 $1,646  $282  $—    $—    $1,928 

 

$

2,996

 

 

$

326

 

 

$

—

 

 

$

—

 

 

$

3,322

 

Deferred tax asset valuation allowance

  —     —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Reinsurance receivables

 9,675  (1,635)   —     —    8,040 

 

 

8,992

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

8,992

 

For the year ended December 31, 2015:

     

For the year ended December 31, 2021:

For the year ended December 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment asset valuation reserves:

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans

 $—    $—    $—    $—    $—   

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Real estate

  —     —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Allowance for doubtful accounts:

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums, accounts and notes receivable

 $1,518  $128  $—    $—    $1,646 

 

$

2,900

 

 

$

96

 

 

$

—

 

 

$

—

 

 

$

2,996

 

Deferred tax asset valuation allowance

  —     —     —     —     —   

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Reinsurance receivables

 9,350  325   —     —    9,675 

 

 

8,992

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

8,992

 

S-7

GLOBAL INDEMNITY LIMITEDGROUP, LLC

SCHEDULE VI —-- SUPPLEMENTARY INFORMATION FOR PROPERTY CASUALTY UNDERWRITERS

(Dollars in thousands)

   Deferred
Policy
Acquisition
Costs		   Reserves for
Unpaid Claims
and Claim
Adjustment
Expenses		   Discount If
Any Deducted		   Unearned
Premiums		 

Consolidated Property & Casualty Entities:

        

As of December 31, 2017

  $61,647   $634,664   $1,200   $285,397 

As of December 31, 2016

   57,901    651,042    2,000    286,984 

As of December 31, 2015

   56,517    680,047    3,000    286,285 

 

 

Deferred Policy
Acquisition Costs

 

 

Reserves for
Unpaid Claims
and Claim
Adjustment
Expenses

 

 

Discount If
Any Deducted

 

 

Unearned
Premiums

 

Consolidated Property & Casualty Entities:

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2023

 

$

42,445

 

 

$

850,599

 

 

$

—

 

 

$

182,852

 

As of December 31, 2022

 

 

64,894

 

 

 

832,404

 

 

 

—

 

 

 

269,353

 

As of December 31, 2021

 

 

60,331

 

 

 

759,904

 

 

 

—

 

 

 

316,566

 

  Earned
Premiums		  Net
Investment
Income		  Claims and Claim Adjustment
Expense Incurred Related To		  Amortization Of
Deferred Policy
Acquisition Costs		  Paid Claims
and Claim
Adjustment
Expenses		  Premiums
Written		 
   Current Year  Prior Year    

Consolidated Property & Casualty Entities:

       

For the year ended December 31, 2017

 $438,034  $39,323  $323,112  $(53,900)  $108,964  $271,756  $450,180 

For the year ended December 31, 2016

  468,465   33,983   321,255   (57,252)   114,317   317,369   470,940 

For the year ended December 31, 2015

  504,143   34,609   310,066   (34,698)   86,170   332,417   501,244 

 

 

Earned

 

 

Net
Investment

 

 

Claims and Claim Adjustment
Expense Incurred Related To

 

 

Amortization Of Deferred Policy

 

 

Paid Claims
and Claim
Adjustment

 

 

Premiums

 

 

 

Premiums

 

 

Income

 

 

Current Year

 

 

Prior Year

 

 

Acquisition Costs

 

 

Expenses

 

 

Written

 

Consolidated Property & Casualty Entities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2023:

 

$

473,357

 

 

$

55,444

 

 

$

279,609

 

 

$

9,544

 

 

$

120,883

 

 

$

270,766

 

 

$

399,319

 

For the year ended December 31, 2022:

 

 

602,471

 

 

 

27,627

 

 

 

367,298

 

 

 

(8,070

)

 

 

150,946

 

 

 

265,306

 

 

 

591,331

 

For the year ended December 31, 2021:

 

 

595,610

 

 

 

37,020

 

 

 

376,306

 

 

 

8,658

 

 

 

144,944

 

 

 

300,156

 

 

 

580,068

 

Note: All of the Company’sCompany's insurance subsidiaries are 100% owned and consolidated.

S-10

S-8