Conduit Holdings Limited

Good day, everyone. Welcome to the Conduit Retrading Update call for Q1 2025. Joining me on the call today are Neil Eckert, Chief Executive Officer, Elaine Whalen, Chief Financial Officer, and Nick Pritchard, Interim Chief Underwriting Officer. Please note our disclaimer language on slide two. I will now turn the call over to our CEO, Neil Eckert.

Thanks, Brett. Joining me on today's call are Elaine Whelan, our CFO, and Nick Pritchard, our interim chief underwriting officer. We are delighted to have Nick with us today in his new role as interim CEO. As mentioned in our press release a few weeks ago, Nick brings deep expertise of the markets we operate in, as well as an extensive leadership experience, and will stand us in good stead as we move through our fifth underwriting year. But it is important to stress we also have real strength in the underwriting unit across our three divisions as this quarter's growth demonstrates. As usual, today's update focuses on our top-line underwriting experience during the quarter. I will also take a moment to highlight the team-leading conduit and to provide some further clarity on our enhanced outward reinsurance strategy. Nick will then share some further details on our performance and outlook for each of our segments. And Elaine will cover the financial highlights, including some thoughts around our capital strategy. As you all would have seen, there's been some significant change in the leadership team over the last six weeks. I've accepted the chief executive role and I'm honoured and deeply committed to Conduit. It's a very personal mission to me. Rebecca Shelley, our senior independent director will step up to interim non-exec chair. Rebecca has a wealth of experience as a director or chair of UK public listed companies. Elaine and the team have been excellent over the last few months, which have been demanding to say the least. Nick has been elevated to his role as interim chief underwriting officer. As CEO, I'm here in Bermuda with the entire business team and have been for the last three months. Even prior to that appointment, we were busy effecting changes to the business model, particularly as it relates to the outward reinsurance purchase and reducing earnings volatility. And I'm working with the team to drive improvements throughout the business. Condor is guided by a highly experienced leadership team with deep and complimentary experience across the global reinsurance and insurance markets. Our executive team has decades of proven success in building and managing listed reinsurance and insurance companies. They are respected specialists in their relevant fields across underwriting, actuarial, finance, operations, and risk management. Collectively, we are committed to delivering Conduit's long-term vision and strategy. Specifically in underwriting, we have a deep team of 22 professionals This is around one third of our total workforce who leveraged their strong client and broker relationships to identify and capture high quality opportunities in target market segments. Over the long term, the incentive scheme we have in place, as outlined in our annual report and accounts, ensure the motivations of both our staff and our leadership continue to be aligned with Conduit stakeholders. Lastly, the board has commenced a search process for a permanent non-executive chair and has appointed a search firm to assist in identifying candidates. We will update you on the process as there is more information and Rebecca will be interim non-executive chair until that process concludes. Ken Randall will step up to be interim senior independent director. Turning now to our experience in the market, the first quarter of 2025. California wildfires aside, has been a quarter with continued growth. Our gross premium written increased by 15% to $410 million. While all three of our segments have always been complementary to our portfolio, growth over the last two years has been driven by property and specialty. As the market is developing, which we will go into in more detail, our growth in the first quarter will spread more equally across each of our segments, with each growing by $15 to $20 million over the prior year. Our risk-adjusted rate change net of inflation through 31st of March 25 across the portfolio was minus four. This follows several hard market years and compounding rate benefits. We are alert to rate softening in certain segments and will not grow in areas where there is in our view, insufficient margin. Regarding investments, Elaine will comment in detail, and while she wouldn't say it, her team have done a good job sticking to our strategy whilst assets under management compound. The investment return was 2.1% during Q125, compared with plus 0.5 during Q124. This driven by a high yielding portfolio and decrease in treasury yields. Our high-quality, short-duration portfolio has continued to grow in scale as the business has matured, and as at 31st of March 25, totaled over $1.9 billion. Turning to losses, as we noted back in March, our undiscounted net loss estimate related to the California wildfires remains unchanged between $100 and $140 million net of reinsurance and reinstatement premiums. The event was one of the largest insured catastrophe events seen to date, particularly for a Q1 event, with the reinsurance industry shouldering the predominant share of the loss. We continue to work closely with our sedants, who in turn are helping the victims of this disaster to rebuild their lives. As we will come on to in more detail, Our team worked proactively to secure additional reinsurance purchases to mitigate earnings volatility for the remainder of 2025. In terms of guidance for the year, the guidance remains unchanged and considering activity during Q1 2025, additional reinsurance purchases and other portfolio adjustments, we expect a full year 2025 return on equity between high single and low double digits. Our cross-cycle target over the long term remains a mid-teens return on equity. The board of directors have approved a $50 million share buyback program to enhance shareholder value. There is a slide later on in this deck on capital strategy, and Elaine will comment further. Our outwards reassurance strategy has evolved and the California wildfires highlighted the need for us not only to address the peak perils such as hurricanes and earthquake, but also secondary perils like fire, flood, winter freeze and convective storms to better align with our return objectives and a desire to reduce earnings volatility. We've taken decisive steps to address these risks. We have secured additional limits both for US and global secondary perils alongside increased aggregate cover, substantially reducing our net exposure. Whilst for commercial reasons we don't disclose details of individual reinsurance contracts, we have purchased meaningful limits for each and every event that attach within our individually disclosed or lost levels for US secondary perils and have also purchased significant additional aggregate reinsurance cover These enhancements complement our existing peak peril protections, strengthening resilience against both large-scale natural catastrophes and smaller, more frequent secondary perils. This refined approach is designed to stabilize returns for the remainder of 25 of the Atlantic wind seas. These recent purchases reflect a strategic shift on outward reinsurance, one that stresses earning stability by balancing protection against high severity in frequent events, but also smaller scale, more frequent ones. We expect this will support more consistent performance across varying risk scenarios. Looking ahead to 2026 and beyond, we plan to leverage these refinements and any changes to our inward portfolio to further optimize protection strategy. Ultimately, we do not expect these strategic adjustments will impact or detract from our ability to achieve our cross-cycle mid-teens return on equity. Turning back to our portfolio and the market, as you can see from the slide, we have continued to build scale in the portfolio into a strong pricing environment, growing 15% over Q1 2024. Over time, Expect to have more balance between quota share and excessive loss within the portfolio, with more excessive loss being written as market conditions warrant. As I mentioned, we have a very strong underwriting team in place and they are well suited to adapt to changing market conditions. We are entering a more competitive phase of the cycle and have started to see pricing come off highs, particularly property and specialties. We have seen additional opportunities in certain areas of the casualty market and expect to continue to deploy capacity here. It's important to remember that we have experienced several years of strong rate increases and the industry has generated strong returns, adding to the overall capacity in the market. Our underwriters continue to see sufficient demand across their markets and have a strong flow of deals being presented. They remain disciplined and selective in renewing or securing deals that align with our strategy. With that, I will hand over to Nick for a deeper dive into our market experience across divisions.

Thank you, Neil. I will now talk further on the premium growth for the individual business segments, along with their respective market conditions and expectations for the remainder of the year. Of the $53.4 million of growth, $20.8 million sits in the property segment, This represents year-on-year Q1 growth of 9.6%. In line with expectation, renewal negotiations were more challenging in 2024, and as a result, the risk-adjusted rate change net of inflation through 31st of March 2025 was minus 6% across the portfolio. We attribute most of this market movement to the industry deploying retained earnings, as most reinsurers remain in agreement that current pricing is adequate for peak risk. Hence, the on-running team only renewed or entered into new partnerships that were aligned with our planned strategy, whilst declining on familiar placements that continue to fall below our return requirements. With respect to demand, we observed an overall increase in limit purchased. We estimate this to be up to $12.5 billion for all regions. We expect demand to grow into Q2 and Q3, the main driver of which is Florida, totaling $20 billion of additional limit for 2025. With this in mind, we expect rates to remain adequate for the mid-year renewals. I will now turn your attention to casualty. Relative to property, this segment experienced more growth of 21.9%, or $15.1 million from Q1 2024 to Q1 2025. Most of this growth was driven by our team expanding with existing clients. This is in part due to the market's continued positive reception to Condor as we enter our fifth year of trading. Our excellent financial strength has further reinforced our position as a trusted and credible partner that enables the team to secure larger shares on preferred programs. Through extensive data analysis of our clients, we have observed evidence of positive cycle management, including appropriate management of limits, attachment points and premium rates within desired classes. There are some areas of the casualty market that continue to correct for reserve development and loss emergence, such as US excess casualty. This follows increased claims and reserve strengthening from the industry, primarily on underwriting years prior to 2020. This correction is driving rate increases, and we are benefiting from these improvements. That said, we remain heightened to the elevated loss trends, which have the potential to further offset the rating improvement. We therefore calculate the risk-adjusted rate change net of inflation through 31st of March 2025 across the casualty portfolio was minus 1%. Finally, we move on to specialty. This portfolio continues to diversify and be accretive to our risk composition outside of peak catastrophe. An increase of 24.8% from Q1 2024 to Q1 2025 has resulted in gross written premium of $88.2 million. The team successfully secured new opportunities where rates and terms remain attractive. We are participating in a market with increased supply as other reinsurers continue to seek margin and risk outside of property cap. Rates are more under pressure as students retain more risk and negotiate more firmly on commissions, terms and conditions. This is reflected in the overall risk-adjusted rate change, net of inflation of minus 3% for Q1 2025. We still view this segment as adequately priced, but we do expect growth to slow as we start to manage the book in this phase of the cycle. Thank you very much, and I will now hand over to Elaine to take you through the numbers.