Fidelis Insurance Group Reports 2024 Third Quarter Results

Third Quarter 2024 Highlights:

• Gross premiums written of $741.9 million; growth of 25.2% from the third quarter of 2023
• Combined ratio of 87.4%
• Annualized operating return on opening common equity ("Operating ROE") of 16.8% and annualized operating return on average common equity ("Operating ROAE") of 16.4%
• Net income of $100.6 million, or $0.88 per diluted common share and operating net income of $105.1 million, or $0.92 per diluted common share
• Repurchased 4,279,983 common shares for $66.8 million, at a weighted average cost per share, including commission expenses, of $15.61

Nine Months Ended September 30, 2024 Highlights:

• Gross premiums written of $3.4 billion; growth of 23.4% from nine months ended September 30, 2023
• Combined ratio of 88.6%
• Annualized Operating ROE of 13.9% and annualized Operating ROAE of 13.3%
• Net income of $235.5 million, or $2.02 per diluted common share and operating net income of $255.3 million, or $2.18 per diluted common share
• Book value per diluted common share was $23.43 at September 30, 2024, an increase of 13.2% from December 31, 2023 of $20.69
• Repurchased 6,570,003 common shares for $105.5 million, at a weighted average cost per share, including commission expenses, of $16.06 

Fidelis Insurance Holdings Limited ("Fidelis" or "FIHL" or "the Group") (NYSE:FIHL) announced today its financial results for the third quarter ended September 30, 2024.

Dan Burrows, Group Chief Executive Officer of Fidelis Insurance Group, commented, "The results of the third quarter once again demonstrate the strength of our business, the steps we have taken to optimize our risk-adjusted returns, and our disciplined approach to capital management. We delivered 25% growth in gross premiums written, a combined ratio of 87.4% and annualized Operating ROAE of 16.4%. In addition, given the strength of our capital position, we have continued to return excess capital to shareholders, including repurchases of $66.8 million of common shares, demonstrating our commitment to enhancing shareholder value.

"Looking ahead, we remain focused on leveraging our scale and positioning, capitalizing on our ability to identify compelling opportunities and produce superior underwriting results. We are pleased with the momentum in our business and continue to pursue attractive growth and value creation for shareholders."

• Net income for the third quarter of 2024 was $100.6 million, or $0.88 per diluted common share. Operating net income was $105.1 million, or $0.92 per diluted common share.
• Underwriting income for the third quarter of 2024 was $80.0 million and the combined ratio was 87.4%, compared to underwriting income of $74.8 million and a combined ratio of 85.4% for the third quarter of 2023.
• Catastrophe and large losses for the third quarter of 2024 were $91.6 million compared to $79.9 million in the prior year period.
• Net favorable prior year loss reserve development for the third quarter of 2024 was $10.1 million compared to $43.3 million in the prior year period.
• Net investment income for the third quarter of 2024 was $52.1 million compared to $33.1 million in the prior year period. Purchased $437.6 million of fixed income securities at an average yield of 4.6%.
• Operating ROE of 4.2%, or 16.8% annualized, in the quarter compared to 4.6%, or 18.4% annualized in the prior year period.
• Operating ROAE of 4.1%, or 16.4% annualized, in the quarter compared to 4.4%, or 17.6% annualized in the prior year period.

• Net income for the nine months ended September 30, 2024, was $235.5 million, or $2.02 per diluted common share. Operating net income was $255.3 million, or $2.18 per diluted common share.
• Underwriting income for the nine months ended September 30, 2024, was $185.9 million and the combined ratio was 88.6%, compared to underwriting income of $232.9 million and a combined ratio of 82.4% for the nine months ended September 30, 2023.
• Catastrophe and large losses for the nine months ended September 30, 2024, were $375.8 million compared to $187.3 million in the prior year period.
• Net favorable prior year loss reserve development of $145.7 million compared to $47.8 million in the prior year period.
• Net investment income of $139.1 million compared to $80.8 million in the prior year period. Purchased $1.5 billion of fixed income securities at an average yield of 4.9%. At September 30, 2024 the current book yield was 4.9%.
• Operating ROE of 10.4%, or 13.9% annualized, in the nine months ended September 30, 2024, compared to 14.7%, or 19.6% annualized in the prior year period.
• Operating ROAE of 10.0%, or 13.3% annualized, in the nine months ended September 30, 2024, compared to 13.3%, or 17.7% annualized in the prior year period.
• Book value per diluted common share was $23.43 at September 30, 2024 (dilutive shares at September 30, 2024 of 636,971), compared to $20.69 at December 31, 2023.

The following table details key financial indicators in evaluating our performance for the three and nine months ended September 30, 2024 and 2023:

Specialty Segment

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

For the three months ended September 30, 2024, our GPW increased primarily driven by growth from new business and increased rates in our Property D&F and Marine lines of business, partially offset by decreases in our Property and Energy lines of business as a result of timing of certain renewals.

For the nine months ended September 30, 2024, our GPW increased primarily driven by growth from new business and improved rates in our Property D&F, Property, and Marine lines of business, partially offset by a decrease in our Aviation and Aerospace line of business where certain deals did not meet our underwriting criteria and rating hurdles.

For the three and nine months ended September 30, 2024, our NPE increased due to earnings from higher net premiums written in the current and prior year periods.

For the three and nine months ended September 30, 2024, our policy acquisition expense ratio increased due to higher variable commissions in certain lines of business and changes in the mix of business written and ceded.

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

For the three and nine months ended September 30, 2024, our loss ratio in the Specialty segment increased by 2.1 points and 2.9 points, respectively, compared to the prior year periods.

The attritional loss ratio in the three months and nine months ended September 30, 2024, improved by 6.9 points and 1.6 points, respectively, compared to the prior year periods due to a lower level of small losses in the current year periods.

The catastrophe and large losses in the three months ended September 30, 2024, were primarily attributable to Hurricane Helene and European storm Boris, impacting our Property D&F and Marine lines of business. This compared to the prior period catastrophe and large losses related primarily to loss events in various lines of business including, Energy, Marine, and Aviation and Aerospace, and losses related to the Hawaii wildfires in our Property D&F line of business.

The catastrophe and large losses in the nine months ended September 30, 2024 related to losses from the Baltimore Bridge collapse in our Marine line of business, severe convective storms, Hurricane Helene and European storm Boris in the Property D&F and Marine lines of business, together with other smaller losses in various lines of business. This compared to prior year period catastrophe and large losses related to our Property D&F line of business where we experienced losses from severe convective storms in the U.S. and the Hawaii wildfires, our Aviation and Aerospace line of business where we experienced losses from the Sudan conflict, and loss events in various lines of business including, Energy, Marine, and Aviation and Aerospace.

The adverse prior year development for the three months ended September 30, 2024, was driven by increased estimates in our Aviation and Aerospace line of business, partially offset by better than expected loss emergence in our Property D&F line of business.

The favorable prior year development for the nine months ended September 30, 2024, was driven primarily by better than expected loss emergence in our Property D&F and Marine lines of business, partially offset by an increase in our Aviation and Aerospace line of business.

Bespoke Segment

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

For the three and nine months ended September 30, 2024, our GPW increased primarily driven by new business in our Bespoke Other line of business, partially offset by timing of renewals in our Credit & Political Risk line of business. Gross premiums written in Bespoke can be opportunistic in nature and premiums written may fluctuate on a quarterly basis due to the timing and selection of the contracts we underwrite.

For the three and nine months ended September 30, 2024, our NPE remained consistent compared to the prior year periods.

Our policy acquisition expense ratio for the three and nine months ended September 30, 2024 changed due to changes in the mix of business written and ceded, and commissions earned from reinsurance partners.

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

For the three months ended September 30, 2024, our loss ratio in the Bespoke segment improved by 25.2 points compared to the prior year period, driven by a decrease in our large loss ratio and lower attritional losses in the period.

For the nine months ended September 30, 2024, our loss ratio in the Bespoke segment increased by 0.4 points compared to the prior year period, driven by an increase in our large loss ratio, partially offset by higher prior year favorable development in the period.

The attritional loss ratio for the three and nine months ended September 30, 2024, improved by 12.3 points and 2.8 points compared to the prior year periods due to a lower level of small losses in the current year periods.

The large losses in the three months ended September 30, 2024 related to our Bespoke Other line of business. The large losses in the nine months ended September 30, 2024 related to intellectual property losses in our Credit & Political Risk line of business. The large losses in the three and nine months ended September 30, 2023 related to intellectual property losses in our Credit & Political Risk line of business.

The favorable prior year development for the three and nine months ended September 30, 2024 was driven by benign attritional experience and favorable claims settlements.

Reinsurance Segment

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

For the three and nine months ended September 30, 2024, GPW increased driven by new business as well as rate increases, while NPE increased driven by earnings from higher net premiums written in the current year periods.

For the three and nine months ended September 30, 2024, our policy acquisition expense ratio decreased, primarily due to change in business mix and the impact of commissions on outwards reinsurance.

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

For the three months ended September 30, 2024, our loss ratio in the Reinsurance segment increased by 14.1 points compared to the prior year period, as a result of lower favorable prior year development.

The loss ratio improved by 3.6 points for the nine months ended September 30, 2024, compared to the prior year period, due to improvements in our attritional and catastrophe and large loss ratios, partially offset by lower favorable prior year development.

The attritional loss ratio in the three months ended September 30, 2024 increased by 1.6 points compared to the prior year period, both of which were benign in terms of attritional losses.

The attritional loss ratio in the nine months ended September 30, 2024, improved by 6.7 points due to favorable experience compared to the prior year period.

The catastrophe and large losses in the three and nine months ended September 30, 2024 were primarily from Hurricane Helene.

For the three and nine months ended September 30, 2024, favorable prior year development was driven by positive development on catastrophe losses and benign prior year attritional experience.

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

The Fidelis Partnership Commissions

For the three and nine months ended September 30, 2024, The Fidelis Partnership commissions were $97.3 million and $249.0 million, respectively, or 15.3% and 15.3% of the combined ratio, respectively, (2023: $70.6 million and $147.4 million or 13.9% and 11.1% of the combined ratio) and comprise ceding and profit commissions as part of the Framework Agreement effective from January 1, 2023. The increase was due to the full impact of earning such commissions since January 1, 2023 together with the increase in net premiums earned. The Fidelis Partnership manages origination, underwriting, underwriting administration, outwards reinsurance and claims handling under delegated authority agreements with the Group.

The following table summarizes The Fidelis Partnership commissions earned:

General and Administrative Expenses

For the three and nine months ended September 30, 2024, general and administrative expenses were $22.7 million and $70.7 million, respectively, or 3.6% and 4.4% of the combined ratio, respectively (2023: $21.8 million and $57.0 million or 4.3% and 4.3% of the combined ratio). For the three months ended, the general and administrative expense remained consistent compared to the prior year period. For the nine months ended, the increase was driven primarily by employment costs relating to increased head count to support the growth of the business.

Net Investment Income

The increase in our net investment income in the three and nine months ended September 30, 2024, was due to the increase in investible assets and a higher yield achieved on the fixed income portfolio and cash balances. During the three and nine months ended September 30, 2024, we purchased $437.6 million and $1.5 billion, respectively, of fixed maturity securities at an average yield of 4.6% and 4.9%, respectively.

Net Realized and Unrealized Investment Gains/(Losses)

The net realized and unrealized investment losses in the three and nine months ended September 30, 2024 resulted primarily from realized losses on the sale of $203.0 million and $632.0 million, respectively, of fixed maturity securities with an average yield of 1.0% and 1.1%, respectively, the proceeds of which were reinvested at higher yields.

Conference Call

Fidelis will host a teleconference to discuss its financial results on Wednesday, November 13, 2024, at 9:00 a.m. Eastern time. The call can be accessed by dialing 1-800-549-8228 (U.S. callers), or 1-289-819-1520 (international callers), and entering the passcode 83511 approximately 10 minutes in advance of the call. A live, listen-only webcast of the call will also be available via the Investors 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 Insurance Group

Fidelis Insurance Group 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 Group operating companies have a financial strength rating of A from AM Best, A- from S&P and A3 from Moody's. 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, attritional loss ratio and catastrophe and large loss ratio, 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, related posts on our website and LinkedIn and the related discussion and analysis relating to our financial results for the third quarter ended September 30, 2024, contain, and our officers and representatives may from time to time make (including on our related earnings 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, targets, 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: "continue," "grow," "opportunity," "create," "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "target," "expect," "evolve," "achieve," "remain," "proactive," "pursue," "optimize," "emerge," "seek," "build," "looking ahead," "commit," "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, targets, 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: targeted operating results such as return on equity, net earnings and net earnings per share, underwriting profitability and target combined, loss and expense ratios, growth in gross written premiums and book value; our expectations regarding our business and capital management 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 recent trend of premium rate hardening and factors likely to drive continued rate hardening or a softening leading to a cyclical downturn of pricing in the (re)insurance industry;
• the development and pattern of earned and written premiums impacting embedded premium value;
• our ability to manage risks associated with macroeconomic conditions resulting from any public health crisis, rising energy prices, inflation and interest rates, current or anticipated military conflict or terrorism, including the ongoing Ukraine Conflict and the escalation of conflict in the Middle East, sanctions and other geopolitical events globally;
• changes to our strategic relationship with The Fidelis Partnership and our dependence on the Delegated Underwriting Authority Agreements for our underwriting and claims-handling operations;
• our ability to successfully implement our long-term strategy and compete successfully with more established competitors and increased competition relating to consolidation in the reinsurance and insurance industries;
• the possibility of greater frequency or severity of claims and loss activity than our underwriting, reserving or investment practices have anticipated;
• the reliability of pricing, accumulation and estimated loss models;
• the impact of complex causation and coverage issues associated with attribution of losses;
• the actual development of losses and expenses impacting estimates for claims which arose as a result of loss activity, particularly for events where estimates are preliminary until the development of such reserves based on emerging information over time;
• any downgrades, potential downgrades or other negative actions by rating agencies relating to us or our industry;
• our dependence on key executives and ability to attract qualified personnel;
• our dependence on letter of credit facilities that may not be available on commercially acceptable terms;
• our potential inability to pay dividends or distributions in accordance with our current dividend policy, due to changing conditions;
• availability of outwards reinsurance on commercially acceptable terms;
• the recovery of losses and reinstatement premiums from our reinsurance providers;
• our potential need for additional capital in the future and the potential unavailability of such capital to us on favorable terms or at all;
• our dependence on clients' evaluation of risks associated with such clients' insurance underwriting;
• the suspension or revocation of our subsidiaries' insurance licenses;
• our potentially being subject to certain adverse tax or regulatory consequences in the U.S., U.K. or Bermuda;
• risks associated with our investment strategy such as market risk, interest rate risk, currency risk and credit default risk;
• the impact of tax reform and changes in the regulatory environment and the potential for greater regulatory scrutiny of the Group as a result of the outsourcing arrangements;
• heightened risk of cybersecurity incidents and their potential impact on our business;
• the impact of inflation or deflation in relevant economies in which we operate;
• our ability to evaluate and measure our business, prospects and performance metrics and respond accordingly;
• the failure of our risk management policies and procedures to be adequate to identify, monitor and manage risks, which may leave us exposed to unidentified or unanticipated risks;
• operational failures, including the operational risk associated with outsourcing to The Fidelis Partnership, failure of information systems or failure to protect the confidentiality of customer information, including by service providers, or losses due to defaults, errors or omissions by third parties and affiliates;
• risks relating to our ability to identify and execute opportunities for growth or our ability to complete transactions as planned or realize the anticipated benefits of our acquisitions or other investments; and
• and those risks, uncertainties and other factors disclosed under the section titled ‘Risk Factors' in Fidelis Insurance Holdings Limited's Form 20-F filed with the SEC on March 15, 2024 (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 referenced on such 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 The Fidelis Partnership, 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.