Fidelis Insurance Holdings Limited Q3 FY2025 earnings call

Key Points

• Delivered outstanding results: Combined ratio 79%, best as publicly traded company, up over 8 points from last year; annualized operating ROAE 21.4%, up 5 points year over year; diluted book value per share grew by $1.25.
• Expect to continue driving profitable growth: Gross premiums written grew 8% for the quarter, in line with 6%-10% target range for the year; strong performance in lines of business with verticalization, leveraging relationships and market access to broaden distribution.
• Ongoing focus on dedicated capital allocation and expert risk selection: Strategically determine risk-reward opportunities, balance profitable growth with returning capital to shareholders; work with underwriting partners to select optimal risks.

Segment Performance Details

• Insurance segment: 4% growth in gross premiums written; strong performance from property and asset-backed finance, portfolio credit books; direct property book grew 9.5% year on year; RPI broadly flat.
• Reinsurance segment: 20% year-on-year premium growth driven by enhanced pricing post-wildfire; RPI positive supported by double-digit increases on US book; renewed whole account quota share with Travelers for 2026.

In the insurance segment, gross premiums written increased by 4% in the quarter to $606 million. The direct property book grew 9.5% year on year driven by new opportunities at compelling pricing. In the reinsurance segment, gross premiums written grew to $192 million for the quarter, compared to $159 million in the prior year period, with a 20% year-on-year premium growth driven by enhanced pricing post-wildfire. The combined ratio for the quarter was 79%, the best as a publicly traded company, an improvement of more than eight points from the same quarter last year. Annualized operating ROAE was 21.4%, an increase of five points year over year. Diluted book value per share grew by $1.25 in the quarter.

Forward-Looking Statements

• Expect to continue driving profitable growth, with top-line growth of 8% for the quarter in line with 6%-10% target range for the year.
• Focus on strategic capital allocation and expert risk selection to balance profitable growth and return capital to shareholders.
• Anticipate continued opportunities in verticalized lines of business and leveraging underwriting partnerships for growth.

Risks

• Market competition: Increased competition in certain lines of business, particularly in property and reinsurance, which could impact pricing and market share.
• Pricing pressure: Some lines of business, such as direct property, face pricing pressure, although the portfolio continues to deliver attractive margin through effective risk selection and cross-selling.
• Reinsurance market dynamics: The reinsurance market is competitive, with more supply and demand, making it challenging to maintain optimal terms and conditions in outward reinsurance programs.

Q: How are you thinking about one-one renewals both from an inwards and outwards perspective and expectations for 2026 growth?

A: Dan Burrows mentioned being bullish on the market in a prevailing hard market, seeing opportunities with underwriting partnerships including the Fidelis partnership and new underwriting partners. Outwards reinsurance has an important interplay with inwards, looking for efficiency in retro session programs and balancing coverage. Anticipates a competitive market for one-one renewals with more supply and demand.

Q: There was stability in RPIs this quarter versus last quarter, with pressure in some property lines. What's the color on that?

A: Dan Burrows said there is pressure in certain lines like direct property, but strong retention rates and margins from compound increases in previous years. Direct property book has 40% loss ratios, and there's a flow of business from admitted market to E&S market. Coverage structures and retentions are holding firm, with pressure more on pricing but still plenty of good margin in the book.

Q: Any exposure to Caribbean hurricane losses in the quarter?

A: Dan Burrows said it's too early to give detailed numbers, but initial analysis shows net losses would fall within expected cat load.