Conduit Holdings Limited Interim Results

Conduit Holdings Limited Interim Results 150 150 Haggie Partners

Conduit Holdings Limited (“CHL” or the “Group”) today announces its results for the six months ended 30 June 2021.


  • Successful first six months of trading with continuing strong broker and client support
  • Estimated ultimate premiums written of $333.1 million
  • Gross premiums written of $210.3 million
  • Indicative renewal rate changes estimated at +14% for Property, +17% for Casualty and +12% for Specialty
  • Estimated Winter Storm Uri incurred loss of $6.0 million, including the impact of reinstatement premiums
  • Net loss ratio of 70.0% (57.2% excluding Winter Storm Uri)
  • Loss on equity of 1.2%, reflecting start-up factors
  • Interim dividend of $0.18 (approximately £0.13) per common share declared

Neil Eckert, Group Executive Chairman, commented:

“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, commented:

“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. 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, commented:

“We are declaring an interim dividend of $0.18 (approximately £0.13) per common share, in line with our previously communicated dividend policy.

We are pleased with the progress we have made with the operational build-out 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.”

Business update

The first seven months of the Group’s operations since its IPO have been a period of great activity. From a standing start in December 2020 we have:

  • established the underwriting discipline, culture and focus we hoped to achieve when we founded the business;
  • selectively written approximately 165 reinsurance contracts of the approximately 700 contracts we have analysed which are estimated to deliver $333.1 million of ultimate premiums written. 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 (the “IPO Prospectus“);
  • successfully placed our outwards reinsurance programme to manage our catastrophe exposures in line with our risk tolerances;
  • built out our team with quality staff across the business. All our key function roles have been filled and we now have a team of 35 highly experienced reinsurance professionals;
  • delivered phase one of our operating plan. We have an ambitious strategy to build a modern and future-proof cloud-based operating and underwriting platform; and
  • fully deployed our IPO funds in line with our conservative investment strategy.

To date, our underwriting portfolio has been more weighted to quota share than originally planned, as reflected in the higher acquisition expenses than anticipated, although we expect this to reduce as the underwriting portfolio develops over time.

The Group’s combined ratio of 127.2% and negative ROE of 1.2% reflect the start-up nature of the business. Notably, 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.

Underwriting results

Given the start-up nature of the business, and the high degree of quota share business, we have presented both estimated ultimate and gross premiums written:

Segment Estimated ultimate premiums written $m Percentage of total Gross premiums written


Percentage of total
Property 157.0 47.1% 129.5 61.6%
Casualty 115.2 34.6% 44.1 21.0%
Specialty 60.9 18.3% 36.7 17.4%
Total 333.1 100.0% 210.3 100.0%

Estimated ultimate premiums written of $333.1 million are in line with the targets set out in the IPO Prospectus. While we are in line with these overall targets, we have written more quota share business than originally planned and consequently there will be more of a lag in the accounting recognition of gross premiums written and earned.

As this is the Group’s first year of business, it does not yet 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 were estimated at +14% for Property, +17% for Casualty and +12% for Specialty.


Ceded reinsurance premiums of $21.8 million are also in line with the targets presented in the IPO Prospectus. Our cover has been purchased on an excess of loss basis to provide protection against significant losses from major events.


The net loss ratio for the first six months of 2021 was 70.0%. Excluding the impact of Winter Storm Uri, the net loss ratio was 57.2%.

Our exposure to the Winter Storm Uri event and the financial impact of this loss event would not typically be considered material to the Group. However, there is a more meaningful impact on the Group’s results of operations for the six months ended 30 June 2021 as our net premiums earned base has yet to mature. Our net losses recorded in relation to Winter Storm Uri, including the impact of reinstatement premiums, are estimated to be $6.0 million. With a lack of any reported claims to date, there remains a degree of uncertainty around early loss estimates. We will continue to keep this estimate under review as more detailed information becomes available.


Net investment income was $1.3 million for the first six months of 2021. Total investment return, including net investment income, net realised gains and losses and the net change in unrealised gains and losses was $0.8 million for the first six months of 2021.

As previously reported, the Group selected three highly reputable fixed maturity investment managers, but funding of the portfolios did not commence until April 2021. As such, the Group avoided the volatility of the first quarter of 2021. The portfolios are now fully funded and our investment guidelines are in line with the strategy set out in the IPO Prospectus. The managed portfolio is as follows:

Fixed maturity securities 88.8%
Cash and cash equivalents 11.2%
Total 100.0%

Key investment portfolio statistics for our fixed maturities and managed cash were:

Duration 2.4 years
Credit quality AA
Book yield 0.8%
Market yield 0.8%

Other operating expenses

Other operating expenses were $13.5 million in the first six months of 2021.

The development of the Group’s technology platforms and recruitment of the wider teams is ongoing and in line with our plan and expectations.

Equity-based compensation

The equity-based compensation expense was $0.2 million for the first six months of 2021.


During July 2021, Conduit Reinsurance Limited (“CRL”), as the borrower, entered into a $125.0 million standby letter of credit facility led by Lloyds Bank Corporate Markets PLC. CHL will guarantee the obligations of CRL with respect to the standby letter of credit facility. Terms of the standby letter of credit facility contain standard qualitative representations and require certain standard financial covenants be adhered to. Outstanding amounts issued under the standby letter of credit facility will be secured by cash and cash equivalents and investments.

Capital and dividends

The Group remains well capitalised to achieve the business plan presented in the 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.

On 27 July 2021 the Group’s Board of Directors declared an interim dividend of $0.18 (approximately £0.13) per common share, resulting in an aggregate payment of $29.7 million. The dividend will be paid in pounds sterling on 10 September 2021 to shareholders of record on 20 August 2021 (the “Record Date”) using the pound sterling / US dollar spot exchange rate at 12 noon BST on the Record Date.

Additional Performance Measures (the “APMs“)

The Group presents certain APMs to evaluate, monitor and manage the business and to aid readers‘ understanding of the Group financials and methodologies used. These are common measures used across the (re)insurance industry and allow the reader of the Group’s financial reports to compare those with other companies in the (re)insurance industry. The APMs should be viewed as complementary to, rather than a substitute for, the figures prepared in accordance with IFRS. This information has not been audited.

Management believes the APMs included in the unaudited condensed interim consolidated financial statements are important for understanding the Group’s overall results of operations and may be helpful to investors and other interested parties who may benefit from having a consistent basis for comparison with other companies within the (re)insurance industry. However, these measures may not be comparable to similarly-labelled measures used by companies inside or outside the reinsurance industry. In addition, the information contained herein should not be viewed as superior to, or a substitute for, the measures determined in accordance with the accounting principles used by the Group for its audited consolidated financial statements or in accordance with IFRS.

Below are explanations, and associated calculations, of the APMs presented by the Group:

APM Explanation Calculation
Net loss ratio Ratio of net losses and loss adjustment expenses expressed as a percentage of net premiums earned in a period. Net losses and loss adjustment expenses / Net premiums earned
Net acquisition expense ratio Ratio of net acquisition expenses charged by insurance brokers and other insurance intermediaries to the Group expressed as a percentage of net premiums earned in a period. Net acquisition expenses / Net premiums earned
Other operating expense ratio Ratio of other operating expenses expressed as a percentage of net premiums earned in a period. Other operating expenses / Net premiums earned
Combined ratio The sum of the net loss ratio, net acquisition expense ratio and other operating expense ratio. A combined ratio below 100% generally indicates profitable underwriting, whereas a combined ratio over 100% generally indicates unprofitable underwriting, each prior to the consideration of total net investment return. Net loss ratio + Net acquisition expense ratio + Other operating expense ratio
Accident year loss ratio Ratio of the accident year ultimate liability revalued at the current balance sheet date expressed as a percentage of net premiums earned in a period. Accident year losses and loss adjustment expenses / Net premiums earned
Underwriting year loss ratio Ratio of net losses and loss adjustment expenses of an underwriting year (or calendar year) expressed as a percentage of net premiums earned in a period. Underwriting year losses and loss adjustment expenses / Net premiums earned
Total net investment return The Group’s principal investment objective is to preserve capital and provide adequate liquidity to support the payment of losses and other liabilities. In light of this, the Group looks to generate an appropriate total net investment return. The Group bases its total net investment return on the sum of non-operating cash and cash equivalents and fixed maturity securities. Total net investment return is calculated daily and expressed as a percentage. (Net investment income + Net unrealised gains (losses) on investments + Net realised gains (losses) on investments) / (Non-operating cash and cash equivalents + Fixed maturity securities, at beginning of period)
Return on equity ROE enables the Group to compare itself against other peer companies in the immediate industry, it is also a key measure internally, and is integral in the performance-related pay determinations. ROE is calculated as the profit for the period divided by the adjusted opening total shareholders’ equity. Profit (loss) after tax for the period / Total shareholders’ equity, at beginning of period
Total shareholder return TSR allows the Group to compare itself against other public peer companies. TSR is calculated as the percentage change in common share price over a period, after adjustment for common share dividends. (Closing common share price – Opening common share price) + Common share dividends during the period) / Opening common share price
Dividend yield Calculated by dividing the annual dividends per common share by the common share price on the last day of the given year and expressed as a percentage. Annual dividends per common share / Closing common share price

Important Information

This announcement may include certain statements and indicative projections that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements are not based on current or historical facts and are forward looking in nature and may be identified by the use of forward-looking terminology, including, without limitation, 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 may 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 the Group’s operations. Forward looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Group’s current view with respect to future events and are subject to known and unknown risks relating to future events and other risks, uncertainties, and assumptions and other factors relating to the Group’s business, results of operations, financial position, liquidity, prospects, growth and strategies.

These factors include but are not limited to: the Group being recently established with a limited history of operations; the Group’s ability to continue to build and sustain a business of writing reinsurance and implement its strategy; the Group’s ability to assess accurately the risks of the potential underwriting losses; Conduit Reinsurance Limited being able to maintain its financial strength rating from A.M. Best; the number and type of reinsurance contracts that the Group writes or may write; competition from existing reinsurance carriers, as well as alternative capital providers, insurance linked funds and collateralised special purpose insurers; increased competition on the basis of pricing, capacity, coverage terms or other factors; the Group’s ability to integrate its businesses and new joiners to the Group; the successful retention and motivation of the Group’s key management; the potential loss of key personnel; the effectiveness of the Group’s loss limitation methods; the reliability of, and changes in assumptions to, catastrophe, accumulation and estimated loss models; potential uncertainties relating to reinsurance recoveries, reinstatement premiums and other factors inherent in loss estimations; the global changing climate conditions which may lead to the possibility of greater frequency or severity of claims and loss activity than the Group’s underwriting, reserving or investment practices have anticipated; possible low frequency of large events or unusual loss frequency; the actual development of losses and expenses impacting estimates for claims which may arise, including for Winter Storm Uri; cyclical downturns of the reinsurance industry; exposure to unanticipated or novel coverage disputes; the impact that the Group’s future operating results, capital position and rating agency and other considerations may have on the execution of capital management initiatives, financing or dividends; the impact of swings in market interest rates, currency exchange rates and securities prices on the Group’s investments or liquidity; 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 the Group operates; the increased regulatory burden facing the Group and the potential for development of an unfavourable regulatory environment; changes in governmental regulations or tax laws in jurisdictions where the Group conducts business; the focus and scrutiny on ESG-related matters regarding the (re)insurance industry from key stakeholders of the Group, and any adverse asset, credit, financing or debt capital market conditions generally, which may affect the ability of the Group to manage its liquidity.

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. The Group expressly disclaims any obligation or undertaking (save as required to comply with any legal or regulatory obligations including the rules of the London Stock Exchange) 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. All subsequent written and oral forward-looking statements attributable to the Group or individuals acting on behalf of the Group are expressly qualified in their entirety by this announcement. Prospective investors should specifically consider the factors identified in this announcement which could cause actual results to differ before making an investment decision.

The Group’s 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 the Group’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 the Group’s contracts. The future profitability of the portfolio of contracts within the change measure is dependent upon many factors besides the trends in premium rates.

Condensed interim consolidated statement of comprehensive loss

  Six months ended 30 June 2021   Period ended 31 December 2020
  $m   $m
Gross premiums written 210.3  
Ceded reinsurance premiums (21.8)  
Net premiums written 188.5  
Change in unearned premiums (153.2)  
Change in ceded unearned premiums 12.4  
Net premiums earned 47.7  
Net investment income 1.3   0.1
Net realised losses on investments (0.4)  
Net unrealised losses on investments (0.1)  
Net foreign exchange gains   0.1
Total net revenue 48.5   0.2
Net losses and loss adjustment expenses 33.4  
Net acquisition expenses 13.8  
Total insurance expenses 47.2  
Equity-based compensation expense 0.2   0.3
Other operating expenses 13.5   4.5
Total expenses 60.9   4.8
Results of operating activities (12.4)   (4.6)
Total comprehensive loss for the period (12.4)   (4.6)
Loss per share      
Basic and diluted $ (0.08)   $ (0.03)

Condensed interim consolidated balance sheet

  As at 30 June 2021   As at 31 December 2020
  $m   $m
Cash and cash equivalents 130.9   1,054.0
Accrued interest receivable 3.2  
Fixed maturity securities 939.9  
Premiums receivable 143.6  
Reinsurance assets      
– Unearned premiums on ceded reinsurance premiums 12.4  
Deferred acquisition expenses 40.2  
Intangible assets 0.5   0.2
Other assets 5.4   1.1
Total assets 1,276.1   1,055.3
Reinsurance contracts      
– Losses and loss adjustment expenses 33.4  
– Unearned premiums 153.2  
Amounts payable to reinsurers 15.6  
Other payables 33.3   2.5
Total liabilities 235.5   2.5
Shareholders’ equity      
Share capital 1.7   1.7
Other reserves 1,055.9   1,055.7
Retained loss (17.0)   (4.6)
Total shareholders’ equity 1,040.6   1,052.8
Total liabilities and shareholders’ equity 1,276.1   1,055.3

Condensed interim statement of consolidated cash flows

  Six months ended 30 June 2021   Period ended 31 December 2020
  $m   $m
Cash flows used in operating activities      
Loss before tax (12.4)   (4.6)
Interest income (2.2)   (0.1)
Net realised losses on investments 0.4  
Net unrealised losses on investments 0.1  
Net foreign exchange gains (0.2)   (0.2)
Amortisation of fixed maturity securities 0.9  
Equity-based compensation expense 0.2   0.3
Change in operational assets and liabilities      
– Reinsurance assets and liabilities 6.1  
– Other assets and liabilities 0.1   1.5
Net cash flows used in operating activities (7.0)   (3.1)
Cash flows used in investing activities      
Purchase of investments (1,008.4)  
Proceeds on sale and maturity of investments 90.5  
Purchase of intangible assets (0.3)   (0.2)
Interest received 2.0   0.1
Net cash flows used in investing activities (916.2)   (0.1)
Cash flows from financing activities      
Proceeds from issue of share capital   1,057.1
Net cash flows from financing activities   1,057.1
Net (decrease) increase in cash and cash equivalents (923.2)   1,053.9
Cash and cash equivalents at beginning of period 1,054.0  
Effect of exchange rate fluctuations on cash and cash equivalents 0.1   0.1
Cash and cash equivalents at end of period 130.9   1,054.0