International General Insurance Holdings Ltd 6-K, filed Aug 18, 2022
International General Insurance Holdings Ltd. (IGIC)
About this 6-K
International General Insurance Holdings Ltd filed this 6-K on August 18, 2022.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For
the month of August
Commission
File Number:
(Translation of Registrant’s name into English)
74 Abdel Hamid Sharaf Street, P.O. Box 941428, Amman 11194, Jordan
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. ☐
INCORPORATION BY REFERENCE
This report on Form 6-K, including Exhibits 99.1 and 99.2 attached hereto, shall be deemed to be incorporated by reference into the registration statement on Form F-3 (File No. 333-254986) and Form S-8 (File No. 333-238918) of International General Insurance Holdings Ltd. (including the prospectuses forming a part of such registration statements) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.
1
EXHIBIT
| Exhibit Number |
Exhibit Description | |
| 99.1 | Interim Condensed Consolidated Financial Statements as of and for the six months ended June 30, 2022 (unaudited). | |
| 99.2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| INTERNATIONAL GENERAL INSURANCE HOLDINGS LTD. | |||
| Date: August 18, 2022 | By: | /s/ Pervez Rizvi | |
| Name: | Pervez Rizvi | ||
| Title: | Chief Financial Officer | ||
3
Exhibit 99.1
INTERNATIONAL GENERAL INSURANCE HOLDINGS LTD.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
30 June 2022 (UNAUDITED)
1
International General Insurance Holdings Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022 and 31 December 2021
| Notes | 30 June 2022 | 31 December 2021 | ||||||||
| USD ’000 | USD ’000 | |||||||||
| Unaudited | Audited | |||||||||
| ASSETS | ||||||||||
| Cash and cash equivalents | 3 (a) | |||||||||
| Term deposits | 3 (b) | |||||||||
| Insurance receivables | ||||||||||
| Investments | 4 | |||||||||
| Investments in associates | 5 | |||||||||
| Reinsurance share of outstanding claims | 6 | |||||||||
| Reinsurance share of unearned premiums | ||||||||||
| Deferred excess of loss premiums | ||||||||||
| Deferred policy acquisition costs | ||||||||||
| Deferred tax assets | ||||||||||
| Other assets | ||||||||||
| Investment properties | 7 | |||||||||
| Property, premises and equipment | 8 (a) | |||||||||
| Intangible assets | 8 (b) | |||||||||
| TOTAL ASSETS | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||
| LIABILITIES | ||||||||||
| Gross outstanding claims | 6 | |||||||||
| Gross unearned premiums | ||||||||||
| Insurance payables | ||||||||||
| Other liabilities | ||||||||||
| Derivative financial liability | 9 | |||||||||
| Deferred tax liabilities | - | |||||||||
| Unearned commissions | ||||||||||
| TOTAL LIABILITIES | ||||||||||
| EQUITY | ||||||||||
| Common shares at par value | 10 | |||||||||
| Share premium | ||||||||||
| Treasury shares | 10 | ( | ) | - | ||||||
| Foreign currency translation reserve | ||||||||||
| Fair value reserve | ( | ) | ||||||||
| Retained earnings | ||||||||||
| TOTAL EQUITY | ||||||||||
| TOTAL EQUITY AND LIABILITIES | ||||||||||
The attached notes from 1 to 20 form part of these interim condensed consolidated financial statements
2
International General Insurance Holdings Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the periods ended 30 June 2022 and 2021 (Unaudited)
| Notes | For the six months ended 30 June | |||||||||
| 2022 | 2021 | |||||||||
| USD ’000 | USD ’000 | |||||||||
| Gross written premiums | ||||||||||
| Reinsurers’ share of insurance premiums | ( | ) | ( | ) | ||||||
| Net written premiums | ||||||||||
| Change in unearned premiums | ( | ) | ( | ) | ||||||
| Reinsurers’ share of change in unearned premiums | ||||||||||
| Net change in unearned premiums | ( | ) | ( | ) | ||||||
| Net premiums earned | ||||||||||
| Claims and claim adjustment expenses | 6 | ( | ) | ( | ) | |||||
| Reinsurers’ share of claims | 6 | |||||||||
| Net claims and claim adjustment expenses | ( | ) | ( | ) | ||||||
| Commissions earned | ||||||||||
| Policy acquisition costs | ( | ) | ( | ) | ||||||
| Net policy acquisition expenses | ( | ) | ( | ) | ||||||
| Net underwriting results | ||||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||||
| Net investment income | 13 | |||||||||
| Share of (loss) profit from associates | ( | ) | ||||||||
| Impairment loss on insurance receivables | ( | ) | ( | ) | ||||||
| Other revenues | ||||||||||
| Other expenses | ( | ) | ( | ) | ||||||
| Change in fair value of derivative financial liability | 9 | ( | ) | |||||||
| Loss on foreign exchange | ( | ) | ( | ) | ||||||
| Profit before tax | ||||||||||
| Income tax | ( | ) | ||||||||
| Profit for the period | ||||||||||
Earnings
per share | 15 | |||||||||
The attached notes from 1 to 20 form part of these interim condensed consolidated financial statements
3
International General Insurance Holdings Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the periods ended 30 June 2022 and 2021 (Unaudited)
| For the six months ended 30 June | ||||||||
| 2022 | 2021 | |||||||
| USD ’000 | USD ’000 | |||||||
| Profit for the period | ||||||||
| Other comprehensive income to be reclassified to profit or loss in subsequent periods | ||||||||
| Net change in fair value reserve during the period for bonds at fair value through other comprehensive income | ( | ) | ( | ) | ||||
| Currency translation difference | ||||||||
| Changes in allowance for expected credit losses transferred to interim condensed consolidated statement of income | ||||||||
Other comprehensive income which will not be reclassified to profit or loss in subsequent periods | ||||||||
| Net change in fair value reserve during the period for equities at fair value through other comprehensive income | ( | ) | ||||||
| Realized gain on sale of equities at fair value through other comprehensive income | ||||||||
| Other comprehensive loss for the period | ( | ) | ( | ) | ||||
| Total comprehensive income for the period | ||||||||
The attached notes from 1 to 20 form part of these interim condensed consolidated financial statements
4
International General Insurance Holdings Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the periods ended 30 June 2022 and 2021 (Unaudited)
| Notes | For the six months ended 30 June | |||||||||
| 2022 | 2021 | |||||||||
| USD ’000 | USD ’000 | |||||||||
| Operating Activities | ||||||||||
| Profit for the period before tax | ||||||||||
| Adjustments for: | ||||||||||
| Impairment loss on insurance receivables | ||||||||||
| Gain (loss) on sale of premises and equipment | ( | ) | ||||||||
| Depreciation | 8 (a) | |||||||||
| Amortization | 8 (b) | |||||||||
| Net share of loss (profit) from associates | 5 | ( | ) | |||||||
| Lease interest expense | 8 (a) | |||||||||
| Realized loss on sale of bonds at FVTOCI | 13 | - | ||||||||
| Realized loss (gain) on sale of financial assets at FVTPL | 13 | ( | ) | |||||||
| Realized loss on sale of investment properties | 13 | |||||||||
| Fair value loss on investment properties | 13 | |||||||||
| Expected credit loss on financial assets | 13 | |||||||||
| Loss (gain) on revaluation of financial assets at FVTPL | 13 | ( | ) | |||||||
| Interest income | 13 | ( | ) | ( | ) | |||||
| Share-based payment expense | 11 | |||||||||
| Change in fair value of derivative financial liability | ( | ) | ||||||||
| Net foreign exchange differences | ||||||||||
| Cash from operations before working capital changes | ||||||||||
| Term deposits | ( | ) | ||||||||
| Insurance receivables | ( | ) | ( | ) | ||||||
| Purchase of investments | ( | ) | ( | ) | ||||||
| Proceeds from sale and maturity of investments | ||||||||||
| Reinsurance share of outstanding claims | ||||||||||
| Reinsurance share of unearned premiums | ( | ) | ( | ) | ||||||
| Deferred excess of loss premiums | ||||||||||
| Deferred policy acquisition costs | ( | ) | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||||
| Interest received | ||||||||||
| Additions to investment properties | ( | ) | ( | ) | ||||||
| Proceeds from sale of investment properties | ||||||||||
| Gross outstanding claims | ( | ) | ||||||||
| Gross unearned premiums | ||||||||||
| Insurance payables | ||||||||||
| Other liabilities | ( | ) | ( | ) | ||||||
| Unearned commissions | ||||||||||
| Income tax paid | ( | ) | ( | ) | ||||||
| Net cash (used in) from operating activities | ( | ) | ||||||||
| Investing Activities | ||||||||||
| Acquisition of a subsidiary, net of cash acquired | 19 | - | ( | ) | ||||||
| Proceeds from sale of premises and equipment | - | |||||||||
| Purchase of premises and equipment | 8 (a) | ( | ) | ( | ) | |||||
| Purchase of intangible assets | 8 (b) | ( | ) | ( | ) | |||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||
| Financing Activities | ||||||||||
| Dividends paid | 12 | ( | ) | ( | ) | |||||
| Treasury shares | 10 | ( | ) | |||||||
| Lease liabilities payments | ( | ) | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ||||||||
| Net foreign exchange differences | ( | ) | ( | ) | ||||||
| Cash and cash equivalents at the beginning of the period | 3 | |||||||||
| Cash and cash equivalents at the end of the period | 3 | |||||||||
The attached notes from 1 to 20 form part of these interim condensed consolidated financial statements
5
International General Insurance Holdings Ltd.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the periods ended 30 June 2022 and 2021 (Unaudited)
Common shares at par value | Share premium | Treasury shares | Foreign currency translation reserve | Fair value reserve | Retained earnings | Total | ||||||||||||||||||||||
| USD ’000 | USD ’000 | USD ’000 | USD ’000 | USD ’000 | USD ’000 | USD ’000 | ||||||||||||||||||||||
| As at 1 January 2021 | ( | ) | ||||||||||||||||||||||||||
| Profit for the period | ||||||||||||||||||||||||||||
| Other comprehensive income | ( | ) | ( | ) | ||||||||||||||||||||||||
| Total comprehensive income | ( | ) | ||||||||||||||||||||||||||
| Issuance of restricted share awards (note 11) | - | |||||||||||||||||||||||||||
| Cash dividends (note 12) | ( | ) | ( | ) | ||||||||||||||||||||||||
| As at 30 June 2021 | ( | ) | ||||||||||||||||||||||||||
| As at 1 January 2022 | ||||||||||||||||||||||||||||
| Profit for the period | ||||||||||||||||||||||||||||
| Other comprehensive income | ( | ) | ( | ) | ||||||||||||||||||||||||
| Total comprehensive income | ( | ) | ||||||||||||||||||||||||||
| Issuance of restricted share awards (note 11) | ||||||||||||||||||||||||||||
| Purchase of treasury shares | ( | ) | ( | ) | ||||||||||||||||||||||||
| Cash dividends (note 12) | ( | ) | ( | ) | ||||||||||||||||||||||||
| As at 30 June 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
The attached notes from 1 to 20 form part of these interim condensed consolidated financial statements
6
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
1. CORPORATE INFORMATION
International General Insurance Holdings Ltd. (“the Company”) is an exempted limited liability company registered and incorporated in Bermuda under the Companies Act of 1981 on 28 October 2019. The principal activities of the Company are to invest in companies engaged in the business of insurance and reinsurance. The Company’s registered office is at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda.
On 17 March 2020, the definitive business agreement between International General Insurance Holdings Limited - Dubai (“IGI”) and Tiberius Acquisition Corp. (NASDAQ: TIBR) (“Tiberius”), a publicly traded special purpose acquisition company, and certain related parties, was effective. As a result of the completion of the Business Combination, the Company became a new public company listed on the Nasdaq Capital Market under the symbol “IGIC” and owned by the former stockholders of Tiberius and the former shareholders of IGI and each of IGI and Tiberius became the Company’s subsidiaries.
The transaction was accounted for as a continuation of IGI. Under this method of accounting, while the Company was the legal acquirer of both IGI and Tiberius, IGI had been identified as the accounting acquirer of Tiberius for accounting purposes. This determination was primarily based on IGI comprising the ongoing operations of the combined company, IGI’s senior management comprising the senior management of the combined company, and the former owners and management of IGI having control of the board of directors of the Company following the consummation of the transaction by virtue of being able to appoint a majority of the directors of the combined company.
As Tiberius did not meet the definition of a business as defined in IFRS 3 - Business Combinations (“IFRS 3”), the purchase of the shares of the former owners of Tiberius was not within the scope of IFRS 3 and was accounted for as a share-based payment transaction in accordance with IFRS 2 - Share-based payments (“IFRS 2”). Hence, the transaction was accounted for as the continuance of IGI with recognition of the identifiable assets acquired and the liabilities assumed of Tiberius at fair value. Operations prior to the transaction were those of IGI from an accounting point of view.
The Company and its subsidiaries (together “the Group”) operate in the Bermuda, United Kingdom, Jordan, Morocco, Malaysia, Malta, United Arab Emirates and the Cayman Islands.
The interim condensed consolidated financial statements were authorized for issue in accordance with a resolution of the Board of Directors on XXXX August 2022.
2. BASIS OF PREPARATION
The interim condensed consolidated financial statements for the six months ended 30 June 2022 have been prepared in accordance with IAS 34 - Interim Financial Reporting.
The interim condensed consolidated financial statements have been presented in United States Dollars (“USD”) which is also the Group’s functional currency. All values are rounded to the nearest thousand (USD ’000), except when otherwise indicated.
The interim condensed consolidated financial statements do not include all information and disclosures required in the annual financial statements and should be read in conjunction with the Group’s annual consolidated financial statements as at 31 December 2021. In addition, results for the six months ended 30 June 2022 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2022.
The interim condensed consolidated financial statements are prepared on a going concern basis under the historical cost convention modified to include the measurement at fair value of financial assets and investment properties at fair value through profit or loss, and financial assets at fair value through other comprehensive income. Financial assets measured at fair value through profit and loss include quoted funds, alternative investments and quoted equities. Financial assets at fair value through other comprehensive income include quoted and unquoted equities.
7
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
2. BASIS OF PREPARATION (continued)
Basis of consolidation
The interim condensed consolidated financial statements comprise the financial statements of International General Insurance Holdings Ltd. and its subsidiaries as at 30 June 2022. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:
| ● | Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) |
| ● | Exposure, or rights, to variable returns from its involvement with the investee, and |
| ● | The ability to use its power over the investee to affect its returns |
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
| ● | The contractual arrangement with the other vote holders of the investee |
| ● | Rights arising from other contractual arrangements |
| ● | The Group’s voting rights and potential voting rights |
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
8
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
2. BASIS OF PREPARATION (continued)
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
The Group has the following subsidiaries and branches:
| Country of incorporation | Activity | Ownership | ||||||||||
| 30
June 2022 | 31 December 2021 | |||||||||||
| International General Insurance Holdings Limited | % | % | ||||||||||
| Tiberius Acquisition Corporation | % | % | ||||||||||
| The following entities are wholly owned by the subsidiary International General Insurance Holdings Limited: | ||||||||||||
| I.G.I Underwriting /Jordan “Exempted” | % | % | ||||||||||
| North Star Underwriting Limited | % | % | ||||||||||
| International General Insurance Co. Ltd. | % | % | ||||||||||
| The following entities are wholly owned subsidiaries and branches by International General Insurance Co. Ltd. Bermuda: | ||||||||||||
| Subsidiaries: | ||||||||||||
| International General Insurance Company (UK) Limited | % | % | ||||||||||
| International General Insurance Company (Dubai) Ltd. | % | % | ||||||||||
| International General Insurance Company (Europe) SE* | % | % | ||||||||||
| Specialty Malls Investment Company | % | % | ||||||||||
| IGI Services Ltd | % | % | ||||||||||
| Branches: | ||||||||||||
| International General Insurance Company Ltd. - Labuan Branch | % | % | ||||||||||
| * |
9
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
2. BASIS OF PREPARATION (continued)
Changes in accounting policies
The accounting policies used in the preparation of the interim condensed consolidated financial statements are consistent with those used in the preparation of the annual consolidated financial statements for the year ended 31 December 2021.
There are no new standards or amendments effective in 2022 that have a material impact on the Group’s interim condensed consolidated financial statements.
3. CASH AT BANKS
(a) CASH AND CASH EQUIVALENTS
30 June 2022 | 31 December 2021 | |||||||
| USD ’000 | USD ’000 | |||||||
| Cash and bank balances* | ||||||||
| Deposits with original maturities of three months or less | ||||||||
| * |
(b) TERM DEPOSITS
30 June 2022 | 31 December 2021 | |||||||
| USD ’000 | USD ’000 | |||||||
| Deposits with original maturities over three months and less than one year | ||||||||
| Deposits with original maturities over one year | ||||||||
The deposits are denominated in US Dollars and other
US Dollars pegged currencies. All deposits earned interest in the range between
10
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
| 30 June 2022 | ||||||||||||||||
| Amortized Cost | Fair value through other comprehensive income | Fair value through profit or loss | Total | |||||||||||||
| USD ’000 | USD ’000 | USD ’000 | USD ’000 | |||||||||||||
| Unquoted bonds* | ||||||||||||||||
| Quoted bonds | ||||||||||||||||
| Quoted funds and alternative investments | ||||||||||||||||
| Quoted equities | ||||||||||||||||
| Unquoted equities** | ||||||||||||||||
| Expected credit losses and impairment | ( | ) | ( | ) | ||||||||||||
| 31 December 2021 | ||||||||||||||||
| Amortized Cost | Fair value through other comprehensive income | Fair value through profit or loss | Total | |||||||||||||
| USD ’000 | USD ’000 | USD ’000 | USD ’000 | |||||||||||||
| Unquoted bonds* | ||||||||||||||||
| Quoted bonds | ||||||||||||||||
| Quoted funds and alternative investments | ||||||||||||||||
| Quoted equities | ||||||||||||||||
| Unquoted equities** | ||||||||||||||||
| Expected credit losses and impairment | ( | ) | ( | ) | ||||||||||||
| * | The Group has an investment in an unquoted bond denominated in JOD (USD pegged currency) issued by ’Specialized Investment Compound Co.
This bond is backed up by collateral in the form of real estate properties. However, the Group management has provided USD |
| ** | The Group has two unquoted equity investments under level 3 designated at fair value through OCI valued at USD
As at 30 June 2022 and 31 December 2021, the Group has measured the fair value of the unquoted investment valued at USD |
There are no active markets for these investments.
11
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
4. INVESTMENTS (continued)
The movement on the expected credit losses and impairment provision for the bonds at amortized cost is as follows:
30 June 2022 | 31 December 2021 | |||||||
| USD ’000 | USD ’000 | |||||||
| Opening balance | ||||||||
| (Release) addition of provision for investment held at amortized cost | ( | ) | ||||||
| Ending balance | ||||||||
The addition of allowance for bonds at FVTOCI
for the period ended 30 June 2022 of USD
The table below shows the sensitivity of the fair value of Level 3 financial assets as at 30 June 2022 and 30 June 2021:
| % | Positive impact | Negative impact | Valuation variables | |||||||||
| USD ’000 | USD ’000 | |||||||||||
| 30 June 2022 | ( | ) | ||||||||||
| 30 June 2021 | ( | ) | ||||||||||
| *** | As at 30 June 2021, the fair value measurement of the unquoted equity investment valued at USD |
5. INVESTMENTS IN ASSOCIATES
The Group holds
| Country of incorporation | Ownership | |||||||||
30 June 2022 | 31 December 2021 | |||||||||
| Star Rock SAL Lebanon | % | % | ||||||||
| Sina SAL Lebanon | % | % | ||||||||
| Silver Rock SAL Lebanon | % | % | ||||||||
| Golden Rock SAL Lebanon | % | % | ||||||||
12
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
5. INVESTMENTS IN ASSOCIATES (continued)
Movement on investments in associates is as follows:
30 June 2022 | 31 December 2021 | |||||||
| USD ’000 | USD ’000 | |||||||
| Opening balance | ||||||||
| Opening balance adjustments for hyperinflation and effect of movements in exchange rates recognised in other comprehensive income | ||||||||
| Adjusted opening balance | ||||||||
| Share of associated companies’ financial results | ( | ) | ( | ) | ||||
| Investment properties fair value adjustment | ( | ) | ||||||
| Share of loss from associates | ( | ) | ( | ) | ||||
| Ending balance | ||||||||
The inflation in Lebanon has increased significantly in prior years, and the underlying quantitative and qualitative indicators following the deteriorating economic conditions and currency controls support the conclusion that Lebanon is a hyperinflationary economy.
Accordingly, for the purpose of the Group’s interim condensed consolidated financial statements, the associates’ financial statements (which are based on historical cost approach, except for the investment properties which are measured at fair value) have been adjusted to be expressed in terms of the measuring unit current at the end of the reporting period by applying a general price index.
The associates’ main business is investing in investment properties located in Beirut, Lebanon. The investment properties of the associates are stated at fair value to bring the associated companies’ accounting policies in line with that of the Group’s. The fair values of the investment properties have been determined by management and in doing so, management has considered valuation performed by third party specialist. The valuation model used was in accordance with that recommended by the International Valuation Standards Committee. The investment properties are valued using the sales comparison approach. Under the sales comparison approach, a property’s fair value is estimated based on comparable transactions. The sales comparison approach is based upon the principle of substitution under which a potential buyer will not pay more for the property than it will cost to buy a comparable substitute property. The unit of comparison applied by the Group is the price per square meter (sqm) which represents the significant unobservable input used in the valuation process.
The real estate market in Lebanon has changed significantly since the onset of the financial crisis that affected the country. Due to the relatively limited information available under the prevailing market conditions, and as a result of artificial demand created by investors outside the professional real estate development industry, who primarily aim to divest from cash assets into more secure holdings, prices found on the market are uncertain. Furthermore, since the majority of property owners are only accepting payments in US Dollars and not in local Lebanese currency, demand for commercial buildings has dropped considerably. Accordingly, prices found on the market at 30 June 2022, including achieved sales prices, are only indicative and may not hold if the market were to be corrected.
All the investment properties generated rental income during the current year and the prior years, except for Sina SAL which did not generate rental income during the six months ended 30 June 2022.
13
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
5. INVESTMENTS IN ASSOCIATES (continued)
The sensitivity of the Group’s interim condensed consolidated statement of income for the six months periods ended 30 June 2022 and 2021 to the change in the price used for the valuation of the investment properties owned by the associates was as follows:
| Impact on interim condensed consolidated statement of income for the change in price per square meter | ||||||||||
| % | Increase | Decrease | ||||||||
| USD ’000 | USD ’000 | |||||||||
| 30 June 2022 | ( | ) | ||||||||
| 30 June 2021 | ( | ) | ||||||||
6. OUTSTANDING CLAIMS
Movement in outstanding claims
| 30 June 2022 | 31 December 2021 | |||||||||||||||||||||||
Gross | Reinsurers’ share |
Net |
Gross | Reinsurers’ share |
Net | |||||||||||||||||||
| USD ’000 | USD ’000 | USD ’000 | USD ’000 | USD ’000 | USD ’000 | |||||||||||||||||||
| At the beginning of the period / year | ||||||||||||||||||||||||
| Reported claims | ( | ) | ( | ) | ||||||||||||||||||||
| Claims incurred but not reported | ( | ) | ( | ) | ||||||||||||||||||||
| ( | ) | ( | ) | |||||||||||||||||||||
| Claims paid | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Provided during the period / year related to current accident year | ( | ) | ( | ) | ||||||||||||||||||||
| Provided during the period / year related to previous accident years | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| At the end of the period / year | ( | ) | ( | ) | ||||||||||||||||||||
| At the end of the period / year | ||||||||||||||||||||||||
| Reported claims | ( | ) | ( | ) | ||||||||||||||||||||
| Claims incurred but not reported | ( | ) | ( | ) | ||||||||||||||||||||
| ( | ) | ( | ) | |||||||||||||||||||||
7. INVESTMENT PROPERTIES
The following table includes summarized information of the Group’s investment properties:
| 30 June 2022 | ||||||||||||
| Commercial building | Lands* | Total | ||||||||||
| USD ’000 | USD ’000 | USD ’000 | ||||||||||
| Opening balance | ||||||||||||
| Additions | ||||||||||||
| Sale of investment properties | ( | ) | ( | ) | ||||||||
| Fair value adjustment | ( | ) | ( | ) | ( | ) | ||||||
| Ending balance | ||||||||||||
14
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
7. INVESTMENT PROPERTIES (continued)
| 31 December 2021 | ||||||||||||
| Commercial building | Lands* | Total | ||||||||||
| USD ’000 | USD ’000 | USD ’000 | ||||||||||
| Opening balance | ||||||||||||
| Additions | ||||||||||||
| Sale of investment properties | ( | ) | ( | ) | ||||||||
| Transfer to property, premises and equipment | ( | ) | ( | ) | ||||||||
| Fair value adjustment | ( | ) | ( | ) | ( | ) | ||||||
| Ending balance | ||||||||||||
| * |
The fair values of investment properties have been determined by management and in doing so has considered a valuation performed by third parties who are specialists in valuing these types of investment properties. The valuation model used was in accordance with that recommended by the International Valuation Standards Committee. The investment properties are valued using the sales comparison approach. Under the sales comparison approach, a property’s fair value is estimated based on comparable transactions. The sales comparison approach is based upon the principle of substitution under which a potential buyer will not pay more for the property than it will cost to buy a comparable substitute property. The management believes that this valuation technique falls under level 3 of the fair value hierarchy since investment properties market is not very active.
The sensitivity of the Group’s interim condensed consolidated statement of income for the six months periods ended 30 June 2022 and 2021 to the change in the price used for the valuation of the investment properties was as follows:
| Impact on interim condensed consolidated statement of income for the change in price per square meter | ||||||||||||||
| % | Average price per square meter | Increase | Decrease | |||||||||||
| USD | USD ’000 | USD ’000 | ||||||||||||
| Commercial building | ||||||||||||||
| 30 June 2022 | ( | ) | ||||||||||||
| 30 June 2021 | ( | ) | ||||||||||||
15
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
7. INVESTMENT PROPERTIES (continued)
| Impact on interim condensed consolidated statement of income for the change in price per square meter | ||||||||||||||
| % | Average price per square meter | Increase | Decrease | |||||||||||
| USD | USD ’000 | USD ’000 | ||||||||||||
| Lands | ||||||||||||||
| 30 June 2022 | ( | ) | ||||||||||||
| 30 June 2021 | ( | ) | ||||||||||||
8 (a). PROPERTY, PREMISES AND EQUIPMENT
The additions to the property and equipment during
the six-months period ended 30 June 2022 were USD
Pursuant to IFRS 16 ‘Lease’, the Group
has recognized a total amount of USD
8 (b). INTANGIBLE ASSETS
The additions to the intangible assets during the
six-months period ended 30 June 2022 were USD
9. DERIVATIVE FINANCIAL LIABILITY
In connection with the Business Combination completed on 17 March 2020
(see note 1), the Group issued
No Public or Private Warrants (together, the “Warrants”) have been exercised or redeemed since originally issued and until the date of these interim condensed consolidated financial statements.
Upon initial recognition on 17 March 2020, the fair value of the Warrants
has been determined using a combination of a market approach and valuation technique used by an independent third-party valuation specialist.
Based on that, the estimated fair value of the Warrants was USD
The Private Warrants are registered for resale on the Group’s registration statement on Form F-3 and are freely tradable into the public market if holders want to sell them.
The Public Warrants and Private Warrants broadly have similar terms.
16
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
9. DERIVATIVE FINANCIAL LIABILITY (continued)
There are no restrictions on the transfer of the Private Warrants. Accordingly, the Private Warrants are valued using the price as deemed equivalent to the fair value of the Public Warrants listed on Nasdaq.
The table below illustrates the movement on the Warrants during the period / year:
30 June 2022 | 31 December 2021 | |||||||
| USD ’000 | USD ’000 | |||||||
| Fair value of Warrants at the beginning of the period / year | ||||||||
| Change in fair value for the period / year | ( | ) | ( | ) | ||||
| Fair value of Warrants at the end of the period / year | ||||||||
10. EQUITY
Common shares
According to the Company’s Bye-laws, the authorized share capital
of the Group consists of
The following table sets out the number of common shares issued and outstanding as at 30 June 2022 and 31 December 2021:
| 30 June 2022 | ||||||||
| No. of shares | Par value | |||||||
| USD ’000 | ||||||||
| Common shares (par value of USD | ||||||||
| Earnout shares* (par value of USD | ||||||||
| Restricted share awards (par value of USD | ||||||||
| Common shares issued | ||||||||
| 31 December 2021 | ||||||||
| No. of shares | Par value | |||||||
| USD ’000 | ||||||||
| Common shares (par value of USD | ||||||||
| Earnout shares* (par value of USD | ||||||||
| Restricted share awards (par value of USD | ||||||||
| Common shares issued and outstanding | ||||||||
| * | The earnout shares are subject to vesting at stock prices ranges from USD |
Treasury shares
On 23 May 2022, the Group announced that the Board of Directors has approved a repurchase authorization of up to 5 million of its issued and outstanding common shares. This authorization, which does not have an expiration date, replaced the Group’s prior authorization of an aggregate consideration of up to USD 5,000 thousand, which was terminated. As at 30 June 2022, the Group repurchased 15,665 shares with a cost of USD 118 thousand.
17
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
11. SHARE-BASED PAYMENTS
On 3 June 2020, the Board of Directors approved the Group’s share-based employee compensation plan, the 2020 Omnibus Incentive Plan (“the Plan”). Under the Plan, the following awards may be granted:
| - | Options to buy Common Shares (“Stock Options”), which may be either incentive stock options (“Incentive Stock Options” or “ISOs”) qualified under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or non-qualified stock options (“Non-Qualified Stock Options” or “NQSOs”), which do not satisfy the requirements of Incentive Stock Options; |
| - | Share appreciation rights (“SARs”) (including tandem, non-tandem and limited SARs); |
| - | Restricted share awards (“Restricted Share Awards”); |
| - | Performance awards denominated in Common Shares or cash (“Performance Awards”); |
| - | Other share-based awards (“Other Share-Based Awards”), including but not limited to restricted share units (“RSUs”); and |
| - | Other cash-based awards (“Other Cash-Based Awards”). |
Grant date fair values represent the closing quoted prices of the Company’s share on Nasdaq on the dates when awards were officially communicated to the participants and shall be applicable for all the three vesting tranches.
Participant’s continued service with the Company or any of its Subsidiaries on each applicable vesting date is the only vesting condition to be met. There is no other performance related condition attached to the vesting of shares.
The movement on the number of restricted shares during the period / year is as follows:
30 June 2022 | 31 December 2021 | |||||||
| Balance at 1 January | ||||||||
| Restricted shares granted | ||||||||
| Restricted shares vested | ( | ) | ( | ) | ||||
| Restricted shares forfeited | ( | ) | ( | ) | ||||
| Balance at end of the period / year | ||||||||
The Company has applied the graded vesting method in recognition of share-based payment expense. Accordingly, the Company has assessed the expected length of service period from date of shares grant until end of each vesting period respectively and considered this to determine proportionate earnout shares at 30 June 2022 and 31 December 2021 attributed to each vesting tranche.
Number of earnout shares to be considered for accounting purposes at period / year end for each tranche are as follow:
| Earn out shares | ||||||||||||||||||||||
| Grant | Days from grant date | From first vesting (tranche 1) | From second vesting (tranche 2) | From third vesting (tranche 3) | Total | |||||||||||||||||
| 30 September 2020 grant | - | ( | ) | |||||||||||||||||||
| 16 February 2021 grant | ||||||||||||||||||||||
| 30 June 2022 | 31 March 2021 grant | |||||||||||||||||||||
| 9 February 2022 grant | ||||||||||||||||||||||
| 24 March 2022 grant | ||||||||||||||||||||||
| Total | ||||||||||||||||||||||
| 7 October 2020 grant | ||||||||||||||||||||||
| 31 December 2021 | 16 February 2021 grant | |||||||||||||||||||||
| 31 March 2021 grant | ||||||||||||||||||||||
| Total | ||||||||||||||||||||||
Accordingly, total earnout shares of
18
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
12. CASH DIVIDENDS
Cash dividends declared and paid:
The Board of Directors resolved to pay the following dividends for the periods ended 30 June 2022 and 2021:
| - | On 19 May 2022: USD |
| - | On 24 March 2022: USD |
| - | On 25 March 2021: USD |
There are no cash dividends declared but not paid as at 30 June 2022 and 31 December 2021.
13. Net INVESTMENT InCOME
For the six months ended 30 June | ||||||||
| 2022 | 2021 | |||||||
| USD ’000 | USD ’000 | |||||||
| Interest income | ||||||||
| Dividends from equities at FVTOCI | ||||||||
| Dividends from equities at FVTPL | ||||||||
| Realized gains and losses on investments | ||||||||
| Realized loss on sale of bonds at FVTOCI | - | ( | ) | |||||
| Realized (loss) gain on sale of equities and mutual funds at FVTPL | ( | ) | ||||||
| Unrealized gains and losses on investments | ||||||||
| Unrealized (loss) gain on revaluation of financial assets at FVTPL | ( | ) | ||||||
| Gains and losses from investment properties | ||||||||
| Realized loss on sale of investment properties | ( | ) | ( | ) | ||||
| Unrealized loss on investment properties | ( | ) | ( | ) | ||||
| Rental income | ||||||||
| Expected credit losses on investments | ||||||||
| Expected credit loss on financial assets at FVOCI | ( | ) | ( | ) | ||||
| Reversal of expected credit loss on financial assets at amortized cost | - | |||||||
| Investments custodian fees and other investments expenses | ( | ) | ( | ) | ||||
19
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
14. Related party transactions
Related parties represent major shareholders, associates, directors and key management personnel of the Group and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’s management.
| ▪ | Compensation of key management personnel of the Group for the period
ended 30 June 2022, consisting of salaries and benefits was USD |
| ▪ | The Group has paid aircraft management fees and chartering revenues
commission in the amount of USD |
| ▪ | Included within the investment properties (see note 7) are lands with
a total amount of USD |
| ▪ | In connection with the Business Combination, the Group issued |
| ▪ | On 24 March 2022, the Board of Directors approved the grant of |
15. EaRNINGS PER SHARE
Basic earnings per share represents the profits attributable to the ordinary shareholders divided by the weighted average number of common shares outstanding during the periods.
Diluted earnings per share represents the profits attributable to the ordinary shareholders divided by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
As at 30 June 2022, the earnout shares and restricted share awards were unvested, however, since these shares contain a nonforfeitable rights to dividends, whether paid or unpaid, they are considered as participating securities and hence included in the computation of both basic and diluted earnings per share.
20
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
15. EaRNINGS PER SHARE (continued)
The following table shows the calculation of the basic and diluted earnings per share for the six months ended 30 June 2022 and 2021.
| For the six months ended 30 June | ||||||||
| 2022 | 2021 | |||||||
| Profit for the period (USD ’000) | ||||||||
| Less: profit attributable to the earnout shares (USD ’000) | ||||||||
| Less: profit attributable to the restricted share awards (USD ’000) | ||||||||
| Net profit available to common shareholders (USD ’000) | ||||||||
| Weighted average number of shares – basic and diluted | ||||||||
| Basic and diluted earnings per share (USD) | ||||||||
16. COMMITMENTS AND CONTINGENCIES
As at 30 June 2022, the Group is contingently liable for the following:
| ▪ | Letters of Credit amounting to USD |
| ▪ | Letter of Guarantee amounting to USD |
21
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
17. Fair value
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
| 30 June 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| USD ’000 | USD ’000 | USD ’000 | USD ’000 | |||||||||||||
| Assets measured at fair value: | ||||||||||||||||
| FVTPL | ||||||||||||||||
| Quoted equities at FVOCI | ||||||||||||||||
| Quoted bonds at FVOCI | ||||||||||||||||
| Unquoted equities at FVOCI* | ||||||||||||||||
| Investment properties | ||||||||||||||||
| Liabilities measured at fair value: | ||||||||||||||||
| Derivative financial liability | - | |||||||||||||||
| 31 December 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| USD ’000 | USD ’000 | USD ’000 | USD ’000 | |||||||||||||
| Assets measured at fair value: | ||||||||||||||||
| FVTPL | ||||||||||||||||
| Quoted equities at FVOCI | ||||||||||||||||
| Quoted bonds at FVOCI | ||||||||||||||||
| Unquoted equities at FVOCI* | ||||||||||||||||
| Investment properties | ||||||||||||||||
| Liabilities measured at fair value: | ||||||||||||||||
| Derivative financial liability | - | |||||||||||||||
Quoted bonds at fair value through other comprehensive
income amounting to USD
As at 31 December 2021, the management has refined
the criteria for financial assets being allocated to level 1, accordingly, USD
As at 30 June 2022 and 31 December 2021, derivative financial liability was categorized at level 2 due to lack of sufficient trading volume at period and year end, respectively.
There were no transfers into or out of level 3 during the six months period ended 30 June 2022 and year ended 31 December 2021.
22
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
17. Fair value (continued)
| * | Reconciliation of fair value of the unquoted equities under level 3 fair value hierarchy is as follows: |
| 30 June 2022 | 31 December 2021 | |||||||
| USD ’000 | USD ’000 | |||||||
| Balance at the beginning of the period / year | ||||||||
| Total gains recognized in OCI | ||||||||
| Balance at the end of the period / year | ||||||||
18. Segment Reporting
The Group’s chief operating decision maker (“CODM”) is the Executive Committee, which periodically reviews financial information at the business line level. Thus, each of the business lines in which the Group operates are considered operating segments.
The Group has aggregated operating segments into the following reporting segments for the purposes of its interim condensed consolidated financial statements:
| 1. | Specialty Long tail (comprising business lines with underwriting risks assumed in form of liability insurance and of a long-term nature with respect to related claims). |
| 2. | Specialty Short tail (comprising business lines with underwriting risks assumed in the form of property and specialty line insurance and of a short-term nature with respect to related claims). |
| 3. | Reinsurance which covers the inward reinsurance treaty and is a single operating segment. |
The Group is of the view that the quantitative and qualitative aspects of the aggregated operating segments are similar in nature for all periods presented. In evaluating the appropriateness of aggregating operating segments, the key indicators considered included but were not limited to: (i) nature of products, (ii) similarities of customer base, products, underwriting processes and outward reinsurance processes, (iii) regulatory environments and (iv) distribution methods.
Segment performance is evaluated based on net underwriting results and is measured consistently with the overall net underwriting results in the interim condensed consolidated financial statements.
The Group also has general and administrative expenses, net investment income, gain/loss on foreign exchange, other expenses/revenues, change in fair value of derivative financial liability and tax expense. These financial items are presented under “Corporate and Other” in the tables below as the Group does not allocate them to individual reporting segments.
23
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
18. Segment Reporting (continued)
| a) | Segment disclosure for the Group’s consolidated operations is as follows: |
| For the period ended 30 June 2022 | ||||||||||||||||||||||||
| Specialty Long tail | Specialty Short tail | Reinsurance | Sub Total | Corporate and Other | Total | |||||||||||||||||||
| USD ’000 | USD ’000 | USD ’000 | USD ’000 | USD ’000 | USD ’000 | |||||||||||||||||||
| Underwriting revenues | ||||||||||||||||||||||||
| Gross written premiums | ||||||||||||||||||||||||
| Reinsurer’s share of insurance premiums | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net written premiums | ||||||||||||||||||||||||
| Net change in unearned premiums | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net premiums earned | ||||||||||||||||||||||||
| Underwriting deductions | ||||||||||||||||||||||||
| Net policy acquisition expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net claims and claim adjustment expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net underwriting results | ||||||||||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||||||||||||||||||
| Net investment income | ||||||||||||||||||||||||
| Share of profit from associates | ( | ) | ( | ) | ||||||||||||||||||||
| Impairment loss on insurance receivables | ( | ) | ( | ) | ||||||||||||||||||||
| Other revenues | ||||||||||||||||||||||||
| Other expenses | ( | ) | ( | ) | ||||||||||||||||||||
| Change in fair value of derivative financial liability | ||||||||||||||||||||||||
| Loss on foreign exchange | ( | ) | ( | ) | ||||||||||||||||||||
| Profit (loss) before tax | ( | ) | ||||||||||||||||||||||
| Income tax | ||||||||||||||||||||||||
| Profit (loss) for the period | ( | ) | ||||||||||||||||||||||
24
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
18. Segment Reporting (continued)
| For the period ended 30 June 2021 | ||||||||||||||||||||||||
| Specialty Long tail | Specialty Short tail | Reinsurance | Sub Total | Corporate and Other | Total | |||||||||||||||||||
| USD ’000 | USD ’000 | USD ’000 | USD ’000 | USD ’000 | USD ’000 | |||||||||||||||||||
| Underwriting revenues | ||||||||||||||||||||||||
| Gross written premiums | ||||||||||||||||||||||||
| Reinsurer’s share of insurance premiums | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net written premiums | ||||||||||||||||||||||||
| Net change in unearned premiums | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net premiums earned | ||||||||||||||||||||||||
| Underwriting deductions | ||||||||||||||||||||||||
| Net policy acquisition expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net claims and claim adjustment expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net underwriting results | ||||||||||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ||||||||||||||||||||
| Net investment income | ||||||||||||||||||||||||
| Share of loss from associates | ||||||||||||||||||||||||
| Impairment loss on insurance receivables | ( | ) | ( | ) | ||||||||||||||||||||
| Other revenues | ||||||||||||||||||||||||
| Other expenses | ( | ) | ( | ) | ||||||||||||||||||||
| Change in fair value of derivative financial liability | ( | ) | ( | ) | ||||||||||||||||||||
| Loss on foreign exchange | ( | ) | ( | ) | ||||||||||||||||||||
| Profit (loss) before tax | ( | ) | ||||||||||||||||||||||
| Income tax | ( | ) | ( | ) | ||||||||||||||||||||
| Profit (loss) for the period | ( | ) | ||||||||||||||||||||||
| b) | Non–current operating assets information by geography as at 30 June 2022 and 31 December 2021 are as follows: |
30 June 2022 | 31 December 2021 | |||||||
| USD ’000 | USD ’000 | |||||||
| Middle East | ||||||||
| North Africa | ||||||||
| UK | ||||||||
| Asia | ||||||||
| Europe | ||||||||
| North America | ||||||||
Non-current assets for this purpose consist of property, plant and equipment, right-of-use assets, investment properties and intangible assets.
25
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
19. ACQUISITION OF A SUBSIDIARY
Following the United Kingdom’s (“UK”) decision to withdraw from the European Union (“EU”) (“Brexit”), the U.K. began a process of “onshoring” EU legislation whereby the UK replicated EU law in UK legislation and regulation and then amended it so that it would be operationally effective following the end of the Brexit transition period on December 31, 2020. As an automatic consequence of the UK’s departure from the EU’s single market, passporting rights to and from the UK ended at the end of the transition period. Passporting is the exercise of the right available to a firm authorised in one European Economic Area (“EEA”) member state to carry on certain activities covered by an EU single market directive in another EEA member state, on the basis of its home state authorisation. For firms based in the UK, this means the loss of access to EU markets. As of the end of the transition period, the Group’s subsidiary in UK has lost its passporting rights in the EU, such that it can no longer write insurance business in EEA countries under the “freedom of services” regime or write insurance business through a place of business in an EEA member state under the “freedom of establishment” regime using the rights contained in the European Council’s Solvency II Directive.
In response to Brexit, the Group developed a contingency plan to ensure that it will be able to continue to provide insurance services throughout Europe despite Brexit. To that end, the Group submitted an application and scheme of operations to the Malta Financial Services Authority in November 2020. The application can be used as a change of control application or a full new licensing application.
In continuation to the above, the Group acquired
The strategy to purchase R&Q Epsilon, as opposed to incorporating a new subsidiary from afresh, was based on operational factors. R&Q Epsilon already had an operational UK based bank account and, given the requirement to use the Xchanging payment platform for broker-based business (especially where the Group is co-ensuring the European risks on global business), it was necessary for the Group to have an account for IGI Europe with a bank that is part of the LIPS (LPC Irrevocable Payment Scheme).
The acquisition agreement of R&Q Epsilon Insurance
Company SE (former company) was fully executed on 25 June 2021 (the “Acquisition Date”) for a purchase consideration of USD
The Group accounted for the acquisition of R&Q Epsilon under IFRS 3 “Business Combinations”.
The book and fair values of the identifiable assets and liabilities of International General Insurance Company (Europe) SE as at the date of acquisition were:
| Book value | Fair value recognized on acquisition | |||||||
| USD ’000 | USD ’000 | |||||||
| Assets | ||||||||
| Insurance receivables and other assets | ||||||||
| Bank Balances | ||||||||
| Liabilities | ||||||||
| Insurance payables and other liabilities | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Total identifiable net assets at fair value | ||||||||
| Goodwill arising on acquisition | ||||||||
| Purchase consideration transferred | ||||||||
26
International General Insurance Holdings Ltd.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At 30 June 2022
19. ACQUISITION OF A SUBSIDIARY (continued)
The movement on the goodwill during the year is as follows
31 December 2021 | ||||
| USD ’000 | ||||
| Balance at the beginning of the year | ||||
| Goodwill arising from acquisition of a subsidiary | ||||
| Impairment loss | ( | ) | ||
| Balance at the end of the year | ||||
Goodwill arising on acquisition of former company was fully impaired since the regulatory approval to write business was granted solely on the strength of IGI Europe’s application and business plan submitted to Malta Financial Services Authority.
From the date of acquisition until 31 December 2021, International General Insurance Company (Europe) SE contributed USD 9,768 thousand of gross written premiums and USD 1,181 thousand of net loss to profit before tax of the Group.
Analysis of cash flows on acquisition:
| USD ’000 | ||||
| Net cash acquired with the subsidiary | ||||
| Cash paid | ( | ) | ||
| Net cash flow on acquisition | ( | ) | ||
On 13 July 2021, the Malta Financial Services Authority (“MFSA”) authorised IGI Europe to write insurance and reinsurance business.
As at 30 June 2021 (the end of the first reporting period), the Group had provisionally accounted for the acquisition of R&Q Epsilon and accordingly determined that the fair value of the net assets and liabilities was approximately equivalent to the book value. Nonetheless, in accordance with the one-year measurement period permitted under IFRS 3, the Group had reassessed the provisional carrying amount of net identified asset and liabilities of R&Q Epsilon at 31 December 2021 and accordingly reflected the new information obtained about facts and circumstances that were in existence at the Acquisition Date as illustrated above.
20. subsequent events
There have been no material events between 30 June 2022 and the date of this report which are required to be disclosed.
27
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context otherwise requires or indicates, references to “we,” “us,” “our,” “IGI,” the “Group,” and the “Company” refer to International General Insurance Holdings Ltd., a Bermuda exempted company, and its consolidated subsidiaries. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the audited and unaudited consolidated financial statements of the Company. 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.
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, contingency, 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 have prudently grown our business with a focus on underwriting profitability and risk-adjusted shareholder returns.
Our primary objective is to underwrite profitable specialty products that maximize return on 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 modern technology 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 IFRS segment reporting: specialty long-tail, specialty short-tail and reinsurance. Our specialty long-tail segment includes (1) our professional lines (non-U.S.) business, which includes our professional indemnity, directors and officers, legal expenses, intellectual property and other casualty lines of business, (2) our financial institutions line of business, (3) our marine liability line of business and (4) 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, contingency and marine cargo lines of business. Our reinsurance segment includes our inward reinsurance treaty business.
In addition, we have a corporate function (“Corporate”) which includes the activities of our parent company and certain functions, including investment management. Corporate includes investment income on a managed basis and other non-segment expenses, predominantly general and administrative, stock compensation, finance and transaction expenses. Corporate also includes the activities of certain key executives such as the Chief Executive Officer and Chief Financial Officer. Our corporate expenses and investment results are presented separately within the corporate segment section.
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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.
Reinsurers’ share of insurance premiums
Reinsurers’ share of insurance 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 reinsurers’ share of insurance premiums constitutes 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.
Net claims and claim adjustment expenses
Claims, 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. Claims comprise the estimated amounts payable, in respect of claims reported to us and those not reported at the consolidated statement of financial position date.
We generally estimate our claims 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 claims incurred but not reported at the consolidated statement of financial position date.
Net claims and claim adjustment expenses constitutes claims and claim adjustments expenses net of reinsurers’ share of claims.
Net policy acquisition expenses
Policy acquisition costs and commissions earned represent commissions paid and received 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 pattern of the underlying contract.
Total investment income, net
Net investment income is principally comprised of income from interest, dividends, gains and losses from investments in properties, expected credit losses on investments and investment custodian fees and other investment expenses. For purposes of this discussion, “total investment income, net” reflects the sum of net investment income and share of profit or loss from associates, calculated net of (1) net realized gains (losses) on investments, (2) realized gains (losses) on investment properties, (3) unrealized gains (losses) on investments, (4) fair value gains (losses) on investment properties, (5) expected credit losses on investments, and (6) share of profit (loss) from associates.
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Realized gains (losses) on investments
Realized gains and losses on investments is comprised of realized gains and losses on the sale of bonds at fair value through other comprehensive income and realized gains and losses on the sale of equities at fair value through profit and loss account.
Realized gains (losses) on investment properties
Net realized gains and losses on investments is comprised of realized gains and losses on the sale of investment properties.
Unrealized gains (losses) on investments
Unrealized gains (losses) on investments includes unrealized losses on the revaluation of financial assets at fair value through profit and loss account.
Fair value gains (losses) on investment properties
Fair value gains (losses) on investment properties includes the revaluation gains and losses of investment properties.
Expected credit losses on investments
Expected credit losses on investments include an allowance for expected credit losses (ECLs) for debt instruments not held at fair value through profit or loss.
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.
Other income (expenses)
Other income (expenses) includes the sum of (1) other revenues, (2) other expenses and (3) impairment loss on insurance receivables.
Change in fair value of derivative financial liability
The Group’s warrants constitute derivative liabilities under IFRS 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.
Gain (loss) on foreign exchange
Gain (loss) on foreign exchange represents gains and/or losses incurred as a result of foreign currency transactions.
Income tax
Income tax 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 and (4) corporate tax payable by International General Insurance Company (Europe) S.E. in accordance with Malta income tax law. International General Insurance Co. Ltd. (IGI Bermuda) is a tax-exempt company. IGI Holdings (a DIFC-registered company) and IGI Dubai are not subject to income tax in accordance with UAE tax law, and IGI Underwriting is a tax-exempt company in Jordan.
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Non-IFRS Financial Measures
In presenting our results, management has included and discussed certain non-IFRS financial measures. We believe that these non-IFRS 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 IFRS.
Tangible book value per diluted common share plus accumulated dividends
In addition to presenting book value per common share determined in accordance with IFRS, we believe that the key financial indicator for evaluating our performance and measuring the overall growth in value generated for shareholders is “book value per diluted common share plus accumulated dividends,” a non-IFRS financial measure.
The following table presents reconciliations of “book value per common share” to “tangible book value per common share plus accumulated dividends.”
| June 30, 2022 | ||||||||||||
| ($) in millions, except per share data | Equity Amount | Common Shares Outstanding | Per Share Amount | |||||||||
| Book value per common share | $ | 393.9 | 45.6 | $ | 8.64 | |||||||
| Non-IFRS adjustments: | ||||||||||||
| Intangible assets | $ | (4.0 | ) | $ | (0.09 | ) | ||||||
| Tangible book value per share | 389.9 | 8.55 | ||||||||||
| Accumulated dividends | 135.8 | 2.98 | ||||||||||
| Tangible book value per common share plus accumulated dividends | $ | 11.53 | ||||||||||
| June 30, 2021 | ||||||||||||
| ($) in millions, except per share data | Equity Amount | Common Shares Outstanding | Per Share Amount | |||||||||
| Book value per common share | $ | 390.2 | 45.5 | $ | 8.58 | |||||||
| Non-IFRS adjustments: | ||||||||||||
| Intangible assets | $ | (5.5 | ) | $ | (0.12 | ) | ||||||
| Tangible book value per share | 384.7 | 8.46 | ||||||||||
| Accumulated dividends | 118.2 | 2.60 | ||||||||||
| Tangible book value per common share plus accumulated dividends | $ | 11.06 | ||||||||||
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.
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In addition to presenting profit for the period determined in accordance with IFRS, 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 profit for the period, the most directly comparable IFRS financial measure, as illustrated in the table below.
Return on average equity and core operating return on average equity, which are both non-IFRS financial measures, represent the returns generated on common shareholders’ equity during the period. Our objective is to generate superior returns on capital that appropriately reward shareholders for the risks assumed.
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| ($) in millions | ||||||||
| Profit for the period | $ | 41.3 | $ | 18.5 | ||||
| Non-IFRS adjustments: | ||||||||
| Realized gains on investments (tax adjusted)(1) | - | (0.2 | ) | |||||
| Expected credit losses on investments (tax adjusted)(1) | 0.7 | - | ||||||
| Unrealized loss (gain) on investments (tax adjusted)(1) | 3.2 | (2.0 | ) | |||||
| Fair value loss on investment properties | 0.5 | 0.8 | ||||||
| Fair value gain on investment properties held through associates(2) | - | (0.3 | ) | |||||
| Change in fair value of derivative financial liability | (3.6 | ) | 3.8 | |||||
| Loss on foreign exchange (tax adjusted) (1) | 11.2 | 2.9 | ||||||
| Core operating income | $ | 53.3 | $ | 23.5 | ||||
| Average shareholders’ equity(3) | 397.9 | 385.6 | ||||||
| Return on average equity (annualized)(3) | 20.8 | % | 9.6 | % | ||||
| Core operating return on average equity (annualized)(5) | 26.8 | % | 12.2 | % | ||||
| Basic and diluted core operating earnings per share(6) | $ | 1.08 | $ | 0.48 | ||||
| Basic and diluted earnings per share attributable to equity holders(7) | $ | 0.84 | $ | 0.38 | ||||
| (1) | Adjusted for the related tax impact. |
| (2) | Fair value gain on investment properties held through associates has been excluded from core operating income for the six months ended June 30, 2022. Accordingly, the presentation of core operating income for the six months ended June 30, 2021 also excludes fair value gain on investment properties held through associates in order to facilitate a comparison. |
| (3) | Average shareholders’ equity as of any date equals the shareholders’ equity at such date, plus the shareholders’ equity as of the same date of the prior year, divided by 2. |
| (4) | Represents profit for the period (annualized) divided by average shareholders’ equity. |
| (5) | Represents core operating income for the period (annualized) divided by average shareholders’ equity. |
| (6) | Represents core operating income attributable to vested common shares divided by weighted average number of shares – basic and diluted as follows: |
| Six months ended June 30, | ||||||||
| ($) in millions, except per share information | 2022 | 2021 | ||||||
| Core operating income for the period attributable to equity holders | $ | 53.3 | $ | 23.5 | ||||
| Minus: core operating income attributable to earn out shares | 3.3 | 1.4 | ||||||
| Minus: core operating income attributable to restricted share awards subject to vesting | 0.7 | 0.2 | ||||||
| Core operating income for the period attributable to vested equity holders (a) | $ | 49.3 | $ | 21.9 | ||||
| Weighted average number of shares – basic and diluted (in millions of shares) (b) | 45.6 | 45.5 | ||||||
| Basic and diluted core operating earnings per share (a/b) | $ | 1.08 | $ | 0.48 | ||||
| (7) | Represents profit for the period attributable to vested common shares divided by the weighted average number of shares – basic and diluted calculated as follows: |
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| Six months ended June 30, | ||||||||
| ($) in millions, except per share information | 2022 | 2021 | ||||||
| Profit for the period attributable to equity holders | $ | 41.3 | $ | 18.5 | ||||
| Minus: earnings attributable to earn out shares subject to vesting | 2.5 | 1.1 | ||||||
| Minus: earnings attributable to restricted shares awards subject to vesting | 0.6 | 0.2 | ||||||
| Profit for the period attributable to common shareholders (a) | $ | 38.2 | $ | 17.2 | ||||
| Weighted average number of shares – basic and diluted (in millions of shares) (b) | 45.6 | 45.5 | ||||||
| Basic and diluted earnings per share (a/b) | $ | 0.84 | $ | 0.38 | ||||
Results of Operations
The following section reviews IGI’s results of operations during the six months ended June 30, 2022 and 2021. 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 income statement for the periods indicated:
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| ($) in millions | ||||||||
| Gross written premiums | $ | 304.4 | $ | 266.8 | ||||
| Reinsurers’ share of insurance premiums | (97.4 | ) | (80.1 | ) | ||||
| Net written premiums | $ | 207.0 | $ | 186.7 | ||||
| Net change in unearned premiums | (24.0 | ) | (18.9 | ) | ||||
| Net premiums earned | $ | 183.0 | $ | 167.8 | ||||
| Net claims and claim adjustment expenses(1) | (67.0 | ) | (89.8 | ) | ||||
| Net policy acquisition expenses | (34.3 | ) | (29.4 | ) | ||||
| Net underwriting results | $ | 81.7 | $ | 48.6 | ||||
| Total investment income, net(2) | 8.5 | 7.9 | ||||||
| Realized gains on investments | - | 0.2 | ||||||
| Unrealized (loss) gain on investments | (3.1 | ) | 2.1 | |||||
| Fair value losses on investment properties | (0.5 | ) | (0.8 | ) | ||||
| Expected credit losses on investments | (0.7 | ) | - | |||||
| Share of profit from associates | - | 0.3 | ||||||
| General and administrative expenses | (33.3 | ) | (29.3 | ) | ||||
| Other expenses, net(3) | (2.2 | ) | (1.6 | ) | ||||
| Change in fair value of derivative financial liability | 3.6 | (3.8 | ) | |||||
| Loss on foreign exchange | (12.7 | ) | (3.2 | ) | ||||
| Profit before tax | $ | 41.3 | $ | 20.4 | ||||
| Income tax | - | (1.9 | ) | |||||
| Profit for the period | $ | 41.3 | $ | 18.5 | ||||
| Basic and diluted earnings per share | 0.84 | 0.38 | ||||||
| (1) | Net claims and claim adjustment expenses represents claims occurring during the period, adjusted either upward or downward based on the prior period’s adverse (or favorable) development in claims, as follows: |
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| Six months ended June 30, |
||||||||
| 2022 | 2021 | |||||||
| ($) in millions | ||||||||
| Claims occurring during the current period | 90.1 | 93.1 | ||||||
| Prior years favorable development | (23.1 | ) | (3.3 | ) | ||||
| Net claims and claim adjustment expenses for current year | 67.0 | 89.8 | ||||||
See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Reserves — Reserving Results & Development” for a discussion of the claims development in each of these periods.
| (2) | The breakdown of total investment income, net is as follows: |
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| ($) in millions | ||||||||
| Net investment income | $ | 4.2 | $ | 9.4 | ||||
| Plus Share of profit from associates | - | 0.3 | ||||||
| Total investment income | 4.2 | 9.7 | ||||||
| Minus Realized gains on investments | - | 0.2 | ||||||
| Minus Unrealized (loss) gains on investments | (3.1 | ) | 2.1 | |||||
| Minus Fair value loss on investment properties | (0.5 | ) | (0.8 | ) | ||||
| Minus Expected credit losses on investments | (0.7 | ) | - | |||||
| Minus Share of profit from associates | - | 0.3 | ||||||
| Total investment income, net | $ | 8.5 | $ | 7.9 | ||||
| (3) | The breakdown of other expenses, net is as follows: |
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| ($) in millions | ||||||||
| Other revenues | 1.2 | 1.0 | ||||||
| Other expenses | (1.3 | ) | (1.5 | ) | ||||
| Impairment loss on insurance receivables | (2.1 | ) | (1.1 | ) | ||||
| Other expenses, net | $ | (2.2 | ) | $ | (1.6 | ) | ||
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Six months ended June 30, 2022 compared to six months ended June 30, 2021 (Consolidated)
Gross written premiums
Gross written premiums increased 14.1% from $266.8 million in the six months ended June 30, 2021 to $304.4 million in the six months ended June 30, 2022. This was primarily due to 19.7% growth (or $29.8 million) in the specialty short-tail segment, 39.0% growth (or $5.7 million) in the reinsurance segment, and 2.1% growth (or $2.1 million) in the specialty long-tail segment. The increase in gross written premiums was the result of new business generated across all segments and most of our business lines, as well as rate increases on existing business in all segments.
Reinsurers’ share of insurance premiums
Reinsurers’ share of insurance premiums increased 21.6% from $80.1 million in the six months ended June 30, 2021 to $97.4 million in the six months ended June 30, 2022. The increase in reinsurers’ share of insurance premiums was mainly due to a 56.1% increase in facultative reinsurance purchases within the specialty short-tail segment.
Net change in unearned premiums
Net change in unearned premiums increased 27.0% from $18.9 million in the six months ended June 30, 2021 to $24.0 million in the six months ended June 30, 2022. The increase in net change in unearned premiums was mainly due to the increase in net written premiums across all segments.
Net premiums earned
As a result of the foregoing, net premiums earned increased 9.1% from $167.8 million in the six months ended June 30, 2021 to $183.0 million in the six months ended June 30, 2022. This was primarily due to the increase in net written premiums.
Net claims and claim adjustment expenses
Gross claims and claim adjustment expenses decreased 2.8% from $102.7 million in the six months ended June 30, 2021 to $99.8 million in the six months ended June 30, 2022, and reinsurers’ share of claims increased 154.3% from $12.9 million in the six months ended June 30, 2021 to $32.8 million in the six months ended June 30, 2022. As a result, net claims and claim adjustment expenses decreased 25.4% from $89.8 million in the six months ended June 30, 2021 to $67.0 million in the six months ended June 30, 2022. This was primarily due to the increase in the favorable development on loss reserves from prior accident years in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 coupled with the favorable foreign currency revaluation impact on net outstanding claims denominated in Pound Sterling and Euro as a result of the strengthening of the U.S. Dollar during the six months ended June 30, 2022.
IGI’s overall net claims and claim expense ratio decreased by 16.9 percentage points from 53.5% for the six months ended June 30, 2021 to 36.6% for the six months ended June 30, 2022. This decrease was primarily driven by the increase in favorable development on loss reserves from prior accident years which was $23.1 million or 12.6 points for the six months ended June 30, 2022, compared to favorable development of $3.3 million or 2.0 points for the six months ended June 30, 2021. The net claims and claim expense ratio excluding the impact of the favorable development on loss reserves from the prior accident year would have been 49.2% during the six months ended June 30, 2022 compared to 55.5% during the six months ended June 30, 2021.
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The tables below outline incurred losses on catastrophe events in the six months ended June 30, 2022 and 2021.
| For the six months ended June 30, 2022 | ||||||||
| ($) in millions | Gross Incurred Amount | Net Incurred Amount | ||||||
| Catastrophe Event | ||||||||
| Flooding in Australia | $ | 0.4 | $ | 0.4 | ||||
| Flooding in Kuwait | 0.3 | 0.3 | ||||||
| Other | 0.7 | 0.6 | ||||||
| Provided during the year related to prior accident years | 23.3 | 14.4 | ||||||
| Total | $ | 24.7 | $ | 15.7 | ||||
| For the six months ended June 30, 2021 | ||||||||
| ($) in millions | Gross Incurred Amount | Net Incurred Amount | ||||||
| Catastrophe Event | ||||||||
| Windstorm URI | $ | 0.1 | $ | 0.1 | ||||
| Other | 0.4 | 0.4 | ||||||
| Provided during the year related to prior accident years | 15.1 | 12.4 | ||||||
| Total | $ | 15.6 | $ | 12.9 | ||||
Net policy acquisition expenses
Net policy acquisition expenses increased 16.7% from $29.4 million in the six months ended June 30, 2021 to $34.3 million in the six months ended June 30, 2022. The policy acquisition expense ratio for the six months ended June 30, 2021 was 17.5% compared to 18.7% for the six months ended June 30, 2022. Realized foreign exchange losses of $2.3 million were recorded upon settlement of non-U.S. Dollar outstanding receivables during the first half of 2022 compared to $2.6 million of gain in the first half of 2021. Excluding the impact of realized foreign exchange gains and losses in the first half of 2022 and 2021, the policy acquisition expense ratio would have been 17.5% compared to 19.1% in the same period of the previous year which was due to improved market conditions coupled with better negotiated commissions.
Net underwriting results
As a result of the foregoing, net underwriting results increased 68.1% from $48.6 million in the six months ended June 30, 2021 to $81.7 million in the six months ended June 30, 2022.
Total investment income, net
Total investment income, net increased 7.6% from $7.9 million in the six months ended June 30, 2021 to $8.5 million in the six months ended June 30, 2022. This was primarily due to a $0.5 million increase in interest income which was primarily driven by a greater amount of funds invested in fixed income securities.
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Realized gains on investments
Realized gains on investments decreased from $0.2 million in the six months ended June 30, 2021 to nil in the six months ended June 30, 2022. The realized gain for the six months ended June 30, 2021 included a realized gain of $0.5 million on the disposal of equity securities, offset by a $0.3 million loss on maturity and call of fixed income bonds.
Unrealized (losses) gains on investments and Fair value losses on investment properties
Unrealized (losses) gains on investments and fair value losses on investment properties reflects a net loss of $3.6 million in the six months ended June 30, 2022 compared to a net gain of $1.3 million in the six months ended June 30, 2021. This charge was primarily due to a mark to market revaluation loss of $3.1 million recorded on financial assets at fair value through profit and loss during the six months ended June 30, 2022 compared to a $2.1 million unrealized gain in the six months ended June 30, 2021.
Fair value losses on investment properties decreased from a loss of $0.8 million recorded in the six months ended June 30, 2021 to a fair value loss of $0.5 million in the six months ended June 30, 2022. This was primarily due to the loss booked from a 2.6% negative adjustment in the fair value of commercial buildings in 2022 compared to a 4.5% negative adjustment in 2021 in line with the overall correction seen in the Jordanian commercial real estate market post-pandemic.
Expected credit losses on investments
Expected credit losses on investments increased from nil in the six months ended June 30, 2021 to $0.7 million in the six months ended June 30, 2022 primarily due to the impairment provision taken for the decline in fair value of a bond in our portfolio as a result of the economic sanctions imposed on Russia related to the invasion of Ukraine.
Share of profit from associates
Share of profit from associates decreased from a profit of $0.3 million in the six months ended June 30, 2021 to nil in the six months ended June 30, 2022.
General and administrative expenses
General and administrative expenses increased by 13.7% from $29.3 million in the six months ended June 30, 2021 to $33.3 million in the six months ended June 30, 2022. This was primarily caused by increased employee-related costs, specifically higher salary costs due to new hires, an increase in business travel as global COVID-19 travel restrictions were lifted, and investment in technology infrastructure to support the Company’s growth.
Other expenses, net
Other expenses, net increased from expense of $1.6 million in the six months ended June 30, 2021 to expense of $2.2 million in the six months ended June 30, 2022. This increase was mainly due to booking an impairment loss on insurance receivables of $2.1 million in the six months ended June 30, 2022 compared to the impairment loss on insurance receivables of $1.1 million in the six months ended June 30, 2021.
Loss on foreign exchange
Loss on foreign exchange amounted to $12.7 million in the six months ended June 30, 2022 compared to a loss of $3.2 million in the six months ended June 30, 2021. The six months ended June 30, 2022 saw a greater degree of negative currency movement in the Company’s major transactional currencies, primarily the Pound Sterling and the Euro, against the U.S. Dollar.
Change in fair value of derivative financial liability
Change in fair value of derivative financial liability increased from a loss of $3.8 million in the six months ended June 30, 2021 to a gain of $3.6 million in the six months ended June 30, 2022 due to the decrease in the value of the Company’s warrants.
Profit for the period
As a result of the foregoing, the profit after tax for the period increased from $18.5 million in the six months ended June 30, 2021 to $41.3 million in the six months ended June 30, 2022. The increase in profit primarily resulted from the increase in the Company’s net underwriting results by $33.1 million. This was offset by the increase in the loss on foreign exchange and general and administrative expenses of $9.5 million and $4.0 million, respectively, during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.
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Results of Operations — Specialty Long-tail Segment
The following table summarizes the results of operations of IGI’s specialty long-tail segment for the periods indicated:
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| ($) in millions | ||||||||
| Gross written premiums | $ | 103.4 | $ | 101.3 | ||||
| Reinsurers’ share of insurance premiums | (28.1 | ) | (26.9 | ) | ||||
| Net written premiums | $ | 75.3 | $ | 74.4 | ||||
| Net change in unearned premiums | 6.3 | 8.3 | ||||||
| Net premiums earned | $ | 81.6 | $ | 82.7 | ||||
| Net claims and claim adjustment expenses | (27.4 | ) | (46.2 | ) | ||||
| Net policy acquisition expenses | (16.9 | ) | (14.0 | ) | ||||
| Net underwriting results | $ | 37.3 | $ | 22.5 | ||||
| Claims & claim expense ratio | 33.6 | % | 55.8 | % | ||||
| Policy acquisition expenses ratio | 20.7 | % | 16.9 | % | ||||
Gross written premiums
Gross written premiums in the specialty long-tail segment increased 2.1% from $101.3 million in the six months ended June 30, 2021 to $103.4 million in the six months ended June 30, 2022. The professional and marine liability lines of business contributed to the growth in gross written premiums. The increase was primarily due to the positive rate movement of approximately 13.8% in renewed business in our professional lines of business. In particular, the Company’s legal expenses, directors and officers, and professional indemnity product lines experienced growth of $2.1 million (29.5%), $0.9 million (8.6%) and $0.7 million (1.2%), respectively, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The marine liability line of business also experienced positive rate movement of 14.3% during the six months ended June 30, 2022, which contributed to the total increase in gross written premiums. On the other hand, gross written premiums in the financial institutions line of business decreased due to the Company’s refusal to accept negative rate adjustments on some of its renewal accounts and exiting the surety bonds sub-class since June 2021. Further, gross written premiums in the inherent defects insurance line also decreased due to reduced opportunities available in accessing mid-term projects and the imposition of tighter underwriting guidelines.
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Reinsurers’ share of insurance premiums
Reinsurers’ share of insurance premiums in the specialty long-tail segment increased from an expense of $26.9 million in the six months ended June 30, 2021 to an expense of $28.1 million in the six months ended June 30, 2022. The increase was primarily due to the increase in quota share premiums under professional lines by $1.5 million on a comparative basis in line with growth in gross written premiums.
Net change in unearned premiums
Net change in unearned premiums in the specialty long-tail segment decreased by 24.1% from income of $8.3 million in the six months ended June 30, 2021 to income of $6.3 million in the six months ended June 30, 2022. The decrease in the unearned premiums charge within the long-tail segment was primarily driven by the professional lines of business, which contributed to a majority of the unearned premiums release during the six months ended June 30, 2022 in respect of policies incepting in prior years and to a lesser extent in the financial institutions line of business corresponding to the decrease in net written premiums.
Net premiums earned
As a result of the foregoing, net premiums earned in the specialty long-tail segment decreased 1.3% from $82.7 million in the six months ended June 30, 2021 to $81.6 million in the six months ended June 30, 2022.
Net claims and claim adjustment expenses
Net claims and claim adjustment expenses in the specialty long-tail segment decreased by 40.7% from $46.2 million in the six months ended June 30, 2021 to $27.4 million in the six months ended June 30, 2022. This was primarily due to a net favorable development of loss reserves in prior periods, particularly in the professional indemnity, directors and officers, and financial institutions subclasses, coupled with the currency devaluation impact on loss reserves denominated in Pound Sterling, which was partially offset by a net unfavorable development of prior years’ loss reserves in the inherent defects insurance and marine liability lines of business.
The net claims and claim expense ratios in the professional lines of business were 56.3% and 35.7% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the decrease in the ratio from 56.3% to 35.7% was mainly driven by a higher net favorable development in the prior years’ loss reserves particularly within the professional indemnity and directors and officers subclasses compared to the six months ended June 30, 2021.
The net claims and claim expense ratios in the financial institutions line of business were 46.3% and 6.7% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the decrease in the ratio from 46.3% to 6.7% was mainly driven by a higher net favorable development in the prior years’ loss reserves compared to the six months ended June 30, 2021.
The net claims and claim expense ratios in the marine liability line of business were 42.1% and 100.8% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the increase in the ratio from 42.1% to 100.8% was mainly driven by a net unfavorable development in the prior years’ loss reserves compared to a net favorable development in the prior years’ loss reserves in the six months ended June 30, 2021.
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The net claims and claim expense ratios in the inherent defects insurance line of business were 293.8% and 109.8% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the decrease in the ratio from 293.8% to 109.8% was primarily driven by a higher net premiums earned compared to the six months ended June 30, 2021.
Net policy acquisition expenses
Net policy acquisition expenses in the specialty long-tail segment increased by 20.7% from $14.0 million in the six months ended June 30, 2021 to $16.9 million in the six months ended June 30, 2022. The net policy acquisition expense ratio for the six months ended June 30, 2022 was 20.7% compared to 16.9% for the six months ended June 30, 2021.
Results of Operations — Specialty Short-tail Segment
The following table summarizes the results of operations of IGI’s specialty short-tail segment for the periods indicated:
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| ($) in millions | ||||||||
| Gross written premiums | $ | 180.7 | $ | 150.9 | ||||
| Reinsurers’ share of insurance premiums | (69.3 | ) | (53.2 | ) | ||||
| Net written premiums | $ | 111.4 | $ | 97.7 | ||||
| Change in unearned premiums | (24.4 | ) | (23.9 | ) | ||||
| Net premiums earned | $ | 87.0 | $ | 73.8 | ||||
| Net claims and claim adjustment expenses | (31.2 | ) | (36.7 | ) | ||||
| Net policy acquisition expenses | (14.7 | ) | (13.6 | ) | ||||
| Net underwriting results | $ | 41.1 | $ | 23.5 | ||||
| Claims & claim expense ratio | 35.8 | % | 49.7 | % | ||||
| Net policy acquisition expenses ratio | 16.9 | % | 18.4 | % | ||||
Gross written premiums
Gross written premiums in the specialty short-tail segment increased by 19.7% from $150.9 million in the six months ended June 30, 2021 to $180.7 million in the six months ended June 30, 2022. Each of our lines of business in this segment, other than the ports and terminals line, contributed to growth in the segment’s gross written premiums during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase in gross written premiums was principally due to the following:
| ● | Gross written premiums in the energy line of business increased by 13.3% from $62.3 million in the six months ended June 30, 2021 to $70.6 million in the six months ended June 30, 2022. This increase was primarily due to the positive rate movements in the upstream and downstream lines of business of 3.1% and 1.1%, respectively, and growth in new business in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. |
| ● | Gross written premiums in the property line of business increased by 28.8% from $39.3 million in the six months ended June 30, 2021 to $50.6 million in the six months ended June 30, 2022. This was primarily due to the positive rate movements of 7.2% and growth in new business in the six months ended June 30, 2022 compared to the six months ended June 30, 2021. |
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| ● | Gross written premiums in the construction and engineering line of business increased by 0.6% from $16.6 million in the six months ended June 30, 2021 to $16.7 million in the six months ended June 30, 2022. |
| ● | Gross written premiums in the political violence line of business increased by 17.8% from $4.5 million in the six months ended June 30, 2021 to $5.3 million in the six months ended June 30, 2022. This was primarily due to the increase in new business by $1.2 million during the six months ended June 30, 2022 compared to the six months ended June 30, 2021. |
| ● | Gross written premiums in the ports and terminals line of business decreased by 4.6% from $15.1 million in the six months ended June 30, 2021 to $14.4 million in the six months ended June 30, 2022. This was primarily due to the decrease in new business by $0.6 million during the six months ended June 30, 2022 compared to the six months ended June 30, 2021. |
| ● | Gross written premiums in the general aviation line of business increased by 19.4% from $10.3 million in the six months ended June 30, 2021 to $12.3 million in the six months ended June 30, 2022. This was primarily due to the increase in new business by $1.2 million during the six months ended June 30, 2022 compared to the six months ended June 30, 2021. |
Reinsurers’ share of insurance premiums
Reinsurance premiums ceded in the specialty short-tail segment increased by 30.3% from $53.2 million in the six months ended June 30, 2021 to $69.3 million in the six months ended June 30, 2022. This increase was primarily due to (i) an increase in facultative reinsurance purchases under the energy and property lines of business, (ii) an increase in non-proportional reinsurance purchases under the property and engineering lines of business, and (iii) a decrease in the quota share premiums under the energy, property and engineering lines of business due to the discontinuation of quota share cession from 7.5% to nil as of July 1, 2021.
Net change in unearned premiums
Net change in unearned premiums increased from a change of $23.9 million in the six months ended June 30, 2021 to a change of $24.4 million in the six months ended June 30, 2022. This increase was due to a higher unearned premium charge on new policies incepting in the current period coupled with the non-renewal of quota share treaties in the energy, property and engineering lines of business.
Net premiums earned
As a result of the foregoing, net premiums earned in the specialty short-tail segment increased by 17.9% from $73.8 million in the six months ended June 30, 2021 to $87.0 million in the six months ended June 30, 2022.
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Net claims and claim adjustment expenses
Net claims and claim adjustment expenses in the specialty short-tail segment decreased by 15.5% from $36.7 million in the six months ended June 30, 2021 to $31.2 million in the six months ended June 30, 2022. This was primarily due to a net favorable development of loss reserves in prior periods, particularly in the energy, ports and terminals, and contingency lines of business, coupled with the currency devaluation impact on loss reserves denominated in Euro, which was partially offset by a net unfavorable development of prior years’ loss reserves in the marine cargo and political violence lines of business.
IGI’s overall net claims and claim expense ratio for the specialty short-tail segment decreased by 13.9 percentage points to 35.8% for the six months ended June 30, 2022 as compared to 49.7% during the six months ended June 30, 2021.
The net claims and claim expense ratios in the energy line of business were 51.8% and 30.1% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the decrease in the ratio from 51.8% to 30.1% was mainly driven by a net favorable development in the prior years’ loss reserves particularly within the downstream energy subclass compared to a net unfavorable development in the prior years’ loss reserves during the six months ended June 30, 2021.
The net claims and claim expense ratios in the property line of business were 16.2% and 41.7% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the increase in the ratio from 16.2% to 41.7% was primarily driven by a lower net favorable development in the prior years’ loss reserves compared to the six months ended June 30, 2021.
The net claims and claim expense ratios in the construction and engineering line of business were 138.8% and 43.7% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the decrease in the ratio from 138.8% to 43.7% was primarily driven by the increase in outstanding recoveries compared to the six months ended June 30, 2021 as the latter recorded a reduction in outstanding recoveries for a 2018 accident year claim under the engineering class due to resolution of outward reinsurance matters under arbitration.
The net claims and claim expense ratios in the political violence line of business were 13.5% and 42.1% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the increase in the ratio from 13.5% to 42.1% was primarily driven by a net unfavorable development in the prior years’ loss reserves compared to a net favorable development in the prior years’ loss reserves during the six months ended June 30, 2021.
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The net claims and claim expense ratios in the ports and terminals line of business were 45.0% and 37.4% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the decrease in the ratio from 45.0% to 37.4% was mainly driven by a higher net favorable development in the prior years’ loss reserves compared to the six months ended June 30, 2021.
The net claims and claim expense ratios in the general aviation line of business were 46.0% and 36.6% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the decrease in the ratio from 46.0% to 36.6% was primarily driven by a net favorable development in the prior years’ loss reserves compared to a net unfavorable development in the prior years’ loss reserves during the six months ended June 30, 2021..
The net claims and claim expense ratios in the marine cargo line of business were 33.9% and 48.3% in the six months ended June 30, 2021 and 2022, respectively. During the six months ended June 30, 2022, the increase in the ratio from 33.9% to 48.3% was primarily driven by a net unfavorable development in the prior years’ loss reserves compared to a net favorable development in the prior years’ loss reserves during the six months ended June 30, 2021.
Policy acquisition expenses
Policy acquisition expenses in the specialty short-tail segment increased by 8.1% from $13.6 million in the six months ended June 30, 2021 to $14.7 million in the six months ended June 30, 2022. The policy acquisition expense ratio for the six months ended June 30, 2022 was 16.9% compared to 18.4% in the six months ended June 30, 2021.
Results of Operations — Reinsurance Segment
The following table summarizes the results of operations of IGI’s reinsurance segment for the periods indicated:
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| ($) in millions | ||||||||
| Gross written premiums | $ | 20.3 | $ | 14.6 | ||||
| Reinsurers’ share of insurance premiums | — | — | ||||||
| Net written premiums | $ | 20.3 | $ | 14.6 | ||||
| Change in unearned premiums | (5.9 | ) | (3.3 | ) | ||||
| Net premiums earned | $ | 14.4 | $ | 11.3 | ||||
| Net claims and claim adjustment expenses | (8.4 | ) | (6.9 | ) | ||||
| Net policy acquisition expenses | (2.7 | ) | (1.8 | ) | ||||
| Net underwriting results | $ | 3.3 | $ | 2.6 | ||||
| Claims & claim expense ratio | 58.3 | % | 61.1 | % | ||||
| Policy acquisition expenses ratio | 18.8 | % | 15.9 | % | ||||
Gross written premiums
Gross written premiums in the reinsurance segment increased 39.0% from $14.6 million in the six months ended June 30, 2021 to $20.3 million in the six months ended June 30, 2022. This increase was primarily due to the positive rate movements of 5.3% and growth in new business by $3.1 million in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.
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Net change in unearned premiums
Net change in unearned premiums in the reinsurance segment increased from $3.3 million in the six months ended June 30, 2021 to $5.9 million in the six months ended June 30, 2022. The increase was in line with the growth in net written premiums.
Net premiums earned
As a result of the foregoing, net premiums earned in the reinsurance segment increased 27.4% from $11.3 million in the six months ended June 30, 2021 to $14.4 million in the six months ended June 30, 2022.
Net claims and claim adjustment expenses
Net claims and claim adjustment expenses in the reinsurance segment increased 21.7% from $6.9 million in the six months ended June 30, 2021 to $8.4 million in the six months ended June 30, 2022. This was primarily driven by a higher net unfavorable development in the prior years’ loss reserves compared to the six months ended June 30, 2021.
Policy acquisition expenses
Policy acquisition expenses in the reinsurance segment increased by 50.0% from $1.8 million in the six months ended June 30, 2021 to $2.7 million in the six months ended June 30, 2022. The policy acquisition expense ratio for the six months ended June 30, 2022 was 18.8% compared to 15.9% for the six months ended June 30, 2021.
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.
We have not historically incurred debt. As of June 30, 2022, we had $3.4 million of letters of credit outstanding to the order of reinsurance companies for collateralizing insurance contract liabilities in accordance with reinsurance arrangements.
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 June 30, 2022, we have paid $0.25 million and the remaining four instalments totaling $1.0 million will be made equally between 2022 and 2025.
We have historically paid regular dividends to our shareholders. The payment of dividends is subject to the discretion of the Company’s board of directors. The board’s evaluation with respect to the payment of dividends will depend on numerous factors, including our results, market conditions, regulatory requirements, contractual obligations, legal restrictions and other factors deemed relevant by the board of directors. The most recent dividends paid per share have been:
| March 2019: | $ | 0.04 | ||
| August 2019: | $ | 0.04 | ||
| August 2020: | $ | 0.09 | ||
| March 2021: | $ | 0.17 | ||
| August 2021: | $ | 0.16 | ||
| March 2022: | $ | 0.19 | ||
| June 2022: | $ | 0.01 |
In May 2022 the Company announced that the board of directors approved a share repurchase program of up to 5 million shares. There is no expiration date for this program. There can be no assurance that the Company will repurchase all 5 million shares pursuant to this authorization or as to the timing of any purchases. As of June 30, 2022, the Company repurchased 15,665 shares with a cost of $0.1 million. The board of directors also announced an intention to declare quarterly dividends, subject to the factors described above.
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Our overall capital requirements are based on regulatory capital adequacy and solvency margins and ratios imposed by the Bermuda Monetary Authority, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority of the Bank of England (PRA) in the United Kingdom and the Malta Financial Services Authority (MFSA). 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 group capitalization in excess of A/A- rating requirements under both the AM Best and S&P models, respectively. In addition, we maintain a solvency ratio above 120% of the group capital requirement under the solvency capital rules of the Bermuda Monetary Authority to ensure capital strength, enable opportunistic growth and support a stable dividend policy.
Cash flows
IGI has three main sources of cash flows: operating activities, investing activities and financing activities. The movement in net cash provided by or used in operating, investing and financing activities and the effect of foreign currency rate changes on cash and cash equivalents is provided in the following table:
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| ($) in millions | ||||||||
| Net cash flows (used in) from operating activities after tax | $ | (13.8 | ) | $ | 58.9 | |||
| Net cash flows used in investing activities | (0.6 | ) | (1.8 | ) | ||||
| Net cash flows used in financing activities | (10.5 | ) | (8.6 | ) | ||||
| Change in cash and cash equivalents | (24.9 | ) | 48.5 | |||||
| Effect of foreign currency rate changes on cash and cash equivalents | (3.3 | ) | (1.8 | ) | ||||
| Net change in cash and cash equivalents | $ | (28.2 | ) | $ | 46.7 | |||
Net cash flows (used in) from operating activities
Net cash flows from operating activities decreased from a net cash inflow of $58.9 million in the six months ended June 30, 2021 to a net cash outflow of $13.8 million in the six months ended June 30, 2022. The net cash outflow for the six months ended June 30, 2022 consisted of $60.9 million generated from operations, reduced by the $74.7 million deployed in investments, net of sale proceeds including term deposits. The net cash inflow for the six months ended June 30, 2021 consisted of $90.1 million generated from operations, reduced by $31.2 million deployed in investments, net of sale proceeds including term deposits.
Net cash flows used in investing activities
Net cash used in investing activities increased from a net cash outflow of $1.8 million in the six months ended June 30, 2021 to a net cash outflow of $0.6 million in the six months ended June 30, 2022. This was primarily due to the addition of office premises and the purchase of intangible assets. The decrease in net cash used in investing activities during the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to the comparatively greater purchase of intangible assets in the six months ended June 30, 2021 as compared to the six months ended June 30, 2022.
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Net cash flows used in financing activities
Net cash flows used in financing activities increased from a net cash outflow of $8.6 million in the six months ended June 30, 2021 to a net cash outflow of $10.5 million in the six months ended June 30, 2022. The cash outflow from financing activities in the six months ended June 30, 2022 primarily reflected a dividend payment of $9.8 million. The cash outflow from financing activities in the six months ended June 30, 2021 primarily reflected a dividend payment of $8.3 million.
Trend Information
Other than as disclosed elsewhere in this “Management’s Discussion and Analysis,” 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.
Investments
Our primary investment objectives are to ensure capital preservation by mitigating credit risk and interest rate risk in the overall portfolio, maintain sufficient liquidity to meet estimated operational needs and generate an optimal yield throughout the economic and market cycles. 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 has historically been established by our investment team and has historically been approved by our board of directors. The strategy is comprised of high-level objectives and prescribed investment guidelines which govern asset 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 at the 1 in 100 year threshold 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.
We manage most of our investment portfolio in-house, with the exception of approximately $18.1 million which is managed by a third party investment advisor. Our investment team is responsible for implementing the investment strategy as set by the investment committee of management and routinely monitors the portfolio to ensure that these parameters are met.
The fair value of our investments, cash and cash equivalents and restricted cash as of December 31, 2021 and June 30, 2022 was as follows:
| Fair Value | ||||||||
| Asset Description | June 30, 2022 | December 31, 2021 | ||||||
| ($) in millions | ||||||||
| Fixed income securities | $ | 472.9 | $ | 420.9 | ||||
| Fixed and call deposits | 247.3 | 305.9 | ||||||
| Cash at banks and held with investment managers | 121.8 | 116.2 | ||||||
| Equities | 30.2 | 34.9 | ||||||
| Real estate | 21.5 | 22.0 | ||||||
| Alternative funds | 12.1 | 14.4 | ||||||
| Total | $ | 905.8 | $ | 914.3 | ||||
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The following table shows the distribution of bonds and debt securities with fixed interest rates according to the international rating agencies’ classifications as of June 30, 2022:
| Rating Grade | Bonds | Unquoted Bonds | Total | |||||||||
| ($) in millions | ||||||||||||
| AAA | $ | 4.7 | — | $ | 4.7 | |||||||
| AA | 43.7 | — | 43.7 | |||||||||
| A | 280.6 | — | 280.6 | |||||||||
| BBB | 136.8 | — | 136.8 | |||||||||
| BB | 1.2 | — | 1.2 | |||||||||
| B | 0.2 | — | 0.2 | |||||||||
| Not Rated | 3.5 | 2.2 | 5.7 | |||||||||
| Total | $ | 470.7 | 2.2 | $ | 472.9 | |||||||
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, 2021:
| Rating Grade | Bonds | Unquoted Bonds | Total | |||||||||
| ($) in millions | ||||||||||||
| AAA | $ | 3.3 | — | $ | 3.3 | |||||||
| AA | 20.8 | — | 20.8 | |||||||||
| A | 220.3 | — | 220.3 | |||||||||
| BBB | 166.8 | — | 166.8 | |||||||||
| BB | 7.0 | — | 7.0 | |||||||||
| B | 0.2 | — | 0.2 | |||||||||
| Not Rated | — | 2.5 | 2.5 | |||||||||
| Total | $ | 418.4 | 2.5 | $ | 420.9 | |||||||
The following table summarizes our investment results as of June 30, 2021 and 2022:
| As of December 31, | As of June 30, | |||||||||||||||||||
| 2021 | 2020 | 2019 | 2022 | 2021 | ||||||||||||||||
| ($) in millions, unless otherwise specified | ||||||||||||||||||||
| Average investments, at cost(1) | $ | 826.5 | $ | 667.0 | 543.4 | $ | 915.0 | $ | 787.2 | |||||||||||
| Average investments and cash portfolio excluding cash and bank balances, at cost | 665.9 | 525.5 | 418.3 | 770.0 | 645.0 | |||||||||||||||
| Total investment income(2) | $ | 8.7 | $ | 8.5 | 13.0 | $ | 4.2 | $ | 9.7 | |||||||||||
| Percent earned on average investments(3) | 1.1 | % | 1.3 | % | 2.4 | % | 0.9 | % | 2.5 | % | ||||||||||
| Minus Realized gain on investments(4) | 0.3 | 1.2 | 0.3 | — | 0.2 | |||||||||||||||
| Minus Realized (loss) gain on investment properties | — | (0.2 | ) | 0.7 | — | — | ||||||||||||||
| Minus Unrealized (loss) gain on investments(5) | 3.1 | (0.2 | ) | 1.6 | (3.1 | ) | 2.1 | |||||||||||||
| Minus Fair value loss on investment properties | (1.3 | ) | (2.0 | ) | (0.3 | ) | (0.5 | ) | (0.8 | ) | ||||||||||
| Minus Expected credit losses on investments(6) | (0.2 | ) | (0.3 | ) | — | (0.7 | ) | — | ||||||||||||
| Minus Share of profit (loss) from associates | (7.3 | ) | (1.5 | ) | (0.4 | ) | — | 0.3 | ||||||||||||
| Total investment income, net(7)(9) | $ | 14.1 | $ | 11.5 | 11.1 | $ | 8.5 | $ | 7.9 | |||||||||||
| Investment yield (a)(8) | 1.7 | % | 1.7 | % | 2.0 | % | 1.9 | % | 2.0 | % | ||||||||||
| Investment yield (b) (9) | 2.1 | % | 2.2 | % | 2.7 | % | 2.2 | % | 2.4 | % | ||||||||||
| (1) | Includes investments, investment properties, investments in associates, cash and bank balances and term deposits. |
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| (2) | Total investment income is comprised of income from interest, dividends, gains and losses from investments and investment properties, change in the unrealized investment gains/losses, fair value gains/losses on investment property, share of profit from associate companies in the business of commercial leasing, impairments and expected credit losses on investments and investment custodian fees and other investment expenses. |
| (3) | Reflects total investment income divided by average investments at cost. |
| (4) | Net realized gains and losses on investments is comprised of realized gains and losses on the sale of bonds at fair value through other comprehensive income, plus fair value changes of financial assets at fair value through profit and loss. |
| (5) | Unrealized gains (losses) on investments includes unrealized losses on revaluation of financial assets at fair value through profit and loss. |
| (6) | Expected credit losses on investments include an allowance for expected credit losses (ECLs) for debt instruments not held at fair value through profit or loss. |
| (7) | Represents net investment income and share of profit (loss) from associates, net of (1) net realized gains (losses) on investments, (2) realized gains (losses) on investment properties, (3) unrealized gains (losses) on investments, (4) fair value gains (losses) on investment properties, (5) expected credit losses on investments, and (6) share of profit (loss) from associates. |
| (8) | Represents total investment income, net divided by average investments at cost. |
| (9) | Represents total investment income, net divided by average investments and cash portfolio excluding cash and bank balances, at cost. |
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 June 30, 2022:
| As of December 31, | As of June 30, | |||||||||||||||
| 2021 | 2020 | 2019 | 2022 | |||||||||||||
| Barclays US Aggregate Bond Index | 2.4 | % | 2.8 | % | 3.2 | % | 1.7 | % | ||||||||
| S&P 500® Index (dividend return) | 1.3 | % | 1.5 | % | 2.6 | % | 2.5 | % | ||||||||
The cost or amortized cost and carrying value of our fixed-maturity investments as of June 30, 2022 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 June 30, 2022 | ||||||||
| Cost | Carrying Value | |||||||
| ($) in millions | ||||||||
| 2022 | 13.7 | 13.4 | ||||||
| 2023 | 36.5 | 35.3 | ||||||
| 2024 | 69.5 | 66.0 | ||||||
| 2025 | 124.4 | 118.4 | ||||||
| 2026 | 114.3 | 104.7 | ||||||
| 2027 | 48.5 | 43.7 | ||||||
| 2028 | 31.3 | 27.5 | ||||||
| 2029 | 24.2 | 21.2 | ||||||
| 2030 | 6.1 | 5.3 | ||||||
| 2031 | 10.9 | 9.2 | ||||||
| 2032 | 2.0 | 1.5 | ||||||
| 2033 | 0.1 | 0.1 | ||||||
| 2055 | 3.8 | 3.0 | ||||||
| 2059 | 0.5 | 0.4 | ||||||
| 2060 | 10.0 | 8.2 | ||||||
| 2061 | 10.6 | 7.5 | ||||||
| 2070 | 5.3 | 4.6 | ||||||
| 2090 | 2.0 | 1.4 | ||||||
| 2100 | 2.0 | 1.6 | ||||||
| Total | $ | 515.7 | $ | 472.9 | ||||
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There are no investments with contractual maturities in the years not mentioned in the schedule above.
The cost or amortized cost and carrying value of our fixed-maturity investments as of December 31, 2021 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 December 31, 2021 | ||||||||
| Cost | Carrying Value | |||||||
| ($) in millions | ||||||||
| 2022 | 43.9 | 44.5 | ||||||
| 2023 | 27.0 | 27.3 | ||||||
| 2024 | 51.4 | 51.7 | ||||||
| 2025 | 78.4 | 78.6 | ||||||
| 2026 | 89.8 | 89.7 | ||||||
| 2027 | 25.6 | 26.4 | ||||||
| 2028 | 22.9 | 23.4 | ||||||
| 2029 | 24.2 | 24.3 | ||||||
| 2030 | 6.1 | 6.2 | ||||||
| 2031 | 10.9 | 10.8 | ||||||
| 2032 | 2.0 | 2.0 | ||||||
| 2033 | 0.1 | 0.1 | ||||||
| After 2033 | 34.2 | 35.9 | ||||||
| Total | $ | 416.5 | $ | 420.9 | ||||
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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, limiting volatility in underwriting performance, and providing us with greater visibility into our future earnings. 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:
| ● | Property reinsurance treaties — We purchase property 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 June 30, 2022. Our property per risk reinsurance generally covers losses between an average entry point in excess of $8.75 million up to $35.0 million probable maximum loss (PML). PML error is purchased beyond this limit for a further $47.5 million. Our catastrophe reinsurance purchase is $80.0 million with a reinstatable limit above an entry point of $10 million. |
| ● | Professional lines reinsurance treaties — We purchase professional lines reinsurance to reduce our exposure to large losses. A significant treaty is in effect as of January 1, 2022 providing us with two layers of protection. The 1st layer provides coverage for losses in excess of $2.5 million and is 35% placed, and the 2nd layer provides coverage for losses in excess of $5 million and is 80% placed. In addition, we place further reinsurance of 20% on a Quota Share basis for our London office written professional indemnity policies and our London / Bermuda office issued director and officer policies. |
| ● | 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 professional lines 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 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 June 30, 2022, approximately 90.3% of IGI’s reinsurance recoverables on unpaid losses (not including ceded unearned premiums) of $157.9 million were due from carriers which had an A.M. Best rating of “A-” or better. The largest reinsurance recoverables from any one carrier was approximately 7.9% of total shareholders’ equity available to IGI at June 30, 2022.
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The following table shows our top 5 reinsurers as of June 30, 2022, their credit rating as of June 30, 2022, and the reinsurance recoverable from such reinsurers as of both June 30, 2022 and December 31, 2021 (dollars in millions):
| Reinsurer | Rating | Reinsurance Recoverable at June 30, 2022 | Reinsurance Recoverable at December 31, 2021 | |||||||
| Hannover Re. – Germany | A+ | $ | 31.1 | $ | 40.3 | |||||
| Transatlantic Reinsurance Company – UK | A+ | $ | 11.6 | $ | 8.2 | |||||
| Eurasia Ins Co - Kazakhstan | B++ | $ | 8.6 | $ | 2.2 | |||||
| Swiss Re Europe S.A. – Germany | A+ | $ | 8.6 | $ | 8.5 | |||||
| Argo Re – Bermuda | A– | $ | 8.3 | $ | 12.4 | |||||
| Total | $ | 68.2 | $ | 71.6 | ||||||
Reserves
Reserving Results & Development
As paid and incurred claims experience develops, 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 period and end of period reserves for the six months ended June 30, 2022, and demonstrates the reserve surplus and deficiencies recognized over this period.
IGI Booked Reserves
IGI Booked Reserves | Six months ended June 30, | |||
| ($) in millions | 2022 | |||
| Net outstanding claims at beginning of period | $ | 393.6 | ||
| Net provision for claims and claims expenses: | ||||
| Claims occurring during the current period | 90.1 | |||
| Provided during the period related to prior accident years | (23.1 | ) | ||
| Total | $ | 460.6 | ||
| Net payments for claims | ||||
| Current period | 1.3 | |||
| Prior years | 51.7 | |||
| Total | $ | 53.0 | ||
| Gross Case Reserves, IBNR and ULAE | 565.5 | |||
| Ceded Case Reserves, IBNR & ULAE | (157.9 | ) | ||
| Net Case Reserves, IBNR and ULAE | $ | 407.6 | ||
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The following table sets out our claims reserving provisions including ULAE as of December 31, 2021 and as of June 30, 2022:
| Change in Case Reserves, IBNR and ULAE | ||||||||||||
| ($) in millions | As of June 30, 2022 | As of December 31, 2021 | Difference | |||||||||
| Gross Reported Case Reserve | $ | 258.6 | $ | 306.9 | $ | (48.3 | ) | |||||
| Reinsurance Reported Case Reserve | 78.7 | 120.3 | (41.6 | ) | ||||||||
| Net Reported Case Reserve | 179.9 | 186.6 | (6.7 | ) | ||||||||
| Net IBNR Reserves & ULAE | 227.7 | 207.0 | 20.7 | |||||||||
| Net outstanding claims | $ | 407.6 | $ | 393.6 | $ | 14.0 | ||||||
During the six months ended June 30, 2022, net ultimate losses increased by $90.1 million for accident year 2022 and decreased by $23.1 million for accident year 2021 and prior accident years. The decrease was split between $17.2 million for the long-tail business and $8.1 million for the short-tail lines. Assumptions for future inflation have changed to reflect the increase in costs of goods and some services and an anticipated knock-on change in wage related costs. The ultimates for the reinsurance book increased by $2.3 million. The decrease in the long-tail book was primarily due to the strengthening of the U.S. Dollar, our reporting currency, against other currencies specifically for the professional lines that are dominated by the Pound Sterling. The decrease in the short-tail book was driven by favorable claims experience. The increase in the reinsurance business is driven by adverse movement related to the 2021 accident year for the proportional line.
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 hereof, the reserves (determined under IFRS 4) 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 the six months ended June 30, 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; |
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| ● | Incidence of large risk or natural catastrophes; and |
| ● | Reserve strengthening. |
As of June 30, 2022, IGI had $227.7 million of incurred but not reported (IBNR) loss reserves including ULAE, net of reinsurance.
| Change in IGI Booked Net IBNR & ULAE | Six months ended June 30, | |||
| ($) in millions | 2022 | |||
| Carrying Balance of IBNR Reserves in Balance Sheet beginning balance (A) | $ | 207.0 | ||
| Subsequent Movement in Following Financial year: | ||||
| IBNR Reserves moved to Incurred Reserves (B) | (35.7 | ) | ||
| IBNR Reserves release pertaining to prior years (C) | (23.1 | ) | ||
| IBNR Reserves added for new accident year (D) | 79.5 | |||
| Net Charge to P/L (B+C+D)= (F) | $ | 20.7 | ||
| Carrying Balance of IBNR Reserves in Balance Sheet ending balance (A+F) | $ | 227.7 | ||
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Ultimate Claims Development
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 | ||||||||||||||||||||||||||||||||||||
| 2012 | 100.1 | 88.1 | 78.1 | 81.5 | 77.3 | 77.8 | 76.8 | 71.6 | 71.6 | 71.7 | 73.1 | 148.4 | ||||||||||||||||||||||||||||||||||||
| 2013 | 123.6 | 121.7 | 120.6 | 117.1 | 109.5 | 107.7 | 107.6 | 107.3 | 107.1 | 105.5 | 180.6 | |||||||||||||||||||||||||||||||||||||
| 2014 | 115.9 | 90.1 | 79.2 | 73.3 | 70.1 | 66.8 | 65.6 | 65.5 | 66.2 | 189.5 | ||||||||||||||||||||||||||||||||||||||
| 2015 | 92.9 | 87.0 | 79.8 | 75.3 | 73.1 | 72.6 | 71.9 | 72.6 | 155.8 | |||||||||||||||||||||||||||||||||||||||
| 2016 | 98.8 | 94.1 | 90.1 | 85.4 | 89.2 | 89.2 | 89.6 | 157.9 | ||||||||||||||||||||||||||||||||||||||||
| 2017 | 110.3 | 117.2 | 116.4 | 113.9 | 112.0 | 113.3 | 146.7 | |||||||||||||||||||||||||||||||||||||||||
| 2018 | 94.3 | 105.0 | 108.5 | 113.0 | 104.8 | 183.3 | ||||||||||||||||||||||||||||||||||||||||||
| 2019 | 124.4 | 115.7 | 100.1 | 103.9 | 215.5 | |||||||||||||||||||||||||||||||||||||||||||
| 2020 | 157.8 | 155.6 | 151.4 | 283.5 | ||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 192.3 | 175.4 | 345.2 | |||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 90.0 | 183.0 | ||||||||||||||||||||||||||||||||||||||||||||||
For additional information about our reserves and reserves development, see Note 7 to IGI’s consolidated financial statements as of and for the year ended December 31, 2021.
Significant accounting judgements, estimates and assumptions
There have been no material changes to the significant accounting judgements, estimates and assumptions described in “Item 5 — Operating and Financial Review and Prospects — Significant accounting judgements, estimates and assumptions” in the Company’s annual report on Form 20-F for the year ended December 31, 2021.
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