Good day, and welcome to the International General Insurance Holdings Ltd.'s Fourth Quarter and Full Year 2022 Financial Results Conference Call. [Operator Instructions] 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..

Thank you and good morning, and welcome to today's conference call. Today, we'll be discussing our fourth quarter and full 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 Investors section of our website at 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. With me on today's call are Wasef Jabsheh, Chairman and CEO of IGI; 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 fourth quarter and full year 2022, and also giving some insight into current market conditions and our outlook for 2023. At that point, we'll open the call up for Q&A.

I'll begin with some 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 the 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 forth 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 results 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 measure, please see our earnings release, which has been filed with the SEC and is available on our website. With that, I will turn the call over to our Chairman and CEO, Wasef Jabsheh..

Thank you, Robin, and good day, everyone. Thanks for joining us on today's call. We had another excellent year in 2022 to close out our 20th anniversary year.

As we’re in our third decade, we are in our strongest position ever, with exceptional teams across the company, a performance-based culture, and a proven ability to manage the growth, volatility and the cyclicality of this business.

For 20 years, our focus has been on creating a solid and lasting company, built on financial strength, innovation and one that is a fair partner to all our stakeholders. Our track record of earning stability and consistency shows that we are certainly on the right path. We posted record results in many of our key metrics in 2022.

Our full year combined ratio of 78.5% and core operating return on average shareholders' equity of 22.7% demonstrate how our strategy and execution capabilities are driving consistent high quality returns and shareholder value. I'd like to thank all of our IGI family for their focus and dedication to the continued success of IGI.

Waleed will talk about the results in more detail and specifics on what we are seeing in the market. So just a few more comments from me. Overall, the market remains robust, with varying competitive pressures leading to some fragmentation between lines and territories.

Our industry continues to face a lot of headwinds with social and financial inflation, political instability and increasing frequency and severity in natural catastrophes, among others. The market is becoming more challenging generally.

Nevertheless, we are still seeing and expect to continue to see some very good opportunities for new business across our portfolio. So we continue to be optimistic about our future and continuing to deliver on our commitment to creating value for the long-term.

Now Waleed can take you through the results for the quarter and full year, and provide more details on our outlook for the remainder 2023.

Waleed?.

Thank you, Wasef, and thank you all for joining us today. I'm going to start with some key highlights in our results for the fourth quarter and full year and then I’m going to talk to what we're seeing in our markets and opportunities ahead.

As Wasef said, our results in '22 were excellent, and really demonstrate the consistent execution of our strategy, the focus and commitment of our people, and our ability to shift gears within the changing market conditions.

I’d echo Wasef's comments and commend everybody at IGI on their hard work, their dedication and the great results we've achieved in 2022. You saw from our press release issued last night that we had record results in a number of line items.

Net underwriting results increased over 40% to $148.5 million, leading to an after-tax profit of 85.5%, almost double that of the previous year 2021. And a combined ratio of 78.5%, showing 7.9 points of improvement over 2021.

And our book value per share was $9.49, up 7.5% from year-end '21 and over 25% since we became a public company in March of 2020. Other highlights for the full year, gross premiums written increased by 6.6%. This is on the back of increases of more than 16% in 2021 and 33% in -- more than 33% in 2020.

Total assets increased 7.5%, total equity up by 6.9%. We continue to make some adjustments in our investment portfolio during the fourth quarter, increasing our allocation to higher rated bonds, managing the duration of the bond portfolio down to three years at December 31, 2022 from 3.3 years at September 30th.

And that's the fourth straight quarter we’ve reduced the duration of bond portfolio, whilst maintaining average credit quality at A minus. We also increased our cash and short-term deposits to take advantage of the more attractive returns. All-in, we delivered 20.6% return on average equity and a 22.7% core operating return on average equity.

I'll address a few themes coming out of 2022. First is the impact of foreign currency movement played in our results. As you know, we report in U.S. dollars, but a sizable percentage of our transactional currencies are the pound, sterling and the euro. So there can be some volatility in currency translation.

We saw the first three quarters of '22 being impacted by the strengthening of the U.S. dollar against the pound and euro. And we said each quarter that at some point this would change and it would have the opposite effect on our underwriting results. Well, that happened during the fourth quarter.

The pound strengthened against the dollar and virtually reversed the impact of the prior three quarters. Also during the fourth quarter, we took steps to mitigate some of that FX volatility by lowering the foreign currency exposure on our balance sheet and holding more assets in pounds and euros.

Our results for the fourth quarter clearly demonstrate what we've been saying each quarter this year, that one quarter is not a true measure of our performance and looking at results and our profitability over longer term is more indicative.

In each quarter's results in '22, currency movements have contributed to volatility in most of our key metrics; specifically, net underwriting results, combined ratio and core operating results; positively during the first three quarters, when the U.S.

dollar strengthened against the pound and euro, and the reversal of that in the fourth quarter when the pound and euro strengthened against the dollar. Our industry will always have quarterly volatility for a variety of reasons. So it's more indicative, as I mentioned, again, to look at the longer periods.

In other developments during the year, previously announced, we created a new Chief Underwriting Officer role and I'm pleased to say that Chris Jarvis joined us in October of last year.

Chris brings significant London market experience, most recently with Canopius and we're already benefiting from his experiences, his relationships in the market and the fresh perspective that he brings to the business. We opened an office in Bermuda, where we've had our principal and underwriting subsidiary for many years.

With the new office in Hamilton, it is a small but growing team there. We expect to expand our portfolio of reinsurance treaty business in the near-term.

Back in August, we announced the acquisition of Oslo -- an Oslo, Norway-based MGA called Energy Insurance Oslo or EIO, with whom we've had an exclusive underwriting agency arrangement since '09, writing a portfolio of mostly upstream, energy and construction business.

We launched a number of initiatives, made a number of new hires across the company in underwriting, investments, IT, operations in order to effectively integrate and service the growth we've seen over the past few years, and that we anticipate going forward.

And on the capital management front, we announced a new dividend policy with a 5 million common share buyback. You saw the update in our press release issued last night that we've utilized more than half of our 5 million share repurchase authorization.

Specifically, we repurchased a total of 2,582,317 common shares in open market purchases and one privately negotiated transaction during the first quarter of '23. All at prices well below our December 31st dated book value per share of $9.49.

Before moving to commentary on the market, I'll address some items to take into consideration relating to the first quarter of '23. First, as mentioned in our 20-F filing for year-end '21, we have voluntarily decided to change our basis of accounting from IFRS to U.S. GAAP. We will report our consolidated financial statements in U.S.

GAAP effective 1st of January 2023. Accordingly, the company has evaluated the full potential conversion impact of this change and the first time application of U.S. GAAP.

So as a result, we estimate total reported equity of 429.8 million as it stands now on an IFRS basis as at 31st of December '22, will be in the range of 405 million to 415 million on a U.S. GAAP basis. It's also important to bear in mind the large repurchase we made in January, which will be reflected in our first quarter '23 results.

Turning to the market, our industry continues to be challenged on a number of fronts. With instability and uncertainty across the globe, inflationary pressures both social and financial impacting -- all of these impacting our business.

Broadly speaking, the market overall remains robust but there's wide variation in pricing, terms, conditions, not just by line of business but by geographies across our entire portfolio.

While we continue to see positive rate movement across our portfolio, with cumulative net rate increases for '22 of 5.2% in short-tail loans, 7.1% in long-tail loans, and 5.4% in reinsurance, this isn't wholly indicative of the underlying trends that we're seeing in each of these segments.

Overall, we're seeing more opportunities in our Short-tail and Reinsurance segments. I'll start with our short-tail business. We're seeing some excellent opportunities across our portfolio but specifically, property as well as construction engineering, contingency, PV, and marine cargo.

Clearly, I've been following the -- following Hurricane Ian, the U.S. markets are showing more dislocation with reduced and restricted market capacity, along with higher retentions, and significant price increases being imposed.

Where we're seeing the most opportunities in our property D&F book, where we saw -- where we've been seeing significant increases in submission clause. On the PV side, we're seeing a greater degree of dislocation with tighter wordings and event coverages.

And reinsurance capacity for PV is much harder to come by following the events in Chile, South Africa; and more recently, the Russia-Ukraine war. At 1/1, our contingency business, whilst still small in terms of dollar premium for us, it's showing healthy rate momentum, and we expect to show growth in this line.

We're seeing healthy rates in terms and engineering and construction, with plenty of opportunities, especially coming out of the GCC and MENA regions, where there's significant infrastructure development going on with many large projects. For us, these are markets we know very well.

And we have people on the ground, who have long and deep relationships in the region. Our Dubai office specifically performed very well last year writing about 25% more business than the prior year. And we are expecting this trend to continue. There has been much said already about the January 1st renewal period.

While 1/1 is an important renewal for us, our business renews fairly evenly throughout the year, and our reinsurance business is comparatively small overall.

However, we did take advantage of the significant dislocation in the treaty reinsurance market so far this year, where we wrote over 65% more than we normally would, and that's on a diversified multi-line base.

You can expect to see our Reinsurance segment globally diversified, become a more significant piece of our portfolio and probably closer to 10% of our overall book in 2023. Having said that, we witnessed some unusual dynamics in the direct markets in the fourth quarter.

At the same time, as we were seeing tightening in the reinsurance markets in the lead up to 1/1. I mean, as far back as June-July of last year, we were seeing some erratic behavior in the direct markets. And what really seemed to be a somewhat of a lack of direction and discipline.

As a result, we took a much more cautious approach in the fourth quarter, waiting to see the outcome of 1/1. And this was one of the reasons you saw that our gross premiums written in the quarter -- in the fourth quarter were down compared to Q4 2021; specifically, no growth in short-tail lines and the non-renewable, some long-tail business.

Turning to a Long-tail segment, the story is quite different. I mean, we're seeing more headwinds with increasing socioeconomic inflationary pressures, and the landscape has become more competitive with new capacity in the markets we write. I'll reiterate again, we don't write any long-tail business in the U.S.

While rates overall in our Long-tail segment were still adequate in the fourth quarter, we've seen several consecutive quarters now where renewal rates are trending down, and this is more pronounced in FI and D&O, but PI and general because these lines are also following a similar trend.

We haven't seen any real change in claims activity yet, but we're -- it’s something that we continue to monitor and take a cautious view here. So you can expect more of a leveling off following 16 quarters -- straight quarters of compound rate increases and significant growth in the segment.

We've always prided ourselves in our ability to anticipate shifting markets and respond quickly and decisively. And we've demonstrated this ability -- or the ability to successfully navigate the volatility and the cyclicality of this business. And our track record, including the results that we're talking about today, clearly illustrate this.

This is the driver behind the success we've achieved over many years and that is what you're seeing us do again so far in 2023, focusing more on those short-tail reinsurance lines that are showing positive momentum and being more selective on the long-tail business.

So all-in, we're seeing some very good opportunities at the outset of '23, and you can expect to see some good growth when we issue our first quarter 2023 results.

Also, we're close to completing the acquisition of EIO and we expect that will present some additional opportunity to expand existing business and also leverage our relationships to access future growth opportunities, not just in Norway, but throughout the Nordic market. So just one last point from my end before we open the call for questions.

We typically announce common share dividend at the same time as we issue our results, as our Board typically meets at that time. Following year-end, however, our Board typically doesn't meet until close to the end of March. And that is the same this year. So you can expect an announcement that time.

Again, would like to thank you for your interest in and support of IGI. We're committed to generating value for our shareholders through excellent 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.

Operator, we're ready to take the first question please..

[Operator Instructions] Our first question comes from Mark Dwelle from RBC. .

A couple of questions. First, there was a relatively higher level of catastrophe losses in the quarter than maybe what I was expecting.

Can you talk about where you had exposure there and what the factors were in that?.

Yes. Hi, Mark. Thanks. There wasn't any specific event that made up those numbers. It was really -- the majority of that amount is more general cat loads that we have in our reserves, and we kept following Ian and the slow -- and some of the other events that happened throughout the year.

We've noticed maybe a little bit of a slowdown in the way it's being reported. And so we've -- the most -- most of that is made of the general cat load. We were -- we had a couple of million dollars exposure on Hurricane Ian and a little bit on Australian floods, but there was no specific event that had any sort of material impact on the numbers..

That's helpful. I knew there's some of the winter storms in the U.S. were big for a lot of the U.S. carriers, but I wouldn't have figured you had exposure there. So I was curious there's something I missed and that helps clarify.

The second question that I had -- and this is really just trying to patch together a couple of the comments you made in your opening remarks.

So it sounded like in the fourth quarter you saw some market behavior that you weren't keen on and accordingly, refrained a little bit from growing the book at that point, and particularly in the long-tail lines.

And then if I'm interpreting it correctly, that gave you the opportunity to then take a little bit better, fuller advantage of some of the conditions that prevailed around the January 1 and early first quarter renewals? Is that the right way to think about your comments?.

That's almost exactly the way to think about my comments. I mean, we were pretty surprised and disappointed with the behavior that we were seeing in the markets. I mean especially following from August, September of last year, the market had -- the reinsurance market was showing clear direction of where it was going.

Unfortunately, from what we observed in the latter part of the year, the direct markets chose to really ignore that, what they knew what was coming. We felt that they didn't choose to react or be proactive with it. And so you did find some erratic behavior, some increased competition. And it was behavior that we weren't willing to be a part of.

That being said, come 1/1, the reinsurance markets were true to their words and action. And since then, we've seen a huge shift in dynamics within certain markets, certain territories, certain lines of business.

And as we said, especially really on where we're seeing it is on the short-tail business, on the Reinsurance segment, and it's a markedly changed environment than what it was just a couple of months ago. And so, the opportunities have -- so far this year, I can say, have been all honesty exceeded our expectations.

And hope that this -- and expect that this continues throughout the remainder of the year..

Were there any particular lines in the fourth quarter or late in last year that seemed to be particularly erratic?.

I mean, we saw and we've been seeing, not erratic, but it's almost like consistent in the long-tail side; on the FI, the D&O, we've seen trending and downward pressure on rates consistently. And we expect that to continue throughout the year.

Where we probably saw the erratic behavior that has now reversed itself more so far this year, is probably on the property side in all honesty and more so on the international book than the U.S. book, but that -- again that become -- that come around to a different story so far this year.

I mean, we will continue to focus on those areas where we feel the returns are healthiest. And that's always been how we've done things and I think are the critical parts of our strength and competitive edge. And I think '23 is going to provide great opportunity and more opportunity than '22 did..

And can you just remind me about what percentage of your book is written in pounds and in euros as compared to dollars…?.

It's about a third of the book that is written in pounds and euros combined, maybe a little over 35% to 40%..

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Wasef Jabsheh for any closing remarks..

Thank you all for joining us today. We appreciate your continued support. And we will 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..

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