REG - Conduit Holdings Ltd - Q1 Trading Update

Conduit HoldingsAnnouncement

15/05/2024 07:00

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RNS Number : 4473O  Conduit Holdings Limited  15 May 2024

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
(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
(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
(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/ (https://conduitreinsurance.com/)

LinkedIn: https://www.linkedin.com/company/conduit-re
(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.

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