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    PLGO
    Earnings call· Jun 2026(Q2 FY26)

    Pelagos Insurance Capital Q2 FY26 earnings call PLGO

    Aug 13, 2026 Source

    Executive summary

    Pelagos Insurance Capital Q2 FY26 — Strong Growth, Capital Returns, and Strategic Partnership Expansion

    Pelagos Insurance Capital reported a strong Q2 FY26, marked by significant growth in gross premiums and robust capital returns, reinforcing its strategic position as a capital allocator. Despite elevated large loss events impacting the quarterly combined ratio, the company maintained its long-term profitability targets and expanded its underwriting partnership network, demonstrating agility in a competitive market.

    Highlights

    5

    • Gross premiums written grew over 6% in the quarter and year-to-date, in line with expectations, driven by new underwriting partners.

    • Book value per diluted common share increased by 23% year-over-year to $26.56, including cumulative dividends.

    • Returned $73 million to shareholders, including $60 million in share repurchases, with $32 million from privately negotiated transactions.

    • Combined ratio for the last 12 months was 86.4%, in line with through-the-cycle expectations.

    • Recognized net favorable prior year development of $33 million for the quarter, compared to adverse development in the prior year.

    Concerns

    3

    • Combined ratio for the quarter was 99.5% due to a higher-than-normal number of large loss events, including $60 million from the Middle East and $34 million from a gas plant explosion.

    • Reinsurance segment acquisition expense ratio was higher than anticipated due to new underwriting partner business and more quota share premium earning through.

    • The market remains competitive, with rate contraction across a number of classes, highlighting the need for selective capital deployment.

    Guidance & targets

    8
    CategoryTargetConfidence
    Net earned premiums (Reinsurance)
    $130 million to $160 million
    medium materiality
    High
    Net earned premiums (Insurance)
    Similar to our second quarter
    medium materiality
    High
    Overall loss ratio
    Mid-40% range
    high materiality
    High
    Insurance segment loss ratio composition
    Roughly 2/3 attritional and 1/3 catastrophe and large losses
    medium materiality
    High
    Reinsurance segment loss ratio composition
    More evenly split between attritional and catastrophe and large losses
    medium materiality
    High
    Gross premiums written growth
    Mid-single digit growth
    high materiality
    High
    Annualized Operating Return on Average Equity (ROAE)
    13% to 15%
    high materiality
    High
    Combined ratio
    Mid- to high 80s
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Insurance
    Growth driven by strong performance from new underwriting partners in Asset Backed Financing & Portfolio Credit and Property lines. Maintained selectivity in areas where pricing no longer meets return hurdles, reflecting focus on portfolio quality and underwriting margin.
    Net premiums earned: $515 millionAttritional loss ratio: 28.2 points (Q2 FY26)Average attritional loss ratio: 30.4% (past 4 quarters)Expected loss ratio composition: roughly 2/3 attritional and 1/3 catastrophe and large losses
    		————
    Reinsurance
    Strong growth in gross premiums written, driven by expanding relationships with existing clients and selectively increasing participation on programs where pricing remained attractive. Shifted capacity towards quota share deals over excess of loss.
    Net premiums earned: $66 millionExpected loss ratio composition: more evenly split between attritional and catastrophe and large losses
    		————

    Operational metrics

    39
    Operating net income
    $29 million
    Q2 FY26
    Operating net income per diluted common share
    $0.34
    Q2 FY26
    Annualized operating return on average equity
    5.1%
    Q2 FY26
    6-month operating net income
    $117 million
    H1 FY26
    6-month operating net income per diluted common share
    $1.31
    H1 FY26
    Annualized operating return on average equity
    10.1%
    H1 FY26
    Gross premiums written
    $1.3 billion6% YoY
    Q2 FY26
    Gross premiums written growth
    6.6%
    YTD FY26
    Catastrophe and large losses
    27.8
    Q2 FY26

    Represents points of the combined ratio. Includes $60 million from the Middle East and $34 million from the Ras Laffan gas plant explosion.

    Attritional loss ratio
    28.2
    Q2 FY26

    Represents points of the combined ratio. Most attritional loss comes from the Insurance segment.

    Average insurance attritional loss ratio
    30.4%
    Past 4 quarters

    In line with long-term expectations for the Insurance segment.

    Underlying policy acquisition expenses
    32consistent with 31.4 points in the prior year period
    Q2 FY26

    Represents points of the combined ratio.

    Policy acquisition expenses to The Fidelis Partnership
    12.1
    Q2 FY26

    Represents points of the combined ratio.

    Policy acquisition expenses to The Fidelis Partnership
    13.7
    YTD FY26

    Represents points of the combined ratio.

    General and administrative expenses
    $29 million
    Q2 FY26
    Net investment income
    $44 millionconsistent with our income last quarter
    Q2 FY26
    Portfolio allocation (cash and fixed maturity securities)
    91%
    As of June 30
    Portfolio yield (cash and fixed maturity securities)
    4.5%
    Q2 FY26

    Average yield.

    Fixed maturity securities average rating
    A+
    Q2 FY26
    Fixed maturity securities average duration
    2.9 years
    Q2 FY26
    Fixed maturity securities new money yield
    4.7%
    Q2 FY26
    Net income from other investments
    $26 million
    Q2 FY26

    Primarily from portfolio of hedge funds, excluded from operating income.

    Effective tax rate
    16%
    Q2 FY26
    Common shares repurchased
    2.8 million
    Q2 FY26
    Share repurchase value
    $60 million
    Q2 FY26
    Average share repurchase price
    $21.60
    Q2 FY26
    Common shares repurchased from Pine Brook
    1.4 million
    Q2 FY26

    Through privately negotiated transactions.

    Share repurchases
    $280 million
    H1 FY26
    Share repurchases contribution to diluted book value per share
    $0.90
    H1 FY26
    Share repurchases contribution to diluted book value per share (since inception)
    $2.14
    Since 2024
    Quarterly dividend
    $0.15
    Q2 FY26
    California earthquake probable maximum loss (1-in-250)
    Mid-single digits
    As of July 1
    Southeast, Gulf and Caribbean clash exposure (1-in-100)
    Below 10%
    As of July 1
    War book premium written
    Over $1 billion
    Since Russia-Ukraine

    Includes losses picked up in the Middle East.

    War book loss ratio
    Sub-20%
    Since Russia-Ukraine

    Includes losses picked up in the Middle East.

    Middle East war book loss ratio
    Sub-20%
    Post-conflict
    Middle East war book market share
    North of 5%
    Q2 FY26

    In these lines of business.

    Reinsurance cat renewals rates (peers)
    Down 15% to 20%
    Mid-year renewals

    Observed for peers based on broker estimates.

    Reinsurance cat renewals rates (Pelagos)
    Closer to single digits
    Mid-year renewals

    Expected for Pelagos due to leadership position and enhanced outwards reinsurance.

    Industry KPIs

    10
    MetricValueDetails
    Combined ratio99.5%%
    Capital returns$73 millionUSD
    ROE operating ROE5.1% (annualized operating ROAE); 10.1% (annualized operating ROAE H1 FY26)%
    Catastrophe losses$162 millionUSD
    Book value per share$26.56USD
    Net investment income$44 millionUSD
    Retention persistencyStrong
    Net premiums written earned$1.3 billion (GPW); $515 million (Insurance NPE); $66 million (Reinsurance NPE)USD
    Renewal rate change pricingDown 15% to 20% (peers); Closer to single digits (Pelagos)%
    Prior year reserve development$33 millionUSD

    Deals & partnerships

    2
    Pine BrookRepurchase of common shares from a long-term sponsor$32 million

    Repurchased 1.4 million common shares through privately negotiated transactions. Pine Brook remains a significant shareholder and valued long-term supporter.

    Leading U.S. insurance partnerAdditional whole-account quota share arrangement

    Covers all business written through The Fidelis Partnership or new underwriting partners, positioning Pelagos well to scale in either over time.

    Risks & headwinds

    2
    Higher-than-normal large loss eventsQ2 FY26

    Combined ratio of 99.5% for Q2 FY26; $162 million in catastrophe and large losses, including $60 million from Middle East and $34 million from Ras Laffan gas plant explosion.

    Mitigation: Viewed as random variability and timing of losses, not an underlying increase in frequency or severity. LTM combined ratio of 86.4% is in line with expectations.

    Increased competition and rate contraction in certain market areasOngoing

    Reinsurance cat renewals rates down 15-20% for peers; Pelagos expects single-digit declines.

    Mitigation: Maintaining disciplined underwriting, leveraging leadership position, using outwards reinsurance to improve margin, and dynamically allocating capital to attractive opportunities.

    What to watch in Q3 FY26

    5

    Net earned premiums (Reinsurance)

    Q3 FY26
    Current$66 million (Q2 FY26)
    Target$130 million to $160 million

    Why it matters

    Reinsurance segment typically earns a higher proportion of business in Q3 and Q4 due to wind perils, impacting overall profitability.

    Looking into the third quarter, we expect net earned premiums to be similar to our second quarter in Insurance, and $130 million to $160 million in Reinsurance.

    Q&A highlights

    6

    How does Pelagos evaluate the profitability of its Middle East war book given the inherent risks and recent losses?

    Management explained their first-mover advantage with The Fidelis Partnership, deploying capital on a per-vessel basis. They reported a sub-20% loss ratio for their war book since Russia-Ukraine, including Middle East losses, and specifically for the Middle East post-conflict. They noted increased competition and re-escalation of conflicts are leading them to be more selective.

    “We think about our war book overall, for example, since Russia-Ukraine, we've written over $1 billion of premium there with a sub-20% loss ratio, and that includes the losses that we picked up in the Middle East.”

    asked by Meyer Shields · answered by Jonathan Strickle

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Capital Allocation Model

    Pelagos operates as a capital allocator, leveraging a diverse and expanding universe of distribution networks and underwriting partners to deploy capital into attractive risk-adjusted return areas. This model allows for dynamic capital allocation and quick response to changing market conditions, enabling growth in specialty lines while maintaining underwriting discipline. The rebrand to Pelagos has increased interest and opportunities, driving broader market access.

    02

    Underwriting Performance and Volatility Management

    The company emphasizes managing portfolio volatility over an annual horizon, noting that the Q2 combined ratio of 99.5% was impacted by higher large loss events, but the year-to-date combined ratio was 93.1% and the LTM combined ratio was 86.4%, aligning with long-term expectations. Management views quarterly fluctuations as random variability rather than a change in underlying frequency or severity, with no expected change to frequency assumptions.

    03

    Expansion of Underwriting Partnerships

    The growing network of new underwriting partners continues to perform well, beating through-the-cycle targets and reinforcing the strength of the model. Pelagos is actively evaluating new opportunities across multiple classes of business, and recently expanded an existing relationship in Asset Backed Financing & Portfolio Credit. A new whole-account quota share arrangement with a leading U.S. insurance partner, effective July 1, further supports growth and capital optimization.

    04

    Market Bifurcation and Leadership Position

    Management highlighted a growing bifurcation between lead and follow markets, with increased capacity leading to rate contraction in certain areas. As a market leader, Pelagos maintains strong pricing, retention, and access to business, using outwards reinsurance to improve margins and protect profitability. This leadership position allows the company to achieve better outcomes, such as single-digit rate declines in reinsurance cat renewals compared to 15-20% for peers.

    05

    Capital Management and Shareholder Returns

    Pelagos returned $73 million to shareholders in Q2, including $60 million in share repurchases at an average price of $21.60 per share. These repurchases, totaling $280 million in H1 FY26, have been highly accretive, contributing $0.90 to diluted book value per share in the first half and $2.14 since inception in 2024. The company also maintained its quarterly dividend of $0.15 per share.

    06

    Asset Backed Financing & Portfolio Credit Growth

    This bespoke specialty line continues to generate high-quality opportunities and profitable growth, driven by new underwriting partners. It provides portfolio diversification and favorable returns, being insulated from traditional insurance pricing cycles. This segment has grown steadily over the last 4-5 years and is expected to continue at a similar rate, complementing more cyclical lines of business.

    AI-generated summary of the company’s earnings call. Not investment advice.