Good day, and welcome to the International General Insurance Holdings Ltd.’s Second Quarter and Half Year 2022 Financial Results Conference Call. All participants are in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Robin Sidders, Head of Investor Relations. Please, go ahead..

Thanks, Anthony, and good morning, everyone. Welcome to today's conference call where we will be discussing our second quarter and half year 2022 results. You will have seen our results press release, which we issued after the market closed yesterday.

If you'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 also be found on our website on the Presentations page in the Investors section.

On today's call are Wasef Jabsheh, Chairman and CEO; Waleed Jabsheh, President; and Pervez Rizvi, Chief Financial Officer.

Wasef will begin the call with some high level comments before handing over to Waleed to talk you through the key drivers of our results for the second quarter and half year, and also giving some insight into current market conditions and our outlook for the remainder of 2022. At that point, we'll open the call up for Q&A.

So before we begin, I'll just cover some of the customary safe harbor 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 that 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. 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 out in the company's annual report on Forms 20-F for the year ended December 31, 2021, the company's reports on Form 6-K and other filings with the SEC, as well as our 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-IFRS financial measures in this conference call for a reconciliation of non-IFRS financial measures to the nearest IFRS measures, please see our earnings release, which has been filed with the SEC and is available on our Web site. So with that, I will turn the call over to our Chairman and CEO, Wasef Jabsheh..

Thank you, Robin and good day, everyone. Thank you for joining us on today's call. On the back of our strong start in the first quarter of 2022, IGI continues to perform well with another set of excellent results recording record for the second quarter and first half of Q2.

Our six month combined ratio of 33.5% and core operating return on average shareholders equity of 26.8% demonstrate how our strategy and execution capabilities are driving continued high quality returns and shareholder value we look at our success over a long term period.

While one or two quarters may stand out compared to others, we are solely focused on our ability to perform well over a sustained period of time. And that is what we are doing at IGI. Over the past 10 years, we have achieved an average combined ratio of 80% and a core operating return on average equity of more than 11%.

This is an impressive track record of earning stability and cost. In our 20 years, we have grown significantly on every measure and we are continuing to grow at a steady pace. We are expanding our underwriting portfolio and our footprint into new lines of business and territories. We are offering new options and taking on new underwriting.

Waleed will talk more on but I would simply note that we are focused on measuring this growth in such a way that we maintain all those qualities that have helped drive our path and current success.

We are achieving and implementing the measures across the company to ensure that we have the right infrastructure and the right people to support all these changes. In a moment, I will have over to Waleed to discuss our results in more detail and our outlook of the market and the specifics of the opportunities ahead of us.

The growth is speaking, market conditions remain favorable and we continue to see attractive rate increases across the number of business lines and territories, and we see excellent opportunities to expand our portfolio.

We have noted in prior quarters that the pace of rate increase is declining, but we are still achieving meaningful increases across most of the lines we like and we are exactly where we need to be to continue to benefit from the momentum for the foreseeable future.

Clearly, we are operating in an increasingly challenging environment where elevated inflationary pressures and rising interest rates and broader economic pressure pose challenges to our business.

So while we are very focused on what's going on inside IGI, we are equally focused on what’s going our ability to navigate these challenges and stay successful means having the right people with right experience and the right level of focus and discipline to manage through any scenario and deliver on the promises we make.

This is what we have at IGI and I'm confident that we will see the and continue delivering the quality of results that we are seeing from us. We are very optimistic about our future and continuing to deliver on our commitment to creating value for.

Now, Waleed can take you through the results for the quarter and half year and provide more details on our outlook for the remainder of 2022. Waleed, you can go ahead, please..

Thank you, Wasef, and thanks all for joining us today. I'm going to take a different or slightly different approach this quarter and focus more on what's going on inside IGI, and also what we're seeing in the market and the opportunities ahead of us. But just a few comments on the results to begin with.

As Wasef said, the results for the second quarter and half year are very strong. We recorded solid profitable growth in all areas of the business and we’re continuing to make decent and excellent progress in identifying new diversified opportunities.

Our six month combined ratio of 73.5% is particularly strong on the back of the 72.2% we recorded in the first quarter of the year. And I would note that this includes about 12.6 points of favorable developments.

While the half year result is exceptional, like Wasef said, we do look at our performance over a longer term period rather than specific quarters or years.

Another item of note in our results this quarter as well as the prior quarters is the balance sheet impact of the foreign currency exchange movements, driven by the continued strengthening of the US dollar. For the second quarter and first six months that impact was a negative $9.2 million and negative $12.7 million respectively.

It's important to understand where this is having the biggest impact for us and what we're doing about it. Where though currency impacts one side of our balance sheet, there is typically a corresponding impact elsewhere in our financials.

We're continually monitoring currency movements on both sides of our balance sheet to better manage this volatility. As you know, our industry will always have quarterly volatility in one or another and we've said this many times before, it's more indicative to look at the longer term trends.

Clearly, there are broader social and financial challenges that are facing our industry today. With our 20 year history, IGI has obviously been tested many times and we've got a history of adapting as and when we need to, and now is no different.

As we continue to experience instability and uncertainty across the globe, rising inflation, both social and financial is impacting our business. We're monitoring this closely and have adjusted our views on pricing appropriately.

We tend to take a conservative view with all aspects given the complexity and inherent uncertainty in our industry, but we took additional steps during the second quarter to account for the inflation.

Lastly, we made some adjustments to asset allocation in our investment portfolio during Q2, including increasing our allocation to higher rated bonds, and managing the duration of the bond portfolio, bringing it down from 3.9 years average at 31st of March to 3.5 years at the 30th of June.

We've also increased our cash and short term deposits to take advantage of the more attractive returns. I'll say a few words about market conditions, our position in the market and the outlook for the remainder of 2022 and beyond. I mean, we're now more than halfway through the year and all indications are trending in the right direction.

Just elaborating on Wasef’s earlier remarks, we're continuing to see healthy rate movements across our portfolio. Cumulative net increases for the first six months of ’22 registered 11.3% in the long tail lines and 4.3% in short tail. The reinsurance portfolio continues to see moderate improvement of about 5%.

It's probably fair to say that we're seeing more opportunities in short tail lines than long tail lines. That landscape is becoming more competitive with new capacity in the markets we , particularly in the UK. There's not been any change in claims activity, but we're taking a cautious view here.

In our short tail portfolio, we've increased line sizes in energy, engineering and property where rates remain healthy and we're seeing good opportunities. We are continuing to see some very interesting opportunities in political violence where there's recently been significant dislocation.

The same goes for contingency, which you recall we started writing last year post pandemic. In terms of the territorial commentary, US and Europe are both growth markets for us and we expect to see further expansion in those regions during the remainder of the year and further growth in 2023.

In the US, as you're all aware, we're primarily writing energy and property business. We've more than doubled gross premiums through the first half.

Similarly, in Europe where our focus has actually been more on the long tail opportunities, primarily DNO and PI, we've written close to $24 million of premium for the first half and we expect to see steady growth going forward.

As you know, we've opened our -- we opened our European subsidiary in Malta last year in July to access this business directly in Europe.

We've also recently announced that we've signed a letter of intent to acquire Energy Insurance Oslo, a Norwegian based MGA, which we've had an exclusive underwriting agency agreement with since 2009, writing a portfolio mostly upstream energy and construction business. We expect this acquisition to be completed during the third quarter.

This gives us two opportunities. First is to expand the existing business that we've been writing for many years, but second, also to leverage our relationships to access further growth opportunities, not just in Norway but throughout the Scandinavian markets.

I would note that here that there is -- that this is an excellent example of the value of true partnerships and how IGI is benefiting from strong relationships with our partners. This relationship with EIO has been particularly beneficial to IGI for many years.

The principles of EIO have built IGI's brands in Norway, especially in the energy sphere where we have a strong reputation and broad name recognition, and where their efforts have produced solid results for IGI and built a foundation we can now expand upon.

We've also recently began the process of establishing an underground presence in Bermuda, where we don't -- where we moved our domicile in 2019, but where we've had a subsidiary underwriting entity for many years.

With the new office in Hamilton, we expect to expand our portfolio of reinsurance treaty business in the near term, and we'll be providing more details on this later in the year. So it's fair to say we've got a lot going on.

What you are not seeing is all the work being done to manage our growth, continue the momentum, manage our risk appetite and ensure that we maintain the track record of strong results that you've seen from us so far this year. This is something we talk about across our management teams regularly.

We've launched a number of initiatives and made a number of new hires in recent months across the company, not just in underwriting, as I've said previously, but also in investment, IT and operations. This all in all effectively integrates all the change. Our continued success depends heavily on the people and talent we can attract and retain at IGI.

Our business, specialty insurance business, requires experienced technical expertise, disciplined and strong leadership. We have that at IGI and we are always working hard to ensure we maintain and improve it. We have good people and a strong performance based culture.

We've proven our ability to manage growth, volatility and the cyclicality of this business and our track record demonstrates this. So one last point before we open the call for questions. We began utilizing the new share repurchase authorization we announced in May. You saw the update in our press release issued last night.

As of earlier this week, we had repurchased more than three 35,000 common shares at an average price per share of $7.51, well below our 30th of June stated book value of $8.64. We will continue to repurchase until we tell you otherwise.

Lastly, I would just highlight the dividend announcements we made earlier this morning, which reflects the new dividend policy announced in May. Again, our commitment is to generate value for our shareholders through excellence and underwriting, growing our book value per share and leveraging other capital initiatives.

So I'm going to pause here, and we'll turn it over for questions now. Operator, we are ready to take the first question, please..

Our first question will come from Mark Dwelle with RBC..

A couple of questions. A couple of -- the first two are sort of numbers questions. It looked like the tax rate in the quarter was actually negative.

Was there some sort of a benefit or kind of a one time item or something in there that might have benefited that result?.

I'll divert that question to Pervez.

Pervez, do you want to address the tax rate?.

Tax rate is applicable to our UK operation only. So our Bermuda operation, we don't pay any tax a tax rate but the general tax rate for the UK is around 30%. But I can get specific later after checking with our UK operation….

negative..

The reason why it is negative we have a deferred tax asset for our Malta operation. So this has turned into negative, because you know that we have the first half year operation, which was a loss recorded and we created a deferred tax asset, that is why it has been in negative..

The second question I had related to some of the reserve releases in the quarter. It looked like those were primarily on the long time tail lines.

Could you maybe talk about kind of which lines were impacted and maybe which accident years?.

The fact the reserve releases from prior years is predominantly on the long tail lines. We take a more cautious view, especially with long tail business. In terms of the specific accident years, I don't have the specific in front of me, but they are on the older years.

Obviously, the newer years will be kept and the not really adjusted that much until we feel more comfortable that we can adjust them. But yes, most of our reserve releases would be on the long tail segment where most of our reserves lie anyway..

The other question I had, you had commented about I guess expanding the scope of the operations in the Bermuda subsidiary, and you mentioned reinsurance treaty business.

Would that be mainly property oriented or would it be casualty, or maybe both?.

I mean, in the near term, it'll most likely be focused on property. Once we -- it's going to be a small operation to begin with and we'll provide more details later in the year. But as time goes by, the operation is undoubtedly going to grow and it will grow based on what we feel the opportunities are and where they take us.

So initially, this will be a property play..

And then the last question I had, you had commented at the beginning of your remarks on some of the rate increases. And the rate increase in the short tail lines of 4.3%, probably a little bit lower than what I've seen reported from some other similar companies.

And I was just wondering if you could elaborate on that a little bit more, we've seen other companies that were really more in the mid and high single digits on some of those lines..

I mean, it all depends, Mark, on the composition of the portfolio territorially as well. So our book, our property book, for example, the short -- or the short tail book is very much diversified.

A small element of that is in the US, which I would assume, the others who have reported, would be more weighted towards the US, whereas, the US makes up about 10% or less than 10% of our overall portfolio. So various territories, different markets, underlying market conditions, it's not going to be the same.

But if you look at our US property portfolio, for example, we average rate increases in the US of about just under 20%. But overall, as an average within the short tail segment that comes in at about 4%. So it depends on the weighting of your book and we're seeing different conditions in different parts of the world..

Okay, that's definitely very helpful. I mean, obviously you're making good combined ratios on the rates that you're getting. So I guess that's a factor in it as well. I'll stop there and let some others have a chance. Thank you for all the answers..

It appears there are no further questions. 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. We appreciate your continued support and we'll continue building on our successes so that we continue to generate value for you in the future years. If you have any additional questions, please contact Robin, and she will be happy to assist. Have a good day. Thank you..

Thank you..

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