Good day, and welcome to the International General Insurance Holdings Ltd.’s Third Quarter and First Nine Months of 2023 Financial Results Conference Call. All participants are in a 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..

Thank you, Betsy, and good morning, and welcome to today's conference call. Today, we'll be discussing our 2023 third quarter and nine months results. You will have seen our results press release that we issued after the market closed yesterday. If you'd like a copy of the press release, it's available on our website in the Investors section.

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 our Executive Chairman, Wasef Jabsheh; our CEO, Waleed Jabsheh and our CFO, 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 third quarter 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.

And before we begin, I'll just go through 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 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 afternoon.

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're aware, we voluntarily changed our basis of accounting from IFRS to U.S. GAAP as of the 1st of January, 2023.

During this call, we will use certain non-GAAP financial measures for reconciliation of non-GAAP financial measures to the nearest GAAP measure, please see the earnings release which we posted and which has now been filed with the SEC and is available on our website. With that, I'll turn the call over to our Executive Chairman, Wasef Jabsheh..

Thank you, Robin, and good day everyone. Thank you for joining us on today's call. I'll just make a few short remarks before handing the call over to Waleed. We have an excellent third quarter with very strong performance across all key metrics.

For the quarter, we exceeded our long-term averages on most financial measures through the consistent execution of our strategy. Our deep understanding of our market and being able to and anticipate shifting trends in our markets. I expect this will continue as we close out 2023.

The current market conditions continue to provide us with the opportunity to clearly demonstrate our proficiency at shifting our focus to those lines and markets with the highest margins. While always staying within our risk appetite, it is discipline and focus that is leading to the consistency and quality of our results.

In six of the last seven quarters, we've recorded combined ratios in the low to mid 70s with core operating ROEs well in excess of 20% and sometimes 30%. I would dare to say that IGI is currently one of the best performing specialty alliance company. This is the result of focus, experience, and cohesive team of people, and the strategy will existed.

For year to date, we have grown our book value per share by more than 21%. We are committed to continuing to build value for our shareholders who have put their trust in IGI and support to us. We take the promise seriously and I'm very pleased with what we have been able to achieve.

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 2023 and the year ahead. I'll remain on the call for any questions at the end. Thank you..

Thank you, officer. Thank you all for joining us today. I'll just start with a quick recap of the result for the quarter in the nine months and then move on to our markets.

As Wasef said, we've produced exception results for Q3 and for the year-to-date through 30th September, 73.2% combined ratio with a core operating ROE of 31% for the quarter, and a 74.9% combined ratio, and a core operating ROE of 31.4% for the nine months.

I said on last quarter's call that we don't expect to achieve mid 70s combined ratios and ROEs above the 30% mark every quarter.

We've always said our longer-term averages are around the mid to high 80s combined ratio-wise and mid to high teens from an ROE perspective, and that's how we look at things over a long period of time and not just from one portion to the other.

Having said that, we are very clearly riding the wave of some very favorable market conditions, and all indications are that this will continue for the foreseeable future.

Now just move on to some key highlights for the third quarter and the year-to-date, growth -- premium growth was very strong at over 25% in Q3, leading to over more than or growth of more than 22% for the first nine months. Again, the growth in ‘23 this year is concentrated in the short tail and reinsurance segment.

And as we've said in previous quarters, the long tail segments remain under a bit of pressure. Specifically in the short tail segment, we grew gross premiums by over 28% in Q3 and 22.5%for the first nine months compared to same periods last year.

Growth in the third quarter was in most short tail lines, but most significantly energy construction and contingency. Areas where we're achieving rate improvement on renewal business continue to be more pronounced in our property engineering and political violence portfolios.

The reinsurance treaty business was also up well more than double that ofQ3, and the first nine months as we continue to take advantage of the housing market we've been speaking about. Over here, cumulative net increases continue to exceed 25%.

And as we said at the beginning of the year, historically, this book has comprised about 5% of the overall of our overall portfolio. Year-to-date, it's around 12.5% for 2023 expected to stabilize at around 10%. As we continue to take advantage of the opportunities in this attractive segments at the moment.

Of course, we do all that whilst staying within our defined risk appetite. Moving on to investment income similar to the first half of ‘23, it showed significant improvements in Q3, as a result of the rising interest rates and overall larger investment portfolio.

This resulted in a 1.4 point improvement in the annualized investment yield to 3.9% for Q3. The first nine months fared very similarly, again with a 1.6 point improvement in the annual investment yield up to 33.8%.

Specifically in our fixed income portfolio, we maintained the overall average credit rating of at A with an average duration at 3.1 years, and more than likely, we're probably going to see that duration increase somewhat over the next few quarters.

Net income for Q3 was 10.9 million, which was a decrease of about 52% versus 22.6 million in Q3 last year. You did see, however, from a press release that net income was impacted by an negative movement of about $17.2 million in the fair value of warrants and earnout shares.

You'll recall that we executed cash conversion of all outstanding warrants during the third quarter, and they have now been delisted. So this is one of those one-offs and will not be recurring. Separately, we've got the earnout shares, which amount to just over 3 million and have staggered testing levels.

Those are impacted by the market price of IGI's common shares when the fair value is calculated, and that runs through net income as well. So -- but for the first nine months, net income was up 27.5% when compared to the same period a year ago.

But I would say the truer measure of our performance is core operating income, which increased almost 30% in Q3 and 29% for the first nine months, when compared to the same periods last year. Just moving to the balance sheet, total assets increased more than 10% to 1.75 billion.

Total equity increased almost 15% to 470 million for the year through September 30th. On the capital management front, we continue to repurchase common shares under our existing authorization. Repurchase of 5 million is the authorized amount of specifics set out in our press release from last night.

We have around 1.5 million shares left under the existing repurchase authorization, and as I mentioned a moment ago, we executed the warrant exchange transaction for cash during Q3 and the warrants delisted on the 4th of October, which helps in simplifying our balance sheet and providing us with greater flexibility as we look at the future.

Mentioned our ROEs earlier for the third quarter nine months, but we just add that we grew our book value year to date per share by more than 21% to $11.04 as at the 30th of September, so all in an excellent quarter and year to date in ‘23 with plenty to be optimistic about for the remainder of the year and going into ’24.

Just moving onto the market, we're seeing continuation of the trends that we saw in the first half of the year. And there continues to be an abundance of profitable opportunities across our portfolio, but particularly as we've seen recently in our short tail and reinsurance segments.

But within these segments, even within these segments, I mean, rates and conditions vary by line and by territory.

In terms of the bright spots and I know that earlier, these are property -- these are in property, engineering and political violence lines within the short tail segment, but all lines are holding up relatively well with the exception of General Aviation.

But overall within the short tail segment, we've seen cumulative net rate increases of over 9%, and this is fairly steady with what we've been seeing since the beginning of the year. Again, there's a lot of variation by line of business.

For example, properties, seeing overall increases of a little bit more than 15% with the higher rate increases in the U.S., lower levels of increases in some other -- in other regions and in some regions, we're actually seeing reductions. We are closely monitoring the tragic events currently unfolding in Palestine and Israel.

And while we do have some exposures in that region, we don't expect any material losses arising from the situation as it stands now. So all in all, the landscape for short tail remains very encouraging with lots of opportunity and strong rate momentum.

In our treaty reinsurance business, we saw cumulative net rate increases of more than 26% in Q3, and we definitely expect that strong momentum to continue as we head into the January 1st renewals. There continues to be plenty of opportunities to write new business and maintain this portfolio as we said earlier at around 10% of our overall book.

Story in the long tail segment is not dissimilar to what we've mentioned in the last couple of quarters. Rates continue to trend downward but mostly in an orderly fashion. Overall cumulative net rates remain above flat for the overall segment to marginally down, but like other areas of our business, there's much variation by line.

I noted in last quarter's call that most of these lines have had compound rate increases well over a 100% in the last three to four years and some excess of 150%. So while rates are coming down, they're coming down from decently high levels, and as a result, largely remain more than adequate.

We've seen renewal rates most pressured in D&O and FI, Financial Institutions, where there's a greater degree of margin compression, and therefore a higher degree of contraction in those books. We will continue, as ever, to take a cautious and selective approach to this business. Looking at our geographic markets, it's not surprising that the U.S.

continues to outpace all of the markets with rate increases more than 20% in the lines that we're writing. Reminder that they are all short tailed. In the first nine months of the year, we've written close to 73 million in gross premium in the U.S., which represents growth of about almost 40% from the same period last year.

In Europe, we wrote over $53 million in the first nine months versus 34 in the same period last year, and we expect to see further opportunities in 2024 in that area.

You'll recall that earlier this year we acquired an MGA based in Oslo, and we're currently building out a team in order to expand our relationships there in the Nordic market and the product offering and our product offering. So, that's an area to focus on going forward for us.

Latin America continues to show healthy rate momentum while Asia is improving. It's not responding as impactfully as we had anticipated.

In the Middle East, where we've got a broad and diversified risk portfolio representing a little less than 10% of our overall premiums, market conditions are quite mixed with evidence of increasing competitive pressures in line. But there are still pockets of opportunities particularly in engineering and construction across the GCC.

In summary, we remain very optimistic with the current market overall and opportunities for us to expand our portfolio. We will continue as always to maintain our focus and remain selective so that we continue on the very positive and profitable growth trajectory that we're on. I would just like to take a moment to congratulate all people of IGI.

We're now more than 400 people spread across eight offices around the world. Our teams have remained steadfast to focus on the task at hand, the strong collaboration and cooperation underpinning consistently solid execution.

This is critical to our ability to achieve the results you're seeing from us today and what is driving our successful track record at IGI. So, I will pause here and we'll turn it over for questions please. Operator, we're ready to take the first question..

Operator:.

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 and she'll be happy to assist. Have a good day everyone..

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