Conduit Holdings Limited

Good afternoon, ladies and gentlemen. It gives me great pleasure to open the Conduit interim results presentation for the first half of 2023. We are now seeing the best market conditions that I've experienced in my career. This is true both for pricing, terms and conditions, and higher attachment points, which to some extent mitigate the increased claims activity we are seeing. We see a number of factors combining to create these market conditions. Inflationary pressures continue to persist and interest rates remain high. But what we have seen is the erosion of traditional reinsurance capital, which we now believe stands at 213, 214 levels. Another element for me, which has not been so much discussed, is a structural change in the US primary markets, where the admitted carriers are withdrawing from new business in certain key states. which is driving strong growth across excess and surplus lines markets, which are core markets for conduit. Our underwriting team and chief executive will go on to discuss this in more detail. Extreme weather events are more and more prevalent, and June 23 is the warmest month on record. We've also witnessed elevated cat activity during the first half, which, whilst not materially affecting Conduit, adds to the cocktail driving current market conditions. Given these excellent market conditions, Conduit is delivering a strong set of numbers, which are testament to the effectiveness of our strategy and a credit to our team. With this, I'll pass over to Trevor Carvey, our CEO, who will take you through our results, alongside Elaine Whelan, our Chief Financial Officer, and Greg Roberts, our Chief Underwriting Officer.

Thank you, Neil. Good morning everyone and a very warm welcome to this half year results call for 2023. So starting with premium income, we've shown really good growth again in the half year growth premiums written of 542 million, which is a 52.9% increase over the first half year in 2022. This is partly an indication of the strength of the market in general, but also demonstrates our growth trajectory in our third year of trading and the compounding effect of renewals flowing through year on year. Elaine and Greg will talk more on the component parts of this growth and also the net reinsurance revenue, which has shown similarly strong growth year over year. Turning to our combined ratio, we are obviously now in the new world of IFRS 17, and as such, there are new definitions and terminology in broad use. For the half year and on an IFRS 17 basis, we are reporting a discounted combined ratio of 72.5%, which compares with the 99.9% on a restated basis for the first six months of 2022. To put the current figure into perspective, the undiscounted combined ratio for the year in old money, if you like, was 83.1%. and was achieved during a period when the industry suffered a relatively high level of cat loss activity, including Turkey-Syria quake, New Zealand flooding losses, and the series of severe convective events in the US. We've navigated the effect of these H1CAT events with no major loss materially impacting the business, either individually or in the aggregate. In terms of comprehensive income, I'm pleased to report a positive result of £78.6 million, and a return on equity of 9.1% for the six months. As we've said previously, as the business has been maturing, our ratios have been trending and demonstrating the right signs, and this result in H1 is a vindication of what we set out to achieve when we founded Conduit in the middle of 2020. More colour on this in the coming slides. The dividend is unchanged at 18 cents a share, again in line with guidance. As a final remark, market conditions remain extremely favourable. Now take this opportunity to reaffirm that we will be maintaining our approach to managing strategically both the volatility and our capital allocation across the classes, which is so important in setting us up for the times ahead. So these graphs give more detail around the remarks from the previous slide and also give a better sense of the journey we've been on since we started. For clarification, all the numbers and ratios here have been restated on an IFRS 17 basis to enable true comparisons. The half-year premium growth was the result of a really good all-round delivery by the team, with not just property but also casualty and specialty classes delivering good growth. Property is often spoken about in the market as a class showing very positive dynamics. And we see those two, but the casualty and specialty lines also delivering good growth and opportunities for us. With careful underwriting and pricing discipline, premium delivery and diversification achieved here have been very pleasing. And then we'll go into more detail in her section on the component parts of our combined ratio and the progress we have made. But here are the headline numbers showing the progression for the past three years, again, on an IFRS 17 basis. The business was formed to commence under IT for the 2021 year. And from a standing start in January 21, we've had to respond to a succession of major loss events, such as Hurricane Ida, Storm Burnt, and the European flooding, Hurricane Ian, and also events such as the Russia-Ukraine situation. On top of these, through 22, we also saw the advent of the volatile financial markets delivering the extreme mark-to-market movements evidenced across the industry. It was always our belief that a reinsurance business needs to be able to handle these shock loss events by the nature of its diversification and good line size management and to have in a way a built in shock absorbers to carry it through. This is what we set out to build and is the platform that we are now pushing on into the market ahead. Lastly, it's worth highlighting our first catastrophe bomb placement. And that was executed in June this year. We sponsored $100 million multi-year cap bond, which is designed to complement the traditional retrocession program that we place. I'm pleased to say the bond was well received in the market with a degree of oversubscription. And the pricing that we achieved was pretty much in our sweet spot. From a net capacity standpoint, it puts us in a solid place for the year ahead in terms of retrocession protection. And being a multi-year instrument, it also provides us with increased certainty around these protections beyond just 2023. So this is the final slide for me before I hand over to Greg, and it shows our premium progression now on an IFRS 17 basis, showing our cumulative gross premiums written since inception and broken down by category. Our view from last quarter remains broadly unchanged in that we see property and specialty spaces currently offering the best margins. And our focus is directed there, as you can see from the growth of these two segments. The largest percentage growth over the first six months of 2023 was property at 66%, specialty at 57%, and casualty at 39%. On an ultimate premium written basis, we have bound 1.9 billion since the inception of the business in December 20, and actually now have $755 million of unearned premium in our pipeline. We are also clearly maturing as a business in terms of premium income and as a broad guide. And of course, with some variance between the classes, 12 months ago, around 40 to 50% of contracts written were new. Over the half year, that proportion now stands at broadly around one third, showing the relevance and impact of the increasing renewal book year on year. In addition to new business bound, being able to take increasing shares on renewals, where it's warranted, of course, is a great foundation for growth. Writing new business will of course be a major part of what we do, but having the increasing renewal book going forward is a big plus for the team to work from. And on that note, I'll hand over to Greg.

Thanks Trevor. This has been a very strong first half for our third year build of the portfolio. We continue to evaluate property, specialty and then casualty contracts in that order as a result of the market opportunities. The first-half portfolio premium has grown around 53% when compared to first-half 2022. Renewing premium for existing contracts counts for around two-thirds of our first-half portfolio, the remaining growth from new contracts. We've pushed forward again with the development of target specialty contracts, and I'm very pleased with these developments, which are providing a broad spread of complementary risk, of which we are able to digest in an efficient manner. This is important as not to create accumulations of clashing risk, which dilutes our return on capital and creates portfolio volatility. Our casualty portfolio, now in year three, continues to benefit from our analytical approach, reviewing underlying trends with a relentless attention to data from the primary markets. We continue to increase the speed at which this information is made available to us, further improving our forward-looking approach. there is increasing evidence that the casualty market is somewhat dislocated with both buyers and sellers responding to underlying trends in a differentiated manner. The best in class primary writers are handling inflationary pressures and trend accordingly and are able to maintain confidence and stable loss ratios. However, there are areas of the primary market where this is not the case and the reinsurers are needing to reduce seeding commissions to maintain combined ratio stability. The property market is very strong. The primary non-admitted markets have adjusted the price of their products to accommodate inflationary pressures much faster than the admitted carriers. This inability to adjust rates efficiently has created drag for the personal lines rises, particularly with challenging areas such as auto. Our focus on ground up primary non-admitted business is continuing to develop strong margins from both growth of renewing premium and new opportunities. The cap market remained disciplined through mid-year, with buyers and sellers generally able to agree terms, creating capacity. Terms and conditions remained broadly as the 1st of January, and pricing moved up again. The difference here to the 1st of January was that the capacity was available, though with often a binary behaviour around terms and conditions. As a reminder here, we continue to report our risk-adjusted portfolio metrics on a year-to-date basis after the application of our view of inflation and terms and conditions. The graphic clearly shows that property and specialty continue to compound rate through the quarter. Our portfolio year-to-date overall rate change is 15%, and the current texture of our casualty portfolio has resulted in a flatlining of risk-adjusted rate change net of inflation. As I mentioned earlier, the differing types of contracts in the casualty portfolio allow for many touchpoints to respond to the underlying metrics. We are very comfortable with our portfolio, and so this data point serves as an expected checkpoint on the dynamic management of the contracts we write. Though not a significant part of our portfolio, sectors such as public DNO have been causing placement processes to become more varied, with contracts with structures expiring being less prescriptive. Terms and conditions remain a dominant factor in how risk is transferred in the specialty market, with our rate change strongly presented at plus 12%. Prices have been rising still, and broadly speaking, are managing inflationary pressures very well. Property has produced a year-to-date rate change of plus 30%. As mentioned earlier, the primary non-admitted market continues to push rate and values strongly, required to move ahead of inflation and organic growth and exposure. The US ENS market and the more global DNF market are great examples of sectors that have responded quickly and affirmatively to improve loss ratios. The compound effect here is very powerful and in a short tail class like this produces significant margin. The natural catastrophe market has simplified with many XOL contracts now traded on a much narrowed coverage basis with significant rate increases. Our underwriting strategy remains unchanged as we seek to rise a balanced portfolio of risk and limit our catastrophe exposure whilst remaining nimble to adapt to opportunities ahead. In the first half of the year, we have seen opportunity with strong property cap rates, notably at the 1 in 100 return period level, so have adapted our plan to benefit from these stronger rates. Conversely, we have not seen a significant improvement at the more remote return periods so have been very selective there. The revised plan contemplates that more opportunities will be presented during the remainder of the year, recognising, however, that the main renewal periods have passed. I shall now hand over to Elaine.