Good day, everyone, and welcome to the International General Insurance Holdings Ltd.'s First Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please also note, today’s event is being recorded. At this time, I would like to turn the conference call over to Robin Sidders, Head of Investor Relations. Ma’am, please go ahead..

Thank you, Jamie, and good morning. Welcome to today's conference call. Today, we'll be discussing our first quarter 2023 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 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 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 first quarter and also give some insight into current market conditions and our outlook for 2023. At that point, we'll open the call up for question-and-answers.

I'll begin with the customary safe harbor language. Our speakers' remarks today 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, 2022, the company's reports on Forms 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, as you are aware, we voluntarily changed the basis of accounting from IFRS to U.S. GAAP effective January 01, 2023. During this conference call, we'll use certain non-GAAP financial measures.

For a reconciliation of non-GAAP financial measures to the nearest GAAP measure, please see our earnings release, which has been filed with the SEC and is available on our website. With that, I'll 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. We had a very strong start to 2023 with excellent results across most metrics. We delivered a combined ratio of 78.4%, while growing our premiums by more than 37%.

With higher yields and reinvestment grades leading to much improved investment income, we delivered a profit of $33.9 million, representing an increase of more than 52% over the first quarter of 2022. This culminated in a 27.9% annualized core operating return on equity.

At March 31, our book value per share was $9.98, representing an increase of 10% from December 31, 2022. Our results in the first quarter clearly demonstrate our consistency in effectively executing our strategy, shifting our focus to those areas of the market with the most profitable opportunities.

As we had expected, we are seeing some excellent opportunities in both our Short-tail and Reinsurance segments, which is where you saw the growth in our gross premiums during first quarter.

The operating environment continues to be very healthy, and we expect to continue to show profitable growth in these segments going forward, while taking a more cautious approach to Long-tail business, where we are seeing increasing pricing pressure.

Here, the landscape has become increasingly competitive with new capacity recently entering these markets. So as we add to our Short-tail and Reinsurance business and these segments become a greater proportion of our total book of business, we will continue to maintain a diversified and balanced portfolio.

We are seeing positive momentum in many areas of our business, and we expect this to continue throughout 2023. The market today for IGI is one of the healthiest we have seen in more than a decade, and we are very excited about the opportunities in front of us.

We have remained focused and disciplined, which has positioned us very well to be able to anticipate and take advantage of opportunities at the right time. There has been significant increase in the flow of business that we are seeing, and that has allowed us to be more selective.

While capacity in some areas of the market remains constrained, IGI has the appetite and the ability to deploy our capital in the most attractive lines and markets, while remaining within our well established risk tolerance. This strategy is what drives our long-term track record of generating shareholder value through excellence in underwriting.

Now, Waleed can take you through the results for the quarter and provide more details on our outlook for the remainder of '23. Waleed, please go ahead..

Thank you, Wasef, and thank you all for joining us today. As Wasef said and as you saw from our press release last night, we've had another strong quarter. I would echo Wasef's comments on the consistent execution of our strategy and our ability to quickly shift our focus of those lines of markets with strong margins and rate momentum.

That is what's behind the excellent results we're producing and what you saw in our results for the first quarter. In last quarter's call, we talked a lot about the opportunities in our markets. The one comment I would make here is that we're more optimistic today than even a couple of months ago when we last spoke to you.

The dislocation was even more pronounced than we had initially anticipated, which for IGI, has led to an abundance of opportunities to expand and further diversify our portfolio with profitable business.

I'll focus on some key highlights for the first quarter in a moment before moving onto what we're seeing in our markets and opportunities ahead of us. But first, I want to provide some comments on the change in the basis of accounting from IFRS to U.S. GAAP as of 1/1/23.

This decision, which was made on a purely voluntary basis, makes sense for us as we're now in our fourth year of trading on NASDAQ and a meaningful proportion of IGIC common shares are held by U.S. investors. All the numbers in the press release we issued last night in our first quarter of 2023 financial results were prepared in accordance with U.S.

GAAP. So they may deviate from or not correspond to numbers previously presented under IFRS. Turning to our first quarter results, there's a few points I would like to focus on. Gross premium growth was very healthy in the first quarter at 37% representing one of the highest quarterly gross premium growth rates for us that we've seen in recent years.

This growth was primarily in the Short-tail and Reinsurance segments, and to a much lesser extent, some of the general casualty lines in our Long-tail segment. Although, overall gross premiums in this segment were down 6%. Specifically in the Short-tail segment, we recorded over 35% growth in gross premiums versus Q1 of last year.

Growth was in all short-tail lines, except for general aviation with the most significant improvement -- opportunities around profitable new business and/or rate improvement on renewal business in our energy book, predominantly power, oil and gas, as well as property and political violence.

Our reinsurance treaty book grew almost threefold over the first quarter of '22 -- over the first quarter of this year, sorry, as we took advantage of the housing market that we talked about in last quarter's call.

More important than actual growth itself was the profitability of the increased level of premiums, a combined ratio of 78.4%, whilst a few points higher than Q1 2022, which you may recall benefited from currency movements was very healthy and below our long term average in the mid to high 80s, while still reflecting a higher level of loss in the first quarter, a result of -- as a result of the flooding in New Zealand from Cyclone Gabrielle, and the earthquake in Turkey.

Overall, profit for the first quarter this year was more than 50% higher at $33.9 million when compared to Q1 '22. I'll quickly address the acquisition and G&A expense ratios, which were down 3.3 points and 3.4 points respectively.

First, the acquisition expense ratio, the key driver here relates to a change in our business mix and the level of fees and commissions earned in the quarter, as well as the growth in net earned premium in '23 versus Q1 '22.

Similarly with the G&A expense ratio, the key drivers here are favorable currency movements in the first quarter of '23 compared to Q1 '22, higher net premiums earned as well as the reduction in IT consultancy fees, partially offset by higher salary costs related to new hires.

Investment income which was up significantly in the first quarter when compared to Q1 of last year. I mean, there's not really a lot here to say.

It's a simple story of the impact of the rising interest rates on yields and reinvestment rates in a growing investment portfolio, and that's led to a 1.7 point improvement in the annualized investment yield to 3.5%.

Turning to the balance sheet, total assets increased 2.6% to over $1.6 billion, and total equity increased 4.7% to just over $430 million. We continued to repurchase common shares under our existing 5 million common share repurchase authorization. You have all the specifics, as set out in our press release issued last night.

All-in, we delivered an annualized return on average equity of 32.2%, representing 8.6 points of improvement over Q1 last year, and an annualized core operating return on average equity of 27.9%, representing a 3.2 point improvement over Q1 last year. We grew book value per share by 10% from December 31st '22 to $9.98 at the end of Q1 this year.

So an excellent start to '23, and as I said, much better than we had initially expected when we spoke on last quarter's call. I'm really proud of our ability as a company, even as we continue to grow in numbers to remain disciplined and to adapt quickly and decisively to the changes in the market that we've seen over the past several months.

That is one of our key attributes, and it's supported by our flat operating structure and our culture of collaboration and transparent communications.

Moving onto the market, it's very similar to what we said in last quarter's call, although the dislocation, as I mentioned earlier was more pronounced than we had initially anticipated, which has meant greater opportunity for us in the form of improving pricing conditions and a far greater submission flow.

So we are increasingly bullish about the momentum in our markets and the opportunities ahead. Our outlook for the remainder of the year is very positive.

Already in the second quarter, we've seen significant growth in our treaty reinsurance portfolio and in virtually all of our short-tail lines with the greatest opportunities similar to Q1 in energy, property and political violence.

While the majority of the portfolio reduced in the first 7 months of the year, we continue to reduce it fairly evenly throughout the remainder of the year. So we will continue to take advantage of the opportunities in front of us. Turning to the Short-tail lines. We saw net rate increase of 9.1% in the first quarter.

The landscape here is robust, with good rate momentum in most lines with the exception of general aviation, as I mentioned earlier. Obviously there is much variation by line and territory. For instance, downstream energy saw renewal net rate increases of 17%, while property showed average net increases of more than 9% and contingency almost 11%.

We continue to see significant dislocation and opportunity in the PV market, given recent geopolitical events. So in the first quarter in this line of business, we saw a net rate increases north of 40%. But I would note that the reinsurance capacity for PV is far more costly at the moment.

In our treaty reinsurance business where we saw net rate improvements of almost 30% in Q1, we are continuing to see increasingly strong momentum. I would note that these are some of the best conditions we've seen in the history of IGI.

The reinsurance market continues to be pressured with a lack of cat capacity as many others have significantly reduced their appetite for cat risk.

As we mentioned in last quarter's call, when we saw the way the market was behaving leading up to and in the fourth quarter, we initially remained very cautious and made the decision to wait until seeing the outcome of the 1/1 vision.

This has allowed us to deploy our capacity in a more meaningful way, as you saw from our first quarter results, without moving outside of our described risk tolerances.

Our treaty reinsurance portfolio is a well diversified global book of business, both territorially and by class of business, that we expect this to become a more meaningful piece of our overall portfolio, probably around 10%, as long as current market -- as long as current business persists, which we believe they will at least in the near-term.

In the Long-tail segment, the story remains mixed, as we continue to see the impacts of competitive and pricing pressures. Overall, in the first quarter, we saw cumulative net rate increases of [1.5%]. But again, there is quite a bit of variation by line of business in this segment.

We noted in last quarter's call, renewal rates force pressures in D&O and financial institutions and where we have seen several consecutive quarters of margin compression. General casualty lines are following this trend, although we are still finding some pockets of opportunity, predominantly in the Middle East and to a lesser extent, Asia.

I'll reiterate again that we don't write any of this business in the U.S. Elsewhere, professional indemnity, which is predominantly a UK based book of business is holding up and remains more than adequate with net rate increases of more than 5%. Overall, we really continue to take a cautious and selective approach to this business.

Looking at our geographical market. The U.S. is clearly outpacing other markets with rate increases of almost 30% in the lines we're writing, all Short-tailed and predominantly energy, property and contingency. In the first quarter, we more than doubled our U.S. premiums of over $25 million from around $11 million in Q1 last year.

Elsewhere, we are seeing positive movement in Europe where we are writing mostly Long-tail business supplemented by some Short-tail and treaty reinsurance business. And Latin America, which as you all know, is kind of exposed.

Our Casablanca and Dubai offices are seeing strong production out in the MENA regions, while Asia, which as you probably know, has arguably had the highest level of competition for many years. It's finally improving, and we registered very healthy growth there of almost 130%.

For IGI, one of our unique advantages is having regional offices with our people on the ground in all of these key markets where understanding of local idiosyncrasies and cultural capabilities is essential to providing service to our clients, and thereby ensuring that we make the right moves at the right times.

So in summary, as I said, we remain very positive on current market conditions, and we're extremely excited about the opportunities for us to continue to expand our portfolio with profitable new business and further diversification.

Excellence in underwriting, remaining focused, disciplined, and adept and anticipating and shifting to those areas with the strongest risk adjusted returns is we believe where we can best continue generating long-term shareholder value. And we are very optimistic and bullish of what's ahead of us.

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 today comes from Mark Dwelle from RBC Capital Markets. .

A few questions. Maybe starting with some of the catastrophe losses.

Could you talk about kind of where you saw exposure and how the claims are developing?.

Yes, Mark, I mean, as I said in my comments earlier, I mean, the majority of the catastrophes in Q1 came from the earthquake in Turkey, as along with Cyclone Gabrielle in New Zealand. The losses came predominantly from our reinsurance portfolio, but there was an element of property as well. Turkey was the most pronounced.

I believe it was a very severe earthquake, and we've been writing business there for a long time. So, we're comfortable with the provisions that we've taken and the reserves that we've taken, although it is still a fluid position, but we don't -- we feel our existing loads, cat loads and reserves will be enough to cover any development.

I hope that gives you clarity. .

Yes. That’s helpful. I had heard some -- I mean, I guess I'd seen some commentary in the media and whatnot that the claims in Turkey are developing pretty slowly.

So, I guess I was just -- if you, anything you can share in terms of how you thought about that claim -- those claims in particular given the complexity that earthquakes always have in the first place?.

I mean, we haven't seen a unusual trend. I think, they will develop differently. When you have a loss of that sort of magnitude or an event of that magnitude in a territory like this, it'll take time just like anywhere else.

So again, our book and our exposures are quite pronounced and we can identify quite quickly where we believe any loss will come from. So again, we've undertaken our own internal, obviously, analysis of the situation and we're very comfortable with where it is at the moment. .

Okay, that's helpful. Turning over to the reserving, there was a pretty good amount of favorable development in the quarter.

Was that primarily FX related as it's been in some prior quarters? Or was it primarily actual favorable development on the underlying lines? Can you maybe provide a little bit more breakdown about how the composition of that?.

No, I mean, if anything, the FX movement in Q1 worked against us as the pound and the euro strengthened. So these releases were purely favorable development, nothing to do with FX predominantly from the short-tail segment, a little bit from the reinsurance segment. And there was actually a little bit of adverse development on the long-tail.

And that's again driven -- that would've been driven by the FX movements in the quarter. .

Okay. That was actually going to be my next question is which lines it was. So you've already beaten me to the question on that one. The other question that I wanted to just spend a minute on was just, the reinsurance book obviously grew quite substantially. You commented in your opening remarks about how favorable that market was.

Is that -- that continues to be predominantly treaty business.

Did I understand that correctly?.

Yes. Yes. It's all -- it’s practically all over the treaty business. .

Okay. And then it looks like then you're seeding a certain amount of that treaty, so you're just taking advantage of retro capacity in order to kind of take primary treaty and then seed some of that off and then retain in that.

Is that -- that continues to -- I mean, I'm just trying to get some understanding on the way you're developing the exposures, because obviously the book is bigger now than it had been in the past. .

Yes. I mean the book is obviously growing quite significantly, which is what we expected. And we mentioned on last quarters call. Our treaty book is predominantly written on a net basis. And it's very, very geographically diversified and diversified by line of business. So the growth that you saw in Q1 is not focused on cat business.

I mean, we have grown our cat exposures, but I mean in certain parts of the world where we're seeing a lot of dislocation now, we're actually quite underweight and have a lot of runway left and to stick within our risk tolerances.

And the market conditions at this point in time are, as I said, on the treaty side, probably the best we've seen in the 21 year history of IGI. So it's a diversified book. It's not focused purely on property. On the treaty side, also in the U.S. our book has grown, but we minimized heavily our exposure to coastal areas.

So we don't have a lot of Florida and Gulf of Mexico sort of top exposures. It's written in an extremely cautious way. And we have capitalized on opportunities in the reinsurance market in other parts. As I said, it's not focused on property. We have gone into several other areas. So it's not a clashing sort of book of business in all forms..

That's helpful. Thank you.

And then I guess one last other question, I mean, given the market opportunity that you are seeing, are you at all kind of capacity constrained as far as the volumes that you are able to write or you are seeing opportunities that are kind of level with the ability or the capital that you have to match it?.

No. I mean, I don't think for capacity constraints. I mean, we are generating very healthy returns in the business, which continues to contribute to the overall capital of the company reinvesting. As I -- we mentioned all the time, it's an underwriting first approach. These are the best conditions we have seen in an extremely, extremely long time.

We have runway ahead of us. And in the event that we feel we might be constrained, I mean there’s various ways obviously to be able to put yourself in a position to continue capitalizing. But we do have a cautious approach, Mark. I mean, the growth in Q1, a lot of this was rate-driven. We continue to refine our portfolios.

We continue to underwrite them in a -- sort of in a personal way, and one that corresponds with our risk appetite and we don't sort of take a broad brush approach. We are very selective. We are very cautious.

And with this growth, we are cautious, but we are just seeing such an abundance of opportunity, good opportunities with where capacities become a lot more relevant and a lot more in demand. So as long as these conditions persist, we will continue to take advantage of them..

That's very helpful color. Maybe one last question. Just, you did a fairly substantial share repurchase during the quarter.

Maybe just update your thoughts in terms of how you are thinking about the capital management and how you are viewing that?.

I mean, the repurchase program continues. So we are out there buying back stock, we gave the latest numbers in the press release last night. As I said, our capital management approach, it's underwriting first. So we will use our funds to capitalize on the opportunity and grow the business. But we feel we can do -- and we can continue to do both.

As we said, the dislocation in the markets and the performance in the first quarter was ahead of expectations, as we are quite bullish about the rest of the year.

And are continuing to deliver such results, which we're confident we can, will continue to give us the flexibility to grow the business and continue repurchasing when the opportunities are there..

[Operator Instructions] And ladies and gentlemen, at this time, I’m showing no additional questions. I'd like to turn the floor back over to management for any closing remarks. .

Well, thank you all for joining us today, and thank you for your continued support of IGI. If you have any additional questions, please contact Robin. She'll be happy to assist. Have a good day, everyone. .

Ladies and gentlemen, with that, the conference has concluded. Thank you for attending today's presentation. You may now disconnect your lines..