FIHL

Overall Company & Financial Performance

• Pelagos Insurance Capital delivered operating net income of $88 million (94 cents per diluted common share), with an annualized operating return on average equity of 15.2% and a combined ratio of 86.6%, a 29-point improvement over Q1 2025.
• Book value per diluted share grew to $26.22, increasing 7.2% including dividends, marking the company's best ever quarter of shareholder value creation.
• Total company gross premiums written grew 7% year-over-year to $1.8 billion.
• Combined ratio breakdown: Catastrophe and large losses contributed 12.7 points ($72 million), a major improvement from 55.3 points ($333 million) in Q1 2025 driven by prior year California wildfires. Attritional loss ratio was 27.2 points, consistent with recent low levels. The company recognized $3 million in net favorable prior year development.
• Investment portfolio: 92% of investments are in cash and fixed maturity securities, yielding an average 4.4% with an average A+ credit rating and 2.7-year average duration.

Strategic Model & Partnership Growth

• The company operates as a strategic capital allocator, partnering with specialized underwriting partners to access differentiated market exposure, dynamically allocate capital, and diversify the portfolio.
• New scalable underwriting partnerships are a core driver of growth: Bamboo Insurance provides access to California and Texas homeowners insurance; Euclid Mortgage enables expansion into the U.S. mortgage market to diversify the existing European mortgage portfolio; Oak Global adds new access to property catastrophe reinsurance, delivering a sub-85 combined ratio in its first year, ahead of plan.
• New partners accounted for half of total company growth in 2025 and continued to drive growth in Q1 2026; future growth will come primarily from scaling existing partnerships rather than rapidly increasing the total number of partners.

Capital Management

• Management believes Pelagos' current stock price is undervalued. In Q1 2026, the company repurchased $219 million of common shares, including a privately negotiated transaction to repurchase all remaining shares held by original private equity sponsor CVC.
• Following the CVC repurchase, ~65% of shares are now publicly held, and management does not anticipate any further secondary offerings from remaining original PE sponsors in the near term.
• As of May 8, $185 million remains under the share repurchase authorization; since IPO, the company has repurchased $600 million of shares (30% of outstanding) at an average price of $17.66 per share.
• The company declared a 15-cent quarterly dividend and redeemed $125 million in junior subordinated notes, resulting in a pro forma debt-to-capital ratio of 24.2% as of quarter-end.

Outwards Reinsurance Optimization

• Pelagos took advantage of favorable retrocession market conditions to materially improve outwards reinsurance coverage for 2026, moving to aggregate structures for natural catastrophe protections, cutting quota share cessions on the most attractive lines, and purchasing a new whole account aggregate excess of loss cover.
• These changes reduced overall portfolio volatility, improved net margins, and offset rate pressure on the inwards book, with the majority of 2026 outwards reinsurance already secured.

• Management expects full-year top-line growth of mid single digits across the entire portfolio.
• For Q2 2026, net earned premiums are expected to be similar to Q1 levels in the insurance segment, and between $65 million and $75 million in the reinsurance segment.
• Management reaffirms its full-year expected attritional loss ratio (excluding prior year development) of mid 40s, and remains comfortable with this outlook despite better-than-expected results in recent quarters.
• If the company executes its full-year plan, management expects year-end 2026 book value per share to be near $30, representing ~68% cumulative growth in book value per share since the company's 2023 formation.
• General and administrative expenses are expected to remain consistent with Q1 levels (=$29 million for the quarter) through full-year 2026.

1. Insurance Segment: Gross premiums written (GPW) grew 13% year-over-year, contributing ~91% of total company net premiums earned (NPE) at $515 million of total $569 million NPE. Key sub-segment performance:
   • Property: Delivered strong growth, with a 3-year average loss ratio below 40% despite active catastrophe and secondary peril environments. Construction within property saw strong open market growth, particularly in complex and post-loss accounts.
   • Asset-backed finance and portfolio credit: Continued strong performance from new and existing partners, with strong margins insulated from traditional market cycles, supporting portfolio diversification.
   • Marine: Saw strong new business flow driven by a step change in marine war rates from Middle East conflict. Management maintains strict underwriting discipline, underwriting risk vessel-by-vessel to avoid broad portfolio exposure. Outside of war, core marine lines (hull, cargo, liability) remain competitive.
   • Political violence and terror: Presented meaningful growth opportunities amid strong pricing in the Middle East, with management's scale and agile risk selection supporting margin preservation.
2. Reinsurance Segment: GPW was $404 million for the quarter, representing 7% year-over-year growth when excluding 2025 Q1 reinstatement premiums from California wildfires. It contributed ~9% of total company NPE at $54 million. The segment has a 3-year average annual loss ratio below 20%, demonstrating a strong healthy margin profile. Growth was driven by new underwriting partnerships, specifically in property catastrophe reinsurance.

• Increased competition in multiple core lines (including E&S property, property catastrophe reinsurance, and aviation) has created downward rate pressure, with rate decreases ranging from mid-single digits to low double digits in most impacted property lines.
• Ongoing geopolitical conflict in the Middle East creates uncertainty for marine war, political violence, and terror lines of business, though first quarter loss experience was minimal and management maintains strict individual risk underwriting to limit exposure.
• Pricing pressure on cyber reinsurance has led to elimination or weakening of required loss ratio caps that protect against systemic tail risk, leading Pelagos to non-renew unacceptably structured policies.
• The Baltimore Bridge collapse, the largest marine loss in history, required an increase to loss reserves above prior market estimates, and a price correction is expected when related cover renews in early 2027.
• Market valuation discounts Pelagos stock to book value despite strong returns on capital, creating pressure on the company to consistently compound strong quarterly results to gain investor recognition.

Q: Can you quantify the impact of the Baltimore Bridge loss reserve increase, clarify overall prior year development outside of this event, and note which lines are driving reinsurance segment growth? / A: Pelagos increased reserves in line with the higher-than-expected market settlement for the event, but the company still recorded overall net favorable prior year development for Q1 after accounting for the increase. Even with three large late 2025 property DNF losses reported in Q1, the segment ran a sub-30% loss ratio and still posted favorable prior year development, demonstrating strong rate adequacy. Reinsurance growth is concentrated in property catastrophe reinsurance, driven by new underwriting partner Oak Global, which provides differentiated market access and delivered a sub-85 combined ratio in its first year, ahead of plan.

Q: With reports of E&S property catastrophe rates down as much as 30%, how is Pelagos navigating pricing pressure, and how meaningful are new partners to overall capital deployment and growth? / A: Pelagos has seen single-digit to low double-digit rate decreases, not the extreme 30% drops reported broadly, and maintains a 3-year average sub-40% loss ratio for direct property, leaving ample margin even after rate decreases. New partners have made up half of total growth over the past year, with existing partnerships like Euclid and Oak being highly scalable; Pelagos will prioritize scaling existing quality partners rather than dramatically increasing the total number of partners, maintaining rigorous underwriting oversight for all new and existing partners.

Q: Why did Pelagos non-renew a cyber policy, and what is the market dynamic driving that decision? / A: Pelagos only participates in cyber reinsurance when it can get a guaranteed loss ratio cap that mitigates systemic tail risk. In 2026, market pressure has led to requests to remove or lower these caps, and Pelagos will walk away from any cyber deal that does not meet its required risk structure; the non-renewed policy was a standalone policy that no longer met this requirement.

Q: When will the growth opportunities from Middle East conflict (marine war, political violence) hit results, and how much came through in Q1 versus future quarters? / A: Opportunities from the conflict span Q1 and Q2, with a much larger uptick expected in Q2 than Q1. Because Pelagos underwrites each risk individually rather than participating in broad market facilities, revenue is recognized as each policy is underwritten, leading to a gradual recognition rather than an immediate one-time uplift in Q1.