Conduit earnings knocked by war and investment results
The war in Ukraine and investment losses knocked the half-year results for Conduit Holdings Ltd to a comprehensive loss of $61.4 million.
This included the $24.6 million estimated loss in relation to Ukraine (net of reinsurance and reinstatement premiums) including an estimate of the impact of potential aviation claims.
The net unrealised loss on investments of $54.3 million reflected the mark to market adjustment driven by expectations of rising interest rates.
The earnings result came as the company noted that estimated ultimate premiums written increased 49 per cent to $496.7 million during the first six months of the year.
But Conduit reported: “The most significant event of the year so far remains the Ukraine conflict. Conduit continues to have potential exposure to the crisis across its property and specialty books via war on land, marine war and aviation.
“There is significant uncertainty in estimating losses emanating from the Ukraine conflict, not least as it is an ongoing event. However, Conduit’s previous guidance regarding loss expectations is unchanged.
“The estimated ultimate net impact, after reinsurance and reinstatement premiums, is $24.6 million, including for aviation-related claims.
“We have not received any loss notifications to date so our loss estimate continues to be derived from a combination of market data and ground-up assumptions, modelled loss projections and information from cedants.”
The group recorded a loss of 4.7 per cent on the investment portfolio for the six months ended June 30, 2022 (June 30, 2021, 0.1 per cent gain) due primarily to rising treasury yields.
Net investment income, excluding realised and unrealised losses, was $6.4 million for the six months ended June 30, 2022 (June 30, 2021, $1.3 million).
Total investment return, including net investment income, net realised gains and losses, and net change in unrealised gains and losses was a loss of $50.0 million (June 30, 2021, $0.8 million gain).
Conduit is blessed with a strong, legacy-free, unencumbered balance sheet with limited exposure to issues such as claims inflation on reserves.
Market conditions include continuing rate increases, improvements in terms and conditions, and a constrained reinsurance market which benefits the company, which is still growing its business.
CHL chief executive officer Trevor Carvey said: “We are seeing strong demand for our offering and we continue to take a highly selective approach to our underwriting in a market which is exhibiting increasingly strong fundamentals.
“The business is normalising, our (105.1 per cent) combined ratio (June 30, 2021, 127.2 per cent) will be trending towards our target of mid-80s steady state and the business is in an excellent position to continue to capitalise in our chosen markets.”
CHL said 70 per cent of its portfolio is non-cat business, a key benefit of its focused and highly diversified approach.