IGI looks to seize on opportunities and highlights stock price disconnect

International General Insurance Holdings (IGI) is confident it can maintain its high levels of premium growth, with president Waleed Jabsheh telling The Insurer he anticipates pricing momentum lasting into 2022, while the company believes there is a disconnect between its fundamentals and its stock price.

IGI last week reported a drop in third-quarter core operating income to $6.4mn, down from $8.2mn.

The combined ratio of 93.7 percent was a deterioration on the 89.3 percent in Q3 2019, with this year’s third quarter including $4.6mn of cat losses, adding 6.3 points, primarily from damaged cranes at a Mumbai port.

“It was a freak storm,” Jabsheh explained of the Indian loss. “It wasn’t a major event and it just happened to hit one of the ports that we insured.”

Despite the deterioration in the Q3 combined ratio, IGI’s nine-month combined ratio was 86.5 percent – an improvement on the 91.5 percent in the same period of 2019.

IGI posted strong premium growth in both the quarter and year to date, and gave a bullish ratings outlook.

Gross written premiums (GWP) increased by 37 percent in the third quarter to $101.2mn, and by 29.8 percent in the first nine months to $337.7mn.

IGI reported that rates across its book of business are up over 21 percent for the year to date. The (re)insurer is seeing 19.3 percent rate increases in specialty short-tail and 30.2 percent in specialty long-tail.

“We’re quite pleased with how the market is behaving,” said Jabsheh. “It is very opportune for a company like us and a company of our size, and we’re trying to take as much advantage of these conditions as we can.”

He continued: ‘We’re seeing opportunities that we haven’t seen for more than a decade. So far in the fourth quarter trends continue as in previous quarters, and we anticipate this will continue throughout 2021 and 2022. Some are saying it’s going to be even longer and I hope they’re right.”

IGI’s biggest percentage growth in the third quarter came in the long-tail segment, with GWP climbing 66 percent to $53.1mn, primarily driven by growth in the financial and professional lines.

“The professional indemnity and the D&O are areas that experienced significant growth,” said Jabsheh. “D&O in particular is probably the area that has generated the largest growth percentage wise, just because the level of rating improvements that we’re seeing are unbelievable. Our D&O book achieved 85 percent rate increases in the first nine months of the year.”

IGI’s D&O book is relatively small, and is written mainly out of London on an excess basis, with the company staying away from US business in this line.

New lines of business

The (re)insurer has also looked to enter new business. This year it has started underwriting marine trades and marine cargo business.

In the second quarter it also entered the US excess and surplus lines market, and had written $15mn of gross premium as of the end of the third quarter. In E&S, IGI is focusing prurely on short-tail business such as property, upstream energy, energy, power, renewables and terrorism.

But not all lines are seeing booming price increases. Jabsheh identified terrorism and politcial violence as a “flat-ish market”. He also said the areas in which IGI plays in reinsurance (of which IGI wrote $5.1mn of GWP in Q3)  “are not seeing the rate increases that you would hope for”. Its reinsurance book is not very cat-exposed.

In addition to entering new lines, IGI has gone through some big changes at a group level this year. Earlier this year it redomiciled to Bermuda and listed on Nasdaq, raising $41mn through a combination with the Tiberius SPAC.

A third-quarter investor presentation stated the company is also in “ongoing late stage discussions” for a European platform post-Brexit to allow it to capitalise on European market opportunities.

The presentation also showed that the company believes there is a disconnect between its fundamentals and its stock price. Its year-to-date 31.3 percent revenue growth, 86.5 percent combined ratio and 11.6 percent return on equity put it near the top of a list of peers selected by the company.

But its share price performance of a 12.1 percent drop since its IPO in mid-March and a 0.87x price-to-book multiple place near the bottom of these peers.

IGI believes it is well positioned to capitalise on market opportunities from here. The presentation noted that Covid-19 has not had a big impact on its book. It is not exposed to the hardest-hit areas such as event cancellation, travel protection, US business interruption, US commercial general liability and US workers’ compensation.

IGI has booked only $2mn in Covid-19 reserves, with limited exposure to D&O and professional indemnity covers, both of which are subject to reinsurance retention, and incidental reinsurance treaty exposure.

Jabsheh said the pandemic has led to more opportunities for IGI.

“We’ve seen a significant increase in the volume of business that we’re seeing compounded on top of that hard market,” said Jabsheh. “It’s made our capacity a lot more relevant and a lot more valuable to brokers and clients. Thankfully, from an underwriting perspective, we sit in a very strong position, in that we don’t participate in the areas that have been most impacted by Covid in terms of insurance claims.”