Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

12.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, 2022, the statutory income tax rates of the countries where the Company conducts or conducted business are 21% in the United States, 0% in Bermuda, 19% in the United Kingdom and 25% on non-trading income, 33% on capital gains and 12.5% on trading income in the Republic of Ireland. 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 (loss) before income taxes is derived from its U.S. subsidiaries for the years ended December 31, 2022 and 2021. For the year ended December 31, 2020, the Company's income (loss) before income taxes from its non-U.S. subsidiaries and U.S. subsidiaries was as follows:

Year Ended December 31, 2020 (Dollars in thousands)	Non-U.S. Subsidiaries			U.S. Subsidiaries			Eliminations			Total
Revenues:
Gross written premiums	$	46,654		$	559,949		$	—		$	606,603
Net written premiums	$	46,654		$	501,513		$	—		$	548,167
Net earned premiums	$	53,384		$	514,315		$	—		$	567,699
Net investment income		17,186			20,348			(9,142	)		28,392
Net realized investment losses		(3,867	)		(10,795	)		—			(14,662	)
Other income		148			1,970			—			2,118
Total revenues		66,851			525,838			(9,142	)		583,547
Losses and Expenses:
Net losses and loss adjustment expenses		12,874			323,327			—			336,201
Acquisition costs and other underwriting expenses		17,827			197,780			—			215,607
Corporate and other operating expenses		23,357			18,641			—			41,998
Interest expense		869			24,065			(9,142	)		15,792
Loss on extinguishment of debt		3,060			—			—			3,060
Income (loss) before income taxes	$	8,864		$	(37,975	)	$	—		$	(29,111	)

The following table summarizes the components of income tax expense (benefit):

	Years Ended December 31,
(Dollars in thousands)	2022		2021		2020
Current income tax expense:
Foreign	$	4	$	54	$	—
U.S. Federal		422		—		163
Total current income tax expense		426		54		163
Deferred income tax expense (benefit):
U.S. Federal		2,395		3,395		(8,268	)
Total deferred income tax expense (benefit)		2,395		3,395		(8,268	)
Total income tax expense (benefit)	$	2,821	$	3,449	$	(8,105	)

The weighted average expected tax provision has been calculated using income (loss) before income taxes in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate.

The following table summarizes the differences between the tax provision for financial statement purposes and the expected tax provision at the weighted average tax rate:

	Years Ended December 31,
	2022						2021						2020
(Dollars in thousands)	Amount			% of Pre- Tax Income			Amount			% of Pre- Tax Income			Amount			% of Pre- Tax Income
Expected tax provision at weighted average	$	414			21.0	%	$	6,889			21.0	%	$	(7,975	)		27.4	%
Adjustments:
Tax exempt interest		—			—			—			—			(2	)		—
Dividend exclusion		(89	)		(4.5	)		(78	)		(0.2	)		(202	)		0.7
Non-deductible interest		—			—			—			—			1,773			(6.1	)
Change in tax status		700			35.5			—			—			(1,704	)		5.8
Parent income treated as partnership for tax		2,156			109.4			(4,057	)		(12.4	)		(533	)		1.8
Other		(360	)		(18.3	)		695			2.1			538			(1.8	)
Effective income tax expense (benefit)	$	2,821			143.1	%	$	3,449			10.5	%	$	(8,105	)		27.8	%

The effective income tax expense rate for 2022 was 143.1%, compared with an effective income tax expense rate of 10.5% for 2021 and an effective income tax benefit rate of 27.8% for 2020. The difference between years is primarily due to a change in income or loss at the parent company which is treated as a partnership for tax.

The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets at December 31, 2022 and 2021 are presented below:

(Dollars in thousands)	2022		2021
Deferred tax assets:
Discounted unpaid losses and loss adjustment expenses	$	9,522	$	8,696
Unearned premiums		10,581		11,049
Net operating loss carryforward		24,454		28,584
Partnership K1 basis differences		1,234		795
Loss on derivative instruments		—		1,763
Capital loss carryforwards		2,338		—
Investment impairments		124		147
Stock options		1,465		2,008
Stat-to-GAAP reinsurance reserve		1,668		1,517
Unrealized loss on securities available-for-sale		10,568		—
Depreciation and amortization		1,211		1,613
Intercompany transfers		—		—
Other		1,353		1,826
Total deferred tax assets		64,518		57,998
Deferred tax liabilities:
Intangible assets		3,146		4,395
Unrealized gain on securities available-for-sale and investments in limited partnerships included in accumulated other comprehensive income		—		1,601
Deferred acquisition costs		13,628		12,670
Partnership K1 basis differences		—		1,709
Other		645		294
Total deferred tax liabilities		17,419		20,669
Total net deferred tax assets	$	47,099	$	37,329

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, 2022 and 2021.

The Company has a net operating loss (“NOL”) carryforward of $116.4 million as of December 31, 2022, which begins to expire in 2036 based on when the original NOL was generated. The Company’s NOL carryforward as of December 31, 2021 was $136.1 million.

The Company did not have any Section 163(j) ("163(j)") carryforward as December 31, 2022 or 2021. The 163(j) carryforward relates to the limitation on the deduction for business interest expense paid or accrued.

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 2019.

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 2022, 2021, and 2020 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, 2022, 2021 and 2020. As of December 31, 2022, the Company did not record any significant liabilities for tax-related interest and penalties on its consolidated balance sheets.