And welcome to the Global Indemnity Group LLC Third Quarter 2022 Earnings Conference Call. I would now like to introduce Stephen W. Reiss, Head of Investor Relations.
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 ks and our other filings made with the SEC for a 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. Joining us are Jay Brown, CEO Tom McGhehan, CFO and Jonathan Altman, President. It's now my pleasure to turn the call over to Jay Brown.
Thank you, Steve. Good morning and thank everyone for joining us today. I am sure you're all surprised to see me sitting here today as the CEO of Global. To be truthful, a few months ago, it never occurred to me either. That said, the Board asked If I would step in and take on the CEO role.
And I said yes, without any reservations. Having served on the Board for 7 years, I'm obviously quite familiar with GBLI, its business and its management team. It probably makes sense if I first address the issue of David Charlton's departure Before offering my initial observations as CEO and turning the presentation over to Tom McGahn to review the 9 months results. David was recruited to Global to execute the board driven strategy of completing a transformation to an excess and surplus lines casualty focused insurance organization. In the past 18 months, David recruited many outstanding seasoned executives and specialists to complement the significant talent we already had in place.
I use the word season carefully here as it is a very high energy group with significant variations in years of experience. In parallel, David initiated a significant effort to develop IT tools to substantially enhance our customer focused strategies and to address some of our internal expense issues. As a result of suffering a series of both third party IT delivery delays In unacceptable product deliveries, the Board requested that I step in as CEO, given both my decades of CEO and Chairman experience at several leading property casualty insurance companies and extensive oversight of IT procurement, Development and Implementation, including most recently as Chairman of a highly innovative insurance tech startup. In addition to my new role, the Board is fortunate to have added 2 experienced executives as Board members to assist us in achieving our objectives, Jason Hurwitz and Gary Tolman. Jason is among the most brilliant analysts I have ever worked with and will help us tremendously as he has in the past in focusing on the key areas that need to be addressed to create value at Global.
Gary has served in multiple roles in his insurance career, but most notably led the teams as CEO that created 2 leading firms In the InsurTech space, Esurance and Nobler Inc, where I served as Chairman. His experience with contemporary technology development Will be a significant asset to both the Board and me as we refocus our technology efforts. Both the Board and I have the utmost respect for David Charlton and will be forever thankful For David's many contributions to and enhancements to the company. We wish David nothing but the best in the future. But now that the decision has been made, it is my role to lead this organization forward.
I became a modest shareholder in Global at the time of Fox Pane's initial investment in 2,003. In 2015, I joined the Board of Global and worked with Saul and the rest of the Board and developed a long term strategy To maximize the value of Global to all of our investors. While I have obviously been Reese. Privy to much of the internal company information as a Director, it is worth a minute to share my observations of Global today after just a couple of weeks on-site in our executive offices as the CEO. Looking at today's insurance market, it is a terrific time for anyone to be in the E and S market.
More importantly, on a relative basis, Global has an enviable competitive position in the insurance market today. We have completed a rapid transformation of our existing book of business that is comprised solely now of business consistent with our Specialty E and S objective to well execute sales of businesses that didn't fit and second, by adding teams To expand the breadth of our product offerings. From both an internal and an external assessment of our balance sheet, We have a very strong capital position, an investment portfolio that's been optimized for today's volatile investment market And a track record stretching back 19 years to Fox Pane's 2003 acquisition of Global of maintaining strong reserves. By shifting our business mix to more than 70% casualty, we have mitigated the company's disproportionate exposure To catastrophic property losses, which has made the last several years of results totally unacceptable to our owners. Given all that, the obvious question is why has the market assigned a significant discount to tangible book value per share?
There are no doubts that our extremely thin daily trading volumes can create distortions in value assessment. But the longer record reflects a clear assessment that we are being valued at a significant discount to book. By definition, the market is telling us that our insurance operations subtract value from our capital base Rather than enhanced value. There is no doubt that our underwriting results as reported over the past 5 years have weighed heavily on our share price. Given the actions that we've taken over the past couple of years, the future must provide an immediate sharp contrast That allows our owners to alter their perception of the value of our insurance operations.
Although the challenges and opportunities I faced in my 5 prior executive roles were unique to each organization, Every one of them had a common objective of maximizing value for the owners. As such, My daily focus as CEO will be to work with both the Board and the management team to make that happen here at Global. As I turn you over to Tom, a reminder of the principles that our management team has embraced to create value. First, our staff is our most important asset. 2nd, we embrace a customer centric mentality To create value in our product for our insurers.
And 3rd and foremost among my Our disciplined underwriting practices are the core to long term profitable growth. With that, I'll turn it over to Tom.
All right. Thank you, Jay, and good morning, everybody. Shareholders' equity increased from $641,300,000 at the end of June to $643,600,000 at September 2020 Debt income for the quarter is $23,700,000 versus a loss in 2021 Of $7,700,000 underwriting income was positive. We are realizing benefits From actions taken to reduce catastrophe exposure that started several years ago. As previously announced, Hurricane Ian had a very modest impact to this quarter.
We compared our losses from Hurricane Ian Took 4 event models that were selected by AIR from their stochastic event catalog. These 4 event models most Closely represented Hurricane Ian post landfall. Had we not taken action to reduce catastrophe exposure, Our model losses from these four events averaged $12,800,000 Our losses from Hurricane Ian Are approximately $11,000,000 lower than these average modeled losses. As a result of exiting the property catastrophe business, Reinsurance business, discontinuing writing properties with total insured values of $10,000,000 or more And recent actions to non renew Capstone business in certain geographies, earnings volatility from catastrophes has reduced significantly. Catastrophes incurred for our entire book in the Q3 of 2022 were $5,900,000 Compared to $22,300,000 in the Q3 of 2021.
Commercial Specialty Lines cat losses are down Significantly as well, catastrophes were $3,900,000 in 3Q 'twenty two compared to $8,900,000 in 2021. The quarter includes the sale of farm renewal rights, which were sold for $30,000,000 As well as write offs and costs associated with services provided by third parties of approximately 9,200,000 The change to equity also includes an unrealized loss of $18,700,000 net of tax. Rising interest rates are negatively impacting book values for the entire property and casualty industry. While we don't like unrealized losses, We expect that our short duration fixed income portfolio will perform well compared to peers. For our continuing business lines, gross written premium in the Q3 of 'twenty two grew by 13% To $144,300,000 compared to $127,700,000 in the Q3 of 2021.
The increase is due to the addition of new business lines, rate increases in commercial specialty And growth in reinsurance lines. Underwriting income also had good results. The combined ratio of our Reiss. Continuing lines was 96.9 percent in the Q3 of 2022. The overall combined ratio, Including continuing lines and exited lines was 97.2% in the Q3 of 2022.
The mix of business is now shifted to casualty. Casualty earned premium for our continuing lines With 72.5 percent during the Q3. Moving to our more color on our Commercial Specialty segment. It grew by 2.7 percent to $100,600,000 in the Q3 of 'twenty 2, Compared to $98,000,000 in the Q3 of 2021, driven by the addition of new lines, Growth in Emerging Markets, Growth in Vacant Properties and Collectibles. Growth is net of actions Taken to see shredding a few classes of business that were not providing a proper return.
Pan America wrote 50 $2,600,000 in the Q3 of 2022 compared to $54,900,000 in the Q3 of 2021. On a year to date basis through September, Panamerica obtained rate increases of 8.4%, and this is just straight. Exposure change added an additional 5.2%. Programs wrote 27,600,000 In the Q3 of 2022 versus $29,000,000 in the same quarter last year. Our program Reese.
The division had year to date rate increases through September of 13.2% and exposure change of 11.3%. The market remains strong for E and S Commercial Business. Over the past several years, our product development team has spent considerable time and effort expanding and enhancing some of our most profitable business segments And Pan America and programs such as small artisan contractors and vacant buildings and land. At the same time, we've moved swiftly to exit areas that have been problematic for us and the rest of the industry, Such as hotels and motels, liquor liability coverage and certain areas made difficult by unique legal Reese. One example of the benefits Reese.
Realized as a result of using proprietary analytics is it helped us reduce the number of firearms related claims by over 85 Reese. Saving the company 1,000,000 of dollars in claims. The same tool is currently being used to target specific pricing actions In areas with higher propensity for losses. While these actions slowed growth this quarter, they will improve profitability. Our InsurTech Businesses, vacant property and collectible lines grew by 4.5% in the Q3 of 2022, Generating gross written premium of $10,900,000 compared to $10,400,000 in the same quarter last year.
Our 3 new businesses, excess casualty, environmental and professional are steadily growing. They wrote $4,400,000 this quarter. Our reinsurance operations primarily focus on casualty reinsurance. Gross written premiums We're $43,700,000 in the Q3 of 2022 compared to $29,700,000 In the Q3 of 2021, the growth is coming from our largest casualty quota share trading As well as our excess professional business and several smaller casualty treaties we have recently written. It is a great time to be in this part of the market where premium rate increases continue to be strong.
Writing longer tail business Reese. Our investment portfolio grow and we can invest these funds at higher interest rates. Exited lines now includes the results of the farm business. It also includes the specialty property book that was sold in the Q4 of Reese. 2021 as well as other businesses we have exited.
Now the farm is sold, Net premiums written prospectively will be very low. Gross written premiums for the quarter and discontinued lines were 31,500,000 Net premium was only $3,200,000 In 2022, I'm moving to the investment portfolio. In 2022, significant efforts were taken to enhance liquidity, provide investment flexibility And buffer market volatility. In response to expected rises in interest rates, we started to reposition the portfolio by lowering duration in May 2021. As we enter 2022, Concerns about market volatility, further rises in interest rates and a possible recession caused us to take additional actions.
In the Q1 of 2022, we sold the common stock portfolio. We identified and took actions Reese. To sell longer duration fixed income securities and in response to a possible recession during the Q2 of 2022, We took action to exit a fund that invested heavily in below investment grade loans. We are well positioned To deploy funds into higher yielding investments, the duration of our fixed income portfolio is currently 1.7 years. Bulk yield was 2.34 percent at the end of March 2022 and increased to 3.07% At September 30, 2022, we have been deploying the proceeds from sales mainly back into shorter term treasuries.
We have also deployed a small amount of the portfolio into higher tranche asset backed securities and CMOs. Maturity and investment income will generate a tremendous amount of cash flow between now and the end of 2024. Yesterday, 2 year treasuries closed at 4.72%. There is a significant opportunity for book yields income portfolio is A plus. Booked reserves remain above actuarial indications.
We have discretionary capital to support our growth and a stock repurchase program that was announced on October 21. This concludes my remarks, and we'll now take your questions.
Who will pause for just
a moment to compile the Q and A roster. And your first question is from the line of Anthony Amotelis with Dowling and Partners. Please go ahead.
Hi, good morning. It's Tom. I had a quick number question. Could you also provide the total prior year development in the quarter? Sure.
And then Thank you. And I just had one other follow-up on the total cat number you provided. I was just kind of curious beyond Ian, where those cats were coming from in the quarter is very low, like you mentioned, given your risk Moving your risk profile away from cat exposed business.
Yes. I'm sorry, your first question was The total number of cats, I'm sorry, prior year development. Yes. Yes. Yes.
Yes. Yes. Yes. Yes. Yes.
$3,000,000 of reserve release in total.
Okay. Thank you.
And the second one, it really was from a just a number of smaller cats That has occurred during the quarter. It's nothing significant beyond what we previously had announced for Hurricane
Okay. Thank you. Another question I had, it looked like commercial specialty Growth seemed to slow a little bit in Q3 compared to the first half. Was there anything driving that? Maybe any books of businesses that We're performing as well.
The actions we took to as mentioned, we Colorado Contractors, we took some actions in our habitational book. It was really actions
Jonathan, do you want to add anything? Yes.
Hi, this is Jonathan Altman. Yes, just to add to Tom's Comments, as he mentioned earlier, it was really several different underwriting actions that have been underway for quite a while. So The growth that you see that has slowed is very much part of our plan. We took underwriting actions, as Tom mentioned, to Exit certain problematic classes of business that were troublesome from a loss ratio perspective. For example, hotels and motels were mentioned, Liquor liability and some more conservative positions on some areas where we've seen some pressure on the loss ratio.
And that's that combined with the rate increases that we've been getting has put some pressure on the top line, but we think all of those It's ultimately benefit the organization from an improved bottom line.
Okay. Thanks for the detail on that. And so then with your overall plan and strategy going forward, Is there any changes under this new management team in terms of strategy or just the planned execution of it?
Not really. I mean, there'll be nuance changes because everybody has a slightly different style I'm approaching things, but in terms of the businesses we're in, I was part of the process of the Board of approving the entry into those businesses, And I am enthusiastic about driving them forward. So I think from the outside, you won't see any major changes. From the inside, there'll be subtle shifts, But nothing of any real significance.
Okay. Thank you. And if I may, I have one last question. I was just hoping to have any additional insight on the timing with in regards to your recent buyback authorization And I was curious kind of how you came to that $32,000,000 that amount?
Sure. That's straightforward. The issue was if you realize we had exited Farm less than 2 months ago in terms of The actual timing of the transaction, we've been analyzing our capital position post that transaction to make sure we understood where we were. As part of the change, we thought it behooved us to also indicate to the market we were prepared to enter the market with some buyback We chose $32,000,000 as roughly at the day it was announced 10% of the value of the outstanding shares. Obviously, because it was announced pre our earnings release, we were in a quiet period.
And so we couldn't enter into the actual market Outside of it, anybody was interested in a reverse inquiry back to us. Going forward, we've Retained an agent that will be entering the marketplace in due course here once we get through the next couple of days. We're obviously we'll have some kind of a trading plan arranged with them. And obviously, certain of our owners May approach us with blocks of shares rather than going into the open market. We'll have to See how that proceeds and we'll obviously report each quarter on any buybacks that took place during the quarter.
Okay. Thank you so much. That was all my questions.
Great. Thank you.
Your next question is from the line of Tom Kerr with Zacks Investment Research. Please go ahead.
Hi, guys. Most of my questions are just covered. A couple of quick ones. Can you break down the corporate and other operating expenses of $14,000,000 I didn't See that in the press release. Any further color on that?
Yes. Dollars 9,200,000 of that is related to the Sale of the farm renewal rights, so what that is, Tom, is write off of Goodwill, interchangeable assets, software, lease costs, and we also had to pay 3rd party advisers. That is what comprises the $9,200,000 The remainder of the corporate expenses are just the normal recurring Corporate expenses that happen every quarter.
And that's roughly $4,000,000 per quarter
Yes. I'm thinking $4,000,000 to $5,000,000 a quarter. That's correct.
Yes. Any thoughts on increasing the equity Exposure in the investment portfolio with some of the areas of the market having significant declines recently.
It's a tough question. Obviously, what we've all experienced here over the last for us in looking at our portfolio, really the last Year 3 quarters, we've been trying to reposition ourselves to be opportunistic going forward. I think where we sit today is incredibly Positioned and our investment committee at the Board is working with outside advisors and will pick appropriate times to reenter the equity market Or different portions of the fixed income market as we see the opportunities arise. It's a daily occurrence trying to think about it and Trying to position right now, as Tom mentioned earlier, we are positioning some of our portfolio into some slightly higher yielding, high quality, Short duration fixed incomes rather than just treasuries. But at this point, there's no real clear Decision yet made about any decision to buy additional equities now that we've exited.
All right. One last question. The question was just asking about change in strategy with the new management team. But can you also comment on the specific Sort of financial objectives that have been outlined, the 6%, 7%, 8% growth in net written premiums, is that still doable or do you think that could change?
Certainly, in terms of minimum objectives, I think what we've outlined at our Investor Day remain in place. I would hope to hit over time over the next 3 to 5 years do better than that. That's certainly what our aspirational goals are. Right now, looking backwards versus looking forward is a pretty big contrast to what we've actually achieved versus what we're committing to. So I think as I tried to stay in my remarks, I think the proof is in the results, and I think we have to post some good numbers here over the next year or 2 to demonstrate that our transformation
Reese. And last question, sorry, Is acquisitions, I forget if you mentioned this, part of the strategy going forward, tuck ins or anything like that, new lines you might like?
Yes. This Board has been open to both divestments and purchases Historically, and that remains on the agenda. We certainly have a very, very strong capital base. It will take 2 or 3 years of internal growth to even begin to dent into how much capital we have available. And so, if
And at this time, there are no further questions. I will now turn the call back over to Jay Brown for closing remarks.
Thank you for joining us today. I do want to suggest that if there are any questions from investors that they follow-up with Steve Reese. And one small change in our investor calls going forward, we will have an open line for questions for all investors to ask questions Rather than just the few that have been able to ask questions in the past. Thank you very much for joining us today.
This does conclude the Global Indemnity Group LLC Third Quarter 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect.