Fidelis Insurance Holdings Ltd. Q4 FY2024 earnings call

• Underwriting: Focused on high-quality opportunities, diversified portfolio, 23% growth in gross premiums written to $4.4 billion in 2024, RPI 111% full year.
• Capital management: Made strategic growth investments, initiated share repurchase and dividend programs, onboarded first partner outside cornerstone relationship.
• Aviation and aerospace: Incurred $287 million net prior year development in Q4 due to Russia-Ukraine conflict, settled two-thirds of exposure, remaining one-third reserved based on probabilistic model.
• Investments: Net investment income $191 million in 2024, $51 million in Q4 2024, repositioned investment portfolio, invested $200 million in diversified hedge fund.
• Wildfires: Catastrophe losses $160-190 million net, industry loss $40-50 billion, impact on pricing and coverage.

In 2024, Fidelis Insurance Group reported operating segments as Insurance and Reinsurance. The Insurance segment saw gross premiums written increase 19% in Q4 to $146 million, with direct property gross premiums written up 30% and marine up 40%. The Reinsurance segment had Q4 gross premiums written of $32 million, but net premiums written decreased due to increased ceded premium for a multiyear catastrophe bond. Net premiums earned in Q4 increased 25%. For 2024 annual results, operating net income was $137 million, operating return on average equity was 5.6%, and combined ratio was 99.7%. The insurance segment had $287 million net adverse prior year development in aviation and aerospace, while reinsurance had net favorable development.

• 2025 guidance: Anticipate 10% growth in gross premiums written. Continue strategic growth and capital management initiatives. Target mid to high 80s combined ratio, 13-15% operating return on average equity through the cycle.
• Expect to capitalize on opportunities across portfolio, maintain disciplined underwriting, and leverage scale and relationships.

• Russia-Ukraine conflict impact on aviation and aerospace reserves, uncertainty in court outcomes.
• California wildfires and other natural catastrophes affecting loss ratios and pricing.
• Bermuda corporate income tax starting 2025, impact on deferred tax assets.

Q: Matt Carletti asked about lessons learned from wildfires and profit commission carryforward.

A: Dan Burrows said wildfires were within expectations, operating as intended; Allan Decleir stated no deficit to carry forward for 2024.

Q: Meyer Shields asked about subrogation recoveries on wildfires and net investment income.

A: Dan Burrows said too early to detail subrogation; Allan Decleir said net investment income returns consistent with Q3, no unusual cash flows.

Q: Lee Cooperman asked about stock valuation and excess capital.

A: Dan Burrows said business undervalued, confident in through-the-cycle targets; unclear on excess capital details but will execute share repurchase when appropriate.

Q: Robert Cox asked about aviation and aerospace reserves and net growth in 2025.

A: Dan Burrows discussed settlement activity and uncertainty in aviation reserves; Allan Decleir explained net premium growth lag due to reinsurance purchasing timing.

Q: Michael Zaremski asked about competitive environment and reinsurance impact on California wildfires.

A: Dan Burrows said market has good technical margin, reinsurance loss ratios sub-20% last two years; wildfires will positively impact pricing trajectory.

Q: Alex Scott asked about Russia-Ukraine conflict resolution and California wildfire loss split.

A: Dan Burrows said too early to comment on conflict resolution; explained loss split with three-quarters reinsurance, remainder direct book.

Q: Ethan Hudson asked about ROE expectations and aviation reserves.

A: Dan Burrows said confident in through-the-cycle ROE targets; Jonny Strickle said difficult to estimate aviation reserves due to settlement process.

Q: Andrew Andersen asked about combined ratio target and reserve study seasonality.

A: Dan Burrows said confident in mid to high 80s combined ratio targets; Jonny Strickle explained PYD from loss experience rather than assumption change.

Q: Pablo Singzon asked about aviation reserves and intellectual property book.

A: Jonny Strickle discussed de-risking in aviation reserves; Allan Decleir said no material development on intellectual property book, running off until 2027.