Business Context and Reporting Period
International General Insurance Holdings Ltd. is a Bermuda-based global specialty insurance and reinsurance group operating in more than 200 countries and territories. Its principal lines include energy, property, construction and engineering, professional lines, political violence, marine, aviation, contingency and treaty reinsurance. The filing is an audited Form 20-F for the fiscal year ended December 31, 2023, rather than a standalone quarterly filing for Q4.
The company prepared its consolidated financial statements under U.S. GAAP for the first time in 2023 after voluntarily transitioning from IFRS. Prior-period information presented in the filing has been recast under U.S. GAAP, but comparisons with earlier IFRS reporting may require caution.
Key Financial Metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Gross written premiums | $688.7 million | $582.0 million | 18.3% increase |
| Net premiums earned | $447.2 million | $376.4 million | 18.8% increase |
| Total revenues | $472.0 million | $397.8 million | 18.6% increase |
| Net income | $118.2 million | $89.2 million | 32.5% increase |
| Basic diluted EPS | $2.58 / $2.55 | $1.85 / $1.84 | Increase |
| Operating cash flow | $196.6 million | $154.9 million | 26.9% increase |
| Total shareholders’ equity | $540.4 million | $410.9 million | 31.5% increase |
Net income margin was approximately 25.0% of total revenues. Reported return on average equity was 24.8%, while core operating return on average equity, a non-GAAP measure, was 28.1% versus 23.7% in 2022. Core operating income increased to $133.8 million from $93.9 million.
- Net loss and loss adjustment expenses were $189.1 million, with a consolidated loss ratio of 42.3% versus 41.9% in 2022.
- Net policy acquisition expenses were $75.0 million, or 16.8% of net premiums earned, compared with 18.7% in 2022.
- Reported segment underwriting income was $183.1 million, implying an underwriting margin of approximately 40.9% on net premiums earned and a combined underwriting ratio of approximately 59.1%, excluding corporate expenses and investment results.
- Investment income rose to $40.4 million from $20.9 million as interest rates increased and the company held more fixed-maturity securities.
- Fixed-maturity securities totaled approximately $767.6 million at year-end, representing about 68% of the investment and cash portfolio. Cash, cash equivalents and restricted cash totaled $195.0 million.
- Total assets were $1.84 billion and total liabilities were $1.30 billion at December 31, 2023.
- The company historically has not incurred debt. Letters of credit outstanding totaled $1.8 million, and a $0.3 million rent-related letter of guarantee was outstanding.
Material Changes Versus the Prior Comparable Period
- Specialty short-tail gross written premiums increased 26.2% to $400.7 million, supported by new business and average renewal rate increases of 9.0%. Segment underwriting income increased to $107.1 million from $57.2 million.
- Reinsurance gross written premiums increased 94.0% to $61.1 million, with underwriting income increasing to $18.7 million from $7.6 million.
- Specialty long-tail gross written premiums declined 2.7% to $226.9 million as management adopted a more selective approach in softer market conditions. Segment underwriting income declined to $57.3 million from $83.8 million, and the loss ratio increased to 43.9% from 30.2%.
- Current accident-year losses increased, including catastrophe losses. Current-year catastrophe losses were $38.3 million, or 8.6 percentage points of the loss ratio, compared with $24.4 million, or 6.5 percentage points, in 2022.
- Prior-year reserve releases remained favorable but decreased to $39.3 million from $42.0 million.
- Net reserves for unpaid losses increased to $499.9 million from $447.4 million, while gross reserves increased to $712.1 million from $636.2 million.
- Operating cash flow increased, while investing cash outflows declined to $90.4 million from $246.6 million. Financing cash outflows increased to $49.1 million, primarily because of $31.1 million of common-share repurchases and $16.3 million spent to repurchase and redeem warrants.
- The company completed the repurchase and redemption of all public and private warrants in 2023. The transaction and mark-to-market changes in earnout shares contributed to a $27.3 million loss from changes in the fair value of derivative financial liabilities.
- The company acquired Energy Insurance Oslo AS, renamed IGI Nordic AS, in March 2023. The filing states that the acquisition was not material to the consolidated financial statements.
Guidance, Outlook, Commentary, Risks and Unusual Items
The filing does not provide formal numerical earnings or premium guidance. Management intends to continue expanding in existing markets and adjacent specialty lines while maintaining disciplined underwriting, conservative investments, robust reinsurance protection and a target solvency ratio above 120% of group capital requirements.
Management cited sustained hard-market conditions in many short-tail and reinsurance lines, favorable renewal pricing and higher investment yields. It also noted softer conditions in specialty long-tail business and continued selectivity in that segment.
- Catastrophe exposure remains material. Reported 2023 gross and net claims from the Turkey earthquake and Cyclone Gabrielle were approximately $15.0 million and $12.4 million, respectively; total 2023 reported catastrophe losses were $42.3 million gross and $29.6 million net, including prior-year-related amounts.
- Reserve estimates are inherently uncertain, particularly for long-tail and assumed reinsurance business. A six-month adverse loss-emergence shift would increase net reserves from $499.9 million to $558.7 million; a 10% unfavorable loss-ratio change would increase them to $528.7 million.
- Reinsurance recoverables totaled $223.1 million, including $212.2 million on unpaid losses. Approximately 75.6% were due from carriers rated A- or higher, but reinsurance does not relieve the company of its primary obligations to policyholders.
- The investment portfolio is sensitive to interest rates, credit spreads and issuer defaults. A 125-basis-point increase in rates was estimated to reduce the fair value of fixed-maturity securities by $29.8 million, or 3.9%.
- Top five international brokers generated 63% of 2023 underwriting premiums, creating broker concentration risk.
- Principal risks include catastrophe losses, climate-related exposures, reserve inadequacy, competition, reinsurance availability and counterparty credit, inflation, foreign-exchange movements, regulatory capital requirements, geopolitical conflicts, sanctions, cyberattacks and operational disruption.
- The company reported no litigation or arbitration expected to have a material adverse effect as of December 31, 2023, and no material cybersecurity incident requiring regulatory action or reporting.
- A March 11, 2024 subsequent event declared a dividend of $0.51 per share for the fourth quarter of 2023, payable April 22, 2024.
Important Facts Investors Should Verify
- Confirm the sustainability of premium growth and pricing, particularly in the short-tail and reinsurance segments, and monitor whether long-tail growth remains constrained.
- Reconcile reported net income and core operating income, including the $27.3 million derivative liability loss and other non-GAAP adjustments.
- Review catastrophe losses, reserve releases and reserve sensitivity disclosures to assess the quality and durability of underwriting profits.
- Evaluate the credit quality, duration and unrealized-loss position of the $767.6 million fixed-maturity portfolio under changing interest rates.
- Assess collectability and concentration of the $223.1 million of reinsurance recoverables and the $245.2 million of premiums receivable.
- Confirm regulatory capital and solvency margins, including IGI Bermuda’s draft 2023 statutory capital and surplus of $548.7 million versus a $260.0 million ECR and $312.0 million target capital level.
- Consider dividend capacity at the holding-company level because distributions depend on regulated subsidiaries and applicable solvency restrictions.
- Monitor the impact of the transition to U.S. GAAP on comparability with prior company-reported IFRS results.
- Review ownership concentration: Wasef Jabsheh beneficially owned approximately 31.2% and Ominvest approximately 20.8% of outstanding common shares as of December 31, 2023.