Good morning, and thank you all for joining us for our next Southwest IDEAS Conference Presentation. Our next presenter is International General Insurance Holdings, trading on NASDAQ under the ticker symbol IGIC. Presenting on behalf of the company today is Waleed Jabsheh. Waleed actually started with IGIC back in 2001, where he started out as an underwriter. In 2011, he actually became the president of IGI. His current role, as of right now, since 2023, has been CEO. Here to tell you a little bit more is Waleed.
Thank you, William. Good morning, everybody. My name is Waleed Jabsheh. I'm President and CEO of IGIC. We prepared the presentation for you, but we're not going to go through slide by slide. What I would like to do is just tell you who we are, give you our story, and give you the main attributes of our DNA and culture and the way we go about the business. Our roots are from the Middle East. We started the business, or our Chairman started the business. He's an industry veteran with almost 60 years' experience in the industry. Started it back in Jordan almost 25 years ago, beginning of 2002. Initially, very modest beginnings, $25 million of capital, private business, family business. I've been involved with the business since the beginning. Prior to that, I was here working in the U.S., up in Massachusetts.
Focus on a handful of lines. We are a specialist insurance and reinsurance company. Initially focused on a handful of lines of business. I do not want to initially focus on Middle East, Africa, Asia. I do not want to bore you with the gory details, but fast forward now 23 years. We are a global specialist insurance and reinsurance player. We started with a handful of lines of business. We now write almost 25 different lines and sublines. We started with one office. We now have eight offices worldwide. We are registered in Bermuda, headquartered still in Jordan, but registered and domiciled in Bermuda. The entity, the public entity, is a Bermudan entity. We have offices located across the globe, focusing on our geographical areas. We have offices in Asia, a couple in the Middle East, one in Africa, a few in Europe, and obviously our Bermudan operation.
We started with $25 million of capital. We're now at a capital base of about $700 million. Started off with a handful of employees. We're now about 470-480 employees group wide. London, which is where I'm based, is our underwriting center. We've got underwriters situated across the network, focusing on their respective areas. If I was to summarize the story or the history so far, it's been one of very measured, disciplined, methodical, gradual growth. Our industry is very cyclical. I'll talk about the cycle in a bit more detail in a minute. The key in our industry is to maintain that discipline and to focus on the business that makes sense, that stacks up. A lot of companies in our business can say this as well. We are not a top-line-driven company.
It's taken us 23 years to build a $700 million book of business. Ultimately, when you look at some of our larger competitors, we're a rounding error for them. That's been the story of IGI. Bit by bit, stick within your capabilities, stick within your risk appetite and tolerances, and do the right things at the right time. Now, we talk about the cycle. Our business is very cyclical. Prices go up and they go down, essentially based, ultimately, on supply and demand. If I just go through the cycle a bit, the last few years have been fantastic for the industry as a whole and for us as a business. The cycle tends to go up and down based on competition, based on supply. Rates go up, rates come down. At this point in time, we're probably in the middle of the cycle.
The last few years have been great. You have been seeing an intensified competition. If you look at the slide, the euphoria phase, this is when rates are up, coverages are narrow, they are favorable for you, capacity is scarce, demand is more than supply in terms of underwriting capacity. The industry itself never fails to amaze in that we never really learn from our mistakes. We are in a good place. All of a sudden, we get greedier, we get hungrier, we want more, we want a bigger piece of the pie. How do you do that? The only way to do that is to compete and bring prices down. People from the outside look in. My God, this industry is doing well. They are making money. We want a piece of the pie as well. People come through and come into the net. That ultimately drives pricing down.
People chip away, chip away, chip away, chip away, until what happens is we get to a point where we realize we've chipped away too much. The rating adequacy within the industry, within the environment, is not good enough. Our business is not rocket science. It's not, what do you call it? It's a law of numbers. When rates are up, margins are going to be higher. When rates are down, margins are going to be lower. It's simple math. We get to a point where this crunch, and a lot of it is to do with discipline. When we get there, the lack of discipline, the increased hunger, the focus on that top line that we say, things we need to be very, very mindful of in our industry. You get to the point where, that's it, the results start looking horrible.
There's blood on the streets, losses come in. Our market ultimately is driven by supply and demand and driven by loss activity. People start realizing we've screwed up here, we've made mistakes, we need to correct them now. People start backing out, pulling back in certain lines of business in certain territories. That ends up, what do you call it, reducing supply and starting to push prices up. You go full round circle. Now, a normal cycle lasts about probably seven to eight years, a maximum of 10. The industry has gone through this time and time and time again. We've always gone up in the cycle and gone down in the cycle for the same reasons. This is why we keep focusing on discipline.
This is why we keep focusing on, what do you call it, just making the right decisions and not getting too greedy with the amount of business that you want to write. How do we manage the cycle then? How do we manage the cycle? We're in the business of taking risk. Nobody in this business should be taking that lightly. You've got to understand the risk that you write. You've got to understand the clients that you have and the, what do you call it, the ultimate exposures that you put on your books. Discipline, as I said, is key. What we have built at IGI is a very, very diversified portfolio. We've done that purposely. We started with a handful of lines. We've added lines of business as we've gone along.
As I said, we're almost 25 different lines of business across three segments: reinsurance, short tail, long tail. We carve out within each segment, within each line of business, we carve out exactly what business we like and target. We've got eight offices worldwide. One cannot underestimate the value of having boots on the ground, local knowledge, local talent. This is one of the mistakes that these large international companies get wrong. It's a combination of technical expertise and local knowledge, local talent. Each market, people have to realize, one has to realize, each market has its own characteristics. Each market behaves and does business in a different way.
For you to be effective, for one to be effective in those markets, you need to be cognizant of how business is done, cultural compatibility, and then understand those markets, understand who the client base is, who to do business with, and most importantly, who not to do business with. Our Malaysian office focuses on Asia. Our Dubai, Jordan offices focus on the Middle East. Our Moroccan office is on Africa. European offices on their respective parts of Europe. Obviously, Bermuda is more of a, what do you call it, a U.S.-focused play. Every company in this business is different. We take bets. That's the nature of what we do. We take bets every day, insurance bets, risk bets.
We talk about discipline, and that is ingrained in our DNA, the discipline of knowing when to walk away from business when you need to, knowing when to put your foot on the gas and when to take it out. We talked about the cycle. The fact of the matter is anybody who's growing in a soft cycle and growing aggressively in a soft cycle is probably doing something wrong. We have built a diversified portfolio of business that allows us to manage the cycle along the way. 25 different lines of business, worldwide book, different markets head in different directions at different times. What that diversification gives us is optionality. Once we've been public now for five years, we've still got that culture of a private business in our blood and in our DNA.
One of the pillars of strength, I think, that we have compared to our competition is that we move quickly. We have a very flat management structure. Access to people is instant. Decision-making is quick. When opportunities present themselves, we pounce. That optionality gives us that. I will demonstrate how we have used that optionality in a couple of bits. It is essentially shifting focus to where we think the best results can be achieved. Knowing when to put your foot on the gas, when to take it off, having the discipline and the will and the strength to say no, right?
Knowing that given the cyclicality of our business and the nature of our business, if you have to not grow top line to protect bottom line, to continue building value and creating value, if you have to not grow top line, if you have to shrink top line, if that's what is necessary, that's what you do. Every company in this industry is different. When we take bets, when we make decisions, we make decisions based on the bets we are able to take. Every company has its own characteristics, own strengths, own positives, and negatives. What we tell our underwriters all the time is, remember who we are, understand who we are. We're a $700 million business. Our capabilities are set. They're limited based on our financial resources, our intellectual resources. The key is understanding what your capabilities are and working within those capabilities.
Set your risk tolerances, define your risk appetite, and make sure you stick to it. That is the key. That is the key. Never bite off more than you can chew. Do not get carried away with the profits that we are making. All of a sudden, prices are coming down and you think you can walk on water, but I will continue building my book. You have got to set your risk tolerances, set your risk appetite, stay within it. Never think you are bigger, better, smarter, stronger than who you really are. Ultimately, stick to your knitting. Do not veer outside your comfort zone. Do not touch anything you do not understand. As an example, we have three segments: reinsurance, long tail, and short tail.
Within the long tail segment, we have carved out what we like. We call it long tail, but in actuality, what it is, it's a professional and financial lines portfolio. We stay away from the U.S. market completely within the long tail business. We have no appetite for U.S. liability business. Do not understand it, scared of it in a very big way. It has no place in our portfolio. It has no place in the composition of the type of exposures and risks we like to take. We focus on what we call a claims-made portfolio, professional financial lines. We stay away from third-party liability completely, except for a small portfolio in the Middle East. The rest of it is written on what we call a claims-made basis, where a claim has to be made during the policy period in order for it to, what do you call it, to be covered.
As a result, the tail on our book, whilst we call it long tail, the tail on our book is six to eight years. We avoid those exposures that something happens today, does not get discovered for another 20 years, comes back and haunts you. That is the type of exposure we do not like. An example of how we carve out a niche within each segment. In terms of the last point I want to make in terms of managing the cycle, people can simplify insurance and reinsurance a lot, right? Our business is not simply just making good underwriting decisions, but everything that comes around it that comes together and makes how you do things viable and sound. You have to think about it this way, when we are writing a portfolio of business, we are not just managing a portfolio of premium.
You're managing a portfolio of risk. You're managing a portfolio of exposures. The way we write the business, we're predominantly what we call a facultative market, i.e., we individually underwrite almost every single piece of business that we write. You're closer to our exposures, closer to our clients, and closer to our markets. At the same time, you're managing that portfolio. You're managing that portfolio of exposures, of claims. As the market goes up and down, there's different levers. It's not just about underwriting decisions, but it's about scaling back in areas where we don't see the biggest opportunities. It's about reinsurance. Just like we offer and sell insurance and reinsurance, we buy reinsurance. That comes in different forms, different shapes.
You manage your portfolio exposures based on the business that you write, how you protect it, and ultimately how you, what do you call it, how it all comes together. Just to give you an example of how we've managed the cycle in the past, I mean, Touchwood, the business has been doing great. We've had a great run, especially over the last few years. As I said, it's been a story of slow, gradual, step-by-step, methodical growth, patient, disciplined, razor-sharp focus on the bottom line, continuous value creation. This slide here, this is a perfect reflection of what I'm talking about. It represents the last 10 or 11 years of the business. If we go back to 2014, going up to 2016, 2017, you notice that time in the market was very, very difficult, very, very tough, very, very soft.
The bets people were taking were crazy. The bets people were taking were bets simply that we could not take. Again, going back to understanding who you are and what your capabilities are and what bets you can and cannot take. You notice that our business shrank between 2014 to 2016. Those were very, very soft market days. It just goes back to the point that if we have to shrink in our business, you have to have the discipline to say, "Fine, I do not need to grow top line. As long as I keep creating value, I do not need to keep growing my business per se." Because of the cyclicality of it, your opportunities will come. It is just biding your time, being patient. That is what we did. That is exactly what we did back then. We said, "It is fine." It is frustrating.
It's sometimes depressing when you see the market behaving in such a bad way and in such a bad place. In 2017, 2018, you started to see a turn, right? These three bars reflect the different segments. The top dark blue bit is short tail. The light blue is long tail, and the purple is reinsurance. In 2017, 2018, our long tail line started pushing positively and pushing positively in a big way. You notice, again, going back, shifting focus to those areas where we think the best opportunities are. You notice a huge or a meaningful increase from 2017, 22%, 2018. We put our foot on the gas on long tail, up to 30%, up to 41%, up to 43%, managing the cycle, shifting focus. The opportunity was there.
These were conditions where underwriters who have been in the market for 30, 35 years have never seen such conditions. Huge, huge dislocation. In our business, wherever there is dislocation, that is where you want to go. In 2018-2020, we took advantage of the long tail uptake. That lasted until about 2022 or so. The more enhanced years were the 2019, 2020, 2021 years. In 2020, 2019, you started to see the short tail lines. You started seeing the growth in the short tail business. Percentage-wise, it does not look very high, although it got up to 58%-59% last year. In dollar terms, yes, we put our foot on the gas for short tail lines. In 2022, you started seeing a huge shift on the reinsurance side, complete and utter dislocation.
Market turned upside down after many, many years of very poor results. You started seeing the long tail business soften. You can see long tail business shrinking from 40% in 2022 to under 30% so far this year or the last 12 months. You saw the reinsurance segment grow from about 5% to almost 15% in just a matter of two or three years. In monetary terms, that equated to more than tripling our reinsurance portfolio in a market that was so dislocated, where capacity was so much in demand, and where appetite was waning. That is when we talk cycle management, that is exactly what we talk about.
Knowing that discipline, having the discipline, our network, keeping your ears on the ground, finger on the pulse, shifting focus, continuously monitoring in what direction markets are going, shifting focus to those areas where we believe the best returns are going to be. This chart, my favorite slide on the deck, demonstrates exactly that. Ultimately, as I said, we're a 23-year-old company with we know exactly the business that we like. We know exactly the business that we don't like. We're just as ambitious as anybody else. We know that at the end of the day, the ultimate goal for us is value creation, increasing book value, growing book value per share. That's what we drive in everybody's minds at IGI. It's part of our DNA. It's part of our culture. It's that approach that has allowed us to achieve what we have achieved.
We have consistently delivered results in the top 10%-15% of the global insurance and reinsurance marketplace. We do not give guidance. We are not a quarter-to-quarter company. Just like we look at our business on a long-term basis, we tell investors, "Look at us as a long-term investment. We are not your quarter-to-quarter company. We are not your quick in and out. We build value over time, hence the 10-year cycle that we mentioned. We do not give guidance on a quarter-to-quarter annual basis. What we say is we can deliver over a cycle, over a 10-year period, we believe we can deliver a combined ratio in the mid-to-high 80s average over that 10-year period, good times and bad times, and a return on equity of low-to-mid teens. Our track record has demonstrated that exactly.
Over the last few years, we've delivered better results than the average because of the market, lots of tailwind, combined ratios in the mid to high 70s, ROEs in the low to mid 20s. I'll tell you, that's not normal. That's not your average expectation. It should not be your average expectation. Just in conclusion, I mean, I hope I've given you a good flavor of who we are as a business. We're a performance-based company, culture. As I said, we're just as ambitious as any other business. Ultimately, our ultimate goal, our ultimate priority is to deliver value, to grow value, and never sacrifice the bottom line for the expense of the top. Thank you. Happy to take any questions. Yes.
[audio distortion] Actually, we did not want to go deeper into slide 10. You know, in 2017, the high ratios are great. Then in 2017, it is just way up. Is that a result of the same loss? Or is that a result of lower premiums?
No. That was a very bad year for the industry as a whole, right? The industry that year averaged a combined ratio of about 120%. Those were the years where you had Hurricanes Irma, Maria, Harvey in the Caribbean, and you had Mexican quakes, and you had, I mean, it was driven by losses and cat activity predominantly.
Okay. Also, the last sentence, specialist underwriting strategy results in a 4.5 ratio again of the industry. That is very specific too. Just elaborate on that a little bit. [audio distortion]
I mean, we've come up with a peer group, and we track the performance of the peer group historically. And to that peer group, our performance has been 4 points better on a combined ratio basis. If you look at the whole industry as a whole, I mean, we track that as well. We've consistently outperformed and delivered superior results to the market in the top 10%-15%, despite our size and limited capabilities. That was actually recognized by S&P recently, just a few weeks ago, where they upgraded our financial rating from an -A to a full A. I mean, we're a very simple business at the end of the day. Insurance is quite simple. It's a matter of how much you want to complicate it, honestly. We try to keep things simple and just stick to our knitting.
It really is not rocket science what we do. Discipline, focus, stick to your knitting, work within your capabilities. It's as simple as that, really.
All right.
Yes?
You put up the slide with the clock with the market cycle. I guess I feel obligated to ask what time you think it is. [audio distortion]
What time?
Hard since you.
I mean, it depends, right? Again, the beauty of our portfolio, 25 lines, different lines, different geographies. These markets move in different directions at different times. It is very difficult to pinpoint as a whole where we are. If you look at long tail business, I'd probably say we're in crunch, right? If you look at reinsurance, we're in euphoria and maybe a little bit on the 1 o'clock side. If you look at short tail lines, some are definitely in crunch. Most are in sort of the right-hand side of euphoria or below in the lighter green section. Yeah. Yes?
Can you chat a little bit about what you do on the investment side? [audio distortion]
Our investment, -- I mean, we take risk on a day-to-day, but our philosophy is that we take risk on a day-to-day basis on the underwriting side. We do not want to take any risk on the investment side. Our investment policy and philosophy is plain vanilla, very boring, fixed income, bond portfolio. Equities represent, I think, less than 2% of the overall portfolio. We do not take any risks on the investment side. It is extremely, and sometimes investors fault us for that because we are being too conservative. Conservativeness is in our DNA, both on the underwriting and the investment side. It is a very plain vanilla fixed income, fixed deposit portfolio. Yes, sir?
[audio distortion] Your potential book value is growing about, I can't see that low. It's like 7.4% over the last 10 years. Is that correct?
Yes, 7.1%.
[audio distortion] I guess you're just saying that you're expecting it. Low teens, ROEs, I guess. I guess why isn't your book value growing faster as you're expecting down through the cycle? ROEs keep getting kind of on the upper?
To be totally honest with you, I mean, you see that blue line. That's when we went public. It's not as simple as the calculation is not as simple going back to the private days. If you look at when we, since we've been public, obviously that book value per share plus dividends has grown dramatically faster. I mean, within capital management, also there's the impact of buybacks, dividends, which impact book value per share, of course, as well. We've been buying back now. We announced the buyback program back in 2022. We've bought back 7.5 million shares, and we just announced a new authorization just a few weeks ago for another 5 million. I mean, at this point in time, we believe our stock is highly undervalued for the returns that we're generating compared to our peers.
In reality, we expect to be trading a lot higher than our peers because we do a lot better. We are a patient business. Coming from the Middle East, we are not your typical insurance stock that you would look at compared to all the other insurance stocks that you would. You would normally look at companies that are mainly American. We are mainly international with a bit of American. When we came and went public, we were an unknown commodity, right? Nobody knew who we were. Nobody was comfortable, honestly, with us. We have built a track record now of five years as a public business. We have shown we can succeed as a public business. As long as our stock continues to be undervalued, of course, we will be in there buying back ourselves.