Shares of newly public insurance company Fidelis Insurance Holdings Limited (FIHL 3.10%) rallied 30.2% in March, according to data from S&P Global Market Intelligence.
Fidelis was incorporated in 2014 but just went public via an initial public offering (IPO) back in June of 2023. As a relatively new-on-the-scene financial company, Fidelis hadn't received a very enthusiastic welcome in the markets, as it initially raised less money than it had wanted last year.
However, Fidelis' blowout earnings to begin the month of March may soon give it more attention.
Shooting past analyst estimates and initiating a dividend
On February 29, Fidelis held its fourth-quarter earnings report. In the fourth quarter, Fidelis posted $553.7 million in revenue, up 29% over the prior year, along with $1.15 in operating net income, a non-GAAP (adjusted) measure that seeks to tease out the underlying earnings of the business outside of realized and unrealized gains on securities holdings. That figure was up a whopping 77% from the prior year, handily beating analyst expectations.
In addition, Fidelis announced it would be initiating a $0.10 quarterly dividend, which equates to a roughly 2.1% dividend yield at today's stock price. The good news sent the stock soaring to begin March, with the stock holding onto those gains through the month.
Fidelis writes insurance across three main segments: specialty insurance, bespoke insurance, and reinsurance. Management noted a "hardened" market in 2023 and going into 2024 across most business lines, characterized by rising insurance rates and more favorable terms and conditions for insurance companies. This is because of the industry losses in the wake of inflationary pressures on claims as well as climate-driven natural disasters over the past few years.
With its newly raised capital from last June, Fidelis was able to lean into the favorable market pricing conditions, and as you can see, grew its book of business in a highly profitable fashion.
The insurance market could benefit from inflation
Paying a higher cost of inflation is never a good thing, but insurance companies tend to be able to increase their rates after such periods. Combined with the fact that insurance companies tend to buy bonds with their premium float, and insurance companies tend to ultimately benefit from periods of inflation and higher interest rates -- that is, if the company in question survives the prior "soft" market.
As a newly public company, Fidelis may still be flying under the radar. It only trades at 6 times this year's earnings estimates and just 0.9 times book value. Given the favorable market conditions, Fidelis still looks like quite a compelling value, even after March's strong run.
