Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Conduit Holdings Ltd (LSE:CRE, Financial) reported a comprehensive income of $98.1 million for the first half of 2024, representing a return on equity of 9.9%, up from $78.6 million and 9.1% in the same period last year.
- Gross premiums written increased by 36.1% year-on-year to $737.8 million, indicating strong growth.
- The company's book value increased to $6.69 per share, reflecting a solid financial position.
- The expense ratio improved from 5.7% in H1 2023 to 4.6% in H1 2024, showing better cost management.
- The property and specialty divisions showed significant growth, with gross premiums written increasing by $195.6 million, driven by new and renewal contracts.
Negative Points
- The combined ratio increased to 85.7% on an undiscounted basis, up from 83.1% in the prior year, indicating higher costs relative to premiums earned.
- The Baltimore Bridge event resulted in an estimated loss of $19.8 million, impacting the overall financial performance.
- The market environment showed signs of rate deceleration, which could affect future profitability.
- Increased competition in the property market, particularly in the cat-exposed lines, could pressure margins.
- The casualty division experienced modest growth of only 5%, indicating potential challenges in this segment.
Q & A Highlights
Q: How should we think about capital allocation decisions into next year, especially regarding potential cash repatriations to shareholders?
A: (Elaine Whelan, CFO) It's too early to provide specific guidance on capital returns. We will assess opportunities to deploy capital as we approach year-end and the one-one renewals. (Trevor Carvey, CEO) We still see attractive opportunities in property and specialty, particularly in the non-cat space, which will be a focus as we move forward.
Q: Can you provide some color on the strong growth in non-catastrophe-exposed lines?
A: (Greg Roberts, CUO) The growth is primarily in US property business, particularly in the non-admitted space like ENS and middle market. These areas are producing rates ahead of inflation, and our partners are managing exposures and deductibles effectively, ensuring a balanced risk portfolio.
Q: What is your view on how the one-one renewals might pan out given the large loss activity across the industry?
A: (Trevor Carvey, CEO) Casualty is underpinned by underlying inflation, and we expect this trend to continue. Property cat renewals are unpredictable and susceptible to recent loss experiences. Specialty classes, impacted by events like Baltimore, may see some market reaction, but overall, we will assess value across various classes.
Q: Can you share insights on the emerging issues in more recent accident underwriting years in casualty?
A: (Trevor Carvey, CEO) We support partners with long track records, allowing us to monitor their portfolios. While it's early days, we like what we see in our portfolio and believe we are reserving prudently.
Q: How do you manage the risk mix given the strong growth in property and specialty?
A: (Trevor Carvey, CEO) We focus on non-res property business but also assume cat risks. Our BSCR is around 380, and we plan over a 3-to-5-year horizon. We see no need for material changes in retro purchases or capital plans, and our model supports diversified growth.
Q: Can you comment on the trends in commissions and their impact on your commission structure?
A: (Greg Roberts, CUO) Commission trends are linked to market conditions. In property, strong primary performance may lead to slight increases in ceding commissions. In casualty, loss ratio creep due to prior year development may result in ceding commission adjustments to maintain combined ratios.
Q: Can you provide an update on the expense ratio and headcount?
A: (Elaine Whelan, CFO) We haven't updated guidance on IFRS 17 basis yet. We aim for a 5% to 6% range on an IFRS basis. Most hiring is complete, with a few positions to be filled in the second half and possibly next year.
Q: Can you explain the discount factor in your property book?
A: (Elaine Whelan, CFO) We use open discount rates to discount our numbers. Different companies have different policy decisions, leading to varying outcomes. If you have specific assumptions, we can discuss them offline for a detailed conversation.
Q: How do you manage the cost of doing business, particularly in terms of commissions?
A: (Greg Roberts, CUO) Commission trends are linked to market conditions and volume negotiations. In property, strong primary performance may lead to slight increases in ceding commissions. In casualty, loss ratio creep due to prior year development may result in ceding commission adjustments to maintain combined ratios.
Q: Are you considering issuing debt to manage solvency?
A: (Elaine Whelan, CFO) We currently have no debt on the balance sheet and no plans to issue debt at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
