Fidelis Insurance Holdings Ltd (FIHL) Q2 2025 Earnings Call Highlights: Navigating Challenges ...

Gross Written Premiums: $2.9 billion year-to-date, a 9% increase driven by high retention levels and new business opportunities. Combined Ratio: 103.7% for the quarter, impacted by the English High Court judgment on the aviation and aerospace line. Net Income: $20 million for the quarter. Operating Net Income: $14 million for the quarter. Annualized Operating ROAE: 2.3% for the quarter. Insurance Segment Premium Growth: 7% in the quarter, driven by asset-backed finance and portfolio credit lines. Reinsurance Segment Premiums: $317 million for the quarter, compared to $346 million in the prior year period. Attritional Loss Ratio: Improved to 24.7% for the quarter. Catastrophe and Large Loss Ratio: 13.8% for the quarter, with $74 million in losses. Net Adverse Prior Year Development: $89 million in the second quarter. Policy Acquisition Expenses: 31.4 points of the combined ratio for the second quarter. General and Administrative Expenses: $22 million for the quarter. Net Investment Income: $45 million for the quarter. Book Value Per Diluted Common Share: $22.04. Share Repurchase: 5.5 million common shares repurchased for $88.7 million at an average price of $16.17 per share. Quarterly Dividend: Increased to $0.15 per share. Debt to Total Capital Ratio: 26.6%.

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Release Date: August 14, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Fidelis Insurance Holdings Ltd (NYSE:FIHL) achieved a gross written premium growth of 54% since 2022 and increased its book value per diluted share by 39%, including dividends. The company has successfully onboarded new strategic partners with proven track records in highly accretive lines of business, expanding its platform. FIHL's capital position remains strong, allowing for enhanced shareholder returns and the expansion of capital management initiatives. The insurance segment delivered 7% premium growth in the quarter, driven by high retention levels and new business opportunities. FIHL's asset-backed finance and portfolio credit lines remain core growth drivers, with a healthy pipeline of new and repeat clients.

Negative Points

The combined ratio for the quarter was 103.7%, impacted by the English High Court judgment on the aviation and aerospace line of business related to Russia-Ukraine litigation. The aviation sector is identified as the most challenged part of FIHL's portfolio, with some accounts not renewed due to unmet underwriting hurdles. The company experienced net adverse prior year development of $89 million in the second quarter, primarily related to the Russia-Ukraine aviation litigation. Policy acquisition expenses increased to 31.4 points of the combined ratio for the second quarter, compared to 28.4 points in the prior year period. The effective tax rate increased to 18.9% for the first half of the year, reflecting a greater proportion of pre-tax income generated in higher tax rate jurisdictions.

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Q & A Highlights

Q: What sort of loss or losses in Florida or in the Southeastern United States from wind season do you think it would take to impact overall property cap pricing for next year? A: Daniel Burrows, CEO, explained that a significant capital event would be necessary to change the market. Recent loss activities have not affected the whole market as they used to. Fidelis is well-positioned with a well-managed portfolio and significant use of reinsurance.

Q: How does the demand for political risk, terror, and similar coverages compare to recent years? A: Daniel Burrows noted that there has been an uptick in deal activity post-COVID. Fidelis has a strong track record in political risk with a low loss ratio, and they are seeing both new and repeat customers, indicating a strong pipeline.

Q: Why is Fidelis selling at a discount valuation relative to its peers? A: Daniel Burrows acknowledged the undervaluation and highlighted the company's strong performance excluding the Russia-Ukraine impact. The structure of Fidelis is working as intended, focusing on profitable underwriting and creating value through share buybacks.

Q: Can you elaborate on the property DNF RPI being down slightly this quarter? A: Daniel Burrows explained that as a verticalized leader, Fidelis achieves better pricing and conditions. Despite some market pressure, Fidelis maintains high retention rates and leverages its relationships to achieve better RPIs than the market.

Q: Can you discuss the impact of recent results on the MGU commission and future expectations? A: Allan Decleir, CFO, stated that the profit commission is based on GAAP calendar year results. With the Russia-Ukraine issue behind them, Fidelis expects to see profit commissions in 2026, assuming continued strong underwriting performance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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