Bermuda-based Conduit Re has reported a rise in underwriting profit to $6.2 million for the first half of 2022, although the carrier has fallen to a comprehensive loss for the period after the impact of losses related to the war in Ukraine and net unrealised losses on investments.
Across the business, underwriting profit improved significantly from the $0.5 million posted a year earlier.
At the same time, the company recorded estimated ultimate premium written growth of 49% to $496.7 million, gross written premiums rose by 71%, year-on-year, to $359 million, net premiums written by 66% to $313 million, and net premiums earned jumped by 340% to $210 million.
Ceded reinsurance premiums for H1 2022 totalled $45.6 million against $21.8 million a year earlier, which reflects the growth in the firm’s inwards portfolio and additional limits purchased.
Despite the growth in premiums and improved underwriting performance, Conduit Re has fallen to a comprehensive loss of $61.4 million in H1 2022, compared with a loss of $12.4 million in H1 2021.
Impacting the firm’s result in the period is a $24.6 million estimated loss, net of reinsurance and reinstatement premiums, related to the ongoing war in Ukraine, which includes an estimate of the impact of potential aviation claims.
“Conduit continues to have potential exposure to the crisis across its property and specialty books via war on land, marine war and aviation. There is significant uncertainty in estimating losses emanating from the Ukraine conflict, not least as it is an ongoing event,” says Conduit Re.
However, in terms of catastrophe exposure, Conduit notes that it had minimal exposure to the natural catastrophe activity of the first quarter, and the large loss activity seen in the second quarter, driven by the fact roughly 70% of its portfolio is non-cat business.
For the first six months of 2022, Conduit’s loss ratio was 67.8% compared with 70% for the same period last year, while the acquisition expense ratio rose slightly to 29.3% and the other operating expense ratio fell to 8%.
All in all, Conduit has reported a combined ratio of 105.1% for the first half of 2022, which is an improvement on the 127.2% combined ratio announced for Q1 2021.
But while the underwriting result improved, the investment return dipped to a negative 4.7% compared with a gain of 0.1% a year earlier, as the company booked a net unrealised loss on investments of $54.3 million, which it says is a reflection of the mark to market adjustment driven by expectations of rising interest rates.
“We are seeing strong demand for our offering and we continue to take a highly selective approach to our underwriting in a market which is exhibiting increasingly strong fundamentals. The business is normalising, our combined ratio will be trending towards our target of mid-80s steady state and the business is in an excellent position to continue to capitalise in our chosen markets,” said Trevor Carvey, Group Chief Executive Officer (CEO).
In terms of pricing, Conduit says that it experienced both pricing and terms and conditions improvements in many of its markets in H1 2022, notably at the primary level, which is a reason its focus has remained towards ground-up quota share business.
Net of inflation, the firm’s overall indicative renewal price change for 2022 for property is estimated at +7.8%, with an estimate of +1.4% in casualty, and +2.4% in the specialty segment.
“We have built a quality underwriting operation which is perfectly positioned at a time where there is a shortage of reinsurance capacity in the market – Conduit’s business model was constructed for precisely these circumstances. The continued hardening of the market provides Conduit with a substantial opportunity for profitable growth to build out the business,” said Neil Eckert, Executive Chairman.
“Conduit has quickly built a reputation for underwriting discipline and focus, as well as great service. We have now passed $1 billion of ultimate premiums written since IPO and it is great to see the validation of our underwriting and approach,” added Carvey.
