Global Indemnity plc Reports Third Quarter 2010 Financial Results & Profitability Enhancement Initiative

DUBLIN, Nov. 9, 2010 /PRNewswire-FirstCall/ -- Global Indemnity plc (Nasdaq: GBLI) today reported net income for the three months ended September 30, 2010 of $19.8 million or $0.65 per share and for the nine months of $63.2 million or $2.09 per share. As of September 30, book value per share increased to $30.01 or by 12.3% on an annualized basis from $27.48 per share at December 31, 2009.  The Company also announced an initiative to enhance profitability and earnings through reducing its U.S. based census by approximately 25%, closing underperforming U.S. facilities, and supplementing staffing in Bermuda and in Ireland.

(Logo: http://photos.prnewswire.com/prnh/20100803/LT45156LOGO )

(Logo: http://www.newscom.com/cgi-bin/prnh/20100803/LT45156LOGO )

Selected Operating and Balance Sheet Data

1. On May 5, 2009 shares were issued in conjunction with the Rights Offering.  If the rights offering was completed on January 1, 2009, net income per share would have been $1.69 and Operating income per share would have been $1.62.

Larry A. Frakes, President and Chief Executive Officer, stated,  "In the face of a very competitive commercial lines property & casualty market, the company continued to build shareholder value, as indicated by the 12.3% annualized rate of growth in book value per share for the nine months ended September 30 as well as our first growth in premiums since 2006.  These results were achieved while maintaining strict underwriting discipline and reducing fixed income volatility in our investment portfolio."  Mr. Frakes added, "In addition, post the end of the quarter, on November 4, the company implemented its Profitability Enhancement Initiative that is expected to increase annual pre-tax earnings starting in 2011 by approximately $9.0 to $11.3 million at the cost of a one-time after tax charge to year end 2010 earnings of approximately $4.3 million to $6.5 million."

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
• Ireland & 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.  These statements include statements regarding expected costs and savings resulting from our Profitability Enhancement Initiative.  Such costs include severance, contract terminations, lease abandonment, fixed asset write-offs and other charges and could include unanticipated costs.  We caution investors that our actual costs and savings 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 and Nine Months Ended September 30, 2010 and 2009

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

For the three months ended September 30th, the calendar year loss ratio decreased by 10.9 points to 42.5 in 2010 from 53.4 in 2009.

• The current accident year loss ratio increased by 8.4 points to 64.0 in 2010 from 55.6 in 2009.  
  • The property loss ratio increased by 15.5 points to 55.0 in 2010 from 39.5 in 2009 primarily due to increased catastrophe related losses from our reinsurance operations and increased reinsurance costs in our insurance operations.
  • The casualty loss ratio increased 3.5 points to 72.0 in 2010 from 68.5 in 2009.
• Current year results include a 21.5 point reduction in the loss ratio related to prior accident years due to a reduction of $16.9 million of loss and loss adjustment expenses in the insurance operation's property and casualty lines, partially offset by a $1.8 million increase in the reinsurance operation's casualty lines.  

For the three months ended September 30th, the expense ratio increased from 37.8 in 2009 to 40.7 in 2010.

• The expense ratio increase is mainly attributable to a decrease in net premiums earned, partially offset by an increase in business from reinsurance operations, which has a lower expense ratio than insurance operations. In addition, the third quarter of 2009 included a reduction in employee incentive expenses.    

For the nine months ended September 30th, the calendar year loss ratio decreased by 9.4 points to 48.4 in 2010 from 57.8 in 2009.

• The current accident year loss ratio increased by 4.2 points to 64.0 in 2010 from 59.8 in 2009.  
  • The property loss ratio increased by 9.5 points to 57.4 in 2010 from 47.9 in 2009 primarily due to increased catastrophe related losses from our reinsurance operations and increased reinsurance costs in our insurance operations.
  • The casualty loss ratio increased 0.7 points to 69.3 in 2010 from 68.6 in 2009.
• Current year results include a 15.6 point reduction in the loss ratio related to prior accident years due to a reduction of $34.8 million of loss and loss adjustment expenses primarily in the insurance operation's casualty lines, partially offset by an increase of $1.0 million in the reinsurance operation's casualty lines.

For the nine months ended September 30th, the expense ratio increased from 39.1 in 2009 to 40.7 in 2010.

• The expense ratio increase is mainly attributable to a decline in net premiums earned and the incurrence of infrastructure costs related to new product development and information technology upgrades, partially offset by an increase in business from reinsurance operations, which has a lower expense ratio than insurance operations.

Global Indemnity plc's Three Months Ended September 30, 2010 and 2009 Gross and Net Premiums Written Results by Business Unit

Insurance Operations:  Gross premiums written for the three months ended September 30, 2010 decreased 1.7%, and net premiums written for the three months ended September 30, 2010 decreased 2.4%, compared to the same period in 2009.  The decrease in gross premium is mainly due to price decreases of approximately 2.0%.  

Reinsurance Operations:  Gross premiums written for the three months ended September 30, 2010 increased 137.3%, and net premiums written increased 137.7%, compared to the same period in 2009.  The increase in gross and net premiums written is primarily due to new excess of loss and quota share treaties.  

Global Indemnity plc's Nine Months Ended September 30, 2010 and 2009 Gross and Net Premiums Written Results by Business Unit

Insurance Operations:  Gross premiums written for the nine months ended September 30, 2010 decreased 12.5%, and net premiums written for the nine months ended September 30, 2010 decreased 13.7%, compared to the same period in 2009.  The decrease in gross premium is comprised mainly of the following:

• $10.0 million due to terminated programs and agents.
• Price decreases in aggregate of approximately 2.3%.  
• Continued soft market conditions.

Reinsurance Operations:  Gross premiums written for the nine months ended September 30, 2010 increased 51.9%, and net premiums written increased 52.0%, compared to the same period in 2009.  The increase in gross and net premiums written is primarily due to new excess of loss and quota share treaties.  

Larry A. Frakes, President & Chief Executive Officer, stated, "We are pleased with the production from our U.S. insurance operations and our Bermuda reinsurance operations.  The initiatives that we have put in place in the US are taking hold.  While we continue to face strong competition, especially in the small business binding arena, we are realizing growth from our brokerage operations.  Over the last several years, we have grown our reinsurance operation at Wind River.  Wind River has strategic relationships with a select group of clients and distributors.  The book is well balanced geographically and by product line.  We remain very optimistic about our growth prospects."

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