Q2 2023 International General Insurance Holdings Ltd Earnings Call

We've grown quite a bit over the last few years. We've been in the business market for about three years. We've managed that growth to ensure that we stay within our risk tolerances and cash appetite.

Obviously, we leverage that with reinsurance, so we're very cautious with how we grow, the speed at which we grow at. But there's no doubt that obviously this location in the US markets are very much directed or located within. It isworthiness of councy 14 modelingbin only age 29 when anyone tackling sign language isoki 18.

you know, the cat exposed territories. We have dipped our toes in more because the conditions are just, you know, best we've ever seen. But we're always mindful and careful with how much we dip our toes in and how we manage the overall exposures.

Speaker 1: Good day and welcome to the International General Insurance Holdings, LTD's second quarter and first half year 2023 Financial Results Conference Call. All participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

and potential net impact in the event of a, what do you call it, in the event of a big event. That makes sense, and yeah, thank you so much. The next question is gonna be similar. It's on the political violence business. Is there a way to sort of break out what geographic areas you're growing that business into? If anything there, thank you. Roland, there's nowhere specific, to be totally honest with you. I would say we're, we've grown very well in various parts of the world. There's nothing, there's no one geographical area that stands out as being the big growth spot. I think it's across the board. The Middle East has been very healthy for us on the PB side. Asia, we just, in the last couple of months we added resource on the PB side out of our Malaysia office, so we're seeing, slowly but surely we're seeing traction there. And yeah, I mean the rest is really very much spread out. Thank you, and if I could get one more in. The annualized investment yield's obviously gone up quite a bit over the last year. Is there a way to give a sort of spread where your new money yields are versus the portfolio and sort of how are you thinking about new investments there? I think we continue to be cautious in how we invest and what we invest in. New money is going at anywhere between 4.5 to 6%, usually above 5 and closer to 6.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would like now to turn the conference over to Robin Sitter, Head of Investor Relations. Please go ahead.

Thanks, Alan, and good morning, everyone, and welcome to today's conference call. We'll be discussing our second quarter and a half year, 2023 results, which you will have seen on our website in the press release that we posted, we issued after the market closed yesterday. He'd like a copy of the press release.

It's available in the investor section of our website at www.iginsure.com.

We've also posted a supplementary investor presentation, which can be found on our website, on the presentations page in the investor section as well. On today's call are Executive Chairman of IGI, Wasif Japchay, CEO Walid Japchay, and Chief Financial Officer Pervez Rizvi.

Wasif will begin the call with some high-level comments before handing over to Walid to talk through the key drivers of our results for the second quarter, 2023, and also give some insight into current market conditions and our outlook for the remainder of 2023. At that point, we'll open up the call for Q&A.

But before handing over to Wasp, I'll begin with the customary safe harbor language.

Our speaker's remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of the...

The composition of the portfolio will remain similar to really how it's always been. We're just taking advantage of the higher interest rate environment. That's helpful. Thank you so much for your answers. Pleasure. Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Thank you all for joining us today, and thank you for your continued support of IGI. If any of you have any additional questions, please contact Robin, and she'll be happy to assist. I wish you all a great day. Thank you.

By the use of forward-looking words, we caution you that such forward-looking statements should not be regarded as a representation by us that the future plans estimates or estimates or expectations contemplated by us will in fact be achieved.

Forward-looking statements involve risks, uncertainties, and assumptions. Actual events or results may differ materially from those projected in the forward-looking statements due to a variety of factors, including the risk factors set forth in the company's annual report on forms 20F for the year ended December 31, 2022.

the company's reports on Form 6K and other filings with the SEC, as well as our results press release issued yesterday after the close. We undertake no obligation to update or revise publicly any forward-looking statements which speak only as of the date they are made.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

In addition, as you are aware, we voluntarily changed our basis of accounting from IRF-RSTUS GAAP at the very beginning of 2023, January 1st. During the call, we usually use certain GAAP financial measures.

Thank you and good day everyone. Thank you for joining us on today's call.

Thank you and good day everyone. Thank you for joining us on today's call.

As you know, I remain the Executive Chair and effective July 1, Walid took over the reins as CEO . This is part of the succession plan that was put in place many years ago. Walid was with me when I founded IGI in 2001 and he has played an important role in developing the IGI culture that has supported our long track record of success.

including the exceptional results that we announced last night. This is a natural transition for us.

IGI is in good hands with Walid and Dale. And the board and I look forward to continuing to provide strong stewardship to the IGI group. I want to congratulate our people on what are really exceptional results for the second quarter and first half of 2013.

Once again, it is the consistent and effective execution of our strategy, knowing our capabilities and what we are going to act.

Once again, it is the consistent and effective execution of our strategy, knowing our capabilities and what we are good at. Our deep understanding of markets.

and being able to anticipate shifting trends in our markets that is leading to these consistent high quality results. And here on this point, I would like to add that I watch the results of our peers in the market.

I would say that IGI is superior to so many of them. And it's because of our understanding of the market and the cycle and laying the cycles correctly. And this is what IGI has been really great in achieving. You know, we don't get attracted to business we think we, you know, is not making money for our shareholders.

The market today for IGI remains one of the healthiest we've seen in many years. And there are plenty of opportunities to grow in certain lines and geographies. Our strategy is not to show growth just for the sake of being bigger companies.

but to show profitable growth with business that we can serve as well for our clients. This means maintaining our focus and discipline and being selective about the business.

we are writing when our markets are robust and especially when they are not. And here on this point, I'd like to emphasize that the diversification of IGI portfolio is going to have many benefits.

are writing when our markets are robust and especially when they are not. And here on this point, I would like to emphasize that the diversification of IGI portfolio geography is so important.

are robust and especially when they are not. And here on this point I'd like to emphasize that the diversification of IGI portfolio, geography is so important and

This is what you concentrate on. And so many companies like us in the market, they miss that and we hear it from them as well when we talk together. Before I hand over to Alid, I'd like to say thank you to all our stakeholders, but especially you, our shareholders, who have put your trust in IGI. I'm very pleased with what we have achieved since becoming public company in 2020. We have compounded annual growth in book value per share plus dividend by 11.4% and tangible book value per share plus dividend by 11.1%. I expect IGI to continue on the same path under Walid's leadership. This is not to say that we won't ever have major events impacting our value. Watchful eye and when required even pull back in areas where we feel the right conditions just aren't there. For IGI, the strategy is critical. It always has been. We are relatively small in size, which is an advantage when it comes to moving quickly and decisively. And given the abundance of opportunities in many of our business, we're able to be selective, show healthy growth within our risk tolerances and appetite and within our ability to service new business.

I will focus on some key highlights for the second quarter and first half. As a reminder, you'll recall we did switch our basis of accounting to US GAAP as of January 1st. So comparative numbers for the period may deviate from numbers previously presented under IFRS. To the specifics, premium growth remained strong at over 10% in the second quarter, leading to overall growth of more than 21% for the first half. Similar to what we said in the first quarter, the opportunities we are seeing are primarily in the short tail and reinsurance segments.

to take advantage of the hardening that we talked about on the call for last quarter's results. More important, the actual growth itself with the profitability, of course, of the increased level of premiums. A combined ratio of 73.5% for Q2 and 75.7% for the first half of this year are again well below our long-term average in the mid to high 80s. Overall, our profit for the second quarter of 23 was up more than 80% at 40.5 million and 68% at 74.4 million for the first half.

when compared to the same periods of last year. Net investment income similar to the first quarter of 23 showed significant improvement in the second quarter.

This is a result of the rising interest rates on yields and reinvestment rates and an overall larger investment portfolio.

net investment gains and a 1.7 point improvement as well in investment yield to 3.7% for the first half. Specifically in our fixed income portfolio we improved the overall average credit rating to A and maintained the average duration at 3.1 years. Turning to the balance sheet total assets are up 9.7% to over 1.7 billion dollars and total equity increased 13.6%.

to $466.8 million. On the capital management front, we continue to repurchase common shares under our existing 5 million common share repurchase authorization.

under the authorization. And as you know, we amended our dividend policy a year ago and that remains in place. We are continually reviewing our options to manage capital, but as we always said, our first priority is always to deploy the capital into the business where we believe we can achieve the best returns with any excess capital being returned to shareholders in various forms. All in, we delivered an annualized return on average equity of 36.1%, representing 12.6 points of improvement over the second quarter of last year, and an annualized core operating return on average equity of 34%.

representing a three-point improvement over the second quarter of last year. For the first half of the year, return on average equity improved 10.5 points.

to 33.9% while our core operating internal average equity improved 3.1 points to 30.8%.

This with more pronounced or less pronounced trends in certain lines in the geographies than we were anticipating, we need to be optimistic about the momentum in our markets and the opportunities ahead, but particularly in our property engineering, political violence, and of course our treaty reinsurance book. Now that we're well into the second half of the year, our outlook remains positive, and for context around 45 to 50% of our portfolio renews in the second half of the year. In our short tail line, we saw cumulative net rate increases of just under 10% in Q2, which is marginally better than what we saw in the first quarter. And the landscape here remains robust with good rate momentum in most lines, but as we mentioned in the last quarters, general aviation continues to lag.

So every line is different and the same goes for the various territories, which I'll talk about more in a moment. But the bottom line is there are still healthy opportunities out there, certainly for the near to mid-term. In our treaty reinsurance business, we saw cumulative net rate improvements of more than 27% in Q2, and that's where momentum continues. As we said on the last quarter's call, these are some of the best conditions we've seen in the history of the company. As I noted earlier, gross written premium was up more than 38%.

But as long as these favorable conditions persist, you can expect this segment to become more and more significant piece of our portfolio. It represented about just over 13 percent of the total portfolio in the first half of the year. It should come in at about 10 percent or level out at about 10 percent for the full year, which is roughly double historical level. In the long tail segment, the story remains mixed, both by line and geographic region.

but there is very much variation by line of business in this segment. For context's sake, I would note that most of these lines have had compound rate increases well over triple digits in the last 3 to 4 years.

So rating adequacy remains at acceptable levels.

But renewal rates continue to be most pressured in D&O and financial institutions, where we've seen another consecutive quarter of margin compression. General casualty lines are following this trend, albeit at a slower pace.

different geographies. So we're still finding some good opportunities in the Middle East.

Elsewhere, professional indemnity, as you all know, predominantly UK-based business is holding up.

and remains more than adequate with net rate increases of more than 3%.

Although worryingly the trend for this class of business is looking similar to

to other lines within this segment.

Overall, we will continue to take a cautious and selective approach.

to take a cautious and selective approach to the business.

looking at our geographic markets.

The US continues to outpace all other markets with rate increases of more than 20% in the lines we're writing. As you know, it is all short-tailed business, predominantly energy, property.

and contingency. In the first half of the year we've written just shy of 50 million of gross premium in the US.

That represents about 52% growth over the first half of 2022.

Europe where we're mostly risiting. Long-tail business, with in a bit of a shorttail and treaty business on the side, continues to be a bright spot. We expect to continue growth.

for the rest of the year and into 2024 as we build out our European platforms, which include Oslo.

which we announced in acquisition of in Q1, working hard to expand our relationships and product offering in the Nordic markets. Latin America continues to show healthy rate momentum.

In the Middle East, that market tends to be less correlated.

with other markets around the world. There we're seeing clear evidence of increased competitive pressures.

example, property lines, but there remain still good pockets of good opportunities.

especially in engineering and political violence.

Asia continues to show improvement but disappointingly rate momentum in the second quarter was not quite as pronounced as we were expecting at the outset of the year.

All in, positive goal.

In summary

As I said, we remain optimistic with the current market overall and the opportunities for us to continue to expand our portfolio profitably. I mean now more than ever it's critical to maintain our focus and discipline.

I would like to read CH1's comments at the beginning of the call and congratulate all our people who continue to work effortlessly, execute well and produce the quality of results that we're sharing with you now.

Growing our business is easy. Growing a sustainable and profitable portfolio that we can service. Not only just service, but service well is not always easy.

for us keeping on top of the shifting dynamics in each line and in each territory.

and staying selective throughout the market cycle is what we are good at.

and what we can never lose sight of.