Q1 Trading Update

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

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

[phone]

[e-mail]

Investor relations and other enquiries:

[e-mail]

Panmure Gordon (UK) Limited (Joint Corporate Broker)

[phone]

Berenberg (Joint Corporate Broker)

[phone]

Peel Hunt (Joint Corporate Broker)

[phone]

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.

 

END