TIDMCRE
RNS Number : 0212L
Conduit Holdings Limited
11 May 2022
Conduit Holdings Limited First Quarter 2022 Trading Update
Conduit Holdings Limited First Quarter 2022 Trading Update
Conduit Holdings Limited ("CHL" or "Conduit Re")
(Ticker:CRE)
Pembroke, Bermuda - 11 May 2022
CHL is today presenting its trading update for the first quarter
of 2022.
Key highlights of the first quarter:
2022 2021 Year on year change %
$m $m
Estimated ultimate premiums written 296.9 199.1 49.1
Gross premiums written 177.5 82.6 114.9
-- Continued build of a high quality reinsurance franchise
-- Market conditions remain strong with continuing rate
increases and improvements in terms and conditions
-- Diversified and balanced portfolio growth with a renewal net rate change of 4.9%
-- Net ultimate incurred losses related to the Russian invasion
of Ukraine are estimated at between $15.0 million and $30.0
million, with net impact for the first quarter of $24.6 million,
after reinsurance and reinstatement premiums, predominantly driven
by the classes of aviation, war on land and marine war
-- Investment return at (2.9)% driven by unrealised losses of
$32.6 million from increase in yields due to interest rate hike
expectations; conservative approach to invested assets
maintained
-- Final dividend of 18c (approximately 14p) per common share
(in respect of the second half of 2021) paid in the second quarter
of 2022
Neil Eckert, Group Executive Chairman, commented:
"Our position as a pure-play reinsurer, with a strong balance
sheet and no legacy, allows the team to take advantage of the best
market conditions for a decade.
As the discipline in primary markets continues, Trevor and his
team are successfully executing the strategy put forward in the IPO
plans and our earned premium recognition is building."
Trevor Carvey, Group Chief Executive Officer, commented:
"The first quarter of 2022 has seen significant year-on-year
growth as we execute on our plan to selectively grow our
diversified portfolio. We continue to enjoy the benefits of strong
reinsurance market conditions and the continuing excellent support
from our clients and brokers.
Turning to the situation in Ukraine, we have estimated the
ultimate potential losses for the first quarter derived primarily
from our property and specialty books via classes such as aviation,
war on land and marine war. Given the typical structure of the
reinsurance treaty contracts that we underwrite, with event and
aggregate limitations in place, we have been able to arrive at a
loss estimate for the relatively small number of contracts we write
across these classes for Ukraine and Russia, and this gives us
confidence in our estimate at this time."
Business update
During the first quarter of 2022, Conduit Re continued to show
growth across all segments thanks to improving rates and,
primarily, to new business. Client count and submission numbers
have increased in line with the Group's growth strategy. Rate
change continues to be positive, outpacing inflation.
Underwriting activities
Our estimated ultimate premiums written for the three months
ended 31 March 2022 and 31 March 2021 were as follows:
Segment 2022 % of total 2021 % of total Year on year change %
$m $m
Property 120.8 40.7% 85.7 43.1% 41.0%
Casualty 99.0 33.3% 60.6 30.4% 63.4%
Specialty 77.1 26.0% 52.8 26.5% 46.0%
Total 296.9 100.0% 199.1 100.0% 49.1%
Our gross premiums written for the three months ended 31 March
2022 and 31 March 2021 were as follows:
Segment 2022 % of total 2021 % of total Year on year change %
$m $m
Property 83.8 47.2% 44.2 53.5% 89.6%
Casualty 59.7 33.6% 15.9 19.3% 275.5%
Specialty 34.0 19.2% 22.5 27.2% 51.1%
Total 177.5 100.0% 82.6 100.0% 114.9%
The split of our estimated ultimate premiums written between
quota share and excess of loss for the three months ended 31 March
2022 and 31 March 2021 was:
Type of business 2022 2022 2021 2021
$m % $m %
Quota share 200.6 67.6% 122.1 61.3%
Excess of loss 40.1 13.5% 18.4 9.3%
Quota share of excess of loss 56.2 18.9% 58.6 29.4%
Total 296.9 100.0% 199.1 100.0%
The split of our gross premiums written between quota share and
excess of loss for the three months ended 31 March 2022 and 31
March 2021 was:
Type of business 2022 2022 2021 2021
$m % $m %
Quota share 114.2 64.3% 40.2 48.7%
Excess of loss 40.1 22.6% 18.8 22.8%
Quota share of excess of loss 23.2 13.1% 23.6 28.5%
Total 177.5 100.0% 82.6 100.0%
Both pricing and terms and conditions continue to improve in
most of the markets we are targeting, particularly at the primary
level. Hence our focus remains towards ground-up quota share
business.
Pricing
The Group's overall indicative renewal price changes, net of
inflation, in the year to date as of 1 April 2022 were estimated to
be:
Period/Type of Business Property Casualty Specialty
Year to date +7.8% +2.7% +2.1%
Losses
While the first quarter of 2022 was the sixth first quarter in a
row where weather-related insured losses have exceeded $10 billion,
Conduit Re had minimal exposure to these natural catastrophe
events.
As regards the escalating crisis in Ukraine and the Russian
invasion on 24 February, Conduit Re has potential exposure across
its property and specialty reinsurance books, via classes such as
aviation, war on land and marine war. There is significant
uncertainty in estimating losses emanating from the conflict, not
least as it is an ongoing event. Based on current information,
Conduit Re's estimated net ultimate losses in relation to the
conflict for the aforementioned classes are expected to be in the
range of $15 million to $30 million, after anticipated reinsurance
recoveries and reinstatement premiums. The estimated net impact
which has been recognised in respect of the first quarter is $24.6
million. This has been derived from a combination of market data
and ground-up assumptions, modelled loss projections and reports
from cedants. As noted, as the event is ongoing, further losses
could occur in the second quarter and beyond depending on the
ultimate duration of the conflict. We will continue to keep these
estimates under review as more detailed information becomes
available.
Our ultimate loss estimates, net of reinsurance and
reinstatement premiums, for the previously reported 2021 loss
events remained relatively stable.
Investments
During the first quarter of 2022 expectations for future Federal
Reserve rate rises increased significantly, driven by the outlook
on inflation. Treasury yields increased significantly as a result,
which led to an unrealised loss of $32.6 million on the Group's
investment portfolio for the quarter. Total return for the three
months ended 31 March 2022 was (2.9)%. While we expect market
volatility to remain elevated in the near term, Conduit Re expects
to be able to reinvest at higher rates as the existing portfolio
rolls over.
The managed portfolio is as follows:
Fixed maturity securities 95.6%
Cash and cash equivalents 4.4%
Total: 100.0%
Key investment portfolio statistics for our fixed maturities and
managed cash were:
-- Duration 2.5 years
-- Credit quality AA-
-- Book yield 1.1%
-- Market yield 2.5%
Conduit Re does not have any direct exposure to Russian or
Ukrainian assets in its investment portfolio.
Capital and dividends
Total capital and tangible capital to the Group on 31 March 2022
was $0.9 billion.
During the first quarter of 2022, the Group's Board of Directors
declared a final dividend of $0.18 (approximately GBP0.14) per
common share (in respect of the second half of 2021) which was paid
in pounds sterling on 22 April 2022 to shareholders of record on 25
March 2022, resulting in an aggregate payment of $29.7 million.
Conference Call & Presentation
CHL management will host a live analyst and investor
videoconference, including a question and answer session, on 11 May
2022 at 12pm (midday) UK time / 8am Atlantic time.
The video conference will be available at:
https://conduitreinsurance.zoom.us/j/88314550313?pwd=eTZSUG9QYUFHMUI1SVhlVTBlNEQ4dz09
Meeting ID: 883 1455 0313
Passcode: 476740
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Meeting ID: 883 1455 0313
Passcode: 476740
Find your local number:
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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 12 May 2022.
Market abuse regulation: This announcement contains inside
information for the purposes of Article 7 of Regulation (EU) No
596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ("MAR").
--
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. The main operating entity is Conduit Reinsurance Limited,
which 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 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 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",
"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, future events or intentions.
Forward-looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues,
pricing rate changes, terms and conditions, earnings, synergies,
economic performance, indebtedness, financial condition, dividend
policy, claims development, losses and future prospects; and (ii)
business and management strategies and the expansion and growth of
CHL'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 CHL'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 CHL'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, Hurricane Ida, and the European storms and floods
in 2021; 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 CHL's risk management and loss limitation methods,
including to manage volatility; the development of CHL's technology
platforms; a decline in Conduit Re's ratings with A.M. Best or
other rating agencies; the impact that CHL's future operating
results, capital position and ratings may have on the execution of
CHL's business plan, capital management initiatives or dividends;
CHL'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 Re'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 CHL's key management and
the potential loss of key personnel; the credit environment for
issuers of fixed maturity investments in CHL'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
CHL operates; CHL 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 CHL conducts business.
Forward-looking statements contained in this trading update may be
impacted by the escalation or expansion of the Ukraine conflict on
Conduit Re'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. 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.
"Estimated ultimate premiums written" is the estimated total
gross premiums written that is expected to be earned assuming all
bound contracts run to the end of the period of cover, after
management discount for prudence.
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, 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 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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