IGI net income drops on unrealised derivative losses

International General Insurance suffered a 51.8% decrease in net income to $10.9 million as a result of a drop in the fair value of derivatives held by the company.

However, the Bermuda-based specialty insurer’s core operating profit rose 29.5% to $36.3 million from $28.1 million as gross written premiums rose 25.1% to $150.3 million and underwriting income increased 18.3% to $49.7 million with the increase driven by a rise in net premiums earned.

The company recorded a 73.2% combined ratio for the quarter, a 0.8% improvement on the same period in 2022.

IGI chief executive officer Waleed Jabsheh said: “IGI’s excellent third quarter and nine month results - reflected in a combined ratio of 73.2% and a core operating return on average equity of 31.0% - demonstrate our continued discipline and ability to shift focus to those lines with the strongest margins.

“While market conditions remain healthy in many lines and increasingly pressured in others, we achieved overall net rate increases of more than seven per cent across our portfolio, recording healthy premium growth of 25.1% during the third quarter and 22.6% for the first nine months of 2023.”

“As we look ahead to 2024, we expect to build on the momentum and profitable growth trajectory of the last several quarters, enabling us to continue to deliver on our value proposition to all our stakeholders.”

IGI said the decline in net income was primarily driven by “the negative movement of $17.2 million in the change in fair value of derivative financial liabilities relating to warrants and earnout shares, and to a lesser extent higher net loss and loss adjustment expenses and general and administrative expenses”.

It added: “This was partially offset by the increase of $12.5 million in net premiums earned and the positive movement of $3.4 million in net investment income. Return on average equity was 9.3% for the third quarter of 2023 compared to 23.9% for the third quarter of 2022.”

Net income for the nine months increased 27.5% to $85.2 million from $66.8 million for same period in 2022. The company said the increase was primarily driven by an increase of $52.5 million in net premiums earned, and positive movement of $29.5 million in net investment income, partially offset by the negative movement of $25.7 million in the change in fair value of derivative financial liabilities, increased net loss and loss adjustment expenses, and general and administrative expenses.

Core operating income was $103.7 million for the nine months ended September 30, 2023, compared to $80.4 million for the same period in 2022.

Gross written premiums were $150.3 million for the quarter, representing an increase of 25.1% compared to gross written premiums of $120.1 million in 2022.

Underwriting income increased 12.5% to $139.5 million for the first nine months of 2023 compared to $124.0 million in 2022.

Gross written premiums were $523.8 million for the first nine months in 2023, representing an increase of 22.6% compared to gross written premiums of $427.2 million for the nine months ended September 30, 2022.

As a result, the combined ratio for the nine months ended September 30, 2023 was 74.9% compared to 73.6% for the nine months ended September 30, 2022.

The company’s long-tail insurance segment recorded a quarterly underwriting profit of $23.1 million, down 36.4% from $36.6 million in 2022 as net premiums earned fell and losses and loss adjustment expenses rose.

By contrast, the short tail segment saw underwriting income quadruple from $4.7 million in 2022 to $20.8 million as gross written premiums rose 28.4% to $77.4 million and net premiums rose 36.2% to $60.9 million.

Reinsurance also rose in the period, with underwriting income jumping to $5.8 million from $1 million a year earlier.

Net investment income was $9 million compared to $5.6 million in the third quarter.