Business Context and Reporting Period
International General Insurance Holdings Ltd. (IGI), an international specialty-risk commercial insurer and reinsurer, filed this Form 6-K on October 19, 2021. The filing amends previously published financial information for the quarter and six-month period ended June 30, 2021, and the quarter ended March 31, 2021.
The amendment follows the SEC’s April 12, 2021 staff statement concerning the accounting treatment of warrants issued by special purpose acquisition companies. IGI concluded that the public and private warrants issued by Tiberius Acquisition Corp. should have been classified as liabilities at fair value rather than as equity.
Key Financial Metrics and Amendments
| Metric | Six Months Ended June 30, 2021 | Quarter Ended June 30, 2021 | Quarter Ended March 31, 2021 |
|---|---|---|---|
| Profit before tax | $20.4 million, amended from $22.0 million | $8.8 million, amended from $6.2 million | $11.5 million, amended from $15.8 million |
| Profit for the period | $18.5 million, amended from $20.1 million | $8.2 million, amended from $5.6 million | $10.2 million, amended from $14.5 million |
| Basic and diluted EPS | $0.38, amended from $0.41 | $0.17, amended from $0.11 | $0.21, amended from $0.30 |
| Book value per share | $8.58, amended from $8.86 | The filing does not provide a clear amended value | $8.41, amended from $8.71 |
| Return on average shareholders’ equity | 9.6%, amended from 10.1% | 8.5%, amended from 5.6% | 10.7%, amended from 14.7% |
| Core operating return on average shareholders’ equity | 12.3%, amended from 11.9% | 9.3%, amended from 9.0% | 15.5%, amended from 14.9% |
For the six months ended June 30, 2021, the amended consolidated statement of financial position removed $6.8 million of warrant equity, reduced retained earnings by $6.0 million, and reduced total equity by $12.9 million to $390.2 million. A derivative financial liability increased by $12.9 million to $17.4 million, and total liabilities increased to $1,001.3 million from $988.4 million.
For the quarter ended March 31, 2021, the amended balance sheet removed $9.2 million of warrant equity, reduced retained earnings by $4.3 million, and reduced total equity by $13.5 million to $382.5 million. A $13.5 million derivative financial liability was recognized, increasing total liabilities to $883.1 million.
The filing does not provide a clear amended revenue, operating cash flow, free cash flow, debt, or liquidity figure.
Material Changes Versus Previously Reported Results
- The warrant reclassification created a derivative financial liability measured at fair value and eliminated the warrant equity classification.
- For the six-month period, the change reduced profit before tax and profit by $1.6 million, primarily through a larger loss from the change in fair value of the derivative financial liability.
- For the June quarter, the amendment increased profit before tax and profit by $2.6 million because the amended change in fair value of the derivative financial liability was a $0.4 million gain rather than a $2.2 million loss.
- For the March quarter, the amendment reduced profit before tax and profit by $4.3 million through recognition of the derivative liability fair-value change.
- Core operating returns on average shareholders’ equity increased modestly after amendment for each reported period, despite lower reported book value and, in the six-month period and March quarter, lower net income.
Outlook, Risks, and Unusual Items
The warrant accounting revision is the principal unusual item in this filing. It affects reported liabilities, equity, earnings, per-share data, and financial ratios, but the filing does not describe a related cash payment.
The filing contains general forward-looking statement cautions but does not provide specific financial guidance. Identified risks include changes in demand, global economic and competitive conditions, profitable growth execution, retention of key employees, changes in laws and regulations, legal proceedings, COVID-19 effects, and the ability to maintain Nasdaq listings for the company’s common shares and warrants. Additional risks are referenced in IGI’s 2020 Form 20-F and other SEC filings.
IGI operates across specialty lines including energy, property, aviation, construction and engineering, marine, political violence, financial institutions, casualty, professional indemnity, directors’ and officers’ liability, surety, and treaty reinsurance. The company reports ratings of A/Stable from AM Best and A-/Stable from S&P Global Ratings.
Investor Verification Checklist
- Verify the amended warrant classification and the valuation methodology for the derivative financial liability.
- Reconcile the amended income statement, balance sheet, retained earnings, total equity, and liability figures with the company’s subsequent annual and interim filings.
- Assess the effect of warrant fair-value volatility on future earnings, EPS, book value, and return metrics.
- Review cash flow, debt, liquidity, capital adequacy, and insurance-reserve information in the company’s complete financial statements, which are not clearly presented in this filing excerpt.
- Review the risk factors in IGI’s 2020 Form 20-F and subsequent SEC filings, including COVID-19, litigation, regulatory, competitive, and Nasdaq-listing risks.