Global Indemnity Ltd. Class A Aktie

Good afternoon. I'm Jo Cheeseman, Vice President and Corporate Secretary of Global Indemnity Group LLC. And it is my pleasure to welcome you to the 22nd Annual General Meeting of Shareholders of the company.

I will act as both Chair and Secretary of the meeting and as the inspector of elections with the authority to determine the validity of proxies and to tabulate the votes. I now call the meeting to order.

This meeting is being conducted virtually via live webcast. The proceedings are being recorded. Questions may be asked online during the meeting, and we will respond to appropriate questions following the meeting, and responses may be posted on the company's website.

The company has received proof by affidavit that the notice of Annual General Meeting, proxy statement and proxy card were mailed on or about April 29, 2026, to each shareholder of record as of the close of business on April 13, 2026, the date our Board of Directors fixed as the date of determining the shareholders entitled to notice of and to vote at the meeting. I, as a secretary, will attach the affidavit together with its exhibits to the minutes of this meeting. I have a list of shareholders entitled to vote at the meeting.

I will now give the report on the quorum. At the close of business on April 13, 2026, the record date, the company had outstanding 10,815,515 Class A common shares, including 780,000 Class A common shares designated as Class A-2 common shares and 3,793,612 Class B common shares, which constitute the only outstanding securities of the company entitled to vote at the meeting.

The holders of Class A common shares and Class B common shares will vote together as a single class. Each record holder of Class A common shares will be entitled to 1 vote per share and each record holder of Class B common shares will be entitled to 10 votes per share.

Based on the votes present in person or by proxy, a majority of the votes entitled to be cast at this meeting are represented. A quorum is therefore present.

I now declare the 2026 Annual General Meeting of Shareholders of Global Indemnity Group LLC officially open.

The matters to be voted on at this meeting are set forth in the notice of annual meeting and proxy statement previously distributed to the shareholders.

There are 3 proposals to be voted on at the meeting: Proposal 1, the election of Director. The first item of business is the election of 1 Director, Seth J. Gersch, to serve until the company's next annual meeting. Proposal 2, ratification of the independent auditor. The second item of business is the ratification of the appointment of the company's independent registered public accounting firm for the fiscal year ending December 31, 2026. Proposal 3, say on pay. The third item of business is the advisory vote on the compensation of the company's named executive officers as disclosed in the proxy statement.

The polls are now open, and any shareholder logged into the meeting, who wishes to vote during the meeting may do so. If you have already submitted your signed proxy, there is no need to vote during the meeting unless you wish to change your vote.

[Voting]

The polls are now closed. The inspector of elections has reviewed and tabulated the proxies received prior to the meeting.

Based on that tabulation, the results of voting are as follows: Proposal 1, the nominee for the Board of Directors of Global Indemnity Group, LLC, Seth J. Gersch, received a plurality of the votes cast by the shareholders present in person or by proxy at the Annual General Meeting and entitled to vote.

I hereby declare Seth J. Gersch is duly elected as a Director of Global Indemnity Group LLC for the term for which he was nominated.

Proposal 2. I hereby declare that the ratification of the appointment of Ernst & Young LLP as the company's independent registered accounting firm was approved by the shareholders by a majority of the votes cast.

Proposal 3. I hereby declare that the advisory vote on executive compensation was approved by the shareholders by a majority of the votes cast.

There being no further business to come before the meeting, this Annual General Meeting of Shareholders is hereby adjourned. Thank you for your participation.

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Global Indemnity Group First Quarter 2026 Earnings Call. My name is Angela, and I will be your conference operator today. I'd like to remind everyone that this call is being recorded [Operator Instructions]

I would now like to turn the call over to Evan Kasowitz, Chief Operating Officer of Global Indemnity Group. Please go ahead.

Thank you, operator. Today's conference call is being recorded. GBLI's remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including without limitation, beliefs, expectations or estimates. We caution you that such forward-looking statements should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will, in fact, be achieved.

Please refer to our annual report on Form 10-K and our other filings with the SEC for descriptions of the business environment in which we operate and the important factors that may materially affect our results. Global Indemnity Group LLC is not under any obligation, and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

It is now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive of Global Indemnity.

Thank you, Evan. Good morning, and thanks for joining us for GBLI's First Quarter 2026 Results Conference Call. Joining me today are Evan Kasowitz, Chief Operating Officer of GBLI and President of Belmont Holdings; and Brian Riley, GBLI's Chief Financial Officer. As usual, I'll start with a quick overview of the quarter, what stood out in the results and what we're seeing in our longer-term trends. Then Brian will walk through the key financial and operating highlights. After that, we'll open it up for your questions.

It's always nice to report solid first quarter results in the spring, especially in a year without a major catastrophe loss. I would add, it's also nice to have a very clean and straightforward story this quarter. Essentially, what you see is what you get.

This quarter, our underlying insurance operating trends stayed very strong and consistent with what we've delivered over the last 4 years. Our accident quarter combined ratio was 94.9%, producing an underwriting profit of $5.5 million. That quarterly underwriting result is in line with what you've seen from us over each of the past 12 quarters, with the exception of the California wildfire a year ago. If you exclude the wildfire, the year-over-year comparison is essentially unchanged, 94.9% this year versus 94.8% in the first quarter of last year.

On investments, our short-duration bond portfolio generated $14.5 million of net investment income. We also recorded a short-term market value loss of $2.3 million from a small investment partnership. Altogether, that produced total net investment income of $12.2 million, down from $14.8 million in the prior year quarter. Brian will go into more detail on the portfolio, but I'll just add this. We are still positioned very defensively, with an extremely short duration, about 1 year, comprised of very high-quality fixed income holdings. In today's uncertain global economic environment, I'm comfortable with that posture, and we'll be ready to redeploy into a more attractive long-term portfolio when conditions settle down.

The other environmental dynamic emerging this quarter is the drop in available business in the overall E&S market. This presents additional challenges for growth in a market that is flat or shrinking. As we noted in the press release, overall reported premium growth was essentially flat versus the first quarter of last year. The main driver was wholesale commercial, where premiums declined by $3.4 million from $64.9 million to $61.5 million, down 5.2%. This decline offset the growth we saw in Vacant, Collectibles, Assumed Reinsurance, now newly branded as Valyn Re, and Specialty Products.

As I mentioned last quarter, the wholesale commercial results were driven by a clear shift in pricing competition in the E&S wholesale space, both from our E&S peers and from the admitted market reentering the property segments in a significant way. Given where we play at the very small end of the wholesale commercial market, the crossover competition from the admitted market comes into play very quickly as the market turns.

Reflecting on the past several quarters, while underwriting a pricing discipline remain my absolute priority, it's clear we didn't react fast enough to increase competition, particularly in the property segments where all our loss results have been outstanding. I am encouraged that our wholesale commercial month-over-month written premium comparisons have improved through the first 4 months of the year, with April now flat against last year.

A few comments on our Kaleidoscope technology platform. Because our last call was less than 2 months ago, there isn't a major update on our investment. The good news is that the core cloud-based full cycle policy administration platform development is now virtually complete, and most of the remaining work has shifted to bringing Wholesale Commercial, Vacant and Collectibles onto the platform. As we noted last quarter, we remain confident that all 3 existing direct product groups will be fully integrated and operating by year-end. And just as importantly, will be ready to extend this same platform to the new product changes we've begun recruiting.

After 3 years of significant IT investment and a renewed focus on our long-term core business, it can be easy to lose sight of how far we've come. But our unrelenting commitment to underwriting excellence has produced an exceptionally attractive book of in-force business. As the year progresses, we expect the business rationale for our organizational realignment last year and the 3-year digital transformation to continue to have a clear driving impact on our results.

Stepping back, we remain satisfied with the solid underlying profitability of the business, driven by excellent loss results. Although expenses are still running roughly 4 points above our long-term targets. Optimizing our operational structure to leverage the technology investment over the last few years, combined with the ability to rapidly expand our product offerings will be the major tactical objective over the next 7 quarters.

Looking ahead, based on the work we've done to improve the delivery of our products, coupled with the discipline to shed business that didn't meet our underwriting criteria, we continue to feel strongly that despite how we started the year, Belmont core gross premium should grow in the 15% to 20% range for the full year 2026. Let me repeat that. We do expect growth in the 15% to 20% level by the time we reach year-end.

Finally, in closing, I'll reiterate a point that I've made in the past. I have a high level of conviction in the quality of our core business, and I'm confident we're well positioned to continue delivering substantial value to our owners.

With that, I'll turn it over to Brian.

Thank you, Jay. Operating income, which excludes after-tax impact of market losses on investments, was $8.3 million compared to a loss of $4.1 million last year. Excluding the 2025 California wildfires, operating income of $8.3 million was up 2% compared to $8.1 million in 2025. As for the investment component, excluding impact to mark-to-market adjustments, investment income was down slightly to $14.5 million in '26 compared to $14.8 million in '25. The mark-to-market adjustments include impact from a $2.2 million loss on equities and a $2.3 million market value loss on limited partnership interest in the first quarter, for which a full recovery will be recorded in the second quarter. Since we record results of our limited partnerships on a one quarter lag, we are certain of the recovery.

The overall investment portfolio is down about $30 million, driven by market value declines on the portfolio that are expected to recover and the expected first quarter operating cash flow, which includes a decline in loss reserves, driven by runoff of our Belmont noncore reserves. The current book yield on the fixed income portfolio was 4.3%, with an average duration of approximately 1 year as of March 31, almost unchanged since year-end, as the majority of the reinvested assets during the quarter were in U.S. treasuries. The average credit quality of the fixed income portfolio remains at AA-.

[ Accident ] year underwriting income increased by 4% to $5.5 million, driven by growth in earned premiums and a steady combined ratio of 94.9%. Our loss ratio for the quarter remained strong at 54.8%, driven by both noncatastrophe and catastrophe performance compared to 71.5% in 2025. Excluding the 2025 California wildfires, the loss ratio of 54.8% is in line with '25 as we continue to maintain disciplined underwriting amidst the competitive nature of the market that Jay mentioned. The expense ratio remains at 40%.

Turning to premiums. Gross written premiums was $96.5 million compared to $98.7 million in 2025. As Jay mentioned, excluding terminated projects, gross written premiums were basically flat. Let me add a little color at the divisional level.

Our Wholesale Commercial business, Penn-America, which focuses on Main Street small business, was down 5% for the first quarter. This reflects maintaining pricing and return standards amidst the competitive market, property market that Jay mentioned. For the first quarter, our property rate change overall was flat, and the loss ratios remained strong. Further, we continue to adjust our products to grow the business with a goal of maintaining our loss ratio.

All the other divisions experienced growth for the quarter. Collectibles was up 13%, and Vacant Express was up 5%, driven by continued agency expansion. Valyn Re's assumed gross written premiums grew 3% to $11.2 million. Specialty Products was up 2% overall and up 21% excluding terminated products.

In closing, I have 4 key takeaways for you. One, although we're seeing increased competition in the marketplace, we are optimistic about our future underwriting performance, given the positioning of our current products and our loss ratio experience for the last 3 accident years. Two, our investment portfolio remains positioned to invest in longer duration maturities at higher yields. Three, booked reserves remained solidly above our current actuarial indications. And four, discretionary capital, which we consider to be the map of consolidated equity in excess of that amount required to remain -- maintain the strongest levels with our rating agencies, is $290 million at March 31, 2026.

Thank you. We will now take your questions.

[Operator Instructions] And your first question comes from the line of Tom Kerr with Zacks SCR.

Just a little more color on the decline in the E&S markets and the increased competition. What is the visibility on that? Because I kind of -- I might have missed this, but then you're still expecting strong double-digit growth the last half of the year. So does that mean it's over? What am I missing?

No. I think you haven't missed anything. It's a little bit about mixing 2 different attributes. When we look at the E&S market in terms of both what we saw in the fourth quarter and some of the early reports in the first quarter plus what we've seen from the stamping offices, it's clear that the E&S market has stopped expanding at this point in time. And that's -- we're looking at 3 or 4 different indicators to draw that conclusion.

In terms of where we are, it has to do with our mix and the growth in different divisions and how they're affected by competition, we would expect our -- as I said, and I've tried to say it very clearly, I believe that based on our current mix and our plans for the year, that we'll see 15% to 20% overall growth.

But in terms of the segment that's most affected by that direct competition, in Wholesale Commercial, we were down in the first quarter, we're flat in April, and we expect we'll probably be in the high single digits growth by year-end for that division. And so the combination of all those things, particularly some extra growth that we expect because of the addition of additional product capabilities in our Assumed Reinsurance, we think we'll get into that 15% to 20% range.

Yes, it is contradictory to say the market is getting harder, and we're still going to be growing at a pretty good rate. But those are the reasons that we believe that to be the case.

Got it. That makes sense. One more big picture one on -- is there any -- I don't know if you can talk about this, but is there any concerted effort to reduce overall exposure in California? Just thinking about the craziness in the insurance market there?

Is it crazy? And that's a good word for it. I have lots of -- lots of 4 letter words. Now I think the issue for us is we try and pick our spaces in California. Mid-last year, we flipped out of the admitted market into the non-admitted market for our vacant product. The reality of that was just simply we could not get the rate increases we had needed for 2.5 years in that case.

And so our -- what's happened, unfortunately, as a result of that because other players continue to offer a competitive -- excuse me, an admitted product in that space, what we're seeing is that our drop in volume in that sector, Vacant Express, is very substantial. So yes, we're essentially out of the homeowners market or the only remaining exposure we have is really in our Wholesale Commercial book, and to a certain extent, obviously, in our Collectible book.

Your next question comes from the line of Ross Haberman with Rlh investments.

I just have a couple of quick numbers questions. Could you address -- you said you had a temporary reduction, I guess, in one of your funds and you expected it to rebound or get out of it in the fourth quarter. Could you talk a little bit about that? And the realized loss of $2.2 million, was that connected to, I think, some of the BDCs you talked about in the last quarter end, and if not, what did you end up doing with your private debt exposure?

Yes. So for starters, on the limited partnership, there was a [ 2 point -- one ] of the partnerships has an equity interest of -- and that declined $2.3 million during the quarter. We booked that on a one quarter lag. So we know today based on the results that, that will recover in second quarter.

As far as the realized losses, that is related to the equities, that $2.2 million, $1.2 million of that is mark to market, which will -- which has recovered as of today, $1 million was actually realized.

Okay. And any further exposure to private -- to private debt or private debt funds or -- and what are your thoughts about that today?

No, no further exposure.

Okay. Sorry, there was just one last question. The stock issuance, I think there was about 20,000 shares, I believe, it was? Sorry, I think it was like 200,000 shares. Is that correct?

That is correct. It was 230,000 shares.

Was that option related? Or could you shed some light on that?

Let me give you some color on that. We have been looking at what were the appropriate tools for long-term retention awards. And we've been studying that for the past year or 2, trying to come up with a security that worked to create incentives to stay, but also minimize expense until there was value created. And we came up with these A2 shares, some of which were granted to Fox Paine last year.

The shares that were granted in the first quarter to a select group of employees, I think there were 10 or 12 people who received the shares. Our design -- are there also A2 shares. They're non-dividend-paying. So there's no economic costs, real economic cost immediately. They only have value when the combination of 2 things occur. One is there's a change in control, and that the employee is still with us. And so the reality is it's a very strong option type tool that only has value when there's a change in control. And so we -- we felt that, that was an important thing to have in place long term. As I said, we spent a better part of a year looking at the right way to construct that. Finally got it done and went ahead granted those awards in the first quarter.

And will there be more granted over the coming year -- over fiscal '26?

I do not expect there to be any material additions. There obviously would be if somebody left and we hired somebody new or promote somebody new into the spot, we would probably grant a replacement grant of a similar magnitude. But other than that, we don't expect any this year.

Your next question comes from the line of Tom Kerr with Zacks SCR.

And just a quick follow-up on interest rates. When we saw the spike in rates with the Middle East conflict, can you guys move quickly enough to take advantage of that? Or do you look for more stability? Or how does that work?

No, it wasn't substantial enough to make a fundamental change in our portfolio. And I think like most people, those kind of spikes, if you're a trader, you can take advantage of it quickly. But if you're a long-term investor, it's hard to market time on a single event like that.

Got it. That's what I was thinking.

We will now move to our web questions to be taken by Evan Kasowitz. You may proceed.

Thank you, Angela. We have 2 webcast questions, which I will read. First one from Andrew. Does the slowdown in industry pricing and company premium growth change your share buyback calculus?

The answer to that is no, at least for this year. Our view is that we're going to utilize some of our excess capacity by growth during the course of 2026. Should that not occur, I assume that our Board will carefully reevaluate our current stance on investing in the business.

Thank you. The other question came from [ Joel Straka ]. A few parts to it, but most of that has been addressed previously. The one part which I will read is Bill Ackman Howard Hughes is acquiring Vantage for 1.4x book value, with the investment thesis that Ackman can improve the ROE by improving the investment returns, and that P&C insurers that generate a 15% to 20% return on equity should be traded near 2x book value. We're currently trading near half book value with enormous excess capital invested in short-term fixed income in a softening insurance market. I appreciate conservatism in the current market environment. But is the real opportunity here following Berkshire, Fairfax and others and focusing on investing?

It's a good question. We do believe that long term, fundamentally a well-run property casualty insurer should generate at least half of the expected return, and that the float properly invested will cover the other half to get you that 15% to 20%.

I think for us at this point in time, in terms of going through a careful retuning of our existing business to get it back to core principles, it was not a good time to add investment risk at that same time. But now that we've got an incredibly solid, stable platform of business that we can grow organically and through adding new teams and new products, now is the time that I think over the next 12 to 24 months, that the Board will have to take a longer look at a more attractive yielding investment portfolio for the company. And so yes, I concur with the observation that a well-run company with a good investment return can generate pretty good returns and hit at 2x book value.

There are no further questions at this time. And with that, I will turn the call back over to Evan Kasowitz for closing remarks. Please go ahead.

Thank you. This concludes our 2026 first quarter earnings call. We look forward to speaking with you about our second quarter 2026 results.

Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect.

Good morning, ladies and gentlemen, and thank you for standing by, and welcome to the Global Indemnity Group 2025 Earnings Call. My name is Jonathan, and I will be your conference operator today. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Evan Kasowitz, President of Belmont Holdings. Please go ahead.

Thank you, operator. Today's conference call is being recorded. GBLI's remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including, without limitation, beliefs, expectations or estimates. We caution you that such forward-looking statements should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will, in fact, be achieved. Please refer to our annual report on Form 10-K and our other filings with the SEC for descriptions of the business environment in which we operate and the important factors that may materially affect our results.

Global Indemnity Group, LLC is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. It is now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive of Global Indemnity.

Thank you, Evan. Good morning, and thank you for joining us for the GBLI Year-end 2025 Results Conference Call. With me today are Evan Kasowitz and Brian Riley, our Chief Financial Officer. Following our usual format, I will first provide overview comments on my assessments of both the fourth quarter and the full year's results. Then our CFO, Brian Riley, will provide the highlights of our financial and operating results. Following Brian's comments, we look forward to your questions.

This quarter results continue the very strong underlying positive insurance operating trends that we have seen for the last several quarters. Our accident quarter combined ratio of 89.3% produced an underwriting profit of $11 million, a very nice increase over the 96.6% we recorded in the fourth quarter last year. This was our first sub-90% quarterly accident year combined ratio in the past several years, reflecting both exceptional property results for non-cat losses and solid casualty results.

Our short duration investment portfolio delivered acceptable net investment income results at $15.3 million, down a tad from the prior period of $16.1 million. As Brian will provide more details on the investment portfolio, I would just observe that we are sitting at an extremely short duration of 1 year with very high-quality fixed income investments. Given where we are in a very uncertain world today, I am personally happy that we are playing defense and have the ability to redeploy into a more attractive portfolio once things settle down.

As we noted in our press release, excluding the largest ever California wildfire loss that we experienced in the first quarter, our quarterly year-to-date accident results improved each quarter with a sequence of 94.8%, 94.7%, 93.2% and 92.2% for the full year. Even including the wildfire losses, which occurred in the first quarter, we still had an okay full year accident year result of 96.2%. I would also note that we did make a modest adjustment to prior year loss reserves in the fourth quarter of $9 million. That's about 1.2% of year-end carried reserves.

The adverse development continues as it has over the past few years to be largely attributed to the accident years 2020, 2021 and 2022. These are the 3 years where we had an extraordinarily poor loss experience in a couple of programs, both since terminated and our New York City habitational risk. We continue to grow our ongoing book of business, which we label as core Belmont at 9%. The press release mentioned our overall reported premium growth was flat as we continue to trim back our remaining underperforming specialty programs.

I will note that the 9% growth was driven by a 77% growth in our assumed reinsurance book. 16% in Vacant Express, 8% in Collectibles and 3% in Penn-America Wholesale. The modest 3% growth in Penn was a disappointment given that we had grown at 8% for the first 9 months of 2025. This was driven by a major drop in new business submissions, resulting in a very weak fourth quarter as we observed a major shift in the level of price competition in the E&S wholesale space. This heightened competition has been fueled by both our existing E&S competitors and the admitted market coming back into the property markets in a big way.

Given the work we have put into improving our current products and the discipline to trim everything that didn't meet our underwriting criteria, we feel very strongly that we should now see Belmont core gross premiums grow in the 15% to 20% range or more in 2026. As we expected, our restructuring expenses remain high. This is due to the combination of, number one, our ongoing investments in completing year 2 of the 3-year digital transformation of our technology stack that includes software, infrastructure and data; and number two, our investment in talent to grow our Katalyx distribution platform.

I recognize that this focused combination, along with normal operating costs leaves our overall expenses too high. As such, we are deeply focused on minimizing the effect on our competitiveness within each product channel. Having established that our Kaleidoscope platform is working for our first 2 deployed products exactly as envisioned 2 years ago. Building on this momentum, we are confident that all 3 of our existing direct product groups, that would be wholesale commercial, Bacon Express and Collectibles will be fully integrated on the platform by year-end.

Not only will our customers see a difference in both our service levels and responsiveness, but our organization will finally be structured to benefit from scale over the next few years. In addition to the progress we have made in our software development, 98% of our data center servers have now been moved into our cloud configuration with the remaining few servers scheduled to move midyear. As we have previously commuted, all our internal data has now been moved to a modern cloud-based Fabric Lakehouse. We are currently running a large number of our existing reporting packages against both the old and the new data sources to verify that the mapping is 100% reconciled.

Equally important, the data has been structured and stored to prepare us for the significant number of emerging AI projects that are being identified across all aspects of our company. Reflecting on the last 3 years of significant IT investment and our renewed focus on core business, it can be challenging to see just how far we've come. However, our ongoing commitment to underwriting excellence has resulted in an exceptionally attractive book of in-force business. As the year progresses, we're set to start seeing the business rationale for our digital transformation unfold in real time.

I want to reaffirm my personal belief in the strength of our existing core business. With our reorganized structure and the strategic efforts we've been putting in place, I am very confident that we are well positioned to deliver substantial value to our owners in the near future. At this point, I'll turn it over to Brian.

Thank you, Jay. The underwriting results, as Jay mentioned, improved steadily since the California wildfire event that resulted in a $15.7 million of underwriting loss that contributed 4 points to the combined ratio and $12 million loss after tax. Given that, I'll focus my discussion on operating income, excluding the impact of the California wildfires to describe year-over-year performance. Operating income, which excludes after-tax impact of unrealized losses on equity securities, was $40.2 million compared to $42.9 million in 2024. Starting with investments.

Investment income was up slightly to $62.7 million from $62.4 million in 2024, mostly in line with growth in average cash and investments as average yield remained steady at 4.4%. Growth in the investment portfolio is stunted by runoff of our loss reserves in our Belmont noncore segment, which declined by $67 million to $237 million at year-end. The current book yield on the fixed income portfolio was 4.4% with an average duration of approximately 1 year, almost unchanged since December 31, 2024. The average credit quality of the fixed income portfolio remains at AA-.

Second, corporate expenses were higher by $6 million, resulting from personnel costs and professional fees for the build-out of Katalyx and mergers and acquisition activity. Lastly, calendar year underwriting income increased by about $5 million, a 1 point improvement in the combined ratio to 94.6% compared to 95.6% in 2024 and consists of a few notable components. First, current accident year underwriting income improved by $13.9 million as the current accident year combined ratio of 92.2% was better than '24 by 3.2 points.

Our loss ratio was better than '24 by 4.1 points, driven by both property and casualty. Property was 44.8%, 9.3 points better than 2024. And casualty was 57.6%, better than '24 by around 1 point. As Jay mentioned, our expense ratio continues to be elevated, about 1 point higher than '24 for investment in personnel to build out Katalyx. Partially offsetting the strong current accident year results was an increase to prior accident year losses of $9 million. As Jay mentioned, this increase was driven by accident years '20 through '22 on a couple of terminated programs and New York habitational business, mainly severity driven.

Turning to premiums. Belmont core gross written premiums was $401 million compared to $400 million in 2024. Excluding terminated products, gross written premiums increased 9% to $401 million compared to $367 million in 2024. Let me add a little color at the divisional level. Penn-America finished the year up 3% at $256 million, lower than growth of 8% through the first 9 months, mainly due to the decline in new business in the fourth quarter due to increased competition in the E&S marketplace as well as competition from admitted markets. Retention, however, does remain strong at 70%.

Collectibles finished the year up 8% and Vacant Express finished the year up 16%, driven by continued agency expansion. Belmont core assumed reinsurance gross written premiums grew 77% to $45 million, resulting from 7 new treaties we added during 2024 and 7 new treaties added in 2025, increasing our in-force treaties to 17 as of year-end. Specialty Products, excluding programs terminated during '24, ended the year flat at $37 million.

In summary, although we are seeing increased competition in the marketplace, we are optimistic given our underwriting performance trends over the last 3 accident years. Our investment portfolio remains positioned to invest in longer duration maturities at higher yields. Booked reserves remain solidly above current actuarial indications. And last, discretionary capital, which we consider to be the amount of consolidated equity in excess of that required to maintain the strongest levels with our rating agencies, is $284 million at year-end.

Thank you. We will now take your questions.

[Operator Instructions] And our first question for today comes from the line of Tom Kerr from Zacks SCR.

Did you give an expense ratio for the fourth quarter? Or what would that be?

Brian is looking for a second.

Yes, a little over 40%, 40.5%.

Okay. And just a big picture on the expense ratio, again, you said it's going to be elevated. Does it drift down towards the end of the year finally? Or is it more level and 2027 is going to see the big improvement in expense ratios?

I think 2026 will be pretty level with that. We'll start to see some improvement starting in '27.

Okay. And on the competition, maybe give your big picture thoughts on just the overall cycle, the competition. You mentioned it's just in E&S, but is there other stuff going on broad-based in the P&C world that's seeing softening or turn or whatever you want to call it?

Sure. I don't know if it's my sixth or seventh cycle in 50 years, but they all seem to have similar ingredients. We seem, as an industry, to be very uncomfortable making money. And when we make a lot of money and particularly when we don't have a lot of cat losses, the market reacts much, much quicker than it used to just simply because information systems are better today, the market is more responsive. I think the fourth quarter, the concentrated change in the property markets driven by not only our own excellent results, but everybody's excellent results has caused the admitted market to come back in and a significant drop in actual available premium.

Now when we look out and talk to our various wholesale partners and look at their numbers, obviously, it's not the same across the board, but there was a big change in the fourth quarter. And so I think we're looking at headwinds going into '26. We're working very quickly to map against what we had been offering in the fourth quarter into the first quarter and making adjustments in real time to try and match up against our competition where we feel comfortable we can still make money. But this is a big change in the cycle, not to be underestimated. It's very different. It's concentrated for us in the wholesale market, but we see a little bit of the effect in Vacant Express, obviously, also, too.

Okay. Great. Two more quick ones. The Specialty Products premiums, is that an inflection point where it's going to be stable? Or is there -- is that where you want to be? Or is there more declines, do you think this year?

Short term, I think it's pretty stable with some -- again, starting with a little more growth in 2027.

Yes. We trimmed out more than 2/3 of the book in the last 2 years. The really bad ones went away right away when I first got here. And we picked up a few more that we identified that had issues and have gotten rid of them in the past 12 months. We ended the year with programs that we're 100% comfortable with going forward. So we do expect to see some organic growth in that area in '26.

Got it. Last one is you guys switched to the NASDAQ, I think, 4 months ago maybe or any benefits to that or any good reasons or benefits from switching from the New York Stock Exchange to the NASDAQ?

Well, as advertised, we should get better trading volumes, but I don't think we've seen that quite yet. So we're hoping to see a little bit more activity for both buyers and sellers because our market -- our actual public market has been so thin in trading volumes. It's been hard for buyers to determine buy a big chunk or sellers to move on from owning our stock. And so we're hoping the volumes pick up a bit and that they get a better execution on both sides.

And our next question comes from the line of Ross Haberman from Rlh Investments.

Could you talk about -- do you have any exposure, one, on the private equity side, there's been a lot of discussion about that in the last couple of months. And any reinsurance exposure to what's happening in the Middle East?

Thank goodness, not to any of our knowledge, do we have any exposure to what's happening directly in the Middle East. In terms of private equity, do you mean on the investment side?

Yes. Yes.

We don't hold any direct private equity. We do have some small investments in some private credit funds. I think roughly about $20 million at this point in time.

And what's your thought going forward with those funds? Are you comfortable with them? Do you think you're going to exit? What's your thought going forward with those funds?

4 or 5 months into it, I would have to say we're disappointed. The real -- the hard question is always, should I be a buyer versus a seller at this point in time. And it's -- our investment portfolio is managed by a subcommittee of the Board, and they spent a fair amount of time discussing it at last week's Board meeting. So it's individual discussions. There's a difference between the 4 different BDCs that we owned. And so we're hopeful that whatever pain we felt in that is behind us. But as you know, it's been a bit of a free fall for the last 3 or 4 weeks.

Yes, I've seen that. Last question. I did see you took some realized losses about [ $3.66 ] million last year. Was that related to the private debt? Or can you tell us a little bit about what [indiscernible] from?

Ross, that's exactly it. It's realized gains on the income statement, but unrealized in the sense that they're mark-to-market, and we're still holding them.

And again, that's related to the $20 million gross exposure you're saying.

Yes.

Yes, $20 million. Exactly.

Okay. And final question, going back to the prior questioner, he talked about your overhead and expense ratio. Should that be moderating, I should say, over the next couple of quarters? Or should we see the level of expense that we saw in this fourth quarter, again, ex that $9 million I guess, adjustment you mentioned?

Yes. Our existing book continues to perform very well. Our in-force loss portfolio book and our loss reserves and our existing in-force premium. We don't see any major changes happening in that in the near term. I do think that it's hard to count on the kind of exceptional year we have to be duplicated back to back. But certainly, through whatever we are 2 months and a few days into the first part of the year, our property book continues to perform well and our casualty looks good.

And I'm not showing any further questions from the phone lines at this time. We'll now move to our web questions.

Thank you, Jonathan. We have one web question from Joel Straka. Book value per share, including the dividend, grew 1% last year. That's obviously an unacceptable return. What return on equity do you expect in 2026 and 2027? And how does that compare to your cost of equity?

Tough question. I would say book value before we pay dividends should increase a minimum of 6% to 7% a year with our current structure, and that would be the same for both of the next 2 years. We are carrying an extraordinary level of excess capital. Brian actually added a different way of thinking about our return on the underlying insurance business and investment business, taking out all of the excess, you see a return that's in the low to mid-teens. That's kind of the underlying book of business we're managing, and we have to deal with our cost structure and our excess capital.

We believe the opportunity is emerging very quickly to deploy that excess capital in our business. We've structured our IT investments such that we could add product very easily. We can increase our writings 30%, 40%, 50% without any real substantial change. I mean, infinitesimal change in our staffing under the new system that we've been building. And so we're really poised to be able to deliver much better returns. And I would share your conclusion that the return over the last couple of years has been unacceptable, and it's certainly something that we spend an enormous amount of time discussing in the boardroom about why we've had those numbers produce. And that's not something we're proud of and it's something we expect to do better going forward.

And we have a follow-up question from the line of Tom Kerr from Zacks SCR.

Okay. Sorry. Just one final question, and this wouldn't be a GBLI call without a share buyback question. You guys are at 58% of book value, I think, as of today, $284 million in discretionary capital. And I don't think anybody is saying by $284 million in shares buyback, but any updated comment on share buybacks from 3 months ago when we had the last call?

No. Just to elaborate, our Board continues to believe the investments we've been making in our company will lead us to a real opportunity going forward to put that capital to work either through additional product inside our existing channels or adding additional arms to our company. And so it's a tough call. And I would agree with what you're saying that it looks like a lot of capital, and it's something that we want to redeploy.

And our next question is a follow-up from the line of Ross Haberman from Rlh Investments.

Sorry, Jay, just one final question along the lines you were talking about. Are you actively looking to buy new lines of business as part of the expansion or as part of the organic growth plan? And/or would that include, if you found small, I don't know, small public and/or private businesses with that, are you actively looking in that direction as part of your expansion plan?

Yes. Let me remind you that a year ago -- a little bit over a year ago, we split the company into a distribution platform, Katalyx, and Belmont Insurance, which is our insurance platform. Belmont, obvious, is where the excess capital sits. And so they're open for more business, entertaining additional programs or individual MGAs that might approach them with existing books of business that they -- that would meet Belmont's appetite.

On the Katalyx side, we spent most of last year looking at an enormous number of possible acquisitions some of which would have involved Belmont underwriting the business, most of which would have been coming with other capacity. And as we've looked at those, we obviously didn't find a large number of acquisitions. So we continue to sit with a large amount of excess capital. But we've been active and open for business. Our best growth, the most predictable growth and the best way to continue profitability is to grow our existing business. And so I would say 85%, 90% of our focus as a management team continuing to execute what we've been doing well for the past 2 or 3 years in our core business. If that continues to perform well, it's easier then to add business to that as we go forward.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Evan Kasowitz for any further remarks.

Thank you again. This concludes our 2025 fourth quarter earnings call. We look forward to speaking with you about our first quarter 2026 results.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Global Indemnity Group Q3 2025 Earnings Call.

[Operator Instructions] I would now like to turn the call over to Nathaniel DeRose, Senior Vice President and Senior Counsel. Please go ahead.

Thank you, operator. Before we begin today, I would like to remind everyone that this conference call may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including, without limitation, beliefs, expectations or estimates. We caution you that such forward-looking statements should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will, in fact, be achieved.

Please refer to our annual report on Form 10-K and our other filings with the SEC for a description of the business environment in which we operate and the important factors that may materially affect our results. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise, except as required by law.

It is now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive Officer of Global Indemnity.

Thank you, Nathaniel. Good morning, and thank you for joining us for the Global Indemnity Third Quarter Results Conference Call. With me today in addition to Nathaniel are Evan Kasowitz, President of Belmont Holdings; Praveen Reddy, President and CEO of Katalyx Holdings; and Brian Riley, our Chief Financial Officer.

Following our usual format, I will first share overview comments on my assessments of this quarter's results. I will also offer some thoughts on our current positioning as a company as I conclude my third year as CEO. Then our CFO, Brian Riley, will present the highlights of our financial and operational results. After Brian's remarks, we look forward to your questions.

This quarter's results continue the underlying positive insurance operating and investment trends that we have seen over the last several quarters. Our accident year combined ratio of 90.4% -- I'm going to say it twice, 90.4%, generated an underwriting profit of $10.2 million, a very nice increase over the 93.5% we recorded last year. This was our best quarterly accident year combined ratio in the past several years, reflecting underlying strong property results for both catastrophic losses and non-cat losses.

Our short duration investment portfolio delivered acceptable net investment income results at $17.9 million, a 9% increase from the prior year period. However, we did see a modest short-term mark-to-market loss this quarter as we have started to shift away from a portfolio consisting substantially of shorter-term fixed income investments. The overall extremely positive insurance and investment results were slightly offset by the planned higher corporate expenses as we continue to invest in our Agency and Insurance Services segment. Brian will provide some details on the areas where corporate expenses are increasing.

But as we've noted earlier in the year, these investments are intended to help drive the long-term anticipated growth. Overall, the resulting net income of $12.5 million remains consistent with the results from last year. And underlying operating income increased by 19% against last year, a nice year-over-year change. Moving from the bottom line to the top line for insurance operations. Excluding terminated products, gross premium grew 13% over the third quarter of 2024.

As noted in our results release, we again saw very solid, sustainable growth in Vacant Express, Collectibles, Wholesale Commercial and Assumed Reinsurance. Premium rate changes on our direct book are still running in the mid-single digits, which coupled with exposure changes are tracking close to our current expectations for loss trends. That said, it is clear that although the market remains favorable for our current products, competition is definitely increasing.

Turning from the quarterly financials. Our efforts under our Project Kaleidoscope team to revamp our technology and data infrastructure, information management and policy issuance systems continues to be on track. Our current plans are to have all of our existing products on the new system architecture in 2026, which has been designed to be compatible with our expanding investments in AI technology. Our progress over the past 3 years has been significant as we initially refocused our business on sectors where we had long-term success and adjusted our staff accordingly to serve that business. This is evident in the steady improvement of our accident results over the 3 years and continued double-digit growth in our ongoing businesses.

Having built a strong foundation, we launched a new legal and organizational structure at the beginning of the year. Following the addition of Praveen Reddy in March, we have started to augment our existing underwriting and distribution human capital resources with additional staffing in key underwriting and finance positions. As we have previously discussed, our focus remains on executing our strategy to achieve substantial scale in our Agency and Insurance Services segment, including through organic growth, new product launches, service enhancements and strategic acquisitions.

We also recently announced the rebranding of this group to Katalyx. Along these lines, we purchased Sayata last month, a high-tech AI-enabled digital distribution marketplace and agency operations for commercial insurance. We believe this acquisition directly supports our strategy to deliver faster, smarter distribution solutions for specialty insurance and new products.

We recognize that it will take a while for the market to properly value GBLI in our new configuration with appropriate metrics for the different segments as they grow at different rates. To address this, we have added external resources at KCSA to ensure our company's story is properly communicated to our investors. I should also note that our Board has made the decision to move our stock listing to the NASDAQ exchange, which is viewed as more appropriate for a company like ours embarking on a new chapter in its history. I firmly believe that our existing core business, coupled with our reorganized structure and strategic efforts will yield substantial value to our owners in the next few years. At this point, I will turn it over to Brian.

Thank you, Jay. Starting with one of our most important metrics. Book value per share increased from $48.35 at June 30 to $48.88 at September 30. Including dividends paid of $0.35 per share, return to shareholders was 1.8% for the third quarter of 2025. Net income was $12.5 million for the third quarter compared to $12.8 million for that same period last year. And as Jay mentioned, operating income, which excludes after-tax impact of unrealized losses on equity securities, was $15.7 million for the third quarter, an increase of 19% over the same period last year.

Key drivers came from both underwriting income and investment income. Underwriting income improved 54% to $10.2 million in the third quarter of '25 compared to $6.6 million for the same period last year. Investment income improved by 9% to $17.9 million in the third quarter of 2025 compared to $16.5 million in the same period last year. This improvement was partially offset by an increase in corporate expenses to $7.8 million in the third quarter compared to $5.9 million for the same period last year, resulting from professional fees related to the build-out of personnel at Katalyx and transaction costs related to the acquisition of Sayata. As Jay mentioned, our corporate expenses will likely remain higher than previous years as we prospect new business opportunities at Katalyx and Belmont.

Let me add a little color on underwriting income and investments, starting with underwriting income. Current accident year underwriting income improved by $3.6 million overall, driven by an improvement in the combined ratio of 3.1 points to 90.4%. This consisted of a 4-point improvement on the loss ratio to 50.1%, driven by both cat and non-cat performance. This is partially offset by an increase in the expense ratio of 1.7 points. Expenses remain elevated as we add personnel to build out Katalyx and complete the runoff of our noncore businesses.

Turning to premiums. Consolidated gross written premiums increased 9% to $108.4 million in the third quarter of '25 compared to $99.8 million in the same period last year. As Jay mentioned, excluding terminated products, gross written premiums increased 13% to $108.5 million compared to $96.4 million for the same period last year.

Let me add a little color to divisional level. Our Wholesale Commercial business, Penn-America, which focuses on Main Street small business grew 10% to $67.9 million compared to $61.9 million in the same period last year and includes average rate increase of 4%. In aggregate, Vacant Express and Collectibles grew 5% to $16.4 million in the third quarter compared to $15.7 million in the same period last year, driven by rate and growth in agency appointments. Our Assumed Reinsurance gross premiums, excluding noncore business, grew 58% to $15.6 million, resulting from 7 new treaties we added during 2024 and 5 new treaties added in 2025, increasing our in-force treaties to 16 at September 30. Specialty Products, excluding the terminated products, remained flat at $8.6 million.

As for investments, total investment return was $14.5 million for the third quarter of '25, with an annualized return of 4%, consisting of $17.9 million of investment income and $3.4 million decline in fair value on the portfolio. Investment income on our fixed income portfolio was $15.2 million for the quarter compared to $15.8 million for the same period last year. Current book yield on the fixed income portfolio is 4.5% with a duration of 1.1 years at September 30 compared to December 31, 2024, of 4.4% with a duration of 0.8 years.

The average credit quality of the fixed income portfolio remains at AA-. Our outlook for 2025 is very positive. Our underwriting income ex the impact of California wildfires in the first quarter of $21.2 million for the first 9 months of '25 compares to $15.3 million for the same period last year. Our underwriting performance for the fourth quarter of '25 is expected to improve compared to the same period in '24. We continue to expect premium growth of 10% for the full year.

Booked reserves remain solidly above our current actuarial indications. We believe the premium pricing is continuing to track with loss inflation. Discretionary capital, which we consider the amount of consolidated equity in excess of that required to maintain the strongest levels with our rating agencies is $273 million at September 30. Lastly, our investment portfolio remains well positioned to invest in longer duration maturities at higher yields. Thank you. We will now take your questions.

[Operator Instructions]Your first question comes from the line of Ross Haberman of RLH Investments.

Nice quarter. Could you go back to the investment losses of $4 million you took in the quarter and sort of give us an explanation of why you decided to take -- realize the loss? And will there be similar type of losses in the next couple of quarters as you say, as you restructure and/or sell some of your bond portfolio?

Yes. Ross, to be clear, the loss was not realized in the form of a sale. It's a fair value decline on $25 million in equities that we invested in the third quarter. We view it as short term.

Okay. And I think you said you're going to restructure investment portfolio. Could you elaborate on that a little bit and the reason why?

Yes. I mean, so far this year, we've deployed $200 million of our short-term investments into corporates and mortgage-backed securities right now. We're at approximately 40% of the portfolio is short term, and we're evaluating how to invest over the next quarter and/or next 5 quarters, those short-term investments.

I'm sorry, just one clarification. What percentage of your investment portfolio is equities as opposed to bonds?

Equity is about 2%...

Your next question comes from the line of Tom Kerr of Zacks SCR.

You mentioned competition is increasing. Can you give us any more color on that, where it's happening and why it's happening now?

For our current product lines, which are basically focused on small commercial or very small personal collections, et cetera, in our Collectibles business or Vacant Express, we don't see the kind of competition you'd see in larger premium where it starts earlier. We're just beginning to see some of that pressure emerge as we're selling new products to new customers. It's a little bit -- I would say it's a little bit more competitive than last year. I think the important thing is at this point in time, for the business we're writing, we're still achieving the same kind of levels that our current book is priced at. So we're very optimistic about what we have on the books and what we're earning. But we do see that there's going to be pressure as we move into '26 and '27.

Okay. And speaking of 2026, do we still have a handle that it's going to be double-digit premium growth? Or any comment looking forward on that?

I am very optimistic it will be at least double digit. It's not going to be triple digit. I'm only kidding. We're sticking with our approach, which we expect our baseline of existing products will continue to grow at 10%. However, we will see an increase in overall growth rates as we start to add new products and new operations in Katalyx.

Got it. Last question. Did you give a discretionary capital number? Sorry if I missed that.

$273 million.

All right. That's up from [ $260 million ] to $273 million.

We will now move to our web questions. Your next question comes from Michael O'Brien. One great way to get your message out and show that you believe there is real value in your stock would be able to implement and execute on a buyback program. Any thoughts?

Sure. The -- I think we've been pretty consistent for the last 2 or 3 quarters that given the amount of money we're investing to restructure our organization, the reorganization we began at the beginning of the year, we think we're going to have a significant amount of growth going into '26 and '27. As such, the Board has made the decision, at least in the short term, meaning in the next 3, 4, 5 quarters that we're going to deploy our capital into those growth opportunities rather than buy back stock. It's obviously a question that's been asked every quarter, and we have not changed our position going forward.

There are no further questions at this time. And with that, I will turn the call back over to Nathaniel DeRose for closing remarks. Please go ahead.

With that, we thank you all for joining us. We look forward to speaking with you about our year-end results at that time. Thank you.

Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Global Indemnity Group Second Quarter 2025 Earnings Call.

[Operator Instructions]

It is now my pleasure to turn the call over to Evan Kasowitz, President of Belmont Holdings. You may begin.

Thank you, operator. Today's conference call is being recorded. GBLI's remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including without limitation, beliefs, expectations or estimates. We caution you that such forward-looking statements should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will, in fact, be achieved. Please refer to our annual report on Form 10-K and our other filings with the SEC for description of the business environment in which we operate and the important factors that may materially affect our results.

Global Indemnity Group LLC is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. It is now my pleasure to turn the call over to Mr. Jay Brown, Chief Executive of Global Indemnity.

Thank you, Evan. Good morning, and thank you for taking the time this morning to join us for the GBLI second quarter update on our financial and operational results. Following our usual format, I will first provide a few overview comments on my view of this quarter's results. Then our Chief Financial Officer, Brian Riley, will offer a few key details on our insurance and investment operations. Following Brian's comments, we will then answer any questions you might have.

This quarter's results are comparable to the underlying positive insurance operating investment trends that we have seen for the past several quarters. Our accident year combined ratio of 94.6% produced an underwriting profit of $5.6 million, a very nice increase over the 96.7% we recorded last year. Our short duration investment portfolio continued to deliver stable results at $14.7 million, with an annualized investment return of 4.9%. The overall positive insurance and investment results were offset a bit by the planned higher corporate expenses as we continue to invest in our Agency and Insurance Services segment. The resulting net income of $10.3 million remains consistent with the results from last year. Brian will provide a bit of insight on the areas where corporate expenses are increasing.

Moving from the bottom line to the top line for insurance operations, excluding terminate contracts, gross premium grew 18% over the second quarter of 2024. As we noted in our results release, we saw a very solid sustainable growth in Vacant Express, collectibles, wholesale, commercial and assumed reinsurance. Premium rate changes are running in the mid-single digits, which when coupled with exposure changes are tracking close to our current expectations for loss trends. Turning from the quarterly financials. Our efforts to revamp our technology infrastructure, information management and policy issuance systems continues to be on track.

We will complete our design and coding of our Kaleidoscope policy rating, quoting and issuance system for wholesale commercial package policies to begin testing by year-end. We then expect to roll out the new environment to our agency partners in conjunction with an underwriting work bench early in 2026. On a parallel track, we have now migrated all our internal data to a modern data lake for both structured and unstructured data in the cloud. We are now migrating and sinking all of our internal reports to the new single unified data source. This effort is a very key foundational step needed to exploit artificial intelligence across the entire enterprise. I should also note that we've requested and received approval in July 2025 for $100 million in aggregate dividends from our insurance subsidiaries. This will bolster our liquidity and position us to fund significant growth that we anticipate in our agency and insurance service operations under Praveen Reddy.

Looking forward, we will continue our efforts to profitably grow our existing businesses as we continue to invest in technology, expand our underwriting capabilities through organic growth and pursue selective add-on acquisitions. We firmly believe our reorganized structure will yield substantial value to our owners in the next few years. At this point, I'll turn it over to Brian.

Thank you, Jay. My commentary will focus on results for the second quarter. Of course, we can answer any questions you may have for the 6-month results. With the combination of net income and a $3 million increase in market value of the fixed income portfolio, book value per share increased from $47.85 at March 31 to $48.35 at June 30. Including dividends paid of $0.35 per share, return to shareholders was 1.8% for the second quarter of 2025.

Net income was $10.3 million for the second quarter of '25 compared to $10.1 million for the same period last year. The key drivers include: underwriting income improved by 61% to $5.6 million in the second quarter of '25 compared to $3.5 million for the same period last year. This was offset by an increase in corporate expenses of $1.2 million to $7.5 million in the second quarter of '25, resulting from recruiting fees, and professional fees related to due diligence on business development opportunities. And last, investment income of $14.7 million for the quarter was stable compared to $15.3 million in the same period last year.

Let me add a little color on investments and underwriting income. Starting with investments. Total investment return was $17.7 million for the second quarter of '25 compared to $17.9 million for the same period last year. And as Jay mentioned, annualized investment return for the second quarter of '25 was 4.9%. Investment income on our fixed income portfolio was $15.3 million for the second quarter of '25 compared to $15 million for the same period last year. Current book yield on the fixed income portfolio is now 4.5% with a duration of 1.2 years at June 30, 2025, compared to December 31, 2024, of a 4.4% book yield and a duration of 0.8 years.

For further comparison, book yield was 2.2% with a duration of 3.2 years at December 31, 2021, before the company took action in early 2022 to sell longer-dated securities and shortened duration. The average credit quality of the fixed income portfolio remained at AA-. As for the current year underwriting performance, current accident year underwriting income was $5.6 million for the second quarter of '25, an increase of 61% compared to the same period in 2024 due to growth in earned premium and an improved combined ratio. The combined ratio improved 2.1 points to 94.6% in the second quarter of '25 compared to $96.7 million in the same period, mainly driven by the loss ratio as the expense ratio is largely flat at 39.

The non-cat loss ratio remains strong as we posted a 50.1% in '25 compared to 54.1% in '24. The cat loss ratio was 5.5% for the quarter compared to 3.8% for the same period last year. Expenses remain elevated here in the short run as we run off our noncore businesses and invest in agency and insurance services operations. We continue to target the expense ratio longer term at 37%. Turning to premiums. Consolidated gross written premiums increased 6% to $106.8 million in the second quarter of '25 compared to $100.7 million in the same period last year. As Jay mentioned, excluding terminated products, gross written premiums increased 18% to $109.9 million in the second quarter of '25 compared to $93.4 million in the same period last year.

Let me add a little color at the divisional level. Wholesale commercial, which focuses on Main Street small business grew 8% to $69.1 million compared to $63.9 million in the same period last year and includes average rate increases of about 4%. In aggregate, Vacant Express in Collectibles grew 20% to $16.6 million in the second quarter '25 compared to $13.7 million in the same period last year. Let me break down those 2 products. Vacant Express grew 27% to $12.4 million, driven by organic growth from existing agents and agency appointments. Collectibles grew 4% to $4.2 million compared to $4 million last year, predominantly driven by rate.

Our assumed reinsurance gross premiums, excluding noncore business, grew 86% to $12 million, resulting from 8 new treaties we had during 2024 and 2 new treaties added here in 2025. Specialty Products, excluding the terminated products, was $12.3 million in the second quarter of $25 million compared to $9.3 million in the same period last year. Overall, our outlook for 2025 is very positive. For the first 6 months of '25, our underwriting income ex impact of California wildfires was $10.9 million compared to $8.7 million for the same period last year. Our underlying underwriting performance for the last half of '25 is expected to improve compared to the same period in '24. We continue to expect premium growth of 10%. Book reserves remained solidly above our current actuarial indications. We believe premium pricing is continuing to track with loss inflation.

Our discretionary capital, which we consider the amount of consolidated equity in excess of that amounts required to maintain the strongest levels with our rating agencies is $265 million at June 30, 2025. And as Jay mentioned earlier, this will support the efforts to invest in the growth of our Agency and Insurance Services segment. Lastly, our investment portfolio is well positioned to invest in longer duration maturities and higher yields. Thank you. We will now take your questions.

[Operator Instructions]

And our first audio question comes from the line of Tom Kerr with Zacks Research.

A quick question on the corporate expenses. I think you said business development fees to find new opportunities. What is that exactly?

We're looking to expand our agency operations with additional underwriting capabilities. And so we've been reviewing a number of different opportunities in the market. We probably looked at a half a dozen to a dozen some of which involve us spending some money to do some due diligence. We haven't yet gotten any conclusions on those at this point in time.

Okay. Any comment on the overall E&S market? Where do you see cycle weakness and that sort of stuff?

Yes. It's a tricky question because it differs depending on which segment you're looking at. Our Vacant Express segment, for example, continues to have real growth opportunities because of what's going on in the property market around the country. But in small commercial, we're starting to see a little bit more headwinds than probably we saw the last 2 years. We continue to be pleased with the level of premium we're obtaining for the business we're writing. But we are seeing a little bit more price competition than we probably saw for the last 2 years.

But what was the time frame on that just recently?

Yes. Just in the past 6 months, it's just -- you start to see it as a wobble first with a little bit lower hit ratio than we've been seeing, but not significant yet. It's still -- we still believe strongly then we should see 8% to 10% growth in that segment this year and perhaps the same next year.

Got it. One quick one. Do you still have any substantial business in California across the portfolio?

Yes. As mentioned in our last call is that we have business in California, across all of our businesses, we are currently moving some of that from an admitted product to a non-admitted product.

Next audio question comes from the line of Ross Haberman with RLH Investments.

Quick question going back to the administrative expenses. Do you see further growth from the level we saw quarter as you look for other lines of business?

Yes. If you -- we've engaged a couple of outside contractors to help with our internal staff to review financials for different things we're looking at. That expense would not create anything. But if we actually get to the point of closing on any transactions, you'll probably see a potential bumps and expenses when that occurs. We're not...

Sorry. Sorry.

No problem. We aren't planning on any big expenditures, but we're doing it incrementally. And if there's any substantial change in the current level, it probably will be a company by actually closing on a transaction and we'll obviously discuss that at that time.

And just a follow-up to the California fire exposure. Was there any further allowances that you came across -- but besides the initial exposure, you expensed, I guess, in March and do you have any exposure to the new fires that are beginning come up in California today?

Two-part question. On the first part, the initial reserves that were established at the end of the first quarter have maintained on there was very little movement, less than 1% or 2% in terms of our final estimates. In terms of the new expires, we haven't yet seen any significant exposure to our company.

Our next question comes from Andrew Bendigney. Can you provide a tangible return on equity target a few years out? What kind of loss and expense ratios would that imply?

Sure. It's it depends on what level you're looking at our return on equity. If we're looking at Belmont, which is our -- essentially our balance sheet company and its holding company, we would expect that the returns there will get into the 12% range in the next couple of years. That's kind of the insurance operation underwriting side.

I would say, when you then look at the other side and the holding company expenses, we're probably going to continue to target at 8% to 9%. The loss ratio that we need for that we're actually at the right loss ratio. What we really need to see is our expense ratio come down another 2 points, and that should put us pretty close to those targets.

All right. With that, we will thank you all again for joining us. This will conclude our 2025 Second Quarter Earnings Call. We look forward to speaking with you about our third quarter 2025 results. Thank you.