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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
11.
Income Taxes

 

Global Indemnity Group, LLC is a publicly traded partnership for U.S. federal income tax purposes and meets the qualifying income exception to maintain partnership status. As a publicly traded partnership, Global Indemnity Group, LLC is generally not subject to federal income tax and most state income taxes. However, income earned by the subsidiaries of Global Indemnity Group, LLC is subject to corporate tax in the United States and certain foreign jurisdictions.

As of December 31, 2024, the Company conducts business in the United States where the statutory income tax rate is 21% and conducts certain functions in Ireland where the statutory income tax rate is 25% on non-trading income, 33% on capital gains and 12.5% on trading income. The statutory income tax rate of each country is applied against the expected annual taxable income of the Company in each country to estimate the annual income tax expense.

The Company's income before income taxes is derived from its U.S. subsidiaries for the years ended December 31, 2024, 2023, and 2022.

 

The following table summarizes the components of income tax expense:

 

 

 

Years Ended December 31,

 

(Dollars in thousands)

 

2024

 

 

2023

 

 

2022

 

Current income tax expense:

 

 

 

 

 

 

 

 

 

Foreign

 

$

41

 

 

$

14

 

 

$

4

 

U.S. Federal

 

 

374

 

 

 

2,207

 

 

 

422

 

Total current income tax expense

 

 

415

 

 

 

2,221

 

 

 

426

 

Deferred income tax expense:

 

 

 

 

 

 

 

 

 

U.S. Federal

 

 

11,300

 

 

 

5,326

 

 

 

2,395

 

Total deferred income tax expense

 

 

11,300

 

 

 

5,326

 

 

 

2,395

 

Total income tax expense

 

$

11,715

 

 

$

7,547

 

 

$

2,821

 

 

The tax provision has been calculated using income before income taxes in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate.

The following table summarizes the differences between the actual income tax expense and differences from the income tax calculated at the statutory U.S. federal tax rate:

 

 

 

Years Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

(Dollars in thousands)

 

Amount

 

 

% of Pre-
Tax Income

 

 

Amount

 

 

% of Pre-
Tax Income

 

 

Amount

 

 

% of Pre-
Tax Income

 

U.S. federal income tax at statutory rate

 

$

11,541

 

 

 

21.0

%

 

$

6,925

 

 

 

21.0

%

 

$

414

 

 

 

21.0

%

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-deductible executive compensation

 

 

420

 

 

 

0.7

 

 

 

1,753

 

 

 

5.3

 

 

 

—

 

 

 

—

 

Dividend exclusion

 

 

(61

)

 

 

(0.1

)

 

 

(76

)

 

 

(0.2

)

 

 

(89

)

 

 

(4.5

)

Meals & entertainment

 

 

56

 

 

 

0.1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Change in tax status

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

700

 

 

 

35.5

 

Parent income treated as partnership for tax

 

 

(934

)

 

 

(1.7

)

 

 

(1,260

)

 

 

(3.8

)

 

 

2,156

 

 

 

109.4

 

Transaction costs

 

 

653

 

 

 

1.2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other

 

 

40

 

 

 

0.1

 

 

 

205

 

 

 

0.6

 

 

 

(360

)

 

 

(18.3

)

Income tax expense

 

$

11,715

 

 

 

21.3

%

 

$

7,547

 

 

 

22.9

%

 

$

2,821

 

 

 

143.1

%

The effective income tax rate for 2024 is 21.3%, compared with an effective income tax rate of 22.9% for 2023 and 143.1% for 2022. The differences between years are primarily due to the change in income or loss at the parent company, treated as a partnership for tax purposes, as well as the impact of non-tax deductible transaction costs related to the Company's internal reorganization executed in 2024.

Intra-entity transfers of certain intangible assets were recorded on this internal reorganization resulting in tax expense on sale of $3.8 million, offset by the establishment of deferred tax assets and related tax benefits of $3.8 million. The tax-deductible amortization related to the transferred intangible assets will be recognized over a period of 15 years.

The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets at December 31, 2024 and 2023 are presented below:

 

(Dollars in thousands)

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Discounted unpaid losses and loss adjustment expenses

 

$

9,429

 

 

$

9,668

 

Unearned premiums

 

 

7,564

 

 

 

7,472

 

Net operating loss carryforward

 

 

4,352

 

 

 

16,540

 

Partnership K1 basis differences

 

 

943

 

 

 

753

 

Capital loss carryforwards

 

 

4,546

 

 

 

4,241

 

Investment impairments

 

 

390

 

 

 

337

 

Stock options

 

 

462

 

 

 

416

 

Stat-to-GAAP reinsurance reserve

 

 

1,668

 

 

 

1,668

 

Unrealized loss on securities available-for-sale

 

 

2,526

 

 

 

5,583

 

Depreciation and amortization

 

 

—

 

 

 

1,368

 

Software

 

 

1,045

 

 

 

1,260

 

Intangible assets

 

 

3,805

 

 

 

—

 

Goodwill

 

 

172

 

 

 

—

 

Other

 

 

1,799

 

 

 

998

 

Total deferred tax assets

 

 

38,701

 

 

 

50,304

 

Deferred tax liabilities:

 

 

 

 

 

 

Intangible assets

 

 

2,961

 

 

 

3,036

 

Deferred acquisition costs

 

 

8,639

 

 

 

8,914

 

Bond discount

 

 

3,989

 

 

 

1,550

 

Other

 

 

653

 

 

 

2

 

Total deferred tax liabilities

 

 

16,242

 

 

 

13,502

 

Total net deferred tax assets

 

$

22,459

 

 

$

36,802

 

 

The deferred tax assets and deferred tax liabilities listed in the table above relate to temporary differences between the Company’s accounting and tax carrying values and carryforwards for its companies in the United States. Management believes it is more likely

than not that the remaining deferred tax assets will be completely utilized in future years. As a result, the Company has not recorded a valuation allowance at December 31, 2024 and 2023.

The Company has a net operating loss (“NOL”) carryforward and a capital loss carryforward of $20.7 million and $21.6 million, respectively, as of December 31, 2024, which begins to expire in 2038 and 2027, respectively, based on when the original carryforwards were generated. The Company’s NOL carryforward and capital loss carryforward were $78.8 million and $20.2 million, respectively, as of December 31, 2023.

The Company and some of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various U.S. states and certain foreign jurisdictions. The Company is no longer subject to U.S. federal tax examinations by tax authorities for tax years before 2021.

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties whereby it only recognizes those tax benefits that have a greater than 50% likelihood of being sustained upon examination by relevant taxing authorities. All tax benefits recognized by the Company in 2024, 2023, and 2022 have a greater than 50% likelihood of being sustained upon examination by relevant taxing authorities.

The Company classifies all interest and penalties related to uncertain tax positions as income tax expense. The Company did not incur any interest and penalties related to uncertain tax positions during the years ended December 31, 2024, 2023, and 2022. As of December 31, 2024, the Company did not record any significant liabilities for tax-related interest and penalties on its consolidated balance sheets.