Conduit Holdings Limited

Good day, ladies and gentlemen, and welcome to Contreed Holdings Limited Q3 2022 trading update. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session through the phone lines, and instructions will follow at that time. Participants can also submit questions through the webcast page using the Ask a Question button. I would like to remind all participants that this call is being recorded. I will now hand over to Neil Eckert, Executive Chairman, Conduit Holdings Limited, to open the presentation. Please go ahead.

Thank you. Good morning, everyone. Right, let's go straight into it and go to slide three. This slide is very busy, but it gives an overview of what we think is happening in the market right now. We describe it as the perfect storm and it's a coincidence of events that I don't think I've seen in my career because you have inflation on the one hand that is affecting both the legacy and reserving and you will be observing sort of reserve strengthening happening that obviously doesn't apply to us because of our legacy free situation Inflation is also causing demand for increased limits in the cat book. And that is creating a supply-demand imbalance, which we have described as a capacity crunch. You've got mark-to-market unrealised, which is causing certain amounts of balance sheet stress. So all in all, we describe this as the perfect storm, but it's a very bullish scenario. for us. So with that, I'll hand over to Trevor.

Okay, thanks, Neil. Next slide. Moving on to page four. Thanks. Good morning, everybody. Before we move into the numbers around the trading update, a few key points on this slide, which I'd like to illustrate, and particularly around our company approach and strategy and the way we go about business. The first few bullets on here, basically articulate the strategy and approach to writing business. It's always our view that a portfolio needs to be robust and able to withstand shocks, which seems an obvious thing to say, really, but it does need to have inbuilt shock absorbers, if you like, to events that when they hit have a tendency to rock and shake up market assumptions and norms. I think we've seen that in the first couple of years, certainly since Conduit came into existence. I think at Conduit we've become known for a balanced approach and being prepared to work on ground-up deals. That's our brand, if you like, in the market. Being known for that and focus on risk data and attention to detail is not a bad thing to my mind. Fundamentally, this requires doing the hard yards to really understand clients' ground-up insurance business and not rely simply on pricing from your model-driven metrics. which is where I think a lot of the industry has gone to in probably recent decades. All of this isn't the most glamorous or headline-catching part of the reinsurance business, but we firmly believe it's where the true value lies in really understanding clients' margins. It's how a reinsurer is able to extract optimum pricing and value from the chain. A few words on product mix. I've always said that over the long term and over market cycles, we will remain agnostic to the product type We said that from day one, and it's still a firm belief. Be that CatXL or proportional quite a share. And rather, it's the market cycle and the underlying margins within those different product types that will always dictate our mix. In building a heavily concentrated cat portfolio, it's often easy to overextend in Excel to an extreme tail, especially in the cat space. For that reason, we will always carefully balance how we bring volatility into the portfolio and what I would call the Excel playing field. Points four and five on here at the end. They refer to balance sheet aspects. Elaine will talk later on our approach to managing credit quality duration on the asset side and amount to market update. Key though here is the comment around legacy or back book as many people often call it. Essentially, I suppose we don't really have one Greg Walsh can talk shortly in the underwriting section around the broader inflationary forces. Now they're having an impact on what I call the industry's back book, but that's now underpinning forward pricing in the longer tail classes. As I say, given that we came into being for the Jan 21 renewal season, we're in the position now of having the freedom and scope to deploy capital as the market conditions are now dictating, and that's really important to us. I find the two points on the slide refer to what we call the operational setup here at Conduit and our keenness to keep thinking current when it comes to design management and running of the business and processes. A few words on this. We've now got just around 50 employees here in Bermuda and one lesson that we're constantly reminded of as we've created this business is the value in having all those individuals in one location. It's really important for us, underwriters of all the functions around the modelling, pricing, risk management, and what we knew, and it's certainly been brought to bear, that shortens the reaction time for a business like ours when looking to make strategic decisions. If you like, in a car driving analogy, we can put our feet immediately on the various pedals, be it the brake or the accelerator, as circumstances dictate. And I think that's been the case. And it's a big part of getting us to where we are now nine months through our second year. Page five. Next slide. Thanks. Yeah, this is the trading update. So data points are understandably quite limited. But I think that, you know, the first nine months of 22 show the strength and certain resilience of the business model that we're putting in place. And as we continue to roll out on the plan, 2022 estimated ultimate premiums are up 55 percent at just over 600 million compared to the nine months ended September 21 and that's up 81 on a gross written basis over the same period I think it shows not only substantial growth which we've been experiencing but also points to stable premium revenue flowing into the current year as 21 also continues to deliver Elaine can touch on that that's both on a written and earned basis as regards major loss update during the quarter for Eric and Ian we're reporting an ultimate estimated loss net of reinsurance and reinstatement premiums of approximately 40 million dollars measured as a percentage first half year 22 shareholders equity that equates to around four and a half percent by way of an update on the ukraine russia crisis we've maintaining our previous estimate and that's unchanged at 24.6 million again net of reinsurance and reinstatement premiums and i would reiterate that that's an ultimate estimate across all classes including aviation both of these are significant industry events as we know and i think our net position speaks to some degree on the approach to managing the impact from these events on the company's bottom line, something we're always conscious of. So in nine months into the year, looking ahead to 23, we really like what we see out there and the business band today is learning through in our pipeline and the outlook is really favourable. Underlying business mix, it's probably worth mentioning again here that much of what we write at Conduit is the non-CAT exposed classes. Currently, a large part of the regular narrative in the industry, as we all know, sits around and focuses on cat exposures. One of the latest headline loss events. It's a sober reminder that around 70% of the premiums that we take on board here at Conduit are actually in the non-cat classes, as we call them. And that's where real opportunities also lie. We're in the area, we've plainly been keen to have a major focus on it to date, being at 70%. Going forward into 23 and beyond, We're probably equally as excited about the non-CAT piece as we are as about the CAT. And that's a really attractive space for us to be as an engine within the Conduit earnings stream going forward. Perhaps to conclude, just winding over to Greg, some words around how the market looks and feels versus others in the past. It's a reality that 2022 is actually my 40th underwriting year and therefore my 40th renewal season, which is quite a thought when you go back. There have been a number of times when the dynamic changed really materially, and I think this is one of them. We've all said that prices are driven not just by losses, which is where people tend to go to in their immediate thinking, but by capacity. It's falling supply currently, not meeting a rising demand. And some of the reasons Greg will go into next, this is the market position now, and it's creating great opportunities for us as a reinsurer currently in the market. Greg, we'll talk about this imbalance between supply and demand and particularly relevant in the property space. So I'll pass over to you now, Greg. Thanks, Joe.