TIDMCRE
RNS Number : 1362R
Conduit Holdings Limited
03 November 2021
Conduit Holdings Limited Q3 2021 Trading Update
Conduit Holdings Limited ("CHL" or "Conduit Re")
(Ticker:CRE)
Hamilton, Bermuda - 3 November 2021
Trading Statement - Q3 2021
CHL is today presenting its trading statement for the nine
months ended 30 September 2021.
Key highlights:
-- Underwriting plan on track;
-- Estimated ultimate premiums written of $387.7 million; on plan for the year;
-- Gross premiums written of $291.2 million;
-- Diversified and balanced portfolio;
-- Market conditions remain strong with continuing rate
increases and improvements in terms and conditions;
-- Net incurred losses in the third quarter in relation to
Hurricane Ida and the European Floods of $28.6 million, including
the impact of outward reinsurance and reinstatement premiums
(representing 2.9% of tangible net assets);
-- Conservative approach to invested assets maintained;
-- Continued development of a high quality underwriting
franchise with the build out of our teams and operating
platform;
-- First interim dividend of 18c (approximately 13p) per common
share (in respect of H1 2021) declared and paid in the third
quarter of 2021.
Neil Eckert, Group Executive Chairman, commented:
"We continue to build our business as we set out in our initial
plans and remain on track to deliver on these. This quarter saw two
major catastrophe loss events and our relatively limited exposures
to these demonstrates the quality of the portfolio that Trevor and
the team have been carefully building. This justifies the Conduit
Re approach of building a focussed, diversified and balanced
business model."
Trevor Carvey, Group Chief Executive Officer, commented:
"We passed our first test as a global reinsurer during the
quarter with the experiences of the European Floods and Hurricane
Ida. Both of these events serve as a poignant reminder of the
potential severity and frequency of natural events in the
reinsurance marketplace. Whilst Ida in particular is a major event
for the Industry, it sits well within our retrocession programme
and has therefore only had a limited impact on our financial
performance. Our reinsurance programme remains strong for the rest
of the year. We anticipate that these events, together with the
continuing pressure of claims inflation and concerns about the
increased frequency of catastrophe events, will support continued
upward pressure on pricing. We are well positioned ahead of the key
1 January renewals."
Business update
During the third quarter of 2021, Conduit Re bound contracts
with total estimated ultimate premiums written of $54.6 million.
Our estimated ultimate premiums written for the year to date are
now $387.7 million. We remain on track to achieve the underwriting
plan we set out in our IPO Prospectus, with the only significant
deviation being our weighting towards quota share contracts rather
than excess of loss business. We consider quota share business to
have provided the best balance between price and risk as we build
out our underwriting portfolio. As there is a greater lag in the
accounting recognition of gross premiums written and earned in
comparison to excess of loss reinsurance, as previously stated this
will result in slower recognition of gross premiums written and
earned in 2021, a proportion of which will be recognised in the
2022 financial year.
Underwriting activities
Our estimated ultimate and gross premiums written for the nine
months ended 30 September 2021 were as follows:
Segment Estimated ultimate premiums written Percentage of total Gross premiums written Percentage of total
$m $m
Property 193.5 49.9% 162.9 55.9%
Casualty 126.8 32.7% 77.2 26.5%
Specialty 67.4 17.4% 51.1 17.6%
Total 387.7 100.0% 291.2 100.0%
The split of our estimated gross premiums written between quota
share and excess of loss for the nine months ended 30 September
2021 was:
Type of business Property Casualty Specialty Total
$m $m $m $m
Quota share 74.2 70.0 38.2 182.4
Excess of loss 31.0 7.2 8.7 46.9
Quota share of excess of loss 57.7 - 4.2 61.9
Total 162.9 77.2 51.1 291.2
Pricing
Both pricing and terms and conditions continued to improve
throughout the third quarter in most of the markets we are
targeting, particularly at the primary level. As this is the
Group's first year of business, we do not have a renewing book.
However, the underlying renewal price index is tracked where there
is sufficient data to do so. The Group's overall indicative renewal
price changes for the year to date were estimated to be:
Period/Type of Business Property Casualty Specialty
Year to date +12% +17% +12%
We anticipate continued momentum in both pricing and terms and
conditions as the industry continues to deal with the effects of
claims inflation on legacy losses and the recent Catastrophe
events.
Catastrophe losses
The third quarter of 2021 saw a high level of catastrophe loss
activity across the industry, primarily as a result of Hurricane
Ida and the European Floods, with numerous other smaller events
adding to the tally of industry losses in the quarter:
Hurricane Ida was a category 4 hurricane in the Gulf of Mexico,
which made landfall in the US in Louisiana on 29 August 2021. It
continued its path across the US mainland into the north-eastern
region causing total estimated economic damage of $65.3 billion (1)
. Industry estimates for insured losses resulting from Hurricane
Ida range from $26 billion to $40 billion.
Our approach to US property business is to deliver what we
believe to be a flatter 'peak event' risk profile with the goal of
delivering a robust, balanced and differentiated portfolio.
The European Floods resulted from a series of storms that
occurred in Northern Europe between 12 and 15 July resulting in
severe widespread flooding in regions of Germany and other
neighbouring countries. Industry estimates for insured losses from
the European Floods range from $11 to $12 billion.
Although our longer term approach to European reinsurance
markets is to build a diversified portfolio in the region, market
conditions in Europe have not improved in line with other markets
and regions in recent years and our current portfolio reflects
this. We anticipate that recent events will provide the catalyst
for a long overdue pricing review in European reinsurance.
Our ultimate loss estimate, net of reinsurance and reinstatement
premiums, for these events was $28.6 million (representing 2.9% of
our tangible net assets), of which $15.8 million is in respect of
Hurricane Ida and $12.8 million is in respect of the European
Floods.
While reserves have been recorded for these events, significant
uncertainty exists in relation to the ultimate losses. Our reserve
estimates have been derived from a combination of market data and
assumptions, modelled loss projections and reports from brokers and
cedants. We will continue to keep these estimates under review as
more detailed information becomes available.
(1) source: Aon Benfield
Investments
We continue to maintain our conservative approach to managing
our invested assets. The Group's total return from investments for
the nine months ended 30 September 2021 was 0.2%, driven primarily
by coupon returns.
The managed portfolio is as follows:
Fixed maturity securities 95.2%
Cash and cash equivalents 4.8%
Total: 100.0%
Key investment portfolio statistics for our fixed maturities and
managed cash were:
-- Duration 2.4 years
-- Credit quality AA-
-- Book yield 0.9%
-- Market yield 0.9%
Operations
The development of our technology platform and recruitment of
the wider Conduit Re team continues to be in line with our plan and
expectation to support our ambition of building a high quality
underwriting franchise.
Capital and dividends
The Group remains well capitalised to achieve the business plan
presented in the IPO Prospectus, and remains committed to its
stated dividend policy.
Total capital available to the Group on 30 September 2021 was
$1.0 billion and tangible capital was $1.0 billion.
During the third quarter of 2021, the Group's Board of Directors
declared an interim dividend of $0.18 (approximately GBP0.13) per
common share (in respect of the first half of 2021) which was paid
in pounds sterling on 10 September 2021 to shareholders of record
on 20 August 2021, resulting in an aggregate payment of $29.7
million.
Outlook
Conduit Re remains on track to deliver on its business plan and
pricing and terms and conditions continue to improve across the
market. The business is in a strong position to capitalise on what
we see as increasing opportunities in the upcoming key 1 January
2022 renewal season.
Conference Call & Presentation
Conduit Holdings management will host a live analyst and
investor videoconference, including a question and answer session,
on Wednesday, 3 November 2021 at 12pm (midday) UK time / 9am
Bermuda time.
The video conference will be available at:
https://conduitreinsurance.zoom.us/j/82329806725?pwd=c2crWmxqVmFRQW02OHVhZ2dTZXZjdz09
Meeting ID: 823 2980 6725
Passcode: 515009
One tap mobile
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Find your local number:
https://conduitreinsurance.zoom.us/u/ksGkMhVy3
An archive of the conference call will be available together
with the presentation slides through the Investors section of CHL's
website at www.conduitreinsurance.com from approximately 4:00 p.m.
BST on 3 November 2021.
-END-
Media contacts
Haggie Partners - David Haggie, Caroline Klein
+44 (0) 207 562 4444
conduitre@haggie.co.uk
Investor relations and other enquiries:
info@conduitreinsurance.com
About Conduit Re
Conduit Re is a pure play global reinsurance business based in
Bermuda. Its main operating subsidiary Conduit Reinsurance Limited,
is licensed by the Bermuda Monetary Authority as a Class 4
reinsurer. A.M. Best has assigned a Financial Strength Rating of A-
(Excellent) and a Long-Term Issuer Credit Rating of "a-" to Conduit
Reinsurance Limited. The outlook assigned to these Credit Ratings
(ratings) is stable.
Learn more about Conduit Re:
Website: https://conduitreinsurance.com/
LinkedIn: https://www.linkedin.com/company/conduit-re
Twitter: https://twitter.com/Conduit_Re
Important Information
This announcement may include 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",
"projects", "anticipates", "expects", "intends", "estimates",
"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, future events or
intentions. Forward-looking statements include statements relating
to the following: (i) future capital expenditures, expenses,
revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects;
and (ii) business and management strategies and the expansion and
growth of Conduit Re's operations. Forward looking statements may
and often do differ materially from actual results. Any
forward-looking statements reflect Conduit Re'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 Re's business, results of operations, financial
position, liquidity, prospects, growth and strategies. 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. These forward-looking statements speak
only as at the date of this announcement. 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.
The Conduit Re renewal year on year pricing change measure is an
internal methodology that management intends to use to track trends
in premium rates of a portfolio of reinsurance contracts. The
change measure reflects management's assessment of relative changes
in price, terms, conditions and limits. The calculation involves a
degree of judgement in relation to comparability of contracts and
the assessment noted above, particularly in Conduit Re'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 Re 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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END
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November 03, 2021 03:00 ET (07:00 GMT)
Conduit (LSE:CRE)
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