Fidelis Insurance Group Reports 2023 Fourth Quarter Results

Fourth Quarter 2023 Highlights:

• Gross premiums written of $783.9 million; growth of 31.7% from the fourth quarter of 2022
• Combined ratio of 81.4%
• Annualized operating return on opening common equity ("Operating ROE") of 25.2% and operating return on average common equity ("Operating ROAE") of 23.6%
• Net income of $228.3 million, or $1.93 per diluted common share and operating net income of $135.4 million, or $1.15 per diluted common share
• Book value per diluted common share was $20.69 at December 31, 2023, an increase of 13.4%, compared to September 30, 2023

Full Year 2023 Highlights:

• Gross premiums written of $3.6 billion; growth of 18.6% from full year 2022
• Combined ratio of 82.1%; improvement of 9.8 points from full year 2022
• Operating net income of $398.9 million, or $3.49 per diluted common share
• Net income of $2.1 billion, or $18.65 per diluted common share
• Operating ROE of 22.2% and Operating ROAE of 18.8%
• IPO completed on the NYSE on July 3, 2023, raising $89.4 million in net proceeds through the issuance of 7,142,857 common shares at $14.00 per common share

Fidelis Insurance Holdings Limited ("Fidelis" or "FIHL" or "the Group") (NYSE:FIHL) announced today its financial results for the fourth quarter ended December 31, 2023.

Dan Burrows, Group Chief Executive Officer, said "The fourth quarter was a strong finish to a milestone year for Fidelis in which we became a public company and strengthened our position as a global specialty insurer. Utilizing our nimble yet disciplined approach, we capitalized on attractive opportunities, achieved strong rate increases, and delivered excellent financial performance, including a combined ratio of 81.4% and annualized Operating ROAE of 23.6% in the fourth quarter, as we continued to execute against all aspects of our strategy.

"We are entering 2024 with strong momentum. Across core lines, we expect hard market conditions to continue, and we remain focused on actively managing our capital to foster sustainable growth and maintain our track record of best in class underwriting performance. With our lead market position and balance sheet strength, we are well positioned to continue delivering long-term profitable growth and shareholder value."

• Net income available to common shareholders for the fourth quarter of 2023 was $228.3 million, or $1.93 per diluted common share, which includes the establishment of a net deferred tax asset of $90.0 million related to the enactment of Bermuda's corporate income tax. Operating net income of $135.4 million, or $1.15 per diluted common share.
• Underwriting income for the fourth quarter of 2023 was $94.4 million and a combined ratio of 81.4%, compared to underwriting income of $137.6 million and a combined ratio of 66.2% for the fourth quarter of 2022.
• Net favorable prior year loss reserve development for the fourth quarter of 2023 was $15.1 million compared to $3.9 million in the prior year period.
• Net investment income for the fourth quarter of 2023 was $38.7 million compared to $17.1 million in the prior year period.
• Operating ROE of 6.3%, or 25.2% annualized, in the quarter compared to 7.0%, or 28.0% annualized in the prior year period.
• Operating ROAE of 5.9%, or 23.6% annualized, in the quarter compared to 6.8%, or 27.2% annualized in the prior year period.
• Book value per diluted common share was $20.69 at December 31, 2023, an increase of 13.4%, compared to September 30, 2023.

• Net income available to common shareholders for the year ended December 31, 2023 was $2,132.5 million, or $18.65 per diluted common share, which includes a net gain on distribution of Fidelis MGU of $1,639.1 million and the establishment of a net deferred tax asset of $90.0 million related to the enactment of Bermuda's corporate income tax. Operating net income was $398.9 million, or $3.49 per diluted common share.
• Underwriting income for the year ended December 31, 2023 was $327.3 million and a combined ratio of 82.1%, compared to $120.4 million and a combined ratio of 91.9% for the year ended December 31, 2022. The improvement was driven by premium growth in our Specialty segment together with significantly lower catastrophe and large losses.
• Net favorable prior year loss reserve development of $62.9 million compared to $22.1 million in the prior year.
• Net investment income of $119.5 million compared to $40.7 million in the prior year.
• Operating ROE and operating ROAE increased to 22.2% and 18.8%, respectively, in the year ended December 31, 2023, from 4.4% and 4.5%, respectively, in the year ended December 31, 2022, driven by significant increases in both underwriting income and investment income.
• Book value per diluted common share was $20.69 at December 31, 2023, an increase of 27.4% from the adjusted book value per diluted common share at the time of the Separation Transactions, which were completed on January 3, 2023, driven by net income and net unrealized gains reported in other comprehensive income.

The following table details key financial indicators in evaluating our performance for the three and twelve months ended December 31, 2023 and 2022:

Specialty Segment

The following table is a summary of our Specialty segment's underwriting results:

For the three months ended December 31, 2023, our underwriting ratio in the Specialty segment increased by 4.1 points from the prior year period, which was primarily driven by an increase in our loss ratio, as described below.

For the twelve months ended December 31, 2023, our underwriting ratio in the Specialty segment improved by 9.7 points from the prior year, which was primarily driven by a decrease in our loss ratio together with rate increases and improved pricing and terms and conditions.

For the three and twelve months ended December 31, 2023, net premiums earned increased primarily driven by an increase in net premiums written as a result of new business, strong renewals, and rate increases in the Property D&F, Marine and Aviation and Aerospace lines of business.

The following table is a summary of our Specialty segment's losses and loss adjustment expenses:

For the three months ended December 31, 2023, our loss ratio in the Specialty segment increased by 10.4 points. For the twelve months ended December 31, 2023, our loss ratio in the Specialty segment improved by 11.4 points.

The catastrophe and large losses in the three months ended December 31, 2023 related primarily to losses in connection with the Viasat-3 satellite deployment failure, the Sudan Conflict and other loss events in our Property D&F line of business. This compared to prior year period catastrophe and large losses related to reversal of certain Hurricane Ian losses originally recorded in the three months ended September 30, 2022.

The catastrophe and large losses in the year ended December 31, 2023 related primarily to the Sudan Conflict, losses in connection with the Viasat-3 satellite deployment failure, losses from severe convective storms in the U.S., and other loss events in various lines of business including Property D&F, Energy, and Marine. This compared to the prior year catastrophe and large losses related to the Ukraine Conflict in our Aviation and Aerospace line of business, and Hurricane Ian in our Property D&F line of business.

The adverse prior year development for the three months ended December 31, 2023 primarily related to adverse development on Hurricane Ian in our Property D&F line of business.

The adverse prior year development for the year ended December 31, 2023 related primarily to increased estimates on two contracts in the Energy line of business, adverse development within the Property D&F and Aviation and Aerospace lines of business, and updated legal expense provisions in the reserve for the Ukraine Conflict.

Bespoke Segment

The following table is a summary of our Bespoke segment's underwriting results:

For the three and twelve months ended December 31, 2023, our underwriting ratio in the Bespoke segment improved by 2.9 points and 4.2 points, respectively, from the prior year period, which was primarily driven by a decrease in our loss ratio.

For the three months ended December 31, 2023, gross premiums written increased as a result of new business, predominantly structured credit deals, in addition to other contracts that had improved terms and conditions than in the three months ended September 30, 2023.

For the twelve months ended December 31, 2023, gross premiums written decreased as we were more selective on new business written. The Bespoke market is weighted towards opportunities which are non-recurring, and a number of factors impacted our view of risk in this segment in 2023, including geopolitical instability, inflation and rising interest rates.

The following table is a summary of our Bespoke segment's losses and loss adjustment expenses:

For the three and twelve months ended December 31, 2023, our loss ratio in the Bespoke segment improved driven by lower large losses in the current year periods.

There were no large losses in the three months ended December 31, 2023, compared to a single large loss in our Other Bespoke line of business in the three months ended December 31, 2022.

The large losses in the twelve months ended December 31, 2023 related to two intellectual property losses in our Credit & Political Risk line of business. This compared to large losses in the twelve months ended December 31, 2022 related to the Ukraine Conflict in our Credit & Political Risk line of business and a single loss in our Other Bespoke line of business.

The favorable prior year development for the three and twelve months ended December 31, 2023 was driven by better than expected loss emergence across the majority of underlying lines of business.

Reinsurance Segment

The following table is a summary of our Reinsurance segment's underwriting results:

For the three months ended December 31, 2023, our underwriting ratio in the Reinsurance segment increased by 3.0 points from the prior year period, which was primarily driven by an increase in our loss ratio.

For the twelve months ended December 31, 2023, our underwriting ratio in the Reinsurance segment improved by 61.9 points from the prior year, which was primarily driven by favorable prior year development and a reduction in catastrophe and large losses.

For the three months ended December 31, 2023 net premiums earned increased driven by the impact of our outwards reinsurance contracts.

For the twelve months ended December 31, 2023 net premiums earned decreased as 2022 benefited from the earnings of higher net premiums written in 2021.

The following table is a summary of our Reinsurance segment's losses and loss adjustment expenses:

The catastrophe and large losses in the Reinsurance segment for the three months ended December 31, 2023 related to severe convective storms in the U.S. in our Property Reinsurance line of business. This compared to the release of incurred but not reported losses in the prior year period related primarily to Hurricane Ian, partially offset by losses related to Australian floods.

The catastrophe losses in the Reinsurance segment for the twelve months December 31, 2023 related primarily to the Hawaii wildfires, severe convective storms in the U.S., and Cyclone Gabrielle in New Zealand, compared to prior year losses related to Hurricane Ian, Australian floods and European storms.

For the three months ended December 31, 2023, favorable prior year development related to loss reductions from various events and benign claim experience.

For the twelve months December 31, 2023, favorable prior year development related primarily to loss reductions from Hurricane Ian as well as favorable attritional experience driven by a benign claim experience on prior accident years.

We do not allocate Fidelis MGU commissions or general and administrative expenses by segment.

Fidelis MGU Commissions

For the three and twelve months ended December 31, 2023, our Fidelis MGU commissions were $77.9 million and $225.3 million, respectively, and are comprised of ceding and profit commissions as part of the Framework Agreement effective from January 1, 2023. Fidelis MGU manages origination, underwriting, underwriting administration, outwards reinsurance and claims handling under delegated authority agreements with the Group.

The following table summarizes Fidelis MGU commissions earned:

General and Administrative Expenses

For the three and twelve months ended December 31, 2023, our general and administrative expenses were $25.7 million and $82.7 million, respectively (2022: $29.4 million and $165.5 million). The decreases were primarily related to the reduced headcount and related costs following the consummation of the Separation Transactions.

Net Realized and Unrealized Investment Gains/(Losses)

The net realized and unrealized investment gains in the three months ended December 31, 2023 resulted from a decrease in our allowance for credit losses and unrealized gains on other investments that are recorded at fair value. The net realized and unrealized investment gains for the year ended December 31, 2023 resulted from realized and unrealized gains on other investments, partially offset by net realized losses on sales of fixed maturity securities.

Net Investment Income

The increase in our net investment income in the three and twelve months ended December 31, 2023 was due to increases in interest rates during 2022 and 2023, where the short duration nature of our portfolio meant that we were reinvesting at higher rates.

Conference Call

Fidelis will host a teleconference to discuss its financial results on Friday, March 1, 2024 at 9:00 a.m Eastern time. The call may be accessed by dialing 1-888-886-7786 (U.S. callers), or 1-206-962-3782 (international callers), and entering the passcode 6281805 approximately 10 minutes in advance of the call. A live, listen-only webcast of the call will also be available via the Investor Relations section of the Company's website at https://investors.fidelisinsurance.com/. A recording of the webcast will be available in the Investor Relations section of the Company's website approximately two hours after the event concludes and will be archived on the site for one year.

About Fidelis

Fidelis Insurance Holdings Limited (NYSE:FIHL) is a global specialty insurer, leveraging strategic partnerships to offer innovative and tailored insurance solutions.

We have a highly diversified portfolio focused on three segments: Specialty, Bespoke, and Reinsurance, which we believe allows us to take advantage of the opportunities presented by evolving (re)insurance markets, proactively shift our business mix across market cycles, and produce superior underwriting returns.

Headquartered in Bermuda, with worldwide offices including Ireland and the UK, Fidelis Insurance operating companies have a financial strength rating of A- (Excellent) from AM Best, S&P and Fitch. For additional information about Fidelis Insurance, our people, and our products please visit our website at www.FidelisInsurance.com

Non-GAAP Financial Measures

This Press Release includes, and the related conference call will include, certain financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. ("U.S. GAAP") including Operating net income, Operating EPS, Operating ROE and Operating ROAE, and therefore are non-U.S. GAAP financial measures. Reconciliations of such measures to the most comparable U.S. GAAP figures are included in the attached financial information in accordance with Regulation G.

RPI Measure

Renewal price index (RPI) is a measure that Fidelis has used to assess an approximate index of rate increases on a particular set of contracts, using the base of 100% for the rates for the relevant prior year. Although management considers RPI to be an appropriate statistical measure, it is not a financial measure that directly relates to the Fidelis consolidated financial results. Management's calculation of RPI involves a degree of judgment in relation to comparability of contracts and the relative impacts of changes in price, exposure, retention levels, as well as any other changing terms and conditions on the RPI calculation. Consideration is given to potential renewals of a comparable nature so it does not reflect every contract in Fidelis' portfolio. The future profitability and performance of a portfolio of contracts expressed within the RPI is dependent upon many factors besides the trends in premium rates, including policy terms, conditions and wording.

Safe Harbor Regarding Forward-Looking Statements

This press release (including the documents incorporated herein) contains, and our officers and representatives may from time to time make (including on our related conference call), "forward-looking statements" which include all statements that do not relate solely to historical or current facts and which may concern our strategy, plans, projections or intentions and are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "predict," "potential," "assumption," "future," "likely," "may," "should," "could," "will" and the negative of these and also similar terms and phrases. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are qualified by these cautionary statements, because they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions, but are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.

Examples of forward-looking statements include, among others, statements we make in relation to: discussion relating to net income and net income per share; expected operating results, such as revenue growth and earnings; our expectations regarding our strategy and the performance of our business; information regarding our estimates for catastrophes and other loss events; our liquidity and capital resources; and expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities and governmental and regulatory investigations and proceedings.

Our actual results in the future could differ materially from those anticipated in any forward-looking statements as a result of changes in assumptions, risks, uncertainties and other factors impacting us, many of which are outside our control, including: the ongoing trend of premium rate hardening and factors likely to drive continued rate hardening; expected growth across our portfolio; the availability of outwards reinsurance and capital resources as required; the development and pattern of earned and written premiums impacting embedded premium value; changes in accounting principles or the application thereof; the level of underwriting leverage; the level and timing of catastrophe and other losses and related reserves on the business we underwrite; the performance of our investment portfolios; our strategic relationship with Fidelis MGU; the maintenance of financial strength ratings; the impact of global geopolitical and economic uncertainties impacting the lines of business we write; the impact of tax reform and insurance regulation in the jurisdictions where our businesses are located; and those risks, uncertainties and other factors disclosed under the section titled ‘Risk Factors' in Fidelis Insurance Holdings Limited's final IPO prospectus filed pursuant to Rule 424(b)(4) (Registration No. 333-271270) with the SEC on June 30, 2023 (which such section is incorporated herein by reference), as well as subsequent filings with the SEC available electronically at www.sec.gov.

Any forward-looking statements, expectations, beliefs and projections made by us in this release and on our related conference call speak only as of the date on which they are made and are expressed in good faith and our management believes that there is reasonable basis for them, based only on information currently available to us. However, there can be no assurance that management's expectations, beliefs, and projections will be achieved and actual results may vary materially from what is expressed or indicated by the forward-looking statements. Furthermore, our past performance, and that of our management team and of Fidelis MGU, should not be construed as a guarantee of future performance. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.