Global Indemnity Group in merger or takeover talks

Specialty property and casualty insurer  Global Indemnity Group is in talks with multiple parties for a potential merger or acquisition of its E&S arm or a deal for the whole company.

The company said “multiple parties have indicated preliminary interest in exploring an acquisition of or merger with Penn-America, Global Indemnity's insurance group, or an acquisition of or merger with Global Indemnity itself”.

The company is responding to certain of these preliminary indications of interest, although there is no assurance that an acceptable transaction will result from such engagement, it noted

The company does not intend to make any further public comment regarding the process unless or until it has been completed or suspended.

However, Global Indemnity has increased its share buyback authorisation to $135 million. It intends to continue to buy back shares pursuant to its previously announced authorisation. 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, it said.

In a letter to shareholders, the company’s chairman Saul A Fox said: “Over the past five years, Global Indemnity’s core Commercial Specialty lines within Penn-America Group increased gross written premium by over 80% from $222 million in 2018 to $401 million in 2022 while also bettering the property & casualty insurance industry’s loss ratio by 19 percentage points (53% on average from 2018 to 2022 compared to 72% for the industry over the same period). The Company’s growth over this period was fueled by a 60% increase in premiums written by Penn-America Group’s historic agency partners, as well as by the contribution of new agency partners, which wrote $100 million in premium in 2022 alone. The capital to support the Company’s substantial growth was self-funded, including by redeploying capital that previously supported (i) two property exposed personal lines businesses spun off in 2021 and 2022 and (ii) three large international reinsurance treaties exited in the wake of Global Indemnity’s redomestication (completed in late 2020).

“Also, beginning in 2021 and continuing through 2022, the Company dramatically repositioned its $1.4 billion investment portfolio to take full advantage of what the Company believed at the time would be future dramatic increases in interest rates, which did, in fact, occur. In this regard, the average years to maturity of the Company’s fixed income investment securities, which stood at 7.3 years at year-end 2020, was reduced to 2.2 years at year-end 2022.”

Fox added: “The repositioning of the investment portfolio did not come without near term cost, however. In 2022, the Company incurred $101 million of realised and unrealised portfolio losses in respect of its fixed income securities, which losses overwhelmed the Company’s robust underwriting income and resulted in the Company’s 2022 bottom line net loss of $0.85 million.

“However, the great news here is that all of the $101 million of realised and unrealised investment losses booked in 2022 are expected to be fully recovered in 2023 and 2024 due to the higher yields and the substantially shortened maturities now embedded in the Company’s repositioned investment portfolio.”

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