By David Bull

Feb 26 - (The Insurer) - The management of Fidelis Insurance Group has reassured investors that it has the balance sheet to support its strategic growth and capital management initiatives, regardless of the legal outcome in relation to its remaining Russia-Ukraine aviation and aerospace exposures.

Shares in the Bermudian were trading up on the news and a fourth-quarter operating loss of -$1.05 compared to analysts' adjusted consensus of -$1.10. Mid-morning in New York the stock price was up 4% before gains were pared back to around 2% approaching midday.

On a call with analysts on Tuesday morning CEO Dan Burrows reiterated that so far the firm has successfully settled, or is in various stages of settlement discussions for around two thirds of its total exposure to “these unprecedented events”.

Fidelis had previously announced a $287mn net reserve charge in its aviation and aerospace line of business.

Burrows said the steps taken have “meaningfully de-risked” exposures and helped to provide increased certainty to shareholders.

The remaining third of its exposure depends partially on the outcome of the recently concluded London trial, on which the judgment is due in the coming months.

“Perhaps most importantly, regardless of these outcomes, our continued balance sheet strength will support our strategic growth in capital management initiatives,” he said.

10% GPW GROWTH TARGET

In prepared remarks, the executive said that Fidelis anticipates achieving around 10% growth in gross premiums written across its portfolio in 2025.

He highlighted partnerships Fidelis continues to target, pointing to recently renewed 20% whole-account quota share with Travelers on an outwards basis.

And he revealed new partnerships including in mortgage reinsurance, and a new relationship with Travelers that sees it take a small capped quota share of the US insurance giant’s cyber book.

“Looking ahead, we continue to see areas of opportunity across our portfolio. We are focused on maintaining our disciplines agile approach to underwriting and leveraging our scale positioning and deep relationships to strategically pursue the opportunities that align within our risk appetite,” said Burrows.

He commented on the carrier’s renewal pricing index $(RPI.UK)$ and said it was able to “maintain great discipline” in specialty property at January 1 with an RPI of 107% and strong retention across the portfolio.

Fidelis renewed one-third of its reinsurance book at January 1, achieving an RPI of 103% across its portfolio while maintaining the “significant improvements” in price, terms and conditions and attachment points.

“As we look ahead to 2025 we remain committed to pursuing accretive growth opportunities across our portfolio.

“There are strong relationships with the Fidelis Partnership. We continue to identify and leverage new distribution channels and markets leverage are these positions as well as create opportunities for cross-selling products,” said Burrows.

The executive said the company sees attractive opportunities for growth and “excellent margin” across its book aided by years of compound rate improvement.

“Our long term through the cycle targets continue to aim for mid to high 80s combined ratio and target operating return on average equity 13 to 15% through the cycle.

“Our strategic initiatives and disciplined approach to underwriting and capital management are designed to support these objectives, ensuring that we remain competitive and resilient in the face of market fluctuations,” he continued.

Questioned on the call by analysts about capital management and the valuation of the company, Burrows reiterated that Fidelis is able to grow profitably as well as execute on strategic capital initiatives, including share repurchases, with $145 million remaining under its current authorisation.

He added: “I think we would absolutely agree that we see the business as undervalued.”

Without the Russia-Ukraine situation he said Fidelis would have exceeded its through the cycle targets in 2024 as it did in 2023, and that it is “very confident” it will exceed plan in 2025, despite the wildfires at the start of the year.

In its Q4 earnings release on Tuesday the Bermudian carrier reported an underwriting loss for the period of $177.6 million and a combined ratio of 128.0%, compared to underwriting income of $94.4 million and a combined ratio of 81.4% in the prior-year period.

Cat and large losses for the quarter were $133.2 million compared to $100.9 million in Q4 2023, while overall net adverse prior year loss reserve development was $270.3 million, compared to $15.1 million of net favourable development in the prior-year period.

Gross premiums written for the quarter climbed 21.7% to $953.7 million while other metrics in the reporting period included net investment income that was up from $38.7 million to $51.4 million.