Q4 2021 International General Insurance Holdings Ltd Earnings Call
Yes.
Good day and welcome to the International General Insurance Holdings limited fourth quarter and full year 2021 financial results conference call.
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Please note. This event is being recorded I would now like to turn the conference over to Robyn City head of Investor Relations. Please go ahead.
Thank you and good morning, and welcome to today's conference call today, we'll be discussing our fourth quarter and full year 2021.
Actual results you will have seen our results press release, which we issued last night after the market closed.
If you'd like a copy of the press release is available in the on our website at Www Dot IGN sure Dot com.
We've also.
Supplementary investor presentation, which can be found on our website on the presentations page in the investors section.
On today's call are what's its job say chairman and CEO will lead job, sorry, President Pervez Frisbee, Chief Financial Officer, Waldorf will begin the call with some high level comments before handing over to all lead to talk you through the results for the fourth quarter and full year 2021 in more detail and also giving some insight into current market conditions that are out.
For the remainder of 2022 at this point, we'll open the call up for Q&A.
Begin with the customary disclaimer language.
Our speakers remarks may contain forward looking statements. Some of the forward looking statements can be identified by the use of forward looking words, we caution you.
Such forward looking statements should not be regarded as a representation by us that future plans estimates or expectations contemplated by us will in fact be achieved before.
Forward looking statements involve risks uncertainties and assumptions actual events or results may differ differ materially from those projected in the forward looking statements due to a variety of factors, including the risk factors set out in the company's annual report on form 20-F for the year ended December 31, 2020, the company's rip.
Ports on form 6K, and other filings with the SEC as well as our earnings press release issued yesterday evening.
We undertake no obligation to update or revise publicly any forward looking statements, which speak only as of the date. They are made in addition, we use some non <unk> financial measures in this conference call for a reconciliation of these measures to the nearest I F. RF measures. Please see our earnings release, which has been filed with the SEC.
See as available on our website.
I'll now turn the call over to our chairman and CEO walk ups job say.
Thank you Robert.
And good day.
Everyone. Thank you for joining us on today's.
Today's call.
We ended Q1 with a very strong fourth quarter, making the year an excellent one on virtually all metrics, including record underwriting result.
We grew.
Our gross premiums by more than 60%.
On the back of roughly 54% growth.
20.
And and have now comfortably close yeah Julien.
Sure.
Got it.
Great.
Average.
We feel 57 confirmed.
For the fourth quarter.
56% for the year.
And we grew our book value per share more than 5%.
I would note that the seven quarters.
Voting as a public company, we have grown our book value per share by 19, 2%.
It's Debbie.
Back for a moment.
Want to comment on that.
Paul.
We have built over the past two decades.
2021 .
20 years since <unk> was established in a month.
Jordan.
We just pay people.
And.
Dominantly centered around.
East region.
And then Andy.
If you need any markets.
Yeah.
Today, we are close to 300 people across six offices.
More than 20 specialty lines of business in every major market worldwide.
In March 2020, we became a.
Publicly traded company listed on NASDAQ.
Though we are still relatively new to the public company in June .
Pardon me. This is the conference operator, it appears we've lost connection with the Speaker line. Please hold while we reconnect.
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Thanks very much.
Thank you Joe.
Yes.
Thank you.
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Okay.
Okay.
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Thank you for your patience, we have reconnected the speaker line at this time I would like to turn the conference back over to Robyn centered.
I apologize I apologies for this we lost one of our lines. So what's if we'll I'll just turn it back over to Walter who was.
Starting to discuss our track record that we've built over the last 20 years.
Over to you. Thank you.
Im sorry.
I apologize to everyone for what's happened, but I'll just continue with what I will say that I think stepping back for a moment I want to comment on the connector or do we have built over the past decade.
2021 'twenty used since our GI was established.
Jordan.
Three people.
This is predominantly centered around middle East region and <unk>.
<unk> markets.
Yes.
We are close to 300 people across six offices.
And I think more than 20 specialty lines of business.
In.
Every major market worldwide.
And in March 2020, we became <unk>.
Publicly traded company listed on NASDAQ.
Though we are relatively new to the public.
And insurance investing landscape.
Yes.
It has a long track record of underwriting.
Hello brokers have been resolved.
You got a business to generate long.
And then for our shareholders.
And our 20 years, we have grown our company from.
From 25 milligram and initial working capital and then this is all of our.
Gross premiums.
Our Q2 over.
Julien and shareholders' equity.
445 million Facebook.
Yes, four to 5 million and gross premiums.
Hum.
Always been to create solid and lasting company.
He can add to that.
Service oriented.
Partner to our clients shareholders and other stakeholders.
Yes.
What we set out to do.
But our work is going well.
There is always more to be done.
Uh huh.
As we chart our course for the next 20 years.
It is clear that recent events have changed some things component there.
We live in a world.
Increasingly complex and risky for all this.
Back to you.
We have achieved have defied our belief that our strategy is the right one.
Our unique advantage is not just our small size.
So the Opex, yes.
Our specialized knowledge of international regional markets.
By law, Sandy and deepen relationships with our clients.
Exactly.
They can expect from us.
Our current loan to be efficient and besides that.
We have it.
Better and responsible approach to growth.
Big four.
We take and the inherent volatility of our business.
It is this approach that has underpinned our purchases.
And it gives you a risk right.
We have demonstrated our ability to manage this like growing our business, while generating strong results when the market is right.
And slowing down all while still maximizing profitability when the market weakens.
We know all of our markets, but most importantly, we know who and what we are.
I understand.
Our capabilities and experience and the expertise that we have.
During Q2 and in the years.
We will continue to be responsible stewards of our shareholders' capital.
While visiting with our solid foundation to deliver strong returns for all our stakeholders.
They called Us.
No way.
Yeah.
Okay.
Through would be resolved for the quarter and.
Please wake required.
Thank you Walter and thank you all for joining us today.
As long as I've mentioned, we've had an excellent year in 2021.
Producing strong solid core underwriting results.
We continue to build the high quality diversified book of business.
Only supports our 20 year track record, but plays a very strong foundation for the years ahead.
I'll start with a high level recap of the numbers is you have the press release and the <unk>.
Story is fairly straightforward.
Straightforward.
Gross premiums written in the fourth quarter were solid at $163 $5 million representing growth of about 26, 3% over the fourth quarter of 2020, which itself so excellent protection.
For the full year, we grew premiums by 16, 8% to a record level of $545 $6 million.
While it's still early in 2022, we expect growth trends, we saw over the past two years to continue in 2022.
Growth in the fourth quarter was experienced in most lines as a result of increases in new and renewal business as well as <unk>.
Increased rates.
In the short tail segments, we saw growth in every line of business.
With the exception of aviation, but particularly in engineering as well as in the U S.
Specifically in the U S. We wrote $31 $3 million of premium in 2021, which is an increase of more than 50% of what we wrote in 2020.
We see this as a strong growth opportunity for us in the years to come.
In the long tail segment, we recorded growth in all lines with the exception of marine liability and financial institutions. The.
The most significant growth in the luxury segment was in the casualty lines.
Which is as we've always said as a non U S business and it's predominantly professional indemnity and D&O.
For the full year 2021, the most significant premium.
<unk> was achieved in the short tail segment, which accounted for approximately 52% of our overall portfolio.
Growth for the full year was 18, 7% it was primarily in the energy property and engineering and construction lines.
And also into the read as cargo and continue to see lights, which are relatively new lines of business for <unk>.
We're continuing to see slowing in the pace of rate acceleration in this segment.
Although I would note that this is gradual.
Low tier segment, which accounted for approximately 44% of the portfolio.
We reported an increase in gross written premium of 13, 8% for the period.
Growth was primarily driven by professional indemnity and D&O business, where rates remain up on average over 26%.
We're continuing to see some very good opportunities in these lines this capacity and market appetite remained relatively constrained.
A large portion of our business in the slides is really around excess basis and also on a claims made basis and it's worth reiterating that we do not practice visits in the U S is primarily made up of the UK business and to a lesser degree.
Business emanating from Europe , and the Middle East.
And our treaty reinsurance book.
Gross premiums of $4 million and $34 million in the fourth quarter and full year 2021, respectively.
That represented increases of 42, 9% and 24, 4% for these periods.
The treaty reinsurance book, because it's for approximately 4% of the overall portfolio.
We reported record net underwriting income for both the fourth quarter of $36 $36 million in the full year of $105 eight to get voters in 2021.
This compares with underwriting income of $14 $7 million for the fourth quarter of 2020, and $77 4 million for the full year 2020.
Overall, the combined ratio was a healthy 83, 8% for the fourth quarter of 2021, and 86, 4% for the full year 2021.
As you saw from our press release, the claims and claims expense ratio improved 13 points in the fourth quarter and two five points for the full year, reflecting increased debt give us earn throughout 2021 lower level of losses as well as favorable development in prior accident years in both the fourth quarter and the full year.
Compared with unfavorable development in the fourth quarter of 2020 that favorable.
Favorable development for the full year of 2020.
Plus the acquisition cost increase in both the fourth quarter and full year 2021, when compared to the same periods in 2020.
Due to the increase in premiums written and earned in both periods.
The total acquisition expense ratio improved by two four points in the fourth quarter of 'twenty, one over the period over the prior year period, and just shy of one point for the full year on a higher earned premium when compared to 2020.
General and administrative expenses were higher in both the fourth quarter and full year 2021, largely due to increased costs and salaries related to new hires.
Investment in technology infrastructure to support the company's growth as well as some nonrecurring legal and professional fees.
We're cognizant that expenses are likely to increase as we continue to grow.
And we keep a close eye on this.
Foreign currency movements for the fourth quarter and full year 'twenty. One are clearly set out in the results press release issued last night, So I will turn to our investment portfolio.
You can find the breakdown of the ratio of the portfolio and the investor presentation for the fourth quarter and full year.
Which we have posted on our website.
Growth in the investment portfolio for the full year supported by an increase in net cash flow from operations.
Total investment income net increased by 23, 5% for the full year 2021.
$2014 2 million.
<unk> doubled as compared to 11 $5 million for 2020 due to a higher volume of funds Detroit, particularly in the fixed maturity portfolio.
Portfolio.
Including the Companys share of loss from associates, and realized and unrealized mark to market movement total investment income was a loss of $4 million for the fourth quarter of 'twenty, one versus a gain of $4 5 million in the same quarter of 2020, respectively, and a gain of $8 $8 million and $8 $5 million for the full years.
2021, and 2020, respectively.
The loss recorded in the fourth quarter related to some investment properties Agi oldest share of in the Netherlands.
We're ongoing financial and economic turmoil and has resulted in significant.
For inflationary pressures and currency devaluation.
Which has caused a meaningful decline in the value of commercial real estate throughout the country. As we said in our press release last night. This portion of our real estate Holdings has now been written down by more than 50%. So we don't expect any further material impacts from our Netherlands real estate holdings.
For the fourth quarter of 2021.
Total investment.
Total investment income net decreased by $1 $2 million when compared to the same period in 2020 and the.
The fourth quarter of 2021 included the reclassification of $1 $6 billion from interest income to other comprehensive income.
As a result of a management assessment for the effective interest rate calculation for the fixed maturity portfolio.
Income from the core interest bearing portfolio was down by 33, 1% in the fourth quarter of 2021.
And up 16, 3% for the full year when compared with the corresponding periods in 2020, where the fourth quarter of 2021 included the reclassification of $1 $6 million interest income to other comprehensive income for the reasons I just described.
The increase in the full year of 'twenty one.
When compared to corresponding periods in 'twenty was the result of an increase in the allocation to higher yielding bonds. Despite the decline in the yield and the term deposit portfolio.
The average yield on our fixed maturity bond portfolio was one 5% for the fourth quarter of 'twenty, one and two 6% for the full year compared with two 8% and two 6% for the fourth quarter and full year of 2020.
The average yield and bank term deposits, because one 5% and one 9% for the fourth quarter and full year 'twenty, one compared with two 2% and two 5% for the fourth quarter and full year two.
2020.
Core operating income more than tripled to $13 $6 million for the fourth quarter of 2021.
Compared to $4 5 million for the fourth quarter of 2020.
An increased roughly 50% for the full year, 2021% to $53 1 million from $35 $6 million for the full year 2020.
Core operating return on average equity annualized was 13, 7% for the fourth quarter of 'twenty, one and 13, 6% for the full year.
Shareholders' equity was 401 $401 9 million.
The value per share was $8 83.
December 31, 21, representing a five 2% increase from December 31 2020.
19, 2% increase from March 31, 2020, which is the first relevant data point for book value per share since becoming a public company.
So all in all an excellent year to Mark our 20 years in business.
Now I'll spend some time discussing market conditions, our position in the market that are up for the remainder of the year.
We are well into the first quarter and indications so far been positive across our portfolio.
The majority of our portfolio renewed during the first half of the year and already we have taken advantage of new opportunities in all our segments.
The U S and Europe are both growth markets for us and we expect to see further expansion in both regions during 2022.
In the U S, where we are only rising short tail business.
Mrs.
We saw 50% growth June 2021, when compared with 2020.
And we expect a similar level of growth in 2022.
In Europe .
You'll recall that we established our European subsidiary multi last July .
We're seeing significant opportunity in both northern and Western Europe , particularly on the long tail lines.
Which include <unk> and to a lesser extent, but still a meaningful extent.
Financial institutions.
We said that we expect the majority of the growth in the first two years to be primarily in the long tail lines.
On the short term side, we're seeing some opportunities in proxy engineering coming out of Western Europe .
While 2021 was really the setup phase.
22 will be a better measure of what we can achieve.
In Europe , but to give you an indication.
Should expect to see growth screen protection were up $25 million this year.
And other short tail lines the pace of rate acceleration has slowed but we continue to see rate increases across most lines of business within this segment. Although this varies widely depending on the line of business.
And the long tail lines rate improvement continues to be significant although there are signs of weakening as well.
In professional lines, specifically D&O rates were up around 25% and more than 29% and professional indemnity.
Again, I would note that the majority of our loan portfolio is written on a claims made basis.
And as we've said several times before we do a bright halo purposes in the U S.
Our reinsurance portfolio, which is well spread geographically continues to see mothers break improvements of over 9%.
It is too early for us to comment on what the impact will be from the current situation in Ukraine as a result of the Russian invasion.
It's also too early to call within the impact of action taken against Russia, including sanctions.
What I can say is we are closely monitoring the situation and are ready to respond immediately to any and all sanctions against Russia.
Given our profile given our business profile and geographic footprint. We obviously do have some exposures in our portfolio are likely to be impacted.
Mostly in our energy book, but these are not material we.
We are looking at our investment portfolio, but again, we don't expect there to be any real impact.
Clearly this is a very serious and fast evolving situation and we are and will continue to keep on top of this.
And take the appropriate action as and when it is required.
Before we open the call up to questions I, just wanted to expand upon Walters comments at the beginning of the call.
We have worked hard for the past 20 years, focusing on our core strengths and capabilities.
Our results in 2020 one.
Clearly demonstrate the earnings power of Hei.
We are very much a technical underwriter and this is backed by significant expertise and experience and a service oriented culture.
We've been systematic in how we've grown our business.
Entering lines of business in markets, where we have proven capabilities staying away from lives where we go.
And including those that are somewhat outside of rvs at risk tolerances.
Our growth is measured and thoughtful.
Let's just go for the sake of growth.
This will not change.
Another important point is that our growth has been entirely organic and tight controls over the past 20 years.
That means is that we know what and where our exposures are.
At our flat operational structure, and transparent and open communications allow us to respond quickly.
And decisively.
So any shifts in market conditions.
So that we can successfully navigate market cycles.
We have proven our ability to manage the volatility and cyclicality of the business and our <unk>.
Track record.
With an average combined ratio of 90% to illustrate clearly demonstrates this.
We are very proud of the results we've achieved in 2021.
And also over the last 20 years.
And as Walter said at the beginning of the call.
We are confident about our future and the value that we expect to continue to generate for our shareholders in the years to come.
In the years to come.
Lastly, and before we open up the call.
Q&A.
I would note that typically our board meetings at the same time that we report our results and so any announcements coming out of those meetings regarding dividends for instance are made around the same time as we report our board. Our board is meeting later this month.
So any announcements will be made.
So I'm going to pause there.
And we will turn it over for questions.
Operator, we're ready to take the first question. Please.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
The first question today.
Comes from Mark Dwelle, Lee with RBC capital markets. Please go ahead.
Hi, yes, good morning.
Just a couple of questions you had a pretty thorough opening statement you commented on.
Potential exposure in Russia.
Russia and Ukraine.
And I think you mentioned the energy area could you just elaborate a little bit on what sort of exposure that is less.
Less concern, particularly with your your exact amount or anything like that and more just trying to understand what sort of exposures.
Insurance companies have in general to that region and the situation that's unfolding.
Thank you Mark and thanks for the question.
As I mentioned earlier, it's mainly on the energy side.
We have some exposures.
Yes.
On the property engineering side as well I mean, these exposures are physical damage business interruption related.
It's just like any other business.
Within those portfolios, except it's located in Russia.
The sanctions.
Situation is evolving on a daily basis.
The.
Some of our client base.
That's already been impacted by these sanctions.
Results, we've had to cease providing cover.
Some haven't but we're ready.
To take any action necessary.
Nothing.
No.
Unique about the covers that are provided in the Russian market is a huge provider of business and premium to the.
Global energy markets.
The London market.
So it will.
It will be <unk>.
Severely impacted.
By business that will no longer fuel.
Hum.
Two to London.
But.
Pure upstream.
Upstream downstream power.
Construction engineering risk that does cover physical damage.
And business interruption.
Thank you that's helpful. I like everybody I will just call mechanical arms around.
Most of US have never seen a situation like this to understand what sort of exposures arrives and how they unfold.
Hopefully that all resolved successfully.
The second question that I had.
You commented.
Pretty thoroughly about the write down of the real estate in Lebanon, and I think I understand that as far as the $20 million or so of value that remains I guess I would infer that about half of that is the remaining value of the Lebanese holdings, whereas the rest of it located what what countries.
In terms of the real estate portfolios that we have.
Actually the what remains is the <unk>.
<unk> on our books from the Lebanese real estate is about $5 $7 million.
And the rest of that is actually.
Dominantly, our head office in Amman Jordan.
We own the company owns.
The building.
We take up most of that space, but we rent out a part of it as well so.
That's pretty much what.
Left within the real estate portfolio.
Got it. Thank you and then one last question if I can.
It looked like in the quarter.
There were some additional development related to <unk>.
Pastor fees related to I think European flooding and maybe another then could you just elaborate a little bit on what you were seeing there and how that losses on bolden.
Yes.
When we reported Q3 results.
Obviously, the flip side, we're very fresh in everybody's minds in the amount of information that.
What's coming out with.
Gradual.
We had specific.
Amounts.
Applied to those of the two.
To the floods.
We also had a obviously.
<unk> Cat I did for the portfolio.
Which more than.
So which at that time and continues to more than <unk>.
Cover any development.
There was development and are encouraged numbers for the European a touch over the quarter.
Our net losses from those currently stand at about $8 $5 million, but that is not I mean, no no surprise or.
Untoward sort of development.
All within expectations.
For the overall portfolio.
Okay. Thanks, I'll jump out and let somebody else jump in.
Thank you Mark.
As a reminder, if you have a question. Please press Star then one to join the question queue.
That's star then wanted to join the question Kim.
This concludes our question and answer session I would like to turn the call back over to management for any closing remarks.
Thank you all for joining US today, we really appreciate your continued support and we will continue building on our successes.
Two new generating value from us in future years.
If you have any additional questions. Please contact robbins, you'll be happy to assist.
I wish you all a good day. Thank you.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.