Conduit Holdings Ltd. · LSE:CRE
Conduit — IPO Roadshow (January 2021)
52 slides from Conduit's IPO roadshow presentation, January 2021
Slide 1: Conduit Holdings Limited Investor Presentation (IPO)
Conduit Holdings Limited Investor Presentation (IPO) - provided as reference January 2021
Slide 2: Disclaimer
Disclaimer THIS PRESENTATION AND ITS CONTENTS ARE STRICTLY CONFIDENTIAL AND ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND TH
Slide 3: Canada Disclaimer
Canada Disclaimer This document may constitute an “offering memorandum” under applicable securities laws in Canada and you may therefore have, depending on your province or territory of residence, remedies for rescission or damages if this document (including any amendment thereto) contains a misrep
Slide 4: Introduction to the Team and The Conduit Proposition
Introduction to the Team and The Conduit Proposition STRICTLY PRIVATE & CONFIDENTIAL 3
Slide 5: In Summary
In Summary A Moment in Time Opportunity in the Reinsurance Market An Attractive Proposition Exceptional Market Conditions • New +$1Bn reinsurer launched into some of the most • Capacity Crunch - industry capital down to $600Bn attractive market conditions of our working lifetimes following $300Bn of
Slide 6: Neil Eckert - Chairman
Neil Eckert - Chairman • Over 40 years experience in the (Re)insurance sector 1988 >90% 12 $1.0Bn • Over 20 years serving on public company Founding Partner Of revenue from Reinsurance(1) Years as Partner / Market Cap on IPO boards Director • Founding partner of The Benfield Group in 1988 out of Ben
Slide 7: Trevor Carvey - CEO
Trevor Carvey - CEO • Over 30 years experience in insurance and reinsurance 2002 Founding Underwriter 5 $1.75Bn • Led the profitable turnaround of the GE Frankona Gross Written Joined Years at Marine & Energy global portfolio from 1999 to 2002 Company Premiums(1) • Arch Re Bermuda founding Underwrit
Slide 8: Exceptional Market Conditions
Exceptional Market Conditions STRICTLY PRIVATE & CONFIDENTIAL 7
Slide 9: Exceptional Market Conditions
Exceptional Market Conditions COVID is the Accelerant not the Cause • Three years of very significant catastrophe losses ($309Bn), including the largest loss year ever (2017)(1) • Significant shortfall in industry casualty reserves pre-COVID - estimated by some market participants at $100Bn to $200B
Slide 10: The Reinsurance Industry – a 20 Year Context
The Reinsurance Industry – a 20 Year Context 248 2020: COVID-19 & 2017-’19 CAT events Expected COVID-19 Japan Earthquake losses of 188 / Fukushima c.$80Bn $154.1 Hurricane $146.6 Katrina $143.4 150 133 130 127 128 $Bn 99 100 $93.7 98 93 78 $80.9 >$80 9/11 Attack $69.5 $63.4 $59.9 $58.7 $61.0 $54.3 $
Slide 11: Significant Rate Momentum
Significant Rate Momentum But still below peak rates Global Insurance Composite Pricing Change Q3 Pricing Changes by Geography 20% Global Composite 20% 19% US Composite 18% 14% US Property 24% US Casualty 8% 11% US FinPro 28% 8% UK Composite 34% 6% UK Property 20% UK Casualty 6% 3% 2% 2% 2% UK FinPr
Slide 12: Consistent Price Rises Across Nearly All Insurance Lines
Consistent Price Rises Across Nearly All Insurance Lines 2021 renewal price increase forecasts • 29 out of 30 insurance classes are now showing positive rate increase Willis Report Issue Forecast Rate Movements forecasts for 2021 Year Decreases Increases Mix/Flat • Casualty XS continues to show subs
Slide 13: COVID is an Unmodelled Catastrophe
COVID is an Unmodelled Catastrophe A Wide Range of Classes and Geographies Affected Breakdown of COVID Loss Estimates Selected Large Insured Loss Events Estimated COVID Losses ($Bn) Losses ($Bn)(1) 2 BI / Contingency UK 7 14 80.0E 4 BI / Contingency US 11 22.5 1 D&O - US 2 4 60.5 1 EPL - US 2 3.5 0
Slide 14: Building a High Quality Business
Building a High Quality Business STRICTLY PRIVATE & CONFIDENTIAL 13
Slide 15: A Very Deliverable Plan
A Very Deliverable Plan Timing is everything • Exceptional market conditions • Benchmarked to previous hard markets • Lack of market capacity creates opportunity to write good business Wholesale not retail model • No significant investment in brand, branches, infrastructure • No J curve to build up
Slide 16: Conduit Underwriting Plan
Conduit Underwriting Plan Target 2021 Gross Written Premium (GWP) of $472m Long Tail Casualty Quota Share ($117m) Property XL ($107m) • D&O • US Regional Cat • Energy Liability • Per Risk (ex Cat) • Non Marine General Liability • Japan, Europe • Marine Liability • Asia Pac • Professional Liability •
Slide 17: Conduit Business Plan Compared To Other New (Re)insurers
Conduit Business Plan Compared To Other New (Re)insurers Invested ($m) Class Metric(2) Year 1 Year 2 Year 3 Year 4 Year 5 Mean Median Capital(1) GWP(3) 909 1,625 1,658 1,751 1,704 Arch 2001/02 1,040 ROE 4.9% 18.0% 16.0% 10.9% 24.1% 14.8% 16.0% GWP(3) 629 1,302 1,352 1,391 1,372 Endurance Specialty H
Slide 18: Risk Management
Risk Management Diversified Portfolio Gives Relatively Low PML Estimates Indicative PML Analysis(1) Year 1 Year 2 Year 3 Year 4 Year 5 Gross PML as % of Opening TNAV (Pre-Reinstatements) Florida Wind 1 in 100 9.5% 12.2% 13.7% 16.1% 18.9% California Quake 1 in 250 13.5% 17.3% 19.4% 22.6% 26.5% Net PM
Slide 19: Distribution
Distribution The Top 4 Brokers represent c.64% of market share(1) • Conduit’s senior management team and identified hires enjoy very strong, decades long, relationships with the key brokers in the target markets • In these extreme market conditions brokers find it harder to fill lines – new capacity
Slide 20: Project Plan – From Concept to Operation
Project Plan – From Concept to Operation Preparation Live Q4’19 Q1’20 Q2’20 Q3’20 Q4’20 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Initial Discussions & Planning H1 Y1 Market Opportunity Results Results Scoping Plan Updated Interim Full Year Detailed modelling of Dividend Dividend underwriting plan Reinsurance m
Slide 21: Planned Organizational Structure
Planned Organizational Structure Key: Neil Eckert Position filled Chairman Position expected to be filled by end Q1 2021 Trevor Carvey CEO/CUO Bermuda London Risk Finance Actuarial Operations Underwriting Legal HR London IT Deputy London & CRO CUO CFO Chief Actuary Group GC Head of HR Strategy Head
Slide 22: Planned Underwriting Heads
Planned Underwriting Heads Key: Position filled Position expected to be filled by end Q1 2021 Head of International Head of Specialty – Head of International Head of Property Head of US Casualty Property and ST Specialty Marine & Energy Casualty and LT Specialty Greg Roberts Name Confidential Identi
Slide 23: Capital Management
Capital Management Generate Attractive Dividends, Maintain Financial Strength Dividend policy supported by strong RoEs • Reinsurance generates significant cashflow • The Company is targeting a dividend as early as during the 2021 financial year • Target payout of approximately 5%-6% of capital raise
Slide 24: Summary
Summary STRICTLY PRIVATE & CONFIDENTIAL 23
Slide 25: Summary: The Conduit Proposition
Summary The Conduit Proposition Exceptional Market Conditions Conduit Proposition • Incurred Cat losses of $309bn across 2017-19, • Experienced and proven management team, no compounded by COVID legacy losses and systems • Latency: $100bn - $200bn of casualty reserve • Wholesale business, very achie
Slide 26: Appendix
Appendix STRICTLY PRIVATE & CONFIDENTIAL 25
Slide 27: Operating Expenses
Operating Expenses STRICTLY PRIVATE & CONFIDENTIAL 26
Slide 28: Planned Operating Expenses
Planned Operating Expenses Main expense is in the Team ($m) 38.5 37.4 36.3 33.0 28.2 Year 1 Year 2 Year 3 Year 4 Year 5 Other Legal & Reg Modelling Outsourcing IT Payroll Expense Ratio (% of GWP) Year 1 Year 2 Year 3 Year 4 Year 5 Conduit(3) 6.0% 5.3% 4.8% 4.2% 4.0% Peer Mean(1) 5.2% 5.5% 5.8% 5.8%
Slide 29: Public Specialty Insurance M&A Activity
Public Specialty Insurance M&A Activity STRICTLY PRIVATE & CONFIDENTIAL 28
Slide 30: Listed Specialty Insurers Are Becoming a Rarity
Listed Specialty Insurers Are Becoming a Rarity Softening pricing has driven significant acquisition activity in the public specialty insurance markets • Markel / Alterra ($3.1bn / 1.1x P/TNAV) • Validus / Flagstone ($0.6bn / 0.7x P/TNAV) • CNA / Hardy ($0.2bn / 1.6x P/TNAV) • Apollo / Aspen ($2.6bn
Slide 31: Select Transaction Comparables
Select Transaction Comparables Relevant Transaction Multiples Transaction consideration $15.3Bn $2.1Bn $5.6Bn $0.6Bn $4.9Bn $6.3Bn $2.6Bn ($Bn) P/E(1) 11.0x(2) n.m. n.m. 22.1x n.m. 18.3x n.m. P/TNAV 2.0x 1.8x 1.8x 1.6x 1.6x Average 1.5x 1.6x 1.1x Bidder Target Announced Mar-18 Aug-18 Jan-18 Jul-17 D
Slide 32: Select Transaction Comparables (Cont'd)
Select Transaction Comparables (Cont’d) Relevant Transaction Multiples Transaction consideration $7.5Bn $5.3Bn $1.9Bn $4.2Bn $1.8Bn $1.9Bn $6.7Bn ($Bn) P/E(1) 16.4x 14.7x 8.8x 10.8x 8.2x 8.5x 6.5x P/TNAV 2.5x 2.4x 1.6x 1.6x Average 1.6x 1.2x 1.1x 1.0x Bidder Target Announced Jun-15 Sep-15 Feb-15 Jan
Slide 33: Select Transaction Comparables (Cont'd)
Select Transaction Comparables (Cont’d) Relevant Transaction Multiples Transaction consideration $0.9Bn $1.1Bn $0.2Bn $3.1Bn $0.5Bn $3.4Bn $0.6Bn ($Bn) P/E(1) 10.1x n.m. n.m. n.m. 13.9x 8.5x n.m. P/TNAV 2.0x 1.8x 1.6x Average 1.3x 1.1x 1.1x 0.8x 0.7x Bidder Target Announced Dec-07 Oct-06 Mar-12 Dec-
Slide 34: Underwriting Plan
Underwriting Plan STRICTLY PRIVATE & CONFIDENTIAL 33
Slide 35: Globally Diverse Underwriting Plan
Globally Diverse Underwriting Plan Based on domicile of client Northern Europe Incl. Lloyd’s (Year 1: c. USA (Year 1: c. $160m) $195m) • General client base has very good data and information transparency • Property Cat XL: Written regionally to produce • Property XL: Broad spread of countries with
Slide 36: Underwriting Plan: Property XL
Underwriting Plan Property XL Property XL Target Premiums Major Sub Classes Year 1 Year 2 Year 3 Year 4 Year 5 • US Regional Cat • Per Risk (ex Cat) ($m) • Japan XL, Europe XL • Asia Pac XL GWP(1) 107 138 159 190 209 • Pillared Retro XL • Event XL excl. 1st Event Indicative Ultimate Mean Gross Loss
Slide 37: Underwriting Plan: Short Tail Property QS
Underwriting Plan Short Tail Property QS Short Tail Property QS Target Premiums Major Sub Classes Year 1 Year 2 Year 3 Year 4 Year 5 QS of various lines including: • Property ($m) • SME Risk • US & ex-US D&F GWP(1) 106 142 170 204 225 • Marine & Energy • Contingency Indicative Ultimate Mean Gross Lo
Slide 38: Underwriting Plan: Long Tail Specialty XL
Underwriting Plan Long Tail Specialty XL Long Tail Specialty XL Target Premiums Major Sub Classes Year 1 Year 2 Year 3 Year 4 Year 5 • Marine Liabilities XL • Medical Malpractice XL ($m) • Personal Accident • Healthcare XL GWP(1) 32 43 54 62 65 • Aviation Liabilities XL • Workers Comp Indicative Ult
Slide 39: Underwriting Plan: Short Tail Specialty XL
Underwriting Plan Short Tail Specialty XL Short Tail Specialty XL Target Premiums Major Sub Classes Year 1 Year 2 Year 3 Year 4 Year 5 • Selected Marine Class XL • Energy/Renewables XL ($m) • Non-US SME Property XL • Engineering, Aviation XL GWP(1) 82 109 131 158 173 • Specie & Fine Art • Contingenc
Slide 40: Underwriting Plan: Long Tail Casualty XL
Underwriting Plan Long Tail Casualty XL Long Tail Casualty XL Target Premiums Major Sub Classes Year 1 Year 2 Year 3 Year 4 Year 5 • Non Marine Gen Liabilities XL • Professional Lines XL ($m) • D&O XL • Energy Liabilities XL GWP(1) 28 37 46 53 56 • Transaction Liabilities XL Indicative Ultimate Mean
Slide 41: Underwriting Plan: Long Tail Casualty QS
Underwriting Plan Long Tail Casualty QS Long Tail Casualty QS Target Premiums Major Sub Classes Year 1 Year 2 Year 3 Year 4 Year 5 • D&O • Energy Liabilities ($m) • Non Marine General Liabilities • Marine Liabilities GWP(1) 117 157 196 226 237 • Professional Liabilities • Transaction Liabilities Ind
Slide 42: Recent P&C (Re)insurance Capital Raises
Recent P&C (Re)insurance Capital Raises STRICTLY PRIVATE & CONFIDENTIAL 41
Slide 43: Capital Raises in the (Re)insurance Market
Capital Raises in the (Re)insurance Market • Several market participants have raised capital or are in the process of raising capital to take advantage of hardening market o Some of these funds will serve to replenish depleted balance sheets of incumbents rather than finance growth • New vehicles ha
Slide 44: People & Infrastructure
People & Infrastructure STRICTLY PRIVATE & CONFIDENTIAL 43
Slide 45: Other Key Personnel
Other Key Personnel Experienced management team in-place Stuart Quinlan – Deputy CEO (Bermuda) • An experienced insurance and reinsurance leader, Stuart has a track record for developing and building successful, enduring and profitable businesses. With a solid background in running all aspects of th
Slide 46: Other Key Personnel
Other Key Personnel Experienced management team in-place Tristan McDonald – Operations and Strategic development (London Head) • Tristan has a 20 year background of working in the financial markets, primarily in the reinsurance industry, as a corporate finance adviser. He has had a particular focus
Slide 47: Infrastructure
Infrastructure Comprehensive operating infrastructure established for launch Planned approach Department At launch Target end of year 1 Current status proven to work in a start- up multiple times Build bespoke end-to- Underwriting platform partner Deploy phase 1 underwriting Underwriting Systems pla
Slide 48: MIP Details
MIP Details STRICTLY PRIVATE & CONFIDENTIAL 47
Slide 49: Management Promote
Management Promote Absolute Return scheme(1): • Principally linked to share price performance and investor returns • Performance condition: annualised 10% total return to investors achieved at or after the exercise points (50% tested on GBP, 50% tested on USD) • Scheme value: o 7.5% share of investo
Slide 50: Management Incentive Plan – Illustrative Example
Management Incentive Plan – Illustrative Example Based on year 7 calculation of the MIP Dummy numbers – for illustrative purposes only MIP Illustration ($m) Investor cashflows Y1 Y2 Y3 Y4 Y5 Y6 Y7 1• In this illustrative example, the 10% minimum total Invt (1,100) shareholders’ return is met in each
Slide 51: Peer Group TSRs
Peer Group TSRs STRICTLY PRIVATE & CONFIDENTIAL 50
Slide 52: Reinsurance Start-ups Have Performed Strongly in the Past
Reinsurance Start-ups Have Performed Strongly in the Past Rebased TSR Since IPO of Select Reinsurance Start-ups – 5 Years Post IPO 350 +231% 300 +182% 250 200 +92% +69% 150 100 50 0 IPO Y1 Y2 Y3 Y4 Y5 Endurance Lancashire Validus Arch Source: Capital IQ Endurance IPO 28/02/2003 Arch Capital Fund Rai