Pelagos profits halve to $62m as marine losses hit Q3 results
Bermuda-based Pelagos Insurance Capital has reported a 53% decline in third-quarter net income to $61.7 million, from $130.5 million a year earlier, as marine losses linked to conflicts in the Middle East and Black Sea drove higher underwriting losses despite continued growth in gross premiums.
Combined gross premiums written (GWP) increased 5.3% to $839.8 million from $797.5 million. The group’s combined ratio deteriorated to 91.5% from 79.0% in the same period a year prior, reflecting a sharp increase in catastrophe and large losses, alongside adverse prior-year reserve development.
Catastrophe and large losses more than doubled to $115.9 million from $57.4 million, while the group recorded $4.7 million of adverse prior-year reserve development, compared with $16.0 million of favourable development a year earlier.
Underwriting income consequently declined to $67.0 million from $125.5 million, while operating net income fell to $83.3 million from $126.8 million.
The deterioration was particularly pronounced in Pelagos’ insurance segment, where catastrophe and large losses increased to $119.2 million from $58.2 million, primarily reflecting marine losses associated with the conflicts in the Black Sea and Middle East.
The segment’s attritional loss ratio also increased by 6.0 percentage points to 32.6%, although Pelagos attributed the deterioration partly to benign attritional losses in the prior-year period.
Adverse prior-year development of $15.8 million, compared with favourable development of $2.7 million a year earlier, was primarily driven by its political risk, violence and terror business.
Despite these pressures, insurance GWP rose to $686.1 million from $605.8 million, driven predominantly by growth in other insurance and marine business.
In contrast, Pelagos’ reinsurance segment continued to deliver strong underwriting profitability, although premium volumes declined.
Reinsurance GWP fell to $153.7 million from $191.7 million, primarily due to the restructuring of a client’s programme. The segment generated underwriting income of $94.7 million, compared with $97.5 million a year earlier.
The performance benefited from $11.1 million of favourable prior-year reserve development and a $3.3 million net benefit within catastrophe and large losses. Pelagos reported no material catastrophe or large losses in its reinsurance segment during the quarter.
Dan Burrows, group CEO, said: “We delivered a strong quarter with 15.3% annualised operating ROAE. These results demonstrate the strength of our capital allocator strategy and our ability to respond to changing market conditions, access a broader range of opportunities, and deploy capital to the most attractive areas of the market. Our advantage is simple: no single underwriting team sees every opportunity. By partnering with multiple leading teams, we expand our opportunity set and create a stronger, more diversified portfolio.
“Looking ahead, we see significant opportunity to build on the momentum across our expanding underwriting partner network. Combined with our strong balance sheet and the ability to pursue both profitable growth and accretive capital management, we are well positioned to accelerate top-line growth, generate attractive risk-adjusted returns, and create long-term value for our shareholders.”
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