GBLI

Good morning, ladies and gentlemen, and thank you for standing by, and welcome to the Global Indemnity Group second quarter 2026 earnings call. My name is Franz, and I will be the conference operator today. 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 one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. 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, believes, 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 second quarter 2026 results conference call. Joining me today are Evan Kaczewicz, our Chief Operating Officer of GBLI and President of Belmont Holdings, and Brian Riley, our Chief Financial Officer. As usual, I'll start with a short overview of the quarter, including what stood out to me in the results and what we're seeing in our longer-term trends. Brian will then walk through the key financial highlights, after which we'll open the call for questions. Let me start with the headline. Our underlying insurance operating trends remain strong and consistent with the results we have delivered over the past several years. Our accident year combined ratio was 94.7 for the quarter, producing an underwriting income of $5.8 million. Through June, our accident year combined ratio was 94.8%, with underwriting income of $11.2 million, modestly ahead of last year.

Loss performance remains the strongest part of the story. Catastrophe experience was favorable, and non-catastrophe experience and results remained strong and consistent. Expenses remained well above our long-term target levels by approximately four and a half points as we continue investing in Katalyx, Kaleidoscope, and related technology platform capabilities. While these investments are elevating current expense levels, operating expense dollars have remained exactly in line with our 2026 plan. We will achieve significantly improved operating leverage as these initiatives drive efficiency, AI-assisted decision making, and support future growth. Turning to insurance revenue growth. Belmont Core gross written premium was $117 million for the quarter, up 7% year-over-year. Through the first half, Belmont Core gross written premium was $214 million, up 3% versus last year, still well below our rolling growth targets. Growth was led by Valiant Re, which was up 79%, and Collectibles, which was up 14%.

Penn-America also returned to growth, increasing 2% during the quarter after two consecutive quarters of declines, an encouraging result against a more competitive E&S market backdrop. The broader E&S market is becoming more competitive as admitted capacity expands and rate momentum moderates. We are extremely focused on not chasing volume at the expense of profitability. Instead, we are staying disciplined and leaning for growth into those areas of the portfolio, including Valiant Re, Collectibles, and our new venture pipeline that are less exposed to cyclical competitive pressures. Excellent future results are dependent on making sure this is an execution reality versus not just words. Within specialty products, legacy programs are also pressured by admitted carriers and MGAs. But we continue to see opportunity in the programs we want to retain and new programs expected to launch later this year.

Our retail and consumer-focused businesses continue to expand distribution with more than 700 retail agent appointments year to date. Collectibles grew 14% while continuing to deliver excellent underwriting results. And Vacant Express delivered 5% growth despite challenging property market conditions and are no longer offering a California admitted property product. Our new venture initiatives continue to advance, including aging services and specialty casualty. We have recruited very talented leaders for our team to establish these new offerings. Both will be important medium-term growth opportunities with product formation work progressing through the end of this year. Valiant Re remains on track for the year following strong growth in the first half. We continue to expand the portfolio thoughtfully, including the addition of new property quota share relationships while maintaining underwriting discipline and exiting underperforming treaties where appropriate.

Sayata is our digital distribution platform connecting agents and carriers in small commercial insurance and continued to make progress in the first half, with submissions increasing 8.5%, expanded carrier participation, and the launch of Excess Cyber. Just as importantly, operational efficiency continues to improve with automation initiatives reducing average daily tickets volume by more than 22%. These productivity gains, combined with enhancements to their leadership team, position the platform for improved operating leverage over time. On the technology front, the Penn-America Pro build is nearing launch, with testing substantially complete and deployment still targeted for a September go live. More broadly, the Kaleidoscope platform continues to be prepared to expand across our portfolio and remains a key driver of future scalability, efficiency, and robust partner connectivity.

The next phase of Kaleidoscope work will focus on Vacant Express and Collectibles with broader application to new ventures and partner API connectivity in 2027. This remains a significant near-term lift for the teams, but it is foundational to our operating model and future scalability. Stepping back, we continue to remain very confident in the underlying quality of our business. Loss ratio performance remains strong. Our portfolio continues to diversify, and we are navigating a more competitive E&S market with discipline. We continue to expect Belmont Core gross premium for the full year to finish approximately 15% above 2025 levels, while investment income should benefit from rising portfolio yields approaching 4.9% by year end. With that, I'll turn it over to Brian to walk through the key financial details.

Thank you, Jay. Net income was $11.1 million for the second quarter, up 8% compared to $10.3 million in 2025. For the year, net income is at $15.3 million, compared to $6.4 million in 2025. Starting with investments. Investment income for the second quarter was $16.4 million, compared to $14.7 million in 2025. For 2026, this includes income on a mark-to-market adjustment of $2.3 million on limited partnership interests. Excluding income of limited partnerships, investment income was $14.1 million in the second quarter, compared to $15.3 million in 2025, driven by a higher allocation of the fixed income portfolio to U.S. Treasuries. As for the first six months, net income was $28.6 million compared to $29.5 million in 2025. Excluding the impact of income related to limited partnerships, investment income was $28.3 million compared to $30.2 million, also driven by an increased allocation to U.S. Treasuries.

The current book yield on the fixed income portfolio increased to 4.42% with an average duration of 1.08 years as of June 30, 2026, compared to 4.27% book yield and duration of 1.01 years as of December 31, 2025, resulting from reinvestment of $177 million of maturities at 5.45% that had an average yield of 4.26%. As Jay noted, we expect this reinvestment trend to continue, targeting book yield of 4.9% by December 31, 2026. The average credit quality of the fixed income portfolio remains at AA-. Moving to underwriting income. For the second quarter, accident year underwriting income increased by 3% to $5.8 million, driven by 4% growth in earned premiums and a combined ratio of 94.7. Our loss ratio for the quarter remains strong at 53.8%. A 1.8 point improvement over 2025, driven by catastrophe loss ratio performance.

As Jay noted, the elevated expense ratio of 40.9% is driven by personnel costs related to build-out of products on the Katalyx platform. As for the year, and similar to the second quarter, accident year underwriting income increased by 3% to $11.2 million, driven by 4% growth in earned premiums and a combined ratio of 94.8. Note that that comparison excludes the impact of California wildfires from the 2025 figures. Turning to premiums. Belmont Core's gross written premiums increased 7% to $117 million for the second quarter, and 3% to $214 million for the year. At the divisional level, starting with wholesale commercial Penn-America business, Penn-America, which focuses on Main Street small business, was up 2% for the quarter, an improvement over first quarter, which was down 5%.

These trends continue to reflect maintaining pricing and return standards amidst the competitive market, as Jay mentioned, demonstrated by an overall flat rate change for the first half of the year and continued strong loss ratios. We continue to adjust our products to grow the business with the goal of maintaining our loss ratio. Valiant Re, our assumed reinsurance business is up 79% to $21.5 million for the second quarter, and 43% to $32.7 million for the first six months of 2026. As three new treaties were added during the quarter, the number of in-force treaties has increased to 22 at June 30, 2026. Vacant Express is up 6% to $13.1 million for the second quarter, and 5% to $24.5 million for the first six months of 2026. Collectibles is up 14% to $4.8 million for the second quarter, and 13% to $9.4 million for the year.

Last, specialty products did experience a decline of 36% to $7.8 million during the second quarter, and 21% to $15.5 million for the year, primarily driven by terminated products. Excluding the terminated business, gross written premiums on the 11 ongoing programs is only down 1%. In closing, I have five takeaways. One, we are on track to achieve growth of 15% in gross written premiums. Two, although we are 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 performance for the last three and a half accident years.

Three, our investment portfolio remains positioned to invest in longer duration maturities at higher yields. Four, our book reserves remain solidly above our current actuarial indications. Five, discretionary capital, which we consider to be the amount of consolidated equity in excess of that required to maintain the strongest levels for the rating agencies, is $302 million at June 30, 2026. Thank you. We will now take your questions.

Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press *1 on your telephone keypad to join the queue. If you would like to withdraw your questions, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Tom Kerr from Zacks SCR. Please go ahead.

Good morning, guys. Several quick ones. On the expense ratio, I think we all know why it's elevated, all the spending. What is the timing, or has the timing changed in when that gets back to normal? Is that a gradual occurrence in 2027, or does it happen like a cliff? How do we look about when it gets back to what you think is normal?

It will accelerate rapidly during 2027, and I would expect by the latter half of 2028, we'll be back to more normal levels.

Okay. It's a 2028 issue, the normal levels? Okay.

At the end of the year, it'll be kind of an eight-quarter rollout change that you'll see very clearly as we go through the year.

Got it. Did you guys give a new level of discretionary capital? Sorry if I missed that.

Yep. $302 million, Tom.

Okay. One more kind of big picture question about AI. Are you guys using traditional or new AI in any areas of the business? Is it claims or fraud detection or underwriting, or have you even started using AI in some form?

That's a broad question. The entire employee population is being brought up the curve individually and collectively with AI skills. That's a process that we began at the beginning of the year. We're starting to see isolated examples of significant efficiencies that are being gained. The larger programs in terms of AI, assisting our underwriters in making better decisions, and our claims officers in establishing more accurate settlement levels are in development, have yet to be fully deployed, though we're testing them in different aspects at this point in time. The underwriting will follow very shortly after the end of the year when Kaleidoscope is fully deployed across our existing direct product capabilities for Collectibles assumed, and Penn-America wholesale business, all of which have AI developments underway that will affect their business fairly significantly as we start to move through 2027.

It is early to declare any kind of significant victories. I would say that our viewpoint of looking forward is we are incredibly optimistic of the wide range of places that will impact the company. It's too early. It'll become so integrated with the company probably in a year or two, we won't be talking about it because it'll have overtaken our entire company during that time period.

Got it. All right, thanks. I will jump back in the queue.

Your next question comes from Ross Haberman from RLH Investments. Please go ahead.

Morning, Jay. How are you? I just wanted to go back to this earlier question. Was he referring to what you call your acquisition costs and other operating expenses, that $41 million in the quarter? If I understand it right, that number is going to ramp up, you said, through 2027, is that correct?

No, he was actually trying to get the point that it's risen over the last 24 months as we've increased our expenses in development. What I view right now is we're at the pivot point where our expenses have started to level off and will start coming down as a percentage. It affects both acquisition costs and operating expenses. Our acquisition cost is a function of the different lines of business we're in. As we write more Valiant Re business, our commission percentage will be going up as a percentage as you look at the total, while our operating expense, personnel-related expenses, will be coming down as a percentage of the total. The goal is to get back roughly into the 36 range within a two-year period. That hasn't changed.

Temporary loss and you recovered it. Could you explain what happened there?

I'm sorry, Ross, we lost you for a minute. Could you repeat the question?

You talked about a $2.3 million limited partnership, I think it was a loss or a temporary loss. Could you explain what happened there?

Yeah. It's a fair value mark-to-market adjustment loss in the first quarter of $2.3 million that reversed in the second quarter fully. For the year, the fair value change on the limited partnership was zero.

Can I ask what kind of investments that includes?

It's our limited partnership funds that we disclose in our 10-Q. It's a global international fund. It's really down to about $1 million at this point.

Do you plan to stay in it?

Limited partnership.

Is that equity or debt or a combination, or what?

The underlying security is in equity.

Okay. Do you plan to stay in it or reduce it, or what?

We expect to be out of it by the end of the year.

Got it. Just one last question. I know it's not your direct lines of business, but do you have any indirect or direct experience to the Middle East risks or Gen Re exposure there to the Middle East conflict?

No. To the best of our knowledge, we're 100% domestic in the United States at this point in time.

Okay. Just one final question I know I ask every quarter. Has your board changed their mind and decided to use some of your excess capital to buy back shares yet?

Not that I'm aware of.

Okay. Thank you, guys. Enjoy the rest of the summer.

Your next question comes from Tom Kerr from Zacks. Please go ahead.

Just a quick follow-up. I think you said it's possible to get 15% gross premium growth on an annual basis in 2026 compared to 2025.

That is still our belief, that we'll have a pretty good shot at getting there by the end of the year. I know it's hard to believe, given we only have modest growth in the first half, because of the composition of the different products growing at very different rates, we still think that's a reasonable target for the year.

Okay. I was just confirming, that implies super strong double-digit premium growth in the second half of the year.

Yep. Your math tracks with mine.

Correct.

Okay. All right. Thanks. That's all I have. I'll jump back.

Yeah.

We will now move to our web questions. Please go ahead.

Thank you, operator. The first web question is from Ashok Mehta. What are the updated plans and timeline for use of the significant excess capital? What type of ROE can the company as a whole generate when this excess capital is fully deployed?

If you look at our current book of business, what we've tried to do is produce some supplementary statistics to GAAP, where we remove both the excess capital and the investment earnings on excess capital. Brian, why don't you give the update of where those numbers are currently?

Yeah. On the adjusted ROEs, when you take out invested capital and really focus on after-tax operating income, is nearing 13%.

The second part of your question really is when does that occur? We have internal plans to utilize that capital through additional products and expansion of the products we're currently offering. I would expect it would be probably a two and a half year ramp up to fully utilize all the excess capital with our current plans.

Thank you. The next question is from Joel Straka. For the portion of your investment portfolio funded with shareholders' equity, do you expect one-year duration fixed income to be actual, not reported inflation? Would it make sense to own some energy or precious metal companies that would hedge inflation? What's your investment plan if the government represses short-term interest rates?

That's a pretty complex question. We are ideally positioned to reallocate in almost any direction, given the short duration of our portfolio. Our investment committee is driven by three of our board members and outside advisors. They are continuing to be very opportunistic in the short term. I think I would agree with you. As we're looking out over the future for the next 18 to 24 months, adding in some hedges against pure inflation pressures is probably called for. Certainly I will make sure that's relayed to our investment committee.

How is this on the webcast?

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

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

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

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 and that 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 number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. 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. 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 four 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 one 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 challenge 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 Express, Collectibles Insurance Services, assumed reinsurance, now newly branded as Valian 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 and pricing discipline remain my absolute priority, it's clear we didn't react fast enough to increase competition, particularly in the property segments where our loss results have been outstanding. I am encouraged that our wholesale commercial month-over-month written premium comparisons have improved through the first four 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 two 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 three existing direct product groups will be fully integrated and operating by year-end. Just as importantly, we'll be ready to extend this same platform to the new product teams we've begun recruiting.

After three 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. 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 three-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 four points above our long-term targets. Optimizing our operational structure to leverage the technology investment of the last few years, combined with the ability to rapidly expand our product offerings, will be the major tactical objective over the next seven 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%-20% range for the full year 2026. Let me repeat that. We do expect growth in the 15%-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 2026 compared to $14.8 million in 2025. The mark-to-market adjustments include impact from a $2.2 million loss on equities and a $2.3 million market value loss on a 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 from 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 non-core reserves. The current book yield on the fixed income portfolio was 4.3%, with an average duration of approximately one year as of March 31st, 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 double A-minus. Actually, our 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 non-catastrophe and catastrophe performance compared to 71.5% in 2025. Excluding the 2025 California wildfires, the loss ratio of 54.8% is in line with 2025 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.

Valian Re's assumed gross written premiums grew 3% to $11.2 million. Specialty Products was up 2% overall and up 21% excluding terminated project products. In closing, I have four 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 three accident years. Two, our investment portfolio remains positioned to invest in longer duration maturities at higher yields. Three, booked reserves remain solidly above our current actuarial indications. Four, discretionary capital, which we consider to be the amount of consolidated equity in excess of that amount required to maintain the strongest levels with our rating agencies, is $290 million at March 31, 2026. Thank you. We will now take your questions.

Your first question comes from the line of Tom Kerr with Zacks SCR. Your line is now open.

Good morning, guys. Just a little more color on the decline in the E&S markets and the increased competition. What is the visibility on that? I might have missed this. You're still expecting strong double-digit growth the last half of the year. Does that mean it's over, or what am I missing?

No, I think you haven't missed anything. It's a little bit about mixing two 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 earlier 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. That's we're looking at three or four 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%-20% overall growth.

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. 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%-20% range. Yes, it is contradictory to say the market's getting harder and we're still gonna 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, I don't know if you can talk about this, but is there any concerted effort to reduce overall exposure in California? Just thinking of all the craziness in the insurance market there.

Is it crazy? That's a good word for it. I have lots of...

A little bit.

... Lots of four-letter words. No, 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. 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. Yeah, we're essentially out of the homeowners market. The only remaining exposure we have is really in our wholesale commercial book and to a certain extent, obviously in our collectible book.

Got it. Thanks. I'll get back in line.

Your next question comes from the line of Ross Haberman with RLH Investments. Your line is now open.

Morning, Jay. Jay, how are you today?

I'm good.

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? The realized loss, the $2.2 million, was that connected to, I think some of the BDCs you talked about in the last quarter? If not, what did you end up doing with your private private debt exposure? Thank you.

Yes. For starters, on the limited partnership, one of the partnerships has an equity interest that declined $2.3 million during the quarter. You know, we book 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 in that is mark-to-market, which has recovered as of today. $1 million was actually realized.

Okay. Any further exposure to private debt or private debt funds? What are your thoughts about that today?

No, no further exposure.

Okay. Thank you. Sorry, there was just one last question. The stock issuance, I think it 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?

Yeah

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 two, trying to come up with a security that worked to create incentives to stay, but also minimize expense until there was value created. We came up with these A-2 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, are designed. They are also A-2 shares. They're non-dividend paying, so there's no economic cost, real economic cost immediately. They only have value when a combination of two things occur.

One is when there's a change in control and that the employee is still with us. The reality is it's a very strong option-type tool that only has value when there's a change in control. 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 and granted those awards in the first quarter.

Will there be more granted over the coming year, over fiscal 2026?

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. Other than that, we don't expect any this year.

Okay. Thank you. Thanks, guys. The best of luck.

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

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. I think like most people, you know, those kind of spikes, if you're a trader, you can take advantage of it quickly. 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. Okay, thanks. That's all I have.

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

Thank you, Angela. We have two 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. There's a few parts to it, but most of that has been addressed previously. The one part which I will read is: Bill Ackman's Howard Hughes is acquiring Vantage for 1.4 times 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%-20% return on equity should be traded near two times book value. You're currently trading your 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, 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%-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.

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. Yeah, I concur with the observation that a well-run company with a good investment return can generate pretty good returns and hit a two times book value.

That's it.

There are no further questions at this time. 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.