Reinsurance
Fidelis Insurance Group is a global specialty insurer headquartered in Bermuda , with offices in Ireland and the United Kingdom . Fidelis Insurance Group was formed under the principles of focused, process-driven and disciplined underwriting and risk selection, strong client and broker relationships and nimble capital deployment. Fidelis completed its initial funding and began underwriting business in June 2015 under the direction of an innovative and experienced management team, including our Chief Executive Officer and Executive Director, Daniel Burrows . Since then, we have established ourselves as a market leader with a diversified global portfolio of innovative and tailored specialty insurance and reinsurance solutions.
The Fidelis Partnership manages origination, underwriting, underwriting administration, outwards reinsurance and claims handling under delegated authority agreements with the Group. For further details, see Item 18 Financial Statements, Note 14 (Related Party Transactions) to our audited consolidated financial statements. For the year ended December 31, 2024 , The Fidelis Partnership commissions were $311.1 million (2023: $225.3 million ) and comprise ceding commissions of $311.1 million (2023: $166.2 million ) and profit commissions of $nil (2023: $59.1 million ). Due to the operating profit not achieving the required hurdle rate of return, as outlined in the Framework Agreement, there were no profit commissions for the year ended December 31, 2024 .
Net Gain on Distribution of The Fidelis Partnership
Net Gain on Distribution of The Fidelis Partnership
Annual Report for Fiscal Year Ending December 31, 2024 (Form 20-F)
Operating and Financial Review and Prospects
The following is a discussion and analysis of our results of operations for the years ended December 31, 2024 , 2023 and 2022 and our financial condition at December 31, 2024 and December 31, 2023 . This discussion and analysis should be read in conjunction with our audited consolidated financial statements for those respective years and related notes contained therein. This discussion and analysis contains forward-looking statements, which are subject to known and unknown risks and uncertainties, many of which may be beyond the Group's control that could cause the Group's actual results to differ materially from those projected, anticipated or implied. See Item 3.D. Risk Factors of this report for a discussion of risks and uncertainties. The discussions below include certain measurements that are considered "non-GAAP financial measures" under SEC rules and regulations. See Item 5.A. Operating Results "Performance Measures and Non-GAAP Financial Measures" for definitions and tables that reconcile these measures to U.S. GAAP. The terms "we," "our," "us," "Fidelis," and the "Group," as used in this report, refer to Fidelis Insurance Holdings Limited and its subsidiaries as a combined entity. Shelf Holdco II Limited is the parent company of an external managing general underwriting platform known as "The Fidelis Partnership " or "TFP" (formerly known as "Fidelis MGU").
Tabular amounts are in U.S. Dollars in millions, except for share and per share amounts, unless otherwise noted.
A. Operating Results
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The discussions that follow include tables and commentary relating to our consolidated income statement and our segment operating results for the twelve months ended December 31, 2024 , 2023 and 2022 and should be read in conjunction with our audited consolidated financial statements and related notes contained in this report. This discussion contains forward-looking statements that involve risks and uncertainties and that are not historical facts, including statements about our beliefs and expectations. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and particularly under the headings "Risk Factors," "Business Overview" and "Cautionary Note Regarding Forward-Looking Statements" contained in Item 3.D. Risk Factors and Item 4 Information on the Company, and the Explanatory Note of this report, respectively.
Overview
The Group comprises FIHL and its principal operating insurance subsidiaries Fidelis Insurance Bermuda Limited ("FIBL"), Fidelis Underwriting Limited ("FUL") and Fidelis Insurance Ireland DAC ("FIID") and has its own service company, FIHL (UK) Services Limited , with a branch in Ireland ("FSL"). During the year ended December 31, 2024 the Group established Fidelis IG Corporate Member, which has a 9.9% participation in the 2024 year of account of Lloyd's Syndicate 3123 (2025 year of account: 7.4%).
Our business comprises two segments: Insurance and Reinsurance. Within these segments, we offer a diverse portfolio comprising 10 distinct lines of business. This diversity enables us to serve various industries, manage different types of risk, and operate in multiple geographic regions. We believe our strategic approach and strong capabilities position us well to capitalize on opportunities in the dynamic (re)insurance markets. Our proactive strategy allows us to adjust our business mix in response to market cycles, targeting opportunities that offer an optimal balance of risk and reward.
The Insurance segment comprises a portfolio of specialty risks. In addition to major specialty lines of business, this segment includeshighly tailoredproducts, where the buying motivation is often driven by regulatory capital relief, capital efficiency or transaction facilitationincluding Property, Marine, Asset Backed Finance & Portfolio Credit, Aviation and Aerospace, Political Risk, Violence & Terror, Energy, Cyber, and Other Insurance risks. A strong rating environment following years of compound rate increases across multiple business lines within the Insurance segment have provided opportunities for targeted growth. We leverage our line size and lead position to cross-sell across our portfolio and achieve preferential terms and conditions. This, combined with long established relationships, has enabled Fidelis Insurance Group to build an established book of specialty business. Given the market environment we have increasingly used our Insurance segment to deploy capital targeted to natural catastrophe exposure through the Property line of business. This allows a more selective approach to managing aggregate exposure.
In the Insurance segment, we have consistently demonstrated a sophisticated ability to adapt to constantly evolving market dynamics by developing specialized and tailored pricing and aggregation models while maintaining a disciplined underwriting approach. We typically seek out capacity-driven layers with attractive pricing, often focusing on dislocated markets, and look to ensure successful and sustainable growth in this segment. Our underwriters work closely with The Fidelis Partnership's experts to develop collaborative relationships with brokers and clients and offer them the full suite of our existing products as well as working with them to innovate new product ideas. This relationship-driven, flexible approach enables underwriters to identify both new business opportunities and additional underwriting opportunities from existing clients to provide cover on other related lines of business.
Our Reinsurance segment consists of an actively managed, property reinsurance book, providing reinsurance and a limited amount of retrocession coverage worldwide on a proportional or excess of loss basis.
We benefit from The Fidelis Partnership's sophisticated analytics capabilities and live aggregation tools, excellent relationships with a blend of regional and nationwide carriers (both in the U.S. and internationally), and strong retail and wholesale broker relations in the distribution of our products. Since 2021, we have developed a view of risk informed by thorough analysis and discussions with weather and forecasting experts. We have concluded that the effects of climate change on perils such as hurricanes, convective storms, floods and wildfires are not represented adequately in current vendor models. As such, we have superimposed our own expectations of frequency and severity on third-party vendor models, to form a base for exposure and aggregation tracking.
We focus deployment of capacity on higher tiered clients in our Reinsurance segment. We are increasingly deploying reinsurance capital across large-scale, well-resourced national accounts away from smaller regional underwriters, who we believe are less able to adjust and manage large catastrophe events. We have reduced our exposure to the middle layers of treaty accounts which are more exposed to increased frequency and severity of losses as a result of climate change and secondary perils associated with floods and wildfires without commensurate increases in rates. Following Hurricane Ian, we also saw an increased demand for private deals and structured covers and significant pricing increases during the 2023 renewal season which have endured throughout 2024. Over time, we expect the impact of these changes to improve the quality of our natural catastrophe-exposed portfolios and reduce volatility. We will continue to leverage a nimble underwriting approach, adapting to constantly evolving market dynamics to source business when favorable market conditions are present. If there is an increase in property catastrophe rates, as well as favorable terms and conditions, we would intend to capitalize on those trends and dislocations.
As noted above in Item 4.A. History and Development of the Company "Important Events in the Recent History of the Company", the Separation Transactions took effect on January 3, 2023 , pursuant to which a number of separation and reorganization transactions occurred to create two separate and distinct holding companies and businesses: Fidelis Insurance Group and The Fidelis Partnership . We have an exclusive long-term Framework Agreement with The Fidelis Partnership , effective from January 1, 2023 , where we collaborate in our strategy to match superior priced risks with efficient sources of capital to produce market-leading returns for shareholders. We believe this operating model gives us a competitive advantage in our underwriting, risk assessment, and ability to offer as many products as possible to clients. The Framework Agreement governs the ongoing relationship between the two groups of companies, including delegating underwriting authority to the operating subsidiaries of The Fidelis Partnership to source and bind contracts for each of the subsidiaries of FIHL. See Item 7.B. Related Party Transactions "Framework Agreement - Term."
We have strategic partnerships with industry-leading underwriters, including The Fidelis Partnership with whom we have an exclusive right of first access via the Framework Agreement. Our underwriters continue to work alongside The Fidelis Partnership , as we play an active role in shaping our inwards and outwards portfolio. Our approach is to underwrite reinsurance and insurance business within
a disciplined, process-driven, and innovative framework, focusing on profitability while also delivering superior solutions for clients and brokers.
Through this operating model, we are well positioned to be nimble, thoughtful, and efficient decision-makers, and we believe that we are able to respond quickly to an ever-changing world and a constantly evolving marketplace. Furthermore, the Group's strong capital position provides flexibility to underwrite attractive opportunities and make strategic capital allocation decisions.
On July 3, 2023 , we completed our IPO and our common shares are now listed on the New York Stock Exchange under the symbol "FIHL".
Our strategic objectives focus on the following:
•Profitable underwriting while maintaining flexibility to manage through the cycle with less volatility than peers;
•Achieving a combined ratio consistently below our peer group;
•Efficient operations by sustaining strong alignment with strategic partners, such as The Fidelis Partnership , to ensure the delivery of a diversified portfolio across our targeted classes of business; and
•Maximize shareholder value by growing book value per share, delivering attractive and stable investment income while targeting an above-average risk-adjusted return, generating consistent returns on equity, and actively managing capital through the cycle.
Financial Highlights
The following table details the key items discussed in the consolidated results of operations section and key financial indicators in evaluating our performance for the years ended December 31, 2024 , 2023 and 2022:
| 2024 | 2023 | 2022 | |||||||||||||||
| Net income available to common shareholders | $ | 113.3 | $ | 2,132.5 | $ | 52.6 | |||||||||||
| Earnings per common share | 0.98 | 18.65 | 0.27 | ||||||||||||||
| Gross premiums written | 4,403.1 | 3,579.0 | 3,018.1 | ||||||||||||||
| Net premiums earned | 2,258.1 | 1,832.6 | 1,500.5 | ||||||||||||||
| Catastrophe and large losses | 509.0 | 288.2 | 428.6 | ||||||||||||||
| Net favorable/(adverse) prior year reserve development | (124.6) | 62.9 | 22.1 | ||||||||||||||
| Net investment income | 190.5 | 119.5 | 40.7 | ||||||||||||||
| Net realized and unrealized investment gains/(losses) | $ | (28.6) | $ | 4.9 | $ | (33.7) | |||||||||||
| Combined ratio | 99.7 | % | 82.1 | % | 91.9 | % | |||||||||||
| Retuon average common equity | 4.6 | % | 96.3 | % | 2.6 | % | |||||||||||
|
Operating ROAE(1)
|
5.6 | % | 18.8 | % | 4.5 | % | |||||||||||
| Earnings per diluted common share | $ | 0.98 | $ | 18.65 | $ | 0.26 | |||||||||||
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(1) Operating ROAE is a non-GAAP financial measure. See definition and reconciliation in Item 5A. Operating Results "Performance Measures and Non-GAAP Financial Measures".
2024 Consolidated Financial Condition
•Total investments of $3.8 billion ; fixed maturities and short-term securities comprised 94.8% of total investments with an average duration of 2.8 years
•Total long-term debt and preference securities of $507.3 million , resulting in a debt-to-total capital ratio of 17.2%
•Total capital of $3.0 billion , with $151.7 million of capital returned to common shareholders in 2024, including common share repurchases of $105.5 million and dividends of $46.2 million .
•Book value per diluted common share of $21.79
Fidelis' Full-Year 2024 Highlights
For the year ended December 31, 2024 , we saw continued growth in our GPW to $4.4 billion , or 23.0% from 2023, driven by our Insurance segment. Our combined ratio was higher than the prior year period at 99.7% for the year ended December 31, 2024 compared to 82.1% in 2023. This was primarily driven by net adverse prior year development of $124.6 million in the year ended December 31, 2024 compared to net favorable prior year development of $62.9 million in 2023. The combined ratio was also affected by an increase in our loss ratio as a result of catastrophe and large losses of $509.0 million in the year ended December 31, 2024
compared to $288.2 million in 2023. Our Operating ROAE was 5.6% in 2024 compared with 18.8% in 2023. For the year ended December 31, 2024 , the total net investment income retuwas 4.2% compared to 2.9% in 2023. During the year, our strong capital position enabled us to opportunistically retu$151.7 million of excess capital to common shareholders through our dividend policy and share repurchase program.
Business Outlook
We are focused on: deploying capital into attractive underwriting opportunities; optimizing our outwards reinsurance purchasing program; continually assessing our investment strategy to improve risk-adjusted returns and returning excess capital to shareholders through a combination of the share repurchase program and our dividend policy. Our underwriting strategy is to deploy gross line sizes where appropriate, take the lead in setting rates, terms and conditions, and establish ourselves as the "go to" market for solutions through our existing portfolio and new-sub lines of specialty products. Our nimble underwriting approach is designed to capitalize on current market trends and dislocations, as well as emerging risk solutions.
Fidelis has a strong track record of peer-leading underwriting performance and profitable growth and is well positioned to capture attractive opportunities across business lines. While we expect dynamics to remain favorable for some time driven by strong market fundamentals, we have the ability to flex our underwriting strategy to navigate market changes.
Insurance
In our property direct line of business, we have significantly increased our GPW following the dislocation in the market beginning in late 2019, when a number of large carriers exited the property market. Rates in this segment remain attractive with continued opportunity to deploy capacity based upon our proprietary view of risk. Given our significant line size and lead positions, we are able to take advantage especially where the market is verticalized, maintaining attractive rate and consistently achieving differential terms. New business opportunities have also presented themselves as local carriers have exited or scaled back in various market locations and/or in post loss environments.
In our marine line of business, we continue to actively shape our portfolio and leverage our participation across marine sub-classes. Marine construction rating is holding steady given the continued need for capacity. We are maintaining our cargo rates, and our underwriters are leveraging our marine war capacity with hull acceptances to improve the overall pricing of the combined hull and war lines.
In the aviation 'all risks' sector, excess capacity continues to put pressure on ratings. We remain disciplined in our approach to underwriting and assessing opportunities within the class, and our line size and capacity across the sub-classes means we continue to maintain relevancy and market share.
Our Asset Backed Finance & Portfolio Credit portfolio includes products where the driver for specific risk transfer is often different to traditional insurance products, including regulatory capital relief, capital efficiency and transaction facilitation. These products tend to be more insulated from traditional insurance market cycles, due to their specialized risk profile which is tailored to each individual deal. Strong engagement with counterparties and technical expertise is essential and we set and lead terms across a significant proportion of this portfolio.
With respect to our intellectual property business, included in our Asset Backed Finance & Portfolio Credit line of business, based on performance, we made the decision to cease underwriting the product and have not written any new intellectual property business in 2024.
Reinsurance
Pricing remains robust driven by a level of reinsurer discipline, and this has continued to support the reinsurance market. This is particularly the case in the natural catastrophe market where we underwrite natural catastrophe exposed contracts using our own proprietary view of risk. We continue to actively shape our portfolio in line with our view of risk and climate change, and take a cautious and targeted approach to deployment, with a continued focus on higher tier clients.
Recent Developments
The Ukraine Conflict
During the year ended December 31, 2024 , the Company incurred net adverse prior year development attributable to its Aviation and Aerospace line of business. This relates to business underwritten in the 2021 and 2022 underwriting years and reflects the recent developments in the complex and evolving Russia -Ukraine aviation litigation.
In respect of the aviation litigation, the Company has been judiciously settling claims to de-risk its overall exposure. In addition, the Company has strengthened reserves, in large part to make allowance for ongoing settlement discussions and also to reflect recent developments and new information received.
To date, the Company has successfully settled or is in various stages of settlement discussions in respect of approximately two-thirds of the total exposure related to lessor policy claims currently in litigation. Of the remaining lessor policy claims in litigation, a significant portion of these claims relate to the English trial that commenced in October 2024 , in respect of which the Company continues to hold reserves based on a probabilistic model of potential court outcomes, incorporating recent developments and updated information received. The English trial concluded February 14, 2025 , and a court judgment will be rendered in the coming months. For more information, see Form 6-K filed with the SEC on February 19, 2025 available electronically at www.sec.gov.
Dividend Policy
On February 29, 2024 , the Company announced the adoption of a program to pay a quarterly cash dividend. On February 20, 2025 , we announced that our Board had approved and declared a dividend of $0.10 per share, payable on March 27, 2025 , to common shareholders of record on March 12, 2025 . During the year ended December 31, 2024 , we paid quarterly cash dividends to our common shareholders for a total dividend distribution of $46.2 million .
See Item 8.A. Consolidated Statements and Other Financial Information "Dividend Policy". See also Item 3.D. Risk Factors "Risks Relating to the Common Shares-The declaration of any dividends on our common shares will be determined at the sole discretion of the Board and FIHL's ability to pay dividends may be constrained by the Group's structure, limitations on the payment of dividends which Bermuda law and regulations impose on the Group and the terms of our indebtedness".
Share Repurchase
On August 14, 2024 , we announced that our Board approved a new share repurchase program, authorizing the Company to purchase up to an aggregate $200.0 million of the Company's common shares, utilizing a variety of methods, including open market purchases, accelerated share repurchases and privately negotiated transactions. For a description of recent common share repurchases made pursuant to the program, see "Financial Condition, Liquidity and Capital Resources."
California Wildfires
On February 19, 2025 , the Company announced its preliminary estimate of catastrophe losses related to the January 2025 California wildfires. Based on an insured industry loss estimate of $40 billion to $50 billion , the Company expects its catastrophe loss estimates to be in the range of $160 million to $190 million , net of expected recoveries, reinstatement premiums and tax. The losses from these wildfires will be reflected in our first quarter 2025 earnings.
Euclid Mortgage
Commencing on January 1, 2025 , Fidelis Insurance Group , alongside other reinsurers, will provide capacity for Euclid Mortgage, LLC ("Euclid Mortgage") on a reinsurance basis. This supports our strategic objective to provide capacity to other carriers where we identify business that is accretive to our portfolio and to broaden and enhance our portfolio.
Herbie Re
On December 27, 2024 , we sponsored and successfully closed a new reinsurance agreement and catastrophe bond involving the issuance of the Series 2024-2 Class A Principal-at-Risk Variable Rate Notes and the Series 2024-2 Class B Principal-at-Risk Variable Rate Notes (together, the "Series 2024-2 Notes") by Herbie Re Ltd. ("Herbie Re"). This is the sixth series of notes issued by Herbie Re and will provide us with $375.0 million of collateralized reinsurance protection. The Series 2024-2 Notes issued will be exposed to insured industry losses resulting from Named Storm and Earthquake Covered Events occurring in the 50 states of the United States and the District of Columbia , Puerto Rico and the U.S. Virgin Islands , as reported by Property Claim Services, on an annual aggregate basis.
Performance Measures and Non-GAAP Financial Measures
In presenting our results, we have included certain non-GAAP financial measures that we believe are useful to consider, in addition to our U.S. GAAP results, for a more complete understanding of the financial performance and position of the Group. The key performance measures and non-GAAP financial measures that we believe are meaningful in analyzing our performance are summarized below and where applicable a reconciliation of non-GAAP financial measures to U.S. GAAP financials is set out. However, any non-GAAP financial measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP and our methodology for calculating these measures may be different from the way our industry peers calculate these measures.
•Loss Ratio: is calculated by dividing losses and loss adjustment expenses by net premiums earned ("NPE"). The losses will be affected by the occurrence and frequency of catastrophe events, the volume and severity of non-catastrophe losses and the extent of any outwards reinsurance that mitigates the effect of those losses.
•Attritional loss ratio and catastrophe and large loss ratio: the attritional loss ratio is a non-GAAP measure of the loss ratio excluding the impact of catastrophe and large losses. Management believes that the attritional loss ratio is a performance measure
that is useful to investors as it excludes losses that are not as predictable as to timing and amount. The attritional loss ratio is calculated by dividing the losses and loss adjustment expenses, excluding catastrophe and large losses and prior year development, by NPE. The catastrophe and large loss ratio is a non-GAAP measure that is calculated by dividing the current year catastrophe and large loss expense by NPE.
•Underwriting Ratio: is calculated by dividing losses and loss adjustment expenses and policy acquisition expenses (excluding TFP commissions) by NPE, or equivalently, by adding the loss ratio and policy acquisition expense ratio (excluding TFP commissions).
•Combined Ratio: is calculated by dividing losses and loss adjustment expenses, policy acquisition expenses and general and administrative expenses by NPE, or equivalently, by adding the loss ratio, policy acquisition expense ratio, The Fidelis Partnership commissions ratio and general and administrative expense ratio. A combined ratio under 100% indicates an underwriting profit, while a combined ratio over 100% indicates an underwriting loss.
The table below reconciles our attritional and catastrophe and large loss ratios to losses and loss adjustment expenses, loss ratio, underwriting ratio and combined ratio for the years ended December 31, 2024 , 2023 and 2022.
| 2024 | 2023 | 2022 | |||||||||||||||
| Net premiums earned | $ | 2,258.1 | $ | 1,832.6 | $ | 1,500.5 | |||||||||||
| Attritional losses | 522.2 | 473.5 | 423.7 | ||||||||||||||
| Catastrophe and large losses | 509.0 | 288.2 | 428.6 | ||||||||||||||
| Prior year (favorable)/ adverse development | 124.6 | (62.9) | (22.1) | ||||||||||||||
| Losses and loss adjustment expenses | 1,155.8 | 698.8 | 830.2 | ||||||||||||||
| Policy acquisition expenses (third party) | 688.6 | 498.5 | 384.4 | ||||||||||||||
|
|
311.1 | 225.3 | - | ||||||||||||||
| General and administrative expenses | $ | 94.3 | $ | 82.7 | $ | 165.5 | |||||||||||
|
Attritional loss ratio
|
23.2 | % | 25.8 | % | 28.2 | % | |||||||||||
|
Catastrophe and large loss ratio
|
22.5 | % | 15.7 | % | 28.6 | % | |||||||||||
| Prior year loss reserve development impact on loss ratio | 5.5 | % | (3.4 | %) | (1.5 | %) | |||||||||||
|
Loss ratio
|
51.2 | % | 38.1 | % | 55.3 | % | |||||||||||
| Policy acquisition expenses ratio | 30.5 | % | 27.2 | % | 25.6 | % | |||||||||||
| Underwriting ratio | 81.7 | % | 65.3 | % | 80.9 | % | |||||||||||
| 13.8 | % | 12.3 | % | - | % | ||||||||||||
| General and administrative expenses ratio | 4.2 | % | 4.5 | % | 11.0 | % | |||||||||||
| Combined ratio | 99.7 | % | 82.1 | % | 91.9 | % | |||||||||||
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(1) Included in policy acquisition expenses on the Consolidated Statements of Income and Comprehensive Income. For further details, see Item 18 Financial Statements, Note 14 (Related Party Transactions) to our audited consolidated financial statements.
Net Investment Retuand Net Investment RetuPercentage, Total Investment Retuand Total Investment RetuPercentage, and Net Investment Income RetuPercentage
•Net investment return:includes net investment income and net realized and unrealized investment gains and losses.
•Total investment return:includes net investment retuplus unrealized gains and losses on available-for-sale investments and reclassification of net realized losses recognized in net income.
•Net investment retupercentage:is calculated as net investment return, divided by total average investible assets (including cash and cash equivalents and restricted cash and cash equivalents).
•Total investment retupercentage:is calculated as total investment retudivided by total average investible assets (including cash and cash equivalents and restricted cash and cash equivalents).
•Net investment income retupercentage: is calculated as net investment income divided by total average investible assets (including cash and cash equivalents and restricted cash and cash equivalents).
The table below reconciles our net investment return, total investment return, net investment retupercentage and total investment retupercentage to net investment income for the years ended December 31, 2024 , 2023 and 2022.
| 2024 | 2023 | 2022 | |||||||||||||||
| Net investment income | $ | 190.5 | $ | 119.5 | $ | 40.7 | |||||||||||
| Net realized and unrealized investment gains/(losses) | (28.6) | 4.9 | (33.7) | ||||||||||||||
|
Net investment return
|
161.9 | 124.4 | 7.0 | ||||||||||||||
| Unrealized gains/(losses) on available-for-sale investments | 9.6 | 81.7 | (99.0) | ||||||||||||||
| Reclassification of net realized losses recognized in net income | 24.7 | 0.7 | 2.5 | ||||||||||||||
|
Total investment return
|
196.2 | 206.8 | (89.5) | ||||||||||||||
| Opening | |||||||||||||||||
| Total investments | 3,341.4 | 2,425.0 | 2,782.6 | ||||||||||||||
| Cash and cash equivalents and restricted cash and cash equivalents | 964.1 | 1,407.9 | 476.0 | ||||||||||||||
| Derivative assets, at fair value | - | 6.3 | 1.0 | ||||||||||||||
| Accrued investment income | 27.2 | 10.9 | 12.1 | ||||||||||||||
| Investment assets pending settlement | 2.2 | 2.0 | 0.5 | ||||||||||||||
| Derivative liabilities, at fair value | (1.1) | - | (0.8) | ||||||||||||||
| Net investible assets | 4,333.8 | 3,852.1 | 3,271.4 | ||||||||||||||
|
Closing
|
|||||||||||||||||
| Total investments | 3,834.7 | 3,341.4 | 2,425.0 | ||||||||||||||
| Cash and cash equivalents and restricted cash and cash equivalents | 946.6 | 964.1 | 1,407.9 | ||||||||||||||
| Derivative assets, at fair value | - | - | 6.3 | ||||||||||||||
| Accrued investment income | 35.3 | 27.2 | 10.9 | ||||||||||||||
| Investment assets pending settlement | 0.5 | 2.2 | 2.0 | ||||||||||||||
| Derivative liabilities, at fair value | (0.5) | (1.1) | - | ||||||||||||||
| Investment liabilities pending settlement | (21.1) | - | - | ||||||||||||||
| Net investible assets | 4,795.5 | 4,333.8 | 3,852.1 | ||||||||||||||
|
Average investible assets
|
$ | 4,564.7 | $ | 4,093.0 | $ | 3,561.8 | |||||||||||
| Net investment income retupercentage | 4.2 | % | 2.9 | % | 1.1 | % | |||||||||||
| Net investment retupercentage | 3.5 | % | 3.0 | % | 0.2 | % | |||||||||||
| Total investment retupercentage | 4.3 | % | 5.1 | % | (2.5 | %) | |||||||||||
Operating net income, ROAE, Operating ROAE and Operating EPS
•Operating net income: is a non-GAAP financial measure of our performance which does not consider the impact of certain non-recurring and other items that may not properly reflect the ordinary activities of our business, its performance or its future outlook. This measure is calculated as net income available to common shareholders excluding net gain on distribution of The Fidelis Partnership , net realized and unrealized investment gains/(losses), net foreign exchange gains/(losses), and corporate and other expenses which include warrant costs, reorganization expenses, any non-recurring income and expenses, and the income tax effect on these items.
•Retuon average common equity ("ROAE"): represents net income available to common shareholders divided by average common shareholders' equity.
•Operating retuon average common equity ("Operating ROAE"): is a non-GAAP financial measure that represents a meaningful comparison between periods of our financial performance expressed as a percentage and is calculated as operating net income divided by adjusted average common shareholders' equity.
•Operating Earnings Per Share ("Operating EPS"): is a non-GAAP financial measure that represents a valuable measure of profitability and enables investors, analysts, rating agencies and other users of Fidelis Insurance Group's financial information to more easily analyze Fidelis Insurance Group's results in a manner similar to how management analyzes Fidelis Insurance Group's underlying business performance. It is calculated by dividing operating net income by the weighted average diluted common shares outstanding.
The table below sets out the calculation of the operating net income, adjusted average common shareholders' equity, ROAE, Operating ROAE and Operating EPS, for the years ended December 31, 2024 , 2023 and 2022.
| 2024 | 2023 | 2022 | |||||||||||||||
| Net income available to common shareholders | $ | 113.3 | $ | 2,132.5 | $ | 52.6 | |||||||||||
| Adjustment for net gain on distribution of |
- | (1,639.1) | - | ||||||||||||||
| Adjustment for net realized and unrealized investment (gains)/losses | 28.6 | (4.9) | 33.7 | ||||||||||||||
| Adjustment for net foreign exchange (gains)/losses | (1.6) | 4.1 | (6.8) | ||||||||||||||
| Adjustment for corporate and other expenses | 1.6 | 4.1 | 20.5 | ||||||||||||||
|
Income tax benefit(1)
|
(4.9) | (97.8) | (10.5) | ||||||||||||||
| Operating net income | $ | 137.0 | $ | 398.9 | $ | 89.5 | |||||||||||
| Average common shareholders' equity | $ | 2,449.1 | $ | 2,213.3 | $ | 1,995.4 | |||||||||||
| Opening common shareholders' equity | 2,449.8 | 1,976.8 | 2,013.9 | ||||||||||||||
| Adjustments related to the Separation Transactions | - | (178.4) | - | ||||||||||||||
| Adjusted opening common shareholders' equity | 2,449.8 | 1,798.4 | 2,013.9 | ||||||||||||||
| Closing common shareholders' equity | 2,448.4 | 2,449.8 | 1,976.8 | ||||||||||||||
| Adjusted average common shareholders' equity | 2,449.1 | 2,124.1 | 1,995.4 | ||||||||||||||
| Weighted average Common Shares outstanding | 115,218,380 | 114,313,971 | 194,290,180 | ||||||||||||||
| Share-based compensation plans | 408,801 | 10,712 | 5,033,674 | ||||||||||||||
| Weighted average diluted Common Shares outstanding | 115,627,181 | 114,324,683 | 199,323,854 | ||||||||||||||
| ROAE | 4.6 | % | 96.3 | % | 2.6 | % | |||||||||||
| Operating ROAE | 5.6 | % | 18.8 | % | 4.5 | % | |||||||||||
| Earnings per diluted Common Share | $ | 0.98 | $ | 18.65 | $ | 0.26 | |||||||||||
| Operating EPS | $ | 1.18 | $ | 3.49 | $ | 0.45 | |||||||||||
__________________
(1) Income tax benefit on adjustments to net income available to common shareholders. The 2023 income tax benefit includes the establishment of a net deferred tax asset of $90.0 million related to the implementation of the Bermuda corporate income tax.
Results of Operations - 2024 to 2023
The following table sets forth the key items discussed in the consolidated results of operations section, and the period-over-period change, for the years ended December 31, 2024 and 2023.
| 2024 | 2023 | Change | |||||||||||||||
| Underwriting income | $ | 8.3 | $ | 327.3 | $ | (319.0) | |||||||||||
| Net investment income | 190.5 | 119.5 | 71.0 | ||||||||||||||
| Net realized and unrealized investment gains/(losses) | (28.6) | 4.9 | (33.5) | ||||||||||||||
| Other income | - | 0.1 | (0.1) | ||||||||||||||
| Net gain on distribution of |
- | 1,639.1 | (1,639.1) | ||||||||||||||
| Corporate and other expenses | (1.6) | (4.1) | 2.5 | ||||||||||||||
| Net foreign exchange gains/(losses) | 1.6 | (4.1) | 5.7 | ||||||||||||||
| Financing costs | (33.8) | (35.5) | 1.7 | ||||||||||||||
| Income tax (expense)/benefit | (23.1) | 85.3 | (108.4) | ||||||||||||||
| Net income | $ | 113.3 | $ | 2,132.5 | $ | (2,019.2) | |||||||||||
Underwriting Results
The decline in our underwriting income in 2024 compared to 2023 was primarily driven by significantly higher catastrophe and large losses of $509.0 million in 2024, compared to $288.2 million in 2023, as well as by adverse prior year development of $124.6 million in 2024 compared to favorable prior year development of $62.9 million in 2023. Our 2024 catastrophe and large losses primarily related to Hurricane Helene, Hurricane Milton, intellectual property losses, the Baltimore Bridge collapse, severe convective storms, together with other smaller losses in various lines of business. This compares to our 2023 catastrophe and large losses primarily
related to the Sudan Conflict, losses in connection with the Viasat -3 satellite deployment failure, severe convective storms in the U.S. , two intellectual property losses and Cyclone Gabrielle in New Zealand . The adverse development for the year ended December 31, 2024 was driven primarily by an increase in our Aviation and Aerospace line of business related to the Ukraine Conflict. This increase relates in large part to an allowance made for ongoing settlement discussions in relation to the related litigation as well as an increase to reserves in order to reflect recent developments and new information received.
Underwriting Results by Segment
We classify our business into two segments: Insurance and Reinsurance.
The Insurance segment comprises a portfolio of Property, Marine, Asset Backed Finance & Portfolio Credit, Aviation and Aerospace, Political Risk, Violence & Terror, Energy, Cyber, and Other Insurance risks.
The Reinsurance segment is primarily a residential property catastrophe book, which includes Property and Retro & Whole Account reinsurance.
Insurance Segment
The following table is a summary of our Insurance segment's underwriting results:
| 2024 | 2023 | Change | |||||||||||||||
| Gross premiums written | $ | 3,538.5 | $ | 2,960.4 | $ | 578.1 | |||||||||||
| Reinsurance premium ceded | (1,488.1) | (1,079.9) | (408.2) | ||||||||||||||
| Net premiums written | 2,050.4 | 1,880.5 | 169.9 | ||||||||||||||
| Net premiums earned | 1,902.4 | 1,577.0 | 325.4 | ||||||||||||||
| Losses and loss adjustment expenses | (1,101.5) | (675.1) | (426.4) | ||||||||||||||
| Policy acquisition expenses (third party) | (604.6) | (429.1) | (175.5) | ||||||||||||||
| Underwriting income | $ | 196.3 | $ | 472.8 | $ | (276.5) | |||||||||||
| Loss ratio | 57.9 | % | 42.8 | % | 15.1 pts | ||||||||||||
| Policy acquisition expense ratio | 31.8 | % | 27.2 | % | 4.6 pts | ||||||||||||
| Underwriting ratio | 89.7 | % | 70.0 | % | 19.7 pts | ||||||||||||
In 2024, our GPW increased from 2023, primarily driven by growth from new business and improved rates in our Property, Marine, Asset Backed Finance & Portfolio Credit and Other Insurance lines of business, partially offset by a decrease in our Aviation and Aerospace line of business where certain deals did not meet our underwriting criteria and rating hurdles.
In 2024, our NPE increased from 2023, driven by earnings from higher net premiums written in the current and prior year periods.
Our policy acquisition expense ratio increased in 2024 from 2023, due to higher variable commissions in certain lines of business and changes in the mix of business written and ceded.
The following table is a summary of our Insurance segment's losses and loss adjustment expenses:
| 2024 | 2023 | Change | |||||||||||||||
| Attritional losses | $ | 476.7 | $ | 415.3 | $ | 61.4 | |||||||||||
| Catastrophe and large losses | 440.2 | 254.2 | 186.0 | ||||||||||||||
| Adverse prior year development | 184.6 | 5.6 | 179.0 | ||||||||||||||
| Losses and loss adjustment expenses | $ | 1,101.5 | $ | 675.1 | $ | 426.4 | |||||||||||
| Loss ratio - attritional losses | 25.1 | % | 26.3 | % | (1.2) pts | ||||||||||||
| Loss ratio - catastrophe and large losses | 23.1 | % | 16.1 | % | 7.0 pts | ||||||||||||
| Loss ratio - prior accident years | 9.7 | % | 0.4 | % | 9.3 pts | ||||||||||||
| Loss ratio | 57.9 | % | 42.8 | % | 15.1 pts | ||||||||||||
In 2024, our loss ratio in the Insurance segment increased by 15.1 points from 2023.
In 2024, our attritional loss ratio improved by 1.2 points from 2023, due to a lower level of small losses in the current year period.
The catastrophe and large losses in 2024 related to intellectual property losses in our Asset Backed Finance & Portfolio Credit line of business, losses from the Baltimore Bridge collapse in our Marine line of business, Hurricanes Milton and Helene, and severe convective storms in our Property and Marine lines of business, together with other smaller losses in various lines of business.This
compared to2023catastrophe and large lossesprimarily related to the Sudan Conflict, losses in connection with the Viasat -3 satellite deployment failure, losses from severe convective storms in the U.S. , two intellectual property losses, and other loss events in various lines of business including Property, Energy, and Marine.
The adverse prior year development for the year ended December 31, 2024 was driven primarily by an increase in our Aviation and Aerospace line of business related to the Ukraine Conflict, partially offset by better than expected loss emergence in our Property, Other Insurance and Marine lines of business. The adverse prior year development for the year ended December 31, 2023 related primarily to increased estimates on two contracts in the Energy line of business, adverse development within the Aviation and Aerospace line of business, and updated legal expense provisions in the reserve for the Ukraine Conflict, partially offset by better than expected loss emergence in the Other Insurance line of business. See Item 18 Financial Statements, Note 10 (Reserves for Losses and Loss Adjustment Expenses) to our audited consolidated financial statements and "-Recent Developments" above.
Reinsurance Segment
The following table is a summary of our Reinsurance segment's underwriting results:
| 2024 | 2023 | Change | |||||||||||||||
| Gross premiums written | $ | 864.6 | $ | 618.6 | $ | 246.0 | |||||||||||
| Reinsurance premium ceded | (520.4) | (362.5) | (157.9) | ||||||||||||||
| Net premiums written | 344.2 | 256.1 | 88.1 | ||||||||||||||
| Net premiums earned | 355.7 | 255.6 | 100.1 | ||||||||||||||
| Losses and loss adjustment expenses | (54.3) | (23.7) | (30.6) | ||||||||||||||
| Policy acquisition expenses (third party) | (84.0) | (69.4) | (14.6) | ||||||||||||||
| Underwriting income | $ | 217.4 | $ | 162.5 | $ | 54.9 | |||||||||||
| Loss ratio | 15.3 | % | 9.3 | % | 6.0 pts | ||||||||||||
| Policy acquisition expense ratio | 23.6 | % | 27.2 | % | (3.6) pts | ||||||||||||
| Underwriting ratio | 38.9 | % | 36.5 | % | 2.4 pts | ||||||||||||
In 2024, our GPW increased from 2023, which was driven by new business as well as rate increases.
In 2024, our NPE increased from 2023, which was driven by earnings from higher net premiums written in the current year period.
Our policy acquisition expense ratio decreased in 2024 from 2023, primarily due to change in business mix, retention levels and the impact of commissions on outwards reinsurance.
The following table is a summary of our Reinsurance segment's losses and loss adjustment expenses:
| 2024 | 2023 | Change | |||||||||||||||
| Attritional losses | $ | 45.5 | $ | 58.2 | $ | (12.7) | |||||||||||
| Catastrophe and large losses | 68.8 | 34.0 | 34.8 | ||||||||||||||
| Favorable prior year development | (60.0) | (68.5) | 8.5 | ||||||||||||||
| Losses and loss adjustment expenses | $ | 54.3 | $ | 23.7 | $ | 30.6 | |||||||||||
| Loss ratio - attritional losses | 12.9 | % | 22.8 | % | (9.9) pts | ||||||||||||
| Loss ratio - catastrophe and large losses | 19.3 | % | 13.3 | % | 6.0 pts | ||||||||||||
| Loss ratio - prior accident years | (16.9) | % | (26.8) | % | 9.9 pts | ||||||||||||
| Loss ratio | 15.3 | % | 9.3 | % | 6.0 pts | ||||||||||||
In 2024, our loss ratio in the Reinsurance segment increased by 6.0 points from 2023.
In 2024, our attritional loss ratio improved by 9.9 points from 2023, due to the current year being benign in terms of attritional losses.
The catastrophe and large losses in the Reinsurance segment for the year ended December 31, 2024 were primarily attributable to Hurricanes Helene and Milton and from storms in Alberta, Canada , compared to prior year losses related to the Hawaii wildfires, severe convective storms in the U.S. , and Cyclone Gabrielle in New Zealand .
For the year ended December 31, 2024 , favorable prior year development was driven by benign prior year attritional experience and positive development on catastrophe losses. For the year ended December 31, 2023 , the favorable prior year development related primarily to loss reductions from Hurricane Ian as well as favorable attritional experience driven by benign claim experience on prior year accidents.
Other Underwriting Expenses
We do not allocate The Fidelis Partnership commissions or general and administrative expenses by segment.
The Fidelis Partnership Commissions
General and Administrative Expenses
For the year ended December 31, 2024 , general and administrative expenses were $94.3 million (2023: $82.7 million ). The increase was driven primarily by increased costs to support the growth of the business and the transition to a publicly traded company in 2023.
Net Investment Income
Net investment income includes investment income net of investment management fees. For the year ended December 31, 2024 our net investment income was $190.5 million compared with $119.5 million in the prior year.
The increase in our net investment income in the year ended December 31, 2024 was due to the increase in investible assets and a higher yield achieved on the fixed income portfolio and cash balances. During the year ended December 31, 2024 we purchased $2.3 billion of fixed maturity securities at an average yield of 4.9%.
Net Realized and Unrealized Investment Gains/(Losses)
Net realized and unrealized investment gains/(losses) include realized gains and losses on fixed maturity securities, available-for-sale, and realized and unrealized gains and losses on other investments and derivatives. For the year ended December 31, 2024 , we had net realized and unrealized investment losses of $28.6 million compared with net realized and unrealized investment gains of $4.9 million in the prior year.
The netrealized and unrealized investmentlosses for the year ended December 31, 2024 ,resulted primarily from realized losses on the sale of $1.2 billion of fixed maturity securities with an average yield of 2.6%, the proceeds of which were reinvested at higher yields.
The net realized and unrealized investment gains for theyear endedDecember 31, 2023 resulted from realized and unrealized gains on other investments, partially offset by net realized losses on sales of fixed maturity securities.
The net gain on distribution of The Fidelis Partnership of$1,639.1 million in the year endedDecember 31, 2023 has been calculated as the fair value of The Fidelis Partnership of $1,775.0 million , less the net assets of The Fidelis Partnership of$67.9 million and less the direct costs of the Separation Transactions of $68.0 million . Direct costs primarily related toprofessional fees of $28.6 million ,acceleration of compensation expense of $21.0 million and an employer payroll tax expense of $17.3 million . For further details, see Item 18, Note 3 (Separation Transactions) to our audited consolidated financial statements.
Corporate and Other Expenses
Corporate and other expenses in 2024 include expenses related to the secondary offering and in 2023, reorganization expenses. For the year ended December 31, 2024 , corporate and other expenses were $1.6 million (2023: $4.1 million ).
Foreign Exchange Gains/(Losses)
For the year ended December 31, 2024 , foreign exchange gains/(losses) were $1.6 million (2023: $(4.1) million ). At December 31, 2024 , we held net foreign exchange contracts with a notional amount of $31.0 million (December 31, 2023 : $9.7 million ). These contracts are used to manage foreign currency risks in our underwriting and non-investment operations. The foreign exchange contracts were recorded as derivatives at fair value in the Consolidated Balance Sheets with changes recorded as net foreign exchange gains and losses in the Consolidated Statements of Income and Comprehensive Income.
Financing Costs
Financing costs were $33.8 million in the year ended December 31, 2024 (2023: $35.5 million ). Our financing costs decreased in 2024 due to a reduction in the costs associated with our letter of credit facilities discussed in Item 18 Financial Statements, Note 13a (Commitments and Contingencies - Letter of Credit Facilities) to our audited consolidated financial statements. Other financing
costs, including the interest expense of our long-term debt and the dividends paid to the holders of the Series A Preference Securities , were similar in both periods.
Results of Operations - 2023 to 2022
The following table sets forth the key items discussed in the consolidated results of operations section, and the period-over-period change, for the years ended December 31, 2023 and 2022.
| 2023 | 2022 | Change | |||||||||||||||
| Underwriting income | $ | 327.3 | $ | 120.4 | $ | 206.9 | |||||||||||
| Net investment income | 119.5 | 40.7 | 78.8 | ||||||||||||||
| Net realized and unrealized investment gains/(losses) | 4.9 | (33.7) | 38.6 | ||||||||||||||
| Other income | 0.1 | 1.9 | (1.8) | ||||||||||||||
| Net gain on distribution of |
1,639.1 | - | 1,639.1 | ||||||||||||||
| Corporate and other expenses | (4.1) | (20.5) | 16.4 | ||||||||||||||
| Net foreign exchange gains/(losses) | (4.1) | 6.8 | (10.9) | ||||||||||||||
| Financing costs | (35.5) | (35.5) | - | ||||||||||||||
| Income tax (expense)/benefit | 85.3 | (17.8) | 103.1 | ||||||||||||||
| Net income | $ | 2,132.5 | $ | 62.3 | $ | 2,070.2 | |||||||||||
Underwriting Results
The improvement in our underwriting results in 2023 compared to 2022 was driven by premium growth in our Insurance segment together with significantly lower catastrophe and large losses. Catastrophe and large losses were $288.2 million , or 15.7 points on the combined ratio, in 2023, compared to $428.6 million , or 28.6 points on the combined ratio, in 2022. Our 2023 catastrophe and large losses primarily related to the Sudan Conflict, losses in connection with the Viasat -3 satellite deployment failure, severe convective storms in the U.S. , two intellectual property losses and Cyclone Gabrielle in New Zealand compared to our 2022 catastrophe and large losses related to theUkraine Conflict, Hurricane Ian,Australia floods and European storms.
Underwriting Results by Segment
Insurance Segment
The following table is a summary of our Insurance segment's underwriting results:
| 2023 | 2022 | Change | |||||||||||||||
| Gross premiums written | $ | 2,960.4 | $ | 2,413.0 | $ | 547.4 | |||||||||||
| Reinsurance premium ceded | (1,079.9) | (787.6) | (292.3) | ||||||||||||||
| Net premiums written | 1,880.5 | 1,625.4 | 255.1 | ||||||||||||||
| Net premiums earned | 1,577.0 | 1,230.6 | 346.4 | ||||||||||||||
| Losses and loss adjustment expenses | (675.1) | (627.8) | (47.3) | ||||||||||||||
| Policy acquisition expenses | (429.1) | (324.0) | (105.1) | ||||||||||||||
| Underwriting income | $ | 472.8 | $ | 278.8 | $ | 194.0 | |||||||||||
| Loss ratio | 42.8 | % | 51.0 | % | (8.2) pts | ||||||||||||
| Policy acquisition expense ratio | 27.2 | % | 26.3 | % | 0.9 pts | ||||||||||||
| Underwriting ratio | 70.0 | % | 77.3 | % | (7.3) pts | ||||||||||||
In 2023, our underwriting ratio in the Insurance segment improved by 7.3 points from 2022, which was primarily driven by a decrease in our loss ratio together with rate increases and improved pricing and terms and conditions.
In 2023, net premiums earned increased from 2022 primarily driven by an increase in net premiums written as a result of new business, strong renewals, and rate increases in the Property, Marine and Aviation and Aerospace lines of business.
The following table is a summary of our Insurance segment's losses and loss adjustment expenses:
| 2023 | 2022 | Change | |||||||||||||||
| Attritional losses | $ | 415.3 | $ | 344.6 | $ | 70.7 | |||||||||||
| Catastrophe and large losses | 254.2 | 322.8 | (68.6) | ||||||||||||||
| (Favorable)/adverse prior year development | 5.6 | (39.6) | 45.2 | ||||||||||||||
| Losses and loss adjustment expenses | $ | 675.1 | $ | 627.8 | $ | 47.3 | |||||||||||
| Loss ratio - attritional losses | 26.3 | % | 28.0 | % | (1.7) pts | ||||||||||||
| Loss ratio - catastrophe and large losses | 16.1 | % | 26.2 | % | (10.1) pts | ||||||||||||
| Loss ratio - prior accident years | 0.4 | % | (3.2) | % | 3.6 pts | ||||||||||||
| Loss ratio | 42.8 | % | 51.0 | % | (8.2) pts | ||||||||||||
In 2023, our loss ratio in the Insurance segment improved by 8.2 points from 2022, which was primarily driven by a decrease in catastrophe and large losses together with improvement in our attritional loss ratio, partially offset by adverse prior year development in 2023.
The catastrophe and large losses in 2023 primarily related to the Sudan Conflict, losses in connection with the Viasat -3 satellite deployment failure, losses from severe convective storms in the U.S. , two intellectual property losses, and other loss events in various lines of business including Property, Energy, and Marine.This compared to2022catastrophe and large losses related to the Ukraine Conflict in our Aviation and Aerospace line of business, and Hurricane Ian in our Property line of business.
The adverse prior year development for the year ended December 31, 2023 related primarily to increased estimates on two contracts in the Energy line of business, adverse development within the Aviation and Aerospace line of business, and updated legal expense provisions in the reserve for the Ukraine Conflict, partially offset by better than expected loss emergence in the Other Insurance line of business. The favorable prior year development for the year ended December 31, 2022 resulted from better than expected loss experience.
Reinsurance Segment
The following table is a summary of our Reinsurance segment's underwriting results:
| 2023 | 2022 | Change | |||||||||||||||
| Gross premiums written | $ | 618.6 | $ | 605.1 | $ | 13.5 | |||||||||||
| Reinsurance premium ceded | (362.5) | (372.1) | 9.6 | ||||||||||||||
| Net premiums written | 256.1 | 233.0 | 23.1 | ||||||||||||||
| Net premiums earned | 255.6 | 269.9 | (14.3) | ||||||||||||||
| Losses and loss adjustment expenses | (23.7) | (202.4) | 178.7 | ||||||||||||||
| Policy acquisition expenses | (69.4) | (60.4) | (9.0) | ||||||||||||||
| Underwriting income | $ | 162.5 | $ | 7.1 | $ | 155.4 | |||||||||||
| Loss ratio | 9.3 | % | 75.0 | % | (65.7) pts | ||||||||||||
| Policy acquisition expense ratio | 27.2 | % | 22.4 | % | 4.8 pts | ||||||||||||
| Underwriting ratio | 36.5 | % | 97.4 | % | (60.9) pts | ||||||||||||
In 2023, our underwriting ratio in the Reinsurance segment improved by 60.9 points from 2022 primarily driven by favorable prior year development and a reduction in catastrophe and large losses.
In 2023, net premiums earned decreased as 2022 benefited from the earnings of higher net premiums written in 2021.
The following table is a summary of our Reinsurance segment's losses and loss adjustment expenses:
| 2023 | 2022 | Change | |||||||||||||||
| Attritional losses | $ | 58.2 | $ | 79.1 | $ | (20.9) | |||||||||||
| Catastrophe and large losses | 34.0 | 105.8 | (71.8) | ||||||||||||||
| (Favorable)/adverse prior year development | (68.5) | 17.5 | (86.0) | ||||||||||||||
| Losses and loss adjustment expenses | $ | 23.7 | $ | 202.4 | $ | (178.7) | |||||||||||
| Loss ratio - attritional losses | 22.8 | % | 29.3 | % | (6.5) pts | ||||||||||||
| Loss ratio - catastrophe and large losses | 13.3 | % | 39.2 | % | (25.9) pts | ||||||||||||
| Loss ratio - prior accident years | (26.8) | % | 6.5 | % | (33.3) pts | ||||||||||||
| Loss ratio | 9.3 | % | 75.0 | % | (65.7) pts | ||||||||||||
In 2023, our loss ratio in the Reinsurance segment improved by 65.7 points from 2022 driven by favorable prior year development, lower catastrophe and large losses and lower attritional losses.
The catastrophe losses in the Reinsurance segment for the year ended December 31, 2023 related to the Hawaii wildfires, severe convective storms in the U.S. , and Cyclone Gabrielle in New Zealand , compared to prior year losses related to Hurricane Ian, Australian floods and European storms.
For the year ended December 31, 2023 , favorable prior year development related primarily to loss reductions from Hurricane Ian as well as favorable attritional experience driven by benign claim experience on prior year accidents. For the year ended December 31, 2022 , the adverse development was driven by deterioration on Hurricane Laura and the 2021 European Floods.
Other Underwriting Expenses
We do not allocate general and administrative expenses by segment.
General and Administrative Expenses
For the year ended December 31, 2023 , general and administrative expenses were $82.7 million (2022: $165.5 million ). The decrease was primarily related to the reduced headcount and related costs following the consummation of the Separation Transactions.
Net Investment Income
Net investment income includes investment income net of investment management fees. For the year ended December 31, 2023 , our net investment income was $119.5 million compared with $40.7 million in 2022.
The increase in our net investment income in the year ended December 31, 2023 was due to increases in interest rates during 2022 and 2023, where the short duration nature of our portfolio means that we are reinvesting at higher rates. During the year ended December 31, 2023 we invested $2.1 billion in fixed maturity available-for-sale securities with an average investment yield of 5.1%.
Net Realized and Unrealized investment Gains/(Losses)
Net realized and unrealized investment gains/(losses) includes realized gains and losses on fixed maturity securities, available-for-sale, and realized and unrealized gains and losses on other investments and derivatives. For the year ended December 31, 2023 , we had net realized and unrealized investment gains of $4.9 million compared with net realized and unrealized investment losses of $33.7 million for the year ended December 31, 2022 .
The netrealized and unrealized investmentgains for the year ended December 31, 2023 resulted from realized and unrealized gains on other investments, partially offset by net realized losses on sales of fixed maturity securities.
The net realized and unrealized investment losses in theyear endedDecember 31, 2022 resulted primarily from a fall in value of our other investments caused by increases in interest rates, together with realized and unrealized losses on derivative instruments.
The net gain on distribution of The Fidelis Partnership of$1,639.1 million has been calculated as the fair value of The Fidelis Partnership of $1,775.0 million , less the net assets of The Fidelis Partnership of$67.9 million and less the direct costs of the Separation Transactions of $68.0 million . Direct costs primarily related toprofessional fees of $28.6 million ,acceleration of compensation expense of $21.0 million and an employer payroll tax expense of $17.3 million . For further details, see Item 18, Note 3 (Separation Transactions) to our audited consolidated financial statements.
Corporate and Other Expenses
Corporate and other expenses include reorganization expenses and warrant expenses. For the year ended December 31, 2023 , corporate and other expenses were $4.1 million (2022: $20.5 million ).
Foreign Exchange Gains/(Losses)
At December 31, 2023 , we held net foreign exchange contracts with a notional amount of $9.7 million (December 31, 2022 : $44.0 million ). These contracts are used to manage foreign currency risks in our underwriting and non-investment operations. The foreign exchange contracts were recorded as derivatives at fair value in the Consolidated Balance Sheets with changes recorded as net foreign exchange gains and losses in the Consolidated Statements of Income.
Financing Costs
Financing costs were $35.5 million in the year ended December 31, 2023 (2022: $35.5 million ). Our financing costs were similar in both periods as there was no change in our debt levels during the periods. The dividend paid to the holders of the Series A Preference Securities is also included in financing costs, along with the costs associated with our letter of credit facilities as discussed in Note 13a (Commitments and Contingencies - Letter of credit facilities) to our audited consolidated financial statements.
B. Liquidity and Capital Resources
Liquidity
Liquidity is a measure of a company's ability to generate cash flows sufficient to meet short-term and long-term cash requirements of its business operations. Management monitors the liquidity of FIHL and of each of our operating insurance subsidiaries. As a Bermuda holding company, FIHL relies on dividends and other distributions from its operating subsidiaries to provide cash flow to meet ongoing cash requirements, including principal and interest payments on our debt and other expenses, the repurchase of common shares, and dividends to the holders of our common shares and preference securities.
The payment of dividends by our subsidiaries is, under certain circumstances, limited by the applicable laws and regulations in the various jurisdictions in which our subsidiaries operate. In addition, insurance laws require our insurance subsidiaries to maintain certain measures of solvency and liquidity. We believe that each of our insurance subsidiaries and branches exceeded the minimum solvency, capital and surplus requirements in their applicable jurisdictions at December 31, 2024 .
During the year ended December 31, 2024 , FIHL received dividends from subsidiaries of $150.0 million .
Management considers the current cash and cash equivalents, together with dividends declared or expected to be declared by the operating insurance subsidiaries, sufficient to appropriately satisfy the liquidity requirements of FIHL.
On an ongoing basis, the operating insurance subsidiaries' sources of funds primarily consist of premiums written, investment income and proceeds from sales and redemptions of investments. Cash is used primarily to pay reinsurance premiums, losses and loss adjustment expenses, brokerage commissions, general and administrative expenses, taxes, interest and dividends, and to purchase new investments. The potential for individual large claims and for accumulations of claims from any given single event(s) means that substantial and unpredictable payments may need to be made within relatively short periods of time.
The operating insurance subsidiaries held $685.0 million of unrestricted cash and unrestricted short-term investments at December 31, 2024 (December 31, 2023 : $598.6 million ). Management monitors the value, currency and duration of cash and investments held by the operating insurance subsidiaries to ensure they are able to meet their (re)insurance and other liabilities as they become due and was satisfied that there was a comfortable margin of liquidity at December 31, 2024 and for the foreseeable future.
For all material currencies in which our reinsurance and insurance business is written, we seek to ensure that sufficient cash and short-term investments are held in such currencies to enable us to meet potential claims without having to liquidate long-term investments and adversely affect our investment return. This follows the matching principle that matches our assets and liabilities in currency to mitigate foreign currency risk whenever possible.
We manage these risks by making regular forecasts of the timing and amount of expected cash outflows and ensuring that we maintain sufficient balances in cash and short-term investments to meet these estimates. Notwithstanding this policy, if these cash flow forecasts are incorrect, we could be forced to liquidate investments prior to maturity, potentially at a significant loss. Historically, we have not had to liquidate investments at a significant loss to maintain sufficient levels of liquidity.
The liquidity of the operating insurance subsidiaries is also affected by the terms of our contractual obligations to policyholders and by undertakings to certain regulatory authorities to facilitate the issue of letters of credit or maintain certain balances in trust funds for the benefit of policyholders, or restricted for other reasons.
The following table shows the forms of collateral or other security provided in respect of these obligations and undertakings at December 31, 2024 and 2023:
| Regulatory and client trusts and deposits: | |||||||||||
| Inter-group transactions | $ | 977.9 | $ | 1,034.1 | |||||||
| Third party: | |||||||||||
| Trust accounts | 318.9 | 391.6 | |||||||||
|
Funds at Lloyds(1)
|
19.4 | - | |||||||||
| Collateral for letters of credit | 216.1 | 173.0 | |||||||||
| Total restricted assets | $ | 1,532.3 | $ | 1,598.7 | |||||||
| Total as percentage of investible assets | 32.0 | % | 36.9 | % | |||||||
__________________
(1) Funds at Lloyd's ("FAL") represent the capital that we are required to provide as security to support our participation.
Capital Resources
We maintain our capital at an appropriate level as determined by our Group Board-approved internal risk appetite and the financial strength required by our clients, regulators and rating agencies. We monitor and review the capital and liquidity positions of FIHL and its operating insurance subsidiaries on an ongoing basis.
The principal capital transactions related to our common shares undertaken during the year ended December 31, 2024 were:
•Repurchase of common shares: Repurchases of 6,570,003 common shares for an aggregate of $105.4 million , excluding expenses, pursuant to the Group's December 21, 2023 share repurchase authorization for $50.0 million and August 14, 2024 authorization for $200.0 million (see Note 17 (Share Capital Authorized and Issued) of our audited consolidated financial statements). The unutilized amount of the August 14, 2024 share repurchase authorization at December 31, 2024 , was $144.6 million .
•Dividend payments to the common shareholders: During the year ended December 31, 2024 , we paid quarterly cash dividends to our common shareholders for a total dividend distribution of $46.2 million (2023: $nil).
•Secondary offering: On May 28, 2024 , FIHL completed an underwritten secondary public offering of an aggregate of 9,000,000 common shares by certain of our shareholders at a price to the public of $16.00 per share, less any underwriting discounts and commissions. The underwriters exercised in full their option to purchase an additional 1,350,000 common shares on the same terms.
Preference securities:At December 31, 2024 , FIHL had 5,835 Series A Preference Securities outstanding that are classified in our balance sheet as debt. During the year ended December 31, 2024 , we paid quarterly cash dividends to our preference security holders totaling $5.3 million (2023: $5.2 million , 2022: $5.3 million ).
Long-term debt: At December 31, 2024 , FIHL had $448.9 million in debt outstanding. For the year ended December 31, 2024 , FIHL incurred interest expense of $24.4 million on outstanding debt. Such debt includes the Senior Notes and the Subordinated Notes. Other than the Series A Preference Securities , the Senior Notes and the Subordinated Notes, FIHL has no material debt outstanding.
Access to capital: Our business operations are in part dependent on our financial strength and the opinions of the independent rating agencies thereof. We believe our financial strength provides us with the flexibility and capacity to obtain funds through debt or equity financing as required from the public and private markets. Our ability to access the capital markets is dependent on, among other things, our operating results, market conditions, and our perceived financial strength. We regularly monitor our capital and financial position, as well as investment and securities market conditions.
Ratings:Our financial strength ratings as determined by AM Best, Standard & Poor's and Moody's provide an independent assessment of our financial strength and ability to meet policyholder obligations. There have been no material changes to our financial strength ratings during the year ended December 31, 2024 . See Item 4.B. Business Overview "Financial Strength Ratings" for further discussion of ratings assigned to the Group's insurance operating subsidiaries.
Inflation:We consider the effects of inflation in pricing our contracts and policies through modeled components such as demand surge. Loss reserves are established to recognize likely loss settlements at the date payment is made. Those reserves inherently recognize the effects of inflation. The actual effects of inflation on our results cannot be accurately known, however, until claims are ultimately resolved.
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities:
| 2024 | 2023 | 2022 | |||||||||||||||
| Net cash provided by operating activities | $ | 618.2 | $ | 495.2 | $ | 741.4 | |||||||||||
| Net cash provided by/(used in) investing activities | (475.8) | (834.9) | 215.9 | ||||||||||||||
| Net cash used in financing activities | (153.9) | (106.9) | (16.2) | ||||||||||||||
| Effect of exchange rate changes on foreign currency cash | (6.0) | 2.8 | (9.2) | ||||||||||||||
| Net increase/(decrease) in cash, restricted cash, and cash equivalents | $ | (17.5) | $ | (443.8) | $ | 931.9 | |||||||||||
Cash flows from operating activities can fluctuate due to timing differences between the collection of premiums and reinsurance recoverables, the payment of losses and loss adjustment expenses, the payment of premiums to reinsurers and operating expenses. The positive operating cash flows for the years ended December 31, 2024 , 2023 and 2022 primarily related to premium receipts exceeding payments for claims, commissions and outward reinsurance premiums.
Cash used in investing activities for the year ended December 31, 2024 reflected the use of cash to purchase fixed maturity securities at higher yields and purchase other investments, funded by the proceeds from the maturities and sales of lower yielding fixed maturity securities as well as cash flows provided by operating activities. Cash used in investing activities for the year ended December 31, 2023 reflected the use of cash to purchase available-for-sale securities at attractive investment yields, partially offset by the proceeds from the sales and maturities of available-for-sale securities. Cash provided by investing activities for the year ended December 31, 2022 reflected the proceeds from the sales and maturities of available-for-sale securities, partially offset by purchases of available-for-sale securities.
Cash used in financing activities in the year ended December 31, 2024 primarily consisted of cash outflows of $105.5 million from common share repurchases, including expenses, and $46.2 million from dividends paid to common shareholders.Cash used in financing activities in the year ended December 31, 2023 primarily consisted of a cash outflow of $105.5 million from disposal of The Fidelis Partnership , $50.6 million of employer tax on restricted share units and $34.1 million of cumulative dividends on warrants, partially offset by net proceeds from the IPO of $89.4 million . Cash used in financing activities in the year ended December 31, 2022 consisted of the purchase of non-controlling interests.
Letter of Credit Facilities
We routinely enter into agreements with financial institutions to obtain secured and unsecured letter of credit facilities. These facilities are primarily used for the issuance of letters of credit to certain reinsurance entities which require us to post collateral. This is in order for these reinsurance counterparties to be able to take credit under local insurance regulations for the reinsurance protection obtained from companies located in jurisdictions which are not licensed or otherwise admitted as an insurer.
The following table summarizes the outstanding letters of credit at December 31, 2024 :
| Bank | Commitment | In Use | Secured by collateral | ||||||||||||||
| $ | 125.0 | $ | 78.0 | $ | 68.5 | ||||||||||||
| 70.0 | 42.9 | 46.9 | |||||||||||||||
| 140.0 | 83.2 | 54.5 | |||||||||||||||
| 140.0 | 71.9 | 46.2 | |||||||||||||||
| Total | $ | 475.0 | $ | 276.0 | $ | 216.1 | |||||||||||
C. Research and Development, Patents and Licenses, etc.
Not applicable.
D. Trend Information
In the year ended December 31, 2024 and the January 2025 renewal period, there was ample opportunity to write business at attractive margins, following a sustained period of hard market conditions which endured throughout the majority of the year. As a result of compound rate increases over a number of years prices in the reinsurance and insurance markets are at all time highs across multiple lines of business. While discipline from the market was inconsistent across the year-end and January renewals those with lead positions and significant capacity were able to differentiate themselves in the verticalization of placements to secure favorable terms. Margin on business remains attractive providing ample opportunity for profitable underwriting, and structural enhancements including improvements to terms, conditions and attachments points were largely upheld. We believe that attractive underwriting conditions will persist throughout 2025, due to (among other factors) climate change, other market events including the recent wildfire losses,
economic and social inflation, geopolitical uncertainties and inadequate casualty reserving (which casualty reserving does not affect Fidelis, as historically Fidelis has not written any traditional casualty classes).
Over the course of the past decade, Fidelis has established itself as a market leader, creating a strong highly diversified and innovative portfolio focused on Insurance and Reinsurance. We believe that we are well placed to take advantage of the current market environment, given our strategic focus on: profitable underwriting, while maintaining flexibility to manage through the cycle; efficient operations, by sustaining strong alignment with strategic partners, such as The Fidelis Partnership , and delivering a diversified portfolio across our targeted classes of business; actively managing capital through the cycle; and maintaining a relatively conservative investment portfolio earning attractive market yields.
For a discussion of known trends, uncertainties and other events that have impacted or may have a material impact on the Group, see Item 5.A. Operating Results. See also Explanatory Note "Cautionary Note Regarding Forward-Looking Statements" and Item 3.D. Risk Factors for a discussion of risks affecting the Group and its business, including certain conditions referenced above such as climate change, economic and social inflation and geopolitical uncertainties.
E. Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. On an ongoing basis, we evaluate our estimates, including those related to written and earned premiums, reserves for losses and loss adjustment expenses, reinsurance balances recoverable on reserves for losses and loss adjustment expenses,fair value measurements of fixed maturity available-for-sale investments, and income tax expense. We base our estimates on historical experience, where possible, and on various other assumptions that we believe to be reasonable under the circumstances, which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results will differ from these estimates and such differences may be material. We believe that the significant accounting policies set forth in Item 18 Financial Statements, Note 2 (Significant Accounting Policies) to our audited consolidated financial statements describe significant estimates used in the preparation of our audited consolidated financial statements as set out in more detail below.
Written and earned premiums
Insurance premiums can be written on a fixed premium basis or proportional basis. Some of our fixed premium policies are written through The Fidelis Partnership owned or sub-delegated managing general agents ("MGAs") who are third parties granted authority to bind risks on our behalf in accordance with underwriting guidelines. For these contracts, premiums are recorded based on monthly statements received from MGAs or best estimates based on historical experience. Through The Fidelis Partnership , we also write insurance business on a line slip or proportional basis, where we assume an agreed portion of the premiums and losses of a particular risk or group of risks along with unrelated insurers. Premiums for these policies are estimated at inception based on estimates provided by clients through brokers. We review such estimates on a quarterly basis and any adjustments are recognized in the period in which they are determined.
Reinsurance contracts provide cover to cedants on an excess of loss or proportional basis. Excess of loss contracts typically include minimum or deposit premiums. For such contracts, minimum or deposit premiums are generally considered to be the best estimate of premiums at the inception of the contract. The minimum or deposit premium is usually adjusted at the end of the contract period to reflect changes in the underlying risks during the contract period. Any adjustments to minimum or deposit premiums are recognized in the period in which they are determined. For proportional reinsurance contracts, premiums are recognized at the inception of the policy based on estimates received from the cedant or broker. These estimates take into account our experience with the ceding companies, familiarity with each market and line of business, and management's judgment on the volume of business ceded to us. Such premium estimates are reviewed on a quarterly basis and updated when estimates are changed or actual amounts are determined.
We record premiums written upon inception of the policy. Premiums written are earned on a basis consistent with risks covered over the period during which the coverage is provided. Fixed premium policies and excess of loss reinsurance contracts are earned consistent with the risks covered over the term of the contract, which is generally 12 months. Proportional insurance and reinsurance contracts are generally written on a "risks attaching" basis, covering claims that relate to the underlying policies written during the terms of these contracts. As the underlying business incepts throughout the contract term which is typically one year, and the underlying business typically has a one-year coverage period, these premiums are generally earned over a 24-month period. The portion of the premiums written applicable to the unexpired terms of the underlying contracts and policies are recorded as unearned premiums on the Consolidated Balance Sheets.
Reinstatement premiums are recognized as written and earned after the occurrence of a loss and are recorded in accordance with the contract terms based upon management's estimate of losses and loss adjustment expenses.
Acquisition costs are directly related to the acquisition of insurance premiums and are deferred and amortized over the related policy period. We only defer acquisition costs incurred that are directly attributable to the successful acquisition of new or renewal insurance contracts, including commissions to The Fidelis Partnership , agents and brokers, and premium taxes. All other acquisition-related
expenses, including indirect costs, are expensed as incurred. To the extent that future policy revenues on existing policies are not adequate to cover related costs and expenses, deferred policy acquisition costs are charged to earnings.
We evaluate premium deficiency and the recoverability of deferred acquisition costs by determining if the sum of future earned premiums and anticipated investment retuis greater than expected future losses and loss adjustment expenses and acquisition costs.
Reserves for losses and loss adjustment expenses
Our liability for losses and loss adjustment expenses includes reserves for reported claims and for losses incurred but not reported. These estimates are net of amounts estimated to be recoverable from salvage and subrogation. The reserve for losses and loss adjustment expenses is established by management based on reports from insureds, brokers, ceding companies and the application of generally accepted actuarial techniques and represents the estimated ultimate cost of events or conditions that have been reported to or specifically identified by Fidelis as incurred.
Inherent in the estimatesof ultimate losses and loss adjustment expenses are expected trends in claim severity, and frequency of large losses and catastrophes, which may vary significantly as claims are settled. We estimate ultimate losses using various actuarial methods as well as our own loss experience, historical insurance industry loss experience, estimates of pricing adequacy trends and management's professional judgment. The estimated cost of claims includes expenses to be incurred in settling claims and a deduction for the expected value of salvage, subrogation and other recoveries. Ultimate losses and loss adjustment expenses may differ significantly from the amount recorded in the financial statements. These estimates are reviewed regularly and as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments, if any, are recorded in losses and loss adjustment expenses in the periods in which they are determined. For further discussion of the actuarial methodologies utilized to perform our losses and loss adjustment expenses reserving analysis, see Item 18 Financial Statements, Note 10 (Reserves for Losses and Loss Adjustment Expenses) to our audited consolidated financial statements.
Reserves for losses and loss adjustment expenses represent our best estimate of the ultimate cost of settling reported and unreported claims and related expenses. The estimation of losses and loss expense reserves is based on various complex and subjective judgments. Actual losses and settlement expenses which are ultimately required to be paid may deviate, perhaps substantially, from the reserve estimates reflected in our financial statements. Similarly, the timing for payment of our estimated losses is not fixed and is not determinable on an individual or aggregate basis. The assumptions used in estimating the payments due by period are based predominantly on industry data overlaid with management experience. Due to the uncertainty inherent in the process of estimating the timing of such payments, there is a risk that the amounts paid in any period can be significantly different.
The breakdown of our reserves for losses and loss adjustment expenses between outstanding claims and IBNR for the relevant period end was as follows:
| Gross outstanding | $ | 1,109.3 | $ | 1,016.3 | |||||||
| Gross IBNR | 2,025.0 | 1,432.6 | |||||||||
| Gross Reserves | $ | 3,134.3 | $ | 2,448.9 | |||||||
| % IBNR | 65 | % | 58 | % | |||||||
Potential Variability in Loss Reserves: The table below summarizes the effect of reasonably likely scenarios on the key actuarial assumptions used to estimate our loss reserves, net of reinsurance balances recoverable on unpaid losses and loss adjustment expenses for our segments at December 31, 2024 . The scenarios in this table summarize the effect of (i) changes to the expected loss ratio selections used at December 31, 2024 , which represent loss ratio point increases or decreases to the expected loss ratios used, and (ii) changes to the loss development patterns used in our reserving process at December 31, 2024 , which represent claims reporting that is either slower or faster than the reporting patterns used. We believe that the illustrated sensitivities are indicative of the potential variability inherent in the estimation process of those parameters. The results show the impact of varying each key actuarialassumption using the chosen sensitivity on our IBNR reserves, on a net basis and across all accident years.
Each of the impacts summarized in the table below isestimated individually and without consideration for any correlation among key assumptions or among lines of business. Therefore, it would be inappropriate to take each of the amounts and add them together to estimate total volatility. While we believe the variations in the expected loss ratios and loss development patterns presented could be reasonably expected, our own historical data regarding variability is generally limited and actual variations may be greater or less than these amounts. It is also important to note that the variations are not meant to be a "best-case" or "worst-case" series of scenarios and, therefore, it is possible that future variations in our loss reserves may be more or less than the amounts set forth below. While we believe that these are reasonably likely scenarios, we do not believe this sensitivity analysis should be considered an actual reserve range.
| Development Pattern | |||||||||||||||||
| Increase/(decrease) in loss reserves, net | 5% Lower | Unchanged | 5% Higher | ||||||||||||||
| Insurance | |||||||||||||||||
| 6 Months Shorter | $ | (224.8) | $ | (197.0) | $ | (169.1) | |||||||||||
| Unchanged | (44.9) | - | 44.9 | ||||||||||||||
| 6 Months Longer | 145.9 | 208.4 | 270.9 | ||||||||||||||
| Reinsurance | |||||||||||||||||
| 6 Months Shorter | (22.5) | (21.6) | (20.7) | ||||||||||||||
| Unchanged | (3.3) | - | 3.9 | ||||||||||||||
| 6 Months Longer | 22.0 | 27.9 | 33.7 | ||||||||||||||
| Total | |||||||||||||||||
| 6 Months Shorter | (247.3) | (218.6) | (189.8) | ||||||||||||||
| Unchanged | (48.2) | - | 48.8 | ||||||||||||||
| 6 Months Longer | $ | 167.9 | $ | 236.3 | $ | 304.6 | |||||||||||
Reinsurance balances recoverable on reserves for losses and loss adjustment expenses
We seek to reduce the risk of net losses on business written and manage our capital by ceding certain risks and exposures to other reinsurers. We also purchase reinsurance protection to limit losses from catastrophic events and to reduce loss aggregation risk. Outwards reinsurance contracts do not relieve us of our primary obligation to insureds. Consequently, we are exposed to credit risk associated with reinsurance recoverable on reserves for losses and loss adjustment expenses.
The recognition of reinsurance recoverable requires two estimates:
•The most significant estimate is the amount of loss reserves to be ceded to our reinsurers. This amount consists of reinsurance recoverable related to reported claims and losses incurred but not reported. This estimate is developed as part of our loss reserving process and its estimation is subject to similar risks and uncertainties as the estimation of our reserves for losses and loss adjustment expenses.
•The second estimate is the amount of reinsurance recoverable that we believe will not be collected from reinsurers. The substantial majority of our reinsurance balances recoverable on paid losses and reserves for losses and loss adjustment expenses are from reinsurers that are rated "A-" or higher by AM Best or S&P, other than three reinsurers that are rated "B++". Where an insurer does not have a credit rating, the Group generally receives collateral, including letters of credit and trust accounts. At December 31, 2024 , the allowance for expected credit losses was $1.0 million (December 31, 2023 : $1.3 million ).
Fair value measurements of fixed maturity investments, available-for-sale
Our fixed maturity securities portfolio compromises U.S. Treasuries, non-U.S. government bonds, government agency bonds, corporate bonds, mortgage and other asset-backed securities. Investments in fixed maturity securities are reported at estimated fair value in our audited consolidated financial statements. The methods used to determine fair value of our fixed maturity securities are described in Item 18 Financial Statements, Note 6 (Fair Value Measurements) to our audited consolidated financial statements.
FASB ASC Topic 820-10 specifies a fair value hierarchy that prioritizes the inputs to the respective valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to valuation techniques that use at least one significant input that is unobservable (Level 3).
In order to determine if a market is active or inactive for a security, we consider a number of factors, including, but not limited to, the frequency of transactions, the size of the bid-ask spread and the amount of adjustment necessary when comparing similar transactions.
At December 31, 2024 , we classified $nil (December 31, 2023 : $nil) of our fixed maturity securities at fair value on a recurring basis using level 3 inputs.
Income tax expense
Deferred tax assets and liabilities result from temporary differences between the amounts recorded in our consolidated financial statements and the tax basis of our assets and liabilities. Such temporary differences are primarily due to net operating losses carried forward, and with respect to the implementation of the Bermuda corporate income tax, differences between the U.S. GAAP basis and tax basis of unearned premiums, reserves for losses and loss adjustment expenses, and intangible assets. The effect on deferred tax assets and liabilities of a change in tax laws or tax rates is recognized in the period in which the change is enacted. A valuation
allowance is recorded against deferred tax assets where the Group considers that it is more likely than not that these assets will not be recovered against future taxable income from each tax-paying entity in each tax jurisdiction. Significant judgments, assumptions and estimates which are inherently subjective are required in determining income tax expense, the deferred tax impact of a change in laws, and valuation allowances.
At December 31, 2024 , we recorded a net deferred tax asset of $118.9 million and valuation allowance of $2.2 million (December 31, 2023 : $129.0 million and $2.2 million , respectively), as discussed inItem 18 Financial Statements, Note19(Income Taxes) of our audited consolidated financial statements. The most significant component of the net deferred tax asset at December 31, 2024 was related to the enactment of corporate income tax in Bermuda . The Bermuda Corporate Income Tax Act 2023 ("Bermuda CIT Act") allows companies to elect to calculate an Economic Transition Adjustment ("ETA") based on the fair value of the assets and liabilities of FIBL at September 30, 2023 . Under the Bermuda CIT Act, fair value is as defined under U.S. GAAP. The ETA deferred tax asset is expected to be utilized over a fifteen-year period, with 99% of the deferred tax asset utilized by December 31, 2034 .
The deferred tax asset on the ETA comprises fair value adjustments for intangible assets, reserves for losses and loss adjustment expense, and unearned premiums. The fair values were estimated using a multi-period excess earnings model and discounted cash flow model. The most significant assumptions utilized in the models included the future revenue and profits of FIBL, the discount rates, and the levels of capital that a market participant would require to underwrite the business.
FIHL, FUL and FSL are tax resident in the U.K. and are subject to relevant taxes in the U.K. The 2023 tax year is open to examination in the U.K. FIID is tax resident in the Republic of Ireland . The 2020 to 2023 tax years are open to examination in Ireland . As of the date of this report, we do not expect the resolution of these open years to have a significant impact on our results of operations or financial condition.
At December 31, 2024 , the Group had unrecognized tax benefits of $75.0 million .
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