Fidelis Insurance Holdings Limited March 2019
Fidelis: The Winning Model in a Changing Market Product innovation driven by superior underwriting, flexible capital allocation and efficient platform driving ROE outperformance Bespoke products Focused offering of innovative products with embedded profitability 1. Superior market access Relevance in all pillars (Bespoke, Specialty, Reinsurance, Partnership Fee income), 2. reputation and multi-decade relationships driving lead roles 3. Disciplined underwriting supported by state of art toolkit In-house system and differentiated analytics, aggregation and risk management platforms 4. Flexible capital allocation Innovative range of 3rd party partnerships to optimise risk and enhance returns 5. Custom built, lean operating platform with no-legacy issues FireAnt & Tyche 6. Exceptional management team Proven track-record aligned with prior experience of working together Execution focused; switched from Specialty to Bespoke; exited hedge funds for traditional investment portfolio 7. Diversified partnership driven earnings stream Rated Q/S, Socium Re, Bespoke & Specialty Q/S Underwriting outperformance, Sustainably Superior Efficient Capital + = profitable top-line ROEs in an Management Uncorrelated Market growth, and partnership income 2
Secular Market Change 2017/2018 was the costliest catastrophe 18 months on record – over USD 220bn 1 Unlike 2005 no significant company rating impairments - no barriers to entry for new capital third party vehicles As a Result price increases in 2018 and 1 January 2019 were only flat to marginally up unless directly loss affected The old model of relying on regular catastrophe losses to drive pricing corrections and broad 2006-style hard markets is severely impaired Fidelis’ Strategy facilitates profitable growth following the secular market change with the focus on innovation and new risk markets § In this market Fidelis deploys its underwriting expertise driven by two philosophies: If you do the same things, Innovating new product streams for new do them better uses for the insurance balance sheet FIDELIS’ FOUR PILLAR STRATEGY 3 1 (Source: Swiss Re Sigma report)
Four Pillar Strategy: Diversified Income and Investment 4
1. Focused offering of Bespoke products with embedded profitability Bespoke – 47% of GPW but through overall risk allocation; 64% of NPW in 2018 How is Fidelis positioned to succeed? Key drivers of demand: Characteristics of bespoke products: Highly specialised models tailored to • Bespoke is a specific risk transfer • Fidelis sets the terms and conditions • the risk profile and driven by extensive opportunity often driven by with embedded intellectual property data history regulatory capital relief, capital and barriers to entry efficiency or transaction Low and stable attritional loss exposure • • Each bespoke transaction requires an facilitation Carefully defined tail loss exposure • understanding of the specific risk driver Customised modelling and • Little/no correlation to peak • • Strong engagement with wordings that closely defines that catastrophe perils so highly capital counterparties and technical expertise exposure efficient is key Bespoke Net Developed Loss Ratio Gross Premiums Written ($m) by Accident Year GPW 2016 – 2018 CAGR: 30% $350 40% $300 30% $250 $200 20% $150 10% $100 $50 0% GWP Bespoke 2016 2017 2018 $0 2016 2017 2018 IBNR 9% 15% 30% GWP Bespoke $188 $210 $319 Incurred 10% 4% 1% 5
2. Focused book of Homogeneous Property Catastrophe Reinsurance Reinsurance – 47% of GPW but through risk allocation 30% of NPW in 2018 Fidelis has achieved sustained growth in Reinsurance since its inception in 2015 8% Whole Account 2% Retro Strong retail and wholesale broker relations combined with long standing client relations • Market-leading analytic capabilities, enabling portfolio optimization • • Quoting market on 79% of reinsurance business written in 2018 Reinsurance GWP by Re • Avoiding unprofitable lines of business and an optimized blend of regional and nationwide Pr Product - 2018 2018 carriers Targeting clients with first-rate data • • Focusing on attachment points exposed to true catastrophe events 90% Property Cat XOL Reinsurance No direct commercial and industrial business; no property binders • Reinsurance Net Developed Loss Ratio by Accident Year Reinsurance Gross Premiums Written ($m) $350 70% $300 60% $250 50% 40% $200 30% $150 20% $100 10% $50 0% Reinsurance 2016 2017 2018 $0 IBNR 2016 2017 2018 35% 14% 33% Reinsurance $181 $265 $328 Incurred 26% 33% 29% The above loss ratios exclude unallocated loss adjustment expenses Fidelis outperformed peers in 2017 during the largest catastrophe year on record, 2017 losses have now reduced from 2.9% of equity to 1.8% 1 as at 12/31/2018 6 1 Based on 2017 year end total shareholders’ equity
2. Specialty Focused on Core Clients and Niche Opportunities Specialty – 6% of GPW in 2018 – Premium reduction From $71m to $44m caused by seasonalisation of multi-year products Specialty Portfolio Overview 14% Marine Business lines primarily include aviation, war, energy, marine, terrorism • 59% Energy Marine predominantly liabilities and select hull clients • Predominantly high excess catastrophe placements for energy & business • Innovative underwriting approach focused on profitability versus growth • Sp Speci cial alty GWP P Private placements driven by long-term client relationships by by Product - 2018 2018 • Seek out capacity driven layers with attractive pricing • 27% Aviation and Aerospace Excellent broker network and support in a saturated environment • Ability to adapt to ever changing market dynamics and ramp up if dislocated • Opportunistic catastrophe driven Property Risk • Specialty Net Developed Specialty Gross Premiums Written ($m) Loss Ratio by Accident Year 30% $80 25% 20% $60 15% $40 10% 5% $20 0% Specialty 2016 2017 2018 $0 2016 2017 2018 IBNR 4% 13% 18% Specialty $35 $71 $44 Incurred 8% 6% 9% The above loss ratios exclude unallocated loss adjustment expenses 25 years of trading relationships and experience in all lines 7 allows us to upsize with market opportunities
2. Superior Market Access Driven by Relevance Reputation and Multi-Year Relationships Multi-year relationships Reputation Relevance Reinsurance top 3 brokers contribute 84% of GPW with over 200 years of relationship with senior management Bespoke & Specialty deals with 40 brokers “Mr Brindle is acknowledged to top 3 Insurance brokers represent ~50% be one of the most successful of GWP underwriters in the worldwide Capability to deploy insurance market and has a Third party capital from previous significant line size track record of outperformance relationships from 2005 Scirocco, Unique brand as the over the past 30 years” AM Best Accordion, Saltire, Kinesis & Socium market of first resort for August 2018 MGA’s: Contract with market leaders on a innovation, distressed Lead 98% of Bespoke business long term basis in closely defined niches and private deals with key buyers and decision with strict delegation and ownership stake makers where appropriate Lead 79% of reinsurance Specialty: Strong relationship over many business decades with brokers & clients led to niche Aviation, Marine & Energy portfolio Reinsurance: Directly visited 85% of target/in-force clients in 2018/19 Fidelis has achieved compelling results across product segments 8
3. Disciplined and Creative Underwriters With State-of-the-Art Underwriting, Aggregation and Risk Management Platforms Underwriting Approach Enables & Informs Differentiated Underwriting Model Disciplined Underwriting approach All submissions logged in Integrated group-wide a single custom- data store with data Real time peer review • developed underwriting definition & data and management of system quality checks portfolios Active management • Underwriting Prequel Jarvis of risk resulting in & Marketing Risk & Return unique portfolios Conference Committee Daily underwriting • call attended by CEO Calls Creativity in Bringing Tyche New Products to Market FireAnt In-house expertise to • Four Pillars innovate client-led solutions FireAnt is an Model platform for innovative insurance Rate Maker rather than • capital allocation, pricing, analytic, and Rate Taker industry leading portfolio optimization performance Finding growth through • tool first mover advantage Allocating Risk & Capital between Key differentiators Prudent and proven underwriting Superior Solutions for Clients and risk management framework own & third party balance sheets for No legacy data systems Ability to move quickly to deliver • • optimised risk/return Focus on maintaining a uniform & • bespoke products without In-house development team means fit for • consistent underwriting approach cumbersome Lloyd's restrictions Management has market-leading • Fidelis expertise that manages risk on gross / Drives consistent capital allocation • Long-term relationships with quality • No black box third party assumptions • net basis across different business lines clients while respecting core broker 2019 Fidelis will be in top 5% of companies • distribution model Active Management of Risk increases • on real time catastrophe exposure capital efficiency 9 monitoring
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