Fidelis Insurance (FIHL) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an operating net income of $127 million, or $1.21 per diluted common share, resulting in an annualized operating return on average equity (ROAE) of 21.4%, an increase of five points year over year [11][12] - The combined ratio for the quarter was 79%, the best as a publicly traded company, and an improvement of more than eight points from the same quarter last year [4][13] - The diluted book value per share grew by $1.25 in the quarter, reaching $23.29, which is an increase of 8.3% since year-end [11][12] Business Line Data and Key Metrics Changes - Gross premiums written increased by 8% to $798 million for the quarter, with year-to-date gross premiums written at $3.7 billion, also an increase of 8% compared to the same period last year [11][12] - In the insurance segment, gross premiums written grew by 4% to $606 million, while the reinsurance segment saw gross premiums written increase to $192 million from $159 million in the prior year period, driven by new business opportunities [11][12] - The direct property book grew by 9.5% year on year, supported by new opportunities at compelling pricing [6][12] Market Data and Key Metrics Changes - The company experienced strong performance in the property and asset-backed finance sectors, with overall RPI remaining broadly flat, reflecting the differentiated position and product diversification [6][7] - The reinsurance segment delivered 20% year-on-year premium growth, driven by enhanced pricing at 7.1, particularly benefiting from post-wildfire opportunities [9][12] Company Strategy and Development Direction - The company is focused on driving profitable growth through strategic capital allocation and expert risk selection, balancing profitable growth with returning capital to shareholders [5][17] - The ongoing expansion of underwriting partnerships is a strategic priority, with the total number of underwriting partners growing to the mid-single digits [19][20] - The company aims to maintain a disciplined approach to underwriting, even as competition increases in certain lines, ensuring attractive margins and risk-reward dynamics [22][24] Management's Comments on Operating Environment and Future Outlook - Management remains bullish about the market, indicating that the company is in a prevailing hard market with opportunities for growth [29][30] - The company is cautious in the aviation sector, which remains highly competitive, while expressing confidence in the marine sector due to stable pricing and new business opportunities [64][68] - Management emphasized the importance of maintaining underwriting discipline and leveraging strong relationships with brokers and clients to capitalize on market opportunities [70][72] Other Important Information - The company repurchased 1.8 million common shares for $32 million at an average price of $17.40 per share during the quarter, with additional repurchases following [17][18] - The effective tax rate for the first nine months of the year was 18.8%, reflecting a greater proportion of pre-tax income generated in higher tax rate jurisdictions [16] Q&A Session Summary Question: Thoughts on reinsurance growth and expectations for 2026 - Management remains optimistic about the market, indicating that they expect to continue seeing growth opportunities across their portfolio, particularly through new underwriting partners [29][30] Question: Stability of RPIs and competitive pressures - Management acknowledged that while there is pressure in certain lines, they are able to maintain strong retention rates and margins, leveraging their leadership position [32][33] Question: Exposure to Caribbean hurricane losses - Management indicated that while there is some exposure, it is too early to provide detailed numbers, but they expect any net losses to fall within their expected cap load [51] Question: Partnerships and capabilities in data center construction - Management highlighted their ability to deploy meaningful line sizes through their partnership structure, allowing them to negotiate favorable terms and conditions [52][53] Question: Valuation concerns and market multiples - Management agreed that they believe the company is undervalued relative to peers and emphasized the importance of consistent strong underwriting results to unlock value [46][47]