IGI Reports Fourth Quarter and Full Year 2021 Condensed and Unaudited Financial Results

International General Insurance Holdings Ltd. (“IGI” or the  “Company”) (NASDAQ: IGIC) today reported financial results for the fourth quarter and full year of 2021. 

Highlights for the fourth quarter and full year of 2021 include:  

IGI Chairman and CEO Mr. Wasef Jabsheh said, “2021 was another excellent year for IGI as we reported  consistently strong quarterly underwriting results and earnings, culminating in one of the best years in  our 20-year history.” 

“IGI is a diverse group of individual risk underwriters with recognized expertise in many specialty lines. We have grown our business organically since inception, and the past two years have seen an acceleration  of that. In 2021, on the back of significant growth in 2020, we increased our gross premiums more than  16% to $546 million, expanding into new lines and markets. We reported record underwriting income for  the fourth quarter and year in 2021 and a combined ratio of 83.8% for the fourth quarter and 86.4% for  the year. With our asset base now approaching $1.5 billion, we expect to continue our strong performance  in 2022, focusing on our core strengths and capitalizing on sector tail winds.” 

“As we mark our twentieth year in business, I’m deeply proud of our successes and the commitment and  focus demonstrated by our people at IGI,” Mr. Jabsheh said. “We have achieved these record results and  continued to deliver high levels of service to our clients while continuing to navigate a prolonged period  of global uncertainty. I look forward to our future with confidence, knowing that we are building on a very  solid foundation that will continue to deliver strong total value creation to all our stakeholders.” 

Results for the Quarters and Years ended December 31, 2021 and 2020  

Profit for the quarter ended December 31, 2021 was $9.1 million, compared to profit of $7.6 million for  the quarter ended December 31, 2020.  

Core operating income, a non-IFRS measure defined below, was $13.6 million for the quarter ended  December 31, 2021, a significant increase over the core operating income of $4.5 million for the  comparable period in 2020. The improvement in core operating income in the fourth quarter of 2021 was primarily the result of an increase in net premiums earned and a lower level of net claims and claim adjustment expenses when compared to the same quarter in 2020. The quarter ended December 31, 2021  benefited from a 13.0 point improvement in the combined ratio primarily driven by an increase in net  premiums earned and favorable development of net loss reserves from prior accident years compared to unfavorable development for the same period in 2020. 

The core operating return on average equity (annualized) increased 8.8 points to 13.7% for the fourth quarter of 2021 compared to the fourth quarter of 2020. 

Profit was $43.6 million for the year ended December 31, 2021, compared to profit of $27.2 million for  the year ended December 31, 2020. 

Core operating income was $53.1 million for the year ended December 31, 2021 compared to core  operating income of $35.6 million for the year ended December 31, 2020. The improvement in core  operating income in the full year of 2021 compared to the full year of 2020 was primarily driven by an increase in net premiums earned and total investment income, net, partially offset by an increase in  net claims and claim adjustment expenses, net policy acquisition expenses, and general and  administrative expenses.  

The core operating return on average equity increased 3.3 points to 13.6% for the full year of 2021 from  10.3% for the full year of 2020. 

Underwriting Results 

The net underwriting results improved to $30.6 million for the fourth quarter of 2021 from $14.7 million  for the fourth quarter of 2020, largely driven by growth in net premiums earned and a lower level of net  claims and claim adjustment expenses. 

Gross written premiums were $163.5 million for the quarter ended December 31, 2021, representing  growth of 26.3% compared to gross written premiums of $129.5 million for the quarter ended December  31, 2020. The increase in gross written premiums was the result of new business generated across all  segments and virtually all lines, as well as rate increases on existing business.  

The net claims and claims expense ratio was 46.8% for the quarter ended December 31, 2021, compared  to 59.8% for the quarter ended December 31, 2020, primarily driven by favorable development of net loss  reserves from prior accident years of $5.7 million or 6.6 points, compared to unfavorable development of  $5.4 million or 7.3 points for the quarter ended December 31, 2020, coupled with the increase in net  premiums earned. The favorable development of net loss reserves for prior accident years in the fourth  quarter of 2021 was primarily in the Long-tail Segment and to a lesser extent in the Reinsurance Segment. 

The general and administrative expense ratio increased 2.4 points to 19.3% in the fourth quarter of 2021,  largely due to increased costs in salaries related to new hires and investment in technology infrastructure  to support the Company’s growth, as well as some non-recurring legal and professional fees.  

The combined ratio for the quarter ended December 31, 2021 was 83.8% compared to 96.8% for the  quarter ended December 31, 2020 and benefited from an increase in net premiums earned and favorable  development of net loss reserves from prior accident years during the quarter.  

The net underwriting results improved to $105.8 million for the year ended December 31, 2021 from  $77.4 million for the year ended December 31, 2020, largely driven by growth in net premiums earned.  

Gross written premiums were $545.6 million for the year ended December 31, 2021, compared to $467.3 million for the year ended December 31, 2020, representing an increase of 16.8%. The increase in gross  written premiums was the result of new business generated in all segments and across virtually all lines as well as rate increases on existing business. While market conditions remained positive, the Company  also continued to further refine its existing portfolio, achieving improved terms and conditions for the full  year of 2021. 

The net claims and claims expense ratio was 51.0% for the year ended December 31, 2021, compared to  53.5% for the year ended December 31, 2020. The net claims and claims expense ratio benefitted from higher favorable development of net loss reserves from prior accident years of $16.1 million, or 4.7 points, for the full year of 2021, compared to favorable development of $6.1 million, or 2.2 points, for the full  year 2020, coupled with the increase in net premiums earned. The favorable development of net loss  reserves from prior accident years for the full year 2021 was recorded primarily in the Long-tail Segment  and to a lesser extent in the Short-tail and Reinsurance segments. 

The general and administrative expense ratio increased 0.5 point to 17.1% for the full year 2021, when  compared to the full year 2020, as the higher net premiums earned for the full year 2021 largely offset  increased salary costs from new hires, increased technology infrastructure costs and non-recurring legal and professional costs.  

The combined ratio for the year ended December 31, 2021 was 86.4%, compared to 89.3% for the year  ended December 31, 2020. 

Segment Results  

The Long-tail Segment, which represented approximately 44% of the Company’s gross written premiums  for the full year 2021, includes all professional and financial lines written by the Company, including D&O,  professional indemnity, financial institutions, legal expenses, as well as surety, marine liability, inherent  defects insurance, and general third-party liability (non-U.S. casualty). 

Gross written premiums for the fourth quarter of 2021 in the Long-tail Segment increased 20.1% to $82.9 million from $69.0 million for the fourth quarter of 2020. Net premiums earned for the quarter ended  December 31, 2021 were $40.0 million, compared to $38.5 million in the comparable quarter in 2020. The  net underwriting results for this segment were a profit of $11.3 million for the fourth quarter of 2021,  compared to a loss of $0.4 million in the fourth quarter of 2020. The growth in net underwriting results  was primarily due to higher net premiums earned, coupled with a lower level of net claims and claim  adjustment expenses in the fourth quarter of 2021, which benefited from favorable development of net loss reserves from prior accident years. This comparesto the fourth quarter of 2020, which was negatively  impacted by unfavorable development of net loss reserves from prior accident years. 

Gross written premiums for the full year of 2021 in the Long-tail Segment were $239.6 million,  representing an increase of 13.8% from $210.5 million for the full year 2020. Net premiums earned for  the full year of 2021 were $167.6 million, compared to $141.4 million for the full year of 2020. The net  underwriting results for this segment were $50.9 million for the full year of 2021, compared to $25.5 million for the comparable period in 2020. The growth in net underwriting results was primarily due to the higher level of net premiums earned in 2021 coupled with a lower level of net claims and claim  adjustment expenses, which benefited from higher favorable development of net loss reserves from prior  accident years, partially offset by an increase in net policy acquisition expenses.  

The Short-tail Segment, which represented approximately 52% of the Company’s gross written premiums  for the full year of 2021, includes energy, property, general aviation, ports and terminals, marine trades,  marine cargo, contingency, construction and engineering, and political violence.  

Gross written premiums for the fourth quarter of 2021 in the Short-tail Segment were $76.6 million, an  increase of 32.8% compared to $57.7 million in the fourth quarter of 2020. Net premiums earned for the  quarter ended December 31, 2021 were $39.7 million, compared to $30.0 million in the comparable  quarter in 2020. The net underwriting results for this segment were $20.3 million for the fourth quarter  of 2021, compared to $2.5 million for the comparable quarter in 2020. The fourth quarter of 2021  benefited from the increase in net premiums earned, partially offset by an increase in net claims and claim  adjustment expenses, primarily relating to the South Africa riots in the political violence line of business.  

Gross written premiums for the full year 2021 in the Short-tail Segment increased to $282.0 million, compared to $237.5 million for the full year of 2020. Net premiums earned for the full year of 2021 were  $153.9 million, compared to $123.2 million for the full year of 2020. The net underwriting results for this  segment were $52.5 million for the full year of 2021, compared to $42.4 million for the full year of 2020.  The full year 2021 net underwriting results benefited from the increase in net premiums earned, partially  offset by an increase in net claims and claim adjustment expenses, primarily relating to the South Africa  riots in the political violence line of business, and an increase in net policy acquisition expenses. 

The Reinsurance Segment, which represented approximately 4% of the Company’s gross written  premiums for the full year of 2021, includes the Company’s inwards reinsurance portfolio.  

Gross written premiums for the fourth quarter of 2021 in the Reinsurance Segment were $4.0 million,  compared to $2.8 million in the fourth quarter of 2020. Net premiums earned for the quarter ended  December 31, 2021 were $6.5 million, compared to $5.4 million for the comparable quarter in 2020. The  net underwriting results for this segment were a loss of $1.0 million for the fourth quarter of 2021,  primarily driven by a higher level of net claims and claim adjustment expenses, including the European  floods, compared to a profit of $2.6 million in the fourth quarter of 2020.  

Gross and net written premiums for the full year of 2021 in the Reinsurance Segment were $24.0 million,  compared to $19.3 million for the full year 2020. Net premiums earned for the full year of 2021 were  $23.7 million, compared to $18.9 million for the full year of 2020. The net underwriting results for this  segment were $2.4 million for the full year of 2021, compared to $9.5 million for the full year of 2020. The  lower net underwriting results in 2021 compared to 2020 was primarily attributable to a higher level of  net claims and claim adjustment expenses, including the European floods.

Foreign Exchange Gains (Losses) 

The gain on foreign exchange in the fourth quarter of 2021 was $3.2 million, compared to $ 6.2 million in  the fourth quarter of 2020, both of which largely represent currency revaluation gain. When compared  with the fourth quarter of 2020, the fourth quarter of 2021 saw a lesser degree of favorable currency  movement in the Company’s major transactional currencies (namely Pound Sterling, Euro and Australian  Dollar) against the U.S. Dollar.  

The loss on foreign exchange for the full year of 2021 was $4.9 million compared to a gain of $2.5 million  for the full year of 2020. The loss for the full year of 2021 was primarily driven by the currency revaluation  losses recorded in non-U.S. Dollar monetary assets due to the weakening of the Company’s major  transactional currencies from December 31, 2020 to December 31, 2021. The gain recorded for the full  year 2020 reflected strengthening of these underlying currencies against the U.S. Dollar. 

Investment Results 

Total investment income was a loss of $4.0 million in the fourth quarter of 2021, compared to a gain of  $4.5 million in the fourth quarter of 2020. The fourth quarter of 2021 includes a share of loss from  associates amounting to $7.0 million, related to the Company’s share of Lebanon-based real estate, which  has been impacted by a significant decline in the fair value of commercial properties due to ongoing local  geopolitical issues coupled with the prevailing hyper inflationary environment in Lebanon. Total real  estate holdings (owned directly and through IGI’s investments in associates in Lebanon) at December 31,  2021 were $22.0 million, and included a write down of 50.9% of the Company’s share of real estate in  Lebanon. Total real estate holdings at December 31, 2020, were $31.6 million. Total investment income,  net (which excludes realized and unrealized gains and losses on investments, realized and fair value gains  or losses on investment properties, expected credit losses on investments, and the share of profit or loss  from associates) was $2.2 million and $3.4 million for the quarters ended December 31, 2021 and  December 31, 2020, respectively. This represented an annualized investment yield of 1.0% on the average  total investments and cash portfolio (comprised of cash and cash equivalents and term deposits) in the  fourth quarter of 2021, compared to 1.8% in the corresponding period in 2020. Excluding cash and bank  balances, the Company’s total investments and cash portfolio produced an investment yield of 1.3% in  both the fourth quarters of 2021, compared to 2.2% in the corresponding period in 2020.  

Total investment income was $8.8 million for the full year of 2021 compared to $8.5 million for the full  year of 2020. Total investment income for the full year of 2021 includes a share of loss from associates of  $7.3 million, related to the Company’s share of Lebanon-based real estate, as above. Total investment  income, net (which excludes realized and unrealized gains and losses, expected credit losses on  investments, and the share of loss from associates) was $14.2million and $11.5 million for the years ended  December 31, 2021 and December 31, 2020, respectively. This represented an investment yield of 1.7%  for the full year of 2021 and 2020. Excluding cash and bank balances, the company’s total investments and cash portfolio produced an investment yield of 2.1% for the full year of 2021, compared to 2.2% yield  for the full year of 2020. 

The cash portfolio totaled $422.1 million at December 31, 2021, representing 46.2% of the Company’s  total investments and cash portfolio, compared to $305.6 million at December 31, 2020, when it  represented 39.4%. Total investments includes investments, investment in associates, and investment properties and totaled $914.3 million at December 31, 2021 compared to $775.3 million at December 31,  2020. 

Total Equity  

Total equity at December 31, 2021 was $401.9 million, compared to $381.0 million at December 31, 2020.  The movement in total equity during the fourth quarter and year ended December 31, 2021 is illustrated  below: 

Book value per share was $8.83 at December 31, 2021, representing growth of 5.2% from $8.39 at  December 31, 2020. 

Separately, during the fourth quarter of 2021, Chairman and CEO Wasef Jabsheh purchased an aggregate  of 139,516 common shares of the Company for approximately $1.09 million in open market transactions.