International General Insurance Holdings Ltd.

Good day and welcome to the International General Insurance Holding Limited second quarter and first half 2025 financial results conference call. All participants are 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 that this event is being recorded. I would now like to turn the conference over to Robin Sidders, head of investor relations. Please go ahead.

Thanks, Nick. And good morning and welcome to today's conference call. Today we'll be discussing financial results for the second quarter and first half of 2025. You will have seen our press release that we issued after the market closed yesterday. That press release can be found on our website at .iginsure.com. We've also posted a supplementary investor presentation, which can be found also on our website on the presentation page in the investor section. On today's call, our executive chairman of IGI, Wasif Jabshay, President and CEO Waleed Jabshay, 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 you through the key drivers of our results for the second quarter and first half and finish up with our views on the market conditions and the outlook for the remainder of 2025. At that point, we'll open up the call for questions that any of the dialers may have. I'll begin with a customary Safe Harbor language. Our speakers' 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 that the future plans, estimates, or expectations contemplated by us will in fact be achieved. Forward-looking statements involve risks, uncertainties, and assumptions. Actual events and 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 that was amended 31st of December, 2024, the company's reports on form 6K, and other filings with the SEC, as well as our results press release that we issued yesterday evening. We undertake no obligation to update or revise publicly any forward-looking statements, which speak only of the date they are made. During this call, we use certain non-GAAP financial measures for reconciliation of non-GAAP measures to the nearest GAAP measure. Please see our earnings release, which has been filed with the SEC, and as I said, is available on our website. With that, I'll turn the call over to our executive chairman, Wasif Jabsha. Wasif.

IGI once again delivered excellent results for the second quarter and third six months of 2025. We generated net income of $34.1 million and $61.4 million for the second quarter and third six months, respectively. We also generated net income of $34.1 million and this resulted in an annualized return average equity of .8% for the second quarter and .6% first half of the year. I'm very pleased with our strong performance, particularly our ability to maintain our focus, exercise discipline, and execute consistently. Given the very international nature of our portfolio, as well as our presence in many regions, we are often directly exposed to some form of geopolitical and or macroeconomic uncertainty. Over more than 20 years, we have consistently demonstrated our strength and proficiency in the development of the world. In managing through all stages of cycling, moving our capital to those areas with the strongest rate momentum and the highest margins and reducing in other areas where conditions are such that we are not able to meet our proctorist targets. That is the fairness and the benefit of having a very diversified platform and always working within our risk, appetite, and policies. Our value at IGI is in our ability to generate consistently high quality results in any stage of market cycle so that we continue to reward our shareholders who have put their trust in us and supported us. So far in 2025, in addition to strong earnings, our proactive capital management has resulted in us growing book value per share by .4% to $15.36 per share in the third half of the year and depending on the total of 77 million dollars to shareholders in dividends and share repurchase. I will now let Walid discuss the numbers in more detail and talk about market conditions and our outlook for the remainder of the year. I will remain on the call for any questions at the end.

Thank you, Wasif. Good morning, everyone, and thank you for joining us. On the committee, we had an excellent second quarter in the first half of 2025 and as Wasif indicated, we're in a strong position to continue through the second half of the year. We're still seeing decent conditions and great data to see across much of our portfolio and pursuing opportunities to enhance our distribution capabilities that will ultimately generate additional value. Our goal and our promise is to create opportunities that will generate consistent and sustainable value for the long term and we've demonstrated over more than 20 years history, our strength is our ability to do this throughout the market cycle. In 2025, while conditions remain generally healthy, there are areas of our portfolio which are facing slightly more of better pressures. We've mentioned those in previous calls. So we're focusing on those lines and markets that remain healthier and reducing our exposure in areas where we can't generate the acceptable level of risk of return. At the end of the day, this is what cycle management is all about. Before I go through the numbers in detail, it's important to note upfront the meaningful impact that foreign currency will enclave in our results once again this quarter. And that is specifically on the revaluation of our non-US dollar denominated most reserves and how this flows through a number of blind items in our results, most significantly on our underwriting results as you saw for both, you saw that in both the second quarter and the first six months of the year. As you know, our underwriting portfolio as was mentioned is very international in nature. Similarly, our investment portfolio is also very geographically diversified. This ensures, however, that we're always striving to achieve as accurate a match as possible between our assets and our liability, although it's never the exact same. Now roughly half of our underwriting portfolio is transacted in either non-US dollars or non-US dollar paid currencies. And this by far is most pronounced in our long tail sector, which as you observed, is represented around 22% of total gross trade. About 80% of the sports portfolio is transacted in sterling, in very British pounds, but more importantly, almost half of the group's total reserves are held against the long tail sector. And the sheer nature of long tail business means these reserves are held for a longer period of time. And for IGI, that means about six to eight years on average. So in the US dollar, our financial reporting currency, when the US dollar weakened meaningfully against the pound as it did at the start of the year, and even more so during the second quarter, the resulting impacts on the revaluation of our reserves undoubtedly led to a somewhat distorted view of the underwriting results, specifically our loss ratio, and obviously therefore ultimately our combined ratio, and also our core operating results. So as I go through the results, I'll try and provide the dollar or percentage value impact where meaningfully distort period over period comparisons in our results. Now specifically on the numbers and starting with the top line, gross premiums in the second quarter of 2025 were just under $190 million, reflecting a decrease of 8.7%. And this is reflected in both the short tail and the long tail segments where competitive pressures are more prevalent. For the first six months, gross premiums were up almost 2% to around $395 million, primarily driven by growth in the reinsurance segment where we continue to take advantage of the more positive market conditions, which I'll talk about more in a moment. Net earned premium was $18 million for the second quarter of 2025, versus around $122 million for the same period last year. For the first six months, net premiums earned were $227.8 million, versus approximately $236 million. For both the second quarter and first six months of this year, net premiums earned included the impact of reinstatement premiums, which we mentioned on the last quarter's call on loss-effective business amounting to $2.6 million this quarter, and $9.9 million for the first half. Again, I would note that we are strategic buyers of reinsurance to help mitigate volatility in the high severity lines of business that we participate in. The combined ratio for the second quarter was 90.5%. The combined ratio for the first half was 92.4%. Now, these were negatively impacted by the revaluation of those non-US dollar loss reserves. The impact amounted to approximately 21 points in Q2 and 15 points in the first half. You hear these numbers, and this really underscores the strength of our fundamental performance in what is becoming a more competitive market. The first six months also saw a higher volume of losses when compared to the same period in Q24, especially in Q1, as well as a lower volume of net earned premiums from the reinstatement premium compact, which is a couple of minutes ago. All in, we delivered net income of $34.1 million or 77 cents per share for the second quarter versus $32.8 million or 73 cents per share for the second quarter of last year. It's important to note here that when you look at the second quarter specifically, even though our combined ratio was almost 10 points high and our net earned premium base was almost .6% lower, we still produced a net income that was higher by 4% over the second quarter of Q24, clearly illustrating the strength of our underlying performance. For the first half of this year, we generated net income of $61.4 million or $1.36 per share versus $70.7 million or $1.55 per share for the first half of last year. The period over period decline in net income in the first half was the result of a lower level of underwriting income, again due to currency revaluation movements in large part, but also a greater level of loss activity in the higher level of net premium savings payments. Overall, we're getting income of $22.8 million over 51 cents per share in Q2 compared to 33.2 million or 74 cents per share in Q2 last year. For the first six months of 25, co-operating income was 42.2 million or 93 cents per share versus 73.3 million or $61 cents per share. With the difference again, primary is attributable to a lower level of underwriting income impacted by the currency revaluation. And there was a high level of loss activity specifically 16.9 points of the current tax and the opportunity of cap losses that we mainly saw in the first quarter. Prior year development was unfavorable in Q2 amounting to 6.3 million, primarily driven by the impact of about just under $20 million currency revaluation. Out of which, and the majority as we mentioned earlier is in the lock down segment, came up to about almost $14 billion as that business as we said is largely transacted in pounds 30. For the first six months prior year development was favorable by just under $20 million versus 41.5 million for the first half of last year. With the lower volume primarily attributable to currency revaluation which in the first half amounted to about $32 million. So on a constant effects basis or on an apples to apples basis, we would have seen favorable development of just under $13 million for the second quarter and about $52 million for the first six months of this year. And I'll talk more about the long tail segment in a moment. The G&E expense ratio was 21% in Q2 versus .1% for the first half. Now a few comments on our segment results. In our short tail segment, gross payments were down .5% and .2% for the second quarter and first half respectively. Consequently, our payments were also down .4% and .9% for Q2 and H1 of 25 compared to the same periods in 24. The decline in both periods reflects the lower level of written premiums as well as the impact of reinstated premiums on our reinsurance purchases. The result underwriting income was up almost 21% to 25.6 million in the second quarter, largely due to a lower level of losses recorded in Q2 versus the same period previous year. For the first six months, underwriting income was just over 50 million, down about 10 points when compared to the first half of 24. I mean, we continue to see new business opportunities in a number of lines, particularly engineering and construction in marine lines and to a lesser degree, contingency and property lines. Although broadly speaking, the rating environment and pricing remains adequate. But engineering continues to stand out as an excellent growth opportunity, seeing a lot of infrastructure projects and opportunities coming to many of our markets across the globe. Growth premiums in the reinsurance segment, the treaty segment, which is, as we've just always say, is very well diversified geographically. We're flat compared to the second quarter of last year, while the first six months of 25 showed growth of about 33% versus the same period in 24, primarily driven by strong renewal and new business generated in Q1 and more around 1st of January. Growth was mainly in marine, energy, PV, terror, and to an utter extent, the property lines. Now, conditions generally remain strong and pricing adequate in this business, in this line, in this segment, but there is definitely increasing evidence of competitive pressures. Brand premium was up just over 21% in Q2 and about a third in the first half of 25 compared to the same period the previous year. Underwriting income was up almost 60% in the second quarter and about 55% in the first half of this year compared to the same period last year. The significant increase in that underwriting income in this segment clearly illustrates the shift of focus, which shift in focus, which we always talk about, that we made a year ago to higher margin insurance business. And we're now seeing this flow through the financial results. The long-term segment continues to be the area of our portfolio that is definitely most challenging. This has been the case now for many quarters. We've said time and time again, and I expect will continue to be the case or at least in the future. I mean, this is the segment where our cycle management capabilities are clearly evident as we've perfectly constructed the both by around 15% since 2021, after several years of healthy top line role when market conditions were very much in our favor. And we've been talking, we've been taking a very cautious approach to rates that have been consistently now declining for many, many quarters, albeit from very high levels. But the pace of decline is now showing signs of slowing down. In the second quarter and first half of 2025, gross premiums were down almost 12% and almost 5% respectively in the segment. We record an underwriting loss of about $3 million per Q2 versus an underwriting profit of about $16 million in Q2 last year. And for the first half, we recorded an underwriting loss of about $10 million versus an underwriting profit of about $26 million last year. Now I'll take a moment to add some context here. Again, first is FX, the currency value, the revaluation of non-US dollar reserves, which I said earlier in fact, this segment, the long tail segment, the most by far as the vast majority of our business is transacted in pounds. So on a currency neutral base, underwriting income would have been just under 12 million in the second quarter and just over 13 million in the first half. Now that's the first factor here. Second, as we've been saying, we've been contracting this portfolio purposefully and the various competitive pressures in these lines have led to reductions in rates and lower margins. And so we're generating less written and earned premium. And finally, we saw a higher level of loss in the segment, especially in the first quarter and specifically within our professional platform. And this has led to higher level of green statement breaks. We've indicated on our last two calls that we were reviewing one area of our professional indemnity portfolio, which has not been performing up to par. We have now made that decision to not renew this. As I said, nothing systemic, just generally poor performance where the results simply aren't meeting our targets. And with the outlook, unlikely to improve enough for us in the near term, to change our view. Which just didn't introduce it to the continued profitability to renew this part of the portfolio. Now the effect of this will be a declining gross premium of about $60 million. It's all about 10% of that will be reflected in Q3, 50% in Q4, and the remainder will be spread over the first half of next year. Now while the impact overall seems very pronounced on the top line, the way that we actually restructured this business over the past few years means that the actual impact on net risk and premium is only around six or seven million dollars. Ultimately, taking this action now should, and we expect that it will improve the overall profitability profile of the long-sale segment going forward, which ultimately is the whole point. Now turning to the balance sheet, total assets increased by just over 4% to about 2.1 billion dollars. Total investments in cash were 0.3 billion. Our low-efficiency income securities, which makes approximately 80% of our investments in cash for the portfolio, generated just under 14 million in investment income in the second quarter, which is an increase over the Q2 of last year of about just over 5%. Now for the first six months of the year, investment income increased more than 10% to about 27.5 million dollars with an average annualized yield of 4.4%. And we also etched out the duration slightly to three and a half years to the quarter, unlocking higher rates on some new bonds. In the second quarter, we repurchased just over 1.34 million common shares at an average price per share of $23.28. As of the end of Q2, this means approximately 800,000 shares remaining on our existing 7.5 billion repurchase authorization. Total equity was .2.2 million at the end of Q2, and that includes the impact of share repurchases and the payment of 42 million dollars in common share dividends, including the special dividend of 85 cents that we paid back in April. This compares total equity of 654.8 million at the end of last year. Ultimately, we recorded the return on average shareholders' equity of .8% for the second quarter, and .6% for the first six months of this year. So from a total return perspective, we grew book value per share by .4% in the first six months, and we returned a total of $77 million to shareholders in share repurchases and dividends in the first half of the year. So, I mean, all the noise from currency movement aside, it was an excellent quarter and an excellent first half of 2025. Now, specifically on what we're seeing in our markets, that elevated competitive pressure is there, and in some areas, it's increasing more than others. And in spite of the headwinds facing our sector, we continue to seek and find profitable opportunities to write new business across many lines within our portfolio. And I expect that overall, we will continue to see some contraction in the top line in certain areas of our portfolio where profitability and coverages just don't meet our required targets. And this is very much the benefit of having a monthly passage diversification strategy, specialist expertise, and people on the ground in our regional market. It just gives us more optionality and more levers to work with. So when market conditions in one line, or in one region are particularly competitive, there'll be other lines in other regions where the market remains robust. The individual elements of our portfolio don't meet in unison, as we all know. I said on last board, it's called domestic markets across the world are becoming stronger and more resilient, and there's much higher desire, growing desire to retain business within those local markets. So being situated in these regions and having local talent means that we can still access domestic business that is no longer coming to London, for example. We're seeing mixed conditions across much of our portfolio consistent with what we've said on previous boarders calls. Some areas remain relatively quite healthy, while other areas are seeing a little more competition and as such, rating pressure. Generally speaking, re-insurance lines remain healthy due to some of the short-term lines. We're clearly at the stage of the broader cycle where portfolio and exposure management is absolutely critical. And I'll make one thing very, very clear. At IGI, we will not sacrifice the bottom line to benefit the top line. Our primary goal, our promise, is to generate sustainable value for the long term. And we won't succeed at that if we give in to some of the more pervasive pressures that are driving rates and ultimately profitability downwards. Now in our long-tail segment, net rates overall do remain adequate in most areas. And the pace of rating decline, as I said a few moments ago, has slowed down moderately. So we're seeking new opportunities and we're taking action to expand our footprint in specific markets, keeping in mind that we have no appetite to write any US liability. In both Oslo and Malta, where registration is a slower process, we've expanded our capabilities over a year ago and these efforts are starting now to bear fruit. Our outlook on short-tail lines continues to be fairly consistent with what we've been saying in prior quarters, although the market is definitely becoming tougher as you go in the other causes during the season. We're seeing greatest pressure in properties and especially energy lines, particularly downstream energy, where we're seeing the most opportunities in the more specialist lines, like construction engineering, as I mentioned earlier, some marine lines, and in those marine lines, certain businesses, a bunch of that business is renewing at least on a flat or at before basis, it's not slightly high rates. The loss events, unfortunately, of the first few months of 2025, don't appear to have had much impact on market conditions in any specific line. And again, unfortunately, we continue to see more intense competition from both the large multinational carriers and from the NGOs. When you've heard comments from other carriers early in the season on the impact of MTAs, on the whole, we are supporters of and users of a facilitated business where we can't access the business ourselves, and we've built a strong dedicated sourcing team internally to best and manage that business. But there are certainly elements of that facilitated business that are less disciplined, not just on pricing, but also on terms, conditions, and most importantly, on coverage. Now, in the reinsurance segment, we're still seeing a decent flow of opportunities that fall within our risk policies, and I expect that that will continue for the remainder of the year. Now, that said, the major one-one and four-one renewals are behind us, so significant growth in the segment in the second half of the year will be a lot more muted. Like all areas of our business, we're pursuing opportunities to enhance our distribution capabilities in this segment, and that should help us continue to expand our portfolio. I mean, overall, the reinsurance market seems to still be behaving in a relatively disciplined manner from a structured terms, words, and perspective. No pricing pressure is absent. So with conditions holding steady, there's still perceived margin in the business. Some carriers are willing to give up more on price. We are again continuing to see the large carriers pushing hard to maintain and build that market share we mentioned earlier, and that's obviously adding to the rate of pressure. In our geographic markets, we've always been underweight in the US, and we expect that it'll continue to be one of the markets with the greatest opportunity for us to write new business. But like always, we're mindful of our risk appetite and our tolerances, particularly in the high cash-exposed regions and zones. So there's room for us to grow here, both in our specialty treaty book and in our short-term plans. Now, Europe will also remain the growth carrier for us, storage similar in MENA and Asia-Pac regions, and our expanded presence in the United States on the ground in those regions are paying benefits. Now, before we open the call for questions, just some final thoughts from my end. I mean, like I said at the start of the call, we're absolutely fully prepared for any veterans. They're all part and parcel of our business, our industry, our strategy, our expertise and footprint. They're all specifically geared towards managing the cyclicality and the volatility of our business, where lines and markets behave largely independent of each other. We've got a fully unlevered balance sheet. Our underwriting portfolios diversify to many levels, and with our physical presence in key regions worldwide, we stay very close to our market. We have the right infrastructure with the right experience and capabilities in our people to successfully execute on our strategy and navigate any and all stages of the silence. This is the foundation that we are built upon and what gives us the resilience to succeed through market cycles and clearly evident in our track records. So we're looking ahead with a healthy dose of optimism that we will continue our track record of generating superior value for the long term. So I will pause here and we will turn this over for questions. Operator, we're ready to take the first question.

Thank you. We will now begin the question and answer session. Again, to ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing any keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Your first question today will come from Nick Yacovello with Dolene and Partners. Please go ahead.

Hi, great quarter considering the FX impact. I was curious on the net to gross retention on a written premium basis was 64% in the quarter. It was down from 73% year over year. Did you speak a bit to that? I was wondering if that was mixed driven in any way or was there just additional opportunistic outwards buying in the quarter?

Hi, thanks for the question. It really is more of the more opportunistic. We've been buying a higher level of faculty to bring insurance in the software market. Again, more opportunistic, trying to generate the higher level of more fee income or overriding income as well. We've expanded also our capabilities in certain lines of business on the back of, reinsurance support from the likes of the larger, European reinsurers that have sought a piece of the pie from our portfolio. So some of it is strategic. But a big element of it is opportunistic.

Thanks, and then I was just curious though, that one area of the professional indemnity portfolio that sounds like will be non-renewed. Based on the net to gross figure you gave, it sounds like there's around an 85% quota share on the book. Has it always been at that levels or has that feed increased in recent years? Or can you just help me think about maybe what the session was a couple years ago versus now would be helpful, thanks.

I mean, in the last few years, it's hovered between sort of the 60 to 80, 85% session. It wasn't always like that. In the initial years, it was a much smaller book that we retained 24 the first couple of years and then we started as we developed the book and grew it. We did it on the back of reinsurance support. Now, that last year was around 82, 82.5%. And hence, the net impact, the gross number, looks like it's a big one, a high one. But once it trickles down through your net numbers and down to your bottom line, at the end of the day, it's not material. And ultimately, what we're doing by non-renewing by non-renewing the book of this size, which I think speaks volumes as to the discipline and power of razor sharp focus on the bottom line. With the non-renewal of this size portfolio, the intent here is to improve overall possibility and that's what we expect with our development program.

That makes sense. Thanks, that's all I have.

Thank you. Thank you, Nick. See no further questions. This will conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, Nick. And just thank you all for joining us today and thank you for your continued support of IGI. As always, any additional questions, please get in touch with Robin and she'll be happy to assist. And we all look forward to speaking with you on the Q3 call. Have a good day, everyone. Thank you very much.

Thank you.

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