Pelagos Insurance Capital Limited

Good morning, ladies and gentlemen, and welcome to the Fidelis Insurance Holdings fourth quarter and year-end 2023 earnings conference call. As a reminder, this call is being recorded for replay purposes. Following the conclusion of formal remarks, the management team will host a question and answer session, and instructions will be given at that time. With that, I will now turn the call over to Miranda Hunter, Head of Investor Relations. Ms. Hunter, please go ahead.

Good morning, and welcome to the Fidelis Insurance Group fourth quarter and full year 2023 earnings conference call. With me today are Dan Burrows, our CEO, and Alan DeClaire, our CFO. We're also joined by members of the Fidelis Insurance Group management team, including Johnny Strickle, our group chief actuary. Before we begin, I'd like to remind everyone that statements made during the call, including the question and answer section, may include forward-looking statements. 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 our IPO perspective dated June 28 and filed with the SEC. Although we believe that the expectations reflected in forward-looking statements have a reasonable basis when made, we can give no assurance 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 with us with the SEC from time to time. Management will also make reference to certain non-GAAP measures of financial performance. The reconciliation to U.S. GAAP for each non-GAAP financial measure can be found in our current report on Form 6-K, furnished with the SEC yesterday, which contains our earnings press release, and is available on our website, fidelisinsurance.com. And with that, I'll turn the call over to Dan.

Thank you, Miranda. Good morning, everyone, and thank you for joining us today. 2023 was a milestone year for the Fidelis Insurance Group, and we couldn't be more pleased with our performance. In July, we completed our IPO and listed on the New York Stock Exchange, unlocking new opportunities and positioning us for long-term industry-leading results. What is particularly exciting is that throughout the year we successfully executed on our objective of delivering consistently compelling returns and there are a few key messages I want to emphasize today. Firstly, this continues to be the best market environment we've seen in 20 years. Against that backdrop, we took advantage of opportunities to grow our business in target markets and actively shaped our portfolio with strong gross premium written growth of 31.7% in the quarter and 18.6% for the year. Secondly, we maintained our track record of best-in-class underwriting performance with one of the best combined ratios in the industry at 81.4% for the quarter and 82.1% for the year. Thirdly, we delivered strong operating ROAE of 23.6% for the quarter and 18.8% for the full year. We also grew book value per share to $20.69 representing growth of 13.4% from the third quarter. And finally, we are proactively sharing our success with shareholders through both our previously announced share repurchase program and yesterday's announcement of a regular quarterly dividend. Alan will dive deeper into our results for the quarter shortly, but as we reflect on this remarkable progress in 2023, we would like to begin today's call by highlighting how Fidelis Insurance Group has built a truly differentiated global specialty insurance platform, which we have also outlined in our updated investor presentation, which has been filed and is available on our website. First and foremost, our strategy is focused on leading the global specialty insurance industry in delivering consistently compelling returns through the cycle. and creating value for our shareholders and all other stakeholders. For nearly a decade, we have established ourselves as a market leader, creating a strong, highly diversified and innovative portfolio focused on three segments, specialty, bespoke and reinsurance. Our specialty segment is focused on traditional specialty business, where we take significant positions in the major lines. including property direct and facultative, marine, and aviation and aerospace, leading approximately 90% of the deals we participate in across the portfolio. This positioning also enables us to cross sell lines of business with both brokers and clients. Our aviation portfolio, where war and allied coverage capacity is scarce, is an example of how we execute this strategy. Our bespoke segment focuses primarily on highly tailored, specialized products that facilitate underlying transactions, offering our clients enhanced capital efficiencies. By its nature, we'd order the deals we participate on within this segment. Our reinsurance segment primarily focuses on a strategically selected property catastrophe book, optimized to reflect our view of risk. This allows us to manage our exposures and minimize volatility, especially as the industry continues to confront the realities of climate change and the rising incidence of secondary peril losses, both of which we have adjusted for in our modeling and risk selection process for a number of years. Furthermore, we leverage our leading position on approximately 80% of the deals we participate on which allows us to secure differential rates, terms and conditions. As we look into 2024 and beyond across core lines, this remains the best market environment our seasoned team has seen in the last 20 years, with clear supply-demand imbalances and no signs of new capital coming into the market in any meaningful way. These market dynamics have presented opportunities for us to accelerate growth, leveraging our scale, agility, and deep relationships with brokers and clients. And as a lead underwriter in a verticalized market, this has created enhanced metrics and underwriting performance durability. Our underwriting strategy and structure is working exactly as intended. providing access to the best underwriters in the industry and ensuring a level of rigor and discipline around risk selection that is frankly unprecedented in our industry. Our in-house underwriting team, led by Chief Underwriting Officer Ian Houston, collaborates closely with Fidelis MGU to actively shape our inwards and outwards portfolio, including engaging in the MGU's daily underwriting calls to directly participate in origination and risk selection as our portfolio is assembled. Our structure continues to deliver industry-leading combined ratios. As I mentioned earlier, in 2023, we achieved an 82.1% combined ratio for the year, which represents an improvement of 9.8 points year over year. And we believe that the portfolio we have constructed is well positioned to continue delivering market leading combined ratios in the mid to high 80s through the cycle. In addition to our proven underwriting success, we continue to advance our operational and capital management capabilities. We maintain a strong, highly rated balance sheet with total capital of $3 billion. We have released reserves every year since inception demonstrating our consistent and robust approach to reserving. In addition, our focus is on short tail lines with carefully managed catastrophe exposure and no longer tail casualty business. This approach and our minimal exposure to social inflation risk reinforces our confidence that we can avoid meaningful reserve volatility moving forward.