CHL, the parent company of Conduit Re, a pure-play Bermuda-based reinsurance business, announces its trading results for Q1 2023.
Ultimate premiums written for Q1 2023 stand at $443.2 million, showing a 50.7% increase on Q1 2022. Gross premiums written for Q1 2023 hit $278 million, showcasing a 59.1% increase from Q1 2022.
The overall portfolio risk-adjusted rate change for Q1 2023, net of claims inflation, is 19%.
Despite an active natural catastrophe quarter of losses for the industry, no major event loss, individually or in the aggregate, had an outsized or material impact on Conduit Re.
During Q1 2023, Conduit Re has continued to show growth across all segments, benefiting from new business, high retention and underlying growth of its renewal business and improving rates. Client count and submission flow have increased which is currently in line with Conduit Re’s strategy, with the embedded renewing portfolio providing the key foundations.
Trevor Carvey, Chief Executive Officer (CEO), commented: “The imbalance between supply and demand continues in the marketplace and Conduit Re has seen a very strong first quarter both in terms of premium growth and the rating levels seen across our target classes. April business renewed through strongly and we continue to dial our book deliberately towards the property and specialty classes where the market environment is considered most favourable. The overall signs are that pricing momentum will be maintained into the important mid-year renewals, and our highly scalable and lean operating model has created a platform for strong future growth.”
According to Conduit Re, the market conditions remain very favourable with property and specialty leading the way ahead of casualty driven by fundamental re-pricing of risk and growing demand for reinsurance while supply remains constrained. The continuing risk-adjusted rate increases, augmented by improvements in terms and conditions
Conduit Re is aiming to continue prioritising the most attractive classes of business within an exceptional, sustainable pricing environment, accelerating its trajectory towards the mid-80s combined ratio. It is currently benefiting from retrocession protection that is in place, purchased early in the year to support growth strategy and ensure certainty of cover. It also has a highly efficient underwriting platform and a low other operating expense ratio of 7.1% for the full year 2022.
Neil Eckert, the Executive Chairman, commented, “As the year progresses, the capacity constraint in the market becomes increasingly acute. We see this as an enduring pricing environment, creating the opportunity for improved margins in our business throughout 2023 and beyond. Conduit continues to deliver strong year-on-year growth. Our current ultimate premium growth is ahead of the original five-year IPO plan expectations and the true value of our strong balance sheet is becoming more apparent as time passes.”
The company’s loss estimates, net of reinsurance and reinstatement premiums, for the previously reported 2022 loss events remain stable. The estimated ultimate losses for Hurricane Ian and the ongoing conflict in Ukraine are in line with previously announced estimates. There were also no material changes to the previously reported 2021 loss events.
Conduit Re continues to maintain its conservative approach to managing invested assets with a strong emphasis on preserving capital and liquidity. Its strategy remains to maintain a short-duration, highly-rated portfolio, with due consideration of the duration of its liabilities. The company’s investment portfolio does not hold any derivatives, equities, alternatives or emerging market debt.
The portfolio returned 1.8% during Q1 2023 driven primarily by the reduction in treasury yields, which more than offset the modest widening of credit spreads during the quarter. This resulted in an unrealised gain of $12.5 million on the investment portfolio for the quarter. Q1 2022 treasury yields had increased significantly, which led to an unrealised loss of $32.6 million. The return for that quarter was 2.9%.
While it expects market volatility to remain elevated in the near term, Conduit expects to be able to reinvest at higher rates as the existing portfolio rolls over.