Global Indemnity plc Reports First Quarter 2011 Financial Results

DUBLIN, May 5, 2011 /PRNewswire/ -- Global Indemnity plc (NASDAQ: GBLI) today reported net income for the three months ended March 31, 2011 of $13.8 million or $0.45 per share. As of March 31st, book value per share increased to $30.96 or 1.2% from $30.59 per share at December 31, 2010.

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Selected Operating and Balance Sheet Data (Dollars in millions, except per share data)

Larry A. Frakes, President & Chief Executive Officer stated, "We continue to see improvements in the fundamentals of our business.  We experienced written premium growth in our core US Insurance Operations of 4.4% in the quarter over the same period in 2010.  Our brokerage property and casualty lines continued to grow while we also saw positive premium production from our agency businesses.  Production trends in our Penn-America small business unit, while still down, were markedly improved from the 1st quarter of 2010.  The Profitability Enhancement executed in the 4th quarter of 2010 is contributing to the 3.3 point decrease in our operating expenses.  We also saw an additional $2.1 million reduction in corporate expenses again related to our expense control efforts and the completion of our re-domestication to Ireland in 2010.  Operating cash flow of $7.2 million was an $18 million improvement over the same period last year.  Our 1st quarter results were impacted by major worldwide catastrophes.  Our Wind River Reinsurance Operations incurred $8.8 million in losses from the Japan earthquake and $3.0 million from the New Zealand earthquake.  Even with these events, shareholders' equity increased by $12.7 million or 1.4% and book value per share grew at 1.2%".

About Global Indemnity plc and its subsidiaries

Global Indemnity plc (NASDAQ: GBLI), through its several direct and indirect wholly owned subsidiary insurance and reinsurance companies, provides both admitted and non-admitted specialty property and casualty insurance coverages in the United States, as well as reinsurance throughout the world.  Global Indemnity plc's two primary divisions are:

• United States Based Insurance Operations
• Bermuda Based Reinsurance Operations

For more information, visit the Global Indemnity plc website at http://www.globalindemnity.ie.

Forward-Looking Information

Forward-looking statements contained in this press release are made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties.  We caution investors that our actual results may be materially different from the estimates expressed in, or implied, or projected by, the forward looking statements.  Please see our periodic reports filed with the Securities and Exchange Commission for a discussion of the risks and uncertainties which may affect us and for a more detailed discussion of our cautionary note regarding forward-looking statements.

Global Indemnity plc's Combined Ratio for the Three Months Ended March 31, 2011 and 2010

The combined ratio is a key measure of insurance profitability.  The components comprising the combined ratio are as follows:

For the three months ended March 31st, the calendar year loss ratio increased by 17.8 points to 76.8 in 2011 from 59.0 in 2010.

• Excluding catastrophes, the current accident year loss ratio increased by 8.4 points to 65.5 in 2011 from 57.1 in 2010.
  • Excluding catastrophes, the property loss ratio increased from 41.3 in the first quarter of 2010 to 53.0 in the first quarter of 2011.  Severity from fire losses and a tornado contributed to the increase.  Including catastrophes, the property loss ratio increased by 39.6 points to 95.9 in 2011 from 56.3 in 2010.  This increase was driven primarily from catastrophe losses in our Reinsurance Operations including $3.0 million and $8.8 million related to earthquakes in New Zealand and Japan, respectively.
  • The casualty loss ratio increased 7.3 points to 74.7 in 2011 from 67.4 in 2010.  The increase is attributable to changes in the mix of business from our Reinsurance Operations, a large loss in professional lines from a class of business that we are exiting, and increased loss trends in several of our casualty classes.
• Current year results include a 7.0 point reduction in the loss ratio related to prior accident years.  For 2011 we reduced prior accident years by $5.3 million primarily relating to general liability within our Insurance Operations for accident years 2004 through 2010, offset partially by an increase to prior accident year 2010 at our Reinsurance Operations within the general liability, auto liability and workers' compensation lines.

For the three months ended March 31st, the expense ratio decreased from 42.6 in 2010 to 39.3 in 2011.

• The expense ratio decreased from 42.6 in 2010 to 39.3 in 2011 primarily due to lower employee costs from our previously disclosed Profit Enhancement Initiative and a decrease in contingent commissions related to increases in loss ratios described above.
• Corporate expenses also decreased $2.1 million on a quarter over quarter basis.  The decrease is due to completing the redomestication to Ireland and the Profit Enhancement Initiative.

Global Indemnity plc's three months ended March 31, 2011 and 2010 Gross and Net Premiums Written Results by Business Unit

Insurance Operations:  For the three months ended March 31, 2011, gross premiums written increased 4.4%, and net premiums written increased 20.5%, compared to the same period in 2010.  The increase in gross premiums is mainly due to growth in Diamond State's property and casualty brokerage units, Collectibles Insurance Services LLC, which was acquired in April of 2010, and our Vacant Express product, offset partially by decreases in Penn-America.  However, we are seeing signs that the small business market where Penn-America competes is improving.  The increase in net written premiums is primarily due to the cancellation of a property quota share reinsurance treaty effective January 1, 2011 and an increase in retention related to the US property excess of loss treaty which renewed on January 1, 2011.

Reinsurance Operations:  For the three months ended March 31, 2011, gross premiums written decreased 19.6%, and net premiums written decreased 19.2%, compared to the same period in 2010.  Timing of new treaties and non-renewals can cause gross premiums written to vary widely in this segment.  The decrease in gross and net premiums written is primarily due to cancellations of non-standard auto and workers' compensation treaties in 2011 that were not replaced, offset partially by several new casualty treaties written in 2011.

Note: Tables Follow

Note Regarding Operating Income

Operating income, a non-GAAP financial measure, is equal to net income excluding after-tax net realized investment gains (losses). Operating income is not a substitute for net income determined in accordance with GAAP, and investors should not place undue reliance on this measure.

SOURCE Global Indemnity plc