Conduit Holdings Ltd. · LSE:CRE
Conduit — Q2 2023 Earnings Presentation
34 slides from Conduit's earnings presentation, Jun 30, 2023
Slide 1: Conduit Holdings Limited
Conduit Holdings Limited IFRS 17 and IFRS 9 Transition Investor and Analyst Presentation 30 June 2023
Slide 2: Disclaimer
Disclaimer Important note All numbers presented are illustrative or indicative, unaudited and subject to change. References to "Conduit" include Conduit Holdings Limited and all its subsidiary companies. Conduit Holdings Limited is the ultimate parent of Conduit Reinsurance Limited and is listed on
Slide 3: Agenda
Agenda 01 Key messages 02 Conduit’s accounting policies 03 Key impacts of IFRS 17 04 IFRS 17 transition and comparatives 05 Key performance indicators 06 Next steps 3
Slide 4: Key messages
Key messages No impact to strategy and reserving approach IFRS 17 and 9 are accounting changes and do not impact our underwriting strategy or the underlying economics. Our reserving approach is unchanged but will include more granular disclosures surrounding the Risk adjustment. No numerical c
Slide 5: IFRS 17 and IFRS 9 key accounting policies
IFRS 17 and IFRS 9 key accounting policies Premium allocation approach (PAA) used for all reinsurance contracts. Measurement model PAA is more closely aligned to current accounting, more appropriate to Conduit and easier to understand than the General Model. Presentation of ceding commissions
Slide 6: Key impacts of IFRS 17
Key impacts of IFRS 17 6
Slide 7: Reinsurance revenue will be lower than Gross premiums written
Reinsurance revenue will be lower than Gross premiums written Bridge from Gross premiums written to Reinsurance revenue1 The change to top line is presentational only with Gross premiums written no longer disclosed on the face of the income statement. Reinstatement premiums are presented as part o
Slide 8: Loss reserves will be discounted and include loss related amounts
Loss reserves will be discounted and include loss related amounts IFRS 4 Net Reserves to IFRS 17 Net liability for incurred The Net liability for incurred claims will be discounted claims1 as at 31 December 2022 and include any amounts payable or receivable that are contingent on claims. Key measure
Slide 9: The discounting of liabilities provides better matching with assets
The discounting of liabilities provides better matching with assets IFRS 17 The interest rate movements seen over the past 18 months clearly highlight the Reinsurance revenue current accounting mismatch between investments and reinsurance liabilities Reinsurance service expenses with unrealised loss
Slide 10: Illustrative discounting impact over time
Illustrative discounting impact over time Net impact of discounting (Incurred discount vs unwind) and reserve growth1 Reserve growth Incurred discount Unwind of discount Net impact In a constant rate environment, we expect discounting on loss reserves to provide a net benefit to income while reserve
Slide 11: Best estimate versus Risk adjustment
Best estimate versus Risk adjustment IFRS 17 Net liability for incurred claims split, as at 31 Estimates of future losses are projected on a actuarial December 2022 best estimate basis with an explicit adjustment for non- financial risk which is termed the Risk adjustment. Key measurement and presen
Slide 12: Underwriting profit (loss) replaced by Reinsurance service result
Underwriting profit (loss)2 replaced by Reinsurance service result3 Bridge for FY 2022 Underwriting profit (loss) to Under IFRS 17, the Reinsurance service result, as Reinsurance service result1 disclosed in the Income statement, is replacing the current non-GAAP measure of Underwriting profit (loss
Slide 13: A clear distinction on reinsurance versus other operating expenses
A clear distinction on reinsurance versus other operating expenses All expenses will be shown in the operating result but expenses identified as attributable to fulfilling reinsurance contracts will be presented as part of the Reinsurance service result as ‘Reinsurance operating expenses’. Two exp
Slide 14: IFRS 17 transition and comparatives
IFRS 17 transition and comparatives 14
Slide 15: Impact to Shareholders' equity on transition, as at 31 December 2021
Impact to Shareholders’ equity on transition, as at 31 December 2021 Shareholders’ equity as at 31 December 2021 ($m) We expect a $7.0m increase to equity from re- statement of our financials from inception on transition to IFRS 17, which represents 0.7% of Shareholders’ equity under IFRS 4 as at 31
Slide 16: FY 2022 results benefit from better matching of assets and liabilities
FY 2022 results benefit from better matching of assets and liabilities $10.4m IFRS 17 Reinsurance service result IFRS 4 Underwriting profit (loss) $0.3m $(43.9)m IFRS 17 Total comprehensive loss IFRS 4 Total comprehensive loss $(89.7)m Total comprehensive loss improved by $45.8m under IFRS 17 compar
Slide 17: FY 2022 comparatives – Income statement bridge
FY 2022 comparatives – Income statement bridge Remove Measurement changes Presentation IFRS 4 2022 IFRS 4 2022 IFRS 17 Changes Discounting Expenses Other UW result $m $m $m $m $m Gross premium written 637.5 (637.5) 406.1 (13.7) 392.4 Reinsurance revenue Ceded premium written (56.6) 56.6 (404.2) 26.6
Slide 18: Impact to Shareholders' equity, as at 31 December 2022
Impact to Shareholders’ equity, as at 31 December 2022 Shareholders’ Equity as at 31 December 2022 ($m) As at 31 December 2022, the increase in equity from IFRS 17 is $52.8m compared to IFRS 4. The increase in the impact of IFRS 17 to equity is driven mostly by the movements in interest rates obse
Slide 19: Attributable operating expenses
Attributable operating expenses Attributable versus non-attributable operating expenses As we have grown since commencing business in 40.00 100.0% December 2020, an increasing proportion of our operating expenses are attributable. 35.00 90.0% We expect the percentage of total operating expenses 80
Slide 20: FY 2022 comparatives – Balance sheet bridge
FY 2022 comparatives – Balance sheet bridge Measurement changes IFRS Remove Presentation IFRS 4 2022 Portfolio 2022 IFRS 17 IFRS 4 changes Discounting Expenses Other Groupings $m $m $m $m $m $m $m $m Cash and cash equivalents 112.9 112.9 Cash and cash equivalents Accrued interest 5.5 5.5 Accrued int
Slide 21: Key performance indicators
Key performance indicators 21
Slide 22: Key performance ratios
Key performance ratios Loss ratio Reinsurance expense ratio Other operating expense ratio Net discounted Reinsurance Acquisition Other operating losses and loss operating expenses expenses related amounts expenses Net reinsurance Net reinsurance Net reinsurance revenue revenue revenue Combined ratio
Slide 23: FY 2022 comparative key ratios
FY 2022 comparative key ratios IFRS 4 IFRS 17 FY 2022 Property Casualty Specialty Total FY 2022 Property Casualty Specialty Total Net loss ratio 66.5% 66.0% 100.8% 71.7% Net loss ratio, undiscounted 83.0% 93.9% 128.6% 94.7% Net acquisition ratio 26.4% 32.2% 23.1% 28.2% Reinsurance expense ratio 11.0
Slide 24: Presenting our FY 2022 KPIs under IFRS 17
Presenting our FY 2022 KPIs under IFRS 17 Gross premiums written Total net investment return Decrease driven by removal Original Restated No impact Original Restated of reinstatement premiums $637.5m $622.4m (5.0)% (5.0)% RoE Increase in profit in the Total shareholder return period primarily
Slide 25: Next steps and final comments
Next steps and final comments 25
Slide 26: 2023 external reporting roadmap
2023 external reporting roadmap February 2024 Q2 2023 July 2023 FY 2023 Results – IFRS 17 and FY 2022 restated results HY 2023 results 9 reporting First formal external reporting Present IFRS 17 restated under IFRS 17 and IFRS 9. Full year end reporting under IFRS comparative results for 2022.
Slide 27: Final comments
Final comments No impact to strategy and reserving approach IFRS 17 and 9 are accounting changes and do not impact our underwriting strategy or the underlying economics. Our reserving approach is unchanged but will include more granular disclosures surrounding the Risk adjustment. Profitability
Slide 28: Appendices
Appendices 28
Slide 29: HY 2022 comparatives – Income statement
HY 2022 comparatives – Income statement IFRS 4 2022 2022 IFRS 17 $m $m Gross premium written 359.0 169.3 Reinsurance revenue Ceded premium written (45.6) (149.8) Reinsurance service expenses Net premium written 313.4 Change in gross UEPR (125.6) (20.4) Ceded reinsurance expense Change in ceded UEPR
Slide 30: HY 2022 comparatives – Balance sheet
HY 2022 comparatives – Balance sheet IFRS 4 2022 2022 IFRS 17 $m $m Cash and cash equivalents 92.0 92.0 Cash and cash equivalents Accrued interest 4.0 4.0 Accrued interest Investments 952.7 952.7 Investments Inwards premium receivable 288.7 - Reinsurance assets Reinsurance assets 87.8 48.2 Ceded rei
Slide 31: The definition of some of our KPIs will change
The definition of some of our KPIs will change Metric Current definition Impact of IFRS 17 Calculation For the majority of excess of loss contracts, premiums written are recorded based on the GPW is no longer disclosed as the top Amounts payable by the insured, minimum and deposit or flat premium,
Slide 32: Glossary
Glossary Term Definition Expenses that are attributable to fulfilling obligations towards the cedants i.e., underwriting and claims handling activities plus an allocation of other Attributable expenses operating expenses. Attributable expenses are classified as those relating to (a) Acquisition (b)
Slide 33: Glossary
Glossary Term Definition Premium allocation approach The measurement model under IFRS 17 that is applied to short duration contracts. (PAA) Reinsurance finance expense Finance expense is comprised of interest accretion and the change in liability for incurred claims due to updating of discount rates
Slide 34: conduitreinsurance.com
W conduitreinsurance.com CONDUIT RE 34