Annual Report for Fiscal Year Ending December 31, 2024 (Form 20-F)
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
This section should be read in conjunction with the "Business" section and the consolidated financial statements of IGI which are included elsewhere in this annual report. The financial information contained herein is taken or derived from such consolidated financial statements, unless otherwise indicated. The following discussion contains forward-looking statements. Our actual results could differ materially from those that are discussed in these forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report, particularly under "Risk Factors."
Introduction
We are a highly-rated global provider of specialty insurance and reinsurance solutions in over 200 countries and territories. We underwrite a diversified portfolio of specialty risks including energy, property, construction and
engineering, ports and terminals, general aviation, political violence, professional lines (non-U.S. ), financial institutions, marine and treaty reinsurance. Our size affords us the ability to be nimble and seek out profitable niches that can generate attractive underwriting results. Our underwriting focus is supported by exceptional service to our clients and brokers. Founded in 2001, we and our predecessors have prudently grown our business with a focus on underwriting profitability and risk-adjusted shareholder returns.
Our primary objective is to underwrite specialty products that maximize retuon equity subject to prudent risk constraints on the amount of capital we expose to any single event. We follow a careful and disciplined underwriting strategy with a focus on individually underwritten specialty risks through in-depth assessment of the underlying exposure. We use data analytics and modetechnology to offer our clients flexible products and customized and granular pricing. We manage our risks through a variety of means, including contract terms, portfolio selection and underwriting and geographic diversification. Our underwriting strategy is supplemented by a comprehensive risk transfer program with reinsurance coverage from highly-rated reinsurers that we believe lowers our volatility of earnings and provides appropriate levels of protection in the event of a major loss event.
We conduct our worldwide operations through three reportable segments under U.S. GAAP segment reporting: specialty long-tail, specialty short-tail and reinsurance. Our specialty long-tail segment includes (a) our professional lines of business, which includes our professional indemnity, directors and officers, legal expenses, intellectual property and other casualty lines of business, (b) our financial institutions line of business, (c) our marine liability line of business and (d) our inherent defects insurance line of business. Our specialty short-tail segment includes our energy (upstream, downstream and renewable), property, construction and engineering, political violence, ports and terminals, general aviation, marine cargo and contingency lines of business. Our reinsurance segment includes our inward reinsurance treaty business.
In addition, we have a corporate and other segment ("Corporate and other") which includes the activities of the Company, and which carries out certain functions, including investment management. Corporate and other includes general and administrative expenses, investment income, net realized gain (loss) on investments, net unrealized gain (loss) on investments, change in allowance for expected credit losses on investments, net foreign exchange gain (loss), change in allowance for expected credit losses on receivables, other expenses/revenues, change in fair value of derivative financial liabilities and income tax expense.
Description of Certain Income Statement Line Items
The definition and method of calculation of certain line items from IGI's consolidated income statement are provided below:
Gross written premiums
Gross written premiums comprise the total premiums receivable for the whole period of cover provided by contracts entered into during the accounting period. They are recognized on the date on which the policy commences. Premiums include any adjustments arising in the accounting period for premiums receivable in respect of business written in prior accounting periods. Rebates that form part of the premium rate, such as no-claim rebates, are deducted from the gross premium; others are recognized as an expense. Premiums also include estimates for pipeline premiums, representing amounts due on business written but not yet notified. We generally estimate the pipeline premium based on management's judgment and prior experience.
Ceded written premiums
Ceded written premiums comprise the total premiums payable for the reinsurance cover provided by retrocession contracts entered into during the year and are recognized on the date on which the policy incepts. Premiums include any adjustments arising in the accounting period in respect of reinsurance contracts incepting in prior accounting periods.
Net change in unearned premiums
Unearned premiums related to gross written premiums constitutes the proportion of premiums written in a year that relate to periods of risk after the reporting date. Unearned premiums are calculated on a pro rata basis. The proportion attributable to subsequent periods is deferred as a provision for unearned premiums.
Unearned reinsurance premiums related to ceded written premiums constitute the proportion of premiums written in a year that relate to periods of risk after the reporting date. Unearned reinsurance premiums are deferred over the term of the underlying direct insurance policies for risk-attaching contracts and over the term of the reinsurance contract for losses-occurring contracts.
Investment income
Investment income is comprised of interest and dividend income, net of investment custodian fees and other investment expenses.
Net realized gain (loss) on investments
Net realized gain and loss on investments is comprised of realized gain and loss on the sale of fixed maturity securities available-for-sale at fair value, equity securities at fair value and other investments.
Net unrealized gain (loss) on investments
Net unrealized gain (loss) on investments includes unrealized loss on revaluation of equity securities at fair value and other investments, in addition to the unrealized gain (loss) on equity-method investments at fair value which the Company has elected to account for using the fair value option.
Change in allowance for expected credit losses on investments
Change in allowance for expected credit losses on investments include an allowance for expected credit losses (ECLs) for fixed maturity securities available-for-sale at fair value and fixed maturity securities held to maturity.
Change in fair value of derivative financial liabilities
The Company's derivative financial liabilities include its warrants and outstanding eaout shares, which must be recorded at fair value with subsequent changes in fair value recorded in the consolidated statement of income at the end of each reporting period. The Company repurchased and redeemed all of its outstanding Warrants in September and October 2023 .
Other revenues
Other revenues comprise mainly chartered flights revenues and rental income.
Net loss and loss adjustment expenses
Losses, comprising amounts payable to contract holders and third parties and related loss adjustment expenses, net of salvage and other recoveries, are charged to income as incurred. Losses comprise the estimated amounts payable, in respect of losses reported to us and those not reported at the consolidated statement of financial position date.
We generally estimate our losses based on appointed loss adjusters or leading underwriters' recommendations. In addition, a provision based on management's judgment and our prior experience is maintained for the cost of settling losses incurred but not reported at the consolidated statement of financial position date.
Net loss and loss adjustment expenses constitute losses and loss adjustments expenses net of reinsurers' share of loss.
Net policy acquisition expenses
Net policy acquisition expenses represent commissions paid in relation to the acquisition and renewal of insurance and retrocession contracts which are deferred and expensed over the same period over which the corresponding premiums are recognized in accordance with the earning patteof the underlying contract. Net policy acquisition expenses are net of ceding commissions received on business ceded under certain reinsurance contracts.
General and administrative expenses
General and administrative expenses is comprised of human resources expenses, business promotion, travel and entertainment expenses, statutory, advisory and rating expenses, information technology and software expenses, office operation expenses, depreciation and amortization, bank charges and board of directors' expenses.
Change in allowance for expected credit losses on receivables
Change in allowance for expected credit losses on receivables includes an allowance for expected credit losses on premiums receivables and reinsurance recoverables.
Other expenses
Other expenses consist mainly of aircraft operational cost and depreciation.
Net foreign exchange gain (loss)
Gain (loss) on foreign exchange represents gains and/or losses incurred as a result of foreign currency transactions.
Income tax expense
Income tax expense reflects (1) income tax payable by IGI Labuan in accordance with the Labuan Business Activities Tax Act 1990, (2) tax payable by IGI Casablanca pursuant to the Casablanca Finance City Tax Code, (3) corporate tax payable by IGI UK and North Star Underwriting Limited in accordance with UK tax law, (4) corporate tax payable by IGI Europe in accordance with Malta income tax law, (5) that IGI Dubai and IGI Dubai Subsidiary are subject to income tax according to the UAE Federal tax law, (6) that IGI Bermuda is a tax-exempt company, (7) that IGI Underwriting is a tax-exempt company in Jordan , and (8) that IGI Nordic is subject to income tax according to Norwegian tax law.
A.Operating Results
The following section reviews IGI's results of operations during the years ended December 31, 2024 , 2023 and 2022. The discussion includes presentations of IGI's results on a consolidated basis and on a segment-by-segment basis.
Results of Operations - Consolidated
The following table summarizes IGI's consolidated statement of income for the years indicated:
| Year Ended |
|||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| ($) in millions, except per share information | |||||||||||||||||
| Gross written premiums | $ | 700.1 | $ | 688.7 | $ | 582.0 | |||||||||||
| Ceded written premiums | (210.6) | (191.5) | (189.2) | ||||||||||||||
| Net written premiums | 489.5 | 497.2 | 392.8 | ||||||||||||||
| Net change in unearned premiums | (6.4) | (50.0) | (16.4) | ||||||||||||||
| Net premiums earned | 483.1 | 447.2 | 376.4 | ||||||||||||||
| Investment income | 51.9 | 40.4 | 20.9 | ||||||||||||||
| Net realized gain (loss) on investments | 0.6 | 6.7 | (0.7) | ||||||||||||||
| Net unrealized gain (loss) on investments | 1.4 | 2.7 | (5.5) | ||||||||||||||
| Change in allowance for expected credit losses on investments | - | 0.4 | (0.3) | ||||||||||||||
| Other revenues | 2.0 | 1.9 | 2.4 | ||||||||||||||
| Total revenues | 539.0 | 499.3 | 393.2 | ||||||||||||||
| Expenses | |||||||||||||||||
| Net loss and loss adjustment expenses | (216.1) | (189.1) | (157.6) | ||||||||||||||
| Net policy acquisition expenses | (79.5) | (75.0) | (70.2) | ||||||||||||||
| General and administrative expenses | (90.4) | (78.9) | (67.2) | ||||||||||||||
| Change in allowance for expected credit losses on receivables | (1.5) | (2.5) | (3.2) | ||||||||||||||
| Change in fair value of derivative financial liabilities | (4.9) | (27.3) | 4.6 | ||||||||||||||
| Other expenses | (6.1) | (5.6) | (4.0) | ||||||||||||||
| Net foreign exchange (loss) gain | (8.1) | 5.1 | (3.5) | ||||||||||||||
| Total expenses | (406.6) | (373.3) | (301.1) | ||||||||||||||
| Income before tax | 132.4 | 126.0 | 92.1 | ||||||||||||||
| Income tax credit (expense) | 2.8 | (7.8) | (2.9) | ||||||||||||||
| Net income | $ | 135.2 | $ | 118.2 | $ | 89.2 | |||||||||||
| Basic earnings per share attributable to equity holders | $ | 3.01 | $ | 2.58 | $ | 1.85 | |||||||||||
| Diluted earnings per share attributable to equity holders | $ | 2.98 | $ | 2.55 | $ | 1.84 | |||||||||||
Gross written premiums
Gross written premiums increased 1.7% from $688.7 million in 2023 to $700.1 million in 2024. This was primarily due to a 2.9% increase (or $11.6 million ) in the specialty short-tail segment, and a 36.5% increase (or $22.3 million ) in the reinsurance segment, which was partially offset by a 9.9% decrease (or $22.5 million ) in the specialty long-tail segment. The increase in gross written premiums was the result of new business generated across most of the lines in our short-tail segment and our reinsurance segment, supported by the increase in overall premium renewal rates in the reinsurance segment which benefited from sustained hard market conditions.
Gross written premiums increased 18.3% from $582.0 million in 2022 to $688.7 million in 2023. This was primarily due to 26.2% growth (or $83.3 million ) in the specialty short-tail segment, and 94.0% growth (or $29.6 million ) in the reinsurance segment, which was partially offset by a 2.7% decline (or $6.2 million ) in the specialty long-tail segment. The increase in gross written premiums was the result of new business generated across most of the lines in our short-tail segment and our reinsurance segment, supported by the increase in overall premium renewal rates in these segments and benefitting from sustained hard market conditions in many of our reinsurance and short-tail lines.
Ceded written premiums
Ceded written premiums increased 10.0% from $191.5 million in 2023 to $210.6 million in 2024. This increase was primarily due to higher facultative reinsurance purchases recorded under the short-tail segment.
Ceded written premiums increased 1.2% from $189.2 million in 2022 to $191.5 million in 2023. The increase in ceded written premiums was due to the increase in gross written premiums, offset by a 10.7% decrease in facultative reinsurance purchases within the short-tail segment.
Net change in unearned premiums
Net change in unearned premiums decreased 87.2% from expense of $50.0 million in 2023 to expense of $6.4 million in 2024. The decrease in net change in unearned premiums was attributable to the decrease in net written premiums in our long-tail segment and the increase in ceded written premiums under our short-tail segment, both of which caused a lower level of net change in unearned premiums on a comparative basis.
Net change in unearned premiums increased more than two-fold from expense of $16.4 million in 2022 to expense of $50.0 million in 2023. The increase in net change in unearned premiums of $33.6 million was due to the increase in net written premiums in our short-tail segment and our reinsurance segment.
Net premiums earned
As a result of the foregoing, net premiums earned increased 8.0% from $447.2 million in 2023 to $483.1 million in 2024.
As a result of the foregoing, net premiums earned increased 18.8% from $376.4 million in 2022 to $447.2 million in 2023.
Net investment income
Net investment income increased from $14.4 million in 2022 and $50.2 million in 2023 to $53.9 million in 2024 as a result of the following:
Investment income
Investment income (comprised of interest and dividend income, net of investment custodian fees and other investment expenses) increased 28.5% from $40.4 million in 2023 to $51.9 million in 2024. This was primarily due to a $11.3 million increase in interest income which was attributable to the rise in interest rates compared in 2024 to 2023 along with a greater amount of funds invested in fixed maturity securities available-for-sale and bank term deposits.
Investment income (comprised of interest and dividend income, net of investment custodian fees and other investment expenses) increased 93.3% from $20.9 million in 2022 to $40.4 million in 2023. This was primarily due to a $19.4 million increase in interest income which was attributable to the rise in interest rates compared to the same period of 2022 along with a greater amount of funds invested in fixed maturity securities available-for-sale.
Net realized gain on investments
Net realized gain on investments reflects a net gain of $0.6 million in 2024 compared to a net gain of $6.7 million in 2023. This change was primarily due to a higher realized gain on the sale of equity securities benefiting from positive market conditions in 2023.
Net realized gain (loss) on investments reflects a net gain of $6.7 million in 2023 compared to a net loss of $0.7 million in 2022. This change was primarily due to a realized gain on the sale of equity securities benefiting from positive market conditions.
Net unrealized gain on investments
Net unrealized gain on investments reflects a net gain of $1.4 million in 2024 compared to a net gain of $2.7 million in 2023. This change was primarily due to a less favorable mark to market revaluation gain recorded on equity securities during 2024 compared to 2023.
Net unrealized gain (loss) on investments reflects a net gain of $2.7 million in 2023 compared to a net loss of $5.5 million in 2022. This change was due to a mark to market revaluation gain recorded on equity securities and other investments during the year ended December 31, 2023 compared to an unrealized loss in the year ended December 31, 2022 . This was offset by the unrealized loss on equity-method investments at fair value which decreased from a gain of $0.3 million in the year ended December 31, 2022 to a loss of $1.4 million in the year ended December 31, 2023 .
Net loss and loss adjustment expenses
Net loss and loss adjustment expenses increased 14.3% from $189.1 million in 2023 to $216.1 million in 2024. This was primarily due to the increase in current accident year losses in all segments in 2024 compared to 2023, and to a lesser extent negatively impacted by lower favorable development on loss reserves from prior accident years. See "Operating and Financial Review and Prospects - Reserves - Reserving Results & Development."
Net loss and loss adjustment expenses increased 20.0% from $157.6 million in 2022 to $189.1 million in 2023. This was primarily due to the increase in current accident year losses in all segments in 2023 compared to 2022, which also included a higher current year catastrophe losses within the short-tail and reinsurance segments. The increase in current accident year losses was partially offset by higher favorable development on loss reserves from prior accident years within the short-tail and reinsurance segments.
The tables below outline reported incurred losses on catastrophe events in the years ended December 31, 2024 , 2023 and 2022.
| For the Year Ended |
|||||||||||
| Gross Incurred Amount |
Net Incurred Amount |
||||||||||
| ($ in millions) | |||||||||||
| Catastrophe Event | |||||||||||
| Taiwan Earthquake | $ | 6.2 | $ | 6.2 | |||||||
| 5.3 | 5.3 | ||||||||||
| SoutheGermany Floods | 1.9 | 1.9 | |||||||||
| 1.8 | 1.8 | ||||||||||
| Djibouti Storm | 2.3 | 1.4 | |||||||||
| Other | 14.1 | 10.1 | |||||||||
| Provided during the year related to prior accident years | 9.6 | 11.4 | |||||||||
| Total | $ | 41.2 | $ | 38.1 | |||||||
| For the Year Ended |
|||||||||||
| Gross Incurred Amount |
Net Incurred Amount |
||||||||||
| ($ in millions) | |||||||||||
| Catastrophe Event | |||||||||||
| Turkey Earthquake | $ | 10.6 | $ | 9.3 | |||||||
| Cyclone Gabrielle | 4.4 | 3.1 | |||||||||
| Hurricane Otis | 7.5 | 2.5 | |||||||||
| Oman Adverse Weather Conditions | 1.3 | 1.2 | |||||||||
| Hawaii Wildfires | 1.1 | 1.1 | |||||||||
| Other | 9.2 | 8.3 | |||||||||
| Provided during the year related to prior accident years | 8.2 | 4.1 | |||||||||
| Total | $ | 42.3 | $ | 29.6 | |||||||
| For the Year Ended |
|||||||||||
| Gross Incurred Amount |
Net Incurred Amount |
||||||||||
| ($ in millions) | |||||||||||
| Catastrophe Event | |||||||||||
| Hurricane Ian | $ | 2.2 | $ | 2.1 | |||||||
| Australia Floods | 1.8 | 1.8 | |||||||||
| Adverse High Wind - Event Cancelation | 1.1 | 0.9 | |||||||||
| Typhoon Hinnamnor | 0.8 | 0.8 | |||||||||
| Kuwait Flood | 0.8 | 0.7 | |||||||||
| Other | 5.8 | 5.1 | |||||||||
| Provided during the year related to prior accident years | 28.3 | 19.0 | |||||||||
| Total | $ | 40.8 | $ | 30.4 | |||||||
Net policy acquisition expenses
Net policy acquisition expenses increased 6.0% from $75.0 million in 2023 to $79.5 million in 2024. The net policy acquisition expense ratio for 2023 was 16.8% compared to 16.5% for 2024.
Net policy acquisition expenses increased 6.8% from $70.2 million in 2022 to $75.0 million in 2023. The net policy acquisition expense ratio for 2022 was 18.7% compared to 16.8% for 2023. The decrease of 1.9 percentage points was primarily attributable to a higher retention ratio under the short-tail segment, coupled with growth in net premiums earned.
General and administrative expenses
General and administrative expenses increased by 14.6% from $78.9 million in 2023 to $90.4 million in 2024. This was primarily caused by higher human resources costs and IT related expenses in line with the Company's growth.
General and administrative expenses increased by 17.4% from $67.2 million in 2022 to $78.9 million in 2023. This was primarily due to new hires, professional fees and IT related expenses.
Change in allowance for expected credit losses on receivables
Change in allowance for expected credit losses on receivables decreased from $2.5 million in 2023 to $1.5 million in 2024 due to the decrease in over 365 days due receivables which carry 100% of ECL allowance.
Change in allowance for ECL on receivables decreased from $3.2 million in 2022 to $2.5 million in 2023. This decrease was mainly due to recording of an allowance in the year ended December 31, 2022 as a result of the economic sanctions imposed on Russia related to the invasion of Ukraine , which was largely reversed in the year ended December 31, 2023 .
Change in fair value of derivative financial liabilities
Change in fair value of derivative financial liabilities decreased from a loss of $27.3 million in 2023 to a loss of $4.9 million in 2024. The decrease was a result of (1) in 2023, the increase in the fair value of warrants upon settlement of warrants in cash pursuant to the Company's offer to purchase all of its outstanding warrants at an average purchase price of $0.95 per warrant in cash and related redemption of warrants, and (2) the discontinuation of changes in the fair value of earnout share as the final tranche of earnout shares vested during the third quarter of 2024.
Change in fair value of derivative financial liabilities decreased from a gain of $4.6 million in 2022 to a loss of $27.3 million in 2023. The change of $31.9 million was a result of (1) the increase in the fair value of warrants upon
settlement of warrants in cash pursuant to the Company's offer to purchase all of its outstanding warrants at an average purchase price of $0.95 per warrant in cash and related redemption of warrants, and (2) the increase in the fair value of the earnout shares which was driven by an increase in the quoted market price of IGI's common shares, as the market price crossed the first tranche in the vesting schedule of the earnout shares.
Other Expenses
Other expenses increased from $5.6 million in 2023 to $6.1 million in 2024. It also increased from $4.0 million in 2022 to $5.6 million in 2023. The increase in 2023 was mainly due to $1.9 million of expenses related to the repurchase of and redemption of warrants for cash.
Net foreign exchange (loss) gain
Net foreign exchange loss for the year ended December 31, 2024 was $8.1 million compared to a gain of $5.1 million for the year ended December 31, 2023 . During 2024, the Company experienced a negative currency movement in the Company's major transactional currencies, primarily the Pound Sterling and the Euro, against the U.S. Dollar.
Net foreign exchange gain for the year ended December 31, 2023 was $5.1 million compared to a loss of $3.5 million for the year ended December 31, 2022 . This was primarily attributable to a greater degree of positive currency movement in our major transactional currencies, primarily the Pound Sterling and the Euro, against the U.S. Dollar.
Results of Operations - Specialty Long-tail Segment
The following table summarizes the results of operations of IGI's specialty long-tail segment for the years indicated:
| Year Ended |
|||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| ($) in millions, unless otherwise specified | |||||||||||||||||
| Gross written premiums | $ | 204.4 | $ | 226.9 | $ | 233.1 | |||||||||||
| Ceded written premiums | (68.2) | (73.9) | (65.6) | ||||||||||||||
| Net written premiums | 136.2 | 153.0 | 167.5 | ||||||||||||||
| Net change in unearned premiums | 10.1 | 4.8 | (0.1) | ||||||||||||||
| Net premiums earned (a) | 146.3 | 157.8 | 167.4 | ||||||||||||||
| Net loss and loss adjustment expenses (b) | (78.7) | (69.2) | (50.5) | ||||||||||||||
| Net policy acquisitions expenses (c) | (28.1) | (31.2) | (33.1) | ||||||||||||||
| Underwriting income | $ | 39.5 | $ | 57.4 | $ | 83.8 | |||||||||||
| Loss ratio (b)/(a) (%) | 53.8 | % | 43.9 | % | 30.2 | % | |||||||||||
| Net policy acquisition expense ratio (c)/(a) (%) | 19.2 | % | 19.8 | % | 19.8 | % | |||||||||||
Gross written premiums
Gross written premiums in the specialty long-tail segment decreased 9.9% from $226.9 million in 2023 to $204.4 million in 2024. This was primarily due to the decline in new business because of the Company's cautious and selective approach driven by the softness in the market for this segment.
Gross written premiums in the specialty long-tail segment decreased 2.7% from $233.1 million in 2022 to $226.9 million in 2023. This was primarily due to a negative rate movement of 1.2% in renewed business and the decline in new business because of the cautious and selective approach driven by the softness in the market for this segment which in several previous years demonstrated compounded growth.
Ceded written premiums
Ceded written premiums in the specialty long-tail segment decreased from $73.9 million in 2023 to $68.2 million in 2024, in line with the decrease in gross written premiums.
Ceded written premiums in the specialty long-tail segment increased from $65.6 million in 2022 to $73.9 million in 2023. The increase was primarily due to increased quota share reinsurance purchases in the professional lines and financial institutions line of business, in addition to increased non-proportional reinsurance purchases in the professional lines.
Net change in unearned premiums
Net change in unearned premiums in the specialty long-tail segment increased from income of $4.8 million in 2023 to income of $10.1 million in 2024. The increase was primarily driven by our inherent defects insurance line of business, which contributed a majority of the unearned premiums released during 2024 as a result of the Company ceasing to write this business.
Net change in unearned premiums in the specialty long-tail segment increased from expense of $0.1 million in 2022 to income of $4.8 million in 2023. The net change was primarily driven by the decrease in gross written premiums, coupled with higher release of earned premiums related to prior underwriting years in 2023 compared to 2022.
Net premiums earned
As a result of the foregoing, net premiums earned in the specialty long-tail segment decreased 7.3% from $157.8 million in 2023 to $146.3 million in 2024, and decreased 5.7% from $167.4 million in 2022 to $157.8 million in 2023.
Net loss and loss adjustment expenses
Net loss and loss adjustment expenses in the specialty long-tail segment increased by 13.7% from $69.2 million in 2023 to $78.7 million in 2024. This was primarily due to $7.2 million of lower favorable development on loss reserves from prior accident years in this segment, accompanied by a $2.3 million increase in current accident losses on a comparative basis.
The loss ratios in the long-tail segment were 53.8% and 43.9% in 2024 and 2023, respectively. The increase in the ratio was mainly driven by a higher level of net loss and loss adjustment expenses and lower net premiums earned on a comparative basis.
Net loss and loss adjustment expenses in the specialty long-tail segment increased by 37.0% from $50.5 million in 2022 to $69.2 million in 2023. This was primarily due to the increase in current accident year losses of $5.8 million within this segment on a comparative basis, in addition to $12.9 million of lower favorable development on loss reserves from prior accident years in 2023 compared to 2022.
The loss ratios in the long-tail segment were 30.2% and 43.9% in 2022 and 2023, respectively. The increase in the ratio was mainly driven by a higher level of net loss and loss adjustment expenses and lower net premiums earned on a comparative basis. Net loss and loss adjustment expenses in the specialty long-tail segment decreased by 40.4% from $84.7 million in 2021 to $50.5 million in 2022. This was primarily due to higher favorable development of net loss reserves from prior accident years, which were also positively affected by the currency devaluation impact on loss reserves denominated in Pound Sterling and Euro in 2022.
Policy acquisition expenses
Policy acquisition expenses in the specialty long-tail segment decreased by 9.9% from $31.2 million in 2023 to $28.1 million in 2024. The net policy acquisition expense ratio for 2024 was 19.2% compared to 19.8% in 2023.
Policy acquisition expenses in the specialty long-tail segment decreased by 5.7% from $33.1 million in 2022 to $31.2 million in 2023. The net policy acquisition expense ratio for each of 2023 and 2022 was 19.8%.
Results of Operations - Specialty Short-tail Segment
The following table summarizes the results of operations of IGI's specialty short-tail segment for the years indicated:
|
Year Ended
|
|||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| ($) in millions, unless otherwise specified | |||||||||||||||||
| Gross written premiums | $ | 412.3 | $ | 400.7 | $ | 317.4 | |||||||||||
| Ceded written premiums | (140.9) | (117.6) | (123.6) | ||||||||||||||
| Net written premiums | 271.4 | 283.1 | 193.8 | ||||||||||||||
| Net change in unearned premiums | (15.4) | (46.9) | (15.1) | ||||||||||||||
| Net premiums earned (a) | 256.0 | 236.2 | 178.7 | ||||||||||||||
| Net loss and loss adjustment expenses (b) | (103.3) | (93.1) | (90.0) | ||||||||||||||
| Net policy acquisitions expenses (c) | (40.5) | (36.0) | (31.5) | ||||||||||||||
| Underwriting income | $ | 112.2 | $ | 107.1 | $ | 57.2 | |||||||||||
| Loss ratio (b)/(a) (%) | 40.4 | % | 39.4 | % | 50.4 | % | |||||||||||
| Net policy acquisition expense ratio (c)/(a) (%) | 15.8 | % | 15.2 | % | 17.6 | % | |||||||||||
Gross written premiums
Gross written premiums in the specialty short-tail segment increased by 2.9% from $400.7 million in 2023 to $412.3 million in 2024. This was primarily due to the growth in gross written premiums in most of the business lines in this segment.
Gross written premiums in the specialty short-tail segment increased by 26.2% from $317.4 million in 2022 to $400.7 million in 2023. This was primarily due to the increase in average renewal premium rates of 9.0% and growth in new business in 2023. Most of our lines of business contributed to growth in gross written premiums in this segment.
Ceded written premiums
Ceded written premiums in the specialty short-tail segment increased by 19.8% from $117.6 million in 2023 to $140.9 million in 2024. This increase was primarily due to higher facultative reinsurance purchases recorded.
Ceded written premiums in the specialty short-tail segment decreased by 4.9% from $123.6 million in 2022 to $117.6 million in 2023. This decrease was primarily due to lower facultative reinsurance purchases recorded.
Net change in unearned premiums
Net change in unearned premiums decreased from an expense of $46.9 million in 2023 to an expense of $15.4 million in 2024. This decrease was attributable to a higher level of reinsurance ceded premiums under the short-tail segment on a comparative basis causing a lower level of change in unearned premiums on a net basis.
Net change in unearned premiums increased from an expense of $15.1 million in 2022 to an expense of $46.9 million in 2023. This increase was in line with the increase in net written premiums recorded in this segment on a comparative basis.
Net premiums earned
As a result of the foregoing, net premiums earned in the specialty short-tail segment increased 8.4% from $236.2 million in 2023 to $256.0 million in 2024 and increased 32.2% from $178.7 million in 2022 to $236.2 million in 2023.
Net loss and loss adjustment expenses
Net loss and loss adjustment expenses in the specialty short-tail segment increased by 11.0% from $93.1 million in 2023 to $103.3 million in 2024. This was primarily due to a $12.6 million increase in current accident losses, offset by $2.4 million of higher favorable development on loss reserves from prior accident years in 2024 compared to 2023.
Net loss and loss adjustment expenses in the specialty short-tail segment increased by 3.4% from $90.0 million in 2022 to $93.1 million in 2023. This was primarily due to a $10.4 million increase in current accident losses, offset by $7.3 million of higher favorable development on loss reserves from prior accident years in 2023 compared to 2022.
The short-tail segment loss ratio increased by 1.0 percentage points to 40.4% for the year ended December 31, 2024 as compared to 39.4% during the year ended December 31, 2023 . The increase in the loss ratio was mainly driven by higher net premiums earned on a comparative basis.
The short-tail segment loss ratio decreased by 11.0 percentage points to 39.4% for the year ended December 31, 2023 as compared to 50.4% during the year ended December 31, 2022 . The decrease in the loss ratio was mainly driven by higher net premiums earned on a comparative basis.
Net policy acquisition expenses
Policy acquisition expenses in the specialty short-tail segment increased by 12.5% from $36.0 million in 2023 to $40.5 million in 2024 in line with the growth in premiums written. The net policy acquisition expense ratio for 2024 was 15.8% compared to 15.2% in 2023.
Policy acquisition expenses in the specialty short-tail segment increased by 14.3% from $31.5 million in 2022 to $36.0 million in 2023. The increase was primarily due to an increase in net premiums earned in 2023 compared to 2022. The net policy acquisition expense ratio for 2023 was 15.2% compared to 17.6% in 2022. The decrease in the net policy acquisition expense ratio was primarily attributable to a higher retention ratio in the short-tail segment, coupled with growth in net premiums earned.
Results of Operations - Reinsurance Segment
The following table summarizes the results of operations of IGI's reinsurance segment for the years indicated:
| Year Ended |
|||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| ($) in millions, unless otherwise specified | |||||||||||||||||
| Gross written premiums | $ | 83.4 | $ | 61.1 | $ | 31.5 | |||||||||||
| Ceded written premiums | (1.5) | - | - | ||||||||||||||
| Net written premiums | 81.9 | 61.1 | 31.5 | ||||||||||||||
| Net change in unearned premiums | (1.1) | (7.9) | (1.2) | ||||||||||||||
| Net premiums earned (a) | 80.8 | 53.2 | 30.3 | ||||||||||||||
| Net loss and loss adjustment expenses (b) | (34.1) | (26.8) | (17.1) | ||||||||||||||
| Net policy acquisitions expenses (c) | (10.9) | (7.8) | (5.6) | ||||||||||||||
| Underwriting income | $ | 35.8 | $ | 18.6 | $ | 7.6 | |||||||||||
| Loss ratio (b)/(a) (%) | 42.2 | % | 50.4 | % | 56.4 | % | |||||||||||
| Net policy acquisition expense ratio (c)/(a) (%) | 13.5 | % | 14.7 | % | 18.5 | % | |||||||||||
Gross written premiums
Gross written premiums in the reinsurance segment increased 36.5% from $61.1 million in 2023 to $83.4 million in 2024, benefitting from growth in both new business premiums and renewal premiums under proportional and non-
proportional lines of business. Also, growth in gross written premiums was supported by the increase in average renewal premium rates of 4.9%.
Gross written premiums in the reinsurance segment increased 94.0% from $31.5 million in 2022 to $61.1 million in 2023, benefitting from growth in both new business premiums and renewal premiums under proportional and non-proportional lines of business. Also, growth in gross written premiums was supported by the increase in average renewal premium rates of 25.4%.
Net change in unearned premiums
Net change in unearned premiums in the reinsurance segment decreased from an expense of $7.9 million in 2023 to an expense of $1.1 million in 2024. Out of$20.8 million increase in net written premiums in this segment, 69.2% increase was related to the business incepted in the first half of 2024, which carried lower unearned premiums expense as of the year end 2024.
Net change in unearned premiums in the reinsurance segment increased from an expense of $1.2 million in 2022 to an expense of $7.9 million in 2023. This increase was in line with the increase in net written premiums recorded in this segment on a comparative basis.
Net premiums earned
As a result of the foregoing, net premiums earned in the reinsurance segment increased 51.9% from $53.2 million in 2023 to $80.8 million in 2024, and increased 75.6% from $30.3 million in 2022 to $53.2 million in 2023.
Net loss and loss adjustment expenses
Net loss and loss adjustment expenses in the reinsurance segment increased 27.2% from $26.8 million in 2023 to $34.1 million in 2024. This was primarily due to the increase in current year accident year losses of $10.0 million on a comparative basis. The increase in current year losses was partially offset by $2.7 million of higher favorable development on loss reserves from prior accident years in 2024 compared to 2023.
Net loss and loss adjustment expenses in the reinsurance segment increased 56.7% from $17.1 million in 2022 to $26.8 million in 2023. This was primarily due to the increase in current year accident year losses of $14.0 million on a comparative basis, which also included a higher level of catastrophe losses, mainly related to the Turkey earthquake in 2023. The increase in current year losses was partially offset by a positive change of $4.3 million from unfavorable development on loss reserves from prior accident years in 2022 compared to favorable development in 2023.
Loss ratios for the reinsurance segment for the three years ended December 31, 2024 , 2023 and 2022 were as follows:
•42.2% in 2024
•50.4% in 2023
•56.4% in 2022
The decrease in the loss ratios for the reinsurance segment in 2024 and 2023 was mainly driven by the increase in net premiums earned being higher than the increase in net loss and loss adjustment expenses on a comparative basis.
Net policy acquisition expenses
Net policy acquisition expenses in the reinsurance segment increased by 39.7% from $7.8 million in 2023 to $10.9 million in 2024. The net policy acquisition expense ratio for 2024 was 13.5% compared to 14.7% for 2023. The decrease in the net policy acquisition expense ratio was primarily attributable to growth in net premiums earned.
Net policy acquisition expenses in the reinsurance segment increased by 39.3% from $5.6 million in 2022 to $7.8 million in 2023. The net policy acquisition expense ratio for 2023 was 14.7% compared to 18.5% for 2022. The decrease in the net policy acquisition expense ratio was primarily attributable to growth in net premiums earned.
Non-GAAP Financial Measures
In presenting our results, management has included and discussed certain non-GAAP financial measures. We believe that these non-GAAP measures, which may be defined and calculated differently by other companies, explain and enhance investor understanding of our results of operations. However, these measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP.
Core operating income
"Core operating income" measures the performance of our operations without the influence of after-tax gains or losses on investments and foreign currencies and other items as noted in the table below. We exclude these items from our calculation of core operating income because the amount of these gains and losses is heavily influenced by, and fluctuates in part according to, economic and other factors external to the Company and/or transactions or events that are typically not a recurring part of, and are largely independent of, our core underwriting activities and including them distorts the analysis of trends in our operations. We believe the reporting of core operating income enhances an understanding of our results by highlighting the underlying profitability of our core insurance operations. Our underwriting profitability is impacted by earned premium growth, the adequacy of pricing, and the frequency and severity of losses. Over time, such profitability is also influenced by underwriting discipline, which seeks to manage the Company's exposure to loss through favorable risk selection and diversification, IGI's management of claims, the use of reinsurance and the ability to manage the expense ratio, which the Company accomplishes through the management of acquisition costs and other underwriting expenses.
In addition to presenting net income for the year determined in accordance with U.S. GAAP, we believe that showing "core operating income" provides investors with a valuable measure of profitability and enables investors, rating agencies and other users of our financial information to more easily analyze the Company's results in a manner similar to how management analyzes the Company's underlying business performance. Core operating income is calculated by the addition or subtraction of certain income statement line items from net income for the year, the most directly comparable U.S. GAAP financial measure, as illustrated in the table below.
Retuon average equity and core operating retuon average equity, which are both non-GAAP financial measures, represent the returns generated on common shareholders' equity during the year.
| Year Ended |
|||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| ($) in millions, unless otherwise specified | |||||||||||||||||
| Net income for the year | $ | 135.2 | $ | 118.2 | $ | 89.2 | |||||||||||
| Reconciling items between net income for the year and core operating income: | |||||||||||||||||
| Net realized (gain) loss on investments | (0.6) | (6.7) | 0.7 | ||||||||||||||
| Net unrealized (gain) loss on investments | (1.4) | (2.7) | 5.5 | ||||||||||||||
|
Tax impact of net unrealized (gain) loss on investments(1)
|
- | 0.1 | (0.1) | ||||||||||||||
| Change in allowance for expected credit losses on investments | - | (0.4) | 0.3 | ||||||||||||||
|
Tax impact of change in allowance for expected credit losses on investments(1)
|
- | - | 0.1 | ||||||||||||||
| Change in fair value of derivative financial liabilities | 4.9 | 27.3 | (4.6) | ||||||||||||||
|
Expenses related to conversion of warrants in cash(2)
|
- | 1.9 | - | ||||||||||||||
| Net foreign exchange loss (gain) | 8.1 | (5.1) | 3.5 | ||||||||||||||
|
Tax impact of net foreign exchange loss (gain)(1)
|
(1.4) | 1.2 | (0.7) | ||||||||||||||
| Core operating income | $ | 144.8 | $ | 133.8 | $ | 93.9 | |||||||||||
|
Average shareholders' equity(3)
|
$ | 597.6 | $ | 475.7 | $ | 396.0 | |||||||||||
|
Retuon average equity (%)(4)
|
22.6 | % | 24.8 | % | 22.5 | % | |||||||||||
|
Core operating retuon average equity (%)(5)
|
24.2 | % | 28.1 | % | 23.7 | % | |||||||||||
|
Basic core operating earnings per share ($)(6)
|
$ | 3.23 | $ | 2.92 | $ | 1.95 | |||||||||||
|
Diluted core operating earnings per share ($)(6)
|
$ | 3.19 | $ | 2.88 | $ | 1.94 | |||||||||||
(1)The tax impact was calculated by applying the prevailing corporate tax rate of each subsidiary to the gross value of the relevant reconciling items as recognized separately by the subsidiaries on a standalone basis.
(2)This expense is included in the 'Other expenses' line item in the Consolidated Statement of Income.
(3)Represents the total shareholders' equity at the reporting period end plus the total shareholders' equity as of the beginning of the reporting period, divided by 2.
(4)Retuon average equity represents the net income for the year divided by average shareholders' equity.
(5)Represents core operating income for the year divided by average shareholders' equity.
(6)Represents core operating income attributable to vested equity holders divided by weighted average number of vested common shares diluted as follows:
| Year Ended |
|||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| ($) in millions, except per share information and number of shares as indicated below | |||||||||||||||||
| Core operating income for the year | $ | 144.8 | $ | 133.8 | $ | 93.9 | |||||||||||
| Minus: Core operating income attributable to earnout shares | 1.5 | 8.5 | 5.2 | ||||||||||||||
| Minus: Dividends attributable to restricted share awards | 0.6 | - | 0.1 | ||||||||||||||
| Core operating income for the period attributable to common shareholders (a) | $ | 142.7 | $ | 125.3 | $ | 88.6 | |||||||||||
| Weighted average number of shares - basic (in millions of shares) (b) | 44.2 | 42.9 | 45.5 | ||||||||||||||
| Weighted average number of shares - diluted (in millions of shares) (c) | 44.7 | 43.5 | 45.7 | ||||||||||||||
| Basic core operating earnings per share ($) (a/b) | $ | 3.23 | $ | 2.92 | $ | 1.95 | |||||||||||
| Diluted core operating earnings per share ($) (a/c) | $ | 3.19 | $ | 2.88 | $ | 1.94 | |||||||||||
B.Liquidity and Capital Resources
Our principal sources of capital are equity and external reinsurance. The principal sources of funds for our operations are insurance and reinsurance premiums and investment returns. The principal uses of our funds are to pay claims benefits, related expenses, other operating costs and dividends to shareholders.
As of December 31, 2024 , our cash and cash equivalents totaled $155.2 million with short-term investments amounting to $89.5 million , providing available short-term liquidity of $244.7 million . Our entire balance of cash and cash equivalents, as well as our short-term investments, were held by subsidiaries outside the U.S. , primarily in Bermuda , the United Kingdom , Malta and Malaysia . These funds are mainly utilized to support the on-going liquidity needs of these subsidiaries outside the United States and, to some extent, to fund the share repurchase program and dividend distributions by the Company. Since the SEC registrant and parent company is incorporated in Bermuda , and all of its subsidiaries are organized and based outside the U.S. , the Company has no need or plans to repatriate cash to the United States .
The Company is indefinitely reinvesting its funds held in foreign jurisdictions outside of the U.S. While the Company has no subsidiaries in the United States and has no plans to repatriate funds to the U.S. , if any of its funds are ever in the future repatriated to the U.S. , or used for U.S. operations, certain amounts could be subject to tax. Due to the uncertainty regarding the timing and circumstances of repatriation of any such earnings, if any, it is not practicable at this time to quantify the amount of tax that would be payable in connection with such repatriation
We have not historically incurred debt. As of December 31, 2024 , we had $5.1 million of letters of credit outstanding to the order of reinsurance companies for collateralizing insurance contract liabilities in accordance with reinsurance arrangements. As of December 31, 2023 , we had $1.8 million of letters of credit. In addition, as of December 31, 2024 and 2023, we had outstanding an approximately $0.3 million letter of guarantee for the benefit of Friends Provident Life Assurance Limited for collateralizing IGI's rent payment obligation for one of its offices.
Our current arrangements with bankers for the issue of letters of credit require us to provide collateral in the form of investments whereby the issued letters of credit do not exceed 70% of the collateralized investment. As at December 31, 2024 and 2023, these investments amounted to $7.3 million and $2.6 million , respectively. We do not consider that this unduly restricts our liquidity at this time.
In 2021, we signed a legally non-binding agreement with the University of California, San Francisco Foundation to contribute an aggregate amount of $1.25 million in five installments over five years to support cancer research projects. As of December 31, 2024 , we have paid $1.0 million and the remaining instalment amounting to $0.25 million will be made in 2025.
We have historically paid regular dividends to our shareholders. In March 2022 , we declared a dividend of $0.19 per share, and in May, August and November 2022 , we declared dividends of $0.01 per share, respectively. In March, May, August and November 2023 , we declared dividends of $0.01 per share, respectively. In March 2024 , we declared dividends of $0.51 per share, and in May, August and November 2024 , we declared dividends of $0.025 per share, respectively.
Our overall capital requirements are based on regulatory capital adequacy and solvency margins and ratios imposed by the BMA in Bermuda , by the FCA and the PRA in the United Kingdom , and by the MFSA in Malta . In addition, we set our own internal capital policies. Our overall capital requirements can be impacted by a variety of factors including economic conditions, business mix, the composition of our investment portfolio, year-to-year movements in net reserves, our reinsurance program and regulatory requirements.
Capital position
We are a holding company with no direct source of operating income. We are therefore dependent on our capital raising abilities and dividend payments from our subsidiaries. The ability of our subsidiaries to distribute cash to us to pay dividends is limited by regulatory capital requirements.
Our operations generate cash flow as a result of the receipt of premiums in advance of the time when claim payments are required. Net cash from operating activities, together with other available sources of liquidity, historically has enabled us to meet our long-term liquidity requirements. We expect that net cash from operating activities will enable us to meet our long-term liquidity requirements for at least the next 12 months.
We target a solvency ratio of more than 130% of the BSCR (120% is the minimum that the BMA requires), to ensure capital strength, enable opportunistic growth and support a stable dividend policy.
Cash flows
| Year Ended |
|||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| ($) in millions | |||||||||||||||||
| Net cash flows from operating activities | $ | 209.5 | $ | 196.6 | $ | 154.9 | |||||||||||
| Net cash flows used in investing activities | (186.6) | (90.4) | (246.6) | ||||||||||||||
| Net cash flows used in financing activities | (49.7) | (49.1) | (12.5) | ||||||||||||||
| Change in cash and cash equivalents | $ | (26.8) | $ | 57.1 | $ | (104.2) | |||||||||||
Net cash flows from operating activities
Net cash flows from operating activities increased from net cash inflow of $196.6 million for the year ended December 31, 2023 compared to net cash inflow of $209.5 million for the year ended December 31, 2024 . This increase was primarily due to the higher level of net premiums written in excess of net claim payments and acquisition costs paid.
Net cash flows from operating activities increased by $41.7 million from net cash inflow of $154.9 million for the year ended December 31, 2022 compared to net cash inflow of $196.6 million for the year ended December 31, 2023 . This increase was primarily due to growth of the business.
Net cash flows used in investing activities
Net cash flows used in investing activities increased from net cash outflow of $90.4 million for the year ended December 31, 2023 to net cash outflow of $186.6 million for the year ended December 31, 2024 . This was primarily due to the decrease in the term deposits and short-term investments combined, which were supported by higher purchases of fixed maturity securities available-for-sale.
Net cash flows used in investing activities decreased from net cash outflow of $246.6 million for the year ended December 31, 2022 to net cash outflow of $90.4 million for the year ended December 31, 2023 . This was primarily due to positive movement on the term deposits and short-term investments combined, which was offset by higher purchases of fixed maturity securities available-for-sale, equity securities and other investments.
Net cash flows used in financing activities
Net cash flows used in financing activities increased from a net cash outflow of $49.1 million for the year ended December 31, 2023 to a net cash outflow of $49.7 million for the year ended December 31, 2024 . The cash outflow from financing activities in the year ended December 31, 2024 included a dividend payment of $26.5 million , and the repurchase of common shares under our share repurchase program of $23.2 million .
Net cash flows used in financing activities increased from a net cash outflow of $12.5 million for the year ended December 31, 2022 to a net cash outflow of $49.1 million for the year ended December 31, 2023 . The cash outflow from financing activities for the year ended December 31, 2023 primarily represented a cash payment for the repurchase of common shares of $31.1 million and cash payment for the repurchase and redemption of warrants of $16.3 million .
Ratings
In November 2021 , A.M. Best reaffirmed the ratings of our insurance subsidiaries (IGI Bermuda, IGI UK and IGI Europe) with an "A" (Excellent)/Stable. This rating reflects A.M. Best's view of our financial strength, underwriting performance and ability to meet obligations to policyholders. In November 2023 and November 2024 , A.M. Best reaffirmed our rating with an "A" (Excellent)/Stable.
In April 2024 , S&P reaffirmed our financial strength with an "A-"/Stable.
Capital Requirements
We are subject to regulatory and internal management capital requirements.
BMA requirements
IGI Bermuda is regulated by the BMA and as such is subject to the BMA's capital and solvency requirements. For purposes of IGI Bermuda's capital requirements, the BMA considers the combination of risk bearing entities that consolidate into IGI Bermuda in addition to treating other companies in the IGI Group as "investments in affiliates" and so assesses the capital and solvency of the Group as a whole. IGI Bermuda maintains sufficient capital and solvency margins in compliance with the requirements under the Insurance Act.
IGI Bermuda is registered as a class 3B insurer by the BMA. A corporate body is registrable as a class 3B insurer where (i) 50% or more of its net premiums written, or (ii) 50% or more of its net loss and loss expense provisions, represent unrelated business and its total net premiums written from unrelated business are $50 million or more. IGI Bermuda generated net written premiums of $489.5 million , $497.2 million , and $392.8 million in 2024, 2023 and 2022, respectively.
The Insurance Act provides that the statutory assets of a general business insurer must exceed its statutory liabilities by an amount greater than the MSM prescribed for the applicable class of general business insurer. The MSM that must be maintained by a Class 3B insurer with respect to its general business is the greater of:
•$1 million ;
•20% of the first $6 million of net premiums written; if in excess of $6 million , the figure is $1.2 million plus 15% of net premiums written in excess of $6 million ;
•15% of the aggregate of net loss and loss expense provisions and other general business insurance reserves; or
•25% of its enhanced capital requirement ("ECR") as reported at the end of the relevant year.
As such, the MSM required of IGI Bermuda was $71.7 million , $65.0 million and $57.8 million , in each of 2024, 2023 and 2022, respectively.
The BMA also requires Class 3B insurers to maintain an additional amount of statutory capital and surplus equal to, or in excess of its ECR, which is established by reference to either the BSCR model or an approved internal capital model. IGI Bermuda's ECR was $286.8 million , $260.0 million and $230.8 million in each of 2024, 2023 and 2022, respectively.
While not specifically referred to in the Insurance Act (or required thereunder), the BMA expects Class 3B insurers to hold capital at least equal to the target capital level ("TCL"). IGI Bermuda's TCL was $344.2 million , $312.0 million and $277.0 million in each of 2024, 2023 and 2022, respectively.
IGI Bermuda's 2024 draft statutory financial statements, and 2023 and 2022 audited statutory financial statements submitted to the BMA reflect the foregoing capital adequacy and solvency margin requirements, as well as IGI's actual statutory capital surplus, which exceeded the BMA's requirements and was 227%, 211% and 179% in 2024, 2023 and 2022, respectively:
| Year Ended |
|||||||||||||||||
| 2024* | 2023* | 2022 | |||||||||||||||
| ($) in millions, unless otherwise specified | |||||||||||||||||
| BMA regulatory requirements | |||||||||||||||||
| Minimum Margin of Solvency (MSM) | $ | 71.7 | $ | 65.0 | $ | 57.8 | |||||||||||
| Enhanced Capital Requirement (ECR) | 286.8 | 260.0 | 230.8 | ||||||||||||||
| Target Capital Level (TCL) | 344.2 | 312.0 | 277.0 | ||||||||||||||
| IGI Bermuda's statutory capital and surplus | $ | 649.7 | $ | 548.7 | $ | 413.8 | |||||||||||
| Bermuda Solvency Capital Requirement Ratio (%) | 227 | % | 211 | % | 179 | % | |||||||||||
| Headroom over TCL | $ | 305.5 | $ | 236.7 | $ | 136.8 | |||||||||||
*The 2024 and 2023 figures are based on IGI Bermuda's draft statutory financial statements.
PRA requirements
IGI UK is subject to regulation by the FCA and the PRA. The Solvency Capital Requirement ("SCR") for IGI UK is governed by the Solvency II regime which sets rules governing the level and quality of capital held by an insurer and the capital requirements applicable to that firm.
The Solvency II measure of available capital ("Own Funds") uses UK GAAP shareholders' funds as a starting point and applies a number of specific adjustments prescribed under Solvency II. The primary adjustments reflect the fact that Solvency II is based on the principle of an economic balance sheet - outstanding reserves and associated reinsurance recoverables being considered on a discounted best-estimate basis. A full reconciliation between the Solvency II and UK GAAP bases is provided in the annual Solvency & Financial Condition Report published on IGI's website (www.iginsure.com).
The Solvency II measure of required capital, the SCR, is calibrated using the Value at Risk (VaR) of the basic own funds of an insurance or reinsurance undertaking subject to a confidence level of 99.5% over a one-year period, with a
minimum of £3.5 million. IGI UK has chosen the Solvency II Standard Formula (the "Standard Formula") method to calculate its SCR.
Specifically, the assessment confirms that the Standard Formula:
•captures the full scope of risks to which the Company is exposed and for which the holding of capital is an appropriate response;
•is sufficiently sensitive to future changes in the risk profile on both the asset and liabilities side of the balance sheet including the influence of outward reinsurance arrangements;
•has been applied in full with no application of undertaking specific parameters, simplifications or transitional measures; and
•is applied with an adjustment for the risk absorbing effect of technical provisions and deferred taxes.
The Standard Formula SCR and associated Solvency II Own Funds are recalculated at least quarterly and at other times in response to an actual or projected material change in the risk profile and the results reported in full to the Audit, Risk and Compliance Committee of the UK board in addition to being communicated to the IGI Bermuda and IGI boards.
The adequacy of the Company's Own Funds to meet the SCR is monitored on an ongoing basis and particularly in the event of an anticipated or actual material impairment in the level of Own Funds.
IGI UK's audited statutory financial statements submitted to the PRA reflect the foregoing capital adequacy and solvency margin requirements, as well as IGI UK's actual statutory capital surplus, which exceeded Solvency II regulatory requirements by 76% and 52% in 2023 and 2022, respectively. IGI UK's draft financial statements for the year ended December 31, 2024 reflect the foregoing capital adequacy and solvency margin requirements, as well as IGI UK's actual statutory capital surplus, which exceeded Solvency II regulatory requirements by 49%.
MFSA requirements
IGI Europe is subject to regulation by the MFSA. The Solvency Capital Requirement (SCR) for IGI Europe is governed by the Solvency II regime which sets rules governing the level and quality of capital held by an insurer and the capital requirements applicable to that firm.
The Solvency II measure of required capital, the SCR, is calibrated using the Value at Risk (VaR) of the basic own funds of an insurance or reinsurance undertaking subject to a confidence level of 99.5% over a one-year period, with a minimum of €4.0 million. IGI Europe has chosen the Solvency II Standard Formula (the "Standard Formula") method to calculate its SCR.
Specifically, the assessment confirms that the Standard Formula:
•captures the full scope of risks to which the Company is exposed and for which the holding of capital is an appropriate response;
•is sufficiently sensitive to future changes in the risk profile on both the asset and liabilities side of the balance sheet including the influence of outward reinsurance arrangements;
•has been applied in full with no application of undertaking specific parameters, simplifications or transitional measures; and
•is applied with adjustment for the risk absorbing effect of technical provisions and deferred taxes.
The Standard Formula SCR and associated Solvency II Own Funds are recalculated at least quarterly and at other times in response to an actual or projected material change in the risk profile and the results are reported in full to the board of directors of IGI Europe in addition to being communicated to the boards of directors of IGI and IGI Bermuda.
The adequacy of the Company's Own Funds to meet the SCR is monitored on an ongoing basis and particularly in the event of an anticipated or actual material impairment in the level of Own Funds.
IGI Europe's audited statutory financial statements submitted to the MFSA reflect the foregoing capital adequacy and solvency margin requirements, as well as IGI Europe's actual statutory capital surplus. IGI Europe's draft financial statements for the year ended December 31, 2024 and audited financial statements for the years ended December 31, 2023 and 2022 reflect the foregoing capital adequacy and solvency margin requirements, as well as IGI Europe's actual statutory capital surplus, which exceeded Solvency II regulatory requirements by 157%, 158% and 157% for the years ended December 31, 2024 , 2023 and 2022, respectively.
Derivative Financial Liabilities
The earnout shares issued to former shareholders of IGI and Tiberius are accounted for as a derivative financial liability because the earnout triggering events that determine the number of earnout shares to be vested include multiple settlement alternatives and events that are not solely indexed to the common shares of the Company. The earnout shares are subject to remeasurement at each balance sheet date until vested, and any change in fair value is recognized in the Group's consolidated statement of income. On December 13, 2023 , January 23, 2024 , June 10, 2024 and August 12, 2024 the first, second, third and last vesting thresholds of the Earnout Shares were achieved. Accordingly, 1,400,000, 560,800, 550,000 and 462,500 respective common shares were transferred to equity and no longer considered a liability, and there were no outstanding unvested Earnout Shares as of December 31, 2024 .
Investments
Our primary investment objectives are to maintain liquidity, preserve capital and generate a stable level of investment income. We purchase securities that we believe are attractive on a relative value basis and seek to generate returns in excess of predetermined benchmarks. Our investment strategy is established by our investment committee and has been approved by our board of directors. The strategy is comprised of high-level objectives and prescribed investment guidelines which goveasset allocation. In accordance with our investment guidelines, we maintain certain minimum thresholds of cash, short-term investments, and highly-rated fixed maturity securities relative to our consolidated net reserves and estimates of probable maximum loss exposures to provide necessary liquidity in a wide range of reasonable scenarios. As such, we structure our managed cash and investment portfolio to support policyholder reserves and contingent risk exposures with a liquid portfolio of high quality fixed-income investments with a comparable duration profile.
In 2024, we managed most of our investment portfolio in-house, with the exception of approximately $23.8 million which was managed by a third-party investment advisor. Our investment team is responsible for implementing the investment strategy as set by the investment committee established by our management and routinely monitors the portfolio to ensure that these parameters are met.
The fair value of our investments, cash and cash equivalents and restricted cash as of December 31, 2024 and 2023 was as follows:
| Fair Value | |||||||||||
| Asset Description | 2024 |
2023 |
|||||||||
| Fixed income securities | $ | 1,004.1 | $ | 767.6 | |||||||
| Fixed and call deposits | 190.4 | 247.2 | |||||||||
| Cash at banks and held with investments managers | 55.0 | 77.1 | |||||||||
| Equities | 29.0 | 26.2 | |||||||||
| Real estate | 1.9 | 3.5 | |||||||||
| Mutual funds | 12.3 | 11.1 | |||||||||
| Total | $ | 1,292.7 | $ | 1,132.7 | |||||||
The following table shows the distribution of bonds and debt securities with fixed interest rates according to the international rating agencies' classifications as of December 31, 2024 :
| Rating Grade | Bonds | Unquoted Bonds |
Total | |||||||||||||||||
| ($) in millions | ||||||||||||||||||||
| $ | 23.5 | - | $ | 23.5 | ||||||||||||||||
| AA | 261.8 | - | 261.8 | |||||||||||||||||
| A | 572.1 | - | 572.1 | |||||||||||||||||
| BBB | 144.4 | - | 144.4 | |||||||||||||||||
| BB | 0.2 | - | 0.2 | |||||||||||||||||
| Not Rated | 0.1 | 2.0 | 2.1 | |||||||||||||||||
| Total | $ | 1,002.1 | $ | 2.0 | $ | 1,004.1 | ||||||||||||||
The following table summarizes our investment results as of December 31, 2024 , 2023 and 2022:
| Year Ended |
|||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| ($) in millions, unless otherwise specified | |||||||||||||||||
|
Average investments(1)
|
$ | 1,215.2 | $ | 1,029.1 | $ | 882.9 | |||||||||||
|
Investment income(2)
|
51.9 | 40.4 | 20.9 | ||||||||||||||
|
Investment yield (%)(3)
|
4.3 | % | 3.9 | % | 2.4 | % | |||||||||||
(1)Includes investments and cash and cash equivalents. The average balance represents the average month end fair value balances of total investments and cash and cash equivalents in each reporting period.
(2)Represents interest and dividend income, net of investment custodian fees and other investment expenses.
(3)Represents investment income divided by average investments.
For comparison, the following are the coupon returns for the Barclays U.S. Aggregate Bond Index and the dividend returns for the S&P 500®Index:
| As of |
|||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| % | |||||||||||||||||
| Barclays US Aggregate Bond Index | 2.9 | 3.1 | 2.7 | ||||||||||||||
|
S&P 500®Index (dividend return)
|
1.3 | 1.5 | 1.7 | ||||||||||||||
The cost and carrying value of our fixed-maturity investments as of December 31, 2024 is presented below by contractual maturity. Actual maturities could differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.
| As of |
|||||||||||
| Cost | Carrying Value | ||||||||||
| ($) in millions | |||||||||||
| 2025 | $ | 141.2 | $ | 137.9 | |||||||
| 2026 | 205.2 | 200.2 | |||||||||
| 2027 | 95.7 | 93.5 | |||||||||
| 2028 | 136.3 | 134.0 | |||||||||
| 2029 | 162.2 | 160.0 | |||||||||
| 2030 | 80.3 | 79.2 | |||||||||
| 2031 | 38.8 | 36.8 | |||||||||
| 2032 | 11.6 | 11.2 | |||||||||
| 2033 | 15.3 | 15.5 | |||||||||
| 2034 | 55.0 | 56.1 | |||||||||
| After 2034 | 88.1 | 79.7 | |||||||||
| Total | $ | 1,029.7 | $ | 1,004.1 | |||||||
Reinsurance
We follow customary industry practice of reinsuring a portion of our exposures in exchange for paying reinsurers a part of the premiums received on the policies we write. Our reinsurance program enhances the quality of our core operations by reducing exposure to potential catastrophe and other high severity losses and limiting volatility in underwriting performance. Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of the policies, it does make the assuming reinsurer liable to the insurer to the extent of the reinsurance coverage. We monitor the financial condition of our reinsurers and place our coverages only with generally financially sound carriers. Reinsurance coverage and retentions vary depending on the line of business, location of the risk and nature of loss. Our reinsurance purchases include the following:
•We purchase property, onshore energy and engineering reinsurance to reduce our exposure to large individual property losses and catastrophe events. The following is a summary of significant property reinsurance treaties in effect as of July 1, 2024 . Our per risk reinsurance covers losses in respect of property and engineering from an entry point of $10.0 million up to $50.0 million PML. Meanwhile in respect of onshore energy, we purchase from an entry point of $12.5 million up to $50.0 million PML. PML error is purchased beyond the aforementioned limits for a further $22.5 million . Our catastrophe reinsurance purchase is $75.0 million with a reinstatable limit above an entry point of $15.0 million .
•We purchase offshore energy reinsurance to reduce our exposure to large losses. As of July 1, 2024 , our maximum platform exposure was $75.0 million . Our offshore reinsurance protection has an entry point of
•Professional and financial lines reinsurance treaties - We purchase professional lines reinsurance to reduce our exposure to large losses by virtue of a 20% Quota Share Treaty. This Quota Share Treaty covers professional indemnity, directors and officers, financial institutions and warranty and indemnity business written or controlled by our London office underwriters.
•Other reinsurance - Depending on the operating unit, we purchase specific additional reinsurance to supplement the above programs.
Our reinsurance strategy is generally driven by our objective to maximize risk adjusted returns and informed by our capital position and cost of reinsurance coverage. We buy property reinsurance to reduce exposure to large individual property losses and catastrophe events. We buy casualty reinsurance to reduce exposure to large liability losses. We purchase facultative and other reinsurance to balance our book of business and optimize our returns. We monitor the reinsurance market closely and at times will cede a greater proportion of our premiums if the availability and cost of reinsurance improves the overall risk and profitability profile of our business. Conversely, when the reinsurance markets are less attractive, we will seek to retain a greater portion of the premiums we write. Our reinsurance purchasing strategy impacts our financial results as our net premiums may increase or decrease depending on our reinsurance program.
We buy our professional and financial lines reinsurance on a "risk attaching" basis. Under risk attaching treaties, all claims from policies incepting during the year of the reinsurance contract are covered even if they occur after the expiration date of the reinsurance contract. If we are unable to renew or replace our existing reinsurance coverage, protection for unexpired policies would remain in place until their expiration. In such case, we could revise our underwriting strategy for new business to reflect the absence of reinsurance protection. Property catastrophe reinsurance is generally placed on a "losses occurring basis," whereby only claims occurring during the year are covered. If we are unable to renew or replace these reinsurance coverages, unexpired policies would not be protected, and therefore we would seek to purchase run off coverage.
Reinsurance Recoverables
At December 31, 2024 , approximately 91.5% of IGI's reinsurance recoverables on unpaid and paid losses (not including ceded unearned premiums) of $225.7 million were due from carriers which had a "A-" or higher rating from a major rating agency. The largest reinsurance recoverables from any one carrier was approximately 7.4% of total shareholders' equity available to IGI at December 31, 2024 .
The following table shows credit ratings of our top 5 reinsurers as of December 31, 2024 , and the unpaid and paid reinsurance recoverable from such reinsurers as of both December 31, 2024 and 2023 (dollars in millions):
| Reinsurer rating | Percentage of total reinsurance recoverables | Reinsurance recoverables at |
Reinsurance recoverables at |
||||||||||||||
| A+ | 21.5% | $ | 48.5 | $ | 35.0 | ||||||||||||
| A++ | 8.9% | 20.1 | 13.7 | ||||||||||||||
| A+ | 8.5% | 19.1 | 11.2 | ||||||||||||||
| B++ | 7.4% | 16.7 | 43.1 | ||||||||||||||
| A- | 6.4% | 14.5 | 9.2 | ||||||||||||||
| Total | $ | 118.9 | $ | 112.2 | |||||||||||||
Reserves
To recognize liabilities for unpaid loss and loss adjustment expenses, both known or unknown, insurers establish reserves, which is a balance sheet account entry representing estimates of future amounts needed to pay claims and related expenses with respect to insured events which have occurred. Estimates and assumptions relating to reserves for net loss
and loss adjustment expenses are based on complex and subjective judgments, often including the interplay of specific uncertainties with related accounting and actuarial measurements. Such estimates are susceptible to change. For example:
•At the time of loss information available regarding the circumstances and the extent of a loss may not be fully known.
•It may not be clear whether the circumstances of a loss are covered.
•If a legal decision is required to resolve coverage this may take many years.
•The actions the insured takes to remediate the loss may affect the eventual loss amount (favorably or unfavorably).
•For this purpose, the term "loss" refers to a claim and the direct costs associated with claims settlement. Except where specific reference to the costs associated with claims settlement is made, the term "claim" and "loss" are used interchangeably.
•The availability of replacement parts, skilled labor, access to the loss site and the speed at which repairs can be undertaken may not be known for some time and may be subject to change.
•It may be many years before the occurrence of a loss becomes known.
•Where claims take a long time to settle, new information, changes in circumstances, legal decisions, rates of exchange and economic conditions (particularly claims inflation) may affect the value and validity of claims made.
When a claim is reported, a member of the claims team will establish a "case reserve". The case reserve will represent an estimate of the expected settlement amount and will be based on information about the specific claim at that time. The estimate represents an informed judgment based on general industry reserving practices, the experience and knowledge of the claims handler and practices of the claims team. If insufficient information is available, the claims handler may be unable to establish an estimate and will seek further information that will allow an informed estimate to be established. Claims reserves are also established to provide for:
•losses Incurred But Not Reported to the insurer ("pure IBNR");
•potential changes in the adequacy of case reserves ("Incurred But Not Enough Reported" or "IBNER"); and
•the estimated expenses of settling claims, including both:
•Allocated Loss Adjustment Expenses: claims specific costs (such as legal, loss adjuster fees); and
•Unallocated Loss Adjustment Expenses: other general expenses (such as the costs of maintaining the claims handling function).
The timing of our results depends in large part on the extent to which the development and settlement of claims and reinsurance recoveries are consistent with the assumptions used to establish reserves. If expectations for and/or the actual cost of settlement increase or the timing of reporting and/or settlement changes, then we face the risk that the reserves in our financial statements may be inadequate and need to be increased. In this event an increase in reserves would cause a reduction in our profitability and could result in operating losses and a reduction of capital.
The Reserving Committee
The reserving committee is responsible to the board of directors for the governance of the reserving process and for the recommendation of the quantum of claims reserves to be booked. The committee includes members of senior management who represent the underwriting, claims, outward reinsurance, actuarial and finance departments. The committee meets quarterly and agrees the carried reserve for each product line. Key inputs to the committee include but are not limited to the quarterly actuarial reserve review, presented by the Group Chief Actuary, and discussions with the heads of claims, reinsurance and underwriting. The committee also considers findings of external actuarial reviews.
External (independent) Actuarial Review
Independent reviews of IGI's reserves have been undertaken by a third-party actuarial consultancy since 2009. At present these reviews are undertaken on an annual basis.
We undertake statutory submissions to the BMA and the National Association of Insurance Commissioners . Actuarial opinions are required to support the annual return. These opinions and the actuarial reviews of reserves supporting these opinions are undertaken by an independent international actuarial consultant.
Actuarial Review
In preparation for the recommendations to the reserving committee, our actuarial team undertakes a review of the reserves each quarter using a range of widely accepted actuarial methodologies and additional approaches as appropriate. The reserving process utilizes proprietary and commercially available actuarial models. Our experience is augmented by comparison to industry loss development patterns and other information.
Reserves are not an exact calculation of liability, but rather are estimates of the expected cost of settling claims. This process relies on the assumption that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for projecting future claims development. The estimates are based on actuarial and statistical projections of facts and circumstances known at the time of the review, estimates of trends in claim frequency, severity and other variable factors, including new bases of liability and general economic conditions. These variables can be affected by many factors, including internal and external events, such as changes in claims handling procedures, economic inflation, foreign currency movements, legal trends, legislative decisions and changes and the recognition of new sources of claims.
Potentially, claims may emerge, particularly claims arising from changes in the legal and regulatory environment, the type or magnitude of which we are unable to predict.
Reserves for inward reinsurance may be subject to greater uncertainty than for insurance primarily because, as a reinsurer, we rely on (i) the original underwriting decisions made by ceding companies and (ii) information and data provided by the ceding companies. As a result, we are subject to the risk that our ceding companies may not have adequately evaluated the risks reinsured by us and the premiums ceded may not adequately compensate us for the risks we assume. In addition, reinsurance reserves may be less reliable than insurance reserves because of the greater scope of losses underlying reinsurance claims, limitations on information provided and the generally longer lapse of time from the occurrence of the event to the reporting of the loss to the reinsurer and its settlement.
The estimation of adequate reserves is more difficult and thus more uncertain for claims arising from "long-tail" policies, under which claims may not be paid until substantially beyond the end of the policy term. The estimation of such liabilities is subject to many complex variables, including the current legal environment, specific settlements that may be used as precedents to settle future claims, assumptions regarding trends with respect to claim frequency and severity, issues of coverage and the ability to locate defendants. Additional uncertainty also arises from the relative lack of development history which also limits the scope of experience on which estimates are based. This is partially mitigated by the use and monitoring against market benchmarks.
While every effort is made to ensure we are reserved appropriately, changes in trends and other factors underlying our reserve estimates could result in our reserves being inadequate. Because setting reserves is inherently uncertain, we cannot provide assurance that our current reserves will prove adequate considering subsequent events. If our loss reserves are determined to be inadequate, we will be required to increase our reserves at the time with a corresponding reduction in our net income for that year. Such adjustments could have a material adverse effect on our results and our financial condition.
Actuarial Methodologies
The main methodologies used to project claims to ultimate include resolution but are not limited to:
Chain Ladder Method:Using a development triangle of cumulative claims amounts, a set of incremental development factors are calculated. The development factor is equal to the ratio of the cumulative claims at each development period to that at the previous development period. These development factors are then applied to the most recent data point in the triangle to project the current claims to ultimate resolution.
Development triangle means values (in this case, cumulative paid or case reported claims) organized by year of origin (typically the applicable accident year) and development period (typically the number of quarters since the commencement of the original period).
In selecting appropriate development factors, a number of important considerations are made which require actuarial judgement. These include, but are not limited to, the following general principles:
•Periods of larger claims volume and more mature development provide more credibility and should be given a larger weighting.
•Typical claims development would generally expect to show a smooth and monotonically decreasing incremental pattefrom period to period.
•Trends of the individual factors within each development, origin period and calendar year within the triangle are evaluated.
•The relevance of historical experience from older accident years used in projecting the future development of more recent accident years must be considered given changes in the mix of business, claims settlement processes, reinsurance protections and claims inflation within a class of business over time.
•Whether claims development is expected to continue beyond the period over which we have historic data available must be considered.
Where the credibility of the experience is considered insufficient to enable the selection of development factors thought to be representative of future claims development, a relevant market benchmark pattemay be considered, where available. Such patterns could be drawn from published industry information (e.g. LMA Lloyd's triangles, ABI or broker industry sector studies) and/or the actuary's own wider market experience. They would then be adjusted as far as is practicably possible and proportionate to the materiality of the business to capture known and expected differences in the development characteristics between the benchmark and class of business modelled.
Initial Expected Loss Ratio ("IELR") Method:This method estimates ultimate claims for each line of business and origin period to be equal to an IELR multiplied by the expected ultimate premium. The unpaid (IBNR) claims is the difference between these estimates and the current paid (or case reported) claims.
Each year the IELRs are derived for each line of business as part of the business planning process. Where relevant and credible data is available, a "bridging" process is used to inform the selection of the IELRs and itself divides each IELR into the following components:
•Small Losses (individual losses below a specified threshold);
•Large Risk Losses (risk losses greater than a specified threshold);
•Modelled Catastrophe Losses (losses arising from perils in countries modelled by our natural catastrophe modelling software, currently Verisk ); and
•Non-Modelled Losses.
The modelling process first considers the IELRs gross of outward reinsurance and then derives the anticipated outward reinsurance recoveries resulting from the gross assumptions. The reinsurance program is modelled within a capital modelling package (currently Aon 's Tyche).
The aim of the bridging process is to restate trended and developed experience for each past year as if it was the experience in the underwriting year. Then the accident year loss ratios are derived by unwinding the underwriting year results by half a year. This calculation involves:
•For premiums: Estimating the premium that would be charged for the same group of risks (to the extent that sufficient information and time allows this will consider real rate changes, changes in the mix of business, line sizes, attachment points and limits).
•For claims: Modifying past claims amounts for claims inflation, changes in coverage, line size and limits (to the extent that sufficient information and time allows this will consider claims inflation, changes in the mix of business, line sizes, attachment points and limits).
With the exception of Modelled Losses, an IELR is selected using a credibility-weighted average of the as-if'd, trended and developed loss ratios. The IELR for Modelled Losses are taken as being equal to a judgmental average of the loss ratio derived from the Average Annual Loss ("AAL"), from IGI's Natural Catastrophe model, and the as-if'd, trended and developed loss ratios for Modelled business experienced historically.
Bornhuetter-Ferguson ("BF") method:This method is a blend of the Chain Ladder and IELR methods. Estimates can be made based on both paid claims and case reported claims.
•For paid claims: The BF paid estimate is equal to the paid claims plus the IELR Method ultimate claims multiplied by the expected percentage estimated to be unpaid (derived from the paid claims Chain Ladder Method).
•For case reported claims: The BF case reported estimate is equal to the case reported claims plus the IELR Method ultimate claims multiplied by the expected percentage estimated to be unreported (derived from the case reported claims Chain Ladder Method).
Other Methodologies:Additional exposure-based methodologies may be used where enough information is available and the materiality of the business, claims or the potential exposures involved are not adequately captured in a development triangle. Examples include:
•large exposures to known natural catastrophes (such as hurricanes, earthquakes and flood);
•large exposures to specific risk losses; and
•long-tailed low frequency, high severity classes.
Reserve for Unallocated Loss Adjustment Expenses ("ULAE")
ULAE amounts are expenses arising from administering claims that are not directly attributable to individual claims. These include claims department salaries, an apportionment of the utilities, computer depreciation, office buildings depreciation, IT software expenses and investment expenses (Solvency II only) and the outward reinsurance department salaries. IGI expresses ULAE as a percentage of the gross unpaid reserves (case estimates and IBNR). IGI estimates ULAE reserves using methods that include but are not limited to:
•Claims staffing Method:This methodology assumes that the ULAE expenditures track in proportion with the number of claims processed, by way of:
•New claims reported during each calendar year.
•Claims remaining open at the end of each calendar year.
•Claims closed during each calendar year.
•Paid-to-Paid ratio:This method assumes that the historic ratio of ULAE to claims paid is consistent and that future ULAE is proportional to the unpaid claims.
•The Kittle Ratio:This method is similar to the Paid-to-Paid method, but assumes that future ULAE is proportional to the value of claims reported and claims settled.
Ceded Reinsurance and Net IBNR
The outward reinsurance department determines outward reinsurance recoveries arising on case reported claims each month end by the application of the outwards program.
Reserves for outward reinsurance recoveries on estimated IBNR claims are determined by the application of reinsurance recovery ("RI") ratios to the estimated gross IBNRs. This process is undertaken by line of business and by year. The derivation of the RI ratio considers each type of reinsurance (Facultative, Proportional Treaty and Excess of Loss Treaty) separately. Broadly speaking, estimates of the RI ratio develops over time, commencing at the business plan assumption (for each reinsurance type) and ending-up as the ratios experienced. Between these times, an approximate subdivision of IBNR is made between pure IBNR and IBNER. The RI ratio applicable to pure IBNR being the business plan assumption and to the IBNER being a judgmental selection based on the ratio currently experienced.
Reserving Results & Development
As paid and incurred claims experience develop, our reserves are adjusted depending on how the actual development compares to that expected. This forms part of the regular reserving process, with the adequacy of reserves reviewed on a quarterly basis. If the claims experience is positive relative to expectations, the excess reserve is released in the year under review. Conversely, reserve deficiencies result in a negative charge to the current year profits.
The following table provides a reconciliation of the beginning of year and end of year reserves for the financial years 2022 to 2024 and demonstrates the reserve surplus and deficiencies recognized over this year.
IGI Booked Reserves
| Year Ended |
|||||||||||||||||
| ($) in millions | 2024 | 2023 | 2022 | ||||||||||||||
| Net reserve for unpaid loss and loss adjustment expenses beginning of year | $ | 499.9 | $ | 447.4 | $ | 395.5 | |||||||||||
| Loss and loss adjustment expenses incurred, net of reinsurance: | |||||||||||||||||
| Current accident year | 253.3 | 228.4 | 199.5 | ||||||||||||||
| Previous accident years | (37.2) | (39.3) | (42.0) | ||||||||||||||
| Total | 716.0 | 636.5 | 553.0 | ||||||||||||||
| Loss and loss adjustment expenses paid, net of reinsurance: | |||||||||||||||||
| Current accident year | (21.6) | (25.8) | (14.9) | ||||||||||||||
| Previous accident years | (113.8) | (110.8) | (90.7) | ||||||||||||||
| Total | (135.4) | (136.6) | (105.6) | ||||||||||||||
| Reserve for unpaid loss and loss adjustment expenses at end of period | 794.2 | 712.1 | 636.2 | ||||||||||||||
| Reinsurance recoverable on unpaid loss and loss adjustment expenses, net of allowance for expected credit losses | (213.6) | (212.2) | (188.8) | ||||||||||||||
| Net reserve for unpaid loss and loss adjustment expenses at end of the year | $ | 580.6 | $ | 499.9 | $ | 447.4 | |||||||||||
The following table sets out our claims reserving provisions including ULAE as of December 31, 2024 and 2023:
Change in Case Reserves, IBNR and ULAE
| ($) in millions | As of |
As of |
Difference | ||||||||||||||
| Gross Reported Case Reserve | $ | 369.9 | $ | 345.4 | $ | 24.5 | |||||||||||
| Reinsurance Reported Case Reserve | 113.0 | 117.0 | (4.0) | ||||||||||||||
| Net Reported Case Reserve | 256.9 | 228.4 | 28.5 | ||||||||||||||
| Net IBNR Reserves & ULAE | 323.7 | 271.5 | 52.2 | ||||||||||||||
| Net reserve for unpaid loss and loss adjustment expenses | $ | 580.6 | $ | 499.9 | $ | 80.7 | |||||||||||
For the year ended December 31, 2023 , the net ultimate loss increased by $228.4 million for accident year 2023 and decreased by $39.3 million for accident years 2022 and prior. The decrease in prior years' ultimate losses is split between $16.9 million for the short-tail business, $19.2 million for the long-tail business and $3.2 million for the
reinsurance business. Where appropriate, assumptions for future inflation have been updated to reflect an increase in the costs of goods and some services and an anticipated knock-on change in wage-related costs. The decrease in ultimate losses is however driven by consistent favorable claims experience.
For the year ended December 31, 2024 , the net ultimate loss increased by $253.3 million for accident year 2024 and decreased by $37.2 million for accident years 2023 and prior. The decrease in prior years' ultimate losses is split between $19.3 million for the short-tail business, $12.0 million for the long-tail business and $5.9 million for the reinsurance business. The decrease in ultimate losses is driven by consistent favorable claims experience in prior years.
Reserve releases/strengthening
Best Estimate:IGI's actuarial recommended reserve is a "best estimate" of the outstanding (unpaid) claims liabilities (the Actuarial Best Estimate). This is intended to represent the mathematical expected value of the distribution of reasonably foreseeable outcomes of the unpaid liabilities. The best estimate does not knowingly contain any prudence or bias in either direction. While the estimates are likely to change as future experience emerges, any changes would only arise as a result of experience being better or worse than current expectations, or from changes in our view of the market. These changes will not be as a result of gradual release of implicit or explicit margins as our results contain no margins.
Booked Reserves:The reserving committee is responsible to the board of directors for the governance of the reserving process and for the recommendation of the quantum of claims reserves to be booked. Key inputs to the committee include but are not limited to the quarterly Actuarial Reserve Review, presented by the Group Chief Actuary, discussions with the heads of claims, reinsurance and underwriting and findings of external actuarial reviews. The booked reserves may differ from the actuarial best estimate.
Time value of money:As of the date of this annual report, the reserves (determined under U.S. GAAP) make no explicit allowance for the time value of money (i.e. reserves are not discounted).
Reserve Strengthening/Reserving Release:Reserve strengthening is the term used when the reserves established previously are no longer considered sufficient and are increased. The reserve strengthening will give rise to a charge against profits during that reporting year, reducing the profit for that year, possibly giving rise to an overall loss. Reserve release has the opposite effect.
The table below indicates that during each of the years ended December 31, 2024 , 2023 and 2022, IGI has recorded reserving releases (item (C)).
Increases in Reserves/Decreases in Reserves:The size of reserves is determined by many factors. Key drivers that cause increases in the volume of reserves held include:
•An increase in the volume of business written;
•A change in the mix of business written toward business that takes a longer period to settle;
•Incidence of large risk or natural catastrophes; and
•Reserve strengthening.
As of December 31, 2024 , 2023 and 2022, IGI had $323.7 million , $271.5 million and $240.5 million of incurred but not reported (IBNR) loss reserves including ULAE, respectively, net of reinsurance.
Change in IGI Booked Net IBNR & ULAE
| Year Ended |
|||||||||||||||||
| ($) in millions | 2024 | 2023 | 2022 | ||||||||||||||
| Carrying balance of IBNR Reserves in Balance Sheet at beginning of the year (A) | $ | 271.5 | $ | 240.5 | $ | 208.6 | |||||||||||
|
IBNR Reserves moved to Incurred Reserves (B)
|
(82.4) | (85.1) | (57.1) | ||||||||||||||
|
IBNR Reserves release pertaining to prior years (C)
|
(37.2) | (39.3) | (42.0) | ||||||||||||||
|
IBNR Reserves added for new accident year (D)
|
171.8 | 155.4 | 131.0 | ||||||||||||||
| Net charge to P/L (B+C+D) = (F) | 52.2 | 31.0 | 31.9 | ||||||||||||||
| Carrying balance of IBNR Reserves in Balance Sheet ending balance (A+F) | $ | 323.7 | $ | 271.5 | $ | 240.5 | |||||||||||
The table below shows the development of IGI's net ultimate losses and loss adjustment expenses by accident year.
| ($) in millions | Initial | 1+ | 2+ | 3+ | 4+ | 5+ | 6+ | 7+ | 8+ | 9+ | 10+ | Net Premiums Earned |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | $ | 115.9 | $ | 90.1 | $ | 79.2 | $ | 73.3 | $ | 70.1 | $ | 66.8 | $ | 65.6 | $ | 65.5 | $ | 66.4 | $ | 66.6 | $ | 67.8 | $ | 189.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 92.9 | 87.0 | 79.8 | 75.3 | 73.1 | 72.6 | 71.9 | 72.4 | 72.4 | 72.3 | 155.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2016 | 98.8 | 94 | 90.1 | 85.4 | 89.2 | 89.2 | 89.8 | 89.1 | 88.6 | 157.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2017 | 110.3 | 117.2 | 116.4 | 113.9 | 112.0 | 111.8 | 109.6 | 108.6 | 146.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2018 | 94.3 | 105.0 | 108.5 | 113.0 | 103.1 | 110.7 | 103.8 | 183.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2019 | 124.4 | 116 | 100.1 | 107.0 | 105.3 | 104.1 | 215.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 157.8 | 155.6 | 145.9 | 150.8 | 181.5 | 283.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 193.8 | 162.9 | 142.3 | 139.4 | 345.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 199.6 | 172.2 | 164.1 | 376.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 228.4 | 180.3 | 447.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 253.3 | 483.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For additional information about our reserves and reserves development, see Note 6 to IGI's consolidated financial statements included elsewhere in this annual report.
Effects of Inflation
Inflation may have a material effect on our consolidated results of operations by its effect on interest rates and on the cost of settling claims. The potential exists after a catastrophe or other large property loss for the development of inflationary pressures in a local economy as the demand for services, such as construction, typically surges. The cost of settling claims may also be increased by global commodity price inflation. We take both these factors into account when setting reserves for any events where we think they may be material.
Our calculation of reserves for net loss and loss adjustment expenses includes assumptions about future payments for settlement of claims and claims-handling expenses. To the extent inflation causes these costs to increase above reserves established for these claims, we will be required to increase our loss reserves with a corresponding reduction in earnings. The actual effects of inflation on our results cannot be accurately known until claims are ultimately settled.
In addition to general price inflation, we are exposed to a persistent long-term upwards trend in the cost of judicial awards for damages. We take this into account in our pricing and reserving of our professional lines of business. We also take into account the projected impact of inflation on the likely actions of central banks in the setting of short-term interest
rates and consequent effects on the yields and prices of fixed interest securities. If inflation, interest rates and bond yields increase, this would result in a decrease in the market value of certain of our fixed interest investments. See "Risk Factors - Risks Relating to Our Business and Operations - Our results of operations, liabilities and investment portfolio may be materially affected by conditions impacting the level of interest rates in the global capital markets and major economies, such as central bank policies on interest rates and the rate of inflation."
C.Research and Development, Patents and Licenses, etc.
We had no significant research and development policies or activities for the years ended December 31, 2024 , 2023 and 2022. We do not have any patents or licenses that are material for conducting our business, except as described in this annual report.
D.Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the current fiscal year that will have a material effect on our net revenues, income, profitability, liquidity or capital reserves, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E.Critical Accounting Estimates
The preparation of our consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities, if any. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. We evaluate our estimates regularly using information that we believe to be relevant.
Reserve for unpaid loss and loss adjustment expenses
Considerable judgement by management is required in the estimation of amounts due to contract holders arising from claims made under insurance contracts. Such estimates are necessarily based on assumptions about several factors involving varying, and possibly significant, degrees of judgement and uncertainty and actual results may differ from management's estimates resulting in future changes in estimated liabilities.
In particular, estimates have to be made for both the expected ultimate cost of claims reported and the expected ultimate cost of claims incurred but not yet reported (IBNR) at the balance sheet date. The primary technique adopted by management in estimating the cost of notified and IBNR claims is that of using past claim settlement trends to predict future claims settlement trends. Claims requiring court or arbitration decisions are estimated individually. Independent loss adjustors normally estimate property claims. Management reviews its provisions for claims incurred, and claims incurred but not reported, on a quarterly basis.
The total carrying amount of reserves for unpaid loss and loss adjustment expenses as at December 31, 2024 and 2023 was $794.2 million and $712.1 million , respectively. As at December 31, 2024 and 2023, net incurred but not reported claims (IBNR) amounted to $323.7 million and $271.5 million respectively out of the total reserve for unpaid loss and loss adjustment expenses. Total carrying amount of reserve for unpaid loss and loss adjustment expenses net of reinsurance as at December 31, 2024 and 2023 was $580.6 million and $499.9 million , respectively.
Sensitivities
The following tables show the effect on estimated net reserves for unpaid loss and loss adjustment expenses as at December 31, 2024 of a change in two of the most critical assumptions in establishing reserves: (i) loss emergence patterns, accelerated or decelerated by three and six months; and (ii) expected loss ratios varied by plus or minus ten percent. Accelerated loss emergence patterns indicate a higher development percentage of losses, therefore requiring lower IBNR than previously expected and hence resulting in a lower ultimate.
Management believes that these scenarios present a reasonable range of variability around the booked reserves using standard actuarial techniques. Loss reserves may vary beyond these scenarios in periods of heightened or reduced claim activity. The reserves resulting from the changes in the assumptions are not additive and should be considered
separately. The following tables vary the assumptions employed therein independently. In addition, the tables below do not adjust any parameters other than the ones described above.
| Change in assumption | Reserve for unpaid loss and loss adjustment expenses, net of reinsurance recoverable |
|||||||
| ($ in millions) | ||||||||
| Accelerated pattern* | $ | 515.5 | ||||||
| Unchanged | $ | 580.6 | ||||||
| Decelerated pattern* | $ | 639.3 | ||||||
*Accelerated/Decelerated patterns are shifted by 6 months for long-tail segment and 3 months for short-tail and reinsurance segments.
| Change in assumption | Reserve for unpaid loss and loss adjustment expenses, net of reinsurance recoverable |
|||||||
| ($ in millions) | ||||||||
| 10% favorable | $ | 541.7 | ||||||
| Unchanged | $ | 580.6 | ||||||
| 10% unfavorable | $ | 618.8 | ||||||
Fair Value Measurements of Certain Financial Assets and Liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Refer to Item 18, Notes 2(s) and 15 to the Consolidated Financial Statements under "Fair Value" for information on the valuation techniques, including significant inputs and assumptions generally used in estimating the fair values of our financial instruments.
Premiums representing amounts due on business written but not yet reported
In addition to reported premium income, we also include an estimate for pipeline premiums representing amounts due on business written but not yet reported. This is based on management's judgement of market conditions and historical data using premium development patterns evident from active underwriting periods to predict ultimate premiums trends at the close of the fiscal period.
Allowance for Expected Credit Losses - Fixed Maturity Securities Available-For-Sale
Fixed maturity securities available-for-sale are reported at fair value at the balance sheet date and are presented net of an allowance for expected credit losses. A fixed maturity security available-for-sale is impaired if the fair value of the investment is below amortized cost. For fixed maturity securities, the evaluation for a credit loss is generally based on the present value of expected cash flows of the security as compared to the amortized cost. On a quarterly basis, the Group evaluates all fixed maturity securities available-for-sale for impairment losses. Details regarding our processes for the identification of impairments of fixed maturity securities available-for-sale and the recognition of the related impairment losses are disclosed in Note 2(a) to the Consolidated Financial Statements in Item 18 of this report. At December 31, 2024 and 2023, we recorded an allowance for expected credit losses of $409 thousand and $353 thousand respectively, and for the years ended December 31, 2024 , we recorded impairment losses of $56 thousand (2023: $158 thousand ) (refer to Note 3 for further details).
Allowance for Expected Credit losses - Premiums Receivable
The Group reports its Premiums receivable net of any allowance for expected credit losses. The Group monitors credit risk associated with premiums receivable through its ongoing review of amounts outstanding, aging of the receivable, historical loss data, and counterparty financial strength measures. The allowance also includes estimated uncollectible amounts related to dispute risk. Any allowance for credit losses is charged to "Change in allowance for expected credit losses on receivables" in the period the receivable is recorded and revised in subsequent periods to reflect changes in the Group's estimate of expected credit losses.
Allowance for Expected Credit losses - Reinsurance Recoverables
The Company reports its reinsurance recoverables net of an allowance for estimated uncollectible reinsurance, including expected credit losses. The allowance is based upon our ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, disputes, applicable coverage defenses and other relevant factors. The Company uses a rating-based method to estimate the uncollectible reinsurance reserves due to credit losses. Under this method, reinsurance credit risk is estimated by considering the reinsurers probability of default. Additionally, reinsurance recoverables balances are evaluated to identify any dispute risk and when required, an additional reserve is recorded. Amounts deemed to be uncollectible, including amounts due from known insolvent reinsurers, are written off against the allowance. Changes in the allowance, as well as any subsequent collections of amounts previously written off, are reported as part of "Change in allowance for expected credit losses on receivables".
Attachments
Disclaimer
Proxy Statement (Form DEF 14A)
Proxy Statement (Form DEF 14A)
Advisor News
- Americans increasingly worried about new tariffs, worsening inflation
- As tariffs roil market, separate ‘signal from the noise’
- Investors worried about outliving assets
- Essential insights a financial advisor needs to grow their practice
- Goldman Sachs survey identifies top threats to insurer investments
More Advisor NewsAnnuity News
- AM Best Comments on the Credit Ratings of Talcott Financial Group Ltd.’s Subsidiaries Following Announced Reinsurance Transaction With Japan Post Insurance Co., Ltd.
- Globe Life Inc. (NYSE: GL) is a Stock Spotlight on 4/1
- Sammons Financial Group “Goes Digital” in Annuity Transfers
- Somerset Reinsurance Announces the Appointment of Danish Iqbal as CEO
- Majesco Announces Participation in LIMRA 2025: Showcasing Cutting-Edge Innovations in Insurance Technology
More Annuity NewsHealth/Employee Benefits News
- ‘They won’t help me’: Sickest patients face insurance denials despite policy fixes
- Thousands of Missouri construction workers with Anthem health insurance left scrambling
- Don't let death penalty turn Luigi Mangione into a martyr
- More than 5M could lose Medicaid coverage if feds impose work requirements
- Don't make Mangione a martyr
More Health/Employee Benefits NewsLife Insurance News
- 2024 ModeSlavery Report (bpcc modeslavery report 2024 en final)
- Exemption Application under Investment Company Act (Form 40-APP/A)
- Annual Report 2024
- Revised Proxy Soliciting Materials (Form DEFR14A)
- Proxy Statement (Form DEF 14A)
More Life Insurance News