International General Insurance Holdings Ltd.

Good day and welcome to the International General Holdings LTD's first quarter 2025 financial results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Robin Sitters, Head of Investor Relations. Please go ahead.

Thanks, Scott, and good morning and welcome to today's conference call. Today we'll be discussing our first quarter 2025 results. We issued our press release last night, which you would have seen after the market closed. If you'd like a copy of the press release, it's available in the investor section of our website. We also posted a supplementary investor presentation, which can be found on our website on the presentation page in the investor section. On today's call are Executive Chairman of IGI, Wasif Jabsha, President and CEO, Waleed Jabsha, and Chief Financial Officer, Pervez Rizvi. As always, Wasif will begin the call with some high-level comments before handing over to Waleed to talk through the key drivers of the results for the first quarter and finish up with our views on market conditions and our outlook for the rest of the year. At that point, we'll open the call up for Q&A. I'll begin with some customary safe harbor language. Our speaker's remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words. We caution you that such forward-looking statements should not be regarded as a representation by us, but the future plans, estimates, or expectations contemplated by us will in fact be achieved. Forward-looking statements involve risks, uncertainties, and assumptions. Actual events or results may differ materially from those projected in the forward-looking statements due to a variety of factors, including the risk factors set forth in the company's annual report on Forms 20F for the year end of December 31, 2024, the company's reports on Form 6K, and other filings with the SEC, as well as our results press release issued yesterday evening. We undertake no obligation to update or revise publicly any forward-looking statements which speak only as of the date they are made. During this conference call, we use certain non-GAAP financial measures. For a reconciliation of non-GAAP financial measures to the nearest GAAP measure, please see our earnings release, which has been filed with the SEC and is available on our website. And with that, I'll turn the call over to our Executive Chairman, Wasif Javshay.

Thank you, Robyn. And good day, everyone. Thank you for joining us on today's call. As you saw from our first quarter results that we issued last night, we had a relatively good start to 2025, in spite of significantly elevated loss environment, as well as macroeconomic uncertainty and much volatility. Our combined ratio of 94.4% clearly demonstrates the value of our diversification strategy and the resilience that we have built in our company. While we experienced significant volume of market losses this quarter, for the first time in many quarters, we continue to deliver excellent value for our shareholders. For the second consecutive year, We paid a special dividend during the first quarter this year of $0.85 and in total returned $43.5 million to shareholders during this period. The events of the first quarter once again underscore why we exist. We are here to provide peace of mind in times of uncertainty. That is our purpose. We are paid to assume volatility and we are strategically positioned to absorb it and mitigate it as much as possible for our clients and customers. At IGI, we have built a very solid platform that is designed to manage market cycles and the volatility that is the nature of our business. We have deep technical underwriting talent, people who understand the dynamics of their business, who stay close to their markets and respond quickly to changes as they are occurring. Our track record demonstrates our ability to maintain our discipline, execute consistently and move our capital to those areas with the strongest rate momentum and the highest margins while always working with our risk appetite and tolerances. I am comfortable and confident with the foundation we have at IGI to continue to deliver on our promises, not just to be stable, and reliable partner to our clients and customers, but to generate good value for our shareholders over the long term. I will now let Waleed discuss the numbers in more detail and talk about market conditions and our outlook for the year ahead. I will remain on the call for any questions at the end.

Thank you, Wasif. Good morning, everyone, and thanks for joining us on today's call. As Wasif noted, it's definitely been an eventful start to the year for our industry with the significantly elevated loss activity, economic, financial market volatility, and of course, the rising global tension, geopolitical tensions across many areas across the globe. Now more than ever, the promises we've made to our stakeholders ring true. And our purpose of providing peace of mind in times of uncertainty comes sharply into focus. Our structure and strategy at IGI is especially valuable when considering the context of the current uncertainty and our long-term perspective. We've said many times that we're not a quarter to quarter or even a year to year company. We are here for the long haul and we've demonstrated our ability to navigate uncertainty and volatility many times in our history. And now is no different. We will protect our portfolio, find opportunities where we can, and remain committed to servicing our clients and customers as best as we can, whilst generating the best value we can for our shareholders. On a side note, I mean, recently we had the privilege of watching the London Marathon through the streets of our city. I'm not a runner myself, but it occurred to me that what we do with IGI is very much like how a runner prepares for a marathon. They train for months, often years. They maintain a high level of discipline, strong will and consistency in how they prepare so they can endure through any conditions when the time comes. They stay focused and they avoid distraction. And when marathon day arrives, they go out and they get the job done. Our business takes discipline, planning and strong execution. It also takes a lot of patience. We stay focused on the road ahead, so that we're fully prepared when our clients need us most. It's easy to sometimes forget just how risky the world is when we have prolonged periods without intense loss activity, as we've had in recent years. So the events of the first quarter certainly serve as a stark reminder for our industry why we do what we do and why it's absolutely critical we stay focused. Our financial results were solid in Q1, even with the higher level of natural catastrophes. We've had the LA wildfires, of course, and other global cat events, as well as a generally higher level of large risk losses in the specialty lines we write, notably energy and property. These lines, as you're all aware, are by nature higher in severity. In addition to significant volatility in financial markets and a general sense of uncertainty, we also saw a heightened foreign exchange volatility. Some degree of currency volatility has been a regular feature in our financial results. And at times it can be further amplified when the US dollar, our reporting currency, weakens against our major transactional currencies, the pound in particular. And we saw that in the first quarter. So definitely some noise in our numbers and where relevant, I'll point out currency impacts in our key metrics. From a top-line perspective, we grew GWP by over 13% to just over $206 million, and this was primarily driven by growth in the reinsurance segment. And that's where we continue to take advantage of a healthy, positive rating environment. Net-earned premium was just under $113 million, and that included a charge of $7.3 million of retained premiums paid on loss-affected accounts to our reinsurers. And that was split between the short and long tail segments. I just remind you that we are active buyers of reinsurance to protect against volatility in the high severity lines of business that we write. Combined ratio of 94.4% reflects the higher level of losses, as well as the lower volume of net earned premium as a result of the reinstating premiums I just mentioned and the impact that had on the net earned numbers. in addition as well as approximately 10 points of currency revaluation impact on non-US dollar reserves. So here, the comparison to Q1 of 2024 is somewhat exaggerated by the impact of currency where Q1 2025 was negatively impacted, while the Q1 2024 combined ratio benefited from approximately four to five points of currency revaluation. on a like-for-like basis, we're talking about quarter-over-quarter deterioration, a combined ratio of about six to seven points, rather than the 20 points that we see on the numbers. I mean, it's never an exact science, obviously, but this just helps to illustrate the impact that currency plays. All in, we delivered net income of 27.3 million, or 59 cents per share, versus 37.9 million, or 84 cents per share, in Q1 of 2024. And again, this was due to a lower level of underwriting income impacted by the loss activity, higher level of, and the higher level of, you know, net green statement premiums paid on the losses that we've incurred. Core operating income was 19 and a half million or 42 cents per share compared to 40 million or 89 cents per share. Again, for the same reasons of the, lower level of underwriting income, heightened loss. And the heightened losses specifically added 25 points of current accident year, or included 25 points of current accident year CAT losses. CAT losses during the quarter included the California wildfires, as we mentioned earlier, earthquakes in Taiwan, and to a lesser extent, a canal breach due to severe flooding here in the UK. These events impacted both the reinsurance and short tail segments. In addition, we experienced a higher volume of large risk losses in our short tail segments and an aggregation of small, medium-sized losses in our long tail segments. I would note that the heightened loss activity we experienced in the first three months doesn't appear to be the result of anything systemic that we're seeing. Prior year development was favorable in the quarter by $25.8 million. And again, this is where we see the impact of currency movements. The net positive development was primarily driven by positive experience in recent years in the short tail segment, primarily in the property and energy lines, both international and U.S., and to a lesser extent, the reinsurance segment as well. This was partially offset by some negative development in the long tail segment. Here, the negative prior year development was inflated by around $6.5 million and $8 million overall, including Q1, all a part of the currency revaluation. As you're aware, that business is largely transacted in pound sterling, where the short-tail and reinsurance segments are predominantly transacted in US dollars or dollar-pegged currencies. And I'll talk a little bit more about the long-tail segment later. in a moment. The G and A expense ratio showed marginal improvement to 19.1% from 19.5% for the same period of last year. And we expect that given the substantial growth of the previous three years, an expense ratio in the region of 18 to 19% is a more reasonable go forward rate. Some comments on our segment results. If we start with the short tail segment, gross premiums were up 2% in Q1. Earned premium was down 5.3% when compared to the same quarter last year, reflecting the impact of re-insurance premiums on our re-insurance purchases, as mentioned previously. Consequently, underwriting income was also down in the first quarter. driven largely by the higher level of losses and again, the reinstated premiums. We continue to see business opportunities in a number of lines, specifically contingency, ports and terminals, marine cargo, and to a lesser degree, property lines. We've mentioned this on prior calls, I would also single out our engineering portfolio, which is doing extremely well and has grown significantly in the first quarter versus the Q1 of 24. Our teams are capitalizing on opportunities in the US, across the MENA region and Asia-Pac regions. The reinsurance treaty segment, as you all know, is well diversified both by geography and by underlying business lines, showed very positive top-line growth of almost 44% driven by new business. The new business generated at 1.1 and throughout the quarter was mostly in our specialty treaty book. predominantly covering marine energy, PV terror, and to a lesser extent property. While rates at 1.1 were broadly off-peak by about 10-15%, as we said on last quarter's call, the new business still benefited from strong rating adequacy. Earned premium and underwriting income were up 48% and 53% respectively. long tail segment definitely remains the most challenging area of our portfolio and and this was clear again in the uh in the first quarter uh premiums were up slightly a couple million dollars uh in the first quarter driven by essentially new marine liability business uh in the aftermath of the uh baltimore bridge collapse last year um this segment has seen now has now seen um several consecutive quarters of top line contraction and we continue to be very cautious and disciplined in risk selection here as rates continue to decline, although the pace of that decline is slowed somewhat. We record an underwriting loss of $7.5 million versus an underwriting profit of around $10 million in Q1 last year, and this is driven by a number of factors. First, there's the higher level of loss activity, including aggregation of smaller losses. Secondly, the impact of FX, which is most pronounced in this segment and which elevated losses by around $8 million. And third, the impact of reinstatement premiums. I would note here, too, that we are reviewing one area of the PI portfolio, which we're not very pleased with the performance of, and we may opt to discontinue going forward. Again, nothing really systemic that we're seeing. If we turn to the balance sheet, total assets increased by almost 3% to 2.1 billion. Total investments in cash was 1.3 billion. Allocation to fixed income securities, which makes up around 80% of our investments in cash portfolio generated 13.6 million investment income, an increase of more than 15% from Q1 of 2024, with a yield of 4.3%. And we also edged out the duration slightly to 3.4 years during Q1, just to lock in higher rates on new bonds. In Q1, we purchased almost 160,000 common shares, average price per share of $23.80. As of the end of Q1, this leaves approximately 2.1 million shares outstanding or remaining under our existing 7.5 million repurchase authorization. Total equity was just over $650 million at the end of the quarter. And that included the impact of share repurchases and the payment of about just under $40 million in common share dividends, including the special dividends, as Walter mentioned, of 85 cents earlier this year. This compares total equity of just under $655 million at the end of 2024. Ultimately, we recorded a return on average shareholder equity of 16.7% for Q1. Book value per share was $14.65. From a total return perspective, book value per share plus dividends increased by 4.5% at the end of Q1 from end of last year. And we returned $43.5 million to shareholders in Q1. share repurchases and dividends in the first quarter. So as I said to the outset, a relatively good quarter for IGR, notwithstanding all the moving pieces and generally tougher market conditions. What our results demonstrate is not only the resilience of the portfolio we've built, but also the value of our diversification strategy and the excellent and experienced teams we have. Looking ahead, I'm confident that we can continue to find good opportunities to write new business across many lines within our portfolio. On the flip side of the equation, obviously, is some contraction in top line we are seeing and may continue to see in other areas of our portfolio where profitability or coverages just don't meet our thresholds. Again, our diversified strategy gives us more optionality and more levers to work with. And our on-the-ground presence in international markets really does make a difference to us in seeing emerging trends and responding quickly and decisively. I mean, these markets are becoming stronger and more relevant and their ability and desire to retain more business locally within their markets is growing. And we definitely benefit from being on the ground in all these locations. Specifically on what we're seeing in our markets, I mean, there's no doubt there's clearly a heightened degree of competitive pressure. If we start with the long tail segment, I mean, overall, net rates remain adequate in many areas, despite several consecutive quarters of decline. There's no doubt our margins are getting squeezed and we continue to see some signs of rates, but we continue to see some signs of rates stabilizing, not broad stabilization, but in some areas. An example is parts of our PI portfolio where the pace of the rate decline is slowing and the book overall is still rate adequate. I noted earlier that we're reviewing an area of the PI portfolio and just with any underperforming part of the business, we're prepared to walk away if things don't improve. Our outlook on short tail lines continues to be fairly stable in line with prior quarters, although the market is definitely becoming tougher. These lines are becoming increasingly competitive, and this is putting pressure on rates, as we all know. The loss events of the first quarter, particularly the CAT events, unfortunately don't appear to have had much impact on market conditions in any specific areas. And we continue to see more intense competition. Our construction and engineering book, as I noted a few moments ago, as well as parts of our property portfolio, marine lines, contingency, I think will continue to present us with the most opportunities. In the reinsurance segment, we've renewed about two-thirds of our treaty book in the first three months of the year. Another 10% or so at the beginning of April, with the rest of the book renewing over the remainder of the year. We continue to see opportunities for new business that fall within our risk tolerances, and I expect that that will continue throughout the remainder of the year. In the first quarter, new business in the segment was more heavily weighted towards specialty treaty business. which is pretty geographically well diversified across the US and the international markets. Reinsurance markets are continuing to be, from what we're seeing, relatively disciplined from a structure, from a terms and wordings perspective, though pricing pressure is continuing. um it may be off probably around 15 to 20 points by the year by the end of the year from the 10 to 15 points we said at the start of 2025. i mean we're continuing to see carriers pushing hard to build market share especially the bigger players and this is obviously uh only adds to the rating uh pressure um in our geographical uh markets um U.S. has been the biggest growth area for us, and we expect that that will continue. It will continue to be one of the markets with the greatest opportunity for us to write new business. And that is essentially where we are most underweight. But given that this is where the most competition is and higher concentration of cat-exposed risk, we are, as with anything else, taking a more cautious approach, always being mindful of our risk appetite and risk tolerances. We noted on last quarter's call that there is a lower volume of business finding its way to the open market in London, which is where we write most of our U.S. portfolio. The U.S. domestic players are retaining greater shares on their business. Nevertheless, there's still room for us to grow here, no doubt, but both in our specialty treaty book and in short tail lines. And as we've said many times, we don't write any casualty business in the U.S. and have no desire to start. Europe always remains a growth area for us, and the story is similar in the Middle East, North Africa, and Asia-Pac regions. And as mentioned earlier, our expanded presence and capabilities on the ground in these areas are paying benefits. Before we open the call up for questions, just some final thoughts from my end. Like I said at the start of the call, we're fully prepared for these headwinds. Along with our fully unleveraged balance sheet, our underwriting portfolio is diversified on many levels. And we have the right infrastructure with the right people and the capabilities. We are close to our markets and we communicate well with each other. This is the strong foundation that allows us to effectively manage all stages of the market cycle. So we'll continue to do what we always do. stay focused, to execute well, and to execute with discipline. This is how we built the successful track record that we have for more than two decades now, and this is how we will continue to do so. So I'm going to pause right there, and we'll turn it over for questions. Operator, we're ready to take the first question, please.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Michael Phillips from Oppenheimer. Please go ahead.

Michael, are you there?

Operator, are you there?

Yes, I am.

Did Mike disconnect?

He must have. Again, if you'd like to ask a question, please press star then 1. Our next question comes from Nick Elcovigo from Doling Partners. Please go ahead.

Thanks for taking my question. You had called out the development on a particular area of the professional indemnity portfolio. I'm just wondering, is that a similar area that underwent some remediation efforts in the third quarter of 24, or is that a different part of the book? Just any color there would be helpful.

No, it's a similar area, Nick. I mean, we've been keeping an eye on this portfolio for quite some time now. So it's not performing exactly like we want it to. And again, nothing systemic though. And something we're reviewing closely and could very much shut down at some point this year.

Got it. Is there a specific – because that book is predominantly UK E&O. Is there a specific underlying class there that is causing the issue, or is there any other color around it?

No, it is all UK, and it just forms part of the portfolio. It's a segment that we've identified that doesn't really – is not really stacking up the way we want it to.

Okay, that's all I have. Thank you.

Our next question comes from Michael Phillips from Oppenheimer. Please go ahead.

Hey, good morning. Can you guys hear me now? Yeah, yeah, we can hear you. Okay, good. Sorry about that. I don't know what that was. Thanks for your patience, and thanks for your time. I guess I wanted to go through your comments on obviously a lot of moving parts with the CATS and the reinstatement premium and the FX, but The combined ratio deterioration around 20 points. You mentioned when you back out the FX is more like six to seven. I think the 20 points and the PowerPoint said back out 10. So I get you to around 10 points. I just wanted to clarify that. And we can take this offline if need be. But I guess really what I wanted to ask was if we can clarify that is if you look at the current action year loss ratio, it's up around four and a half or 4.6 points or so. Can you talk about that by segment? and where you're seeing most of that. And I guess going forward, it's kind of a mid-50s, kind of a good run rate for this year, do you think? Thanks.

Yeah, no, thanks for the questions, Mike. The comment about the combined ratio and a 67-point difference is when you compare Q1 of this year and the impact that the currency movements had on this year's numbers against Q1 of last year, and the impact that the currency movements had on the numbers of Q1 last year. This year, the pound strengthened, and so that's impacting negatively our revaluation of reserves. In Q1 of 2024, the pound weakened, and that impacted positively our revaluation of reserves. So if you sort of Again, as I said on the call, it's never an exact science. We run the exercise because it doesn't impact us more than your typical U.S. listed company. When you take all that noise away, this year's combined ratio would have been lower by about 10 points. Q1 of 24 combined ratio would have been higher by about 4 or 5 points. And then the difference when you then compare apples to apples, if you want to call it that, right, is that 67 points that you asked about and questioned. So in true actuality, in reality, the difference between the performance of Q124 and Q125 is not as vast as the numbers point out. In terms of the current year accident loss ratio, I mean, a lot of that was in the reinsurance and the short tail segments. We mentioned the California fires, which pretty much mostly impacted our reinsurance segments. And then you had some cat losses within the short tail segment, as well as some large risk losses, especially on the onshore energy side. it was just one of those quarters where loss activity was higher, you know? Um, and we, we've always said, you know, we, we will have these quarters. We have, we've had a fantastic run of relatively manageable volatility. Um, and this quarter wasn't, you know, bad, I wouldn't call it, you know, was, was, uh, um, uh, uh, a bad quarter. It was just, the losses happened to occur in Q1 and, and, uh, you know, it's only Q1 and we'll continue plowing through, you know, for the rest of the year.

No, okay, thank you. I guess it's just a side, the comment is just hard. You talk about the impact of XX and the six or seven points on an apples to apples, but on the loss ratio, it's kind of hard to see where that is. So it just makes it a little confusing. That's just a comment, I guess. Let's fill in the topic of tariffs. We talk here in the United States, it's all about impacts on personal auto and physical damage and some homeowners and property. And you guys clearly have some property exposure. But I guess I was thinking more on any comments you might have on impacts tariffs may have on your marine business, on your port business and things like that. Have you seen anything yet? Do you expect to see anything? And if so, what might that look like on those businesses, if anything at all?

I mean, we haven't seen anything yet. I think the business that we are in, the tariff situation is not going to have much or a significant impact. I mean, it might impact cargo values, obviously, and thus premiums might go up as a result. But in terms of any sort of challenges that it creates or obstacles that it creates for the underwriting of our portfolios and management of our exposures, we don't see it and have not seen anything so far that would make life more difficult for us.

Okay. And then, Willie, it sounds like despite rates down 5 to 10 in reinsurance and maybe going to 15 as the year progresses, you're still positive on rate adequacy and still positive on growth opportunities in reinsurance despite a uh, softening rate environment there.

Yeah. I mean, you've got to, I think, I think, I mean, you know, we've always, we talk about rate movements. We talk about rate adequacy. We've always said, it's not, it's not about rate movement. I mean, we've, we've, we've now across many lines of business for the last five, six years benefited from significant rate improvement. You know, anybody who, who, who works in this business, um, uh, understands and knows that that doesn't last. And at some point, rates will stabilize and then come down. And so that's why we always say, and we tell our underwriters, it's not about rate movement. It's all about rate adequacy. At the end of the day, if the rate is adequate, we will continue to write the business. And in many areas, the rating environment is still adequate. Yes, are rates down? 100%. Is that going to squeeze margins? 100%. It's a, you know, simple law of numbers. But also for us, I think that one of the advantages that we have is that in a lot of these areas, you know, we're coming off a much lower base as well. So our, you know, capability of growing does come a lot easier than it does with the larger you know, players that have much more or significantly bigger portfolios. And we can choose to be selective. Listen, at the end of the day, we all have, you know, the ambition is always to grow and maybe the market, you know, moves around a bit, you know, depending on what happens throughout the rest of the year. Our aim will always to go out there and fight and find the business that we want to write. If we can't or if we find it and it's not at the levels that are acceptable to us, we won't write it. And if we have to shrink inside, then we will. I would point out, I mean, Q1 showed good growth overall, but that was more on the reinsurance side. You saw the growth in short tail and long tail was practically none, very marginal. And as you know, Q1 is a very heavy industry. reinsurance renewal quarter. So I would make clear that the growth that was achieved in Q1 should not be taken as an indication of what can be achieved for the rest of the year.

Okay. Thank you. I guess thanks for that. Lastly, just one specific segment. Let's see if there's any changes in your commentary. It's been over a year that you've been you know, negative on this market and there's been lots of losses. I don't know if that's changed at all. Does the outlook for aviation for you change this year at all?

I mean, aviation, I think, is still extremely challenging. Our book has reduced significantly. But, you know, last year, the aviation book had a very solid profitability and Q1 this year, the same. um you know we've got a good team uh of underwriters we're cutting the book back um writing the business that we comfortable with sticking to the business that we're comfortable with and letting go of of the business that we're not there are a lot of people out there doing very silly things within this business line um but we're not playing that game um and our results in the line so far i mean have not uh shown or given any signal that we should be exploring a change of heart with this business line. It's performing quite well, actually.

Okay. No, good. Thank you for that, Waleed, and thanks for everything else. Have a good day. Thank you. Thanks, Mike. You too.

This concludes our question and answer session. I'd like to turn the conference back over to management for closing remarks.

Just a quick thank you really for joining us all today and thank you for your continued support. As always, if you've got any questions, please contact Robin and she'll be happy to help. And we look forward to speaking to you all on next quarter's call. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.