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Q & A Highlights

Q: Real quick on the California fires, was that just the underwriting type issues? Or have you guys been trying to get rate increases and deal with that issue? A: We've had an outstanding rate increase for our vacant express probably for a year plus at this point in time. Like most carriers, it just stalled completely in the regulatory environment. But otherwise, it's a sizable loss for us, involving very few properties, less than 10 overall.

Q: Could you provide a little more color on the reinsurance segment and that growth in that? And what is the plan? Could that continue its strong growth in 2025? A: Yes, our growth there is significant. We have 16 treaties at this point, roughly $45 million in force, and we expect a nice increase in '25 and '26. We'll evaluate our other lines of business and capital allocation to decide on further growth.

Q: On the project manifest, do you see any benefits yet on the destocking of the organization in terms of ability to move capital between organizations? Has that kind of started yet? A: Yes, we picked up dividends to the holding company, about $50 million. Our statutory surplus is around $500 million, which gives us more capacity in the insurance market.

Q: With $255 million in discretionary capital, any portion of that could be used to buy back the stock at a discount to book value? A: Of course, it could be used to buy back stock at a discount. However, the Board is more enthusiastic about adding additional products and underwriting types through Penn-America. We expect better returns from growing our insurance business in the short term.

Q: Could you tell us what your total exposure is in California? And is it on the direct commercial side or mostly on the reinsurance side? A: Our total exposure in California is about 6 basis points of the total property market. It was all on our direct book, not on any assumed reinsurance.

Q: Regarding Project Manifest, GBLI has tried growth strategies in the past and failed. Can you explain why your growth strategy will work this time? A: Our new structure allows us to bring in additional underwriting teams coupled with technology investments. Previously, teams operated in a manual environment without tech support. Now, our technology investments create a platform for offering new products to existing and new partners. We also brought in a new individual with experience in products we don't currently offer.

Q: Is there room to reduce the expense ratio without compromising underwriting quality? Any uses for excess capital, maybe a special dividend? A: We don't currently plan any special dividends. There is room to reduce the expense ratio as we run off terminated business. We aim to bring the expense ratio down another 1 to 1.5 points over the next couple of years.

Q: Anything abnormal in the Q4 corporate and other operating expenses wraps to $7 million for the Q? A: Yes, corporate expenses are up $5 million due to professional fees related to Project Manifest and implementation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.