Hello. Thank you for standing by. My name is Jeremy, and I will be your conference operator today. At this time, I would like to welcome everyone to the GBLI First Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the one on your telephone keypad. If you would like to withdraw your question, again, press the star and then one. I would now like to turn the call over to Stephen Ries. You may begin.
Thank you, Jeremy. 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 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. It's now my pleasure to turn the call over to Mr.
Jay Brown, Chief Executive Officer of Global Indemnity.
Thank you, Steve. Good morning, and thank everyone for taking the time this morning to join us for our quarterly results call. Before I turn it over to our Chief Financial Officer, Tom McGeehan, who will provide a detailed explanation of our first quarter financial results, I would like to briefly reiterate the background on the pivotal changes that have been implemented to position GBLI going forward. It's been six months since I joined the company as CEO, and although a lot has transpired during that time period, it has really been a continuation of a process that began in 2021 to alter the composition of our company to improve the returns for our shareholders. In 2021, we were successful in selling the renewal rights to our manufactured home and dwelling business and significantly reduced the amount of our property brokerage unit.
This was followed in 2022 by the sale of the renewal rights to our farm, ranch, and stable business, and at year-end, the sale of the American Reliable Legal Entity. As previously reported, these exits contributed $43 million to the bottom line and freed up a substantial amount of capital. Also, at year-end 2022, we made the decision to exit our involvement in the four wholesale brokerage operations we had established earlier that year and eliminated all of the staff associated with those operations. In addition, we significantly reduced our appetite for retrocession reinsurance business. As Tom will explain in a few minutes that although overall reported business written is down consistent with our plan resulting from these decisions, we are seeing double-digit growth tracking our long-term objectives in most of our Commercial Specialty operations.
As a result of exiting businesses that comprise close to one-half of our top line premium written only two years ago, it was then necessary to significantly restructure our internal costs, some of which occurred in the fourth quarter of 2022, and the remainder in the first quarter of this year. We established a very simple set of expense objectives that will be needed to produce underwriting combined ratios in the low 90s for our remaining businesses, consistent with the loss ratios we have achieved over the past five years. Our first quarter results are consistent with our goal to have underwriting expenses under 38% this year and then below 36% within two more years.
As Tom will highlight, although we are on target with both our growth objectives and our expensive targets, we had a big miss in the property loss ratio in the first 90 days of the year due to a limited number of significant fire losses. Not a great start to the year, our casualty loss ratio remains on target as we continue to achieve adequate rate increases. Let me provide a bit more detail on the specifics of the fire losses. The source of these type of fires first showed up a bit in the fourth quarter then jumped way up in the first quarter. Virtually all of the higher than expected losses came in the vacant commercial property portion of our business. This was a big deviation from our decades-long, extremely profitable business that we've experienced in this class of business.
As we analyzed the common characteristics of these losses, the combination of extreme homelessness and cold weather on the West Coast jumped out as the root cause. We are now on top of this situation and are making the appropriate. Our underwriting criteria and pricing to accommodate the demographic and lawless uncertainties that are present in certain U.S. metropolitan markets. In addition to the changes we have made in our insurance operations that I just articulated, our board quickly reacted to the emergence of a significant inflation that occurred post-pandemic after the administration change. As we have previously reported, our decision to dramatically shorten our portfolio duration to around 1.5 years is now bearing fruit, with investment income almost doubling in comparison to the first quarter a year ago.
We remain convinced that our company is now positioned to continue to generate excess capital over the next couple of years. We bought back 250,000 shares in the first quarter and another 200,000 shares in April and have about $26 million remaining in our share buyback authorization. We expect that our financial ability to buy back shares will continue to expand as we meet our combined ratio targets over the next couple of years. While I am generally satisfied with our progress in my first six months, I was very disappointed with our property loss ratio that popped in the first quarter. I fully expect we will see improvement as the remainder of the year unfolds. With that, I'll turn it over to Tom.
Thank you, Jay. Net income for the first quarter of 2023 was $2.5 million, and adjusted operating income, which excludes realized losses and results of accident lines, was $3.4 million. Book value per share increased from $44.87 at December 31st, 2022 to $45.68 at March 31st, 2023. Much of this increase is due to appreciation of the value of the fixed income portfolio and share repurchases. As Jay noted, during the first quarter, 250,000 shares were required. Share buybacks during the first quarter of 2023 increased book value per share by $0.35.
Since the share repurchase program was initiated in the fourth quarter of 2022, the company has repurchased 1,357,000 shares from third parties for an aggregate amount of $34 million. This amount includes 200,000 shares purchased in April 2023. As a result of these share repurchase transactions, book value per share increased $1.69 per share. As Jay noted, an additional $26 million is still available for repurchases under the current $60 million share repurchase program. I will now discuss some of the key drivers of net income, starting with investment performance. Investment income almost doubled in the first quarter of 2023 compared to the first quarter of 2022. Investment income was $12 million in 2023 compared to $6.6 million in 2022.
Income from alternative investments, which is included in the $12 million in last year's number, was half a million in both the first quarter of 2023 and the first quarter of 2022. The increase in investment income is due to higher book yields. Book yield on the portfolio increased from 2.3% at March 31, 2022 to 3.6% at March 31, 2023. At March 31, 2023, the duration of the fixed income portfolio was 1.5 years. In comparison of the March numbers to December 31, 2022, at December 31, 2022, book yield was 3.5% and duration was 1.7 years.
Between March 31st, 2023, and December 31st, 2024, we expect our investment portfolio will generate approximately $900 million of cash flow as bonds mature and investment income is realized. Realized losses in the first quarter were $1.5 million. Approximately two-thirds of this realized loss is due to Silicon Valley Bank. During the first quarter of 2023, the fixed income portfolio appreciated in value by $10 million. Moving to underwriting results. Our continuing lines had an underwriting loss of $1.4 million in the first quarter of 2023. On a consolidated basis, the underwriting loss was $1.1 million. As Jay noted, in the first quarter of 2023, fire losses were much higher than average. This negatively impacted our underwriting results. Actions are being taken to address this issue.
Our property loss ratio was high due to the fires. Our casualty loss ratio remains on target. Gross written premium in our continuing lines was $118.9 million. Compared to $143.8 million in 2022. Much of this decrease was planned. Reinsurance operations wrote $23.4 million in 2023, compared to $41 million in 2022. This decline is mainly due to non-renewing a casualty treaty. Within Commercial Specialty, there was some business that was underperforming that was terminated.
Packaged Specialty E&S, which is comprised of Penn-America business, the company's primary division within its Commercial Specialty segment, increased gross written premiums by 13.5% to $58.3 million in 2023, from $51.4 million in 2022, driven by new agency appointments, strong rate increases, as well as exposure growth in both property and general liability. Excluding underperformance business that was terminated, Packaged Specialty grew by 18%. Targeted Specialty E&S, which contains the remaining business lines in Commercial Specialty, had $37.2 million of gross written premium in 2023, compared to $51.5 million in 2022. Excluding terminated business, gross written premium was $36.8 million in 2023, compared to $40.8 million in 2022.
Exited lines include the farm business sold in August 2022, the specialty property book that was sold in the fourth quarter of 2021, as well as other lines we have exited. Exited lines are continuing to run down as expected. Net written premium for the quarter was $1.2 million, and underwriting profit of $0.4 million was realized. Corporate expenses in the first quarter of 2023 were $6.4 million. Corporate expenses include $2.2 million of restructuring costs related to actions taken to rightsize the expense base. Our annual expense base is approximately $16 million lower as a result of the restructuring actions. In summary, shareholder value is being created. We are returning capital to shareholders through share repurchases and dividends. We are very focused on profitably growing our core books of business. Expenses have been reduced.
Actions are regularly taken to assure the business written is providing a good return. Our high-quality, short-duration investment portfolio is very well-positioned. Funds that become available are currently being invested at yields higher than 5%. With that, thank you, and we will now take your questions.
Awesome. Thank you. At this time, I would like to remind everyone, in order to ask a question, press star and then number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Okay. Our first question comes from Tom Kerr. Tom, please go ahead.
Morning, guys. A couple quick ones here. On the exited lines business, does that run off completely in 2023, or are there still stragglers throughout the end of the year and maybe even into next year?
I'm sorry, could you I had trouble hearing the first part of your question, Tom.
On the exited lines of businesses, does that run off completely in 2023, or will there still be a little bit of a runoff left premium throughout the rest of the year?
Yeah, there'll be a little bit left, but not much. You know, as I said, right now the net written premium, which is the main driver of earned premium in the income statement, was only $1.4 million in the first quarter. As we go through this year, as I had noted on our previous earnings call, we're not expecting, you know, very much net written premium at all in 2023. You know, there's still gonna be some earned as some of the unearned premium that we have related to our farm business runs off. That's going to earn between now and August. After that, earned premium should be very minimal.
Our next question comes from the line of Jeff Bronchick. Jeff, please go ahead.
good morning to all.
Good morning.
What a surprise. How are you, Jay? I guess it's a general question, Jay. I mean, obviously, your predecessors came in with a mission to sort of build something to grow. For whatever reasons, that was decided not to be, you know, the plan. You're coming in and sort of taking the opposite tack, you know, cutting expenses and things that produce near-term results, which nothing wrong with that. Arguably, you know, three to five years, what do we have? My question to you is, you know, what do you think your mission is, you know, aside from, you know, the first 18 months? How do you see this, and what happens after?
you know, it's always a difficult question to say what's gonna happen five years out.
I think when I look from where I kind of started six months ago, the initial goal was to position the company as quickly as profitable, quickly as possible on its profitable base that we knew historically had generated good returns. Corresponding to that, because of actions taken over the previous two years where we significantly reduced the amount of premium, I had to make a corresponding cut in expenses to make it right-size back to the kind of business we wanted to write. I think the Main Street business is a forever business. It's been here... I've been in this business 40+ years. Main Street business has been a core component of almost any major property casualty company's business during that time period. We think we're very good at that.
We've got a long track record of good results. It's been confused somewhat, if you look over our 20-year history with different things we've tried along the way, including what we tried in 2022. I think what we've now decided to do is concentrate on those that segment of the market where we do believe we have a good competitive advantage and where we can be successful. We've got 350-375 so agents that we work with, that we've built up a good relationship with over that time period. You know, there's. Growth is great and we like to grow. We wanna grow, you know, hopefully 10%-12% per year on a regular basis. Growth without profits is not gonna lead to any value for our shareholders.
I think that's what we've tried to do, is just quickly reduce back down to a size that made sense and then grow from that base. What we saw in the first quarter was a good start on that. We had a couple of adjustments still in some of our business, but the basic core business that's been written in Packaged Specialty, as Tom noted, grew about 18% in the first quarter on a growth basis. That's, in this marketplace for that type of business, we're very happy with that. You know, I think importantly, it will occur on a regular sequential basis, as we generate excess capital, hopefully we're going to continue to deploy that in ways that make sense for our shareholders.
At today's stock price, it's very easy to tell you what I would do. It's a board decision. I would buy back every share I can at these kind of prices. I think that will eventually yield to a return of a share price that's more reflective of the underlying value of the business. It's not a precise answer in the sense that we're talking about what could happen over a two to five-year timeframe, but I think the results will be fine in that time period if we achieve those kind of results.
All right. Our next question comes from the line of Anthony Mottolese. Anthony, please go ahead.
Hi. Good morning. Just a quick follow-up on the Q1 results. Was there any reserve development, seen in the quarter, favorable or adverse? Also, it would be helpful if you could quantify any cat losses in the quarter as well.
Yeah, sure. Hang on just one second. Cat losses in our continuing lines were $3.3 million. In our discontinued, we do have some on our premium that's running off, $2.1 million. In total, $5.5 million, rounding up. That's the cat loss answer. In terms of prior year development, on a net basis, it was zero. We did a little bit of strengthening in our GL reserves in our continuing line businesses, but we had a corresponding offset where we've had some good property development in our exit lines. Net-net, it was 0. We're not seeing anything that's causing us any real concern in the first quarter on our prior year development.
All right. Thank you. Our next question comes from the line of David Schiff. David, please go ahead.
Thank you.
Thank you.
Hi there. Hi there, Jay. I was delighted to see you become CEO, and I like your strategy. Just one question here just about the investments. At least at year-end, you all had about and obviously it was a great call, clearly market call, getting out of stock, shortening your maturities last year. Of course, one has to wonder, given the strength of your balance sheet, very strong, if in, as a long-term strategy to not own any common stocks. Maybe you could comment on that. The other thing just to comment on, you do have about, at year-end, it was 23%-24% in BBB bonds. I was just wondering if there was any thought of reducing that and putting some into stocks. Although, obviously, your own stock is arguably the cheapest thing out there.
Anyway, just any thoughts on those things?
Sure.
Curious.
One is I do believe, the investment portfolio for a company of our type
Definitely should have a stock component over time. I think the trick is, I think the easier call is to play defense, which is what we did.
Mm-hmm
... Beginning in 2022. The harder call is deciding when to go back in. I could tell you that's not today, but I expect before the year unfolds, as things stabilize in the markets and we begin to get a sense where the Fed is gonna stop and where inflation kind of targets out, I think then the ability to assess the type of risks we wanna take in the stock market or in the bond market makes sense. That includes stretching back out on duration at the appropriate time, 'cause we're very short of our normal duration target of what we would use for our company at this time, at this point in time.
As you correctly said, the easiest decision we have in terms of deploying capital is to buy back our own shares at these prices. I'm gonna let Tom comment about the composition of our current portfolio.
Yeah, no. It's right now we have a fair amount in treasuries, over $300 million. We also have about a third of the portfolio is in floating rate investments. The corporates that we're in the triple B, and some of the other asset classes that are there, we're very comfortable with what we're holding and, you know, they were purchased to generate good returns. Building on your question on redeployment into common stock, over Global Indemnity's history, and it depends when, but we've been in and out of not only common stocks, but other asset classes that we thought at the time would provide a really good return to our shareholders.
Common stocks, is the main one, but, you know, there have been times in our history where, we invested in other asset classes such as, bank loans. There's times to be in those, and there were times to be out of it. The time we got out of it last year was in January. I think we made a really good call at that point.
Mm-hmm. Yeah.
There was a lot of market volatility, and the other thing it allowed us to do is, we used the proceeds to pay off all of our remaining third-party debt. At this point in time, Global Indemnity has no third-party debt on its balance sheet. Again, we'll continue to look at it and at the right time, we'll make the right decisions to or what we believe are the right decisions to jump back in.
All right. Thank you. Our next question comes from the line of Tom Kerr. Tom, please go ahead.
A couple follow-ups. Following up on the strategy question from a few callers ago, whoever that was, would you consider adding lines of business in the tech and acquisitions or the use of capital still just be focused on your own shares?
I think once we get the base record established again, where we have a consistent reported result, I think we will continue to look at adding different things. I think we got in front of ourselves in terms of in 2022 of trying to add four new lines that were gonna be significant long-term contributors, but the cost of scaling those up at our size was just not something that we could be accomplished. None of the lines that we exited, I should be clear, did we have any discomfort with the loss ratios. All of the business that we wrote during that time period is something that at this point in time looks fine.
It was just a question of the expense base necessary and the systems technology that would be necessary to play in those spots. I think if we, if and when we choose to either add new lines or acquire something, again, it'll be something that will have to be consistent with the size of the company and our record at that point in time. You know, Global has a history of a number of acquisitions over its history, most of which have been good, not all. We don't have a perfect track record. When we look back in hindsight, that's one of the things that you have to understand, is if you're gonna take those risks, you've got to be careful to get them right, and they're not always gonna turn out right.
I think we've recovered quickly from American Reliable, which cost us a little bit of money along the way, and we were able to get out of it at a return that essentially negated our initial entry cost. We even in that case, where it wasn't a great acquisition, we did fine. I think the history of the company suggests that we're not afraid to take step into something at the appropriate time, when we have the, both the financial resources and the ability to feel comfortable with it.
All right. Sounds good. Thanks for the color on that. A couple quick financial questions. On the corporate expense line, I think you said $2 million was restructuring of the $6.4 million. Does that mean sort of the quarterly run rate for corporate expenses is around the $4 million per quarter?
Yes
... Is what we can expect?
Yes.
Okay.
Okay, I see no further questions at this time. This concludes today's conference call. You may all disconnect.