Pembroke, Bermuda - 15 May
2024
Pembroke,
Bermuda - 15 May 2024
Conduit Holdings Limited
("CHL" LSE ticker: CRE)
TRADING UPDATE FOR Q1
2024
Continued strong year-on-year growth
in gross premiums written of 28.3%
CHL, the ultimate parent company of Conduit Re, a
pure-play Bermuda-based reinsurance business, today presents its
trading update for the three months ended 31 March 2024.
Trevor Carvey, Chief Executive
Officer, commented: "Following a successful 2023, our
momentum was maintained in the first quarter, with growth
continuing in line with our plans. The broad trading landscape
remains very attractive and we continue to see a significant range
of high quality opportunities. As always, we remain focused on
profitability and underwriting discipline, leveraging our efficient
operating model."
Key highlights:
• Gross premiums
written for the three months ended 31 March 2024 of $356.8 million,
a 28.3% increase over the first three months of 2023
• A 35.1%
increase in reinsurance revenue to $181.1 million over the first
three months of 2023
• Overall
portfolio risk-adjusted rate change for the three months ended 31
March 2024 of 3%, net of claims inflation
• No event loss,
individually or in the aggregate, had a material impact on Conduit
Re in the quarter; exposure to the Baltimore Bridge collapse is
within our expectations for an event of this nature
• High quality
investment portfolio with average credit quality of AA; duration
2.5 years; book yield of 3.9%, and market yield of 5.3% as at 31
March 2024 (respectively AA, 2.4 years, 2.8% and 5.0% as at 31
March 2023)
Outlook:
• Market
conditions remain at historically favourable levels across the
business we target
• Net
accumulations benefit from diversifying opportunities
• Underwriting
portfolio with key partners provides stability alongside selective
growth
• Conservative
investment strategy focused on protecting capital to support
underwriting
• Diversified
platform allowing capital allocation to deserving opportunities
• Low 80s
undiscounted combined ratio continues to emerge
Underwriting update
• Continued
growth across all segments, benefiting from new business, high
retention and underlying growth of renewal business, coupled with
improving rates
• Client count
increased in line with Conduit Re's strategy, with the embedded
renewing portfolio providing the key foundations
Premiums
Gross premiums written for the three months ended 31
March 2024:
|
2024
|
2023
|
Change
|
Change
|
|
Segment
|
$m
|
$m
|
$m
|
%
|
|
Property
|
217.1
|
159.0
|
58.1
|
36.5%
|
|
Casualty
|
69.0
|
64.9
|
4.1
|
6.3%
|
|
Specialty
|
70.7
|
54.1
|
16.6
|
30.7%
|
|
Total
|
356.8
|
278.0
|
78.8
|
28.3%
|
|
Reinsurance revenue
Reinsurance revenue for the three months ended 31
March 2024:
|
2024
|
2023
|
Change
|
Change
|
|
Segment
|
$m
|
$m
|
$m
|
%
|
|
Property
|
98.8
|
72.9
|
25.9
|
35.5%
|
|
Casualty
|
48.3
|
36.8
|
11.5
|
31.3%
|
|
Specialty
|
34.0
|
24.3
|
9.7
|
39.9%
|
|
Total
|
181.1
|
134.0
|
47.1
|
35.1%
|
|
Pricing
Pricing levels and terms and conditions generally
continued to be attractive in the three months ended 31 March
2024.
Conduit Re is seeing an increasing number of
opportunities to deploy its capital into the areas and products
that it targets. The non-catastrophe elements of both property and
specialty in particular are providing good opportunities for
selective growth.
Conduit Re's overall risk-adjusted rate change for
the three months ended 31 March 2024, net of claims inflation, was
3%, and by segment was:
Property
|
Casualty
|
Specialty
|
5%
|
-2%
|
2%
|
Greg Roberts, Chief Underwriting
Officer, commented: "Conditions remain supportive for our
focused and disciplined deployment of capital. Our mature
relationships with non-admitted and E&S carriers remain a
cornerstone of our strategy as we continue to grow in that space.
Rating levels are generally strong, and the overall trading
environment remains in a very good place and continues to be an
'underwriters' market'."
Net reinsurance losses and loss
related amounts
For the first three months of 2024, despite an active
loss period for the industry, no event loss, individually or in the
aggregate, had a material impact on Conduit Re. The market loss
associated with the Baltimore Bridge collapse continues to develop;
our exposure is within expectations for an event of this
nature.
Our undiscounted ultimate loss estimates, net of
ceded reinsurance and reinstatement premiums, for prior years
reported loss events remain stable.
Investments
In line with our stated strategy, we continue to
maintain our conservative approach to managing our invested assets
with a strong emphasis on preserving capital and liquidity. Our
strategy remains maintaining a short duration, highly-rated
portfolio, with due consideration of the duration of our
liabilities. Our investment portfolio does not hold any
derivatives, equities, alternatives or emerging market debt.
The investment return for the first three months of
2024 was 0.5% driven primarily by investment income, given a
generally higher yielding portfolio which offset the increase in
treasury yields in the quarter. In the first three months of 2023
the portfolio returned 1.8% due to the reduction in treasury
yields, which more than offset the modest widening of credit
spreads.
While we expect market volatility to remain elevated
in the near term, Conduit Re expects to continue to be able to
reinvest at higher rates as the existing portfolio rolls over.
The breakdown of the managed
investment portfolio is as follows:
|
As at 31
March 2024
|
As at 31 March 2023
|
|
Fixed maturity securities
|
88.4%
|
91.5%
|
|
Cash and cash equivalents
|
11.6%
|
8.5%
|
|
Total
|
100.0%
|
100.0%
|
|
Key investment portfolio statistics for our fixed
maturity securities and managed cash were:
|
As at 31
March 2024
|
As at 31 March 2023
|
|
Duration
|
2.5 years
|
2.4 years
|
|
Credit quality
|
AA
|
AA
|
|
Book yield
|
3.9%
|
2.8%
|
|
Market yield
|
5.3%
|
5.0%
|
|
Capital & dividends
Total capital and tangible capital available was
$0.99 billion as at 31 March 2024 (31 March 2023: $0.88 billion and
$0.87 billion respectively).
Tangible net assets per share as at 31 March 2024 was
$6.30, or £4.99 (31 March 2023: $5.45 or £4.42).
During the first quarter of 2024, CHL's Board of
Directors declared a final dividend of $0.18 (£0.14306) per common
share in respect of 2023, which was paid in pounds sterling on 24
April 2024 to shareholders of record on 22 March 2024, resulting in
an aggregate payment of $29.7 million.
Shares purchased by CHL's employee benefit trust
during the first three months of 2024 amounted to $7.1 million (31
March 2023: $nil) and will be held in trust to meet future
obligations under CHL's variable incentive schemes.
Presentation for Analysts and
Investors at 12:00 noon UK time
Conduit Re's management team will host a virtual
meeting for analysts and investors via a webcast and conference
call on Wednesday 15 May 2024 at 12:00 noon UK time / 8:00 am
Bermuda time.
To access the webcast, please
register in advance here:
https://www.lsegissuerservices.com/spark/ConduitHoldingsLtd/events/8c236820-9ded-423d-a072-0afe3c841e09
To access the conference call,
please register to receive unique dial-in details here:
https://registrations.events/direct/LON75095443
The accompanying slides for this
presentation are now available to view on the Investors section of
Conduit Re's website at www.conduitreinsurance.com. A recording of
the conference call will be made available later in the day at the
same location.
Investor Presentation via Investor
Meet Company at 3:00 pm UK time
Neil Eckert, Executive Chairman, and Trevor Carvey,
Chief Executive Officer, will provide a separate live presentation
aimed at retail investors, relating to the Q1 2024 Trading Update
via the Investor Meet Company platform on Wednesday, 15 May 2024 at
3:00 pm UK time. In addition to discussing the Q1 2024 Trading
Update, Neil and Trevor will also introduce Conduit Re and its
business model, and will provide an overview of the reinsurance
market and Conduit Re's positioning to capitalise on favourable
market conditions.
The presentation is also open to all existing
shareholders. No new trading, financial or other CHL information
will be disclosed during the presentation.
There will be an opportunity for Questions &
Answers at the end of the meeting. Questions can be submitted
pre-event via the Investor Meet Company dashboard up until 9:00 am
UK time the day before the meeting or at any time during the live
presentation.
Investors can sign up to Investor
Meet Company for free, or if signed up, can add to meet Conduit
Holdings Limited via:
https://www.investormeetcompany.com/conduit-holdings-limited/register-investor
Investors who are already registered on the Investor
Meet Company platform and follow Conduit Re on the Investor Meet
Company platform will automatically be invited.
Media contacts
H/Advisors Maitland - Vikki Kosmalska / Genevieve
Ryan
+44 (0) 207 379 5151
conduitre@h-advisors.global
Investor relations and other
enquiries:
info@conduitreinsurance.com
Panmure Gordon (UK) Limited (Joint
Corporate Broker)
+44 (0) 207 886 2500
Berenberg (Joint Corporate
Broker)
+44 (0) 203 207 7800
Peel Hunt (Joint Corporate
Broker)
+44 (0) 207 418 8900
About Conduit Re
Conduit Re is a pure-play Bermuda-based reinsurance
business with global reach. Conduit Reinsurance Limited is licensed
by the Bermuda Monetary Authority as a Class 4 insurer. A.M. Best
has assigned a Financial Strength Rating of A- (Excellent) and a
Long-Term Issuer Credit Rating of a- (Excellent) to Conduit
Reinsurance Limited. The outlook assigned to these ratings is
stable.
Conduit Holdings Limited is the ultimate parent of
Conduit Reinsurance Limited and is listed on the London Stock
Exchange (ticker: CRE). References to "Conduit" include Conduit
Holdings Limited and all of its subsidiary companies.
Learn more about Conduit
Re:
Website: https://conduitreinsurance.com/
LinkedIn: https://www.linkedin.com/company/conduit-re
Important information
(disclaimers)
This announcement contains inside information for the
purpose of the Market Abuse Regulation (EU) No 596/2014 (which
forms part of UK domestic law pursuant to the European Union
(Withdrawal) Act 2018, as amended).
This announcement includes statements that are, or
may be deemed to be, "forward-looking statements". These
forward-looking statements may be identified by the use of
forward-looking terminology, including the terms
"believes","estimates", "plans", "goals", "objective", "rewards",
"expectations", "signals", "projects", "anticipates", "expects",
"achieve", "intends", "tends", "on track", "well placed",
"continued", "estimated", "projected", "upcoming", "may",
"will","aims", "could" or "should" or, in each case, their negative
or other variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, targets, future events or
intentions. Forward-looking statements include statements relating
to the following: (i) future capital requirements, capital
expenditures, expenses, revenues, unearned premiums pricing rate
changes, terms and conditions, earnings, synergies, economic
performance, indebtedness, financial condition, dividend policy,
claims development, losses and loss estimates and future business
prospects; and (ii) business and management strategies and the
expansion and growth of Conduit's operations.
Forward-looking statements may and often do differ
materially from actual results. Forward-looking statements reflect
Conduit's current view with respect to future events and are
subject to risks relating to future events and other risks,
uncertainties and assumptions relating to Conduit's business,
results of operations, financial position, liquidity, prospects,
growth and strategies. These risks, uncertainties and assumptions
include, but are not limited to: the possibility of greater
frequency or severity of claims and loss activity than Conduit's
underwriting, reserving or investment practices have anticipated;
the reliability of catastrophe pricing, accumulation and estimated
loss models; the actual development of losses and expenses
impacting estimates for claims which arose as a result of recent
loss activity such as the Ukraine crisis, the impact of hostilities
in the Middle East, Hurricanes Ian, Ida, and Idalia, the European
storms and floods in 2021 and 2022 and, the earthquake in Turkey
and wildfires in Canada and Europe; the impact of complex causation
and coverage issues associated with attribution of losses to wind
or flood damage; unusual loss frequency or losses that are not
modelled; the effectiveness of Conduit's risk management and loss
limitation methods, including to manage volatility; the recovery of
losses and reinstatement premiums from our own reinsurance
providers; the development of Conduit's technology platforms; a
decline in Conduit's ratings with A.M. Best or other rating
agencies; the impact that Conduit's future operating results,
capital position and ratings may have on the execution of Conduit's
business plan, capital management initiatives or dividends;
Conduit's ability to implement successfully its business plan and
strategy during 'soft' as well as 'hard' markets; the premium rates
which are available at the time of renewals within Conduit's
targeted business lines and at policy inception; the pattern and
development of premiums as they are earned; increased competition
on the basis of pricing, capacity or coverage terms and the related
demand and supply dynamics as contracts come up for renewal; the
successful recruitment, retention and motivation of Conduit's key
management and the potential loss of key personnel; the credit
environment for issuers of fixed maturity investments in Conduit's
portfolio; the impact of the ongoing conflicts in Ukraine and the
Middle East, the impact of swings in market interest rates,
currency exchange rates and securities prices; changes by central
banks regarding the level of interest rates and the timing and
extent of any such changes; the impact of inflation or deflation in
relevant economies in which Conduit operates; Conduit becoming
subject to income taxes in Bermuda, the United States or in the
United Kingdom; and changes in insurance or tax laws or regulations
in jurisdictions where Conduit conducts business. Forward-looking
statements contained in this trading update may be impacted by the
escalation or expansion of the Ukraine conflict on Conduit's
clients, the volatility in global financial markets and
governmental, regulatory and judicial actions, including coverage
issues.
Forward-looking statements speak
only as of the date they are made. No representation or warranty is
made that any forward-looking statement will come to pass. Conduit
disclaims any obligation or undertaking to update or revise any
forward-looking statements contained herein to reflect actual
results or any change in the assumptions, conditions or
circumstances on which any such statements are based unless
required to do so by law or regulation. All subsequent written and
oral forward-looking statements attributable to Conduit and/or the
group or to persons acting on its behalf are expressly qualified in
their entirety by the cautionary statements referred to
above.
"Estimated ultimate premiums written" is the
estimated total gross premiums written (excluding reinstatement
premiums) that is expected to be earned assuming all bound
contracts run to the end of the period of cover, after management
discount for prudence. "Estimated ultimate premiums written"
reflects underwriter expectations at time of writing and involves
significant judgement. Prior year comparative figures reflect those
presented in Conduit's previously published Trading Update and are
not intended to present a current view of underwriting year
expectations for prior periods. We caution against using estimated
ultimate premiums written for anything other than understanding how
we view 1/1 on this basis in comparison to prior periods. This
figure is not representative of revenue recorded in the IFRS
financial statements.
The Conduit renewal year on year indicative pricing
change measure is an internal methodology that management uses to
track trends in premium rates of a portfolio of reinsurance
contracts. The change measure is specific for our portfolio and
reflects management's assessment of relative changes in price,
exposure and terms and conditions. It is also net of the estimated
impact of claims inflation. It is not intended to be commentary on
wider market conditions. The calculation involves a degree of
judgement in relation to comparability of contracts and the
assessment noted above, particularly in Conduit's initial years of
underwriting. To enhance the methodology, management may revise the
methodology and assumptions underlying the change measure, so the
trends in premium rates reflected in the change measure may not be
comparable over time. Consideration is only given to renewals of a
comparable nature so it does not reflect every contract in the
portfolio of Conduit contracts. The future profitability of the
portfolio of contracts within the change measure is dependent upon
many factors besides the trends in premium rates.