TIDMCRE
RNS Number : 7090S
Conduit Holdings Limited
08 November 2023
Pembroke, Bermuda - 8 November 2023
Pembroke, Bermuda - 8 November 2023
Conduit Holdings Limited
("CHL" LSE ticker: CRE)
Trading Update for the nine months ended 30 September 2023
Strong year-on-year growth in gross premiums written of
50.3%
Efficient business model, strong capital base, ideally
positioned for continued growth into favourable market conditions
ahead of the 1 January renewals
CHL, the ultimate parent company of Conduit Re, a pure-play
Bermuda-based reinsurance business, today presents its trading
update for the nine months ended 30 September 2023.
Trevor Carvey, Chief Executive Officer, commented: "The third
quarter has been a great period for us at Conduit Re. Renewals and
new business alike have contributed to the growth of our portfolio,
with the non-catastrophe and specialty space continuing to receive
much of our attention. The estimated ultimate premiums written of
$909.3 million in the first nine months of 2023 represented an
increase of 56.4% over the same period last year and our
underwriting teams continue to deploy capacity efficiently in this
dynamic marketplace across a broad range of both quota share and
excess of loss opportunities."
Neil Eckert, Executive Chairman, commented: "Trevor and his team
have created a scalable business model and a platform that is
delivering strong organic sustainable growth and we have an ample
capital base that will enable us to continue to do so. We expect
the duration of the current hard cycle to be extended due to
structural changes in the industry, continued inflationary
pressures and adverse development on the industry's legacy casualty
business."
Key highlights:
-- $909.3 million of estimated ultimate premiums written for the
nine months ended 30 September 2023, a 56.4% increase on the nine
months ended 30 September 2022
-- Gross premiums written for the nine months ended 30 September
2023 of $764.4 million, a 50.3% increase over the first nine months
of 2022
-- Almost $2.0 billion of estimated ultimate premiums written
from launch in December 2020 up to 30 September 2023, with
significant unearned premium of approximately $676 million which
will flow through in subsequent years
-- Overall portfolio risk-adjusted rate change for the nine
months ended 30 September 2023, net of claims inflation, of 15%
-- No event loss, individually or in the aggregate, had a
material impact during the nine months ended 30 September 2023
-- High quality investment portfolio with average credit quality
of AA; duration 2.3 years; book yield of 3.5%, and market yield of
5.8% as at 30 September 2023 (respectively AA, 2.3 years, 1.8% and
4.8% as at 30 September 2022)
Outlook
-- Market conditions: the mid-year renewal pricing was strong
and represented a healthy indicator, for property and specialty in
particular, through the third quarter. Casualty classes show lower
rate rises after adjusting for inflation and we continue to build
that book around clients with the right discipline, experience and
acumen
-- The upcoming 1 January renewal season remains a primary
indication point for pricing in the reinsurance market and there
are signals that currently point to further risk-adjusted rate
improvements in an already hard market
-- Our capacity for continued growth into excellent market conditions is driven by:
-- Supply-demand imbalance: the demand for reinsurance among
insurance carriers continues to generally exceed supply and is
providing positive momentum in pricing and terms and conditions
-- Efficient business model: with a single operating location
and a focused approach to underwriting, Conduit Re has operational
leverage as the premium base continues to grow
-- Legacy-free balance sheet with capital capacity to support
the planned growth and beyond; AM Best A- (Excellent) rating, with
"very strong" balance sheet strength
Underwriting update
In the nine months to 30 September 2023, Conduit Re continued to
show growth across all segments, benefitting from new business,
high retention and underlying growth of renewal business, coupled
with improving rates. Client count and submission flow have
increased in line with Conduit Re's strategy, with the embedded
renewing portfolio providing the key foundations.
Premiums
Estimated ultimate premiums written 1 for the nine months ended
30 September 2023:
2023 2022 re-stated Change Change 2022 Published 2
Segment $m $m $m % $m
Property 440.5 276.1 164.4 59.5% 292.8
Casualty 277.2 200.8 76.4 38.0% 200.8
Specialty 191.6 104.5 87.1 83.3% 107.3
Total 909.3 581.4 327.9 56.4% 600.9
----------- ------ --------------- ------- ------- -----------------
Gross premiums written 3 for the nine months ended 30 September
2023:
2023 2022 re-stated Change Change 2022 Published 4
Segment $m $m $m % $m
Property 403.3 245.6 157.7 64.2% 262.3
Casualty 219.2 181.1 38.1 21.0% 181.1
Specialty 141.9 82.0 59.9 73.0% 84.7
Total 764.4 508.7 255.7 50.3% 528.1
----------- ------ --------------- ------- ------- -----------------
Pricing
Pricing levels and terms and conditions continued to improve
overall in the nine months to 30 September 2023, driven by strong
continued demand for reinsurance from insurers.
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 nine
months ended 30 September 2023, net of claims inflation, was 15%,
and by segment was:
Property Casualty Specialty
30% 0% 9%
Greg Roberts, Chief Underwriting Officer, commented: "The
property and specialty accounts continue to show very strong
underlying trading dynamics, providing significant growth
opportunities, in line with our targeted prioritisation. Our focus
remains on quality partners who understand their own local market
places and whom we will support as their volumes grow."
Net reinsurance losses and loss related amounts 5
In an active natural catastrophe period for the industry, no
event loss, individually or in the aggregate, had a material impact
on Conduit Re during the first nine months of 2023.
The first nine months of 2022 were impacted by our estimated
ultimate net impact, on an undiscounted basis, from Hurricane Ian
of approximately $40 million and the Ukraine conflict of $24.6
million. Our undiscounted ultimate loss estimates, net of ceded
reinsurance and reinstatement premiums, for prior years reported
loss events remain stable.
Our loss and reserve estimates have been derived from a
combination of reports and statements from brokers and cedants,
modelled loss projections, pricing loss ratio expectations and
reporting patterns, all supplemented with market data and
assumptions. We will continue to review these estimates as more
information becomes available.
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 nine months of 2023 was 2.1%
driven primarily by investment income given a generally higher
yielding portfolio. In the first nine months of 2022 the portfolio
returned (6.2)% due to the significant increase in treasury
yields.
While we expect market volatility to remain elevated in the near
term, Conduit Re expects 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 30 September 2023 As at 30 September 2022
--------------------------- ------------------------ ------------------------
Fixed maturity securities 87.5% 90.5%
Cash and cash equivalents 12.5% 9.5%
Total 100.0% 100.0%
--------------------------- ------------------------ ------------------------
Key investment portfolio statistics for our fixed maturities and
managed cash were:
As at 30 September 2023 As at 30 September 2022
---------------- ------------------------ ------------------------
Duration 2.3 years 2.3 years
Credit quality AA AA
Book yield 3.5% 1.8%
Market yield 5.8% 4.8%
---------------- ------------------------ ------------------------
Capital & dividends
Total capital and tangible capital available was $0.92 billion
as at 30 September 2023.
During the third quarter of 2023, CHL's Board of Directors
declared an interim dividend of $0.18 (GBP0.1415) per common share
in respect of 2023, which was paid in pounds sterling on 8
September 2023 to shareholders of record on 18 August 2023,
resulting in an aggregate payment of $29.7 million.
Webcast for Analysts and Institutional Investors
Conduit Re's management team will host a virtual meeting for
analysts and investors via a webcast and conference call on
Wednesday 8 November 2023 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/499b2dd1-0283-4d76-b06f-066075865f27
To access the conference call, please register to receive unique
dial-in details here:
https://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNumber=3748152&linkSecurityString=9c308a0f0
A recording of the conference call will be made available from
5:00PM (GMT) on the Investors section of Conduit Re's website at
www.conduitreinsurance.com.
Webcast for retail investors via Investor Meet Company
Neil Eckert, Executive Chairman, will provide a separate live
presentation via the Investor Meet Company platform for retail
investors on 8 November 2023 at 2:30 pm UK time. In addition to
discussing the results for the nine months ended 30 September 2023,
Neil will also introduce Conduit Re and its business model, and
will provide an overview of the reinsurance market and the
Company'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 this overview presentation.
There will be an opportunity for Questions & Answers at the
end of the presentation. Questions can be submitted 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 already follow Conduit Re on the Investor Meet
Company platform will automatically be invited.
Media contacts
H/Advisors Maitland - Vikki Kosmalska / Alistair de
Kare-Silver
+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 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 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, 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.
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 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. 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.
1 Estimated ultimate premiums written now exclude reinstatement
premiums to ensure consistency with the IFRS 17 view of
revenue.
2 Numbers as reported in the third quarter 2022 trading update
under IFRS 4.
3 Gross premiums written now exclude reinstatement premiums to
ensure consistency with the IFRS 17 view of revenue.
4 Numbers as reported in the third quarter 2022 trading update
under IFRS 4.
5 Reinsurance losses and loss related amounts less ceded
reinsurance recoveries.
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END
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