Fidelis enjoys third quarter turnaround as reinsurance losses drop

A massive drop in catastrophe reinsurance claims drove Fidelis Insurance Holdings to a $88 million third quarter profit compared to a $93 million loss in the same period in 2022. 

The company, which went public earlier this year, said its underwriting income for the three months September 30 was $75 million compared to an underwriting loss of $89 million. 

The company’s combined ratio dropped to 85.4% compared to 120.5% in 2022. 

Gross written premiums fell to $592 million compared to $688 million as the company reduced its underwriting in its bespoke segment, citing market conditions. 

“I am pleased with another strong quarter for Fidelis which produced excellent results across multiple key metrics,” said Dan Burrows, group chief executive officer. “We continue to deliver our strategy of generating superior underwriting returns with a year to date combined ratio of 82.4%. 

“Our results demonstrate our ability to be nimble and opportunistic across our three pillars to react to market conditions and evidence the strength of the alignment with our partners at Fidelis MGU who are able to fully focus on underwriting activities.”

He added: “During the year we looked to preserve underwriting integrity across the portfolio, and given the economic and geopolitical conditions, maximise the bottom line, delivering an annualized operating ROAE of 17.7%.”

Burrows predicted that the so-called hard market would continue and said the company would focus on its specialty lines. 

“We believe market duration is set to continue and there is still considerable opportunity within the portfolio following a number of years of compound increases across multiple lines of business,” he said. 

“Our market-leading specialty portfolio remains an important driver of growth within the business given strong prevailing market conditions, as evidenced by the strong year to date premium growth. 

“We take a measured approach in bespoke, where we continually assess market dynamics and evaluate opportunities based on the current risk environment. While this had led to a reduction in bespoke premium year to date, we have a robust pipeline and are well positioned to pursue long-term growth in this pillar.” 

Fidelis benefited from net favourable prior year loss development of $43.3 million compared to $2.7 million while net investment income tripled to $33 million compared to $11 million. 

Net realised and unrealised investment losses fell from $12.3 million to $5.3 million. 

By segment, gross written premiums for specialty was virtually unchanged at $327 million, $1 million lower than in 2022, while losses dropped from $178 million to $138 million. 

Reinsurance GWP were $104 million compared to $86 million while losses plummeted from $140 million in 2022 – largely a result of Hurricane Ian – to $10 million. 

In the bespoke segment, GWP fell to $162 million from $275 million and losses rose from $32 million to $43 million. 

The company said of the bespoke segment: “For the three and nine months ended September 30, 2023, gross premiums written decreased as a result of increased economic and geopolitical uncertainty, we continue to take a measured approach in writing certain exposures in this segment, and instead take advantage and deploy capital in segments which present significant opportunities due to post-loss dislocation. 

“Gross premiums written in Bespoke can be opportunistic in nature and premiums written may fluctuate on a quarterly basis due to the timing and selection of the contracts we underwrite.”