REG - Conduit Holdings Ltd - Trading Statement

Conduit HoldingsAnnouncement

06/11/2024 07:00

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RNS Number : 0765L  Conduit Holdings Limited  06 November 2024

Pembroke, Bermuda - 6 November 2024

Pembroke, Bermuda - 6 November 2024

Conduit Holdings Limited

("CHL" LSE ticker: CRE)

Trading update for Q3 2024

Continued year-on-year growth of 25.2% in gross premiums written

CHL, the ultimate parent company of Conduit Re, a multi-line Bermuda-based
reinsurance business, today presents its trading update for the nine months
ended 30 September 2024.

Trevor Carvey, Chief Executive Officer, commented: "Our increase in premiums
written of 25% year-on-year reflects continued growth into our capital base,
in what we view as a strong market with healthy rate adequacy. We have seen an
active quarter from an event perspective, notably natural catastrophe events
across the US, Canada and the Caribbean, and as a well-diversified,
predominantly quota share reinsurer we pick up our fair share of these, as we
expect to do so. Looking forward and into 2025, we remain committed to risk
selection and growing our business in a measured and balanced manner."

 

Key highlights:

•   Gross premiums written of $957.3 million, a 25.2% increase over the
first nine months of 2023

•   Reinsurance revenue of $588.2 million, a 30.3% increase over the first
nine months of 2023

•   Overall portfolio risk-adjusted rate change for the nine months ended
30 September 2024 was 1%, net of claims inflation

•   Activity across smaller and mid-size natural catastrophe and risk
events has been elevated, and in aggregate our estimated undiscounted net loss
recorded in the third quarter was approximately $50 million, net of
reinsurance and reinstatement premiums

•   Following the loss events of the third quarter, our undiscounted
combined ratio was in the mid-90s on a year to date basis through 30 September
2024

•   High quality investment portfolio with average credit quality of AA;
duration 2.5 years; book yield of 4.2% and market yield of 4.5% as at 30
September 2024 (respectively AA, 2.4 years, 2.8% and 5.0% as at 30 September
2023)

Outlook:

•   Market conditions remain stable across the business classes we target,
with Property and Specialty lines in particular providing continued
opportunities for growth

•   In October, Hurricane Milton made landfall in Florida and while we are
in the early stages of assessing the loss we expect our undiscounted net loss
to be in the range of $30-50 million, net of reinsurance and reinstatement
premiums

•   Recent natural catastrophe and risk events, as well as pre-2020
industry legacy reserve development, are expected to support a resilient
pricing outlook

•   The market outlook supports good risk / return dynamics, and our
portfolio is well positioned to respond to market conditions. Rates in loss
exposed classes, such as marine liability and civil unrest, are likely to
respond positively

•   Conduit Re's single location and efficient structure allow the team to
be responsive to quickly changing market conditions

•   Our partnership is valued in the market, and clients are engaging
early in January renewal conversations

•   Conduit Re remains well capitalised and positioned to deploy capacity
to the classes it finds most attractive across its multi-line platform at
upcoming renewals

Underwriting update

Premiums

Gross premiums written for the nine months ended 30 September 2024:

            2024   2023   Change  Change
 Segment    $m     $m     $m      %
 Property   536.0  403.3  132.7   32.9%
 Casualty   223.6  219.2  4.4     2.0%
 Specialty  197.7  141.9  55.8    39.3%
 Total      957.3  764.4  192.9   25.2%

 

Reinsurance revenue

Reinsurance revenue for the nine months ended 30 September 2024:

            2024   2023   Change  Change
 Segment    $m     $m     $m      %
 Property   319.9  245.3  74.6    30.4%
 Casualty   148.8  125.3  23.5    18.8%
 Specialty  119.5  80.7   38.8    48.1%
 Total      588.2  451.3  136.9   30.3%

Pricing

Pricing levels and terms and conditions generally continued to be attractive
in the nine months ended 30 September 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 nine months ended 30
September 2024, net of claims inflation, was 1%, and by segment was:

 Property  Casualty  Specialty
 3%        (1%)      1%

 

Gregory Roberts, Chief Underwriting Officer, commented: "With two months
remaining in the year, the reinsurance industry has already experienced a
significant level of natural catastrophe and large loss activity. Pricing
conditions remain broadly stable and benefit from several years of compounding
rate increases. As a trusted partner, our underwriting team engages with
clients in what is a dynamic marketplace as we continue to grow while
maintaining the balance of our overall portfolio."

 

Net reinsurance losses and loss related amounts

Activity across smaller and mid-size natural catastrophe and large risk events
was elevated in the third quarter. In aggregate, our estimated undiscounted
net loss, after reinsurance and reinstatement premiums, for these large loss
events recorded in the third quarter was approximately $50 million. While
reserves have been recorded for these events, significant uncertainty exists
in relation to the ultimate losses.

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.

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 a conservative
approach to managing our invested assets with a strong emphasis on preserving
capital and liquidity. Our strategy is focused on 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 nine months ended 30 September 2024 was 4.9%,
driven primarily by a significant decrease in treasury yields during the third
quarter, combined with investment income given a generally higher yielding
portfolio. In the nine months ended 30 September 2023, the portfolio returned
2.1% driven primarily by investment income.

The breakdown of the managed investment portfolio is as follows:

                            As at 30 September 2024  As at 30 September 2023
 Fixed maturity securities  86.6%                    87.5%
 Cash and cash equivalents  13.4%                    12.5%
 Total                      100.0%                   100.0%

Key investment portfolio statistics for our fixed maturity securities and
managed cash were:

                 As at 30 September 2024  As at 30 September 2023
 Duration        2.5 years                2.3 years
 Credit quality  AA                       AA
 Book yield      4.2%                     3.5%
 Market yield    4.5%                     5.8%

Capital and dividends

Total capital and tangible capital available was $1.05 billion as at 30
September 2024 (30 September 2023: $0.92 billion).

During the third quarter of 2024, CHL's Board of Directors declared an interim
dividend of $0.18 (£0.1394) per common share in respect of 2024, which was
paid in pounds sterling on 5 September 2024 to shareholders of record on 16
August 2024, resulting in an aggregate payment of $29.7 million.

Presentation for Analysts and Investors at 12:00 noon UK time

Conduit's management team will host a virtual meeting and conference call for
analysts and investors on Wednesday 6 November 2024 at 12:00 noon UK time /
8:00 am Bermuda time.

To access the webcast, please register in advance here:

https://sparklive.lseg.com/ConduitHoldingsLtd/events/d3bfb5ee-bde7-49a7-b1f7-f92465578a4e/conduit-holdings-limited-q3-2024-trading-update

To access the conference call, please register to receive unique dial-in
details here:

https://registrations.events/direct/LON98987130

The accompanying slides for this presentation are now available to view on the
Investors section of Conduit'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 16:00 pm UK time

Trevor Carvey, Chief Executive Officer, and Neil Eckert, Executive Chairman,
will provide a separate live presentation aimed at retail investors, relating
to the Q3 2024 Trading Update via the Investor Meet Company platform, on
Wednesday, 6 November 2024 at 16:00 UK time / 12:00 noon Bermuda time.

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 on 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 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:

brett.shirreffs@conduitre.bm

Panmure Liberum (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 multi-line 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", "projects", "growth","anticipates", "expects", "achieve",
"intends", "tends", "on track", "well placed", "estimated", "projected",
"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 CHL'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,
particularly for recent events where estimates are preliminary as more
information arises, including but not limited to the Ukraine crisis, Atlantic
and Gulf of Mexico Hurricanes, European storms and floods, earthquakes,
wildfires in North America 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; the
impact of cyber attacks (including as exacerbated by geopolitical tensions) on
technology, data and network security; 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 and opportunities which are available at
the time of renewals within Conduit's targeted business lines; 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 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 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 interim update may be impacted by
the escalation or expansion of the Ukraine conflict or conflicts in the Middle
East 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. CHL 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 CHL
and/or the group or to persons acting on its behalf are expressly qualified in
their entirety by the cautionary statements referred to above.

The Conduit renewal indicative rate change measure is an internal methodology
that management intends to use to track risk-adjusted 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's 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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