On Thursday, Fidelis Insurance Hldgs (NYSE:FIHL) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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View the webcast at https://events.q4inc.com/attendee/138609479
Summary
FIHL achieved a strong first quarter with a combined ratio of 86.6% and an annualized operating ROAE of 15.2%, growing book value per diluted share by 7.2% to $26.22.
The company grew gross premiums written by 7% overall and 13% in the insurance segment, driven by new underwriting partnerships and strategic capital allocation.
Management repurchased $219 million of shares, indicating confidence in stock undervaluation, and emphasized no further secondary offerings are anticipated in the near term.
Operational highlights include strong growth in property, construction, asset-backed finance, and marine sectors, leveraging partnerships and underwriting discipline.
Future outlook remains positive, with expectations of mid-single-digit growth, supported by strategic partnerships and improved outwards reinsurance strategies.
Management expressed confidence in maintaining strong pricing and retention levels despite competitive pressures, emphasizing their lead market position.
The company continues to focus on efficient capital allocation and maintaining a lean operational structure to optimize margins and manage risk.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to the Pelagos Insurance Capital First Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded for replay purposes. Following the conclusion of formal remarks, the management team will host a question and answer session and instructions will be given at that time. With that, I will now turn the call over to Miranda Hunter, Head of investor relations. Ms. Hunter, please go ahead.
Miranda Hunter (Head of Investor Relations)
Good morning and welcome to Pelagos Insurance Capital’s first quarter 2026 earnings conference call. With me today are Dan Burrows, our CEO, Alan Declare, our CFO, and Johnny Strickel, our Group Managing Director. Before we begin, I’d like to remind everyone that statements made during the call, including the question and answer section, will include forward looking statements. Management’s comments regarding expectations, projections, targets and any future results are based upon current assessments and assumptions and are subject to a number of risks, uncertainties and emerging information developing over time. It is important to note that actual results may differ materially from those expressed or implied today. Additional information regarding factors shaping these outcomes can be found in our SEC filings, including our earnings press release issued last night. Management will also make reference to certain non-GAAP and proprietary measures of financial performance. The reconciliations to US GAAP for each non-GAAP financial measure as well as description of our proprietary financial measures can be found in our earnings press release and financial supplement available on our website at pelagosinsurancecapital.com with that, I’ll turn the call over
Dan Burrows (Chief Executive Officer)
Thank you Miranda. Good morning everyone and thank you for joining us today. I’m pleased to welcome you to our first earnings call as Pelagos Insurance Capital. The Pelagos rebrand marks an exciting milestone and a deliberate step in our evolution. Our new name is a stronger, clearer reflection of who we are. An expert capital allocator accelerating our resilient, high performing diversified portfolio by bringing together strategic capital and underwriting expertise through our expanding community of specialist partners. Our strong first quarter performance builds on our momentum from last year. I want to highlight three key areas that both underscore our progress and position us well for continued success. First, we once again delivered excellent results demonstrating the strength and flexibility of our capital allocator model. We achieved a combined ratio of 86.6%, generated annualized operating ROAE of 15.2% and grew book value per diluted share to $26.22 including dividends. An increase of 7.2% in the quarter. This represents our best ever quarter of value creation for our shareholders. Second, our growth this quarter highlights the Unique advantages of our model, we grew GROSS Premiums written by 7% driven by our new underwriting partners and as our platform evolves, we will continue to expand on this. What sets us apart in the market is our ability to allocate capital across a diverse and expanding universe of distribution networks. This gives us multiple differentiated points of access to the market and allows us to execute with agility. Third, we continue to successfully balance profitable underwriting with meaningful capital returns, creating significant value for shareholders. This is underscored by the accretion to our book value per share, which to reiterate, increased by 7.2% in the first quarter alone. We continue to believe that our current market price of stock is undervalued and as part of our capital management Strategy, we repurchased $219 million of shares in the quarter. This includes 163 million bought through a privately negotiated transaction to repurchase all the remaining shares of one of our original PE sponsors. Importantly, following this strategic transaction, approximately 65% of our shares are now in the public fleet at current market valuation. We do not anticipate any further secondary follow on offerings with our remaining original and long term PE sponsors. In the near term, turning to our segments within insurance, we grew gross premiums written this quarter by 13% driven by the continued execution of our strategy to expand new underwriting partnerships across multiple lines of business. Property again delivered strong performance with continued growth and new business momentum. Our disciplined underwriting approach has enabled us to maintain our margin through our leadership position and by optimising our use of outwards reinsurance, even amid a competitive environment and rate pressure. This is evidenced by the fact that over the last three years we have been running at an average sub 40% loss ratio for our property line. Despite an active catastrophe and secondary parallel environment within property, construction has had a strong start to the year with growth driven by success in the open market, particularly in complex and post loss accounts where pricing and terms are more attractive. While some segments continue to experience pressure, we have remained selective while continually adapting our underwriting approach. Asset Backed Finance and Portfolio Credit continued its strong performance with both our existing and new underwriting partners as we continue to convert our pipeline of opportunities. This is not only diversifying our portfolio, but giving us additional ways to grow in a market with high barriers to entry and where we have deep expertise. We continue to see strong margins across these products which are insulated from traditional market cycles. In Marine we saw strong new business flow with a step change in marine war rates driven by conflict in the Middle East As a leader, our ability to quickly respond executing bespoke trades in the open market enables us to actively manage our portfolio at the individual risk level. Our underwriting discipline is driven by a precise risk assessment process. Along with our underwriting partners, we analyze each risk across critical factors like vessel journey, crew origination, cargo and beneficial ownership, allowing us to underwrite vessel by vessel, avoiding broader coverage through facilities outside of war. Market conditions in hull, cargo and liability remain competitive and we continue to to prioritise underwriting discipline to maintain portfolio quality. Our political violence and terror lines also presented opportunities for growth in the quarter, driven by our agile approach to selecting individual risks that meet our pricing hurdles. Pricing in the Middle east remains strong. We continue to benefit from our scale and lead position, enabling selected deployment and margin preservation Attractive Segments the evolving geopolitical landscape is creating new opportunities in this region which we are well positioned to continue executing on. In our reinsurance segment, gross Premiums written were $404 million for the quarter. This represented growth of 7% excluding the impact of the reinstatement premiums related to the California wildfires in Q1 2025. We are pleased with the results of our January 1st renewal season. Our underlying portfolio is supported by strong margins and sustained demand and We’ve delivered a three year average annual loss ratio in the sub 20% for this segment, clearly demonstrating the healthy margin profile of the business. Before I hand it over to Alan to discuss our first quarter results in more detail, I’d like to take a moment to highlight how our capital allocated model uniquely positions us in this market. While the market is seeing increased competition in certain lines today, that pressure is verticalized. By that we mean the pricing difference between lead and follow markets continues to become more pronounced and being a price maker, not taker, is increasingly important. As a market leader, we continue to see strong pricing, retention levels and access to business. Our ability to pick and choose how, where and when we execute across lines and geographies and with the right partners gives us the flexibility to capitalise on the most attractive opportunities. For example, following the outbreak of conflicts in the Middle east, we immediately set an underwriting and risk appetite framework and working alongside our partners, were among the first to underwrite risk and deploy capital. This enabled us to maximize pricing and set terms and conditions, demonstrating our ability to not only match the right capital to the right risk, but but also to the right partner at the right time. In summary, our strong capital position, deep relationships and access to the market, we continue to see significant opportunities for disciplined profitable growth and as demonstrated by our results this quarter the deliberate actions we are taking across this selection, our outwards reinsurance strategy and capital allocation position us to deliver strong performance throughout the cycle. And with that, I’ll turn the call over to Alan.
Alan Declare (Chief Financial Officer)
Thanks, Dan Pelagos Insurance capital delivered operating net income of $88 million, or $0.94 per diluted common share in the first quarter, resulting in an annualized operating return on average equity of 15.2%. This performance was driven by another quarter of excellent underwriting results. Our combined ratio of 86.6% was a significant improvement of 29 points. Over the first quarter of 2025. Our book value per diluted common share grew to $26.22, including dividends. This increased by 7.2%, delivering outstanding value creation in the quarter. Taking a closer look at our quarterly results, we grew our GROSS Premiums written by 7% versus the same quarter last year to $1.8 billion during the quarter. In the insurance segment, gross premiums written increased by 13%. We saw continued growth from new underwriting partnerships in several lines of business. In the reinsurance segment, we had growth of 7% excluding the impact of the reinstatement premiums related to the California wildfires in Q1 2025. This growth was driven by new underwriting partnerships. Our net premiums earned were $515 million in insurance and 54 million in reinsurance. Through our network of underwriting partnerships, we saw additional opportunities to strategically deploy capital in the quarter, including in lines that have an accelerated earning pattern, enabling us to exceed the expectations provided on our last call. Looking into the second quarter, we expect net earned premiums to be similar to the first quarter in our insurance segment and 65 to $75 million in our reinsurance segment. Our excellent underwriting performance resulted in a combined ratio of 86.6%. I will now break down the components of our combined ratio in more detail. For the quarter, our catastrophe and large losses were 12.7 points of the combined ratio, or $72 million. This represents a significant improvement compared to the same period last year when catastrophe and large losses were 55.3 points of the combined ratio, or $333 million, primarily related to the California wildfires. As Dan said, the evolving geopolitical landscape, particularly in the Middle east, has created underwriting opportunities for us. It is an ongoing situation and we continue to monitor it. The loss experienced in the first quarter was minimal during the quarter, our attrition loss ratio was 27.2 points of the combined ratio, consistent with the low levels we have reported over the last several quarters. We recognize net favorable prior year development of $3 million for the quarter compared to $41 million in the prior year period. We had continued positive development on catastrophe losses and benign prior year attritional experience in our reinsurance segment and better than expected loss emergence in multiple lines of business in our insurance segment in the quarter. We, like others, recognized increased loss estimates related to the Baltimore Bridge collapse. Turning to expenses, Underlying policy acquisition expenses were 26.8 points of the combined ratio for the first quarter consistent with 27.8 points in the prior year period. Policy acquisition expenses to Total Financial Performance were 15.3 points of the combined ratio in the quarter. The increase of 2.3 points from prior year related to the excellent underwriting results in the current year. Finally, our general and administrative expenses were $29 million in the quarter. This is consistent with what we shared on our last call and continue to expect through 2026. Moving on to our investment results, our net Investment income was $44 million consistent with the fourth quarter of 2025. As of March 31, 92% of our portfolio is in cash and fixed maturity securities yielding an average of 4.4%. The fixed maturity securities have an average rating of A plus with an average duration of 2.7 years and a new money yield of 4.5%. Turning to taxes, our effective tax rate for the first quarter was a negative 4.8% in the quarter. We recorded a one time benefit due to the UK government updating its tax laws to conform with the most recent OECD guidance on Pillar 2 global minimum tax. Excluding this discrete item, our effective tax rate remains in line with our expectations at 16%. Turning to capital Management, we are in a very strong capital position which has enabled us to grow our underwriting portfolio and also return capital to shareholders. In the first quarter, we repurchased 11.5 million common shares for $219 million at an average price of $19 per share, which includes our previously disclosed repurchase from CVC. Our repurchases have been highly accretive on both a book value and earnings per share basis to our shareholders contributing $0.75 to our diluted book value per share. In the first quarter alone, we have repurchased an additional $14 million of common shares through May 8th with $185 million remaining on our share repurchase authorization. Since our IPO, we have repurchased $600 million of our common shares or 30% of our shares at an average price of $17.66 per share. We continued to pay a quarterly common dividend in the first quarter and last week we announced a 15 cent dividend payable in June. In April, we also redeemed our $125 million junior subordinated notes, reducing our debt and resulting in a pro forma debt to capital ratio of 24.2% as of March 31. In summary, our financial results once again demonstrated strong earnings power as well as effective capital management, resulting in 7.2% growth in book value per diluted share. And with that, I will now turn the call over to Jonny Thanks Alan
Jonny
and good morning everyone. As Dan mentioned, at a time when the market is finding it more challenging, our model continues to drive profitable growth as we grow and form new relationships with trading partners. As a capital allocator, we bring together underwriting partners, each with their own strengths, expertise and differentiated access points to the market. Then, based on our underwriting …
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