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Conduit Re posts small underwriting gain as investment loss dents 2022 performance

22nd February 2023 - Author: Luke Gallin

Bermuda-based reinsurer Conduit Re has reported a comprehensive loss of $89.7 million for the year ended December 31st, 2022, as an investment loss of $52.8 million more than offset a slight underwriting gain in the period.

Conduit Re logoThe company’s loss actually widened from the -$42 million reported a year earlier, while the investment loss also worsened from -$3.1 million in 2021.

However, and in spite of natural catastrophe impacts, Conduit Re has produced a small underwriting profit of $0.3 million for 2022, compared with an underwriting loss of $7 million in 2021.

The group net loss ratio improved slightly, year-on-year, to 71.7% from 73.2%, as the accident year loss ratio, including the impact of foreign exchange revaluations, was 72.9% compared to 73.2% for 2021.

The most significant natural catastrophe event for Conduit Re in 2022 was Hurricane Ian, which net of reinsurance and reinstatement premiums, cost the firm $40.9 million in 2022, contributing 8.8% to the net loss ratio.

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The ongoing war in Ukraine also had an impact on the reinsurer during the year, with the firm noting potential exposure across its property and specialty reinsurance books, via classes such as aviation, war on land and marine war. Based on current information, the carrier says that its previously announced estimated ultimate loss, net of reinsurance recoveries and reinstatement premiums, in relation to the war is unchanged at $24.6 million, which represented 5.1% of the net loss ratio.

As a result of these losses, Conduit Re’s combined ratio hit 107% in 2022, which is actually an improvement on the 119.4% seen a year earlier.

In terms of business growth, Conduit Re has announced estimated ultimate premiums of $659.9 million in 2022 against $458.5 million in 2021, as gross premiums written (GPW) increased from $378.8 million to $637.5 million. At the same time, net premiums written moved from $346.2 million in 2021 to $580.9 million in 2022, while net premiums earned jumped from $194.2 million to $482.3 million over the same period.

In terms of GPW, growth was evident in all segments, including 63.4% expansion in property to almost $300 million, 83.5% growth in casualty to $236.7 million, and more than 52% growth in specialty to over $101 million.

Ceded reinsurance premiums also increased, year-on-year, from $32.6 million to $56.6 million, which the firm attributes to additional limits purchased as the inwards portfolio and exposures grew over the year.

On pricing, Conduit Re highlights that rates and terms and conditions continued to improve in the markets it targeted, and it was presented with a growing number of opportunities to deploy capital into the areas and products which it both knows well, and where renewal and new prospects met profitability requirements.

Overall, the company’s risk-adjusted rate change, net of claims inflation, was 4% in 2022.

Commenting on the January 1st, 2023, reinsurance renewals, the reinsurer notes significant hardening of pricing and terms and conditions at what it describes as an exceptional renewals for the firm.

The firm estimates ultimate premiums written at 1 January 2023 of approximately $421.4 million, compared with $262.6 million in 2022, an annual increase of 60.5%. Overall portfolio year-on-year risk-adjusted rate change, net of claims inflation, increased by 19% at the January 1st, 2023 renewals.

Additionally, the company managed to reduce acquisition costs on new and renewed business, maintain a high renewal retention ratio, and successfully placed its planned retrocession coverage.

Neil Eckert, Executive Chairman, commented: “We have delivered outstanding premium growth in 2022 and have continued that trajectory at the 1 January 2023 renewals. More importantly, we have delivered our first underwriting profit in a year notable for its elevated catastrophe activity. Our business has capital to continue its planned growth and to take advantage of the opportunities that we see.”

Turning to its investments, and the net loss for the year of $52.8 million includes net unrealised losses of $67.8 million. For the year ended December 31st, 2022, the portfolio return is negative 5%, mostly due to unrealised losses.

Trevor Carvey, Chief Executive Officer (CEO), said: “Our planned growth path has continued over the last 12 months while all the time we have maintained our same disciplined approach to risk selection. We have seen exceptional growth, supported by our legacy-free balance sheet and a strong capital base. In a year where the industry has experienced extreme natural and man-made losses, the resilience of our results validates our business model.

“Looking forward, we are perfectly positioned to take advantage of the current exceptional market conditions. As the business grows, we will see the benefit from increasing efficiencies of scale and the significant pipeline of revenue we have in place which will continue to flow through to earnings. We are excited by our business prospects for 2023.”

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