Conduit Re praised for renewals prowess, bodes well for upstart in hard market

Bermuda-based property and casualty (P&C) and specialty reinsurer  Conduit Re took quick praise for strong growth in January renewals from stock analysts who appreciated a young, unencumbered balance sheet for adding diversified risks in a hard market.

"A good start of the year" to a "balanced" and "selective" strategy, Peel Hunt analyst Andreas van Embden wrote in a note to the market.

The headline growth rate of 70% ran ahead of expectations. Analysts at Jeffries had said 33% at IPO, 57% at prior forecast and are rewriting the spreadsheets again.

That higher-than-expected growth will most likely offset the change in revenue emergence stemming from the rise in quota share to 64% of total, they said.

Aggregate rate increases at 5% net of inflation testify to a "balanced book" and improving quality, analysts said. "The quality of new business is materially improving," Jeffries said of the rate gain.

Stripped of the likely claims inflation forecast, premium growth appears to have risen in excess of 10%, Jeffries said of its estimates. That would meet or beat key reinsurance pricing indexes from the major insurance brokerages.

Growth at Conduit Re is not a risk-piling runaway story, analysts say in unison.

"The company is not a property catastrophe reinsurance play, but rather is delivering a strategy of building a diversified reinsurance portfolio," Hunt's Embden wrote.

In the event, Conduit grew strongest into the lower pricing casualty segment, which doubled its share in the portfolio to some 33%. Property grew more modestly and accounts for 41% of the portfolio.

"As CRE selectively builds out its underwriting portfolio in a hardening reinsurance market, the value of the business should grow and deliver attractive cash flows," he wrote.

Investors were not as gracious as the analyst pool:  shares of Conduit Re on the London market traded down 0.6% or £2.77 to £461.73 at 10:09 London time.

Conduit will publish its end-2021 financial statements on February 24.

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