Conduit takes start-up cat losses in stride
Top executives of Bermuda-based Conduit Holdings Ltd have declared their satisfaction with the interim results generated by the start-up operation, after a comprehensive loss of $12.4 million for the first six months.
The company is the parent of Class 4 reinsurer Conduit Re, which is part of the “Class of 2020” group of companies set up to capitalise on rising re/insurance rates.
The company is headquartered in Hamilton, and also has an office in London.
Conduit's interim results for the six month to June 30 included gross premiums written of $210.3 million, and estimated ultimate premiums written of $333.1 million.
The company said indicative renewal rate changes are estimated at +14 per cent for property, +17 per cent for casualty and +12 per cent for speciality.
Conduit reported an estimated Winter Storm Uri incurred loss of $6 million, including the impact of reinstatement premiums.
The company reported a net loss ratio of 70 per cent, 57.2 per cent excluding Winter Storm Uri.
Loss on equity was 1.2 per cent, reflecting start-up factors, Conduit said.
The company declared an interim dividend of 18 cents per common share.
Neil Eckert, Group executive chairman, said: “I am proud of what we have achieved in our first six months as an operating business and we could not have asked for more from our growing team. We are delivering on the plan we set out in our IPO last year and continue on our mission to build Conduit into a leading, modern pure play reinsurance franchise.”
Trevor Carvey, Group chief executive officer, said: “In our first half year of operations as a global reinsurer, we have hit the ground running and been accepted as a disciplined and supportive reinsurance partner by our brokers and clients who have shown us overwhelming support. We are building a strong team culture of technical discipline, collaboration and transparency which we believe is well received by our customers.
“We have been deliberately more weighted to quota share business than excess of loss in these early stages and I am delighted with the diversity and quality of the book and the pricing we have been able to achieve. Over time, we would expect the balance of excess of loss business to increase as we continue to build out our book.”
He added: “The benefits of our focused and diversified approach to underwriting have meant that we have avoided significant exposures to the large losses that have been experienced in the wider reinsurance industry in the first half of the year.
“We expect our ultimate premium income to be broadly in line with the estimates we set out in our plan, subject to market conditions over the remainder of this year.
“We have made excellent progress so far, but there is still lots of hard work ahead of us.”
Elaine Whelan, Group chief financial officer, said: “We are pleased with the progress we have made with the operational buildout and development of our systems. Our IPO funds are now fully invested in accordance with our investment strategy and we will maintain a high quality, highly liquid investment portfolio to support our underwriting activities.”
In the first seven months of the Group's operations since its IPO, Conduit said it has selectively written approximately 165 reinsurance contracts of the approximately 700 contracts it has analysed which are estimated to deliver $333.1 million of ultimate premiums written.
The company said: “These contracts provide a book of business which exceeds our underwriting criteria on both terms and price and are written across a wide variety of classes of business, thus providing a focused and diversified book of business in line with the characteristics identified in our prospectus published in connection with the Group's IPO.”
Conduit said it has successfully placed its outward reinsurance programme to manage catastrophe exposures in line with its risk tolerances.
The group said its combined ratio of 127.2 per cent and negative ROE of 1.2 per cent reflect the start-up nature of the business. Notably, it said, the lag in net premiums earned as a result of writing more quota share means that the expense side of the business, such as incurred losses (for example Winter Storm Uri) and the level of operating expenses, can significantly impact these metrics.
Net investment income was $1.3 million for the first six months of 2021.
Other operating expenses were $13.5 million in the first six months of 2021.
The Group said it remains well capitalised to achieve the business plan presented in its IPO prospectus, and remains committed to its dividend policy.
Total capital available to the group was $1.041 billion. Tangible capital was $1.040 billion.