Fidelis Insurance (FIHL) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company recorded top line growth of 14% for Q1 2025, with gross premiums written amounting to $1.7 billion, compared to the same quarter last year [18][7] - The combined ratio for the quarter was 115.6%, impacted significantly by catastrophe losses, particularly from California wildfires, which accounted for $333 million in losses [20][21] - Net investment income increased to $50 million, up from $41 million in the prior year, reflecting a higher yield on cash and fixed income portfolios [25] Business Line Data and Key Metrics Changes - In the insurance segment, gross premiums written increased by 7% to $1.3 billion, driven by new business and asset-backed finance [19] - The reinsurance segment saw a 39% increase in gross premiums written to $456 million, largely due to new business and reinstatement premiums related to wildfire losses [19] - The attritional loss ratio improved to 22.7% from 30% in the prior year, indicating better performance in the overall portfolio [20] Market Data and Key Metrics Changes - The company noted a favorable trading environment with strong margins across various lines of business, despite increasing competition in some areas [9][8] - The marine portfolio continued to grow year-on-year, primarily driven by new construction business [10] - The aviation and aerospace premiums saw a reduction year-on-year due to the timing of a line slip renewal [11] Company Strategy and Development Direction - The company remains committed to pursuing profitable underwriting opportunities and strategic capital management, focusing on a diversified portfolio with no casualty exposure [6] - The management emphasized the importance of active exposure management and the strategic use of outward reinsurance to navigate current market conditions [8][12] - The company is exploring new opportunities in highly accretive business segments to maximize returns and access new risks [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to achieve approximately 10% growth in gross premiums written for the year, citing a strong trading environment [36][42] - The company is actively monitoring global economic conditions and adjusting its underwriting strategy accordingly, particularly in response to inflation and political risks [30][29] - Management highlighted the importance of maintaining strong relationships with clients and brokers to access business at preferential terms [34] Other Important Information - The company repurchased $41.5 million of common shares at an average cost of $15.63 per share year-to-date, indicating a commitment to returning capital to shareholders [14][27] - The company has settled or is in various stages of settlement discussions for approximately 80% of its total exposure related to the Russia-Ukraine aviation litigation [15][90] Q&A Session Summary Question: What are the growth opportunities in the second half of the year? - Management acknowledged a timing headwind in the aviation line and expressed confidence in achieving 10% growth for the year, citing a diversified portfolio [40][42] Question: Can you discuss the drivers behind the favorable reserve movement? - Management noted that the favorable prior year development of $41 million was driven by strong performance in the attritional book and reserve releases from prior catastrophe events [44][45] Question: Why is the stock trading at a discount to book value? - Management agreed on the undervaluation and emphasized the need to continue performing well to build investor confidence [48][50] Question: What is the impact of the pending UK aviation litigation on share repurchases? - Management indicated that the strong capital position allows for both profitable underwriting and share repurchases, with plans to continue buying back shares if prices remain attractive [82][85] Question: How is the company addressing the competitive environment in property insurance? - Management highlighted the ability to implement pricing adjustments in real-time and the strong demand from the admitted market, allowing for continued growth [92][94]