Good morning, ladies and gentlemen, and welcome to the Fidelis Insurance Holdings Fourth Quarter and Year End 2023 Earnings Conference Call. As a reminder, this call is being recorded for replay purposes. Following the conclusion of formal remarks, the management team will host the question-and-answer session, and instructions will be given at that time. With that, I will now turn the call over to Miranda Hunter, Head of Investor Relations. Ms. Hunter, please go ahead.

Good morning, and welcome to the Fidelis Insurance Group fourth quarter and full year 2023 earnings conference call. With me today are Dan Burrows, our CEO; and Allan Decleir, our CFO. We are also joined by members of the Fidelis Insurance Group management team, including Jonny Strickle, our Group Chief Actuary. Before we begin, I'd like to remind everyone that statements made during the call, including the question-and-answer section, may include forward-looking statements. These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. These risks and uncertainties are described in our IPO prospectus dated June 28th and filed with the SEC. Although we believe that the expectations reflected in forward-looking statements have a reasonable basis when made, we can give no assurance these expectations will prove to be achieved. Consequently, actual results may differ materially from those expressed or implied. For more information, including on the risks and other factors that may affect future performance, investors should also review periodic reports that are filed with us -- with the SEC from time to time. Management will also make reference to certain non-GAAP measures of financial performance. The reconciliation to US GAAP for each non-GAAP financial measure can be found in our current report on Form 6-K furnished with the SEC yesterday, which contains our earnings press release and is available on our website fidelisinsurance.com. And with that, I'll turn the call over to Dan.

Thank you, Miranda. Good morning, everyone, and thank you for joining us today. 2023 was a milestone year for the Fidelis Insurance Group and we couldn't be more pleased with our performance. In July, we completed our IPO and listed on the New York Stock Exchange, unlocking new opportunities and positioning us for long-term industry-leading results. What is particularly exciting is that throughout the year, we successfully executed on our objectives of delivering consistently compelling returns, and there are a few key messages I want to emphasize today. Firstly, this continues to be the best market environment we've seen in 20 years. Against that backdrop, we took advantage of opportunities to grow our business in target markets and actively shaped our portfolio with strong gross premium written growth of 31.7% in the quarter and 18.6% for the year. Secondly, we maintained our track record of best-in-class underwriting performance with one of the best combined ratios in the industry at 81.4% for the quarter and 82.1% for the year. Thirdly, we delivered strong operating ROAE of 23.6% for the quarter and 18.8% for the full year. We also grew book value per share to $20.69, representing growth of 13.4% from the third quarter. And finally, we are proactively sharing our success with shareholders through both our previously announced share repurchase program and yesterday's announcement of a regular quarterly dividend. Allan will dive deeper into our results for the quarter shortly, but as we reflect on this remarkable progress in 2023, we would like to begin today's call by highlighting how Fidelis Insurance Group has built a truly differentiated global specialty insurance platform, which we have also outlined in our updated investor presentation, which has been filed and is available on our website. First and foremost, our strategy is focused on leading…

Thanks, Dan, and I'd also like to welcome everyone joining our fourth quarter earnings call. Additionally, I'd like to take a moment to wish Dan a very Happy Birthday. As Dan mentioned, we had a very strong fourth quarter with operating net income of $135 million or $1.15 per diluted common share and an annualized operating return on average equity of 23.6%. For the year, we had operating net income of $399 million or $3.49 per diluted common share, which is an operating return on average equity of 18.8%. Our diluted book value per share at year-end was $20.69, which represents growth of 27.4%, from January 3, 2023, the date of the separation transactions. I will now discuss our fourth quarter of 2023 results and briefly touch on our full year results. Looking at our gross premiums written, we had strong top-line growth of 32% in the quarter to $784 million compared to the fourth quarter of 2022. The increase was broad-based across all three segments. This was driven in large part by Bespoke with growth of 59% with over $100 million of new business, predominantly structured credit deals that came in at the end of the quarter, new business in the political risk book, and some recurring deals. The Specialty segment grew by 14%, primarily driven by property D&F that benefited from the continued strong rating environment and new business. Our Reinsurance segment had immaterial activity in quarter four as is typical for that business. On a net premiums earned basis, we delivered an increase of 25% to $508 million in the fourth quarter of 2023, consistent with our growth in gross premiums written. Our strong underwriting performance resulted in a combined ratio of 81.4% for the fourth quarter, which included a loss ratio of 37.3%. This loss ratio…

Thanks, Allan. As you have heard, we have had a great deal of success in 2023, capitalizing on opportunities across attractive lines, achieving strong rate increases, and firmly cementing our position as a leading global specialty insurer. We are entering 2024 with momentum and expect sustainable mature hard market conditions to persist across our portfolio. We remain disciplined and nimble in our approach, opportunistically responding to changing market dynamics to deliver underwriting, profitability, and compelling risk-adjusted returns through the cycle. Let me give you some additional detail on how we review the year ahead. In Specialty, we believe we are well positioned with a high quality, mature portfolio, and lead positioning in lines of business including property direct and facultative, marine, and aviation and Aerospace. The attractive pricing we saw in 2023 has carried over into the start of 2024 and we are positioned to take advantage of opportunities in the market. Based on Q1 transactions to-date, we expect growth in 2024 to be broadly in line with what we saw last year, which evidences a mature hard market. We continue to see attractive opportunities in these lines though we expect to prioritize our growth in the property direct and facultative line in 2024 where we leverage our substantial capacity and relationships which allows us to see risks before peers facilitating better pricing, terms and conditions, and risk selection. In Bespoke, the risks we underwrite yield strong returns. However, the premiums written do not follow a regular predictable schedule like the Specialty and Treaty books. Deal flow on this book can be difficult to predict as we saw in the second half of 2023, but as of today, we are two-thirds of the way through the first quarter and I would note the pipeline of deals is currently tracking with…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] With that, our first question comes from the line of Matt Carletti with JMP. Please go ahead. I'm sorry. Your first question comes from Meyer Shields with KBW. Please go ahead.

Great. Thanks so much and thank you for all the detail in terms of expectations for 2024. One question I'm getting is if you can give us a sense of the catastrophe load that's embedded in the loss ratios?

Yeah, thanks, Meyer. Great question. And I think we've explained previously we stepped back in 2021, we didn't think the models were adequately reflecting climate change and the impact of inflation, so we formed our own view of risk. When we look at how that differs from our peer group, we think the loads that we're putting in are roughly about 160% and that would depend on geography and peril. But if you think that's how we're kind of think about it. It's about that sort of benchmark.

Okay. Perfect. And then this is probably a little bit detailed, but I was wondering given the sort of history of rushing in when there are pricing opportunities, I was hoping you could talk about the exposure Fidelis has to Middle East Marine?

To, pardon me?

I'm sorry. Marine...

Sorry -- okay. Well, I think, firstly, I'd start by saying we as a business have no concentration of exposure in the region. We have no known reported losses of materiality. But there is obviously an opportunity in political violence and war policies. So we think specifically about marine war breach. So, we have seen some opportunities, but not to the same degree as what we saw post-Ukraine. So, we're taking advantage of that. But I'd say we don't really have a concentration of exposure in the Middle East.

Okay. Fantastic. Thank you.

Your next question comes from Matt Carletti with JMP. Please go ahead.

Hey, thanks. Good morning. Hopefully, you guys can hear me now?

Hey, good morning, Matt.

Good morning. Happy Birthday, Dan. I'm sure there's nothing you'd rather be doing than...

Thanks, Matt. No, this is what I wanted to do with my birthday.

Look, you gave a lot of great color on expectations by segment for the year. I guess if I could just ask you a high-level question of, you guys have always been very agile in reacting to market conditions, recent history, kind of pulling back on property and reinsurance, putting that capital to work through insurance means to get the same exposure. Is there anything like that taking place in the market that we should think of as kind of shifting exposures? Or do you expect at least at this juncture '24 to kind of look a lot like '23?

We've built a lead position across the three pillars of our business. I think if you break down the gross written premium, it's 62% Specialty, 20% Bespoke, and 18% Reinsurance. I would expect that to be very similar for 2024. We always evaluate new opportunities, and when they hit those risk-adjusted returns, then we execute. But I think we see very positive movement in all lines of business. So, I would expect the portfolio to look very similar as to it did in '23.

Okay, great. And then just a second question, if I could, probably for Allan. I noticed the expense ratio -- policy acquisition ratio in Specialty was quite low this quarter. Is that just mix of business line being written in the quarter, or is there anything to note there that we should think about going forward?

Yeah, well, good question, Matt. And Dan, again. It really is, as you say, it's all about business mix in that line of business.

Great. Thanks a lot. Thank you. Appreciate it.

Your next question comes from Andrew Andersen with Jefferies. Please go ahead.

Hey, good morning. Maybe going back to the growth commentary, and I think I heard you say within Bespoke, tracking with the prior year for 2024. I guess I'm trying to think about 4Q is very strong and that is a seasonally higher quarter with perhaps a different business mix, but end of the year strong. So kind of why are we thinking about maybe flattish growth in '24 for this segment?

Yeah, thanks. Actually, great question. Dan again here. I mean, obviously, I'll remind everyone, Bespoke is a really profitable line. And as you say, the deal flow is a lot less predictable than our other pillars, Specialty and Reinsurance, which have nominated renewal seasons throughout the year. So, what we really wanted to do in today is give you a bit more color around the dynamic within a quarter. So that's give you a better sense of direction because we know it's hard to model. So that's why we say we're tracking with Q1 in terms of momentum. We do have a very robust pipeline. And again, that's what we saw in the back end of '23 deals that come back some new business that hit those benchmarks and we were able to execute on them. So we've got a very strong pipeline, but they've got to hit those with risk-adjusted returns. So that's why we're really looking to follow the similar pattern where the second half of the year will be heavier. But as we stand now, we're bang on line with where we want to be and where we were last year.

Okay. Thank you. And then I guess on the other side of that, it sounds like the Specialty opportunity is perhaps a lot better than where we were thinking it would be for '24, and growth in that segment could be upwards of 30% plus. Kind of, how did the environment change throughout the second half of the year? And does it sound like there's better opportunity within -- I guess broadly within Specialty, across all the subsegments?

Yeah, I think we see potential to expand existing lines, and that could be geographically as well. I think we're looking at other regions. Obviously, the BRIC economies are expanding, so that creates opportunity. But we're a top three market in those lines of business, so we see plenty of opportunity. We've seen deals before, peer groups, so we're able to structure and benefit from differential pricing and terms. So again, just very positive movement for Specialty and those three core lines. I would say if you think about Specialty, marine, aviation and aerospace, and then property D&F, property direct and facultative is where we will focus most of the growth in 2024.

Thank you.

Your next question comes from Lee Cooperman with Omega Family Office. Please go ahead.

Thank you. Good morning, and Happy Birthday, Dan. I have a few questions. One is on capital adequacy. Looking at your income statement, your balance sheet, it seems that we have more capital than we need. And I'm just curious, what is your view of your capital adequacy, and would you rather write more business in this environment or buy back your stock, which is more attractive use of your capital?

Good morning, Lee, and thanks for the birthday message. We're in a strong position. We've had a great performance, and we've got a very strong balance sheet. But what I'll do is I'll pass over to Allan to let him talk a little bit further about capital management in 2024.

Yeah. Hi. Good morning, everyone. Thanks, Dan and Lee. Yeah. Currently, as I said in my prepared remarks that our primary focus is investing back in the business with outstanding returns, deploying capital into underwriting opportunities, and opportunistically taking advantage of some of the pricing dynamics. We believe that this deployment will deliver strong returns for our investors. As I mentioned, we also always look at our Outwards Reinsurance Program. When we look at our capital, there are opportunities there to look at whether we want to retain more risk or less risk, given what we see in the market. But as you mentioned, right now, share buybacks are certainly the best way to return value back to shareholders. We have the $50 million plan that's out there that we put in place in December. We've utilized only $3 million of it, but we do plan to fully utilize that plan going forward. Once that plan is utilized, we will certainly assess the share price at that point in time and decide whether we should implement a new share buyback program.

All right. Second question is a follow-up. We sell at a very attractive price relative to our competition. Does our unusual structure discourage potential buyers from bidding for us? To me, you've built a hell of a company selling at a ridiculously low multiple. And I'm just curious whether our relationship with MGU makes it highly unlikely that anybody would try to buy us.

Yeah. Thanks, Lee. It's Dan here. It's a great question. So, obviously, when we look, we look at the share price, we don't feel it's reflecting or aligned to our performance. We've got one of the market-leading combined ratios for the year, just over 82%. I think what it shows to us is we need to spend more time with investors, getting them more comfortable with the structure, because it is the structure that has resulted in this great outperformance. Let's not be -- let be clear about that. When we're very proud of it, our relationship with the MGU has worked exactly as it intended and we have delivered outstanding results. So, we have to be a little patient. But we're certainly dedicating more and more time to that investor engagement so they get more comfortable with the structure.

I'm not an insurance expert, but I'm just curious, when you take all the pushes and pulls, do you expect to earn more money in 2024 than you earned in 2023? Not asking you for specific forecast, but directionally, will you expect to have improved results in 2024 versus the outstanding results in 2023?

Yeah, I think, our long-term ROE target throughout the market is through the cycle is 13% to 15%. But I think at this particular moment we can up that a little bit and we'd expect to earn a bit more. So, we'd go more in the range of 14% to 16%. But we are seeing positive movement as well and we expect to grow. So we'd factor that into those comments.

Good luck, and Happy Birthday once again. Thank you.

Yeah, I really appreciate it. Thanks very much.

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

Hi, good morning. Dan, first of all, I hear you no signs of new capacity entering the market. But we've been hearing that in certain lines of property D&F, for example. It seems like price increases in '24, there's a chance that they could be not of the same magnitude as in '23. Do you think that's an...

Sorry, that's a really bad line. We couldn't -- we can't really hear the question. It's breaking up.

Oh, is this better, Dan?

Yeah, that's much better. Thank you. Yeah, thanks.

Yeah, sorry about that. I'll speak louder. So, I was just saying, hear you on no signs of new capacity entering the market. But we've been hearing that in certain lines, property D&F, for example, price increases in '24 are unlikely to be of the same magnitude as in '23. Do you think that's an accurate commentary about the market, and therefore, will most of your -- let's call it 30%-plus Specialty growth in '24, come from exposure?

No. We're still seeing positive rate movement in that line of business. Yes, we've had compounding increases over the last four or five years, and we are very much in a mature hard market. So, we still see plenty of opportunity to grow with positive price movement year-over-year in '24. We are a lead market. It's a verticalized market. So, you have to factor that in that price makers get better terms than price takers. So, we're seeing the deals before other people, we're structuring them. A lot of them are private layers or private arrangements. So, we get much better terms, conditions. And it's not all about premium, it's terms, conditions, coverage, that's an important proportion of any RPI when we look at that and model it.

Okay. And then for Allan, just on taxes. I guess this is a two-for-one, but they're short. One was just hoping for more color on the 14% tax rate for '24, I think you were running in the high-single digits of '23. And then for this quarter specifically, it seems like the tax rate [ex the days] (ph) was lower than normal as well. Thank you.

Yeah, thanks, Pablo. You picked up some of the -- some tax numbers here but very appropriately. Yeah, 2023 to answer that question first is, our profits for 2023 were mainly in jurisdictions with a lower tax rate. So, Bermuda, for example, rather than in the UK or Ireland, where the tax rate is higher, hence our decrease in our expected tax rate for 2023. For 2024, as I said in my prepared remarks, we're expecting a tax rate of approximately 14%. But again, that will depend greatly on where the profits arise. Again, we are diversified across jurisdictions as well as lines of business. Looking beyond that becomes a little more complicated. As you know, the Bermuda Corporate Tax Act was just enacted at the end of 2023. It's at a 15% baseline tax rate. However, there are many transition and other credits that would be provided against that. We know of the transition adjustment which we booked in the quarter for $90 million. However, all the other items that are going to play into that rate are not yet concluded upon by the Bermuda tax authorities. They're going to be rolled out through 2024 and we'll know more about those. So, as we think about 2025, we think it'll be broadly in line in terms of a tax rate with 2024. However, again, it's to be determined based on things that happen in the upcoming year.

Okay. Thank you.

Your next question comes from Mike Ward with Citi. Please go ahead.

Thanks, guys. Good morning. I was just wondering if you could maybe expand on the structured credit product growth in the quarter and any update on the IP finance line in terms of risk or growth?

Yeah, thanks, Mike. Dan here, I'll take those questions. So, firstly, when we look at Q4, we wrote about $102 million of new business, and that was predominantly through the aircraft leasing sort of the AFIC deal, which is contract frustration, then some structured credit and some mortgage. The structured credit really is regulatory capital relief transactions with some of the major European banks on their asset-backed portfolio. So, as they get to the end of the year, they could be rolling up those portfolios and insurance can step in and kind of give them some regulatory capital relief. And that's the sort of product that we're looking at. So that's really traditionally why those deals happen towards the end of the year, as institutions roll up the portfolio and are looking to buy out some capital relief, solvency relief, regulatory capital, that sort of thing. And then moving on to IP, it's a really good question. I think what we can say, there's been no movement in the losses to our portfolio. It is a new line of business, and certainly, we've ensured a feedback loop from our claims data into the underwriting process. We're not afraid to change our assumptions and change pricing accordingly. So that's just resulted in fewer deals hitting our hurdle rate than originally planned. And we believe this is the right approach with any new line of business. And I'd just like to underline, again, we don't have any exposure to Vesttoo unlike others in this space.

Got it. That's helpful. And then maybe just kind of high level question. Just curious if you could discuss any business that you might have rejected from the MGU in the quarter. And then I guess after the split like, I'm curious if there's been business that maybe the MGU wanted, but you didn't, so they looked elsewhere. Just kind of trying to think about the relationship so far.

Yeah, I think that we have a very aligned approach and share a very similar view of risk. So fundamentally, the portfolio we're very pleased with. But, yeah, we've had discussions around certain lines. It could be primary D&F where we don't really have appetite for attrition. We helped work with them on a construction portfolio where our Chief Underwriting Officer, myself, have experience of that. So that was more kind of shaping risk. Neither party currently is that interested in writing lines like casualty. So, yeah, there are deals. Occasionally we discuss in more detail, and they may not be within our appetite, but I wouldn't disclose any more than that.

Thank you.

Your next question comes from Meyer Shields with KBW. Please go ahead.

Thanks. First, I feel bad for not wishing Dan a Happy Birthday. But more importantly, with all the puts and takes on Reinsurance, should the 2024 ratio of net and gross written premium go up or down compared to 2023, do you think?

Yeah, I'll take that, Meyer. Thanks. It's Allan here. No, I mean, as I mentioned in prepared remarks, a lot of our reinsurance on our reinsurance portfolio has been purchased already. So, we believe that our outwards program is pretty similar to how it was last year in terms of retention. We're pleased with how the program worked last year. And so, as Dan mentioned, we wrote one-third of our reinsurance book at Jan 1. Our Outwards Reinsurance Program has been partially placed in our quota shares, a lot of those are in place, so we would expect generally the same retention in 2024 as 2023 broadly. Although, of course, we do have the renewals in Japan in April and then in the US market in middle of the year.

Perfect. Thanks so much.

[Operator Instructions] Your next question comes from Pablo Singzon with JPMorgan. Please go ahead.

Hello? Can you hear me?

Yeah, hi, Pablo.

Okay. Yeah. Hi. So, the first one, just for Allan, has the entire book renewed into the commission arrangement with Fidelis MGU at this point? In other words, is a 15% MGU expense ratio a good run rate to think of for '24?

Yeah. Thanks, Pablo. That's a great question. Our strategy and structure was designed to work in the long term with the MGU. Again, it's a long-term binder agreement to work with some of the best underwriters in the industry, and it's worked as intended. And we produced a fabulous 82.1% combined ratio for 2023. And we believe that the portfolio as a whole is well positioned going forward through the cycle to produce a combined ratio in the mid to high 80%s through the cycle. We work closely and collaborate closely with the MGU on all aspects of our inwards and outwards portfolio. In 2023, we were -- we had outstanding underwriting performance, and as a result, the profit commission to the MGU was higher than in a normal year, in a 13% to 15% ROE year. So, broadly speaking, yes, the fees to the MGU will be similar going forward. It is pretty much baked into our returns or is baked into our returns. It'll be slightly less if we only have slightly lower returns, obviously, but I think it'll be broadly in line with this year going forward.

Okay, thanks. And then second and last, for Dan, I just want to confirm, when you say growth in Specialty will be broadly in line with '23, we're talking about the 40% GPW growth this year, right? So, that's sort of your expectation for '24? Just wanted to make sure that's clear.

Yeah, that's what we would be projecting for '24. That's correct, Pablo.

Okay. Thank you.

Thank you. That concludes today's question-and-answer session. I'd like to turn the call back to Dan Burrows for closing remarks.

Well, thank you, and thanks for joining today's call. I'd just like to say we're very confident in our current position and excited about the prospects for 2024, and we look forward to sharing our continued progress with you in future earnings calls. It's a special day today, not only because it's my birthday, and in closing, I would like to extend heartfelt thanks to all our colleagues and partners for their exceptional performance throughout the year, especially today on Employee Appreciation Day. It's important to acknowledge the hard work, dedication, and unwavering commitment of the team at Fidelis Insurance Group. So, I thank them all. So, thanks, and have a great day.

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