Pelagos Insurance Capital Limited

Participants are asked to limit themselves to one question and one follow-up during the Q&A session. With that, I'd like to turn the call over to Jillian Benson, Group Head of Reporting. Ms. Benson, please go ahead.

Good morning, and thank you for joining us to discuss Fidelis Insurance Holdings Limited's 2023 Second Quarter Earnings Results. With me today are Dan Burrows, our CEO, Alan DeClaire, our CFO, Johnny Strickle, our Chief Actuarial Officer, and Anne Houston, our Chief Underwriting Officer. We will start with prepared comments by Dan and Alan, and then we will take your questions. Before we begin, I'd like to remind everyone that certain statements in our press release and discussed on this call do constitute forward-looking statements under federal securities laws within the meaning of the Private Securities Litigation Reform Act of 1995. We intend our forward-looking statements to be subject to the safe harbor created thereby. These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. These risks and uncertainties are described in an IPO perspective dated June 28, filed with the SEC on June 30. Although we believe that the expectations reflected in the forward-looking statements have a reasonable basis when made, we can give no assurance that these expectations will prove to be achieved. Consequently, actual results may differ materially from those expressed or implied. For more information, including on the risks and other factors that may affect future performance, investors should also review periodic reports that are filed by us at the SEC from time to time. Management will also make reference to the non-GAAP measures of financial performance. The reconciliations to US GAAP for each non-GAAP financial measure can be found in our period report on Form 3-K, furnished to the SEC yesterday, which contains our earnings tax relief and is available on our investor relations website at investors.fidelisinsurance.com and on the SEC's website. With that, I'll turn it over to Dan.

Thank you, Gillian, and good morning, everyone. Let me begin by saying that I'm delighted to be speaking with you today on our first earnings call post-IPO and to be updating you on our view of the market, the progress we've been making against our growth strategy, and how that, again, has translated into robust financial and operational performance. We very much look forward to engaging with our analysts, our shareholders and the broader investment community going forward. We are pleased to have this opportunity to discuss our performance at the half-year stage, which we believe further reinforces the strength of the Fidelis business model. Our structure is designed to deliver alpha underwriting returns for our exclusive partnership with the Fidelis MGU. which provides us with access to one of the most renowned underwriting teams in the business, led by Richard Brindle, with a long track record of outperformance that translates into strong top and bottom line results for our business. We are strongly positioned as a leading specialty and bespoke insurer, underwriting risk into an attractive marketplace with a portfolio of 84% specialty and bespoke insurance. This is based on half year net written premium numbers. This is delivering attractive results as evidenced by our first half year performance. Compared to prior year, gross written premiums for the first half of the year increased 27% to $2.2 billion. This strong top line growth has been coupled with compelling bottom line profitability. Our combined ratio improved year on year from 89% to 80.6% for the half year And our half-year annualized operating ROAE is 18.2%. Now, this was achieved against a backdrop of heightened loss activity for the industry, which, per a recent report, saw reported global insured losses from natural disasters in excess of $50 billion for the first half-year, which is more than 40% above the 21st century means. The market continues to be sophisticated with a clear supply-demand imbalance, and we expect these whole market conditions to have duration, due in part to no new startups or noticeable inflow of significant new capital into the market, unlike in previous hard market cycles. These market dynamics have presented opportunity for Dallas, and we have grown our business. Leveraging our scale and targeting opportunities across our portfolio, maintaining significant lead status across all underwriting pillars. To recap on our underwriting strategy, our business focuses on three core pillars of underwriting, specialty insurance, bespoke, and reinsurance. Our specialty pillar is focused on traditional specialty business lines, such as aviation, energy, space, marine, and property direct and facultative. Our bespoke pillar is focused primarily on highly tailored and specialized products, often purchased to facilitate underlying transactions and offer our clients enhanced capital efficiencies. This pillar includes policies covering credit and political risk, political violence and terrorism, and transactional liabilities. In reinsurance, you have an actively managed property catastrophe reinsurance book, optimized in line with our house view of risk, and concentrated on core client relationships at targeted attachment points with the aim of managing exposure and volatility. Leveraging our experience and deep position across these pillars, we take a nimble and thoughtful approach to underwriting and risk and capital allocation, which allows us to respond quickly to a consistently evolving marketplace. We have delivered a strong track record of performance capturing compelling underwriting and combined ratios, while maintaining a strong balance sheet and financial position. We believe our combination of management expertise and access to top underwriting talent positions us well to create value not only in the current hard market, but across market cycles with the goal of driving a consistent and compelling balance of risk and reward for our shareholders. Touching on our performance across the three pillars, In our specialty pillar, we delivered gross written premium growth of 76% for the quarter and 63% for the half year. The growth was driven by marine, aviation, and property direct and facultated, but we were able to take advantage of the dislocated market to secure significant new lines and participate in accounts with favorable terms. We achieved a renewal price index, which is our measure of year-on-year rate increases, for the half year 128 percent across the specialty portfolio and we would expect to see further increases in this metric in the second half of the year as premium weighting shifts towards the property dnf book where considerable pricing momentum continues our bespoke pillar continues to be a key focus and an area of differentiation driven by transaction activity the contracts in this pillar tend to be more insulated against market cycles however we still saw evidence of price and momentum with a half-year renewal price index of 118%. The markets for our highly specialized products remain strong. There are high barriers to entry. And I would note that due to the timing and selection of contracts we underwrite, gross written premium bespoke can fluctuate in a single period. And from a seasonality perspective, it tends to be weighted towards the second half of the year. In our reinsurance pillar, as previously documented, we began optimizing our portfolio in late 2021 to reflect our proprietary view of risk and concerns over inadequate pricing and the capture of climate change and inflationary impacts. We continue to refine our portfolio and believe we are well positioned to be opportunistic in our capital deployment, capturing improved rating whilst continuing to manage exposure and volatility.