gbli-10q_20210331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2021

☐	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 GROUP, LLC

(Exact name of registrant as specified in its charter)

Delaware

85-2619578

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer Identification No.)

Three Bala Plaza East, Suite 300

Bala Cynwyd, PA

19004

(Address of principal executive office including zip code)

Registrant's telephone number, including area code: (610) 664-1500

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit such files.). Yes ☒ No ☐

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	☐

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Shares	GBLI	NASDAQ Global Select Market
7.875% Subordinated Notes due 2047	GBLIL	NASDAQ Global Select Market

As of April 30, 2021, the registrant had outstanding 10,479,999 Class A Common Shares and 3,947,206 Class B Common Shares.

TABLE OF CONTENTS

			Page
	PART I – FINANCIAL INFORMATION

Item 1.		Financial Statements:	3

		Consolidated Balance Sheets As of March 31, 2021 (Unaudited) and December 31, 2020	3

		Consolidated Statements of Operations Quarters Ended March 31, 2021 (Unaudited) and March 31, 2020 (Unaudited)	4

		Consolidated Statements of Comprehensive Income (Loss) Quarters Ended March 31, 2021 (Unaudited) and March 31, 2020 (Unaudited)	5

		Consolidated Statements of Changes in Shareholders’ Equity Quarters Ended March 31, 2021 (Unaudited) and March 31, 2020 (Unaudited)	6

		Consolidated Statements of Cash Flows Quarters Ended March 31, 2021 (Unaudited) and March 31, 2020 (Unaudited)	7

		Notes to Consolidated Financial Statements (Unaudited)	8

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	55

Item 4.		Controls and Procedures	55

	PART II – OTHER INFORMATION

Item 1.		Legal Proceedings	56

Item 1A.		Risk Factors	56

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	56

Item 3.		Defaults Upon Senior Securities	56

Item 4.		Mine Safety Disclosures	56

Item 5.		Other Information	56

Item 6.		Exhibits	57

Signature			58

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

GLOBAL INDEMNITY GROUP, LLC

Consolidated Balance Sheets

(In thousands, except share amounts)

	(Unaudited) March 31, 2021			December 31, 2020
ASSETS
Fixed maturities:
Available for sale, at fair value (amortized cost: 1,202,472 and 1,149,009; net of allowance for expected credit losses of $0 at March 31, 2021 and December 31, 2020)	$	1,214,622		$	1,191,186
Equity securities, at fair value		83,449			98,990
Other invested assets		95,522			97,018
Total investments		1,393,593			1,387,194

Cash and cash equivalents		47,465			67,359
Premiums receivable, net of allowance for expected credit losses of $2,772 at March 31, 2021 and $2,900 at December 31, 2020		116,707			109,431
Reinsurance receivables, net of allowance for expected credit losses of $8,992 at March 31, 2021 and December 31, 2020		85,431			88,708
Funds held by ceding insurers		36,689			45,480
Deferred federal income taxes		40,158			34,265
Deferred acquisition costs		65,698			65,195
Intangible assets		20,830			20,962
Goodwill		6,521			6,521
Prepaid reinsurance premiums		14,414			12,881
Other assets		70,140			66,912
Total assets	$	1,897,646		$	1,904,908

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses	$	675,908		$	662,811
Unearned premiums		297,012			291,495
Ceded balances payable		10,301			8,943
Payable for securities purchased		11,718			4,667
Contingent commissions		4,479			10,832
Debt		126,324			126,288
Other liabilities		75,447			81,548
Total liabilities	$	1,201,189		$	1,186,584

Commitments and contingencies (Note 11)		—			—

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: 10,303,832 and 10,263,722 respectively; class A common shares outstanding: 10,293,839 and 10,263,722, respectively; class B common shares issued and outstanding: 4,133,366 and 4,133,366, respectively		—			—
Additional paid-in capital		446,199			445,051
Accumulated other comprehensive income, net of tax		9,853			34,308
Retained earnings		236,688			234,965
Class A common shares in treasury, at cost: 9,993 and 0 shares, respectively		(283	)		—
Total shareholders’ equity		696,457			718,324
Total liabilities and shareholders’ equity	$	1,897,646		$	1,904,908

See accompanying notes to consolidated financial statements.

GLOBAL INDEMNITY GROUP, LLC

Consolidated Statements of Operations

(In thousands, except shares and per share data)

	(Unaudited) Quarters Ended March 31,
	2021			2020
Revenues:
Gross written premiums	$	163,558		$	155,724

Net written premiums	$	147,683		$	139,112

Net earned premiums	$	143,700		$	144,468
Net investment income		9,836			10,129
Net realized investment gains (losses)		3,819			(68,162	)
Other income		377			165
Total revenues		157,732			86,600

Losses and Expenses:
Net losses and loss adjustment expenses		90,783			77,647
Acquisition costs and other underwriting expenses		54,764			56,412
Corporate and other operating expenses		4,276			4,223
Interest expense		2,595			4,865
Income (loss) before income taxes		5,314			(56,547	)
Income tax benefit		(203	)		(11,969	)
Net income (loss)	$	5,517		$	(44,578	)
Less: preferred stock distributions		110			—
Net income (loss) available to common shareholders	$	5,407		$	(44,578	)

Per share data:
Net income (loss) available to common shareholders (1)
Basic	$	0.38		$	(3.13	)
Diluted	$	0.37		$	(3.13	)
Weighted-average number of shares outstanding
Basic		14,380,423			14,249,551
Diluted		14,640,658			14,249,551
Cash dividends/distributions declared per common share	$	0.25		$	0.25

(1)	For the quarter ended March 31, 2020, 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.

GLOBAL INDEMNITY GROUP, LLC

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

	(Unaudited) Quarters Ended March 31,
	2021			2020
Net income (loss)	$	5,517		$	(44,578	)

Other comprehensive loss, net of tax:
Unrealized holding losses		(25,178	)		(2,032	)
Reclassification adjustment for (gains) losses included in net income (loss)		816			(1,714	)
Unrealized foreign currency translation losses		(93	)		(1,303	)
Other comprehensive loss, net of tax		(24,455	)		(5,049	)

Comprehensive loss, net of tax	$	(18,938	)	$	(49,627	)

See accompanying notes to consolidated financial statements.

GLOBAL INDEMNITY GROUP, LLC

Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except share amounts)

	(Unaudited) Quarters Ended March 31,
	2021			2020
Number of Series A Cumulative Fixed Rate Preferred Shares
Number at beginning and end of period		4,000			—
Number of class A common shares issued:
Number at beginning of period		10,263,722			10,282,277
Common shares issued under share incentive plans, net of forfeitures		20,104			—
Common shares issued to directors		20,006			23,127
Number at end of period		10,303,832			10,305,404
Number of class B common shares issued:
Number at beginning and end of period		4,133,366			4,133,366
Par value of Series A Cumulative Fixed Rate Preferred Shares
Balance at beginning and end of period	$	4,000		$	—
Par value of class A common shares:
Balance at beginning and end of period	$	—		$	1
Par value of class B common shares:
Balance at beginning and end of period	$	—		$	1
Additional paid-in capital:
Balance at beginning of period	$	445,051		$	442,403
Share compensation plans		1,148			1,238
Balance at end of period	$	446,199		$	443,641
Accumulated other comprehensive income, net of deferred income tax:
Balance at beginning of period	$	34,308		$	17,609
Other comprehensive income (loss):
Change in unrealized holding gains (losses)		(24,362	)		(3,746	)
Unrealized foreign currency translation gains (losses)		(93	)		(1,303	)
Other comprehensive income (loss)		(24,455	)		(5,049	)
Balance at end of period	$	9,853		$	12,560
Retained earnings:
Balance at beginning of period	$	234,965		$	270,768
Net income (loss)		5,517			(44,578	)
Preferred share distributions		(110	)		—
Dividends / distributions to shareholders (0.25 per share per quarter in 2021 and 2020)		(3,684	)		(3,641	)
Balance at end of period	$	236,688		$	222,549
Number of treasury shares:
Number at beginning of period		—			115,221
Class A common shares purchased		9,815			4,724
Forfeited shares		178			—
Number at end of period		9,993			119,945
Treasury shares, at cost:
Balance at beginning of period	$	—		$	(3,973	)
Class A common shares purchased, at cost		(283	)		(143	)
Balance at end of period	$	(283	)	$	(4,116	)
Total shareholders’ equity	$	696,457		$	674,636

See accompanying notes to consolidated financial statements.

GLOBAL INDEMNITY GROUP, LLC

Consolidated Statements of Cash Flows

(In thousands)

	(Unaudited) Quarters Ended March 31,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	5,517		$	(44,578	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation		1,956			1,775
Amortization of debt issuance costs		35			66
Restricted stock and stock option expense		1,148			1,238
Deferred federal income taxes		(203	)		(11,969	)
Amortization of bond premium and discount, net		1,395			1,399
Net realized investment (gains) losses		(3,819	)		68,162
Income from equity method investments, net of distributions		(584	)		(710	)
Changes in:
Premiums receivable, net		(7,276	)		2,704
Reinsurance receivables, net		3,277			864
Funds held by ceding insurers		8,672			182
Unpaid losses and loss adjustment expenses		13,097			9,287
Unearned premiums		5,517			(6,560	)
Ceded balances payable		1,358			3,528
Other assets and liabilities		(10,329	)		(6,262	)
Contingent commissions		(6,353	)		(6,087	)
Federal income tax receivable/payable		—			5,479
Deferred acquisition costs		(503	)		1,062
Prepaid reinsurance premiums		(1,533	)		1,204
Net cash provided by operating activities		11,372			20,784
Cash flows from investing activities:
Proceeds from sale of fixed maturities		364,277			124,070
Proceeds from sale of equity securities		37,475			49,546
Proceeds from maturity of fixed maturities		28,721			13,259
Proceeds from other invested assets		2,080			682
Amounts paid in connection with derivatives		(262	)		(20,007	)
Purchases of fixed maturities		(441,964	)		(156,424	)
Purchases of equity securities		(17,566	)		(10,810	)
Net cash (used for) provided by investing activities		(27,239	)		316
Cash flows from financing activities:
Net repayments under margin borrowing facility		—			(1,922	)
Dividends / distributions paid to common shareholders		(3,634	)		(3,555	)
Distributions paid to preferred shareholders		(110	)		—
Purchases of class A common shares		(283	)		(143	)
Net cash used for financing activities		(4,027	)		(5,620	)
Net change in cash and cash equivalents		(19,894	)		15,480
Cash and cash equivalents at beginning of period		67,359			44,271
Cash and cash equivalents at end of period	$	47,465		$	59,751

See accompanying notes to consolidated financial statements.

GLOBAL INDEMNITY GROUP, LLC

1.	Principles of Consolidation and Basis of Presentation

References to “the Company” refer to Global Indemnity Group, LLC and its subsidiaries. If prior to August 28, 2020, references to the Company refer to Global Indemnity Limited and its subsidiaries.

Global Indemnity Group, LLC, a Delaware limited liability company formed on June 23, 2020, replaced Global Indemnity Limited, incorporated in the Cayman Islands 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 completed on August 28, 2020. Global Indemnity Group, LLC’s class A common shares are publicly traded on the NASDAQ Global Select Market under the ticker symbol GBLI. Global Indemnity Group, LLC’s predecessors have been publicly traded since 2003. See Note 2 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2020 Annual Report on Form 10-K for additional information regarding the redomestication.

Global Indemnity Group, 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 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, Penn-Patriot Insurance Company, and American Reliable Insurance Company.

The insurance companies’ primary activity is providing insurance products across a distribution network that includes binding authority, program, brokerage and reinsurance. The insurance companies are managed through four business segments: Commercial Specialty, Specialty Property, Farm, Ranch & Stable, and Reinsurance Operations. The Company’s Commercial Specialty segment offers specialty property and casualty insurance products in the excess and surplus lines marketplace. The Company manages Commercial Specialty by differentiating them into four product classifications: 1) Penn-America, which markets property and general liability products to small commercial businesses through a select network of wholesale general agents with specific binding authority; 2) 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; 3) Diamond State, which markets property, casualty, and professional lines products, which are developed by the Company’s underwriting department by individuals with expertise in those lines of business, through wholesale brokers and also markets through program administrators having specific binding authority; and 4) Vacant Express, which primarily insures dwellings which are currently vacant, undergoing renovation, or are under construction and is marketed through aggregators, brokers, and retail agents. These product classifications comprise the Company’s Commercial Specialty business segment and are not considered individual business segments because each product has similar economic characteristics, distribution, and coverage. The Company’s Specialty Property segment offers specialty personal lines property and casualty insurance products through general and specialty agents with specific binding authority. The Company’s Farm, Ranch & Stable segment provides specialized property and casualty coverage including Commercial Farm Auto and Excess/Umbrella Coverage for the agriculture industry as well as specialized insurance products for the equine mortality and equine major medical industry. These insurance products are sold through wholesalers and retail agents, with a selected number having specific binding authority. 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 Company’s Reinsurance Operations segment provides reinsurance solutions through brokers and primary writers including insurance and reinsurance companies. Prior to the redomestication transactions, the Company’s Reinsurance Operations consisted solely of the operations of its Bermuda-based wholly-owned subsidiary, Global Indemnity Reinsurance Company, Ltd. (“Global Indemnity Reinsurance”). As part of the redomestication transactions, Global Indemnity Reinsurance was merged with and into Penn-Patriot Insurance Company ("Penn-Patriot"), with Penn-Patriot surviving, resulting in the assumption of Global Indemnity Reinsurance's business by the Global Indemnity group of companies’ existing U.S. insurance company subsidiaries. The Commercial Specialty, Specialty Property, Farm, Ranch & Stable, and Reinsurance Operations segments comprise the Company’s insurance operations.

The interim consolidated financial statements are unaudited, but 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.

GLOBAL INDEMNITY GROUP, LLC

The unaudited consolidated financial statements include all adjustments that are, in the opinion of management, of a normal recurring nature and are necessary for a fair statement of results for the interim periods. Results of operations for the quarters ended March 31, 2021 and 2020 are not necessarily indicative of the results of a full year. The accompanying notes to the unaudited consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s 2020 Annual Report on Form 10-K.

The consolidated financial statements include the accounts of Global Indemnity Group, LLC and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

There have been no significant changes to the Company's accounting policies during the current year except for the following:

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.

Please see Note 3 of the notes to the consolidated financial statements in Item 8 Part II of the Company's 2020 Annual Report on Form 10-K for more information on the Company's summary of significant accounting policies.

3.	Investments

The amortized cost and estimated fair value of the Company’s fixed maturities securities were as follows as of March 31, 2021 and December 31, 2020:

(Dollars in thousands)	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of March 31, 2021
Fixed maturities:
U.S. treasuries	$	217,484	$	—	$	1,629	$	(5,953	)	$	213,160
Agency obligations		10,277		—		—		(404	)		9,873
Obligations of states and political subdivisions		62,341		—		2,242		(230	)		64,353
Mortgage-backed securities		320,405		—		5,124		(3,498	)		322,031
Asset-backed securities		121,597		—		1,223		(311	)		122,509
Commercial mortgage-backed securities		103,110		—		3,811		(483	)		106,438
Corporate bonds		256,859		—		9,327		(3,038	)		263,148
Foreign corporate bonds		110,399		—		3,530		(819	)		113,110
Total fixed maturities	$	1,202,472	$	—	$	26,886	$	(14,736	)	$	1,214,622

GLOBAL INDEMNITY GROUP, LLC

(Dollars in thousands)	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of December 31, 2020
Fixed maturities:
U.S. treasuries	$	195,444	$	—	$	3,125	$	(1,089	)	$	197,480
Obligations of states and political subdivisions		58,140		—		3,170		(67	)		61,243
Mortgage-backed securities		351,453		—		7,876		(551	)		358,778
Asset-backed securities		116,349		—		1,890		(646	)		117,593
Commercial mortgage-backed securities		105,509		—		6,094		(644	)		110,959
Corporate bonds		223,387		—		17,703		(373	)		240,717
Foreign corporate bonds		98,727		—		5,716		(27	)		104,416
Total fixed maturities	$	1,149,009	$	—	$	45,574	$	(3,397	)	$	1,191,186

As of March 31, 2021 and December 31, 2020, the Company’s investments in equity securities consist of the following:

(Dollars in thousands)	March 31, 2021		December 31, 2020
Common stock	$	65,072	$	60,379
Preferred stock		18,377		11,683
Index funds that invest in fixed maturities		—		26,928
Total	$	83,449	$	98,990

As of March 31, 2021 and December 31, 2020, the Company held Fannie Mae mortgage pools that totaled as much as 3.2% and 3.9% of shareholders’ equity, respectively. Excluding the Fannie Mae pools, U.S. treasuries, agency bonds, index funds, limited liability companies, and limited partnerships, the Company did not hold any debt or equity investments in a single issuer in excess of 2.2% and 1.9% of shareholders' equity at March 31, 2021 and December 31, 2020, respectively.

The amortized cost and estimated fair value of the Company’s fixed maturities portfolio classified as available for sale at March 31, 2021, 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
Due in one year or less	$	42,951	$	43,345
Due in one year through five years		189,621		197,113
Due in five years through ten years		326,307		324,990
Due in ten years through fifteen years		29,695		29,652
Due after fifteen years		68,786		68,544
Mortgage-backed securities		320,405		322,031
Asset-backed securities		121,597		122,509
Commercial mortgage-backed securities		103,110		106,438
Total	$	1,202,472	$	1,214,622

GLOBAL INDEMNITY GROUP, LLC

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 March 31, 2021. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 5.

	Less than 12 months					12 months or longer					Total (1)
(Dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities:
U.S. treasuries	$	142,149	$	(5,953	)	$	—	$	—		$	142,149	$	(5,953	)
Agency obligations		9,873		(404	)		—		—			9,873		(404	)
Obligations of states and political subdivisions		5,282		(230	)		—		—			5,282		(230	)
Mortgage-backed securities		165,838		(3,484	)		2,589		(14	)		168,427		(3,498	)
Asset-backed securities		25,749		(89	)		12,826		(222	)		38,575		(311	)
Commercial mortgage-backed securities		19,494		(336	)		2,806		(147	)		22,300		(483	)
Corporate bonds		78,918		(2,864	)		4,746		(174	)		83,664		(3,038	)
Foreign corporate bonds		27,892		(805	)		373		(14	)		28,265		(819	)
Total fixed maturities	$	475,195	$	(14,165	)	$	23,340	$	(571	)	$	498,535	$	(14,736	)

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, 2020. The fair value amounts reported in the table are estimates that are prepared using the process described in Note 5.

	Less than 12 months					12 months or longer					Total (1)
(Dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed maturities:
U.S. treasuries	$	81,999	$	(1,089	)	$	—	$	—		$	81,999	$	(1,089	)
Obligations of states and political subdivisions		2,588		(67	)		—		—			2,588		(67	)
Mortgage-backed securities		57,350		(551	)		4		—			57,354		(551	)
Asset-backed securities		22,268		(389	)		13,354		(257	)		35,622		(646	)
Commercial mortgage-backed securities		10,294		(526	)		1,154		(118	)		11,448		(644	)
Corporate bonds		7,783		(373	)		—		—			7,783		(373	)
Foreign corporate bonds		885		(27	)		—		—			885		(27	)
Total fixed maturities	$	183,167	$	(3,022	)	$	14,512	$	(375	)	$	197,679	$	(3,397	)

The Company regularly performs various analytical valuation procedures with respect to its investments, including reviewing each available for sale debt security in an unrealized loss position to assess whether the decline in fair value below amortized cost basis has resulted from a credit loss or other factors. In assessing whether a credit loss exists, the Company compares the present value of the cash flows expected to be collected 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 the allowances are recorded in the period of change as either credit loss expense or reversal of credit loss expense. Any impairments related to factors other than credit losses and the intent to sell are recorded through other comprehensive income, net of taxes.

For fixed maturities, the factors considered in reaching the conclusion that a credit loss exists include, among others, whether:

(1)

the extent to which the fair value is less than the amortized cost basis;

(2)

the issuer is in financial distress;

GLOBAL INDEMNITY GROUP, LLC

(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.

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, any allowance for expected credit losses is written off and the amortized cost basis is written down to the fair value of the fixed 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 time the issuer 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 assets on the Company’s consolidated statements of financial position. Accrued interest receivable was $5.6 million and $5.7 million as of March 31, 2021 and December 31, 2020, respectively.

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. treasuries – As of March 31, 2021, gross unrealized losses related to U.S. treasuries were $5.953 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other 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.

Agency obligations – As of March 31, 2021, gross unrealized losses related to agency obligations were $0.404 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other 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 agency obligations during the period.

Obligations of states and political subdivisions – As of March 31, 2021, gross unrealized losses related to obligations of states and political subdivisions were $0.230 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other factors, elements that may influence the performance of the municipal bond market are considered in evaluating these securities 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 extensive in-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 March 31, 2021, gross unrealized losses related to mortgage-backed securities were $3.498 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other 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

GLOBAL INDEMNITY GROUP, LLC

within each deal. The model utilizes HPI-adjusted current LTV, 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 March 31, 2021, gross unrealized losses related to asset backed securities were $0.311 million. The weighted average credit enhancement for the Company’s asset backed portfolio is 29.9. This represents the percentage of pool losses that can occur before an asset backed security will incur its first dollar of principal losses. To 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 an in-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 March 31, 2021, gross unrealized losses related to the CMBS portfolio were $0.483 million. The weighted average credit enhancement for the Company’s CMBS portfolio is 37.9. This represents the percentage of pool losses that can occur before a mortgage-backed security will incur its first dollar of principal loss. To assess whether the 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 is re-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 March 31, 2021, gross unrealized losses related to corporate bonds were $3.038 million. To assess whether the decline in fair value below amortized cost has resulted from a credit loss or other 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 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 March 31, 2021, gross unrealized losses related to foreign bonds were $0.819 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. Based on the analysis performed, the Company did not recognize a credit loss on foreign bonds during the period.

The Company has evaluated its investment portfolio and has determined that an allowance for expected credit losses on its investments is not required.

GLOBAL INDEMNITY GROUP, LLC

Accumulated Other Comprehensive Income, Net of Tax

Accumulated other comprehensive income, net of tax, as of March 31, 2021 and December 31, 2020 was as follows:

(Dollars in thousands)	March 31, 2021			December 31, 2020
Net unrealized gains (losses) from:
Fixed maturities	$	12,150		$	42,177
Foreign currency fluctuations		43			161
Deferred taxes		(2,340	)		(8,030	)
Accumulated other comprehensive income, net of tax	$	9,853		$	34,308

The following tables present the changes in accumulated other comprehensive income, net of tax, by component for the quarters ended March 31, 2021 and 2020:

Quarter Ended March 31, 2021 (Dollars In Thousands)	Unrealized Gains and Losses on Available for Sale Securities			Foreign Currency Items			Accumulated Other Comprehensive Income
Beginning balance, net of tax	$	34,181		$	127		$	34,308
Other comprehensive income before reclassification, before tax		(31,186	)		(118	)		(31,304	)
Amounts reclassified from accumulated other comprehensive income, before tax		1,159			—			1,159
Other comprehensive income, before tax		(30,027	)		(118	)		(30,145	)
Income tax benefit		5,665			25			5,690
Ending balance, net of tax	$	9,819		$	34		$	9,853

Quarter Ended March 31, 2020 (Dollars In Thousands)	Unrealized Gains and Losses on Available for Sale Securities			Foreign Currency Items			Accumulated Other Comprehensive Income
Beginning balance, net of tax	$	18,641		$	(1,032	)	$	17,609
Other comprehensive income (loss) before reclassification, before tax		(884	)		(1,303	)		(2,187	)
Amounts reclassified from accumulated other comprehensive income, before tax		(1,932	)		—			(1,932	)
Other comprehensive income (loss), before tax		(2,816	)		(1,303	)		(4,119	)
Income tax expense		(930	)		—			(930	)
Ending balance, net of tax	$	14,895		$	(2,335	)	$	12,560

The reclassifications out of accumulated other comprehensive income for the quarters ended March 31, 2021 and 2020 were as follows:

		Amounts Reclassified from Accumulated Other Comprehensive Income
(Dollars in thousands)		Quarters Ended March 31,
Details about Accumulated Other Comprehensive Income Components	Affected Line Item in the Consolidated Statements of Operations	2021			2020
Unrealized gains and losses on available for sale securities	Other net realized investment (gains) losses	$	1,159		$	(1,932	)
	Income tax expense (benefit)		(343	)		218
	Total reclassifications, net of tax	$	816		$	(1,714	)

GLOBAL INDEMNITY GROUP, LLC

Net Realized Investment Gains (Losses)

The components of net realized investment gains (losses) for the quarters ended March 31, 2021 and 2020 were as follows:

	Quarters Ended March 31,
(Dollars in thousands)	2021			2020
Fixed maturities:
Gross realized gains	$	3,378		$	2,243
Gross realized losses		(4,537	)		(311	)
Net realized gains (losses)		(1,159	)		1,932
Equity securities:
Gross realized gains		5,673			1,822
Gross realized losses		(1,305	)		(51,804	)
Net realized gains (losses)		4,368			(49,982	)
Derivatives:
Gross realized gains		2,353			13,623
Gross realized losses		(1,743	)		(33,735	)
Net realized gains (losses) (1)		610			(20,112	)
Total net realized investment gains (losses)	$	3,819		$	(68,162	)

(1)	Includes periodic net interest settlements related to the derivatives of $1.4 million and $0.6 million for the quarters ended March 31, 2021 and 2020, respectively.

The following table shows the calculation of the portion of realized gains and losses related to equity securities held as of March 31, 2021 and 2020:

	Quarters Ended March 31,
(Dollars in thousands)	2021		2020
Net gains and (losses) recognized during the period on equity securities	$	4,368	$	(49,982	)
Less: net gains (losses) recognized during the period on equity securities sold during the period		1,376		(4,221	)
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date	$	2,992	$	(45,761	)

The proceeds from sales and redemptions of available for sale and equity securities resulting in net realized investment gains (losses) for the quarters ended March 31, 2021 and 2020 were as follows:

	Quarters Ended March 31,
(Dollars in thousands)	2021		2020
Fixed maturities	$	364,277	$	124,070
Equity securities		37,475		49,546

Net Investment Income

The sources of net investment income for the quarters ended March 31, 2021 and 2020 were as follows:

	Quarters Ended March 31,
(Dollars in thousands)	2021			2020
Fixed maturities	$	6,827		$	9,041
Equity securities		675			1,364
Cash and cash equivalents		50			180
Other invested assets		2,997			533
Total investment income		10,549			11,118
Investment expense		(713	)		(989	)
Net investment income	$	9,836		$	10,129

GLOBAL INDEMNITY GROUP, LLC

The Company’s total investment return on a pre-tax basis for the quarters ended March 31, 2021 and 2020 were as follows:

	Quarters Ended March 31,
(Dollars in thousands)	2021			2020
Net investment income	$	9,836		$	10,129
Net realized investment gains (losses)		3,819			(68,162	)
Change in unrealized holding gains (losses)		(30,145	)		(4,119	)
Net realized and unrealized investment returns		(26,326	)		(72,281	)
Total investment return	$	(16,490	)	$	(62,152	)
Total investment return % ₍₁₎		(1.1	%)		(3.9	%)
Average investment portfolio ₍₂₎	$	1,439,613		$	1,578,765

(1)	Not annualized.

(2)	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.

As of March 31, 2021 and December 31, 2020, the Company did not own any fixed maturity securities that were non-income producing for the preceding twelve months.

Insurance Enhanced Asset-Backed and Credit Securities

As of March 31, 2021, the Company held insurance enhanced bonds with a market value of approximately $31.4 million which represented 2.2% of the Company’s total cash and invested assets, net of payable/ receivable for securities purchased and sold.

The insurance enhanced bonds are comprised of $16.4 million of municipal bonds, $7.2 million of commercial mortgage-backed securities, and$7.8 million of collateralized mortgage obligations. The financial guarantors of the Company’s $31.4 million of insurance enhanced commercial-mortgage-backed, municipal securities, and collateralized mortgage obligations include Municipal Bond Insurance Association ($3.1 million), Assured Guaranty Corporation ($10.6 million), Federal Home Loan Mortgage Corporation ($15.0 million), Ambac Financial Group ($2.1 million), School Bond Guaranty Program ($0.1 million), and Higher Education State Aid Intercept Program ($0.5 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 March 31, 2021.

Bonds Held on Deposit

Certain cash balances, cash equivalents, and bonds available for sale were deposited with various governmental authorities in accordance with statutory requirements, were held as collateral, or were held in trust. The fair values were as follows as of March 31, 2021 and December 31, 2020:

	Estimated Fair Value
(Dollars in thousands)	March 31, 2021		December 31, 2020
On deposit with governmental authorities	$	28,757	$	26,966
Held in trust pursuant to third party requirements		91,603		100,234
Letter of credit held for third party requirements		2,512		3,970
Securities held as collateral		—		494
Total	$	122,872	$	131,664

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

GLOBAL INDEMNITY GROUP, LLC

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 four 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% of their respective investments.

The carrying value of one of the Company’s VIE’s, which invests in distressed securities and assets, was $10.6 million and $10.8 million as of March 31, 2021 and December 31, 2020, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $24.8 million and $25.0 million at March 31, 2021 and December 31, 2020, respectively. The carrying value of a second VIE that also invests in distressed securities and assets was $13.6 million and $15.7 million at March 31, 2021 and December 31, 2020, respectively. The Company’s maximum exposure to loss from this VIE, which factors in future funding commitments, was $30.6 million and $32.7 million at March 31, 2021 and December 31, 2020, respectively. The carrying value and maximum exposure to loss of a third VIE that invests in REIT qualifying assets was $10.8 million and $10.5 million as of March 31, 2021 and December 31, 2020, respectively. The carrying value and maximum exposure to loss of a fourth VIE, which invests in a broad portfolio of non-investment grade loans, was $60.4 million and $60.0 million as of March 31, 2021 and December 31, 2020, respectively. The Company’s investment in VIEs is included in other invested assets on the consolidated balance sheet with changes in carrying value recorded in the consolidated statements of operations.

4.Derivative Instruments

Derivatives are used by the Company to reduce risks from changes in interest rates and limit exposure to severe equity market changes. The Company has interest rate swaps with terms 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 also utilizes exchange-traded futures contracts, which give 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. The Company posts collateral and settles variation margin in cash on a daily basis equal to the amount of the futures contracts’ change in value scaled by a multiplier.

The Company accounts for the interest rate swaps and futures as non-hedge instruments and recognizes 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 is 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 relies on the forward interest rate curve and information obtained from a third party financial institution.

The following table summarizes information on the location and the gross amount of the derivatives on the consolidated balance sheets as of March 31, 2021 and December 31, 2020:

(Dollars in thousands)		March 31, 2021					December 31, 2020
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 assets/liabilities	$	213,022	$	(14,077	)	$	213,022	$	(16,430	)
Futures contracts on bonds ₍₁₎	Other assets/liabilities		—		—			28,996		—
Total ₍₂₎		$	213,022	$	(14,077	)	$	242,018	$	(16,430	)

(1)

Futures are settled daily such that their fair value is not reflected in the consolidated statements of financial position

(2)

The derivatives are held by GBLI Holdings, LLC and are guaranteed by Global Indemnity Group, LLC

GLOBAL INDEMNITY GROUP, LLC

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 quarters ended March 31, 2021 and 2020:

		Quarters Ended March 31,
(Dollars in thousands)	Consolidated Statements of Operations Line	2021			2020
Interest rate swap agreements	Net realized investment gains (losses)	$	929		$	(9,423	)
Futures contracts on bonds	Net realized investment gains (losses)		(319	)		(2,399	)
Futures contracts on equities	Net realized investment gains (losses)		—			(8,290	)
Total		$	610		$	(20,112	)

As of March 31, 2021 and December 31, 2020, the Company is due $2.6 million and $2.8 million, respectively, for funds it needed to post to execute the swap transaction and $16.2 million and $17.5 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.

As of March 31, 2021, the Company was not utilizing futures contracts. As of December 31, 2020, the Company posted initial margin of $0.5 million in securities for trading futures contracts with a mark-to-market receivable of less than $0.1 million. Variation margin is included in other assets on the consolidated balance sheets.

5.	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.

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.

GLOBAL INDEMNITY GROUP, LLC

The following table presents information about the Company’s invested assets and derivative instruments measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

	Fair Value Measurements
As of March 31, 2021 (Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities:
U.S. treasuries	$	213,160	$	—	$	—	$	213,160
Agency obligations		—		9,873		—		9,873
Obligations of states and political subdivisions		—		64,353		—		64,353
Mortgage-backed securities		—		321,422		609		322,031
Commercial mortgage-backed securities		—		106,100		338		106,438
Asset-backed securities		—		122,181		328		122,509
Corporate bonds		—		262,220		928		263,148
Foreign corporate bonds		—		113,110		—		113,110
Total fixed maturities		213,160		999,259		2,203		1,214,622
Equity securities		65,072		18,377		—		83,449
Total assets measured at fair value	$	278,232	$	1,017,636	$	2,203	$	1,298,071
Liabilities:
Derivative instruments	$	—	$	14,077	$	—	$	14,077
Total liabilities measured at fair value	$	—	$	14,077	$	—	$	14,077

	Fair Value Measurements
As of December 31, 2020 (Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities:
U.S. treasuries	$	197,480	$	—	$	—	$	197,480
Obligations of states and political subdivisions		—		61,243		—		61,243
Mortgage-backed securities		—		358,778		—		358,778
Commercial mortgage-backed securities		—		110,959		—		110,959
Asset-backed securities		—		117,593		—		117,593
Corporate bonds		—		240,717		—		240,717
Foreign corporate bonds		—		104,416		—		104,416
Total fixed maturities		197,480		993,706		—		1,191,186
Equity securities		87,307		11,683		—		98,990
Total assets measured at fair value	$	284,787	$	1,005,389	$	—	$	1,290,176
Liabilities:
Derivative instruments	$	—	$	16,430	$	—	$	16,430
Total liabilities measured at fair value	$	—	$	16,430	$	—	$	16,430

The securities classified as Level 1 in the above table consist of U.S. Treasuries and equity securities actively traded on an exchange.

The securities classified as Level 2 in the above table consist primarily of fixed maturity securities and derivative instruments. Based on the typical trading volumes and the lack of quoted market prices for fixed maturities, 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

GLOBAL INDEMNITY GROUP, LLC

speeds previously experienced at the interest rate levels projected for the underlying collateral. 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.

The following table presents changes in Level 3 investments measured at fair value on a recurring basis for the quarters ended March 31, 2021 and 2020:

	Quarters Ended March 31,
(Dollars in thousands)	2021			2020
Beginning balance	$	—		$	—
Total gains (realized / unrealized):
Included in accumulated other comprehensive income		(39	)		—
Amortization of bond premium and discount, net		—			—
Purchases		2,242			—
Sales		—			—
Ending balance	$	2,203			—

There were no transfers into or out of Level 3 during the quarters ended March 31, 2021 or 2020.

The investments classified as Level 3 in the above table consist of fixed maturities 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 debt instruments.

For the Company’s material debt arrangements, the current fair value of the Company’s debt at March 31, 2021 and December 31, 2020 was as follows:

	March 31, 2021				December 31, 2020
(Dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
7.875% Subordinated Notes due 2047 (1)	$	126,324	$	132,252	$	126,288	$	132,008
Total	$	126,324	$	132,252	$	126,288	$	132,008

(1)	As of March 31, 2021 and December 31, 2020, the carrying value and fair value of the 7.875% Subordinated Notes due 2047 are net of unamortized debt issuance cost of $3.7 million, respectively.

The subordinated notes due 2047 are publicly traded instruments and are classified as Level 1 in the fair value hierarchy.

GLOBAL INDEMNITY GROUP, LLC

Fair Value of Alternative Investments

Other invested assets consist of limited liability companies and limited partnerships whose carrying value approximates fair value. The following table provides the fair value and future funding commitments related to these investments at March 31, 2021 and December 31, 2020.

	March 31, 2021				December 31, 2020
(Dollars in thousands)	Fair Value		Future Funding Commitment		Fair Value		Future Funding Commitment
European Non-Performing Loan Fund, LP ₍₁₎	$	10,636	$	14,214	$	10,808	$	14,214
Distressed Debt Fund, LP ₍₂₎		13,641		17,000		15,721		17,000
Mortgage Debt Fund, LP ₍₃₎		10,843		—		10,489		—
Credit Fund, LLC ₍₄₎		60,402		—		60,000		—
Global Debt Fund, LP ₍₅₎		—		25,000		—		—
Total	$	95,522	$	56,214	$	97,018	$	31,214

(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 stressed and distressed securities and structured products. 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 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.

(4)	This limited liability company invests in a broad portfolio of non-investment grade loans, secured and unsecured corporate debt, credit default swaps, reverse repurchase agreements and synthetic indices. The Company does have the ability to sell its interest by providing notice to the fund.

(5)

This limited partnership invests in performing, stressed or distressed securities and loans across the global fixed income markets. 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.

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%. The equity method of accounting for an investment in limited liability companies and limited partnerships 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, except for the Credit Fund, LLC, are booked on a one quarter lag due to non-availability of data at the time the financial statements are prepared. Information for the Credit Fund, LLC is received on a timely basis and is included in current results. The investment income associated with these limited liability companies and limited partnerships is reflected in the consolidated statements of operations in the amounts of $3.0 million and $0.5 million for the quarters ended March 31, 2021 and 2020, respectively.

Pricing

The Company’s pricing vendors provide prices for all investment categories except for investments in limited liability companies and limited partnerships. Two primary vendors are utilized to provide prices for equity and fixed maturity securities.

The following is a description of the valuation methodologies used by the Company’s pricing vendors for investment securities carried at fair value:

•

Equity security prices are received from primary and secondary exchanges.

•

Corporate and agency bonds are evaluated by utilizing a spread to a benchmark curve. Bonds with similar characteristics are grouped into specific sectors. Inputs for both asset classes consist of trade prices, broker quotes, the new issue market, and prices on comparable securities.

•

Data from commercial vendors is aggregated with market information, then converted into an option adjusted spread (“OAS”) matrix and prepayment model used for collateralized mortgage obligations (“CMO”). CMOs are

GLOBAL INDEMNITY GROUP, LLC

categorized with mortgage-backed securities in the tables listed above. For asset-backed securities, spread data is derived from trade prices, dealer quotations, and research reports. For both asset classes, evaluations utilize standard inputs plus new issue data, and collateral performance. The evaluated pricing models incorporate cash flows, broker quotes, market trades, historical prepayment speeds, and dealer projected speeds.

•

For obligations of state and political subdivisions, an attribute-based modeling system is used. The pricing model incorporates trades, market clearing yields, market color, and fundamental credit research.

•

U.S. treasuries are evaluated by obtaining feeds from a number of live data sources including primary 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 the quarters ended March 31, 2021 and 2020, the Company has not adjusted quotes or prices obtained from the pricing vendors.

6.Allowance for Expected Credit Losses - Premiums Receivable and Reinsurance Receivables

For premiums 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 premiums receivable for the quarter ended March 31, 2021 and 2020:

	Quarters Ended March 31,
(Dollars in thousands)	2021			2020
Beginning balance	$	2,900		$	2,754
Current period provision for expected credit losses		88			162
Write-offs		(216	)		(170	)
Ending balance	$	2,772		$	2,746

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.

GLOBAL INDEMNITY GROUP, LLC

The following table is an analysis of the allowance for expected credit losses related to the Company's reinsurance receivables for the quarters ended March 31, 2021 and 2020:

	Quarters Ended March 31,
(Dollars in thousands)	2021		2020
Beginning balance	$	8,992	$	8,992
Current period provision for expected credit losses		—		—
Write-offs		—		—
Ending balance	$	8,992	$	8,992

7.Income Taxes

Effective August 28, 2020, Global Indemnity Group, LLC became 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 March 31, 2021, the statutory income tax rates of the countries where the Company conducts or conducted business are 21% in the United States, 0% in Bermuda, 19% in the United Kingdom, and 25% on non-trading income, 33% on capital gains and 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 estimate the annual income tax expense.

The Company’s income (loss) before income taxes from its non-U.S. subsidiaries and U.S. subsidiaries for the quarters ended March 31, 2021 and 2020 were as follows:

Quarter Ended March 31, 2021 (Dollars in thousands)	Non-U.S. Subsidiaries		U.S. Subsidiaries		Eliminations		Total
Revenues:
Gross written premiums	$	—	$	163,558	$	—	$	163,558
Net written premiums	$	—	$	147,683	$	—	$	147,683
Net earned premiums	$	—	$	143,700	$	—	$	143,700
Net investment income		—		9,836		—		9,836
Net realized investment gains		—		3,819		—		3,819
Other income		—		377		—		377
Total revenues		—		157,732		—		157,732
Losses and Expenses:
Net losses and loss adjustment expenses		—		90,783		—		90,783
Acquisition costs and other underwriting expenses		—		54,764		—		54,764
Corporate and other operating expenses		—		4,276		—		4,276
Interest expense		—		2,595		—		2,595
Income before income taxes	$	—	$	5,314	$	—	$	5,314

GLOBAL INDEMNITY GROUP, LLC

Quarter Ended March 31, 2020 (Dollars in thousands)	Non-U.S. Subsidiaries			U.S. Subsidiaries			Eliminations			Total
Revenues:
Gross written premiums	$	17,517		$	138,207		$	—		$	155,724
Net written premiums	$	17,517		$	121,595		$	—		$	139,112
Net earned premiums	$	23,855		$	120,613		$	—		$	144,468
Net investment income		6,376			7,250			(3,497	)		10,129
Net realized investment losses		(3,710	)		(64,452	)		—			(68,162	)
Other income (loss)		(318	)		483			—			165
Total revenues		26,203			63,894			(3,497	)		86,600
Losses and Expenses:
Net losses and loss adjustment expenses		12,562			65,085			—			77,647
Acquisition costs and other underwriting expenses		8,549			47,863			—			56,412
Corporate and other operating expenses		1,127			3,096			—			4,223
Interest expense		342			8,020			(3,497	)		4,865
Income (loss) before income taxes	$	3,623		$	(60,170	)	$	—		$	(56,547	)

The following table summarizes the components of income tax benefit:

	Quarters Ended March 31,
(Dollars in thousands)	2021			2020
Deferred income tax benefit:
U.S. Federal	$	(203	)	$	(11,969	)
Total deferred income tax benefit		(203	)		(11,969	)
Total income tax benefit	$	(203	)	$	(11,969	)

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.

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:

	Quarters Ended March 31,
	2021						2020
(Dollars in thousands)	Amount			% of Pre- Tax Income			Amount			% of Pre- Tax Income
Expected tax provision at weighted average tax rate	$	1,116			21.0	%	$	(12,635	)		22.3	%
Adjustments:
Tax exempt interest		—			—			(1	)		—
Dividend exclusion		(17	)		(0.3	)		(71	)		0.1
Non-deductible interest		—			—			679			(1.1	)
Parent income treated as partnership for tax		(1,367	)		(25.7	)		—			—
Other		65			1.2			59			(0.1	)
Effective income tax benefit	$	(203	)		(3.8	%)	$	(11,969	)		21.2	%

The effective income tax benefit rate for the quarter ended March 31, 2021 was (3.8%), compared with an effective income tax benefit rate of 21.2% for the quarter ended March 31, 2020. The decrease in the income tax benefit rate for the quarter ended March 31, 2021 was primarily driven by higher pre-tax income for the Company’s U.S. subsidiaries of $5.3 million for the quarter ended March 31, 2021 as compared to a pre-tax loss of $60.2 million for the same period in 2020. The $5.3 million of pretax income for the quarter ended March 31, 2021 included $6.5 million from Global Indemnity Group, LLC which has elected to be a partnership. Income earned by Global Indemnity Group, LLC passes through to its shareholders. The increase in pre-tax income in the U.S. subsidiaries is primarily due to the U.S. subsidiaries incurring net realized investment losses of $64.5 million during the quarter ended March 31, 2020 which primarily resulted from the

GLOBAL INDEMNITY GROUP, LLC

impact of changes in fair value on equity securities and derivatives due to disruption in the global financial markets as a result of COVID-19.

The Company has a net operating loss (“NOL”) carryforward of $27.7 million as of March 31, 2021, which begins to expire in 2036 based on when the original NOL was generated. The Company’s NOL carryforward as of December 31, 2020 was $26.2 million.

The Company has a Section 163(j) (“163(j)”) carryforward of $4.9 million and $5.6 million as of March 31, 2021 and December 31, 2020, respectively, which can be carried forward indefinitely. The 163(j) carryforward relates to the limitation on the deduction for business interest expense paid or accrued.

8.Liability for Unpaid Losses and Loss Adjustment Expenses

Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:

	Quarters Ended March 31,
(Dollars in thousands)	2021			2020
Balance at beginning of period	$	662,811		$	630,181
Less: Ceded reinsurance receivables		82,158			76,273
Net balance at beginning of period		580,653			553,908
Incurred losses and loss adjustment expenses related to:
Current year		94,194			78,247
Prior years		(3,411	)		(600	)
Total incurred losses and loss adjustment expenses		90,783			77,647
Paid losses and loss adjustment expenses related to:
Current year		21,719			22,034
Prior years		53,230			48,806
Total paid losses and loss adjustment expenses		74,949			70,840
Net balance at end of period		596,487			560,715
Plus: Ceded reinsurance receivables		79,421			78,753
Balance at end of period	$	675,908		$	639,468

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 the first quarter of 2021, the Company reduced its prior accident year loss reserves by $3.4 million, which consisted of a $0.4 million decrease related to Commercial Specialty, a $1.6 million decrease related to Specialty Property, a $0.7 million decrease related to Farm, Ranch & Stable, and a $0.6 million decrease related to Reinsurance Operations.

The $0.4 million reduction of prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:

•

Property: A $0.2 million decrease in total reflects decreases of $2.6 million in the 2017 and 2019 through 2020 accident years mainly recognizing better than expected claims severity, mostly offset by an increase in the 2018 accident year, which reflects an increase in the ultimate for Hurricane Michael.

•

Professional: A $0.2 million decrease primarily in the 2019 and 2020 accident years mainly reflecting lower than anticipated claims severity.

The $1.6 million decrease of prior accident year loss reserves related to Specialty Property primarily consisted of the following:

•

General Liability: A $1.2 million reduction mostly in the 2018 accident year primarily reflects lower than anticipated claims severity.

GLOBAL INDEMNITY GROUP, LLC

•

Property: A $0.4 million decrease mostly in the non-catastrophe reserve segments. The reductions were primarily in the 2016 through 2019 accident years mainly due to lower than expected claims severity partially offset by an increase in the 2020 accident year driven by higher than anticipated claims severity.

The $0.7 million reduction of prior accident year loss reserves related to Farm, Ranch & Stable primarily consisted of the following:

•

Property: A $0.7 million decrease in total reflects subrogation recoveries of $1.1 million in the catastrophe reserve category from the California Thomas wildfire loss in the 2017 accident year and a decrease of $0.5 million in the 2019 accident year primarily recognizing a lower than expected claims severity. These decreases were partially offset by increases in the 2018 and 2020 accident years mainly due to higher than anticipated claims severity.

The $0.6 million decrease in prior accident year loss reserves related to Reinsurance Operations were primarily based on a review of the experience reported from cedants. There was a $0.6 million decrease in the property lines mainly in the 2011 and 2017 through 2018 accident years, partially offset by an increase in the 2010 and 2019 accident years. In total, the property catastrophe segments decreased $2.6 million and the other property segments increased $2.0 million.

During the first quarter of 2020, the Company reduced its prior accident year loss reserves by $0.6 million. This reduction consisted of increases and decreases in prior accident year loss reserves in all segments with the primary impact being a $0.6 million decrease related to Reinsurance Operations.

The increases and decreases in prior accident year loss reserves related to Commercial Specialty primarily consisted of the following:

•

General Liability: An increase of less than $0.3 million primarily in the 2016 through 2018 accident years reflects higher than anticipated claims severity. These increases were mostly offset by decreases mainly in the 2012 through 2015 and 2019 accident years due to lower than expected claims severity.

•

Workers Compensation: A $0.2 million reduction primarily in loss adjustment expense reserves in the 2012 accident year and accident years prior to 2005.

•

Property: A decrease of less than $0.1 million is mainly due to decreases in the 2018 and 2019 accident years primarily recognizing lower than expected claims severity, offset by an increase in the 2016 accident year due to higher than anticipated claims severity.

The increases and decreases in prior accident year loss reserves related to Specialty Property primarily consisted of the following:

•

General Liability: A $0.4 million decrease primarily recognizes lower than expected claims severity in the 2015, 2016 and 2019 accident years.

•

Property: A $0.4 million increase mainly reflects higher than anticipated claims severity in the 2019 accident year, partially offset by a decrease in the 2018 accident year due to lower than expected claims severity.

Farm, Ranch & Stable had immaterial increases and decreases in prior accident year loss reserves.

The $0.6 million reduction of prior accident year loss reserves related to Reinsurance Operations was from the property lines. Decreases were primarily in the 2014 through 2017 accident years based on a review of the experience reported from cedants, partially offset by an increase in the 2018 accident year mainly due to development on Typhoons Jebi and Trami and an increase in attritional losses in the 2019 accident year.

GLOBAL INDEMNITY GROUP, LLC

9.Shareholders’ Equity

The following table provides information with respect to the class A common shares that were surrendered or repurchased during the quarter ended March 31, 2021:

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
January 1-31, 2021		6,720	(2)	$	28.59		—		—
March 1-31, 2021		3,095	(2)	$	29.40		—		—
Total		9,815		$	28.85		—		—

(1)	Based on settlement date.

(2)	Surrendered by employees as payment of taxes withheld on the vesting of restricted stock.

The following table provides information with respect to the class A common shares that were surrendered or repurchased during the quarter ended March 31, 2020:

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
January 1-31, 2020		3,124	(2)	$	29.63	—	—
February 1-29, 2020		1,600	(2)	$	31.13	—	—
Total		4,724		$	30.14	—	—

(1)	Based on settlement date.

(2)	Surrendered by employees as payment of taxes withheld on the vesting of restricted stock.

There were no class B common shares that were surrendered or repurchased during the quarters ended March 31, 2021 or 2020.

As of March 31, 2021, Global Indemnity Group, LLC’s class A common shares were held by approximately 180 shareholders of record. There were four holders of record of Global Indemnity Group, LLC’s class B common shares, all of whom are affiliated investment funds of Fox Paine & Company, LLC, as of March 31, 2021. Global Indemnity Group, LLC’s preferred shares were held by 1 holder of record, an affiliate of Fox Paine & Company, LLC, as of March 31, 2021.

Please see Note 14 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2020 Annual Report on Form 10-K for more information on the Company’s repurchase program.

Dividends / Distributions

Distribution payments of $0.25 per common share were declared during the quarter ended March 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
Various (1)	Various	Various		114
Total			$	3,684

(1)

Represents distributions declared on unvested shares, net of forfeitures.

GLOBAL INDEMNITY GROUP, LLC

Dividend payments of $0.25 per common share were declared during the quarter ended March 31, 2020 as follows:

Approval Date	Record Date	Payment Date	Total Dividends Declared (Dollars in thousands)
February 9, 2020	March 24, 2020	March 31, 2020	$	3,539
Various (1)	Various	Various		102
Total			$	3,641

(1)

Represents dividends declared on unvested shares, net of forfeitures.

As of March 31, 2021 and December 31, 2020, accrued distributions on unvested shares, which were included in other liabilities on the consolidated balance sheets, were $0.8 million and $0.7 million, respectively. Accrued preferred distributions were less than $0.1 million as of both March 31, 2021 and December 31, 2020 and were included in other liabilities on the consolidated balance sheets.

Please see Note 14 of the notes to the consolidated financial statements in Item 8 Part II of the Company’s 2020 Annual Report on Form 10-K for more information on the Company’s dividend program.

10.	Related Party Transactions

Fox Paine Entities

Pursuant to Global Indemnity Group, LLC’s Limited Liability Company Agreement (“LLCA”), Fox Paine Capital Fund II International, L.P. and certain of its affiliates (the “Fox Paine Funds”), together with Fox Mercury Investments, L.P. and certain of its affiliates (the “FM Entities”), and Fox Paine & Company LLC (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 Global 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 83.9% of the voting power of Global Indemnity Group, LLC as of March 31, 2021. The Fox Paine Entities control the election of all of Global Indemnity Group, LLC’s Directors due to their controlling share ownership. Global Indemnity Group, LLC’s Chairman is the chief executive and founder of Fox Paine & Company, LLC.

On August 27, 2020, Global Indemnity Group, LLC issued and sold to Wyncote LLC, an affiliate of Fox Paine & Company, LLC, 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 $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 Board of Directors, in connection with any exercise of the foregoing provisions.

Management fee expense of $0.7 million and $0.5 million was incurred during the quarters ended March 31, 2021 and 2020, respectively. Prepaid management fees, which were included in other assets on the consolidated balance sheets, were $1.1 million and $1.8 million as of March 31, 2021 and December 31, 2020, respectively.

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 Global Indemnity Group, LLC’s Conflicts Committee of the Board of Directors or Global Indemnity Limited’s Audit Committee of the Board of Directors, for those services from time to time. Each of the Company’s transactions with Fox Paine & Company, LLC are reviewed and approved by either Global Indemnity Group, LLC’s Conflicts Committee or Audit 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 was not a member of Global Indemnity Limited’s Audit Committee and recused himself from the Board of Directors’ deliberations).

GLOBAL INDEMNITY GROUP, LLC

11.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’ 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.

Commitments

In 2014, the Company entered into a $50 million commitment to purchase an alternative investment vehicle which is comprised of European non-performing loans. As of March 31, 2021, the Company has funded $35.8 million of this commitment leaving $14.2 million as unfunded. Since the investment period has concluded, the Company 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 securities and structured products. As of March 31, 2021, the Company has funded $33.0 million of this commitment leaving $17.0 million as unfunded. Since the investment period has concluded, the Company expects minimal capital calls will be made prospectively.

In 2021, the Company entered into a $25 million commitment to purchase an alternative investment vehicle comprised of performing, stressed or distressed securities and loans across the global fixed income markets. As of March 31, 2021, the Company has not funded this commitment leaving $25 million as unfunded.

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, LLC. See Note 10 above for additional information pertaining to this management agreement.

COVID-19

There is risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Commercial Specialty and Farm, Ranch & Stable policies, or other conditions included in policies that would otherwise preclude coverage.

12.	Share-Based Compensation Plan

Options

During the first quarter of 2021, the Company granted 140,000 Performance-Based Options under the Plan. The Performance-Based Options vest in 33% increments over a three-year period subject to the achievement of certain underwriting results and expire ten years after the grant date or the occurrence of certain events specified in the agreement, whichever is earlier. No stock options were awarded during the quarter ended March 31, 2020. 300,000 unvested options were forfeited during the quarter ended March 31, 2021. No unvested stock options were forfeited during the quarter ended March 31, 2020.

GLOBAL INDEMNITY GROUP, LLC

Restricted Shares / Restricted Stock Units

There were no restricted class A common shares granted to key employees during the quarters ended March 31, 2021 and 2020 and there were no restricted stock units granted to key employees during the quarter ended March 31, 2021.

During the quarter ended March 31, 2020, the Company granted 94,281 restricted stock units, with a weighted average grant date value of $29.63 per share, to key employees under the Plan. 3,375 of these restricted stock units will vest evenly over the next three years. One third of these restricted stock units vested on January 1, 2021. One third of these restricted stock units will each vest on January 1, 2022 and January 1, 2023. The remaining 90,906 restricted stock units vest as follows:

•

16.5% vested on January 1, 2021. 16.5% and 17.0% of the restricted stock units will vest on January 1, 2022 and January 1, 2023, respectively.

•

Subject to Board approval, 50% of restricted stock units will vest 100%, no later than March 15, 2023, following a re-measurement of 2019 results as of December 31, 2022.

During the quarter ended March 31, 2021, there were 20,437 restricted stock units that became fully vested. Upon vesting the restricted stock units converted to restricted class A common shares. During the quarter ended March 31, 2020, there were no restricted stock units that vested.

During the quarters ended March 31, 2021 and 2020, the Company granted 20,006 and 23,127 class A common shares, respectively, at a weighted average grant date value of $28.32 and $29.19 per share, respectively, to non-employee directors of the Company under the Plan. Of the shares granted during the quarters ended March 31, 2021 and 2020, the vesting of 4,903 shares and 6,422 shares, respectively, is deferred until January 1, 2024 or a change of control, whichever is earlier. The remaining shares granted to non-employee directors of the Company in 2021 and 2020 were fully vested but are subject to certain restrictions.

13.Earnings Per Share

Earnings per share have been computed using the weighted average number of common shares and common share equivalents outstanding during the period.

The following table sets forth the computation of basic and diluted earnings per share:

	Quarters Ended March 31,
(Dollars in thousands, except share and per share data)	2021		2020
Numerator:
Net income (loss)	$	5,517	$	(44,578	)
Less: preferred stock distributions		110		—
Net income (loss) available to common shareholders	$	5,407	$	(44,578	)

Denominator:
Weighted average shares for basic earnings per share		14,380,423		14,249,551
Non-vested restricted stock		10,065		—
Non-vested restricted stock units		137,839		—
Options		112,331		—
Weighted average shares for diluted earnings per share (1)		14,640,658		14,249,551

Earnings per share - Basic	$	0.38	$	(3.13	)
Earnings per share - Diluted	$	0.37	$	(3.13	)

(1)	For the quarter ended March 31, 2020, weighted average shares outstanding – basic was used to calculate diluted earnings per share due to a net loss for the period.

If the Company had not incurred a loss in the quarter ended March 31, 2020, 14,417,506 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 quarter ended March 31, 2020 would have included 16,298 shares of non-vested restricted stock, 29,261 shares of non-vested restricted stock units, and 122,396 share equivalents for options.

GLOBAL INDEMNITY GROUP, LLC

The weighted average shares outstanding used to determine dilutive earnings per share does not include 540,000 shares and 500,000 options for the quarters ended March 31, 2021 and 2020, respectively, which were deemed to be anti-dilutive.

14.	Segment Information

The insurance companies are managed through four business segments. Commercial Specialty offers specialty property and casualty products designed for product lines such as Small Business Binding Authority, Property Brokerage, and Programs. Specialty Property offers specialty personal lines property and casualty insurance products. Farm, Ranch & Stable offers specialized property and casualty coverage including Commercial Farm Auto and Excess/Umbrella Coverage for the agriculture industry as well as specialized insurance products for the equine mortality and equine major medical industry. Reinsurance Operations provides reinsurance solutions through brokers and primary writers including insurance and reinsurance companies.

The following are tabulations of business segment information for the quarters ended March 31, 2021 and 2020:

Quarter Ended March 31, 2021 (Dollars in thousands)	Commercial Specialty			Specialty Property		Farm, Ranch & Stable			Reinsurance Operations			(1)	Total
Revenues:
Gross written premiums	$	87,332		$	33,358	$	21,002		$	21,866			$	163,558
Net written premiums	$	78,515		$	29,699	$	17,603		$	21,866			$	147,683
Net earned premiums	$	76,150		$	30,591	$	18,141		$	18,818			$	143,700
Other income (loss)		—			430		34			(56	)			408
Total revenues		76,150			31,021		18,175			18,762				144,108
Losses and Expenses:
Net losses and loss adjustment expenses		53,235			14,478		11,801			11,269				90,783
Acquisition costs and other underwriting expenses		28,177			13,039		6,986			6,562				54,764
Income (loss) from segments	$	(5,262	)	$	3,504	$	(612	)	$	931			$	(1,439	)
Unallocated Items:
Net investment income														9,836
Net realized investment gains														3,819
Other loss														(31	)
Corporate and other operating expenses														(4,276	)
Interest expense														(2,595	)
Income before income taxes														5,314
Income tax benefit														203
Net income														5,517

Segment assets	$	856,180		$	217,190	$	147,697		$	281,543			$	1,502,610
Corporate assets														395,036
Total assets													$	1,897,646

(1)	External business only, excluding business assumed from affiliates.

GLOBAL INDEMNITY GROUP, LLC

Quarter Ended March 31, 2020 (Dollars in thousands)	Commercial Specialty		Specialty Property		Farm, Ranch & Stable		Reinsurance Operations			(1)	Total
Revenues:
Gross written premiums	$	80,831	$	35,243	$	22,133	$	17,517			$	155,724
Net written premiums	$	72,483	$	30,007	$	19,105	$	17,517			$	139,112
Net earned premiums	$	67,714	$	34,216	$	18,683	$	23,855			$	144,468
Other income (loss)		—		427		36		(295	)			168
Total revenues		67,714		34,643		18,719		23,560				144,636
Losses and Expenses:
Net losses and loss adjustment expenses		37,435		17,498		9,610		13,104				77,647
Acquisition costs and other underwriting expenses		25,993		14,232		7,638		8,549				56,412
Income (loss) from segments	$	4,286	$	2,913	$	1,471	$	1,907			$	10,577
Unallocated Items:
Net investment income												10,129
Net realized investment loss												(68,162	)
Other loss												(3	)
Corporate and other operating expenses												(4,223	)
Interest expense												(4,865	)
Loss before income taxes												(56,547	)
Income tax benefit												11,969
Net loss												(44,578	)

Segment assets	$	730,202	$	209,758	$	135,731	$	276,640			$	1,352,331
Corporate assets												676,173
Total assets											$	2,028,504

(1)	External business only, excluding business assumed from affiliates.

15.	New Accounting Pronouncements

Accounting Standards Adopted in 2021

In December, 2019, the FASB issued updated guidance related to the accounting for income taxes. The updated guidance is intended to simplify the accounting for income taxes by removing several exceptions contained in existing guidance and amending other existing guidance to simplify several other income tax accounting matters. The updated guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The Company adopted this guidance on January 1, 2021. The adoption of this new accounting guidance did not have a material impact on the Company’s financial condition, results of operations, or cash flows.

16. Subsequent Events

On April 19, 2021, the Company announced that David S. Charlton was named chief executive of the Company’s insurance operations and was appointed to serve as the principal executive officer of the Company. Furthermore, in connection with Mr. Charlton’s appointment, the board of directors of Global Indemnity Group, LLC (the “Board”) has increased the size of the Board from six to seven directors and appointed Mr. Charlton to fill the newly-created directorship, in each case, with effect as of execution of the CEO Agreement. In connection with Mr. Charlton’s appointment, Global Indemnity Group, LLC, Penn-Patriot Insurance Company (“Penn-Patriot”) and Mr. Charlton executed a Chief Executive Officer Agreement (the “CEO Agreement”) on April 19, 2021. The CEO Agreement provides for an employment term from April 19, 2021 through December 31, 2026. The CEO Agreement provides for an annual base salary and an annual target bonus opportunity payable based on the achievement of certain underwriting results as determined by the Board. The CEO Agreement provides for a grant of 2,000,000 Penn-Patriot book value appreciation rights (the “BVARs”) with an aggregate initial notional value equal to approximately 4% of Penn-Patriot’s book value, which entitle Mr. Charlton to a payment based on the value of the

GLOBAL INDEMNITY GROUP, LLC

per-BVAR appreciation in Penn-Patriot’s book value over the initial notional value, calculated in accordance with the CEO Agreement. The BVARs will vest by December 31, 2026, subject to the achievement of certain performance goals and Mr. Charlton’s continued employment as of the vesting date, with half of the applicable appreciation value of the BVARs payable on April 1, 2027 and an additional amount payable on April 1, 2030 following a true-up of underwriting results for the applicable performance period. The BVARs will vest in full in the event of a “change in control” of Penn-Patriot (as defined in the CEO Agreement) and a specified portion may vest in the event Mr. Charlton is terminated by Penn-Patriot without cause.

On May 7, 2021, the Company amended and restated the CEO Agreement to increase the number of BVARs granted to Mr. Charlton from 2,000,000 to 2,500,000, with such BVARs having an aggregate initial notional value equal to approximately 5% of Penn-Patriot’s book value.

GLOBAL INDEMNITY GROUP, LLC

Item 2. 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 the Company 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 Note Regarding Forward-Looking Statements" at the end of this Item 2 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. For more information regarding the Company’s business and operations, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Recent Developments

COVID-19

The global outbreak of COVID-19 continues to present significant risks to the Company. The COVID-19 pandemic may affect the Company’s operations indefinitely. The Company may experience reductions in premium volume, delays in the collection of premiums, and increases in COVID-19 related claims. Any resulting volatility in the global financial markets may negatively impact the market value of the Company’s investment portfolio and may result in net realized investment losses as well as a decline in the liquidity of the investment portfolio. All of these factors may have far reaching impacts on the Company’s business, operations, and financial results and conditions, directly and indirectly, including without limitation impacts on the health of the Company’s management and employees, distribution, marketing, customers and agents, and on the overall economy. The scope and nature of these impacts, most of which are beyond the Company’s control, continue to evolve and such effects could exist for an extended period of time even after the pandemic ends.

Appointment of Chief Executive

Distributions

During 2021, 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 22, 2021. Dividends / distributions paid were $3.6 million during the quarter ended March 31, 2021. In addition, distributions of $0.1 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the quarter ended March 31, 2021.

AM Best Rating

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. On April 21, 2021, AM Best affirmed the financial strength rating of "A" (Excellent) for the U.S. operating subsidiaries of Global Indemnity Group, LLC.

Overview

The Company’s Commercial Specialty segment sells its property and casualty insurance products through a group of approximately 190 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 Specialty operates predominantly in the excess and surplus lines marketplace. The Company manages its Commercial Specialty segment via product classifications. These product classifications are: 1) Penn-America, which includes property and general liability products for small commercial businesses sold through a select network of wholesale

GLOBAL INDEMNITY GROUP, LLC

general agents with specific binding authority; 2) United National, which includes property, general liability, and professional lines products sold through program administrators with specific binding authority; 3) Diamond State, which includes property, casualty, and professional lines products sold 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 sold through aggregators, brokers, and retail agents.

The Company’s Specialty Property segment, primarily via American Reliable, offers specialty personal lines property and casualty insurance products through a group of approximately 205 agents, primarily comprised of wholesale general agents, with specific binding authority.

The Company’s Farm, Ranch & Stable segment, primarily via American Reliable, provides specialized property and casualty coverage including Commercial Farm Auto and Excess/Umbrella Coverage for the agriculture industry as well as specialized insurance products for the equine mortality and equine major medical industry. These insurance products are sold through a group of approximately 220 agents, primarily comprised of wholesalers and retail agents, with a selected number having specific binding authority.

The Company’s Reinsurance Operations provides reinsurance solutions through brokers and on a direct basis. It uses its capital capacity to write niche and specialty-focused treaties and business which meet the Company’s risk tolerance and return thresholds. Prior to the redomestication, the Company’s Reinsurance Operations consisted solely of the operations of Global Indemnity Reinsurance. In connection with the redomestication, Global Indemnity Reinsurance merged into Penn-Patriot Insurance Company and all of its business was assumed by the Company’s existing insurance company subsidiaries.

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. Actual results could differ from those estimates and assumptions.

The most critical accounting policies involve significant estimates and include those used in determining the liability for unpaid losses and loss adjustment expenses, recoverability of reinsurance receivables, investments, fair value measurements, goodwill and intangible assets, deferred acquisition costs, and taxation. For a detailed discussion on each of these policies, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There have been no significant changes to any of these policies or underlying methodologies during the current year except for the following:

GLOBAL INDEMNITY GROUP, LLC

quarter lag. The recording of such results is applied consistently for each investment once the timing of receiving the results has been established.

Results of Operations

The following table summarizes the Company’s results for the quarters ended March 31, 2021 and 2020:

	Quarters Ended March 31,						%
(Dollars in thousands)	2021			2020			Change
Gross written premiums	$	163,558		$	155,724			5.0	%

Net written premiums	$	147,683		$	139,112			6.2	%

Net earned premiums	$	143,700		$	144,468			(0.5	%)
Other income		408			168			142.9	%
Total revenues		144,108			144,636			(0.4	%)

Losses and expenses:
Net losses and loss adjustment expenses		90,783			77,647			16.9	%
Acquisition costs and other underwriting expenses		54,764			56,412			(2.9	%)
Underwriting income (loss)		(1,439	)		10,577			(113.6	%)

Net investment income		9,836			10,129			(2.9	%)
Net realized investment gains (losses)		3,819			(68,162	)		105.6	%
Other loss		(31	)		(3	)	NM
Corporate and other operating expenses		(4,276	)		(4,223	)		1.3	%
Interest expense		(2,595	)		(4,865	)		(46.7	%)
Income (loss) before income taxes		5,314			(56,547	)		109.4	%

Income tax expense (benefit)		(203	)		(11,969	)		(98.3	%)
Net income (loss)	$	5,517		$	(44,578	)		112.4	%

Underwriting Ratios:
Loss ratio (1):		63.1	%		53.7	%
Expense ratio (2)		38.1	%		39.0	%
Combined ratio (3)		101.2	%		92.7	%

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 earned premiums.

(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 earned premiums.

(3)	The combined ratio is a GAAP financial measure and is the sum of the Company’s loss and expense ratios.

GLOBAL INDEMNITY GROUP, LLC

Premiums

The following table summarizes the change in premium volume by business segment:

	Quarters Ended March 31,
(Dollars in thousands)	2021		2020		% Change
Gross written premiums (1)
Commercial Specialty	$	87,332	$	80,831		8.0	%
Specialty Property		33,358		35,243		(5.3	%)
Farm, Ranch & Stable		21,002		22,133		(5.1	%)
Reinsurance (3)		21,866		17,517		24.8	%
Total gross written premiums	$	163,558	$	155,724		5.0	%

Ceded written premiums
Commercial Specialty	$	8,817	$	8,348		5.6	%
Specialty Property		3,659		5,236		(30.1	%)
Farm, Ranch & Stable		3,399		3,028		12.3	%
Reinsurance (3)		—		—		—
Total ceded written premiums	$	15,875	$	16,612		(4.4	%)

Net written premiums (2)
Commercial Specialty	$	78,515	$	72,483		8.3	%
Specialty Property		29,699		30,007		(1.0	%)
Farm, Ranch & Stable		17,603		19,105		(7.9	%)
Reinsurance (3)		21,866		17,517		24.8	%
Total net written premiums	$	147,683	$	139,112		6.2	%

Net earned premiums
Commercial Specialty	$	76,150	$	67,714		12.5	%
Specialty Property		30,591		34,216		(10.6	%)
Farm, Ranch & Stable		18,141		18,683		(2.9	%)
Reinsurance (3)		18,818		23,855		(21.1	%)
Total net earned premiums	$	143,700	$	144,468		(0.5	%)

(1)	Gross written premiums represent the amount received or to be received for insurance policies written without reduction for reinsurance costs, ceded premiums, or other deductions.

(2)	Net written premiums equal gross written premiums less ceded written premiums.

(3)	External business only, excluding business assumed from affiliates.

Gross written premiums increased by 5.0% for the quarter ended March 31, 2021 as compared to same period in 2020. This increase is mainly due to the continued growth of existing programs, increased pricing, and several new programs within Commercial Specialty as well as the organic growth of an existing casualty treaty and the assumption of two new smaller casualty treaties within Reinsurance Operations. This growth in premiums was partially offset by the continued reduction of catastrophe exposed business within both Specialty Property and Farm, Ranch & Stable, the continued reduction in business not providing an adequate return on capital within Specialty Property, and actions taken by Commercial Specialty to reduce risk and increase profitability of Property Brokerage.

GLOBAL INDEMNITY GROUP, LLC

Net Retention

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

	Quarters Ended March 31,						Point
(Dollars in thousands)	2021			2020			Change
Commercial Specialty		89.9	%		89.7	%		0.2
Specialty Property		89.0	%		85.1	%		3.9
Farm, Ranch & Stable		83.8	%		86.3	%		(2.5	)
Reinsurance		100.0	%		100.0	%		—
Total		90.3	%		89.3	%		1.0

The net premium retention for the quarter ended March 31, 2021 increased by 1.0 points, as compared to the same period in 2020. This increase in retention is primarily driven by the restructuring of the Company’s catastrophe reinsurance treaties which occurred on June 1, 2020 as well as a change in the mix of business.

Net Earned Premiums

Net earned premiums within the Commercial Specialty segment increased by 12.5% for the quarter ended March 31, 2021 as compared to the same period in 2020. The increase in net earned premiums was primarily due to a growth in premiums written as a result of organic growth from existing agents, pricing increases, and several new programs partially offset by a reduction in Property Brokerage’s net earned premiums as a result of actions taken to reduce risk and increase profitability. Property net earned premiums were $34.5 million and $30.5 million for the quarters ended March 31, 2021 and 2020, and, respectively. Casualty net earned premiums were $41.6 million and $37.2 million for the quarters ended March 31, 2021 and 2020, respectively.

Net earned premiums within the Specialty Property segment decreased by 10.6% for the quarter ended March 31, 2021 as compared to the same period in 2020 primarily due to a continued reduction of catastrophe exposed business and a reduction in business not providing an adequate return on capital. Property net earned premiums were $28.7 million and $31.7 million for the quarters ended March 31, 2021 and 2020, respectively. Casualty net earned premiums were $1.8 million and $2.6 million for the quarters ended March 31, 2021 and 2020, respectively.

Net earned premiums within the Farm, Ranch & Stable segment decreased by 2.9% for the quarter ended March 31, 2021, as compared to the same period in 2020. The decrease in net earned premiums was primarily due to the continued reduction of catastrophe exposed business. Property net earned premiums were $13.6 million and $13.4 million for the quarters ended March 31, 2021 and 2020, respectively. Casualty net earned premiums were $4.6 million and $5.3 million for the quarters ended March 31, 2021 and 2020, respectively.

Net earned premiums within the Reinsurance Operations segment decreased by 21.1% for the quarter ended March 31, 2021 as compared to the same period in 2020 primarily due to the non-renewal of its property catastrophe treaties partially offset by the organic growth of an existing casualty treaty. Property net earned premiums were $2.0 million and $10.0 million for the quarters ended March 31, 2021 and 2020, respectively. Casualty net earned premiums were $16.8 million and $13.9 million for the quarters ended March 31, 2021 and 2020, respectively.

GLOBAL INDEMNITY GROUP, LLC

Reserves

Management’s best estimate at March 31, 2021 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 $675.9 million and $596.5 million, respectively, as of March 31, 2021. A breakout of the Company’s gross and net reserves, as of March 31, 2021, is as follows:

	Gross Reserves
(Dollars in thousands)	Case		IBNR (1)		Total
Commercial Specialty	$	165,411	$	272,147	$	437,558
Specialty Property		14,298		27,375		41,673
Farm, Ranch & Stable		13,168		34,640		47,808
Reinsurance Operations		48,624		100,245		148,869
Total	$	241,501	$	434,407	$	675,908

	Net Reserves (2)
(Dollars in thousands)	Case		IBNR (1)		Total
Commercial Specialty	$	133,720	$	239,433	$	373,153
Specialty Property		11,716		23,225		34,941
Farm, Ranch & Stable		11,672		27,852		39,524
Reinsurance Operations		48,624		100,245		148,869
Total	$	205,732	$	390,755	$	596,487

(1)	Losses incurred but not reported, including the expected future emergence of case reserves.

(2)	Does not include reinsurance receivable on paid losses.

Each reserve category has an implicit frequency and severity for each accident year as a result of the various assumptions made. If the actual levels of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’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’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’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 $94.2 million for claims occurring during the quarter ended March 31, 2021:

		Severity Change
(Dollars in thousands)		-10%			-5%			0%			5%			10%
Frequency Change	-5%		(13,659	)		(9,185	)		(4,710	)		(236	)		4,239
	-3%		(11,963	)		(7,395	)		(2,826	)		1,743			6,311
	-2%		(11,116	)		(6,500	)		(1,884	)		2,732			7,348
	-1%		(10,268	)		(5,605	)		(942	)		3,721			8,384
	0%		(9,420	)		(4,710	)		—			4,710			9,420
	1%		(8,572	)		(3,815	)		942			5,699			10,456
	2%		(7,724	)		(2,920	)		1,884			6,688			11,492
	3%		(6,877	)		(2,025	)		2,826			7,677			12,529
	5%		(5,181	)		(236	)		4,710			9,656			14,601

The Company’s net reserves for losses and loss adjustment expenses of $596.5 million as of March 31, 2021 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.

GLOBAL INDEMNITY GROUP, LLC

Underwriting Results

Commercial Specialty

The components of income and loss from the Company’s Commercial Specialty segment and corresponding underwriting ratios are as follows:

	Quarters Ended March 31,					%
(Dollars in thousands)	2021			2020		Change
Gross written premiums	$	87,332		$	80,831		8.0	%

Net written premiums	$	78,515		$	72,483		8.3	%

Net earned premiums	$	76,150		$	67,714		12.5	%
Total revenues		76,150			67,714		12.5	%

Losses and expenses:
Net losses and loss adjustment expenses		53,235			37,435		42.2	%
Acquisition costs and other underwriting expenses		28,177			25,993		8.4	%
Underwriting income (loss)	$	(5,262	)	$	4,286	NM

	Quarters Ended March 31,						Point
	2021			2020			Change
Underwriting Ratios:
Loss ratio:
Current accident year		70.4	%		55.3	%		15.1
Prior accident year		(0.5	%)		—	%		(0.5	)
Calendar year loss ratio		69.9	%		55.3	%		14.6
Expense ratio		37.0	%		38.4	%		(1.4	)
Combined ratio		106.9	%		93.7	%		13.2

NM – not meaningful

GLOBAL INDEMNITY GROUP, LLC

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 within Commercial Specialty 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.

	Quarters Ended March 31,
	2021						2020
(Dollars in thousands)	Losses			Loss Ratio			Losses			Loss Ratio
Property
Non catastrophe property losses and ratio excluding the effect of prior accident year (1)	$	20,292			58.8	%	$	12,249			40.1	%
Effect of prior accident year		(1,563	)		(4.5	%)		(359	)		(1.2	%)
Non catastrophe property losses and ratio (2)	$	18,729			54.3	%	$	11,890			38.9	%

Catastrophe losses and ratio excluding the effect of prior accident year (1)	$	10,304			29.8	%	$	3,713			12.2	%
Effect of prior accident year		1,323			3.8	%		338			1.1	%
Catastrophe losses and ratio (2)	$	11,627			33.6	%	$	4,051			13.3	%

Total property losses and ratio excluding the effect of prior accident year (1)	$	30,596			88.6	%	$	15,962			52.3	%
Effect of prior accident year		(240	)		(0.7	%)		(21	)		(0.1	%)
Total property losses and ratio (2)	$	30,356			87.9	%	$	15,941			52.2	%

Casualty
Total Casualty losses and ratio excluding the effect of prior accident year (1)	$	23,049			55.4	%	$	21,473			57.7	%
Effect of prior accident year		(170	)		(0.4	%)		21			0.1	%
Total Casualty losses and ratio (2)	$	22,879			55.0	%	$	21,494			57.8	%

Total
Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1)	$	53,645			70.4	%	$	37,435			55.3	%
Effect of prior accident year		(410	)		(0.5	%)		—			—	%
Total net losses and loss adjustment expense and total loss ratio (2)	$	53,235			69.9	%	$	37,435			55.3	%

(1)	Non-GAAP measure / ratio

(2)	Most directly comparable GAAP measure / ratio

Premiums

See “Result of Operations” above for a discussion on consolidated premiums.

GLOBAL INDEMNITY GROUP, LLC

Loss Ratio

The current accident year losses and loss ratio is summarized as follows:

	Quarters Ended March 31,				%
(Dollars in thousands)	2021		2020		Change
Property losses
Non-catastrophe	$	20,292	$	12,249		65.7	%
Catastrophe		10,304		3,713		177.5	%
Property losses		30,596		15,962		91.7	%
Casualty losses		23,049		21,473		7.3	%
Total accident year losses	$	53,645	$	37,435		43.3	%

	Quarters Ended March 31,						Point
	2021			2020			Change
Current accident year loss ratio:
Property
Non-catastrophe		58.8	%		40.1	%		18.7
Catastrophe		29.8	%		12.2	%		17.6
Property loss ratio		88.6	%		52.3	%		36.3
Casualty loss ratio		55.4	%		57.7	%		(2.3	)
Total accident year loss ratio		70.4	%		55.3	%		15.1

The current accident year non-catastrophe property loss ratio increased by 18.7 points during the quarter ended March 31, 2021 as compared to the same period in 2020 reflecting a higher claims frequency and severity in the first accident quarter compared to last year.

The current accident year catastrophe loss ratio increased by 17.6 points during the quarter ended March 31, 2021 as compared to the same period in 2020 due to a higher claims frequency in the first accident quarter compart to last year, primarily driven by the February Texas winter storms. The impact of the PCS Catastrophe Event 2117, which was a freeze storm that affected Texas and several other nearby states during February 16-20, 2020, was an increase of 23.9 points to the loss ratio.

The current accident year casualty loss ratio improved by 2.3 points during the quarter ended March 31, 2021 as compared to the same period in 2020 due to a lower claims severity for the first accident quarter compared to last year.

The calendar year loss ratio for the quarter ended March 31, 2021 includes a decrease of $0.4 million, or 0.5 percentage points, related to reserve development on prior accident years. The calendar year loss ratio for the quarter ended March 31, 2020 includes a net decrease of zero related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.

Expense Ratios

The expense ratio for the Company’s Commercial Specialty segment improved by 1.4 points from 38.4% for the quarter ended March 31, 2020 to 37.0% for the quarter ended March 31, 2021. The improvement in the expense ratio is primarily due to higher earned premiums.

COVID-19

COVID-19 could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect Commercial Specialty’s business, financial condition, and results of operation.

GLOBAL INDEMNITY GROUP, LLC

Company’s Commercial Specialty policies, or other conditions included in these policies that would otherwise preclude coverage.

Specialty Property

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

	Quarters Ended March 31,				%
(Dollars in thousands)	2021		2020		Change
Gross written premiums	$	33,358	$	35,243		(5.3	%)

Net written premiums	$	29,699	$	30,007		(1.0	%)

Net earned premiums	$	30,591	$	34,216		(10.6	%)
Other income		430		427		0.7	%
Total revenues		31,021		34,643		(10.5	%)

Losses and expenses:
Net losses and loss adjustment expenses		14,478		17,498		(17.3	%)
Acquisition costs and other underwriting expenses		13,039		14,232		(8.4	%)
Underwriting income	$	3,504	$	2,913		20.3	%

	Quarters Ended March 31,						Point
	2021			2020			Change
Underwriting Ratios:
Loss ratio:
Current accident year		52.7	%		51.1	%		1.6
Prior accident year		(5.4	%)		—	%		(5.4	)
Calendar year loss ratio		47.3	%		51.1	%		(3.8	)
Expense ratio		42.6	%		41.6	%		1.0
Combined ratio		89.9	%		92.7	%		(2.8	)

GLOBAL INDEMNITY GROUP, LLC

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 within Specialty Property 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.

	Quarters Ended March 31,
	2021						2020
(Dollars in thousands)	Losses			Loss Ratio			Losses			Loss Ratio
Property
Non catastrophe property losses and ratio excluding the effect of prior accident year (1)	$	12,694			44.2	%	$	14,393			45.5	%
Effect of prior accident year		(285	)		(1.0	%)		338			1.1	%
Non catastrophe property losses and ratio (2)	$	12,409			43.2	%	$	14,731			46.6	%

Catastrophe losses and ratio excluding the effect of prior accident year (1)	$	2,424			8.4	%	$	2,079			6.6	%
Effect of prior accident year		(126	)		(0.4	%)		31			0.1	%
Catastrophe losses and ratio (2)	$	2,298			8.0	%	$	2,110			6.7	%

Total property losses and ratio excluding the effect of prior accident year (1)	$	15,118			52.6	%	$	16,472			52.1	%
Effect of prior accident year		(411	)		(1.4	%)		369			1.2	%
Total property losses and ratio (2)	$	14,707			51.2	%	$	16,841			53.3	%

Casualty
Total Casualty losses and ratio excluding the effect of prior accident year (1)	$	997			54.1	%	$	1,026			40.0	%
Effect of prior accident year		(1,226	)		(66.5	%)		(369	)		(14.4	%)
Total Casualty losses and ratio (2)	$	(229	)		(12.4	%)	$	657			25.6	%

Total
Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1)	$	16,115			52.7	%	$	17,498			51.1	%
Effect of prior accident year		(1,637	)		(5.4	%)		—			—	%
Total net losses and loss adjustment expense and total loss ratio (2)	$	14,478			47.3	%	$	17,498			51.1	%

(1)	Non-GAAP measure / ratio

(2)	Most directly comparable GAAP measure / ratio

Premiums

See “Result of Operations” above for a discussion on consolidated premiums.

Other Income

Other income was $0.4 million for each of the quarters ended March 31, 2021 and 2020. Other income is primarily comprised of fee income.

GLOBAL INDEMNITY GROUP, LLC

Loss Ratio

The current accident year losses and loss ratio is summarized as follows:

	Quarters Ended March 31,				%
(Dollars in thousands)	2021		2020		Change
Property losses
Non-catastrophe	$	12,694	$	14,393		(11.8	%)
Catastrophe		2,424		2,079		16.6	%
Property losses		15,118		16,472		(8.2	%)
Casualty losses		997		1,026		(2.8	%)
Total accident year losses	$	16,115	$	17,498		(7.9	%)

	Quarters Ended March 31,						Point
	2021			2020			Change
Current accident year loss ratio:
Property
Non-catastrophe		44.2	%		45.5	%		(1.3	)
Catastrophe		8.4	%		6.6	%		1.8
Property loss ratio		52.6	%		52.1	%		0.5
Casualty loss ratio		54.1	%		40.0	%		14.1
Total accident year loss ratio		52.7	%		51.1	%		1.6

The current accident year non-catastrophe property loss ratio improved by 1.3 points during the quarter ended March 31, 2021 as compared to the same period in 2020 reflecting a lower claims frequency in the first accident quarter compared to last year.

The current accident year catastrophe loss ratio increased by 1.8 points during the quarter ended March 31, 2021 as compared to the same period in 2020 due to a higher claims frequency in the first accident quarter compared to last year, mainly driven by the February Texas winter storms. The impact of the PCS Catastrophe Event 2117, which was a freeze storm that affected Texas and several other nearby states during February 16-20, 2020, was an increase of 4.8 points to the loss ratio.

The current accident year casualty loss ratio increased by 14.1 points during the quarter ended March 31, 2021 as compared to the same period in 2020. Specialty Property experienced lower than expected claims frequency and severity in the first accident quarter of 2020.

The calendar year loss ratio for the quarter ended March 31, 2021 includes a decrease of $1.6 million, or 5.4 percentage points related to reserve development on prior accident years. The calendar year loss ratio for the quarter ended March 31, 2020 includes a net decrease of zero related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.

Expense Ratios

The expense ratio for the Company’s Specialty Property segment increased 1.0 points from 41.6% for the quarter ended March 31, 2020 to 42.6% for the quarter ended March 31, 2021 primarily due to a reduction in earned premiums.

COVID-19

COVID-19 could result in declines in business and non-payment of premiums that could adversely affect Specialty Property’s business, financial condition, and results of operation.

GLOBAL INDEMNITY GROUP, LLC

Farm, Ranch & Stable

The components of income and loss from the Company’s Farm, Ranch & Stable segment and corresponding underwriting ratios are as follows:

	Quarters Ended March 31,					%
(Dollars in thousands)	2021			2020		Change
Gross written premiums	$	21,002		$	22,133		(5.1	%)

Net written premiums	$	17,603		$	19,105		(7.9	%)

Net earned premiums	$	18,141		$	18,683		(2.9	%)
Other income		34			36		(5.6	%)
Total revenues		18,175			18,719		(2.9	%)

Losses and expenses:
Net losses and loss adjustment expenses		11,801			9,610		22.8	%
Acquisition costs and other underwriting expenses		6,986			7,638		(8.5	%)
Underwriting income (loss)	$	(612	)	$	1,471		(141.6	%)

	Quarters Ended March 31,						Point
	2021			2020			Change
Underwriting Ratios:
Loss ratio:
Current accident year		69.2	%		51.4	%		17.8
Prior accident year		(4.1	%)		—	%		(4.1	)
Calendar year loss ratio		65.1	%		51.4	%		13.7
Expense ratio		38.5	%		40.9	%		(2.4	)
Combined ratio		103.6	%		92.3	%		11.3

GLOBAL INDEMNITY GROUP, LLC

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 within Farm, Ranch & Stable 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.

	Quarters Ended March 31,
	2021						2020
(Dollars in thousands)	Losses			Loss Ratio			Losses			Loss Ratio
Property
Non catastrophe property losses and ratio excluding the effect of prior accident year (1)	$	5,967			44.0	%	$	5,077			37.9	%
Effect of prior accident year		315			2.3	%		(558	)		(4.2	%)
Non catastrophe property losses and ratio (2)	$	6,282			46.3	%	$	4,519			33.7	%

Catastrophe losses and ratio excluding the effect of prior accident year (1)	$	4,127			30.4	%	$	1,401			10.5	%
Effect of prior accident year		(1,045	)		(7.7	%)		550			4.1	%
Catastrophe losses and ratio (2)	$	3,082			22.7	%	$	1,951			14.6	%

Total property losses and ratio excluding the effect of prior accident year (1)	$	10,094			74.4	%	$	6,478			48.4	%
Effect of prior accident year		(730	)		(5.4	%)		(8	)		(0.1	%)
Total property losses and ratio (2)	$	9,364			69.0	%	$	6,470			48.3	%

Casualty
Total Casualty losses and ratio excluding the effect of prior accident year (1)	$	2,452			53.6	%	$	3,132			59.2	%
Effect of prior accident year		(15	)		(0.3	%)		8			0.2	%
Total Casualty losses and ratio (2)	$	2,437			53.3	%	$	3,140			59.4	%

Total
Total net losses and loss adjustment expense and total loss ratio excluding the effect of prior accident year (1)	$	12,546			69.2	%	$	9,610			51.4	%
Effect of prior accident year		(745	)		(4.1	%)		—			—	%
Total net losses and loss adjustment expense and total loss ratio (2)	$	11,801			65.1	%	$	9,610			51.4	%

(1)	Non-GAAP measure / ratio

(2)	Most directly comparable GAAP measure / ratio

Premiums

See “Result of Operations” above for a discussion on consolidated premiums.

Other Income

Other income was less than $0.1 million for each of the quarters ended March 31, 2021 and 2020. Other income is primarily comprised of fee income.

GLOBAL INDEMNITY GROUP, LLC

Loss Ratio

The current accident year losses and loss ratio is summarized as follows:

	Quarters Ended March 31,				%
(Dollars in thousands)	2021		2020		Change
Property losses
Non-catastrophe	$	5,967	$	5,077		17.5	%
Catastrophe		4,127		1,401		194.6	%
Property losses		10,094		6,478		55.8	%
Casualty losses		2,452		3,132		(21.7	%)
Total accident year losses	$	12,546	$	9,610		30.6	%

	Quarters Ended March 31,						Point
	2021			2020			Change
Current accident year loss ratio:
Property
Non-catastrophe		44.0	%		37.9	%		6.1
Catastrophe		30.4	%		10.5	%		19.9
Property loss ratio		74.4	%		48.4	%		26.0
Casualty loss ratio		53.6	%		59.2	%		(5.6	)
Total accident year loss ratio		69.2	%		51.4	%		17.8

The current accident year non-catastrophe property loss ratio increased by 6.1 points during the quarter ended March 31, 2021 as compared to the same period in 2020 due to a higher claims severity for the first accident quarter compared to last year.

The current accident year catastrophe loss ratio increased by 19.9 points during the quarter ended March 31, 2021 as compared to the same period in 2020 due to a higher claims frequency in the first accident quarter compared to last year, primarily driven by the February Texas winter storms. The impact of the PCS Catastrophe Event 2117, which was a freeze storm that affected Texas and several other nearby states during February 16-20, 2020, was an increase of 25.1 points to the loss ratio.

The current accident year casualty loss ratio improved by 5.6 points during the quarter ended March 31, 2021 as compared to the same period in 2020 due to a lower claims frequency in the first accident quarter compared to last year.

The calendar year loss ratio for the quarter ended March 31, 2021 includes a decrease of $0.7 million, or 4.1 percentage points related to reserve development on prior accident years. The calendar year loss ratio for the quarter ended March 31, 2020 includes a net decrease of zero related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.

Expense Ratios

The expense ratio for the Company’s Farm, Ranch & Stable Segment improved 2.4 points from 40.9% for the quarter ended March 31, 2020 to 38.5% for the quarter ended March 31, 2021 primarily due to a reduction of commission rate partially driven by a change in agent distribution as well as a reduction in compensation, travel, and advertising expenses.

COVID-19

There is continued risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Farm, Ranch & Stable policies, or other conditions included in these policies that would otherwise preclude coverage.

GLOBAL INDEMNITY GROUP, LLC

COVID-19 could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect Farm, Ranch & Stable’s business, financial condition, and results of operation.

Reinsurance Operations

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

	Quarters Ended March 31,						%
(Dollars in thousands)	2021 (1)			2020 (1)			Change
Gross written premiums	$	21,866		$	17,517			24.8	%

Net written premiums	$	21,866		$	17,517			24.8	%

Net earned premiums	$	18,818		$	23,855			(21.1	%)
Other loss		(56	)		(295	)		(81.0	%)
Total revenues		18,762			23,560			(20.4	%)

Losses and expenses:
Net losses and loss adjustment expenses		11,269			13,104			(14.0	%)
Acquisition costs and other underwriting expenses		6,562			8,549			(23.2	%)
Underwriting income	$	931		$	1,907			(51.2	%)

	Quarters Ended March 31,						Point
	2021			2020			Change
Underwriting Ratios:
Loss ratio:
Current accident year (2)		63.2	%		57.4	%		5.8
Prior accident year		(3.3	%)		(2.5	%)		(0.8	)
Calendar year loss ratio (3)		59.9	%		54.9	%		5.0
Expense ratio		34.9	%		35.8	%		(0.9	)
Combined ratio		94.8	%		90.7	%		4.1

(1)	External business only, excluding business assumed from affiliates

(2)	Non-GAAP ratio

(3)	Most directly comparable GAAP ratio

Reconciliation of non-GAAP financial ratios

The table above includes a reconciliation of the current accident year loss ratio, which is a non-GAAP ratio, to its calendar year loss ratio, which is its most directly comparable GAAP ratio. The Company believes the non-GAAP 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. This non-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

See “Result of Operations” above for a discussion on consolidated premiums.

Other Loss

The Company recognized other loss of $0.1 million and $0.3 million during the quarters ended March 31, 2021 and 2020, respectively. Other loss is comprised of foreign exchange gains and losses.

GLOBAL INDEMNITY GROUP, LLC

Loss Ratio

The current accident year loss ratio increased by 5.8 points during the quarter ended March 31, 2021 as compared to the same period in 2020. The increase in the current accident year loss ratio reflects a mix of business shift to more casualty premium, which has a higher expected loss ratio than property segments. The casualty net earned premium was 89% of the total Reinsurance Operations earned premium compared to 58% in 2020 and the casualty current accident year loss ratio improved 1.5 points compared to the first quarter of last year.

The calendar year loss ratio for the quarter ended March 31, 2021 includes a decrease of $0.6 million, or 3.3 percentage points, related to reserve development on prior accident years. The calendar year loss ratio for the quarter ended March 31, 2020 includes a decrease of $0.6 million, or 2.5 percentage points, related to reserve development on prior accident years. Please see Note 8 of the notes to the consolidated financial statements in Item 1 of Part I of this report for further discussion on prior accident year development.

Expense Ratio

The expense ratio for the Company’s Reinsurance Operations improved by 0.9 points from 35.8% for the quarter ended March 31, 2020 to 34.9% for the quarter ended March 31, 2021 which is primarily due to a change in business mix.

COVID-19

COVID-19 could result in declines in business, non-payment of premiums, and increases in claims that could adversely affect the Reinsurance Operations’ business, financial condition, and results of operation.

Unallocated Corporate Items

The Company’s fixed income portfolio, excluding cash, continues to maintain high quality with an A+ average rating and a duration of 4.7 years.

Net Investment Income

	Quarters Ended March 31,						%
(Dollars in thousands)	2021			2020			Change
Gross investment income (loss) (1)	$	10,549		$	11,118			(5.1	%)
Investment expenses		(713	)		(989	)		(27.9	%)
Net investment income	$	9,836		$	10,129			(2.9	%)

(1)	Excludes realized gains and losses

Gross investment income decreased by 5.1% for the quarter ended March 31, 2021 as compared to the same period in 2020. The decrease was primarily due to a decrease in yield within the fixed maturities portfolio offset by increased returns from alternative investments.

Investment expenses decreased by 27.9% for the quarter ended March 31, 2021, as compared to the same period in 2020 due to decreased investment management expenses as a result of a reduction in the size of the investment portfolio.

At March 31, 2021, the Company held agency mortgage-backed securities with a market value of $219.8 million. Excluding the agency mortgage-backed securities, the average duration of the Company’s fixed maturities portfolio was 4.9 years as of March 31, 2021, compared with 4.5 years as of March 31, 2020. Including cash and short-term investments, the average duration of the Company’s fixed maturities portfolio, excluding agency mortgage-backed securities, was 4.7 years as of March 31, 2021, compared to 4.2 years as of March 31, 2020. Changes in interest rates can cause principal payments on certain investments to extend or shorten which can impact duration. The Company’s embedded book yield on its fixed maturities, not including cash, was 2.3% as of March 31, 2021, compared to 2.9% as of March 31, 2020. The embedded book yield on the $63.7 million of taxable municipal bonds in the Company’s portfolio, was 3.0% at March 31, 2021, compared to an embedded book yield of 3.1% on the Company’s taxable municipal bonds of $64.9 million at March 31, 2020.

GLOBAL INDEMNITY GROUP, LLC

Net Realized Investment Gains (Losses)

The components of net realized investment gains (losses) for the quarters ended March 31, 2021 and 2020 were as follows:

	Quarters Ended March 31,
(Dollars in thousands)	2021			2020
Equity securities	$	4,368		$	(49,982	)
Fixed maturities		(1,159	)		1,932
Derivatives		610			(20,112	)
Net realized investment gains (losses)	$	3,819		$	(68,162	)

See Note 3 of the notes to the consolidated financial statements in Item 1 of Part I of this report for an analysis of total investment return on a pre-tax basis for the quarters ended March 31, 2021 and 2020.

Corporate and Other Operating Expenses

Corporate and other operating expenses 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, and taxes incurred which are not directly related to operations. Corporate and other operating expenses were $4.3 million and $4.2 million during the quarters ended March 31, 2021 and 2020, respectively.

Interest Expense

Interest expense decreased 46.7% during the quarter ended March 31, 2021 as compared to the same period in 2020 primarily due to the redemption of the Company’s 7.75% Subordinated Notes due in 2045 and the repayment of the margin borrowing facility in August, 2020.

Income Tax Benefit

Income tax benefit was $0.2 million for the quarter ended March 31, 2021 compared with an income tax benefit of $12.0 million for the quarter ended March 31, 2020. The decrease in the income tax benefit for the quarter ended March 31, 2021 was primarily driven by higher pre-tax income for the Company’s U.S. subsidiaries of $5.3 million for the quarter ended March 31, 2021 as compared to a pre-tax loss of $60.2 million for the same period in 2020. The $5.3 million of pretax income for the quarter ended March 31, 2021 included $6.5 million from Global Indemnity Group, LLC which has elected to be a partnership. Income earned by Global Indemnity Group, LLC passes through to its shareholders. The increase in pre-tax income in the U.S. subsidiaries is primarily due to the U.S. subsidiaries incurring net realized investment losses of $64.5 million during the quarter ended March 31, 2020 which primarily resulted from the impact of changes in fair value on equity securities and derivatives due to disruption in the global financial markets as a result of COVID-19.

See Note 7 of the notes to the consolidated financial statements in Item 1 of Part I of this report for a comparison of income tax between periods.

Net Income (Loss)

The factors described above resulted in a net income of $5.5 million and net loss of $44.6 million for the quarters ended March 31, 2021 and 2020, 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 insurance companies: United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, Penn-Patriot Insurance Company, and American Reliable Insurance Company.

GLOBAL INDEMNITY GROUP, LLC

Global Indemnity Group, LLC’s short term and long term liquidity needs include but are not limited to the payment of corporate expenses, debt service payments, dividend payments to shareholders, and share repurchases. In order to meet their short term and long term needs, Global Indemnity Group, LLC’s principal sources of cash includes 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, proceeds from sales and redemptions of 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 debt payments, fund margin requirements on interest rate swap agreements, to purchase investments, and to make dividend / distribution payments. In addition, the Company periodically reviews opportunities related to business acquisitions and as a result, liquidity may be needed in the future.

GBLI Holdings, LLC is a holding company which is a wholly-owned subsidiary of Penn-Patriot Insurance Company. GBLI Holdings, LLC’s principal asset is its ownership of the shares of its direct and indirect subsidiaries which include United National Insurance Company, Diamond State Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company, and American Reliable Insurance Company. GBLI Holdings, LLC is dependent on dividends from its subsidiaries to meet its debt obligations as well as corporate expense obligations.

As of March 31, 2021, the Company also had future funding commitments of $56.2 million related to investments. However, the related investments are currently in their harvest period and it is unlikely that a capital call will be made.

The future liquidity of both Global Indemnity Group, LLC and GBLI Holdings, LLC is dependent on the ability of its subsidiaries to pay dividends. 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 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 - Statutory Accounting Principles” in Item 1 of Part I of the Company’s 2020 Annual Report on Form 10-K. Key differences relate to, among other items, deferred acquisition costs, limitations on deferred income taxes, reserve calculation assumptions and surplus notes. See Note 20 of the notes to the consolidated financial statements in Item 8 of Part II of the Company’s 2020 Annual Report on Form 10-K for further information on dividend limitations related to the Insurance Companies. The Insurance Companies did not declare or pay any dividends during the quarter ended March 31, 2021.

Cash Flows

Sources of operating funds consist primarily of net written premiums and investment income. Funds are used primarily to pay claims and operating expenses and to purchase investments. As a result of the distribution policy, funds may also be used in the future to pay distributions to shareholders of the Company.

The Company’s reconciliation of net income (loss) to net cash provided by operations is generally influenced by the following:

•

the fact that the Company collects premiums, net of 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.

GLOBAL INDEMNITY GROUP, LLC

Net cash provided by operating activities was $11.4 million and $20.8 million for the quarters ended March 31, 2021 and 2020, respectively. The decrease in operating cash flows of approximately $9.4 million from the prior year was primarily a net result of the following items:

	Quarters Ended March 31,
(Dollars in thousands)	2021			2020			Change
Net premiums collected	$	148,915		$	147,119		$	1,796
Net losses paid		(74,409	)		(67,496	)		(6,913	)
Underwriting and corporate expenses		(69,968	)		(70,827	)		859
Net investment income		9,360			11,313			(1,953	)
Net federal income taxes recovered		—			5,479			(5,479	)
Interest paid		(2,526	)		(4,804	)		2,278
Net cash provided by operating activities	$	11,372		$	20,784		$	(9,412	)

See the consolidated statements of cash flows in the consolidated financial statements in Item 1 of Part I of this report for details concerning the Company’s investing and financing activities.

Liquidity

COVID-19

The Company’s liquidity could be negatively impacted by the cancellation, delays, or non-payment of premiums related to the ongoing COVID-19 pandemic. There is continued risk that legislation could be passed or there could be a court ruling which would require the Company to cover business interruption claims regardless of terms, exclusions including the virus exclusions contained within the Company’s Commercial Specialty and Farm, Ranch & Stable policies, or other conditions included in policies that would otherwise preclude coverage which would negatively impact liquidity. In addition, the liquidity of the Company’s investment portfolio could be negatively impacted by disruption experienced in global financial markets. Management is taking actions it considers prudent to minimize the impact on the Company’s liquidity. However, given the ongoing uncertainty surrounding the duration, magnitude and geographic reach of COVID-19, the Company is regularly evaluating the impact of COVID-19 on its liquidity.

Dividends / Distributions

During 2020, 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 22, 2021. Distributions paid were $3.6 million during the quarter ended March 31, 2021. In addition, distributions of $0.1 million were paid to Global Indemnity Group, LLC’s preferred shareholder during the quarter ended March 31, 2021.

Other than the items discussed in the preceding paragraphs, there have been no material changes to the Company’s liquidity during the quarter ended March 31, 2021. Please see Item 7 of Part II in the Company’s 2020 Annual Report on Form 10-K for information regarding the Company’s liquidity.

Capital Resources

There have been no material changes to the Company’s capital resources during the quarter ended March 31, 2021. Please see Item 7 of Part II in the Company’s 2020 Annual Report on Form 10-K for information regarding the Company’s capital resources.

Co-obligor Financial Information

The Company is providing the following information in compliance with Rule 13-01 of Regulation S-X, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” with respect to the Company’s 7.875% Subordinated Notes due in 2047 (“2047 Notes”). Global Indemnity Group, LLC (parent co-obligor) and GBLI Holdings, LLC (subsidiary co-obligor) are co-obligors of the 2047 Notes. GBLI Holdings, LLC is a wholly-owned indirect subsidiary of Global Indemnity Group, LLC. The 2047 Notes are subordinated unsecured obligations and rank (i) senior to the companies’ existing and future capital stock, (ii) senior in right of payment to the companies’ future junior subordinated debt, (iii) equally

GLOBAL INDEMNITY GROUP, LLC

in right of payment with any existing unsecured, subordinated debt that the companies have issued or may issue in the future that ranks equally with the 2047 Notes, and (iv) subordinate in right of payment to any of the companies’ future senior debt. In addition, the 2047 Notes are structurally subordinated to all existing and future indebtedness, liabilities and other obligations of Global Indemnity Group, LLC’s subsidiaries, except for GBLI Holdings, LLC.

GBLI Holdings, LLC is a subordinated co-obligor with respect to the 2047 Notes with the same obligations and duties as Global Indemnity Group, LLC under the Indenture (including the due and punctual performance and observance of all of the covenants and conditions to be performed by Global Indemnity Group, LLC, including, without limitation, the obligation to pay the principal of, and interest on, the 2047 Notes when due whether at maturity, by acceleration, redemption or otherwise), and with the same rights, benefits and privileges of Global Indemnity Group, LLC thereunder. Notwithstanding the foregoing, GBLI Holdings, LLC's obligations (including the obligation to pay the principal of and interest in respect of the 2047 Notes) are subject to subordination to all monetary obligations or liabilities of GBLI Holdings, LLC owing to any regulated reinsurance or insurance company that is a direct or indirect subsidiary of Global Indemnity Group, LLC, in addition to indebtedness of GBLI Holdings, LLC for borrowed money. If Global Indemnity Group, LLC pays any amount with respect to the subordinated note obligations, Global Indemnity Group, LLC is entitled to be reimbursed by GBLI Holdings, LLC within 10 business days after a demand is made to GBLI Holding, LLC by Global Indemnity Group, LLC.

The following tables present summarized financial information for Global Indemnity Group, LLC (Parent co-obligor) and GBLI Holdings, LLC (Subsidiary co-obligor) on a combined basis after transactions and balances within the combined entities have been eliminated.

Parent and Subsidiary Co-obligors

The following table presents the summarized balance sheet information as of March 31, 2021 and December 31, 2020.


(Dollars in thousands)	March 31, 2021		December 31, 2020
Intercompany note receivable	$	6,000	$	11,283
Intercompany receivables		431		57
Investments		249,657		250,863
Total assets excluding investment in subsidiaries		319,952		324,229
Intercompany payables		6,247		5,515
Total liabilities		158,067		158,423

The following table presents the summarized statement of operations information for the quarter ended March 31, 2021.


(Dollars in thousands)
Total revenue	$	8,143
Intercompany interest income		35
Intercompany interest expense		—
Income before income taxes (1)		1,370
Net income (1)		2,505

(1)

excludes equity in the earning of a subsidiary

Off Balance Sheet Arrangements

The Company has no off balance sheet arrangements.

Cautionary Note Regarding Forward-Looking Statements

Some of the statements under “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," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, financial

GLOBAL INDEMNITY GROUP, LLC

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 in the Company’s 2020 Annual Report on Form 10-K for risks, uncertainties and other factors that could cause actual results and experience to differ from those projected. 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 undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For the quarter ending March 31, 2021, global equities rose approximately 4.5% with U.S. equities outperforming, returning approximately 6.2%. US fixed income fell approximately 3.4% despite tighter spreads as 10 year treasury rates significantly rose over the quarter to end at 1.74%. Interest-rate volatility is proving to be a theme in early 2021. Despite the increase in yields, the Fed remains firm in its commitment to maintain its current policy stance and purchase programs, with all efforts focused on furthering economic growth and reducing unemployment. Growth estimates are being revised higher on the back of strong economic data, while inflation concerns are debated among market participants.

The Company’s investment grade fixed income portfolio continues to maintain high quality with an A+ average rating and a duration of 4.7 years. Portfolio purchases were focused within US Treasury, MBS, and investment grade credit securities. These purchases were funded primarily through cash inflows, sales of US Treasury and MBS securities, as well as maturities and paydowns. During the first quarter, the portfolio’s allocation to US Treasuries and investment grade credit increased, while the portfolio’s exposure to MBS decreased. There have been no other material changes to the Company’s market risk since December 31, 2020. Please see Item 7A of Part II in the Company’s 2020 Annual Report on Form 10-K for information regarding the Company’s market risk.

Item 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-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’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief 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’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2021. Based upon that evaluation, and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2021, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

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 March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

GLOBAL INDEMNITY GROUP, LLC

PART II-OTHER INFORMATION

Item 1.

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 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.

Item 1A.

Risk Factors

The Company’s results of operations and financial condition are subject to numerous risks and uncertainties described in Item 1A of Part I in the Company’s 2020 Annual Report on Form 10-K, filed with the SEC on March 12, 2021. The risk factors identified therein have not materially changed.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The Company’s Share Incentive Plan allows employees to surrender the Company’s class A common shares as payment for the tax liability incurred upon the vesting of restricted stock. There were 9,815 shares surrendered by the Company’s employees during the quarter ended March 31, 2021. All class A common shares surrendered by the Company’s employees are held as treasury stock and recorded at cost until formally retired.

Item 3.

Defaults upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None

GLOBAL INDEMNITY GROUP, LLC

Item 6.

Exhibits


10.1		Chief Executive Officer Agreement with David Charlton effective April 19, 2021 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated April 21, 2021 (File No. 001-34809)).

10.2+		Chief Executive Officer Agreement with David Charlton amended and restated as of May 7, 2021.

10.3		Terms of Employment with Jonathan E. Oltman effective January 19, 2021 (incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (File No. 001-34809)).

10.4		Separation Agreement with Cynthia Y. Valko effective January 15, 2021 (incorporated by reference to Exhibit 10.21 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (File No. 001-34809)).

22.1		List of Co-Issuer Subsidiaries (incorporated by reference to Exhibit 22.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (File No. 001-34809)).

31.1+		Certification of Principal Executive Officer pursuant to Rule 13a-14 (a) / 15d-14 (a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2+		Certification of Chief Financial Officer pursuant to Rule 13a-14 (a) / 15d-14 (a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1+		Certification of Principal 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.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

+	Filed or furnished herewith, as applicable.

GLOBAL INDEMNITY GROUP, LLC

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GLOBAL INDEMNITY GROUP, LLC
	Registrant


Dated: May 10, 2021	By:	/s/ Thomas M. McGeehan
		Thomas M. McGeehan
		Chief Financial Officer
		(Authorized Signatory and Principal Financial and Accounting Officer)