Fidelis Insurance (NYSE:FIHL), operating as Pelagos Insurance Capital, reported second-quarter operating net income of $29 million, or $0.34 per diluted common share, as higher large-loss activity pushed its quarterly combined ratio to 99.5%.
For the first six months of 2026, operating net income totaled $117 million, or $1.31 per diluted common share, while annualized operating return on average equity was 10.1%, Chief Financial Officer Allan Decleir said. Book value per diluted common share rose to $26.56, and including cumulative dividends, increased 23% over the past 12 months.
Premium Growth Driven by Specialty Lines and Partnerships
Gross premiums written increased 6% from a year earlier to $1.3 billion in the second quarter. Burrows said insurance growth was led by property, marine, asset-backed finance and portfolio credit, while the reinsurance segment expanded through targeted deployment in areas with attractive risk-adjusted returns.
Net premiums earned totaled $515 million in insurance and $66 million in reinsurance. For the third quarter, Decleir said Pelagos expects insurance net earned premiums to remain similar to the second quarter, while reinsurance net earned premiums are expected to range from $130 million to $160 million.
The company earns a larger share of its reinsurance premium in the third and fourth quarters because of its exposure to wind perils, management said.
Property growth included expanded business with bundled insurance, Burrows said. He added that the company remained selective in classes where pricing no longer met its return requirements, even as it sought new opportunities through its network of underwriting partners.
Marine, political-risk and political-violence business saw stronger demand and favorable pricing amid geopolitical uncertainty in the Middle East. Burrows said Pelagos deployed capital selectively, but has become more cautious as conflict re-escalated and competition increased in those lines.
During the question-and-answer session, Burrows said Middle East business written since the conflict began this year had operated at a loss ratio below 20%. Group Managing Director Jonny Strickle said the company’s broader war book, including business written since the Russia-Ukraine conflict, has generated more than $1 billion in premium at a sub-20% loss ratio.
Large Losses Lifted Quarterly Combined Ratio
Catastrophe and large losses accounted for 27.8 points of the quarterly combined ratio, or $162 million. The two largest events were a $60 million loss related to the Middle East and a $34 million loss from the gas plant explosion at the Ras Laffan facility in Qatar, Decleir said. Other large losses affected the company’s property and marine lines.
Management characterized the quarter’s elevated loss activity as variability in the timing of losses rather than evidence of a sustained increase in loss frequency or severity. The combined ratio was 93.1% for the first half and 86.4% over the trailing 12 months.
Attritional losses represented 28.2 points of the quarterly combined ratio. Over the past four quarters, the insurance segment’s average attritional loss ratio was 30.4%, which Decleir said was in line with long-term expectations.
The company recorded $33 million of net favorable prior-year reserve development during the quarter, compared with $89 million of adverse development in the prior-year period. Decleir attributed the favorable development to better-than-expected loss emergence in several insurance lines and continued positive development in reinsurance.
Management reaffirmed its expectation for a mid-40% overall loss ratio. For insurance, it expects roughly two-thirds of losses to be attritional and one-third to come from catastrophe and large-loss events. In reinsurance, attritional and catastrophe-related losses are expected to be more evenly divided.
Capital Returns and Investment Income
Pelagos returned $73 million to shareholders during the quarter, including $60 million used to repurchase 2.8 million common shares at an average price of $21.60 each. The buybacks included 1.4 million shares acquired in privately negotiated transactions with Pine Brook.
During the first half, the company repurchased $280 million of shares, which Decleir said contributed $0.90 to diluted book value per share. Since the share repurchase program began in 2024, repurchases have added $2.14 to diluted book value per share, according to the company.
Pelagos also maintained its quarterly dividend and announced a $0.15 per-share dividend payable in September.
Net investment income was $44 million, consistent with the prior quarter. As of June 30, 91% of the investment portfolio was held in cash and fixed-maturity securities, with an average yield of 4.5%. Fixed-maturity securities carried an average A+ rating, a 2.9-year average duration and a 4.7% new-money yield.
Management Sees Competitive but Selective Market
Burrows said insurance and reinsurance markets remain bifurcated, with increased capacity creating rate pressure in certain classes. However, he said Pelagos’ position as a lead market has helped it retain attractive business and achieve more favorable outcomes than follow markets.
At midyear catastrophe reinsurance renewals, management said market rates were reportedly down 15% to 20%, while Pelagos experienced declines closer to single digits because of its lead position, ability to restructure programs and outward reinsurance strategy.
The company said it has shifted some reinsurance capacity toward quota-share arrangements from excess-of-loss business where pricing remained attractive. It also secured an additional whole-account quota-share arrangement with a U.S. insurance partner effective July 1, although management did not disclose the size of the agreement.
Strickle said the company’s one-in-250 California earthquake probable maximum loss remained in the mid-single digits as a percentage of shareholders’ equity as of July 1. Its one-in-100 Southeast Gulf and Caribbean clash exposure remained below 10% of shareholders’ equity.
Management maintained its outlook for mid-single-digit gross written premium growth in 2026 and targets of 13% to 15% return on average equity and a mid-to-high-80% combined ratio through the cycle.
About Fidelis Insurance (NYSE:FIHL)
Fidelis Insurance Holdings Ltd is a Bermuda‐incorporated specialty insurer and reinsurer that underwrites a broad range of liability and property risks. Founded in 2015, the company completed its initial public offering on the New York Stock Exchange in 2016 under the ticker FIHL. Fidelis focuses on providing tailored solutions for complex risks that traditional insurers may find difficult to accommodate, leveraging data analytics and underwriting expertise to structure policies across diverse industry segments.
The company’s product portfolio spans casualty lines—including general liability, excess and umbrella, professional indemnity, and management liability—alongside property, marine, energy and specialty programs.
