Impressive Growth and Financial Performance
Headquartered in Bermuda, Conduit Re has marked a significant milestone by achieving gross premiums written (GPW) of $1.16 billion for the year 2024, reflecting a nearly 25% increase from the previous year. Despite encountering substantial catastrophic events, the company reported a robust return on equity (ROE) of 12.7% for the year.
The reinsurer strategically expanded across its three primary business segments: property, specialty, and casualty. This growth was driven by seizing favorable underwriting opportunities in targeted areas. Specifically, the property segment soared by 29.5% to $606.3 million, specialty recorded a 38.7% increase reaching $258.5 million, and the casualty segment rose by 7.6% to $297.6 million.
Pricing Dynamics and Financial Metrics
Throughout 2024, pricing, terms, and conditions remained attractive, with an overall modest 1% risk-adjusted rate increase after accounting for claims inflation. The property sector experienced a 3% increase, specialty saw a 1% rise, while casualty encountered a slight 1% decline.
Reinsurance revenues appreciated by 28.5%, totaling $813.7 million, while net reinsurance revenue surged by 29.4% to $720 million. However, the reinsurance service result decreased by 28.3% to $131.6 million, primarily due to a rise in net reinsurance service expenses, which escalated to $588.4 million, up from $372.7 million in 2023.
Challenges and Loss Ratios
The year 2024 was characterized by above-average loss activity within the re/insurance industry. Conduit Re reported a net loss of $68 million related to Hurricanes Helene and Milton, which contributed 9.4% to the undiscounted loss ratio of 84.4%, compared to 68% in the previous year. The discounted net loss ratio rose to 73.3%, driven by increased losses from natural catastrophes and significant risk events.
Despite these challenges, the company managed to maintain a lower reinsurance operating expense ratio of 8.4% and an other operating expense ratio of 4.3%. Consequently, the discounted combined ratio increased to 86%, and the undiscounted combined ratio rose to 97.1%.
Investment Performance
On the investment front, Conduit Re reported a total net investment return of 4% in 2024, compared to 5.8% in 2023. This was attributed to a higher yielding portfolio, resulting in net investment income of $65 million, marking a 57.4% year-on-year increase. Total investment return, encompassing net investment income, realized, and unrealized gains and losses, amounted to a $66.1 million gain for the year.
Outlook and Future Prospects
Looking forward, Conduit Re experienced strong growth during the January 1st, 2025 reinsurance renewals, with expansion across all business segments and a renewed retrocession program at improved terms. The reinsurer recorded a -3% risk-adjusted rate change net of claims inflation but noted that pricing and underwriting terms remain attractive.
With regards to the California wildfires, Conduit Re has released a preliminary undiscounted ultimate loss estimate ranging between $100 and $140 million, net of reinsurance recoveries and reinstatement premiums. These events are expected to enhance favorable underwriting conditions, presenting opportunities for growth at attractive rates.
CEO Trevor Carvey commented on the achievement, “From a startup four years ago, we’ve built a business generating $1.16 billion in gross premiums with a 24.8% increase over 2023, even amidst high catastrophe conditions. Our demonstrated platform is generating profitable returns, and we anticipate continued growth and success as the business matures.”
Executive Chairman Neil Eckert added, “Surpassing our IPO target by 30% with a 12.7% ROE in a challenging year, we are proud of our achievements. With a solid capital base and an efficient platform, the future looks promising for Conduit Re.”
