Pelagos Insurance Capital Limited

earnings conference call. With me today are Dan Burrows, our CEO, Alan DeClaire, our CFO, and Johnny Strickle, our Chief Actuarial Officer. 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 and emerging information developing over time. These risks and uncertainties are described in our press release filed with the SEC via Form 6-K on February 19, 2025, our fourth quarter earnings press release, and our most recent annual report on Form 20-F filed with the SEC, as available on our website at FidelisInsurance.com. Although we believe that expectations reflected in forward-looking statements have a reasonable basis when made, we can give no assurance that these expectations will 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 performance, investors should review the safe harbor regarding forward-looking statements included in our press release filed with the SEC via Form 6-K on February 19, 2025, and our fourth quarter earnings press release, both available on our website, fidelisinsurance.com. as well as those periodic reports that are filed by 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 under definition of RPI, which is our Renewal Pricing Index, can be found in our current report on Form 6K, furnished to the SEC yesterday. which contains our earnings press release and is available on our website at fidelisinsurance.com. With that, I'll turn the call over to Stan.

Thanks, Miranda. Good morning, everyone, and thank you for joining us today. I wanted to start by reflecting on the year as a whole, where we continued our focus on underwriting and capital management. In underwriting, we identified and seized on high-quality opportunities, expanding our diversified portfolio and delivering significant top-line growth. We remained disciplined in our approach to capital management, making strategic growth investments, such as our investment in Lloyd Syndicate 3123, and initiating our share repurchase and dividend programs. And we onboarded our first partner outside of our cornerstone relationship with the Fidelis Partnership, marking a pivotal step in our growth and diversification strategy. Now, taking a closer look at some of our headline numbers for the year, in 2024, we generated a combined ratio of 99.7%, operating net income of $137 million, and an operating return on average equity of 5.6%. These results clearly do not align with our through-the-cycle expectations and are inclusive of the net adverse prior year development we announced last week. I'd now like to take a few minutes to address this announcement in more detail. During the fourth quarter, we incurred $287 million in net prior year development in our aviation and aerospace line of business. This relates to business underwritten in 2021 and 2022 that has been impacted by the ongoing Russia-Ukraine conflict. As this litigation has continued to progress we have taken opportunities to de-risk our overall exposure by judiciously settling certain claims. To date, we have successfully settled, or are in, various stages of settlement discussions for approximately two-thirds of our total exposure, resulting from this unprecedented event. These prudent steps have meaningfully de-risked our exposure to limitation and helped to provide increased certainty to shareholders. For the remaining one-third, we are reserved on the basis of a probabilistic model of potential court outcomes incorporating recent developments and updated information received. A significant portion of these claims relate to the English trial, which recently concluded and a court judgment will be rendered in the coming months. Perhaps most importantly, regardless of these outcomes, initiatives. Turning back to our underwriting performance for 2024, excluding the net adverse prior year development specific to aviation and aerospace, we would have exceeded our long-term return on average equity targets. We delivered on our growth objectives with strong retention rates and continued diversification through new business. We grew gross premiums written 23% $4.4 billion, and achieved RPIs across our portfolio of 111% for the full year. Growth was primarily driven by our direct property, marine, and structured credit insurance portfolios, as well as our reinsurance book. Our direct property gross premiums written increased 30%, as we continue to see opportunities to deploy targeted capacity and leverage on these positioning. Reinsurance premiums grew 40% as we capitalized on favorable market conditions. Consistent with prior years, our portfolio split remains approximately 80% specialty insurance and 20% reinsurance. These results underscore our ability to capitalize on strong opportunities across most of our key classes and secure preferential rates, terms, and conditions as a leader in a verticalized market. At the same time, we maintain a disciplined and nimble approach to underwriting. Where we see more competition in satellite business, we've held our discipline and will not support business that does not meet our underwriting hurdles. Moving to investments, we delivered net investment income of $191 million for the year, an increase of 59% from 2023. This was driven by an increase in investable assets and a higher earned yield on our fixed income portfolio and cash balances. The portfolio is well positioned as we enter 2025, and these results underscore our strategic focus on optimising our investment portfolio within our risk appetite. Active capital management remains a cornerstone of our strategy, and Alan will go into more detail shortly. In 2024, we remain focused on deploying our capital strong capital position enabled us to opportunistically return excess capital to our shareholders. During the year, we returned $152 million of excess capital to our dividend and share buyback programs. Finally, before handing it over to Alan, I want to briefly discuss the impact of the recent California wildfires. First and foremost, I want to extend our thoughts and sympathies to everyone who's been impacted. The January wildfires fueled by greater than average vegetation, dry conditions and high winds resulted in unprecedented industry losses for this peril. As announced last week, based on an insured industry loss estimates of $40 billion to $50 billion, we expect our catastrophe losses related to this event to be in the range of $160 million to $190 million, net of expected recoveries, reinstatement premiums and net of tax. Events like this highlight the increasing impact of climate change. In 2024, natural catastrophe losses made it the sixth most costly year in insurance history. The escalating frequency of these natural disasters underscores the essential role of insurers and reinsurers and emphasizes the necessity for premium rates and coverage terms and conditions to accurately reflect the evolving risk landscape. In summary, we closed out 2024 with a resilient, diversified portfolio and strong capital position. Later in the call, I will offer more insights into January renewals and the opportunities we anticipate for 2025. However, first I will turn it over to Alan, who will provide an overview of our financial performance.

Thanks, Dan, and good morning, everyone. As you saw in our 2024 year-end earnings release, We are reporting our results in their newly defined operating segments, insurance and reinsurance. This change ensures that our financial reporting is aligned with our internal management structure and decision-making process and aligns more closely with peer reporting. Our new insurance segment includes our previously reported bespoke and specialty segments, both of which remain a critical component of our value proposition. Before going into our quarterly results in detail, I'd like to highlight our 2024 annual results. As Dan mentioned, we are pleased with the progress we made on executing our strategic objectives. Our operating net income for 2024 was $137 million, or $1.18 per diluted common share. We closed the year with a diluted book value per share, including AOCI, of $21.79. which increased by 5.3% from the end of 2023. Our total capital is $3 million, while having returned $152 million to shareholders through dividends and share repurchases. Now taking a closer look at our quarterly results. We continue to deliver excellent top line growth with gross premiums written of 954 million in the quarter, an increase of 22% versus the same quarter last year. In the insurance segment, gross premiums written increased by 19%, or $146 million in the quarter. We continued to see high retention levels across key classes and added significant new business. Meanwhile, in the reinsurance segment, although Q4 is seasonally our lowest quarter for premiums written, market dynamics remained favorable, and we continued to find new opportunities to support our diversified portfolio. We grew gross premiums written to $32 million as market disciplined around rates remained. In the fourth quarter, our net premiums written decreased by $71 million versus 2023, primarily as a result of an increase in seeded premium written of $145 million for our most recent multi-year Herbie Re catastrophe bond, which we publicly announced at the end of December. Our net premiums earned increased by 25% compared to the fourth quarter of 2023, driven by growth of our gross premiums written in the current and prior year periods. Turning to the combined ratio of 128% for the quarter, I'll break down the components in more detail. Our net adverse prior year development was $270 million in the quarter, compared to net favorable development of $15 million in the same period last year. As noted last week in our press release, the insurance segment had adverse development in our aviation and aerospace line of business of $287 million, or 45.3 points of the loss ratio for the quarter. The remainder of the insurance segment experienced net favorable development of $6 million. The reinsurance segment had net favorable development of $11 million in the fourth quarter, driven by benign prior year attritional experience and positive development and catastrophe losses. Our net adverse prior year development for the entirety of 2024 was $125 million. This included favorable prior year development in nearly all lines of business, offset by the adverse prior year development in aviation and aerospace. The fourth quarter catastrophe and large loss ratio of 21%, or $133 million of losses, compares to 19.9%, or $101 million in the prior year period. Of the fourth quarter catastrophe and large losses, insurance accounted for $83 million and reinsurance $51 million, with the majority of the loss related to Hurricanes Milton and Helene. The fourth quarter was particularly benign in terms of attritional losses, and our attritional loss ratio improved to 17.3% in the quarter, compared to 20.4% in the prior year period. Continuing with trends we have seen in the year across both segments, our full year attritional loss ratio improved to 23.2%, which compared to 25.8% in 2023. The improvement reflects our portfolio optimization over the last several years. Turning to expenses, policy acquisition expenses from third parties were 33.6 points of the combined ratio for the quarter compared to 23.7 points in the prior year period. The increase was primarily driven by acquisition costs in our insurance segment due to higher variable commissions in certain lines of business and changes in the mix of business written and seeded. Our four-year policy acquisition expenses were 31.8 points in insurance and 23.6 points in reinsurance. The acquisition costs for the year are more reflective of our expectations regarding how policy acquisition expenses should run for our current book of business. The Fidelis Partnership Commissions accounted for 9.8 points of the combined ratio for the quarter. This is net of a reversal of all variable profit commissions that had been accrued for TFP through the third quarter of 2024. For 2024, there is no profit commission payable to the Fidelis Partnership as the underwriting profits as defined in the framework agreement did not meet the required hurdle. This reflects our alignment of interests with TFP and demonstrates that the framework agreement is operating as intended. Finally, our general and administrative expenses were $24 million versus $26 million in the fourth quarter of 2023. The decrease in expense was driven by lower variable compensation accruals in the current year. Our net investment income increased to $51 million for the fourth quarter of 2024, compared with $39 million in the prior year period, reflecting a higher earned yield on our cash and fixed income portfolio, as well as an increase in investable assets compared to the prior year period. During the quarter, we sold $600 million of securities with an average book yield of 4.2%, resulting in a realized loss of $5 million. We also reinvested $779 million into new fixed income securities in a quarter with an average purchase yield of approximately 4.8% as we continued to reposition our overall investment portfolio. We also invested $200 million into a diversified hedge fund portfolio. The hedge fund investment represents 4% of our total investable assets and is part of our ongoing strategy within our risk appetite to generate superior risk-adjusted diversified investment returns and enhance shareholder value. At December 31, the average rating of fixed income securities remains very high at AA minus with a book yield of 4.9%. Average duration is consistent with the third quarter at 2.8 years. Turning to tax, the Bermuda government has enacted a 15% corporate income tax starting in 2025. As a reminder, we are carrying a deferred tax asset valued at $90 million in respect of the Bermuda economic transition adjustment, which is expected to be substantially utilized within 10 years as an offset against any Bermuda corporate income tax that is payable. Consistent with 2024, we remain committed to maintaining a strong balance sheet while returning excess capital to shareholders. Our outwards reinsurance program is a very important tool in our capital management strategy. At January 1st, we renewed the majority of our outwards reinsurance protection. Significantly, we have successfully renewed our 20% whole account quota share agreement with travelers for the third consecutive year. As mentioned earlier, we issued a new tranche of a Herbie-Ree catastrophe bond, securing $375 million in collateralized reinsurance protection for named storm and earthquake-covered events in the U.S. for a multi-year period. Finally, we have continued with our $0.10 quarterly common dividend in the first quarter. We have $145 million remaining under our authorized repurchase plan. our strong capital position will enable us to pursue accretive growth opportunities across our portfolio while continuing to take an opportunistic approach to share repurchases. In conclusion, we remain committed to our strategic initiatives and are confident in our ability to navigate the evolving market conditions. I will now turn it back to Dan for additional remarks.