International General Insurance Holdings Ltd. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Performance: 2024 was an outstanding year with solid results across key metrics, including book value per share growth of almost 20% and dividends over 24%. Core operating return on equity averaged 20.1% over 5 years as a public company.
• Growth and Expansion: Over the past 5 years as a public company, the company doubled its underwriting portfolio, entered new markets (e.g., U.S.), added new lines of business (e.g., Contingency), opened offices in Bermuda, Oslo, and Malta, and bolstered underwriting capabilities. It also created efficiencies by bringing previously outsourced services in-house.
• Cultural Integrity: Maintained a unique culture characterized by high performance, collaboration, and mutual respect, which has contributed to stability and excellent results despite rapid growth.

Segment Performance

• Short Tail: In Q4, gross premiums were up marginally, and for the full year, up just shy of 3%. Earned premium was relatively flat compared to Q4 2023 but up over 8% for the full year. Underwriting income was down in Q4 due to higher losses but up almost 5% for the full year despite elevated loss activity. The new business opportunities in certain areas were offset by contraction in the aviation book.
• Reinsurance: Performed very well overall. For the full year, gross premiums were up more than 36%. Both underwriting income and net earned premiums were up significantly in Q4 and the full year compared to prior periods.
• Long Tail: The most challenging segment. In Q4, it was down about 1.5 points, and for the full year, down almost 10 points. Net earned premiums were down compared to the same periods in 2023. Underwriting income more than doubled in Q4 due to lower losses in Q4 2024 vs. Q4 2023, but full year underwriting income was down a little over 30%. Rates in the long tail segment are likely to remain under pressure for the foreseeable future.

Guidance

• 2025 has started challenging with elevated loss activity, particularly in short tail and reinsurance lines, and long tail lines remain pressured.
• There are opportunities for new business but the company is selective, only writing business that meets profitability requirements.
• Presence in key territories is critical for seeing emerging trends and capturing local business. The company remains cautious in the long tail segment until market conditions improve.
• The U.S. is a key growth area with plenty of room to expand in treaty, reinsurance, and short tail segments, while Europe and other regions have their own dynamics but also growth opportunities.

Risks

• Competitive Pressures: Intense competition in many markets, pressuring rates and requiring the company to work harder to find profitable business.
• Global Financial and Geopolitical Pressures: Macro-level pressures that create headwinds for the business.
• Elevated Loss Activity: As seen in 2024 with events like hurricanes, floods, earthquakes, which can impact profitability if not managed properly.
• Market Dynamics: Rapidly evolving market conditions that can affect rate adequacy and profitability, especially in the long tail segment.

Question and Answer

Q: Michael Phillips asked about the balance between growth and maintaining profitability, specifically if there's more room to be aggressive and grow the top line while maintaining strong margins.

A: Waleed Jabsheh responded that the company has ambition to grow but is guided by risk appetite and tolerances. The approach is to stick to risk tolerances as the industry is punitive, and while margins are healthy, the company is selective about where to grow, focusing on areas that align with risk appetites.

Q: Scott Heleniak inquired about why the core loss ratio continues to be excellent compared to peers, loss trends in the long tail book, and pricing environments in other markets.

A: Waleed Jabsheh stated that the company's approach to discipline and focusing on the bottom line contributes to the strong loss ratio. On loss trends, he mentioned areas like aviation where the book has been contracted due to inadequate rates. In other markets, pricing varies by region and line of business, with some areas like construction and engineering showing good opportunities but overall markets being competitive, requiring the company to work harder to find profitable business.