Fidelis Insurance : Group FCR 2023

2023

Financial Condition Report

FIDELIS INSURANCE HOLDINGS LIMITED

	CONTENTS
I.	EXECUTIVE SUMMARY	3
A.	BUSINESS AND PERFORMANCE	4
	A1. BUSINESS	4
	A2. PERFORMANCE	5
	A3. ANY OTHER INFORMATION	10
B.	SYSTEM OF GOVERNANCE	11
	B1. BOARD AND SENIOR EXECUTIVE	11
	B2. FIT AND PROPER REQUIREMENTS	16
	B3. RISK MANAGEMENT AND SOLVENCY SELF-ASSESSMENT	21
	B4. INTERNAL CONTROL SYSTEM	25
	B5. INTERNAL AUDIT FUNCTION	26
	B6. ACTUARIAL FUNCTION	27
	B7. OUTSOURCING	27
	B8. OTHER INFORMATION	28
C.	RISK PROFILE	29
	C1. MATERIAL RISKS THE INSURER IS EXPOSED TO DURING THE REPORTING PERIOD	29
	C2. INVESTMENT OF ASSETS IN ACCORDANCE WITH THE PRUDENT PERSON PRINCIPLES OF THE
	CODE OF CONDUCT	36
	C3. RISK CONCENTRATION	36
	C4. STRESS TESTING AND SENSITIVITY ANALYSIS TO ASSESS MATERIAL RISKS	37
	C5. ANY OTHER INFORMATION	37
D.	VALUATION FOR SOLVENCY PURPOSES	39
	D1. VALUATION BASES, ASSUMPTIONS AND METHODS TO DERIVE THE VALUE OF EACH ASSET CLASS..	39
	D2. VALUATION BASES, ASSUMPTIONS AND METHODS TO DERIVE THE VALUE OF TECHNICAL
	PROVISIONS	40
	D3. VALUATION BASES, ASSUMPTIONS AND METHODS TO DERIVE THE VALUE OF OTHER LIABILITIES ..	41
	D4. ANY OTHER INFORMATION	41
E.	CAPITAL MANAGEMENT	42
	E1. ELIGIBLE CAPITAL	42
	E2. REGULATORY CAPITAL REQUIREMENTS	44
	E3. APPROVED INTERNAL CAPITAL MODEL	45
F.	SUBSEQUENT EVENTS	46
G.	GLOSSARY	47

FIDELIS INSURANCE HOLDINGS LIMITED & FIDELIS INSURANCE BERMUDA LIMITED

FINANCIAL CONDITION REPORT FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023

2

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

The Financial Condition Report ("FCR") covers the Business and Performance, System of Governance, Risk Profile, Valuation for Solvency Purposes, and Capital Management of the Fidelis Insurance Group and its subsidiaries, as well as Fidelis Insurance Bermuda Limited ("FIBL") and its subsidiaries, on a separate basis where appropriate. The report details the Group's risk profile and its solvency and capital needs and examines how the governance framework and risk management processes support it in identifying, monitoring, and assessing these needs. Fidelis Insurance Holdings Limited ("Fidelis", "FIHL", or "the Company") and its subsidiaries are collectively referred to as the "Group" within this FCR.

FIBL owns 100% of a UK holding company, Fidelis European Holdings Limited, ("FEHL"), which in turn owns 100% of an Irish insurance company, Fidelis Insurance Ireland DAC ("FIID"). These three entities are referred to as the "FIBL Group" within this FCR and all numbers quoted for the FIBL Group are on a consolidated basis.

A copy of this report is available on the Company's website: https://investors.fidelisinsurance.com/financials/Other- Financial-Results/default.aspx

The administrative body that has ultimate responsibility for all these matters is the FIHL Board of Directors, with the assistance of various governance and control functions which are in place to monitor and manage the business.

Throughout this document we have used acronyms and defined these in the glossary, please refer to page 50.

BUSINESS AND PERFORMANCE

FIHL is a holding company which was incorporated under the laws of Bermuda on 22 August 2014. The Group provides Specialty and Bespoke insurance and Reinsurance, pursuant to our strategic partnership with The Fidelis Partnership (as defined below). Fidelis' principal operating subsidiaries are:

• FIBL, is a Class 4 Bermuda domiciled company which writes most of the Group's Reinsurance business, as well as writing Specialty and Bespoke lines. FIBL is regulated by the Bermuda Monetary Authority. FIBL acts as the designated insurer of the Group.
• Fidelis Underwriting Limited ("FUL"), is a U.K. domiciled company which principally writes Specialty and Bespoke insurance, as well as Reinsurance. FUL is regulated by the Prudential Regulation Authority.
• FIID, is a Republic of Ireland domiciled company that writes Specialty and Bespoke insurance and reinsurance within the European Economic Area. FIID is regulated by the Central Bank of Ireland. FIID is owned by a UK holding company that is 100% owned by FIBL.
• FIHL (UK) Services Limited ("FSL"), is a U.K service company that also has a branch in the Republic of Ireland.

RISK PROFILE

The Group is exposed to risks from several sources. These include non-life underwriting risk, market risk, credit risk, liquidity risk, operational risk, strategic risk, group risk and emerging risk. The primary risk to the the Group is underwriting risk. There were no material changes to the Group's key risk areas in 2023. Each of these risk areas is described in more detail in section C.

The Group undertakes various stress and scenario testing on a quarterly basis to confirm the adequacy of the capital and liquidity in respect of both the regulatory requirements and the maintenance of the Group's credit rating. The tests are designed to simulate extreme but possible scenarios affecting investments, underwriting and operations either individually or in combination.

Based on the latest results of these tests, management of the Group believes that it has sufficient capital and liquidity to comply with the contractual obligations of the organisation and regulatory requirements upon experiencing such scenarios.

FIDELIS INSURANCE HOLDINGS LIMITED & FIDELIS INSURANCE BERMUDA LIMITED

FINANCIAL CONDITION REPORT FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023

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BUSINESS AND PERFORMANCE

A. BUSINESS AND PERFORMANCE

A1. BUSINESS

FIHL is a Bermuda exempted company, incorporated under the Bermuda Companies Act 1981 on 22 August 2014. The following table sets forth information regarding beneficial ownership of our common shares, where known, to be more than 5% of common shares as at 31 December 2023:

Names of Beneficial Owners, 5.0% Shareholders	Number	%
Crestview Funds	17,014,423	14.5 %
CVC Falcon Holdings Limited	18,506,328	15.7 %
Pine Brook Feal Intermediate L.P.	8,454,329	7.2 %
Platinum Ivy B 2018 RSC Limited	13,869,151	11.8 %
SPFM Holdings, LLC	8,445,456	7.2 %
Shelf Holdco II Limited ("TFP HoldCo")	11,609,282	9.9 %

Name of Insurer:	Fidelis Insurance Holdings Limited (Group)
	Fidelis Insurance Bermuda Limited (Designated Insurer)
Supervisors:	Group Supervisor
	Bermuda Monetary Authority
	BMA House
	43 Victoria Street, Hamilton
	Bermuda
	Insurance Supervisor
	Bermuda Monetary Authority
	BMA House
	43 Victoria Street, Hamilton
	Bermuda
Approved Auditor:	KPMG Audit Limited
	Crown House
	4 Par-la-Ville Road
	Hamilton, HM 08, Bermuda

A1.1 Group structure

The following diagram provides details of the Group structure as at 31 December 2023:

FIDELIS INSURANCE HOLDINGS LIMITED & FIDELIS INSURANCE BERMUDA LIMITED

FINANCIAL CONDITION REPORT FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023

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BUSINESS AND PERFORMANCE (continued)

A2. PERFORMANCE

A2.1 Insurance business written by the business segment and by geographical region

Our business comprises three segments: Specialty, Bespoke, and Reinsurance. This three-segment strategy allows us to manage volatility through our balanced and diversified portfolio and to deliver attractive risk-adjusted returns by managing through (re)insurance cycles and deploying capital to the most favorable market conditions. We focus on areas where deep expertise is required to deliver these returns through (re)insurance cycles.

• The Specialty segment comprises a portfolio of tailored risks across specialty business lines including Aviation and Aerospace, Energy, Marine, Property and Property Direct & Facultative ("D&F"). 'Hard' market conditions following years of compound rate increases across multiple business lines within the Specialty segment have provided opportunities for targeted growth, and the ability to leverage leadership and scale. This, combined with long established relationships has enabled FIHL to build across specialty classes. Given the current market environment we have increasingly used our Specialty segment to deploy capital targeted to natural catastrophe exposure through our Property D&F line of business rather than through our Reinsurance segment. This allows a more selective approach to managing aggregate exposure.
• We believe our Bespoke segment is one of the key differentiators of our business. This business focuses primarily on highly tailored, innovative and specialized products, where the buying motivation is often driven by regulatory capital relief, capital efficiency or transaction facilitation versus more traditional drivers of insurance needs. The portfolio includes policies covering Credit & Political Risk and Other Bespoke risk transfer opportunities, including political violence and terrorism, limited cyber reinsurance, tax liabilities, title, transactional liabilities and other bespoke solutions to fit our clients' needs.
• Our Reinsurance segment consists of an actively managed, property catastrophe reinsurance book. We have repositioned the portfolio in line with our proprietary view of risk, with the aim of managing exposure and volatility. We deploy capacity opportunistically on core clients at targeted attachment points and focus on specific peril coverage and geographies.

FIDELIS INSURANCE HOLDINGS LIMITED & FIDELIS INSURANCE BERMUDA LIMITED

FINANCIAL CONDITION REPORT FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023

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BUSINESS AND PERFORMANCE (continued)

A2.1.1 Group insurance business written by segment (US GAAP)

The following table summarizes gross premiums written by line of business within each underwriting segment:

$ millions	2023	2022
Specialty
Aviation & Aerospace	371.8	297.3
Energy	172.1	119.5
Marine	673.8	542.2
Property	79.8	21.6
Property D&F	908.3	611.5
Specialty Other	35.5		24.1
Total Specialty	2,241.3	1,616.2
Bespoke
Credit & Political Risk	516.4	330.9
Bespoke Other	204.0		464.8
Total Bespoke	720.4	795.7
Reinsurance
Property Reinsurance	595.5	557.0
Retrocession	18.5	32.4
Whole Account	3.3		16.8
Total Reinsurance	617.3		606.2
Total
3,579.0	3,018.1

The following table presents gross premiums written by the geographical location of the Group's subsidiaries:

$ millions	2023		2022
United Kingdom	1,977.0	1,755.7
Bermuda	1,047.5	707.6
Republic of Ireland	554.5	554.8
Total
3,579.0	3,018.1

The information presented above is after allocation of consolidation adjustments. Amounts relating to intergroup reinsurance are not included in the above table.

FIDELIS INSURANCE HOLDINGS LIMITED & FIDELIS INSURANCE BERMUDA LIMITED

FINANCIAL CONDITION REPORT FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023

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BUSINESS AND PERFORMANCE (continued)

A2.1.2 FIBL Group (including intra-group reinsurance) gross insurance business written by segment (US GAAP)

The following table summarizes gross premiums written by line of business within each underwriting segment:

$ millions		2023	2022
Specialty
Aviation & Aerospace		218.2	194.5
Energy		102.2	52.3
Marine		354.5	324.8
Property		49.8	22.9
Property D&F		434.4	303.2
Specialty Other			11.3		16.1
Total Specialty		1,170.4	913.8
Bespoke
Credit & Political Risk		370.0	195.4
Bespoke Other			63.1		252.9
Total Bespoke		433.1	448.3
Reinsurance
Property Reinsurance		585.1	459.2
Retrocession		18.6	32.5
Whole Account			3.3		16.9
Total Reinsurance			607.0		508.6
Total
	2,210.5	1,870.7
$ millions		2023		2022
Bermuda		1,656.0	1,315.9
Republic of Ireland	554.5	554.8
Total	2,210.5	1,870.7

A2.2 Performance of investments & material income & expenses for the reporting period

A2.2.1 Performance of investments for the reporting period (US GAAP)

The Group's primary investment objective is to optimise investment return while supporting the underwriting activities of the Group through capital preservation. Within the investment portfolio the Group looks to optimise investment return while remaining in compliance with approved risk appetites and applicable investment constraints. The Group focuses on investing in high quality, short-duration and liquid fixed income assets with a high level of diversification across asset types, sectors and issuers but may seek to enhance total investment return with a small allocation to 'other investments'. The Group, through its appointed external investment managers, seeks to outperform selected benchmarks over a full investment cycle.

The duration target of the Group's core fixed income portfolio, which is designated as backing the Group's liabilities, is set to approximately match the duration of those liabilities. The Group's core fixed income portfolios are managed against a customised blended fixed income benchmark which is aligned with the Board's strategic asset allocation. The benchmark has a target weighted average duration equal to the liability duration and the core fixed income portfolio aims to remain within a tolerance band around the benchmark duration.

FIDELIS INSURANCE HOLDINGS LIMITED & FIDELIS INSURANCE BERMUDA LIMITED

FINANCIAL CONDITION REPORT FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023

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BUSINESS AND PERFORMANCE (continued)

A2.2.1 Performance of investments for the reporting period (US GAAP) (continued)

For the year ended 31 December 2023, the core fixed income portfolio outperformed the blended benchmark. During the year, yields moved higher which was a positive for investment return as the Group was able to reinvest cash and maturities into fixed income securities offering higher interest rates. The average book yield of the portfolio improved significantly as a result. Having started the year in a short-duration position, the Group rebalanced the portfolio to be back in-line with the duration target by the end of 2023.

Within the core fixed income portfolio, the Group has a moderate allocation to securitised instruments (asset-backed securities, agency mortgage-backed securities, commercial mortgage-backed securities, and collateralised loan obligations) to aid in diversification and enhance yield. Investment limits have been placed on these assets through the investment guidelines set out in the investment management agreements. The Group performs a regular review of the securities held and runs compliance checks to ensure guidelines are followed.

The return on investments for the Group for the year ended 31 December 2023 was as follows:

$ millions
Investment Strategy	Fair Value		Gain/Loss	Return
Cash¹	991.1	31.2	2.6%
Fixed income	3,293.9	87.5	3.1%
Other investments	47.6	5.8	7.0%
Total
4,332.6	124.5	3.1%
Unrealized gains on AFS instruments, net of tax
	72.7	2.0%
Total investment return
	197.2	5.1%

The return on investments for FIBL Group the year ended 31 December 2023 was as follows:

$ millions
Investment Strategy	Fair Value		Gain/Loss	Return
Cash¹	586.7	16.8	2.3%
Fixed income	2,519.4	70.2	3.4%
Other investments	47.6	5.8	7.0%
Total
3,153.7	92.8	3.2%
Unrealized gains on AFS instruments, net of tax
	56.7	2.0%
Total investment return
	149.5	5.4%

FIDELIS INSURANCE HOLDINGS LIMITED & FIDELIS INSURANCE BERMUDA LIMITED

FINANCIAL CONDITION REPORT FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023

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BUSINESS AND PERFORMANCE (continued)

A2.2.1 Performance of investments for the reporting period (US GAAP) (continued)

The return on investments for the Group for the year ended 31 December 2022 was as follows:

$ millions
Investment Strategy	Fair Value		Gain/Loss	Return
Cash¹	1,394.0	4.1	0.4%
Core fixed income	2,307.9	12.9	0.5%
Other investments	117.1	(12.2)	(6.6%)
Total
3,819.0		4.8	0.1%
Unrealized losses on AFS instruments, net of tax		(88.4)	(2.7%)
Total investment return
	(83.6)	(2.5%)

The return on investments for FIBL Group the year ended 31 December 2022 was as follows:

$ millions
Investment Strategy	Fair Value	Gain/Loss
Cash¹	857.6		2.1
Core fixed income	1,621.4		11.4
Other investments	117.1		(12.2)
Total
2,596.1		1.3
Unrealised losses on AFS instruments, net of tax			(66.2)
Total investment return
		(64.9)

• Cash balance net of accrued interest, pending trades and forward foreign exchange contracts

A2.2.2 Material income & expenses for the reporting period (US GAAP)

Return

0.4%

0.7%

(6.6%)

0.1%

(2.6%)

(2.6%)

The following table represents material expenses for the Group:
$ millions	2023			2022
Losses and loss adjustment expenses	698.8		830.2
Policy acquisition expenses	723.8		384.4
General, administrative and other expenses	126.4		214.7
The following table represents material expenses for FIBL Group:
$ millions		2023			2022
Losses and loss adjustment expenses	452.7		654.2
Policy acquisition expenses	536.4		343.2
General, administrative and other expenses	54.9		71.0

FIDELIS INSURANCE HOLDINGS LIMITED & FIDELIS INSURANCE BERMUDA LIMITED

FINANCIAL CONDITION REPORT FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023

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BUSINESS AND PERFORMANCE (continued)

A3. ANY OTHER INFORMATION

FIDELIS INSURANCE RESTRUCTURING

On 3 January 2023, a number of separation and reorganization transactions occurred to create two distinct holding companies and businesses: FIHL and Shelf Holdco II Limited, which is the parent company of an external managing general underwriting platform known as "The Fidelis Partnership" (the "Separation Transactions"). As part of the Separation Transactions, the Fidelis Insurance Group and The Fidelis Partnership entered into a number of agreements governing the outsourced relationship from the Fidelis Insurance Group to The Fidelis Partnership, including the "Framework Agreement", a series of "Delegated Underwriting Authority Agreements" and the "Inter-Group Services Agreement". These agreements govern the ongoing relationship between the two groups of companies, including delegating underwriting authority to the operating subsidiaries of The Fidelis Partnership to source and bind contracts for each of the subsidiaries of FIHL.

The impact of the reorganisation has been considered as part of the Company's going concern analysis and it has been determined that the Company remains a going concern under the re-organised structure. The net gain on the distribution of The Fidelis Partnership amounted to $1,639.1 million.

INITIAL PUBLIC OFFERING ("IPO")

On July 3, 2023, FIHL completed an IPO of an aggregate of 15,000,000 common shares, including 7,142,857 common shares sold by FIHL and 7,857,143 common shares sold by certain selling shareholders, at an offering price of $14.00 per common share. The net proceeds of the offering to FIHL were $89.4 million, after deducting underwriting discounts, commissions, and other offering expenses paid by the Group. FIHL's common shares are now listed on the New York Stock Exchange under the symbol "FIHL".

FIDELIS INSURANCE HOLDINGS LIMITED & FIDELIS INSURANCE BERMUDA LIMITED

FINANCIAL CONDITION REPORT FOR THE YEAR FROM 1 JANUARY 2023 TO 31 DECEMBER 2023

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