Fidelis Insurance Holdings Limited Price & Performance (FIHL)

Consequently, actual results may differ materially from those expressed or implied. For more information, including on the risks, and other factors that may have affect our performance, investors should review the Safe Harbor regarding forward looking statements included in our press release filed with the SEC via Form six ks on 02/19/2025, and our fourth quarter earnings press release, both available on our website edelisinsurance.com. As well as those periodic reports that are filed by us with the SEC from time to time. Management will also make reference to certain non GAAP measures of financial performance. A reconciliation to U. S. GAAP for each non GAAP financial measure under definition of RPI, which is our renewal pricing index, can be found in our current report on Form six ks furnished to the SEC yesterday. Which contains our earnings press release and is available on our website at adellisinsurance.com. With that, I'll turn the call over to Stan. Thanks, Miranda. Good morning, everyone, and thank you for joining us today. I wanted to start by reflecting on the year as a whole. Where we continued our focus on underwriting, and capital management. Underwriting, we identified and seized on high quality opportunities, Expanding our diversified portfolio, and delivering significant top line growth.

We remain disciplined in our approach to capital management making strategic growth investments, such as our investment in Lloyd Syndicate 03/2023, and initiating our share repurchase and dividend programs. [indiscernible] outside of our cornerstone relationship with the Vidalia partnership. Marking a pivotal step in our growth diversification strategy. Now taking a closer look at some of our headline numbers for the year, In 2024, we generated a combined ratio of 99.7%. Operating net income of $137,000,000 and an operating return on average equity 5.6%. These results clearly do not align with our through the cycle expectations, and are inclusive of the net adverse prior year development we announced last week. I'd now like to take a few minutes to address this announcement in more detail. During the fourth quarter, we incurred $287,000,000 in net prior year development, in our aviation and aerospace line of business. This relates to business underwritten in 2021 and 2022, that has been impacted by the ongoing Russia Ukraine conflict. As this litigation has continued to progress, through the court system, we have taken opportunities to de risk our overall exposure judiciously settling certain claims. To date, we have successfully settled or are in various stages of settlement discussions for approximately two thirds of our total exposure resulting from these unprecedented events.

These prudent steps have meaningfully de risked our [indiscernible] and help to provide increased certainty to shareholders. For the remaining one third, we are reserved on the basis a probabilistic model potential core outcomes incorporating recent developments and updated information received, A significant portion of these claims relate to the English trial recently concluded and the court judgment be rendered in the coming months. Perhaps most importantly, regardless of these outcomes, our continued balance sheet strength will support our strategic growth capital management initiatives. Turning back to our underwriting performance for 2024, excluding the net adverse prior year development, [indiscernible] we would have exceeded our long term return on average equity target. We delivered on our growth objectives with strong retention rates, and continued diversification through new business. We grew gross premiums written 23% to $4,400,000,000 and achieved RPIs across our portfolio of 111% for the full year. Growth was primarily driven by our direct property, marine and structured credit insurance portfolios as well as our reinsurance book. Our direct property gross premiums written increased 30% as we continue to see opportunities to deploy targeted capacity and leverage our lead positioning. Reinsurance premiums grew 40% we capitalized on favorable market conditions, Consistent with prior years, our portfolio state remains approximately 80% specialty insurance and 20% reinsurance.

These results underscore our ability to capitalize on strong opportunities across most of our key classes and secured preferential rates, terms and conditions as a leader in a verticalized market. At the same time, maintain a disciplined and nimble approach to underwriting. Where we see more competition in satellite business, we held our discipline and will not support business that does not meet our underwriting hurdles. Moving to investments. We delivered net investment income of $191,000,000 for the year, an increase of 59% from 2023. This was driven by an increase in investable assets and a higher earned yield on our fixed income portfolio and cash balances. The portfolio is well positioned as we enter 2025 and these results underscore our strategic focus on optimizing our investment portfolio within our risk appetite. Active capital management remains a cornerstone of our strategy. Alan will go into more detail shortly. In 2024, we remain focused on deploying our capital when we see the most attractive risk reward opportunities. And on a strong capital position, enables us to opportunistically return excess capital to our shareholders. During the year, we returned $152,000,000 of excess capital to our dividend and share buyback programs. Finally, before handing it over to Alan, I want to briefly discuss the impact of the recent California wildfires.

First and foremost, I want to extend our thoughts and sympathy's to everyone who's been impacted. [indiscernible] fueled by greater than average vegetation dry conditions and high winds, resulted in unprecedented industry losses for this peril. As announced last week, based on an insured industry loss estimates of $40,000,000,000 to $50,000,000,000 expect our catastrophe losses related to this event to be in the range of $160,000,000 to $190,000,000 net of expected recoveries, reinstatement premiums and net of tax. Events like this highlight the increasing impact of climate change. In 2024, natural catastrophe losses made it the sixth most costly year in insurance history. The escalating frequency of these natural disasters underscores essential role of insurers and reinsurers and emphasizes the necessity for premium rates and coverage terms and conditions to accurately reflect the evolving risk landscape. In summary, we closed out 2024 with a resilient, diversified portfolio and strong capital position. Later in the call, I will offer more insights into channel and renewals, the opportunities we anticipate for 2025. However, first, I will turn it over to Alan, who who will provide an overview of our financial performance. Thanks, Dan, and good morning, everyone. As you saw in our 2024 year end earnings release, we are reporting our results under newly defined operating segments.

Insurance and Reinsurance. This change ensures that our financial reporting is aligned with our internal management structure and decision making process and aligns more closely with peer reporting. Our new insurance segment includes our previously reported Bespoke and Specialty segments both of which remain a critical component of our value proposition. Before going into our quarterly results in detail, I'd like to highlight our 2024 annual results. As Dan mentioned, we are pleased with the progress we made on executing our strategic objectives. Our operating net income for 2024 was $137,000,000 or $1.18 per diluted common share. We closed the year with a diluted book value per share including AOCI, of $21.79 which increased by 5.3% from the end of twenty twenty three. Our total capital is $3,000,000,000 having returned $152,000,000 to shareholders through dividends and share repurchases. Now taking a closer look at our quarterly results. [indiscernible] We continue to deliver excellent top line growth with gross premiums written of $954,000,000 in the quarter, an increase of 22% versus the same quarter last year. In the Insurance segment, gross premiums written increased by 19% or $146,000,000 in the quarter. We continue to see high retention levels across key classes and added significant new business.

Meanwhile, in the Reinsurance segment, Although Q4 is seasonally our lowest quarter for premiums written, market dynamics remained favorable and we continue to find new opportunities to support our diversified portfolio. We grew gross premiums written to $32,000,000 as market discipline around rates remained. In the fourth quarter, our net premium of written decreased by $71,000,000 versus 2023 primarily as a result of an increase in ceded premium written of $145,000,000 for our most recent multiyear Herbie Re catastrophe bond which we publicly announced at the December. Our net premiums earned increased by 25% compared to the fourth quarter of twenty twenty three driven by growth of our gross premiums written in the current and prior year periods. Turning to the combined ratio of 128% for the quarter. I'll break down the components in more detail. Our net adverse prior year development was $270,000,000 in the quarter compared to net favorable development of $15,000,000 in the same period last year. As noted last week in our press release, the Insurance segment had adverse development in our Aviation and Aerospace line of business of $287,000,000 or 45.3 points of the loss ratio for the quarter. The remainder of the insurance segment experienced net favorable development of $6,000,000 The Reinsurance segment had net favorable development of $11,000,000 in the fourth quarter Driven by benign prior year attritional experience and positive development and catastrophe losses.

Our net adverse prior year development for the entirety of 2024 was $125,000,000 This included favorable prior year development in nearly all lines of business, offset by the adverse prior year development in aviation. And aerospace. [indiscernible] The fourth quarter catastrophe and large loss ratio of 21% or $133,000,000 of losses compared to 19.9% or $101,000,000 in the prior year period. The fourth quarter catastrophe and large losses, insurance accounted for $83,000,000 and reinsurance $51,000,000 with the majority of the loss related to Hurricanes Milton and Helium. The fourth quarter was particularly benign in terms of attritional losses and our attritional loss ratio improved to 17.3% in the quarter compared to 20.4% in the prior year period. Continuing with trends we have seen in the year, across both segments, our full year attritional launch ratio improved to 23% which compared to 25.8% in 2023. The improvement reflects our portfolio optimization over the last several years. Policy acquisition expenses from third parties were 33.6 points of the combined ratio the quarter, compared to 23.7 points The increase was primarily driven by acquisition costs in our Insurance segment, due to higher variable commissions in certain lines of business and changes in the mix of business written and ceded.

Our full year policy acquisition expenses were 31.8 points in insurance and 23.6 points in reinsurance. The acquisition costs for the year are more reflective of our should run for our current book of business. The Fidelis partnership commissions accounted for 9.8 points of the combined ratio for the quarter. This is net of a reversal of all variable profit commissions that had been accrued for TFP through the third quarter of twenty twenty four. [indiscernible] For 2024, there is no profit commission payable to the Fidelis partnership as the underwriting profits as defined in the framework agreement did not meet the required hurdle. This reflects our alignment of interest with PFP and demonstrates that the framework agreement is operating as intended. Finally, general and administrative expenses were $24,000,000 for versus $26,000,000 in the fourth quarter of twenty twenty three. The decrease in expense was driven by lower variable compensation accruals, the current year. Our net investment income increased to $51,000,000 for the fourth quarter of twenty twenty four. Compared with $39,000,000 in the prior year period reflecting a higher earned yield on our cash and fixed income portfolio as well as an increase in investable assets compared to the prior year period.

During the quarter, we sold $600,000,000 of securities with an average book yield of 4.2% resulting in a realized loss of $5,000,000 We also reinvested $779,000,000 into new fixed income securities in the quarter with an average purchase yield of approximately 4.8% as we continue to reposition our overall investment portfolio. We also invested $200,000,000 into a diversified hedge fund portfolio, The hedge fund investment represents 4% of our total [indiscernible] And as part of our ongoing strategy within our risk appetite, to generate superior risk adjusted diversified investment returns, and enhance shareholder value. At December 31, the average rating of fixed income securities remains very high at AA minus with a book yield of 4.9%. Average duration is consistent with the third quarter at two point eight years. Turning to tax. Bermuda government has enacted a 15% corporate income tax starting in 2025. We are carrying a deferred tax asset valued at $90,000,000 in respect of the Bermuda economic transition adjustment, which is expected to be substantially utilized within ten years as an offset against any Bermuda corporate income tax that is payable. Consistent with 2024, we remain committed to maintaining a strong balance sheet. While returning excess capital to shareholders.

We Our Outwards reinsurance program is a very important tool in our capital management strategy. At January 1, we renewed the majority of our Outwards reinsurance protection. Significantly, we have successfully renewed our 20% hold account quota share agreement with Travelers to the third consecutive year. As mentioned earlier, issued a new tranche of our Hervey Reed catastrophe bond securing $375,000,000 in collateralized reinsurance protection for named storm and earthquake covered events in The U. S. For a multi year period.

Finally, we have continued with our $0.1 quarterly common dividend in the first quarter. We have $145,000,000 remaining under our authorized repurchase plan.

Our strong capital position enable us to pursue accretive growth opportunities across our portfolio we're continuing to take an opportunistic approach to share repurchases. In conclusion, we remain committed to our strategic initiatives and are confident in our ability to navigate the evolving market conditions. I will now turn it back to Dan for additional remarks. Thank you, Alan.

Looking ahead, we continue to see areas of opportunity across our portfolio. We are focused on maintaining our disciplines agile approach to underwriting, and leveraging our scale, positioning and deep relationships to strategically pursue the opportunities that align within our risk appetite.

And importantly, as a leader in this verticalized market, we are able to take a first look at business opportunities and achieve differentiated rates, terms, and conditions. There'll be difference in the dynamics within our underwriting segments.

In insurance, we continue to build on our established book of specialty business. In property, our lead position coupled with our gross line size and underwriting approach enable us to successfully navigate the market and capitalize on areas of opportunity. We continue to maintain rate discipline with an RPI of 107% the business bound at January 1.

And are still seeing strong retention levels in the book. We continue to differentiate ourselves through the best client market. The performance of this book demonstrates our selective approach to how we deploy capacity across this portfolio managed catastrophe exposures. In marine, we take a multi class approach leveraging our line across the portfolio to match underwriting appetite. Taking advantage of the more attractive pricing in areas such as Marine Moor, [indiscernible] While maintaining our discipline in marine hull, we're raising it under more pressure. We are continuing to see new business opportunities through geographic diversification and strong demand for capacity as fleet growth continues. [indiscernible] continue to see capacity drilling rate pressure. Take a cautious approach Our focus is on maintaining underwriting discipline and leveraging our line size and package offering to differentiate ourselves in the market. Instructure credit we continue to work with both repeat and new clients. Following a strong end to the year, our pipeline for the first quarter tracking prior period. Turning to reinsurance, our strategy remains consistent with prior years we seek to take advantage of opportunities to optimize our portfolio, in line with our risk appetite. At oneone, where we renew approximately one third of our book we saw strong retention rates on our core clients, continue to capitalize on new diversifying business opportunities.

We were able to achieve an RPI of 103% across the portfolio maintaining the significant improvements to price, terms and conditions, including attachment points, achieved in the prior years. We continue to focus on higher tier clients to deploy capacity based on our view of risk. As we look ahead to 2025, we remain committed to pursuing accretive growth opportunities across our portfolio. Through our strong relationship with the Fidelis partnership, we we continue to identify and leverage new distribution channels and markets leverage all these positions well as create opportunities for cross selling products. Additionally, announced last quarter, we continue to explore opportunities to form new partnerships highly accretive and profitable business segments that diversify our portfolio under capital efficient. Our objective is to evaluate and capitalize on new opportunities that provide long term capacity to best in class underwriters ultimately delivering value to our shareholders, Our first partnership, as noted earlier, [indiscernible] where we will provide capacity on a reinsurance basis. Effective 01/01/2025, this partnership is estimated to generate approximately $35,000,000 in gross premiums written in 2025 Today, we are pleased to announce that we added another component to our relationship with Travelers, taking a small caps credit share of their cyber book.

While this credit share may not be material from a premium perspective, it exemplifies our ability to successfully onboard new partners. These partnerships are a testament to the effectiveness of our right of first offer On binder agreement processes, the Fidelis partnership.

Which demonstrates that the relationship is working as intended It is important to reemphasize that the hurdle for any new partnership is a must reach our through the cycle targets Together with our partners, we anticipate achieving approximately 10% growth gross premiums written across our portfolio in 2025.

This great target underscores our unwavering commitment to enhancing our market presence and expanding our reach through innovative and strategic collaborations. After years of compound rate improvement across most lines of business, we continue to see attractive opportunities for growth, an excellent margin across our books, Our long term through the cycle targets continue to aim for mid- to high-80s combined ratio. And target operating return on average equity of 13% to 15% through the cycle. Our strategic initiatives and disciplined approach to underwriting and capital management are designed to support these objectives. Ensuring that we remain competitive and resilient in the face of market fluctuations. [indiscernible] With that, operator, we will now open it for questions. Thank you. We will now begin the question and answer session. And if you have any further questions, please rejoin the queue. With that, our first question comes from the line of Matt Curletti with Citizens GMP. Please go ahead.

Hi, thanks. Good morning. Dan, I was hoping to ask you a question about I know it's a Q1 event, but just about kind of the wildfires high level. Specifically, as you kind of assess the event, Were there any lessons learned? I mean, the number looked like quite frankly smaller than we might expect for Fidelis at a tail event. So I'm not trying to imply it was a bad outcome, but just were there any lessons learned in that sort of tail event that you might you and the MGU might approach underwriting differently or is that the sort of outcome that we should expect for when you guys look to have exposure to what I think will be viewed as a tail wildfire event.

Yes. Thanks, Matt. Thanks for dialing in. Great question. So obviously, the wildfires recent wildfires were a significant event for the industry.

Four times larger than the previous largest wildfire loss. And we think the estimated return period is somewhere around the one in five hundred. So of course, insurers and reinsurers should be paying that loss. That's what we're here for. When we look at the loss on a net basis, it's well within our overall cut budget [indiscernible] And it's well within our expectations for an event of this massive cheese. So when we think about the reinsurance portfolio, it's performed incredibly well over the last two years. Loss ratios been sub-twenty think in fact in 2023, it was 9%. And in 2024, it was 15%. So I think we're operating in a red bus market. We seen improvements in terms of conditions. We operate very much on a gross net line side. So as I say, it's within expectations.

We believe that TUVEN will have a positive impact on pricing or the trajectory of pricing. I was actually talking to one of our direct property underwriters earlier in the week. And on high net worth, he's seen an increase in base rates on some new deals from $1 to $3.5 and we're seeing improvements in coverage, sub limits for water and smoke damage. So the strength of our business is always to look at [indiscernible] We'll continue to do that throughout the year. I think what we learned from this is actually we're operating as intended. The gross to net line size through reinsurance purchasing is working as intended.

Okay, great. That's helpful. Thank you. And then if I could just a quick follow-up Alan, you mentioned about and it was obviously in the release how kind of no performance fees for 'twenty four given the the results. I know in certain circumstances, I think in certain circumstances under the framework agreement, there could be a kind of a deficit carry forward mechanism for a few years if it reaches a certain level. Guess short question is, is there any carryforward impact to $25,000,000 or beyond from the 2024 results? Or should we just expect it to be encapsulated in 2024?

Yes, Matt. Hi, it's Alan. Thanks for the question. Great question. As I said in my prepared remarks, the profit commission for the TFP for 2024 is zero and it's [indiscernible] framework agreement is working as intended. Specifics of the binder agreement, mentioned a deficit carried forward. We had a 99.7% combined ratio for the year. So So essentially, there is no deficit to carry forward. For into future years. We certainly, as we go through 2025, the wildfires and others will impact the profit commission. So again, we'll accrue that quarter to quarter. Based on underwriting results for that quarter.

Okay, great. Thanks for the color. I appreciate it.

I think Sorry to jump in, but I just think what it does is demonstrate the alignment between us and the CFP, because actually our results are very much aligned. So they're showing it as well. So I think that's as Alan said, it it showed it's working exactly as intended.

Yeah. That makes perfect sense and agree. Thank you. Appreciate it.

And your next question comes from the line of Meyer Shields with KBW. Please go ahead.

Great. Thanks so much. I guess sticking with wildfires for a second, Dan, are you anticipating any subrogation recoveries either within or beyond the estimate that you put out? Yes. I think, Mike, too early to really go into any detail on that. But normally in this event, you would expect to see that happening. So as and when we can update you, we will.

Okay. No, that's perfect.

The second question, and I don't know if this is significant or not, but it looks like net investment income was actually a little lower in the fourth quarter than the third. And I was wondering if you could talk through what drove that Hi, Meyer. It's Alan. The net investment income that were the returns we're making are consistent with the Q3 and what you're seeing is that our amount of investable assets were relatively flat in Q4 versus Q3. Operating cash flows were there's obviously variability quarter to quarter. We hope to improve the amount of invested assets going forward obviously, but in Q4, they were flat with Q3. So again, the returns are positive. We're pleased with our portfolio. We managed to reinvest some of the proceeds in some higher yielding securities. So we expect going forward have optimized that portfolio.

Okay. So there's no unusual need for cash right now. I guess that's really the crux of the question.

Sorry, Matt. No, there's nothing sorry, Meyer. The nothing unusual in there, of course, as we go through 2025. Cash flows will be a prime consideration.

Okay. Your next question comes from the line of Deane Cooperman with Omega Family Thank you. I need a little help here. I'm not an insurance expert.

It seems to me your stock is ridiculously mispriced. Because what you're saying is over a cycle, you expect to do a 13% to 15% ROE. So we use 14% applied to the 31% to 2,179 book value. We're seeing over the cycle we're selling it around four times, 4.4 times rigs.

I assume we're in a hard market now, so you expect to earn more than 12% to 13% to 14% in equity, 13% to 15 I'm assuming we're selling it around less than four times earnings.

Is that a reasonable guesstimate? Yes, Liam, I think you are exactly right. If we were at absolutely agree that we see the business is undervalued. If we assume Russia Ukraine last year, we would have exceeded our three year cycle plan. We did exceed our through the cycle plan in 2023. And whilst the industry has not had a great start to the year, we're very confident in our through the cycle target So whilst the Monster hasn't been the ideal start, we still think we can deliver on that and it's entirely possible to exceed them through the cycle target.

We agree Dan. What is the amount of excess capital we have currently? Would you guess roughly? Yes, we don't [indiscernible] These sorts of calls. Okay. So let me ask you this question. Do you have You have $145,000,000 left in your repurchase.

Would you be willing to spend it all on stock repurchase all this year if the opportunity arose or the stock was at this price?

Yes. I think regardless of the outcomes, On the remaining exposures, we have a strong capital position. And we're able to do both things. We're able to grow profitably grow the underwriting portfolio well as execute on our strategic capital objectives and that obviously includes a share repurchase. So prices is very accretive. We'll do that hands on when it's appropriate.

Okay. Well, let me just say this. So as I was outside looking in, and looking at your business and the environment, I think the best thing you do when you share all this money is buy back your stock at a big discount to book Thank you, Liam.

We certainly agree that the company is undervalued.

All the best. Thank you. Thank you, Neil.

Your next question comes from the line of Robert Cox with Goldman Sachs. Please go ahead. Hey, thanks. I just wanted to ask on the aviation and aerospace reserves. I'm curious how much did the outcomes of the cases where you're in the various stages of settlement discussions change your view on the remaining one third of the exposure you're not in those discussions? So I guess I'm just asking how much did the reserves increase on the remaining one third Yes.

Thanks, Rob.

A really important question and quite rightly spent a bit of time on that now. So I'd just like to outline what we've actually done Obviously, we made a press release last week and made further statements on the call a bit earlier. So reminding you what we've done, we've meaningfully derisked our overall exposure to the ongoing vessel aviation litigation. We've actually settled or we're in various stages of settlement for two thirds of the total exposure. So as you mentioned, the one third that's left we're holding reserves on a probabilistic model, which is based on a range of core outcomes, possible core outcomes. Now regardless of these outcomes, our continued balance sheet strength will support both our strategic growth and our capital management objective for the year. And as I said earlier, without Russia Ukraine, we would have exceeded our long term through the cycle targets in '20 But why now, what's actually happened? There's no single piece of information But what we have seen in the legal process, litigation has progressed. In the last quarter. We've seen summary adjustments in The U. S. We all know, English trial wraps up mid Feb, and its judgment expected in the coming months.

Then the Irish trial is also well progressed [indiscernible] new information has resulted in an opportunity for both sides to come to the table we certainly saw settlement activity accelerate over that period. Now we have chosen to judiciously settle certain exposures and that de risk uncertainty around potential incomes narrows those outcomes And that's really inherent in complex litigation cases. We can't discuss quantum we're still in live exposures going to investigation. We can't really give further comment on that.

But I think what we would say is we remind you this is not a casualty exposure. It's a discrete set of cases, which once resolved we won't need to come back to you. So again, I'd just say probably I'd point to, regardless of the core outcomes in the remaining third, we have a continued balance sheet strength that supports strategic growth and capital management objectives in 2025.

Got it. Thank you. And just as a follow-up, on growth, appreciate the guidance for 10% GPW growth in 2025 I think the net premium growth has been a little bit lighter as you guys have sort of increased the the seating ratio. How should we think about net growth in 2025?

Hi, it's Al and thanks for the question and it's a very good one.

As we all know, there's a lag to earn versus written. And what we're also have to be clear on is that the assumed business that we write sometimes is written on a different basis than the outwards reinsurance that we purchase. As we've mentioned, Outwards reinsurance purchasing is an important part of our our DNA and the timing of when we purchase the Outwards doesn't always match the assumed business. And a perfect example of how that happened this quarter in Q4 where we purchased the Herbie Reed multiyear [indiscernible] on that covers up to four years for U. S. Quake and main storm. So that is a four year policy or up to four years in certain things. The most part that we wrote in Q4 that will earn out over the next four years. Whereas the assumed business is primarily a one year business. So another way to answer that is to say that when we look to 2025, our net premium earned because of the lag and when things are earned is going to grow approximately between 1520% whereas the written book growth 10%.

Okay. Thank you. If I could sneak one more in. On the insurance, the new insurance segment, could you help us think about policy acquisition expense ratio loss ratio, I think you guys had given us sort of guidelines for the other segments in the past and I was hoping you could walk us through how to think about this segment? Thanks, Rob. It's Alan again.

As we've stated in prior quarters, we are focused on combined ratio And while the components are important, over the long term targets for our combined ratio are mid to high 80s.

If you look at the insurance segment alone, the acquisition costs are I said in my prepared remarks, in the low 30s. Then we have to add in the loss ratio expectations on both an attritional and a cat basis as well as commissions to the TFP and G and A. Which all add up to the mid to low 80s.

Your next question comes from the line of Mike Zaremski with BMO Capital Markets. Please go ahead.

Hey, thanks.

Maybe just stepping back kind of if you can kind of comment on the overall competitive environment in some of your your larger businesses?

I know there's been did hop on a few minutes later. I'm not sure if you talked about the RPI stats, but there's been a Not a lot of talk about some deceleration, especially on the property side. From excellent pricing levels, obviously, but I'm curious kind of what you all are seeing in your book? And then lastly, same topic, but on the Bespoke segment, I know there's I don't know, maybe you can share how you think about pricing, maybe it's kind of we should [indiscernible] Credit spreads, just kind of corporate credit spreads to see kind of how pricing is, but any comments there would be helpful too since you're growing into that. Thanks.

Thanks very much for the question. I'll take the first part and then pass it on. So yes, look, I think the market is benefiting from better rates, terms and conditions. Which have all compounded year on year for the last five to six years. We were able to grow 19% in 2023, 23% this year.

The drivers of that really when we look at the direct property, reinsurance and some of the special the RPIs for the year overall for the full year across the whole portfolio were 111%. And in Q4, that's about 106%. So as you know, we use our scale, we use reinsurance to grow our gross line. Gives us leverage as a leader in a verticalized market. We have package offerings, so we'll tend to blend different lines of business within the major segments to make sure that we get the best terms and conditions that we see deals first. I don't think we have necessarily same outcome others in the market because we are a leader and we are using leverage to get sort of better terms and conditions. When I think specifically about some of the drivers property DNF has grown a lot. It grew 30% last year.

Year over year and the RPIs in that book for the quarter were 107%, for the full year was 115%. And we're looking the full year RPI for '24 was 117%. So not much difference for the full year. Obviously, these are all pre qualifier, as I said earlier. We are seeing some pricing impact and coverage improvements since the wildfire events early in January. So we believe our growth targets are realistic in this market. I think there'll be more balance between some of the specialty lines We write over 100 or just around 100 lines of business and we see the best technical margin across the portfolio that we've seen in recent years. So we're optimistic We're so excited about the opportunities we see.

I would think property direct will grow in the low to mid teens. Across 2025. We'll see a lower number from reinsurance But the reinsurance has performed incredibly well. As I said earlier, the loss ratio is are kind of sub-twenty, sub-fifteen for the last two years. So that's how we think about the pricing. It's in a good place, very strong, technical margin across all lines business. And hey, it's Johnny here. So in terms of the bespoke pricing, mean that's really something we look at on a deal by deal basis.

Comparing the metrics of the deal against our long term profitability hurdles. And just as a reminder there, it's really not just risk transfer that the client are getting. It's either giving some capital relief or precipitating a transaction as well. So that helps to hold pricing up. Across those products over the last quarter or so, we're still seeing lots attractive opportunities to deploy capital.

Got it.

Thank you. That's very helpful. And switching gears to reinsurance a bit. Curious if you feel the California events could kind of move the market a bit as the year progresses and maybe related Are you hearing or seeing any primary insurers who have their reinsurance towers impacted potentially looking to buy some additional coverage to kind of top off their their reinsurance towers that were utilized from the California devastating wildfires. Thanks.

Yes, great question. We believe event will have a positive impact on the trajectory of pricing for the remainder of the year. I said earlier, sort of couple of times, we have seen some improvement already on the direct side. As deals come to market, we think that will have there will be a positive impact. I think it's as simple as that. It is a significant event for the industry. Unprecedented. So that has to have an impact. Our reinsurance book, as I said, has performed really, really well. So we'll look for opportunities and we'll execute on those as and when they happen. We continue to strengthen our business ties with our core clients. We want to be relevant. So if they are coming to market with new demand, we're there for them. And as I said, we'll execute.

Thank you. Your next question comes from the line of Alex Scott with Barclays. Please go ahead. [indiscernible] Good morning. First one I have for you is on the planes in Rauch with the conflict ongoing. You framed for us, I think, pretty well the potential risk though from some of the things that are ongoing around court cases. I'd be interested if you could frame what happens if there is a CFIRE if the planes are returned? Like could you walk us through like the way that I guess it would be subregration maybe like what would that look Yes, again, I think first and foremost, we'd all like to see an end to this conflict a peaceful end with a satisfactory outcome for all parties. I think it's too early. To think about what the absolute outcome will be. I would imagine if the sanctions are lifted, would make salvageable easier to get your assets. But I'm afraid we think about salvage, it is part of the ongoing settlement discussions. We really can't go into detail on that. But I think overall, we'd like to see it end we think it would give us access to assets [indiscernible] I guess I appreciate you don't want to comment on the lawsuit specifically, but let's say not asking you to comment on like what maybe resolution could look like to that conflict.

But like if it if it did occur, if there was a resolution and the planes were available, and you could you want with them.

Is it fair to say that you get pretty full recovery of the losses that you booked at this point? Like I'm just trying to understand high level if that's something that happens in the next few months, like what could that we still have live exposure going through litigation, so we just can't comment on it. And salvage, subrogation is part of those discussions. So we just can't comment any further. Got it.

Okay.

All right. So maybe go back to the California wildfire Can you help us think through maybe the split between insurance, reinsurance of the expected loss? And maybe as a separate piece of it, are there opportunities that you look to execute on the other side of this? This dislocation in this in this market?

Yes. I think the speed of loss we'd say about three quarters of it is reinsurance. And the remainder is the direct book. What you'd expect in a lot of this size. As I said, we're certainly seeing some things come through the direct side and the reinsurance side, and we believe it will have a positive impact on the rest of the year. But it is what the reinsurance market is here for. And I would say that our loss is well within our cap budget for the year.

Well within our expectations for an event of this magnitude. The strategic book has performed really, really well over the last couple of years. And there's been significant increase in pricing and attachment points and improvements in coverage in terms of conditions. So that's been maintained. So we look forward to executing on opportunities We see some flow but this is very much within expectation for us. Thanks for the question.

And your next question comes from the line of Peter Nudson with Evercore. Please go ahead.

Hey, good morning. Thanks for taking my questions.

I hear you guys on the continued 13% to 15% ROE through the cycle longer term. I think right in in 2024, you guys had provided sort of a near term outlook of 14% to 16%.

Percent. And so I'm just wondering, could you share maybe some thoughts on your expectations specifically for '25 within that longer term target and where you guys potentially see yourself shaking out relative to that target?

Yes. Thanks very much for the question. Look, it's still early in 2025, as you know.

We're not even doing the first quarter yet. So think the wildfires not the ideal start for the industry, but we certainly have a manageable loss We see plenty of opportunity for the rest of the year. Given the underwriting track record of the business, the price environment we're actually in, which is very positive, we find ourselves in a place where we have good opportunities and we can add profitable business. So we are confident through the cycle targets very much so. That continues year on year.

Okay, great. Thanks.

And then for my follow-up, back to the Russia Ukraine aviation situation. I'm just wondering would you guys be able to share what sort of industry insured loss you guys are considering that's embedded in the reserves for that?

It's Johnny here. I think that's a really difficult question for this time. Of event. Obviously, it's not gone through to judgment. So we haven't had an outcome to base it on. And it's party by party reaching settlement with the underlying leasing companies. Don't know what value others have settled at. We don't know to what extent they settled at a really difficult question to answer at the moment.

Yes. Thanks, Dan. I'm not sure we ever will. So Okay. That's the best we can answer that question.

Understood. Thanks so much.

Your next question comes from the line of Andrew Anderson with JP Jefferies. Please go ahead.

Hey, good morning. You mentioned the operating ROE through the cycle, but could you maybe touch on the target combined ratio of mid to high 80s? It's higher in '24, it feels like in '25 with wildfires.

It will be elevated as well. If we think of the RPI is coming in a little bit, It just feels like that's becoming a little bit more challenging to hit. Is that still a target? And do you see yourself getting closer to that in 'twenty six and 'twenty seven? [indiscernible] I think the market is benefiting from really good rates rating environment, good technical margin, all those compound increases, everything we've said confident they're hitting our targets. That hasn't changed combined ratio kind of mid to high 80s. If we think about where we would have been ex Russia, Ukraine this year, we would have exceeded that. So we were on plan last year We'd have done well this year. So we've got a manageable loss for the wildfires. It's still early in the year. But we still think that we're confident for the cycle targets. Which include obviously those combined ratios mid to high 80s.

Thanks. And is there any reserve study seasonality in the first half of the year we should be thinking about?

Hey, it's Johnny here. Just to give a bit of background about where most of our PYD comes from in terms of us being a short tail private business. It's really from the loss experience as it comes through. Rather than any change in underlying assumptions. If you take Russia Ukraine out last year, for example, with favorable prior year development overall, and favorable priority development in almost every quarter. And that was really driven by a benign claims environment, I. E. We had fewer claims coming through than our assumptions made allowance for. Think that's quite different. So if you look at someone like a casualty player, where there typically is the knock on to changes in your reserving assumptions through those reviews that moves the reserves around, and that's not really as applicable to us. That being said, we do look at the assumptions once a year. We tend to look at them around Q3. '3 When we did that last year, there was nothing really material coming out of the exercise.

Okay. You mentioned Q3, but if I look at first half of twenty twenty four, was quite a bit of PYD. I guess that's just related to weather activity that would have occurred in the second half of the year. So would it be fair to say if there's second half weather events you kind of look at them again in the first half of the subsequent year? Although this year is favorable PYD, it was more on the nutritional side. So it was just fewer claims being reported through that was smaller related the prior accident year than we've made allowance for. It wasn't really driven by movements in the reserves we had for large events in the prior year.

Your next question comes from the line of Pablo Singzon with JPMorgan. Please go ahead.

Hi, good morning.

I appreciate you can't say much about the Aviation resource, but would it be fair to assume that both higher probabilities and higher expected claim payouts under the various scenarios you're considering? Drove the reserve addition? And then as a follow-up, does the reserve addition cover the two thirds being settled or already settled as well as the one third still being delegated?

Hey, it's Johnny here. Thanks. For the question. The majority of the PYD impact in the fourth quarter was through de risking. So we through the settlement discussions and moving through that process. Obviously, as we get new information, as Dan alluded to, the trials progressed over the period, we feed that into the model. There was also an element of the model increasing on the other third, but the primary reason for the increase was derisking and looking to sell out exposures on the GPAs.

Okay.

Gotcha.

And then second question, the intellectual property book, I think that caused some issues maybe one or two quarters ago. Any notable development there in you fully off the risk at this point? Hi, Pablo, it's Alan.

There's no material development on our intellectual property book. As a reminder, there were a handful of Triggy still there on that book of business, but it's performing as we expect. But again, we were constantly monitoring that and we see We look at the activity that's there and right now there's no material change.

And when are you fully off the risk Those are in runoff, right? They're not being renewed, but when this [indiscernible] It's Johnny here. They run off up to around 2027, although there's always the possibility that Got you. Thank you. Yes, it's down here, but there's a very of deals outstanding. So yes, less than a handful. Yes, in a handful, yes.

All right. Thank you. And that concludes today's question and answer session. So I'd like to turn it back to Dan Burrows for closing remarks.

Thanks very much. I'd like to take a moment to thank our partners. And our employees for their immense contributions. Our team is our greatest competitive advantage without them, our success would not be possible. So thank you to the Fidelis team. We appreciate everyone joining us today. And if there are any additional questions, we are here to take your calls. Thank you for ongoing support. And I'll now turn it over to the operator wrap up the call. Please enjoy the remainder of your day.

Thank you. And that concludes today's conference call. Thank you for participating. You may now disconnect.