Executive Summary / Key Takeaways

• Strategic Reorganization for Growth: Global Indemnity has undergone a significant "Project Manifest" restructuring, realigning into three segments (Agency & Insurance Services, Belmont Core, Belmont Non-Core) to facilitate rapid, profitable product expansion, supported by new talent and a clear capital allocation strategy.
• Technology as a Competitive Moat: The company is investing heavily in a proprietary technology platform, including the Kaleidoscope policy system and a cloud-based data lake, which is foundational for AI exploitation and designed to drive operational efficiency, enhance underwriting, and enable new product offerings.
• Solid Underwriting and Investment Performance: Despite a Q1 2025 impact from California wildfires, GBLI's underlying core business demonstrates strong underwriting profitability (Q2 2025 accident year combined ratio of 94.6%) and a disciplined, short-duration investment strategy yielding stable returns (4.9% annualized in Q2 2025).
• Clear Growth and Profitability Targets: Management targets at least 10% premium growth, a combined ratio in the low 90s, and a long-term expense ratio of 36-37%, with discretionary capital of $265 million earmarked for strategic investments rather than immediate share repurchases.
• Navigating Risks and Competitive Dynamics: GBLI faces challenges from regulatory environments (e.g., California wildfire rates) and price competition in some small commercial lines, but its specialized niche focus and technological advancements position it to compete effectively against larger, more diversified players and agile insurtechs.

The Genesis of a Focused Insurer: GBLI's Strategic Evolution

Global Indemnity Group, LLC, a specialty property and casualty insurer and reinsurer, has embarked on a transformative journey since its founding in 2003. The company's current strategic direction, heavily influenced by leadership changes in late 2022/early 2023, marks a deliberate shift towards maximizing long-term shareholder value through profitable growth, operational efficiency, and technological innovation. This evolution has reshaped GBLI's competitive stance within the dynamic insurance landscape.

Historically, GBLI engaged in various insurance and investment activities, including a $50 million commitment to European non-performing loans in 2014. A pivotal financial strategy adjustment occurred in early 2022, as the company proactively sold longer-dated securities to shorten its fixed-income portfolio's duration, aiming for higher current book yields. This move was a direct response to anticipated market shifts, a stark contrast to its prior, longer-duration investment posture. Upon CEO Jay Brown's arrival, 2023 became a "realignment and transition year," characterized by a critical assessment of product offerings, refocusing on consistently profitable core products, and significant expense restructuring. This period also saw the non-renewal of a substantial assumed retrocession casualty treaty, leading to a planned reduction in non-core earned premium.

The culmination of these efforts is "Project Manifest," an extensive legal and operational transformation completed by December 2024. This restructuring aimed to enhance operational efficiency, increase statutory capital, and improve capital management by de-stacking insurance companies. It created separate and distinct businesses for Penn-America Underwriters, LLC's divisions—Wholesale Commercial, Vacant Express, Collectibles, and Specialty Products—and established independent technology (Kaleidoscope Insurance Technologies, Inc.) and claims services (Liberty Insurance Adjustment Agency, Inc.) businesses. These new entities are designed to support existing insurance operations and eventually offer services to other industry participants, signaling a broader strategic ambition.

Competitive Positioning and Technological Moats

GBLI operates in a competitive specialty P&C market, vying with both large, diversified insurers and more focused specialty players. Larger, global competitors like Chubb Limited (CB) and The Travelers Companies, Inc. (TRV) offer broad portfolios and extensive networks, often demonstrating consistent revenue growth and strong profitability. Berkshire Hathaway (BRK.B), through its insurance subsidiaries, brings immense financial stability and underwriting discipline. Specialty rivals such as Arch Capital Group Ltd. (ACGL) focus on underwriting excellence and innovative product development in niche lines.

GBLI differentiates itself through a targeted approach, particularly in segments like agriculture and equine insurance, where its specialized expertise and distribution channels foster stronger customer relationships. While GBLI's smaller scale might limit its bargaining power compared to giants like Chubb, its focused strategy allows for greater efficiency in niche areas. For instance, GBLI's wholesale network can lead to recurring revenue and better capital efficiency in specific segments, helping it counter the innovation focus of competitors like Arch Capital by building loyalty in underserved areas. This specialization, coupled with regulatory licenses for niche markets, provides GBLI with access to exclusive segments, enhancing its pricing power and financial outcomes.

A critical differentiator for GBLI is its aggressive investment in technology. The company is undertaking a multi-year effort to transform its technology platforms, transaction, and information software. Over 75% of its servers have migrated to the cloud, and data stores are now housed in a cloud-based "data lake." This modern data infrastructure is a foundational step for exploiting artificial intelligence across the entire enterprise, aiming to enhance decision-making and operational efficiency.

The flagship of this technological push is the proprietary Kaleidoscope policy rating, quoting, and issuance system. This system, currently in design and coding for wholesale commercial package policies, is expected to begin testing by year-end 2025 and roll out to agency partners in conjunction with an underwriting workbench in early 2026. This integrated workstation is specifically designed to improve the time to handle referral business and enhance service for wholesale commercial agents. The tangible benefits include streamlined policy issuance, improved underwriting accuracy through advanced analytics, and faster response times for agents, which directly translates to a competitive edge in service quality and operational cost efficiency. This technological leap addresses past challenges where underwriting teams operated in manual environments, positioning GBLI to offer a variety of new products more effectively to existing and new agency partners.

Segment Performance and Financial Health

The new segment structure, effective Q1 2025, provides clearer insights into GBLI's operations:

• Agency and Insurance Services: This new segment, comprising three agencies, a technology company (Kaleidoscope), and a claims services company, generated $15.35 million in total revenues and $2.31 million in underwriting income in Q2 2025. For the first six months of 2025, revenues were $29.79 million with $4.11 million in underwriting income. This segment is the engine for future product expansion, with management actively recruiting talent and pursuing business development opportunities.
• Belmont Insurance Companies - Core: This segment, the former Penn-America, focuses on ongoing direct and assumed E&S insurance products. In Q2 2025, it reported gross written premiums of $109.82 million, a 9.1% increase in net earned premiums to $97.51 million, and $2.73 million in underwriting income. For the first six months, gross written premiums were $208.21 million, with net earned premiums of $189.77 million (up 6.3%) and $8.85 million in underwriting income. Growth was robust across Wholesale Commercial (8.1% in Q2 2025), Vacant Express (27.1%), Collectibles (4.3%), and Assumed Reinsurance (85.5%), driven by rate increases, new agency appointments, and new treaties. The current accident year combined ratio improved to 94.6% in Q2 2025, reflecting better non-catastrophe property and casualty loss ratios.
• Belmont Insurance Companies - Non-Core: This segment manages the run-off of de-emphasized and terminated business. Its impact is diminishing, with gross written premiums of $3.02 million in Q2 2025 and $2.73 million for the first six months. Management expects the remaining earned premium from discontinued lines (less than $5 million) to be fully run off by the end of 2025.

Consolidated, GBLI reported a Q2 2025 net income of $10.34 million ($0.71 diluted EPS), a slight increase from $10.09 million in Q2 2024. The current accident year underwriting income surged 61% to $5.6 million, with the combined ratio improving to 94.6% from 96.7% a year prior. For the first six months of 2025, net income was $6.36 million. Excluding the $15.7 million pre-tax impact of the January 2025 California wildfires, net income would have been $18.8 million, and the current accident year combined ratio would have been 94.7%, an improvement over 2024.

GBLI's investment portfolio generated $14.71 million in net investment income in Q2 2025, with an annualized return of 4.9%. The fixed income portfolio's book yield increased to 4.54% at June 30, 2025, with a duration of 1.20 years, up from 0.80 years at December 31, 2024. This reflects a strategic shift from early 2022 to capitalize on higher interest rates. The company reinvested approximately $400 million of its fixed maturities portfolio at a 5.50% yield in the first half of 2025, focusing on high-quality corporates and structured securities.

Comparing GBLI's TTM financial ratios to its competitors reveals its unique profile. GBLI's Net Profit Margin of 6.40% is lower than Chubb (17%), Travelers (11%), and Arch Capital (25%), reflecting its smaller scale and ongoing investment in growth initiatives. Similarly, its P/E ratio of 15.00 is more attractive than Chubb (12.17) and Travelers (10.99), but higher than Arch Capital (7.98), suggesting the market is pricing in some of its growth potential. GBLI's P/B ratio of 0.61 stands significantly below its peers (Chubb 1.76, Travelers 1.97, Arch Capital 1.65), indicating a substantial discount to book value, which management attributes to a focus on long-term value creation through operational investment rather than short-term share price boosts. The dividend yield of 4.67% is notably higher than its peers (Chubb 1%, Travelers 2%, Arch Capital 6%), offering a compelling income component.

Capital Allocation and Future Outlook

GBLI's capital allocation strategy is firmly aligned with its long-term growth objectives. The company's discretionary capital stood at $265 million as of June 30, 2025, which management intends to deploy primarily into the growth of its Agency and Insurance Services segment. This commitment was further bolstered by the approval in July 2025 for $100 million in aggregate dividends from its insurance subsidiaries, enhancing liquidity for these strategic investments. The board has explicitly prioritized investing in the new Penn-America Underwriter operation over share repurchases, believing this will generate "double-digit returns over the long term."

Management's outlook for 2025 is "very positive," with expectations for continued premium growth and improved underlying underwriting performance in the latter half of the year. Long-term goals include a compound annual growth rate of at least 10% for the insurance business, achieving a combined ratio in the low 90s, and managing insurance expenses to a competitive level of 36-37%. The Belmont (balance sheet) segment is expected to reach a 12% return in the next couple of years. Corporate expenses, while elevated in the short term due to investments in the new agency and insurance services companies and Project Manifest advisory fees, are expected to trend back towards historical run rates once these foundational investments are complete, absent new acquisition-related expenses. The company also anticipates signing on four new Specialty Products over the next 6 to 12 months.

Risks and Challenges

Despite the positive outlook, GBLI faces several pertinent risks. The California wildfires in January 2025 resulted in a $15 million catastrophic loss, exceeding previous model estimates for moderate-risk areas. This event highlighted the challenge of obtaining adequate rates in California's regulatory environment, which management describes as a "real obstacle." The company has already taken steps to reduce property exposures to wildfires and is re-evaluating its catastrophe models. If adequate rates cannot be secured, GBLI may selectively reduce its presence in such markets.

Economic downturns pose a risk, potentially leading to increased fraud claims and interruptions in premium payments. GBLI's defensive, short-duration investment strategy aims to mitigate the impact of fluctuating interest rates. Furthermore, the issuance of 550,000 Class A-2.00 common shares to Fox Paine Company, LLC as an advisory fee for Project Manifest, while approved by the Conflicts Committee, resulted in a $1.74 per share tangible book value dilution and raises questions about related-party transactions, though these shares only gain value upon a change of control above a certain threshold. Price competition in the small commercial segment, observed over the past six months, also presents a headwind to premium growth.

Conclusion

Global Indemnity Group is in the midst of a profound strategic transformation, shedding non-core assets and investing heavily in a technology-driven, specialized growth engine. The "Project Manifest" reorganization, coupled with significant investments in proprietary platforms like Kaleidoscope and a modern data lake, positions GBLI to unlock new efficiencies and expand its product offerings. While the company's financial performance in Q2 2025 demonstrates solid underlying trends, the impact of the California wildfires in Q1 serves as a stark reminder of the inherent risks in property insurance and the challenges of a restrictive regulatory landscape.

Despite these headwinds, management's clear guidance for 10% premium growth, improved underwriting profitability, and a disciplined capital allocation strategy focused on long-term investment underscores a compelling investment thesis. The current valuation, particularly the significant discount to book value, suggests that the market may not yet fully appreciate the potential of GBLI's strategic rebirth and its commitment to technological leadership. For discerning investors, GBLI represents an opportunity to participate in a focused insurer leveraging technology and specialization to drive sustainable value creation, even as it navigates the complexities of the P&C market.