PLGO

Overall Financial Performance

• Q2 2026 operating net income was $29 million ($0.34 per diluted common share), with an annualized operating return on average equity (ROAE) of 5.1%. Year-to-date operating net income reached $117 million ($1.31 per diluted share), with an annualized ROAE of 10.1%.
• Diluted book value per share grew 23% year-over-year to $26.56.
• Gross premiums written grew 6% year-over-year, in line with the full-year mid-single-digit growth target. Year-to-date growth is 6.6%.
• Q2 2026 combined ratio was 99.5%, driven by higher-than-normal large loss events (including $60 million in Middle East conflict losses and $34 million from the Ras Laffan gas plant explosion in Qatar). Year-to-date combined ratio is 93.1%, and the 12-month trailing combined ratio is 86.4%, which is in line with through-the-cycle targets.

Strategic Model & Underwriting Partnerships

• The firm operates as a flexible capital allocator with an expanding network of underwriting partner relationships, which is a core competitive differentiator. The model enables dynamic capital deployment to the highest risk-adjusted return opportunities across 100+ product lines, dampening the impact of market cycles.
• The pipeline of new underwriting partnership opportunities is growing, with continued interest from high-quality specialist underwriting teams. The firm recently expanded an existing asset-backed finance partnership, adding a new distribution avenue that further diversifies the portfolio. All new partners are held to the same profitability hurdles as existing partners, and new partner performance has beaten through-the-cycle targets to date.

Capital Management & Shareholder Returns

• The firm maintains a very strong capital position, with flexibility to both pursue growth and return capital to shareholders.
• In Q2 2026, $73 million was returned to shareholders, including $60 million in common share repurchases (1.4 million shares via privately negotiated transaction with long-term sponsor Pinebrook). $280 million in shares were repurchased in the first half of 2026, adding $0.90 to diluted book value per share. Since the 2024 program inception, repurchases have added $2.14 to diluted book value per share.
• A 15 cent quarterly dividend was announced, payable in September 2026.

Portfolio & Risk Management

• Outwards reinsurance is used as a strategic tool to improve margins, manage net volatility, and optimize capital use. The firm recently secured an additional whole-account quota share arrangement for a leading US insurance partner, effective July 1, 2026, that supports growth and further validates portfolio quality.
• Probable maximum loss exposure remains well within risk limits: 1-in-250 California earthquake exposure is in the mid-single digits as a percentage of shareholder equity, and 1-in-100 Gulf/Caribbean hurricane exposure is below 10% of shareholder equity.

• Full-year 2026 gross premium growth is maintained at the guided mid-single-digit rate, with Q3 2026 growth expected to be lower than Q2 due to normal portfolio seasonality.
• Q3 2026 net earned premiums are expected to be similar to Q2 levels for the insurance segment, and between $130 million and $160 million for the reinsurance segment (in line with normal seasonal patterns, as a larger share of reinsurance premiums are earned in the second half of the year for wind peril exposure).
• Full-year targets are maintained at 13% to 15% annualized ROAE and a mid-to-high 80s overall combined ratio, with management confirming they remain on track to meet these targets as of the first half of 2026.
• Long-term through-the-cycle loss ratio guidance is maintained: overall loss ratios are expected to be in the mid-40% range for the insurance segment, with roughly one-third of losses coming from catastrophe and large events. For the reinsurance segment, the expected mid-40s overall loss ratio is split evenly between attritional and catastrophe/large losses.

1. Insurance Segment: Net premiums earned were $515 million in Q2 2026, accounting for 88.6% of total net premiums earned (insurance + reinsurance). Gross premiums written grew 6% year-over-year to $1.3 billion overall, with growth in the insurance segment driven by property, marine, and asset-backed finance/portfolio credit lines. Within the insurance segment: property delivered strong growth from expanded partner relationships; marine, political risk, and political violence saw increased demand and favorable pricing due to geopolitical uncertainty; asset-backed finance and portfolio credit generated high-quality, diversified growth from new partners that is insulated from traditional pricing cycles; aviation maintained a highly selective underwriting approach.
2. Reinsurance Segment: Net premiums earned were $66 million in Q2 2026, accounting for 11.4% of total net premiums earned. Gross premiums written saw strong growth driven by expanding existing client relationships and selective participation in attractively priced programs. The segment shifted capacity towards quoted share deals, maintaining selectivity in lines with moderated pricing and elevated competition, and kept probable maximum losses (PMLs) relatively stable.

• The broader property and reinsurance markets are currently competitive, with rate softening and contraction across multiple classes, driven by abundant market capacity including growth in alternative capital.
• Geopolitical uncertainty (particularly the escalating conflict in the Middle East) has led to increased large loss activity, while growing competition in war and political risk lines has reduced the number of opportunities meeting the firm's risk appetite thresholds.
• Loss activity is uneven quarter-to-quarter for this short-tail specialty insurance business, with Q2 2026 seeing a higher concentration of large loss events that increased the quarterly combined ratio above target levels, though this is viewed as temporary random timing volatility rather than an underlying trend.

Q: How has underwriting profitability for Middle East conflict-related lines held up, and what is the firm's internal assessment of this opportunity?

A: The firm entered this space through its Fidelis Partnership, deploying capacity on a granular risk-by-risk (per-vessel, per-voyage) basis with clear upfront risk limits. This approach has delivered very strong results: Middle East business written since the escalation has a sub-20% loss ratio, and the firm's overall war book (including Russia-Ukraine conflict exposure) has written over $1 billion in premium with a sub-20% loss ratio, including current Middle East losses. Claims reporting is immediate for this business, so loss experience is tracked accurately. While increased competition post-re-escalation has reduced the number of opportunities meeting risk thresholds, the portfolio has performed very well in line with the firm's underwriting framework.

Q: What explains the higher-than-expected acquisition expense ratio in the reinsurance segment this quarter?

A: Two factors drove the increase. First, commission costs for business from new underwriting partnerships (such as Fidelis) flow through the acquisition expense line, which increases the ratio as new partner business grows. Second, the firm wrote more quota share premium in 2026 that has higher associated commission costs. Management confirms that despite the higher acquisition expense, the overall business still remains on track to meet the mid-to-high 80s combined ratio target.

Q: Should ROE expectations be lowered to the bottom of the historical range given the current softer market cycle?

A: Management reaffirms the existing 13% to 15% ROAE and mid-to-high 80s combined ratio guidance, with no changes to targets. Over the last 12 months, the combined ratio is 86.4% which is already within the target range, even in the current more competitive market. Halfway through 2026, the firm is exactly on plan, and the larger share of premiums earned in the second half of the year is expected to bring full-year results in line with targets. The firm's lead market position and proactive outward reinsurance strategy are supporting margins despite broader market softening.

Q: How has the bifurcation between lead and follow markets evolved over the past year, and how durable is this dynamic?

A: The gap between lead and follow market pricing and performance has widened slightly over the past 12 months across most lines. For example, recent mid-year reinsurance catastrophe renewals saw broker/peer estimates of average rate decreases of 15% to 20% for the broader market, while Pelagos (as a lead market player) only saw rate decreases in the single-digit range. Lead market position provides a clear, durable competitive advantage, including the ability to restructure terms and capacity proactively, which delivers better performance outcomes than follow market positions.