Pelagos Insurance Capital: 1Q26: Operating EPS Beat on Modestly Favorable AYLR and Benign Cats

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Pelagos Insurance Capital: 1Q26: Operating EPS Beat on Modestly Favorable AYLR and Benign Cats

Barclays | Pelagos Insurance Capital

around loss ratio caps. The gross to net retention was also higher at 69.9% vs our 64.0%,

resulting in an NPW growth of 24.1% that comfortably beat our 6.3% estimate. While the earn-in

factor came in a touch lighter at 78.3% vs our 80.0% estimate, the material beat on NPW growth

resulted in NPE of $514.9m vs our $511.4m estimate, which was also above the $450-$500m

guidance management provided in the 4Q25 call. The beat on policy acquisition ratio was

attributable to changes in mix of business written and ceded, though this more seasonal

variability and is expected to revert back to the low 30's that management had previously

guided to. As a result, both reported combined ratio (71.3% vs our 74.2%) and underlying

combined ratio (54.4% vs our 59.0%) landed favorable.

Reinsurance - Underwriting Income $44.3m vs $23.0m Barc / $31.9m Street. The beat was

driven benign cats, favorable PYD, and lower policy acquisition expenses. This more than offset

slightly higher attrition loss ratio and lower NPE. Cat losses of $0.5m/0.9pts were virtually flat in

the quarter vs our $7.7m/12.7pts estimate. The segment also recognized $18.3m/34.1pts of

favorable PYD (Reinsurance segment is nearly all property) compared to our flat development

assumption. Policy acquisition expenses also landed favorably due to changed in ceded

premium and commissions earned from outwards reinsurance partners. On topline, GPW

decline 11.3% vs our 14.0% assumption. Excluding the ~$80m in reinstatement premiums

included in 1Q25 prior year baseline (related to CA wildfires), GPW growth would have been 8%

which we note is a stronger topline growth compared to peer reinsurers.