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. [Operator Instructions] After today's presentation, there will be an opportunity to ask question.

[Operator Instructions] Please note this event is being recorded. I would like now to turn the conference over to Robin Sidders, 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 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.

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 be found on our website on the Presentations page in the Investors section as well.

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

Wasef will begin the call with some high level comments before handing over to Waleed 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 Wasef, I'll begin with 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 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 Form 6-K 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.

In addition, as you are aware, we voluntarily changed our basis of account from IFRS to U.S. GAAP at the very beginning of 2023, January 1. During the call we will 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 will turn the call over to our Executive Chairman, Wasef Jabsheh..

Thanks, Robin and good day everyone. Thank you for joining us on today's call. We will today -- to do today's call a little bit differently. I'm going to have Waleed take the lead and talk you through the results for the second quarter and half-year and what we are seeing in the markets.

As you know, I remain the Executive Chair and effective July 1, Waleed took over [Indiscernible] as CEO. This is part of succession plan that was put in place many years ago.

What it 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 time. This is a natural transition for us, as Waleed has served as President alongside me for over a decade.

IGI is in good hands with Waleed [Indiscernible] 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 ‘23. 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'd like to add that I watch the results of our peers in the market. And, I would say that IGI is superior to so many of them.

And it's because of our understanding of the market and the cycles and laying the cycles correctly. And this is what IGI has been really great in achieving. We don't get attracted to business, we think we -- 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 company, 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, geographically is so important. And this is what you concentrate on.

And so many companies, like us in the market, they miss that as we hear it from them as well when we talk together. Before I hand over to Waleed, 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 Waleed leadership. This is not to say that we won't ever have major events impacting our results. That is the nature of our business.

And that is why we look at results over the longer term, not just quarter-to-quarter. I will now hand over to Waleed, who will take you through the results and provide more details on our outlook for the remainder of ‘23. I'll remain on the call for any questions at the end. Thank you.

Waleed?.

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 exceptional quarter and a very strong first-half to the 2023 year. We certainly don't expect to achieve mid-70s combined ratios and 30-plus ROEs every quarter.

But what these results demonstrate is our ability to shift our focus to lines and territories showing the momentum and keep a watchful eye and when required, even pulled 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 were 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 U.S. GAAP as of January 1st. So, comparative numbers for the period may deviate from its numbers previously presented under IFRS [Technical Difficulty].

To the specifics, gross 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’re seeing apparently in the short tail on reinsurance segments with competitive pressures remaining across most lines on the long tail side.

Specifically in the short sales segment, we recorded just under 12% growth in gross premiums for the second quarter and just over 20% growth for the first-half, when compared to the same periods of last year.

Growth in Q2 was in most short tail lines, the most significant opportunities to write profitable business and new business are -- where we're -- and where we're achieving rate improvement on renewal business. That's most evident in property engineering and BV portfolios.

Our reinsurance treaty business was also up almost 40% over the second quarter of 2022, and well more than double that from the first-half of 2022 as we continued to take advantage of the hardening that we talked about on the call for last quarter's results.

More important, the actual growth itself is the profitability, of course, of the increased level of premiums. Our 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 profits 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 investments income similar to the first quarter of ’23 showed significant improvements in the second quarter.

This is a result of the rising interest rates on yields and reinvestment rates and an overall larger investment portfolio. This led to a 1.7 point improvement in the annualized investment yield to 3.9% for the second quarter.

When combined together, the first-half of ’23 was also significantly better than the first-half in terms of net investment gained with 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 and total equity increased 13.6% to $466.8 million.

On the capital management front, we continued to repurchase common shares under our existing 5 million common share repurchase authorization. We provided the specifics in our press release from last night, we've got approximately 1.9 million shares under the authorization.

And as you know, 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 average equity of 34%, representing a 3 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 return on average equity improved 3.1 points to 30.8%. We grew our book value per share by more than 20% to $10.91 for the first-half year to June 30, 2023. So all in, an excellent quarter and first-half with lots to be excited about.

I am specifically proud of our ability to continually generate consistent profitable results and grow our book value per share. As Wasef said, while our quarterly results have been excellent so far this year, we are more focused on longer periods of time and it's this multi-year track record that sets companies apart from each other.

Before discussing what we're seeing in the markets, I just want to address the foreign exchange transactions that we announced. As you know, we commenced and are currently in the midst of an offering to exchange all 17.25 million outstanding warrants for $0.95 per warrants.

I won't comment much further, but I'm happy to take any questions on our rationale for the cash exchange versus the share exchange. But simply, the management and the Board believed this was the best option as it is non-dilutive to existing shareholders.

This is going to be reflected in our third quarter 2023 results and I would remind listeners that we're already carrying $10.5 million liability on our balance sheet related to the warrants.

So moving on to the market, it's fairly similar to what we said in last quarter's call with more pronounced or less pronounced trends in certain lines of geographies than were anticipating. There are many areas of our portfolio with plenty of opportunities, but within this rates and conditions do vary by line and by territory.

So, we continue to see very healthy submission flow, which is allowing us to be more selective in the risk we're taking on the books. So, we continue 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 renewals in the second-half of the year. In our short tail lines, 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 on last quarters called General Aviation continues to lag.

There's much variation by line and territory, as I said, for instance, we’ve got power and renewables that are seeing cumulative net rate increases of around 3% to 4%, whereas you've got property with net rate increases of almost 15% and PV well over 30% and that's on the back of the geopolitical events of the past few years.

So every line is different and same goes for the various territories, which I'll talk about more in a moment. But the bottom line is there's still healthy opportunities out there, certain 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 strong momentum continues.

I mean, 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% over the second quarter of ’22, driven mostly by the increased rating environment, of course, and new business in, predominantly in the U.S. and Europe.

We are continuing to find plenty of opportunity to write new business and grow this portfolio. But again, as always, we're being selective and disciplined and working within our risk appetite, especially for cat exposed business.

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% of the total portfolio in the first-half of the year should come in at about 10% or level out at about 10% for the full-year, which is roughly double historical levels.

In the long tail segment, the story remains mixed both by line and geographic region as we continue seeing the impacts of competitive and pricing pressures. Overall cumulative net rates remain in positive territory, but there is very much variation by line of business in this segment.

For context sake, I would note that most of these lines have had compound rate increases well over triple-digits in the last three to four years. So, rating adequacy remains at acceptable levels. But renewal rates continue to be most pressured in DNO 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 U.K.-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 other lines within the segment. Overall, we will continue to take cautious and selective approach to the business. Looking at our geographic markets. The U.S. continues to outpace all our -- all other markets with rate increases more than 20% in the lines we're writing.

As you know, this is all short sale 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 U.S. That represents about 52% growth over the first-half of ‘22.

Europe where we're mostly writing long tail business with a bit of a short tail 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 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 remains still good pockets of good opportunities, especially in engineering and political violence.

Asia continues to show improvement, but supportingly rate momentum in the second quarter was not quite as pronounced as we were expecting at the outset of the year. All in, positive though. In summary, as I said, we remain optimistic with the current market overall and the opportunity 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 reiterate Wasef’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 the 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.

And that's what we believe differentiates us, IGI, when it comes to generating strong returns for our shareholders over the longer term. 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..

We will now begin the question-and-session. Our first question comes from Roland Mayer of RBC Capital Markets. Go ahead..

Hi, good morning. Well, I guess, good afternoon over there. Well, even Wasef, congratulations to both of you on the CEO transition..

Thank you very much. Thank you, Ron. I appreciate it..

My first question is, I believe the U.S. property growth, it’s mostly in the Florida Panhandle or Florida just generally.

I was wondering if you could walk through a bit about how we should be thinking about cat exposure in the United States?.

Yes, I mean, inevitably if you're guiding a U.S. property book of business, E&S book, inevitably your cat exposures are going to be there. We've grown quite a bit over the last few years. We've been in the business now in the market for about three years. And we've managed that growth to ensure that we stay within our risk tolerance and cat 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 U.S. markets are very much directed or located within 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 and how we manage the overall exposures and potential net impact in the events of a -- what you call it in the event of a big event..

That makes sense. And yes, thank you so much. The next question is going to 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? Anything there? Thank you..

Roland, there's no way 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, that they grow spot. I think it's across the board. The Middle East has been very healthy for us on the PV side.

Asia, we just in the last couple of months, we added resource on the PV side out of our Malaysia office. So we're seeing slowly, but surely we're seeing traction there. And yes, I mean, the rest is really very much fed up..

Thank you. And then if I could get one more in, the annualized investment yields 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 mean, we continue to be cautious in how we invest and what we invest in. New money is going at anywhere between, you know, 4.5% to 6%, usually above 5%, and closer to 6%. 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..

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