Conduit Holdings Limited Annual Report 2022
We have proven experience across our
business to make dynamic decisions
throughout the market cycle.
We have a disciplined and collaborative
culture, underwriting in a single location
on a legacy-free balance sheet.
We use differentiated technology to
provide insight and bespoke solutions to
support our clients.
Social responsibility and inclusiveness are
at the core of how we operate.
Conduit Holdings Limited Annual Report 2022
1
Contents
IN THIS
REPORT
Strategic report
At a glance
Business model
Strategy
Key performance indicators
Executive Chairman's statement
CEO's report
CUO's report
CFO's report
Business review – finance
Enterprise risk management report
ESG summary
Section 172 statement and stakeholder engagement
Case study: Talent acquisition
page 21
Case study: Education
page 28
Case study: Employee solar loans
page 35
2-37
Governance
39-90
Financial statements
91-159
2
4
5
6
7
9
13
17
18
23
29
36
Governance at a glance
Board of Directors
Executive Chairman's introduction to
corporate governance
Corporate governance and compliance with the UK
Corporate Governance Code 2018
Nomination Committee report
Audit Committee report
Directors' remuneration report
Directors' Remuneration Policy
Notes to the Director's Remuneration Policy
Annual report on remuneration
Directors' report
Directors' responsibilities statement
36
40
45
48
52
54
60
62
68
72
86
90
Independent Auditor's report
Consolidated statement of comprehensive income (loss)
Consolidated balance sheet
Consolidated statement of changes in shareholders' equity
Statement of consolidated cash flows
Notes to the consolidated financial statements
Additional performance measures
Glossary
Advisers and contact information
92
98
99
100
101
102
154
157
161
Conduit Holdings Limited | Annual Report and Accounts 2023
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At a glance
HOW WE
CREATE
VALUE
Our key business objectives
— Building a sustainable business
for the long-term benefit of
our stakeholders
— Deliver profitability and a mid-
teens return on equity across
the cycle
Our investment proposition
Targeted underwriting
Operational excellence
Strong balance sheet
— Pure-play reinsurance
— Single location, highly
treaty focus
— Balanced and diversified
efficient set-up with open
and collaborative culture
portfolio
— Dynamic cycle
management across
classes of business and
geographies
— Management team
with proven industry
track record
— Targeted and effective
use of data-driven pricing,
analytics and exposure
management thanks to
efficient cloud-based
ecosystem
— Legacy-free balance
sheet. Well capitalised
for future growth
— AM Best (A-) Excellent
financial strength rating
with “very strong”
balance sheet
— High-quality investment
portfolio, with average
credit quality of AA
Conduit Holdings Limited | Annual Report and Accounts 2023
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At a glance continued
Bermuda-based reinsurer
BMA supervised –
Class 4 Licensed
Members of staff
59
AM Best financial strength rating
A-
(Excellent)
Final dividend for 2023
$0.18
per Common Share ($0.36 full year)
2023 Gross premiums written1
$931.4m
(2022: $622.5m)2
By class:
l Property 50.3%
l Casualty 29.7%
l Specialty 20.0%
Underwriting
Conduit Re offers a broad range of traditional and tailored proportional and excess of loss reinsurance
solutions to our clients on a worldwide or region-specific basis within our Property, Casualty and Specialty
portfolios. Below is a list of sub-class examples of the solutions offered.
Property
Proportional and
non-proportional
Casualty
Proportional and
non-proportional
Specialty
Proportional and
non-proportional
Catastrophe and non-
catastrophe property
business lines
Directors and officers
liability, financial institutions
liability, general liability, medical
malpractice, professional liability
and transactional liability
Aviation, energy, engineering
and construction, environmental,
marine, renewables, political
violence and terrorism and
whole account
Gross premiums written ($m)1
Gross premiums written ($m)1
Gross premiums written ($m)1
Gross premiums written now exclude reinstatement premiums to ensure consistency with the IFRS 17 view of revenue
1.
2. Where appropriate throughout this report, comparatives for 2022 have been re-stated on an IFRS 17 basis
Conduit Holdings Limited | Annual Report and Accounts 2023
0236.7276.7020222023097.7186.40202220230288.1468.3020222023 4
Business model
A MODEL
WHICH
HELPS US
GROW
Our business model is designed
around our strategy, and is
fundamental to delivering long-term
value to our stakeholders.
Inception to 31 December
2023 estimated ultimate
premiums written
$2.1bn
Our vision is to maintain Conduit Re as a
leading reinsurance business with a global
reach, delivering sustainable long-term
returns through the market cycle.
Conduit Re offers a broad range of traditional and tailored proportional and
excess of loss reinsurance solutions to our clients on a worldwide or region-
specific basis within our Property, Casualty and Specialty portfolios.
People and talent
Our people with their
skills and expertise are
critical to the success
of the business.
Technology
We have invested in the
latest technology to
continuously improve
the business.
Capital
We are a well capitalised
business to help support
our growth strategy.
– A pure-play reinsurer in a
single location in Bermuda.
– A business with no conflicts
of interest with our cedants.
– An open culture where
knowledge transfer is
facilitated and collaborative
challenge is encouraged.
– Client, geography and
– Modern, modular technology
– A broad view to exploring
solutions in ever-changing
market conditions,
unhindered by legacy
systems and issues.
product neutral.
We enable fast, flexible and
informed decision-making.
to provide enhanced
portfolio insight.
We create a diverse, inclusive
and fun working environment.
– An integrated approach
to ESG, building this into
our operations, underwriting
and investment activities.
We deliver long-term
sustainable benefits for
our stakeholders.
Conduit Holdings Limited | Annual Report and Accounts 2023
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Strategy
OUR STRATEGY IS ROBUST
IN CHANGEABLE MARKET
CONDITIONS
The ability to act decisively and
make informed decisions while
remaining disciplined in deploying
our capital into the marketplace is
fundamental to our strategy.
The industry has experienced several
significant events and challenges in a
relatively short time span, such as the
COVID pandemic, the rapid rise and
ongoing impact of inflation on prior year
reserves and on claims costs, a run of
above average losses from natural
catastrophes, and the ongoing conflicts
in Ukraine and the Middle East.
Strategy alignment
We are well positioned in this new
environment, as we can explore solutions
in ever-changing market conditions,
unhindered by legacy systems and issues.
Climate change is increasingly impacting
the market. The frequency and severity
of natural peril losses are on the rise. The
increasing use of ‘named peril’ coverage
should enable a more realistic assessment
of natural peril risk. In 2023, across the
board, we saw a move towards greater
transparency and clearer definitions in
the reinsurance treaty market.
Strategy alignment
Greater clarity around natural peril risk
pricing and definitions helps us identify
the relative value in the reinsurance
product chain and technically underwrite
a balanced and diversified portfolio: our
core underwriting philosophy.
Inflation and rapidly increasing interest
rates, following a prolonged low interest
rate period, has caused significant
volatility in the investment markets and
increased liquidity and credit risks.
Resulting mark-to-market movements
have been a notable feature in the
(re)insurance industry, and wider
financial markets, in recent years.
Strategy alignment
Our strategy is to assume risk in our
underwriting and to seek to protect
our asset base to maximise solvency
capital and, consequently, we will
continue to invest conservatively,
maintaining a lower-risk profile with
high average credit ratings and
relatively low duration.
A fundamental shift in the pricing and
underwriting of risk is generating a
supply versus demand imbalance,
particularly in the shorter-tail risks, driving
the market to embrace both a significant
increase in premium rates and, crucially, an
improvement in the terms and conditions
being offered.
Strategy alignment
As a pure-play reinsurer who is client,
geography and product-neutral, with no
conflicts of interest with our cedants, we are
perfectly positioned to address this
imbalance to generate long-term sustainable
benefits for our stakeholders, thanks to the
strength of our diversified portfolio.
Conduit Holdings Limited | Annual Report and Accounts 2023
6
KPIs
OUR KEY
PERFORMANCE
INDICATORS
Gross premiums written1 ($m)
RoE
378.8
IFRS 4
IFRS 4
IFRS 17
IFRS 17
637.5
622.5
931.4
IFRS 4
IFRS 4
IFRS 17
IFRS 17
-9.1%
-4.0%
-4.4%
22.0%
In its third year of underwriting, Conduit has
continued its growth across all segments, benefiting
from new business, high retention and underlying
growth of renewal business, coupled with improving
rates. Client count and submission flow have
increased as we expand our footprint.
Conduit reached a level of scale and maturity in its
third year of underwriting, and with a higher yielding
investment portfolio, it was better able to withstand
above average industry loss levels and ongoing
volatility in the investment markets and generate
a very healthy RoE.
Total net investment return
Total shareholder return
Combined ratio
Net tangible asset value per share (NTAVS)
($m)
-0.3%
-5.0%
-12.2%
5.5%
16.4%
5.8%
IFRS 4
IFRS 4
IFRS 17
IFRS 17
119.4%
107.0%
103.0%
72.1%
IFRS 4
IFRS 4
IFRS 17
IFRS 17
5.93
5.08
5.41
6.25
After the significant increases in US interest rates in
2022 – which drove the negative performance for
that year – Conduit now has a generally higher
yielding investment portfolio to drive positive
performance. The Company also benefited from
the rate rally in the fourth quarter of 2023.
Despite general malaise in the UK stock market,
Conduit was able to generate a positive TSR given
its strong results and supported by its interim and
final dividends. As a comparison, over the same
period the FTSE100 and FTSE250 delivered +3.8%
and +4.4% respectively.
The combined ratio reflects the Company
completing its third year of underwriting and
therefore relative maturity in earnings, strong
underwriting performance due to superior risk
selection, greater ability to cover operating
expenses and the benefit of discounting from
the introduction of IFRS 17.
The increase in NTAVS was due to strong
comprehensive income generated for the year, less
dividends paid by the Company during the year.
1. On transition to IFRS 17 the definitions of some additional performance measures have been updated as presented on page 154. Comparatives for 2022 have been re-stated on an IFRS 17 basis. Prior to IFRS 17 implementation the numbers
were presented on an IFRS 4 basis.
Conduit Holdings Limited | Annual Report and Accounts 2023
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Executive Chairman's statement
“Our efficient underwriting
platform and strong
balance sheet put us in
a wonderful position to
continue our planned
growth in exceptional
market conditions.”
Neil Eckert
Executive Chairman
M
Performance
I am particularly pleased to present Conduit’s
2023 results as they denote a significant
milestone in the development of the business.
Conduit was only formed three years ago, yet,
with comprehensive income of $190.8 million,
2023 is when we truly started to reap the
benefits of the strategic decisions and the
hard work done by Trevor and the rest of the
Conduit team during those first three years.
As earnings start to mature, we still have a
very strong pipeline of unearned premium,
and we have shown strong growth in gross
premiums written while enjoying exceptional
market pricing. We pride ourselves on being
a pure-play, single location reinsurer that has
built a platform for organic growth and has the
capital base to support its business on an
ongoing basis.
We are maintaining our dividend at $0.18 per
share making it $0.36 per share for the full
year (approximately 28 pence).
Conduit Holdings Limited | Annual Report and Accounts 2023
8
Executive Chairman's statement continued
Market
Market conditions remain exceptionally strong.
In some primary markets there are still acute
shortages of capacity. For example, several of
the large, regulated insurance providers are
pulling back in some geographies and types
of risks. This is often referred to as a structural
shift in the way that insurance business is
conducted especially in the US. The market
is also grappling with the difficult issue of the
'Protection Gap', which is the difference
between the insured versus economic loss
on major catastrophic events. The market
perception is that less than half of the
economic value of major losses are insured.
This gap will only worsen as the major
insurance providers try to protect themselves
through increased deductibles and new
exclusions, which is serving to drive more
business into the non-admitted market.
People
Over the course of 2023 we added talent and
diversity across all areas of Conduit’s business,
increasing leadership, expertise and depth.
Conclusion
These results are a significant step forward for
Conduit and our top-line growth is well ahead
of original projections at the time of the IPO.
It only remains for me to thank Trevor, the
entire Conduit team, our brokers, customers
and shareholders. Conduit is now established
as a business that is well placed to generate
strong investor returns and we are excited
about our prospects.
Neil Eckert
Executive Chairman
27 February 2024
At Board level, we welcomed Rebecca Shelley
as a Non-Executive Director. Rebecca brings a
wealth of public company experience. Along
with extensive knowledge of financial services,
she has a strong background in investor and
public relations and in sustainability. She is the
senior independent director of one other UK
public company.
Four out of nine Board members and over half of
our staff are female; only one way in which we
evidence our diversity. We also maintain an open
and collaborative culture, led by a demonstrably
accessible executive team. With only 59 staff we
can maintain a flat structure that makes decision
taking and execution simpler than in large
multinational organisations.
Brian Williamson will step down from the Senior
Independent Director role in February 2024, and
will be replaced by Rebecca Shelley. He will
however continue to serve on the Board as a
Non-Executive Director and Chair of the
Remuneration Committee until CHL's AGM on
15 May 2024, when he will step down from the
Board having served a three-year term.
Brian joined the Board at Conduit's formation
in 2020 and I am deeply grateful to him for
his wise counsel as Senior Independent
Director and for his contribution to
Conduit's establishment.
Dr. Richard Sandor stepped down from the
Board in November 2023. Richard joined the
Board of CHL at the time of the Company's
IPO in December 2020, shortly after Conduit's
formation and I would also like to thank him
for his contribution during our formative first
three years.
Our corporate values and work ethic, in my
opinion, make Conduit a great place to be.
The hard work that has been required to get
the business to where it is today cannot be
underestimated and, while there has been a
huge amount of work in underwriting, the
work then must flow right through the
organisation ably supported by operations,
finance, modelling, actuarial, risk, HR and legal
and compliance. Simply put, the team have
delivered on all fronts.
We aspire to the values expected by our
investors, especially as they relate to ESG.
But it is not about words, and one of the
outstanding achievements for the year has
been our charitable activity exclusively in
Bermuda, which we highlight in the ESG
section of this Annual Report. My thanks go
to the ESG Committee and the Board for
their oversight and for ensuring that these
values are deeply embedded across all areas
of our business.
Conduit Holdings Limited | Annual Report and Accounts 2023
9
CEO's report
"Over the year we saw the
benefits of the long-term
strategic calls we have
made which were designed
to deliver a robust and
scalable platform."
Trevor Carvey
CEO
Introduction
In last year’s report, I said that the industry
developments we had seen since 2020
presented a 2023 landscape that was well
beyond the original expectations we had
when Conduit was formed. I also said that
our team, pulling together from one location,
was ideally positioned to respond to the
favourable market conditions, and so it has
proved. We were quietly confident that we
were experiencing a broad reinsurance
market correction in our favour, and what
we witnessed in 2023 was a fundamental
shift in risk versus return metrics, which
presented opportunities for us to accelerate
our growth plans.
A significant aspect of our strategy is
proactive cycle management which we believe
will drive superior returns over time. Over the
last three years the industry has experienced a
number of major events and challenges, such
as the COVID pandemic, the rapid rise and
ongoing impact of inflation, a run of above
average losses from natural catastrophes and
then the ongoing conflicts in Ukraine and the
Middle East. Not exactly an unprecedented
series of consecutive events, but nonetheless
a considerable change in the landscape for
insurers and reinsurers alike to contend with.
In our view, being able to adapt readily to such
a changing landscape is what a successful
reinsurance business should do, and I am proud
that the Company was swiftly able to align our
risk appetite through this period to protect and
improve our position. This was achieved through
a series of both pre-emptive actions, and, at
other times, defensive actions, in a relatively
short space of time. As we moved through 2023,
we took comfort also from the underlying
performance and underwriting contribution from
the 2021 and 2022 underwriting years. 2023 was
indeed a good year at Conduit and the continued
optimisation of the portfolio, along with the
strength of our diversified platform, was very
evident as we produced a very profitable result.
2023 performance
In 2023, our gross premiums written grew by
49.6% to $931.4 million and on an estimated
ultimate premiums written basis by 49.9%
to $966.6 million. Our overall result was
comprehensive income of $190.8 million or
$1.19 per share. We achieved a combined
ratio of 72.1% and reinsurance service result
of $183.6 million. This was an excellent
performance by the team in only our third
year of underwriting, particularly in another
year of above average industry losses, where
natural peril losses were estimated to be more
than $100 billion. This marks the sixth year
since 2017 where this annual threshold has
been exceeded.
Our performance in 2023 stems from our
commitment to being wholly focused on
smart, disciplined underwriting and is evidence
that we are delivering a growing business
respected for its risk selection, partnerships
and underwriting integrity.
The growth in premiums in 2023 was spread
right across our three divisions of property,
casualty and specialty and was broadly in
line with our previously communicated
commitment earlier in the year to skew our
resources and capacity towards growing more
in the property and specialty sectors where
higher returns are more readily present. Our
casualty division also had a solid year by
building on the renewals and core contract
base we have had in place since 2021 and we
saw opportunities to continue to grow and
build that book with our existing clients plus
some new opportunities.
We were able to capitalise on favourable
conditions in the ILS space and successfully
sponsored the Stabilitas Re catastrophe bond
structure. The resulting attractively priced
three-year collateralised reinsurance cover
complements Conduit Re's existing outwards
reinsurance protection.
We ended 2023 by delivering an RoE of 22.0%
for the year, compared with (4.4)% in 2022.
The Company’s net tangible asset value per
share increased from $5.41 to $6.25 in 2023.
Conduit Holdings Limited | Annual Report and Accounts 2023
10
CEO's report continued
Investments
Beyond underwriting, in contrast to 2022,
our 2023 results were favourably impacted by
the performance of our investment portfolio,
with an investment return of 5.8% mostly
driven by a higher yielding portfolio as we
took advantage of some of the higher rates
available on reinvestment. The 2022 results
were affected by the impact of the increased
interest rates on our invested assets, with an
investment return of (5.0)% mostly driven by
a mark-to-market effect over the 12 months of
$(67.8) million. By comparison, the mark-to-
market effect over the 12 months of 2023 was
$30.6 million. Our invested assets at the end
of 2023 were $1.2 billion versus $1.0 billion at
the end of 2022. In 2023, within our normal
portfolio monitoring and duration positioning
activities, we accumulated cash and reinvested
when opportunities presented themselves, and
we avoided realising losses unnecessarily.
We have always said that our strategy is to
assume risk in our underwriting and to seek
to protect our asset base to maximise our
solvency capital. Consequently, we will
continue to deploy our investments
conservatively, maintaining a lower-risk profile
with high average credit ratings (AA at the
end of both 2023 and 2022) and duration
(2.4 years at the end of 2023 and 2.2 years
at the end of 2022) positioned within a
reasonable range of our liabilities.
Reinsurance market conditions
In 2023, while the industry remained largely
unscathed from a large US land-falling
hurricane, it was the secondary perils events
that dominated the year’s catastrophe loss
reporting. In the US, the severe convective
storm total losses passed the $50 billion
insured level, significantly above historical
levels. Not only have these events apparently
become more frequent, but they are also
becoming more severe, with higher exposure
values and inflation all contributing to the
losses. The latest commentary from cedants
and the broader industry press suggests that
the primary insurers have felt, and are
continuing to feel, squeezed by events
probably more than the reinsurers. With
attachment points on catastrophe excess of
loss programmes moving higher through the
year, coupled with changes to terms and
conditions and generally more limited
reinsurance capacity, primary insurance
writers are absorbing more of the losses
this time around.
When I am asked to summarise our
perspective on the general market
fundamentals in 2023, I turn back to the
comments we made in our quarterly updates
on the way in which we view the relative
attractiveness of the different business classes.
When prioritising the opportunity value, we
used the phraseology of property being the
most attractive, then specialty followed by
casualty. Although somewhat simplistic, this is
a good way to think about how the market
overall has presented itself to Conduit in 2023,
and indeed we think will probably continue to
do so for some time to come.
In the alternative asset space, macro
influences drove some major shifts in
allocations with investors rebalancing after
falls in the valuation of bond and equity
portfolios. One consequence, relevant to the
property catastrophe market, was inflows to
catastrophe bond funds, where price increases
were evident following Hurricane Ian, which
made land-fall in September 2022, with some
subsequent catastrophe bond price softening
evolving though the second quarter of 2023.
Our approach has been, and continues to be,
to back those insurers with track records of
sensible risk selection and exposure
management, and we firmly continue to hold
the view that the margins available, especially
in the specialty non-catastrophe area, remain
attractive to a diversified strategy portfolio.
Similar to the approach we have taken on our
property business, we seek to not over-extend
the portfolio to a specialty risk loss event.
Therefore, our growth in the specialty lines has
been measured and we have maintained
consistency in the overall portfolio balance
through 2023.
We see continuing access to and growth of
this accretive/non-catastrophe specialty book
as important to our success over time.
Turning to casualty, economic and social
inflation have been been doing their job,
reminding the industry of the need to price
adequately and reserve for ongoing
inflationary loss trends. This feature
significantly underpinned the casualty market’s
discipline through 2023. Still dealing with
inadequate reserving for 2019 and prior years,
the casualty market saw well-funded litigation
and significant settlements in 2023, all of
which is pointing to another rebound in pricing
and potentially a return to casualty rate
increases in 2024.
Capital management
In 2023 we continued to deploy our capital
to support growth. Our portfolio mix is less
capital intensive than we initially planned for,
supporting accelerated growth. Absent
unexpected events we expect Conduit Re
to reach its normal operating target BSCR
solvency ratio range of 200% to 300% within
a three to five year planning horizon.
Further growth is supported within that target
range. Any retained earnings, after dividends,
would serve to add further support, with
sufficient buffers maintained to withstand
modelled catastrophe losses or mark-to-market
investment volatility. As at 31 December 2023
Conduit Re’s estimated BSCR coverage ratio is
381% compared with 404% at the end of 2022.
Total capital and tangible capital available to
Conduit was $0.99 billion at 31 December 2023
versus $0.87 billion at the end of 2022.
Conduit Holdings Limited | Annual Report and Accounts 2023
11
CEO's report continued
ESG
Conduit Re remains committed to being
a responsible business and we engage
proactively with key stakeholders to
understand what is important to them from an
ESG perspective. As well as consulting with
our investors, consulting with our employees
and with local community organisations forms
part of our engagement process. Our 2022
ESG materiality assessment and details of our
engagement activities were set out in our first
standalone ESG report published on our
website in 2023. Details of our 2023 ESG
engagement process is included in this Annual
Report and Accounts and in the standalone
2023 ESG report which is available on our
website. Our reporting on ESG seeks to be
transparent in setting out our considered
approach as to what we do and why we do it.
Being responsible and engaged with our
people and our wider community is important
as we seek to attract and retain the very best
talent and to be an employer of choice.
Beyond Conduit’s support of social and
environmental causes through our Foundation,
I was proud and delighted of the support our
team gave Stuart Quinlan, my deputy CEO and
our Chief Operations Officer, as he delivered
on his ambition to bring a Gala of Giving to
Bermuda. Under his leadership, and supported
by Conduit and many other Bermuda
businesses, a very successful charitable event
was organised, raising much needed additional
funds for many of the Bermuda charities that
our own Foundation has also supported.
People & operations
I admire the strides we have made across the
operational and people aspects of our
business in 2023 and there are many
successes that contribute in that regard, for
example: the successful implementation of
additional systems; the building of new models
for pricing or capital management; and
supporting new cedants or growing an
existing business relationship.
Our finance team successfully implemented
the accounting changes arising from IFRS 17
and, to a lesser extent, IFRS 9. While the
implementation of these new standards has
impacted the look of our financial statements
and disclosures, it did not, and will not, impact
Conduit’s underwriting strategy or underlying
economics.
One key foundation of these successes has
been our drive to ensure that we employ and
embed within our respective teams individuals
with integrity and who bring high-quality
technical knowledge. In 2023 we welcomed
Peter Kiernan to head our property team,
Mario Binetti to head our casualty team and
Paige Gell as Assistant General Counsel to
name a few, and there were a number of
promotions, such as Alex Bateman to Chief
Accounting Officer. We continued to add
further talent to increase the resources and
expertise across all functional areas of our
business. At the end of 2023 we had 59
employees, up from 54 at the end of 2022.
Additionally, our commitment to diversity and
inclusion aligns with our core values and is
reflected in our Diversity and Inclusion Policy.
Diversity and inclusion are not limited to any
one of our practices and policies singularly but
are reflected in all that we do within our
business. We strive to create an environment
which embraces differences and fosters
collaboration and inclusion, where everyone’s
voice is heard. We encourage our people to be
inquisitive in the execution of their roles and
always seek to improve and challenge the
status quo. We believe this will support us
to achieve our vision to create value for our
cedants, colleagues, business partners and
shareholders. The results of our annual
employee engagement survey in 2023 were
positive, and I am pleased with the quality of
feedback from our employees. We continue
to listen to feedback from our staff and take
action where needed on policies, technology,
training or staffing to ensure we continue to
create and maintain a great business.
Outlook
Our ability to react quickly, to offer proactive,
disciplined solutions and to adapt to the
rapidly changing environment is how we
engage in the reinsurance marketplace. It is
also key to us actively managing our exposure
footprint and in that regard we are seeing
greater transparency in the sharing of data
from insurer to reinsurer as we move forward.
Systems are now able to 'talk' more readily to
each other and this improved data exchange
certainly gives us encouragement as we move
forward enabling clearer longer-term research
and analysis around the risk transfer
transaction.
On the topic of new capital, we see elements
re-entering at the more remote, pure
catastrophe-modelled end of the property
reinsurance chain and while we do not play as
heavily in this space, it will likely dampen high-
end catastrophe rate increases slightly.
Despite this, the current broader property
landscape remains a very good place to be
operating in as a reinsurer in our view.
Geopolitical factors always need to be
considered when underwriting and a prudent
approach is to remain watchful of current
conflict events and also remain alert to other
potential conflicts across the globe. We in turn
track such events and it informs our decisions
on deploying capacity in certain regions as we
move forward.
In August 2023, the Bermuda Government
announced a consultation on the
implementation of a corporate income tax
in Bermuda, aligned with the OECD’s global
minimum tax initiative model rules. This
initiative has moved on rapidly and enabling
legislation was passed in December 2023.
The new tax is scheduled to apply to
qualifying entities from 1 January 2025. Given
Conduit’s limited international presence, we
have initially concluded that Conduit will likely
be exempt from any associated taxation for at
least five years after it would otherwise apply.
Conduit Holdings Limited | Annual Report and Accounts 2023
12
CEO's report continued
To our employees, I wish to thank you for
delivering on our goals and for your drive to
always seek to improve on what we do and
how we deliver products to our customers.
We have an efficient structure operating
decisively from our Bermuda location with a
very motivated and highly-engaged workforce.
To our clients and brokers with whom we
engage daily, thank you for your support and
the team look forward to developing these
relationships further for our mutual benefit
as we head in to 2024.
Finally to our shareholders, we thank you for
the continued investment and support as we
build the business and for providing your
valuable feedback along the way. The business
is in a great shape as we enter 2024 and I have
every confidence that we are in a strong
position to deliver the value expected of us
by our stakeholders.
Trevor Carvey
CEO
27 February 2024
Conduit Holdings Limited | Annual Report and Accounts 2023
13
CUO's report
"The team continues to
apply themselves to
researching, identifying and
responding to opportunities
across each of our divisions
and the base knowledge of
their underlying insurance
risk was key to this at every
stage of the process."
Greg Roberts
CUO
Underwriting approach
We adhere to the principle that reinsurance
underwriting at Conduit was founded on,
which is a solid technical understanding of
the underlying insurance risk.
Throughout 2023 we continuously improved
both our use of technology and its
interconnectivity across underwriting, pricing
and exposure management.
This relationship with data is achievable due
to the cedant partnerships we have formed.
In fact, it is a major requirement for us to
engage in any business proposal. The sharing
of the most granular of insurance exposure
information is paramount to understanding
with confidence the risks which we are
reinsuring.
As an example of our digital data collection,
we hold information on over six billion
individually identified property locations.
This volume of data continues to grow over
time. It enables us to allocate and refine the
deployment of our capital and make the
best underwriting decisions to deliver on
our strategy.
wide range of sources, regions and classes, all
from our one location in Bermuda, has been
key to the delivery of our results.
from flat to marginally negative towards the
end of the year.
Underwriting performance
Our estimated ultimate premiums written in
2023 were $966.6 million compared with
$644.8 million in 2022 – an increase of
49.9% over the same period. Gross premiums
written for the year ended 31 December 2023
were $931.4 million (31 December 2022:
$622.5 million).
Estimated ultimate
premiums written ($m)
Gross premiums
written ($m)
The market has remained generally favourable
for us to grow into and our strategy of
technical ground up underwriting has served
us well in understanding where the better
margins lie in the value chain.
Turning to the broader accumulation
management around the business, we
continued to purchase outwards reinsurance
protection on our portfolio. We grew our panel
of reinsurers and increased the limits
purchased in line with the growth of the
overall portfolio and in line with our plan.
During the year there were a number of
industry loss events including a series of
severe convective storm losses in the US,
floods in New Zealand, the Turkey earthquake
and the Maui wildfire losses. None of these
events either individually or in the aggregate
had a material impact on our business and
fell within our broad pricing parameter
assumptions. The portfolio was in a strong
position to handle these claims through
the year.
Conduit Holdings Limited | Annual Report and Accounts 2023
Broker engagement and distribution
In 2023, we continued expanding on our
broker and client relationships. As a result, the
overall business volumes and policy count
increased across all three of our divisions of
property, casualty and specialty. The ability to
access both renewal and new business from a
Throughout 2023 we saw a healthy
reinsurance marketplace, with rate adequacy
remaining generally strong across all three
divisions. We observed positive risk-adjusted
rate change in property and specialty.
Casualty risk-adjusted rate change moved
644.8966.620222023622.5931.420222023 14
CUO's report continued
Property
In property, estimated ultimate premiums
written in 2023 were $485.4 million compared
with $307.7 million in 2022, representing an
increase of 57.8% over 2022. Our risk-adjusted
rate change in 2023 in our property division,
net of claims inflation, was 30% (2022: 7%).
Gross premiums written for the year ended
31 December 2023 were $468.3 million
(31 December 2022: $288.1 million).
Estimated ultimate
premiums written ($m)
Gross premiums
written ($m)
Property estimated ultimate premium split (2023)
(All property)
l Commercial lines 60%
(2022: 62%)
l Personal lines 40%
(2022: 38%)
We saw greater opportunities in proportional
reinsurance in the US non-admitted (or 'excess
& surplus') area of the market, where the rate
adequacy was again very strong in 2023. We
were able to build on our renewing 2022 book
of non-admitted business, which had itself
been the beneficiary of rate rises and
improvements in policy terms and conditions.
Away from the US, we have deliberately been
underweight in our allocation of capacity to
Europe since we began underwriting in 2021.
However, a number of loss events in Europe,
such as storms in Belgium and France, storms
and flooding in Italy and the UK, and the
earthquake in Turkey all served to stabilise the
market making it more attractive to us.
(All property)
l Catastrophe 60%
(2022: 59%)
l Non-catastrophe 40%
(2022: 41%)
On the excess of loss side, increases in
property values continue to drive demand
for increased catastrophe limits and, with
continued growth in population and urban
expansion, it required us as a reinsurer to
adapt on a continuing basis our modelling
systems to account for the changing trends
and shifts in the exposure base. Our cloud-
based exposure management software is
integral to this endeavour and we believe is a
key differentiator of Conduit Re's management
of property accumulations across the globe.
Early in the year, market pressures led to
reinsurance treaties within the same
programmes being offered for placement with
different terms and conditions. As the year
progressed, a more orderly approach to
acceptable concurrent exclusionary language
was applied for all parties.
At the same time, we continued to underwrite
other property classes in the US, such as
admitted lines and pure catastrophe excess of
loss, where our focus was on underwriting
business with regionally restricted exposures
ahead of the more broad nationwide or multi-
country exposed programmes.
This approach results in a portfolio balance
with more manageable peak zone
accumulations.
Conduit Holdings Limited | Annual Report and Accounts 2023
307.7485.420222023288.1468.320222023 15
CUO's report continued
Casualty
In casualty, estimated ultimate premiums
written in 2023 were $280.8 million compared
with $234.4 million in 2022, representing an
increase of 19.8% over 2022. Our risk-adjusted
rate change in 2023 in our casualty division,
net of claims inflation, was 0% (2022: 1%).
Gross premiums written for the year ended
31 December 2023 were $276.7 million
(31 December 2022: $236.7 million).
Estimated ultimate
premiums written ($m)
Gross premiums
written ($m)
Specialty
In Specialty, estimated ultimate premiums
written in 2023 were $200.4 million compared
with $102.7 million in 2022, representing an
increase of 95.1% over 2022. Our risk-adjusted
rate change in 2023 in our specialty division,
net of claims inflation, was 9% (2022: 2%).
Gross premiums written for the year ended
31 December 2023 were $186.4 million
(31 December 2022: $97.7 million).
Estimated ultimate
premiums written ($m)
Gross premiums
written ($m)
Casualty estimated ultimate premium split (2023)
(All casualty)
a drop off in underlying risk-adjusted rate in
the second half of 2023.
l Commercial lines 100%
(2022: 100%)
l Personal lines 0%
(2022: 0%)
Casualty sub-classes, such as public
directors & officers insurance and some
professional lines, are examples of where
rates have weakened.
In casualty we see many submissions through
the year and continue to have a relatively
low ratio of policies bound versus total
submissions received, continuing our highly
selective approach to supporting the best-in-
class cedants. With this approach, we have
established a strong group of core casualty
cedants that we support and we work closely
with to understand how they are responding
to the challenges of both increased inflation
and litigation. We track closely how they are
adapting their risk selection, line size
management, limit deployment and pricing
approach to mitigate these impacts.
We were pleased to welcome Mario Binetti
to our team as Head of Casualty, responsible
for both our US and international casualty
business.
(All casualty)
l Casualty general third-
party liability 57%
(2022: 54%)
l Casualty professional
liability/financial
institutions 26%
(2022: 36%)
l Casualty miscellaneous
lines 17% (2022: 10%)
The casualty market in 2023 was driven by the
continuing effects of the increased economic
and social inflationary pressures that emerged
in 2022, exacerbated for those insurers with
historical portfolios. There were a number of
companies that announced significant
increases in reserving as they continued to
grapple with prior year reserving deterioration,
particularly for 2019 and earlier. Consequently,
underlying casualty pricing has remained
relatively strong overall, although we did see
Conduit Holdings Limited | Annual Report and Accounts 2023
102.7200.42022202397.7186.420222023234.4280.820222023236.7276.720222023
16
CUO's report continued
Specialty estimated ultimate premium split (2023)
(All specialty)
l Commercial lines 98%
(2022: 98%)
l Personal lines 2%
(2022: 2%)
(All specialty)
l Energy & Power 29%
(2022: 50%)
l Marine 19%
(2022: 37%)
l Other 52%
(2022: 12%)
The political violence and terror sub-classes
remain challenging and we continued to be
careful on how we deployed capacity into
those spaces through 2023. Globally there
were a number of political and socio-economic
circumstances and as such the political
violence space remained one we watched with
a cautious interest.
We secured an increase in cedants in the
marine and energy sub-classes, although we
saw a range of pricing levels. Marine hull and
marine liability remained subdued from a
rating perspective and so we allocated less
capacity into those lines.
Renewable energy is a growing class generally
as investment in the renewable energy
industry increases globally. We deployed
capacity into the sub-class where the
exposure met our risk appetite and margin
expectations.
In the aviation classes we had limited
involvement, although we did see some
positive market movements in rate and a
tightening in terms and conditions. The
aviation war contracts have shown material
rate uplift since Russia's invasion of Ukraine,
However, our view was that the base dollar
premiums paid for aviation war coverage,
while increasing substantially through 2023,
were not significant enough for us to allocate
our capacity in any meaningful way.
Looking ahead
As we look forward to 2024, we remain
resolute in our underwriting discipline and
active cycle management. In 2023 we have
shown that discipline in the evolving profile of
our portfolio. This is against a complex set of
drivers across supply and demand, and a
backdrop of elevated inflation. The data we
collect supports our analysis whilst our
working style and internal metrics allow us to
respond efficiently to dynamic conditions,
supported by our valued partners from the
broking community.
Our successes in 2023, evidenced by the
programmes we have greater participation in,
the new business we are on and the further
strengthening of our team, all support our
continuing and unrelenting focus on making
data-driven decisions. This positions us well to
write our target business which is designed to
deliver strong profitability over time. I look
forward to 2024.
Greg Roberts
CUO
27 February 2024
Conduit Holdings Limited | Annual Report and Accounts 2023
17
CFO's report
"Our third year of
underwriting saw us
accelerate against our
original 2020 IPO plan."
Elaine Whelan
CFO
Our third year of underwriting saw us accelerate
against our original 2020 IPO plan. With
estimated ultimate premiums written for 2023
of $966.6 million, bringing us to $2,063.5 million
from inception, we are now $208.5 million ahead
of that original plan. While market conditions
have been more favourable than we had
anticipated, our third year is when we expected
to reach a level of scale and maturity in our
earnings and that has very much proved to be
the case.
Our earnings base now has much more ability to
absorb losses and cover our expenses. 2023 has
been described in the industry press as (yet)
another above-average industry loss year.
However, 2023 was a year of accumulation of
smaller loss events, which made it distinct from
the last few years. There was a lack of any
individually significant loss events and an
increase in impact from secondary peril events,
such as tornadoes in the US. While Conduit as a
writer of quota share agreements has picked up
some losses from those events, we did not have
any losses that were material to Conduit either
individually or in the aggregate and we are
protected from more significant losses by the
inclusion of event caps and limitations in our
terms. Our loss ratio for 2023, on an
undiscounted basis, was 68.0% and our
combined ratio, also on an undiscounted basis,
was 81.9%. Our pure underwriting profit was
$183.6 million. That compares to the prior year
undiscounted loss and combined ratios of 94.7%
and 109.3% respectively, which reflected the
stage of development of Conduit plus the
impact of Hurricane Ian and the conflict in
Ukraine. Hurricane Ian was the second-largest
industry catastrophe loss event ever. It is worth
noting that Conduit's undiscounted net losses,
after reinsurance and reinstatement premiums,
for these two events of $40.9 million and
$24.6 million respectively, as at 31 December
2022 remained broadly stable.
While 2022 saw unrealised losses on our fixed
maturity investment portfolio due to the rising
interest rate environment, in 2023 we saw the
benefits of a higher-yielding investment
portfolio and a strong rate rally in the fourth
quarter of the year. Our net investment return
was 5.8% versus negative 5.0% in 2022.
Although there has been some minor re-
balancing of our portfolio, we have largely
allowed securities to mature and so some of the
unrealised loss generated in 2022 has unwound
over the course of the year. We have maintained
a short-duration, highly liquid, high-quality
portfolio with no risk assets, such as equities,
high-yield or alternative investments. While our
primary investment aim is capital preservation
and liquidity to support our underwriting
activities, we are well placed to take advantage
of the higher interest rates currently available.
While we have continued to investigate funds
or other investments that meet our risk
appetite and which also generate a positive
impact from an ESG perspective, we have not
yet found opportunities that have the right fit.
We have, however, appointed one additional
investment manager with additional ESG
criteria in their mandate.
IFRS 17 implementation finally happened in
2023. Conduit is a straightforward business,
without any legacy, so implementation of IFRS
17 for us was not overly complex relative to
others. Other than presentational differences,
the biggest impact to Conduit was from
discounting reinsurance liabilities. That
discounting also brought greater matching with
the asset side of the business although, while we
have not fully deployed our capital and our asset
duration is shorter than our liability duration in
the current environment, a degree of mismatch
remains. We noted in our 2023 interim results
that the opening equity impact of IFRS 17
implementation was $7.0 million. Discounting
amounted to $22.0 million in 2023, versus
$42.7 million in 2022, made up of $54.8 million
on incurred losses and loss related amounts
offset in part by $(6.8) million of re-
measurement to current rates plus the unwind
of prior discount of $(26.0) million. For 2022 the
amounts were $21.9 million, $26.9 million and
$(6.1) million respectively.
Lastly, as we continue to grow our book with
balance in mind, we have more than enough
capital to execute our plans. We continue to see
an excellent market ahead of us and we are
exceptionally well placed to build on our existing
relationships plus market-driven new business
opportunities.
Elaine Whelan
CFO
27 February 2024
Conduit Holdings Limited | Annual Report and Accounts 2023
18
Business review – finance
Premiums
Estimated ultimate premiums written
For the year ended 31 December:
Segment
Property
Casualty
Specialty
Total
Gross premiums written
For the year ended 31 December:
Segment
Property
Casualty
Specialty
Total
2023
$m
485.4
280.8
200.4
966.6
2023
$m
468.3
276.7
186.4
931.4
2022
$m
(re-stated)
307.7
234.4
102.7
644.8
2022
$m
(re-stated)
288.1
236.7
97.7
622.5
Change
$m
Change
%
177.7
46.4
97.7
321.8
57.8%
19.8%
95.1%
49.9%
Change
$m
Change
%
180.2
40.0
88.7
308.9
62.5%
16.9%
90.8%
49.6%
Pricing
Pricing levels and terms and conditions continued to improve in 2023 and we were presented
with an increasing number of opportunities to deploy our capital into the areas and products that
we target. The non-catastrophe elements of both Property and Specialty in particular provided
opportunities for selective growth.
Conduit Re's overall risk-adjusted rate change for the year end 31 December 2023, net of claims
inflation, was 16%, and by segment was:
Property
30%
Casualty
0%
Specialty
9%
Net reinsurance revenue
Year ended 31 December 2023
Reinsurance revenue
Ceded reinsurance expenses
Net reinsurance revenue
Year ended 31 December 2022
Reinsurance revenue
Ceded reinsurance expenses
Net reinsurance revenue
Property
$m
Casualty
$m
Specialty
$m
345.2
(66.9)
278.3
171.8
(1.3)
170.5
116.0
(8.5)
107.5
Property
$m
Casualty
$m
Specialty
$m
192.8
(40.5)
152.3
136.7
(1.2)
135.5
62.9
(6.9)
56.0
Total
$m
633.0
(76.7)
556.3
Total
$m
392.4
(48.6)
343.8
Reinsurance revenue for the year ended 31 December 2023 was $633.0 million compared with
$392.4 million for 2022. The increase in reinsurance revenue relative to the prior year is due to
continued growth in the business plus the earn-out of premiums from prior underwriting years.
Conduit Holdings Limited | Annual Report and Accounts 2023
Property
$m
Casualty
$m
Specialty
$m
Total
$m
Reinsurance operating expenses and other operating expenses
19
Business review – finance
Ceded reinsurance expenses for the year ended 31 December 2023 were $76.7 million compared
to $48.6 million for 2022. The increase in cost relative to the prior year reflects additional limits
purchased due to the growth of the inwards portfolio exposures plus price increases on renewals.
During the second quarter of 2023, Conduit Re sponsored the first issuance of a $100 million
catastrophe bond by Stabilitas Re Limited, which was placed successfully with strong investor
demand. The resulting three-year collateralised reinsurance cover complements Conduit Re's
traditional retrocession programme.
Net reinsurance service expenses
Year ended 31 December 2023
Reinsurance losses and loss
related amounts
Reinsurance operating expenses
Ceded reinsurance recoveries
(136.5)
(120.7)
(70.8)
(328.0)
(30.4)
4.6
(11.9)
0.2
(6.7)
(0.5)
(49.0)
4.3
Net reinsurance service expenses
(162.3)
(132.4)
(78.0)
(372.7)
Year ended 31 December 2022
Reinsurance losses and loss
related amounts
Reinsurance operating expenses
Ceded reinsurance recoveries
Property
$m
Casualty
$m
Specialty
$m
(142.9)
(16.7)
21.4
(116.1)
(8.5)
0.2
(73.5)
(4.4)
7.1
Total
$m
(332.5)
(29.6)
28.7
Net reinsurance service expenses
(138.2)
(124.4)
(70.8)
(333.4)
Net reinsurance losses and loss-related amounts
In an active natural catastrophe year for the industry, no major event loss, individually or
in aggregate, had an outsized or material impact on Conduit Re during the 2023 year.
Our discounted net loss ratio for the year ended 31 December 2023 was 58.2% compared with
88.4% for the 2022 year, while our undiscounted net loss ratio was 68.0% and 94.7% respectively.
The loss ratio for the prior year was impacted by our estimated ultimate net impact, on an
undiscounted basis, from Hurricane Ian of $40.9 million and the Ukraine conflict of $24.6 million.
Our undiscounted ultimate loss estimates, net of ceded reinsurance and reinstatement premiums,
for previously reported loss events remain stable. Our loss and reserve estimates have been
derived from a combination of reports and statements from brokers and cedants, modelled
loss projections, pricing loss ratio expectations and reporting patterns, all supplemented with
market data and assumptions. We will continue to review these estimates as more information
becomes available.
Year ended 31 December
Reinsurance operating expenses
Other operating expenses
Total expenses
2023
$m
49.0
28.3
77.3
Year ended 31 December
Reinsurance operating expense ratio
Other operating expense ratio
Total reinsurance and other operating expense ratio
2022
$m
29.6
20.7
50.3
2023
%
8.8
5.1
13.9
Change
$m
Change
%
19.4
7.6
27.0
2022
%
8.6
6.0
14.6
65.5%
36.7%
53.7%
Change
(pps)
0.2
(0.9)
(0.7)
Reinsurance operating expenses includes brokerage and operating expenses deemed attributable
to reinsurance contracts.
Total reinsurance and other operating expenses were $77.3 million for the year ended 31 December
2023 compared with $50.3 million for the prior year. The increase is due to the continued growth of
the business and increased headcount.
Conduit Holdings Limited | Annual Report and Accounts 2023
20
Business review – finance
The marginal increase in the reinsurance operating expense ratio was due to a larger proportion
of Conduit's operating expenses being deemed attributable to reinsurance operating expenses
as the business matures. The decrease in the other operating expense ratio was due to the
additional costs attributable to reinsurance operating expenses increasing, while the majority of
the decrease was due to the growth in net reinsurance revenue outpacing the increase in other
operating expenses.
Net reinsurance finance income (expense)
Year ended 31 December
Net interest accretion
Net change in discount rates
Net reinsurance finance income (expense)
2023
$m
(26.0)
(6.8)
(32.8)
2022
$m
(6.1)
26.9
20.8
Change
$m
(19.9)
(33.7)
(53.6)
The net reinsurance finance expense was $32.8 million for the year ended 31 December 2023
compared with income of $20.8 million for the prior year. The unwind of discount made up most
of the expense in 2023, although there was some expense related to the reduction in discount
rates in the latter part of 2023 as we re-measured at those lower rates. The opposite was true for
the income in the prior year as discount rates increased significantly and we re-measured at the
higher rates, but there was little discount to unwind.
Investments
We continue to maintain our conservative approach to managing our invested assets, with
a strong emphasis on preserving capital and liquidity.
Our strategy remains maintaining a short duration, highly creditworthy portfolio, with due
consideration of the duration of our liabilities. Our portfolio mix shows our conservative
philosophy (more information on the portfolio mix is set out in the charts on page 21 and
in the risk disclosures on page 110). Our asset allocation is dictated by our approved investment
guidelines. There are currently no risk assets held in the portfolio. Risk assets will generally
only be considered to diversify and protect the portfolio, and where the risk return profiles
are appropriate.
We currently have two portfolio categories – short-tail and long-tail – to match our underwriting
categories and the differing obligations associated with different classes of business across our
property, casualty and specialty divisions. Liquidity preferences are monitored for each.
Conduit’s cash inflows are primarily derived from receipts for fulfilling coverage of reinsurance
contracts, ceded reinsurance recovered from reinsurers and net investment income, plus the sale
and redemption of investments. Cash outflows are primarily the settlement of losses and loss
related amounts, payments for ceded reinsurance contracts held, payment of other operating
expenses, the purchase of investments and the distribution of dividends or other forms of capital
returns. Excess funds are invested in the investment portfolio.
As part of our investment strategy, we seek to maintain a level of liquidity that we believe to be
adequate to meet our foreseeable payment obligations. We believe that our liquid investments
and cash flow will provide us with sufficient liquidity to meet our obligations to settle losses.
However, the timing and amounts of actual claims payments vary based on many factors,
including large individual losses, changes in the legal environment and general market conditions.
Investment performance
The investment return for the year ended 31 December 2023 was 5.8% driven by investment
income given a generally higher yielding portfolio, and also a significant reduction in treasury
yields and narrowing of credit spreads during the fourth quarter. For 2022 the portfolio returned
(5.0)% mostly due to unrealised losses resulting from the significant increase in treasury yields.
Net investment income, excluding realised and unrealised losses, was $41.3 million for 2023,
compared with $17.8 million for 2022. Total investment return, including net investment income,
net realised gains and losses, and net change in unrealised gains and losses, was a gain of
$70.6 million for 2023 compared with a loss of $52.8 million in 2022.
The breakdown of the managed investment portfolio as at 31 December is as follows:
Fixed maturity securities
Cash and cash equivalents
Total
2023
87.7%
12.3%
2022
91.3%
8.7%
100.0%
100.0%
Conduit Holdings Limited | Annual Report and Accounts 2023
21
Business review – finance
Key investment portfolio statistics for our fixed maturities and managed cash as at 31 December
were:
Duration
Credit quality
Book yield
Market yield
2023
2022
2.4 years
2.2 years
AA
3.7%
5.1%
AA
2.4%
5.2%
Cash and investments credit ratings for
managed portfolio 2023
Cash and investments credit ratings for
managed portfolio 2022
l AAA 30.0%
l AA+, AA, AA- 39.8%
l A+, A, A- 22.5%
l BBB+, BBB, BBB- 7.7%
l AAA 58.2%
l AA+, AA, AA- 6.6%
l A+, A, A- 23.7%
l BBB+, BBB, BBB- 11.5%
ESG considerations are incorporated into our individual portfolio investment guidelines. We
believe that, all other things being equal, it is less risky to own securities with strong ESG ratings.
More information about the ESG approach to our investments is contained in the CFO’s report
on page 17 and in the ESG summary on page 29.
Capital and dividends
Conduit remains well capitalised to achieve its objectives with a legacy-free balance sheet.
Total capital and tangible capital available to Conduit was $0.99 billion at 31 December 2023
(31 December 2022: $0.87 billion). Further information on capital management is set out in the
risk disclosures on page 127 and in the financing arrangements on page 146.
Tangible net assets per share as at 31 December 2023 were $6.25 (31 December 2022: $5.41).
Conduit continued on-market purchases of its shares under a share purchase programme
where shares may be repurchased pursuant to authority obtained at Conduit's most recent
Annual General Meeting. Shares purchased by Conduit's EBT during 2023 amounted to $13.7
million (2022: $19.9 million) and will be held in trust to meet future obligations under Conduit's
variable incentive schemes.
Further details of the share repurchase scheme are set out in the Directors’ report on page 87
and in note 17 to the consolidated financial statements on page 147.
On 20 February 2024 Conduit’s Board of Directors declared a final dividend of $0.18
(approximately 14 pence) per Common Share, resulting in an aggregate payment of $29.7 million.
The dividend will be paid in pounds sterling on 24 April 2024 to shareholders of record on
22 March 2024 (the Record Date) using the pound sterling/US dollar spot exchange rate at
12 noon BST on the Record Date.
Conduit previously declared and paid an interim dividend during 2023 of $0.18 (approximately
14 pence) per Common Share. Consequently, the full 2023 dividend is $0.36 (approximately
28 pence) per Common Share in line with our stated dividend policy. Conduit’s dividend policy
and information on the final dividend declared in respect of 2023 can be found on page 45.
There is no debt and there are no off-balance sheet forms of capital.
Conduit Holdings Limited | Annual Report and Accounts 2023
22
Case study
A measured and intentional
approach to talent
acquisition
As we have noted previously, a team is
only as strong as its component parts
and, in that respect, we have been
deliberate, measured and focused when
targeting talent to join the business.
We have sought to focus on talent with
a broad range of knowledge and
experience underpinned by technical
skills and capabilities to deliver on our
aspiration to be data and solution
driven in all we do within the business.
Building a business that is scaleable and
has the right blend of talent and
experience is a key focus as we grow
the business. Closing out our third
underwriting year, the team has
strengthened from 54 to 59 employees.
Our deliberate approach to sourcing
talented individuals who add to the
diversity of thought and knowledge within
the team continues to strengthen our
whole business, building our depth and
operational resilience.
Our recruitment and selection strategy
mirrors our measured and technical
approach to assessing risk. Diversity of
thought is actively encouraged throughout
the interview and selection process; each
candidate meets with at least four staff
from the business before any hiring
decision is made.
This approach has and will serve us well
as we continue to grow our business.
“By design, we have focused
on building a diversified team
focusing on experience and
technical skills to support the
business through the cycle.”
Stuart Quinlan
COO and Deputy CEO
Conduit Holdings Limited | Annual Report and Accounts 2023
23
Enterprise risk management report
"Our deliberate and
proactive management
of risk and exposure
positions us to exceed
our prior growth
expectations.”
Andrew Smith
CRO
Prudent risk management in a world of
elevated risk
Long-standing emerging risk themes have
remained largely consistent, but the
imminence and expected magnitude make
matters more immediate. The World’s
progress on limiting climate change lags the
Paris Agreement; the risks and opportunities
of artificial intelligence are better understood;
while geopolitical risks are perhaps the highest
in a generation.
Against that backdrop, the importance of the
protection and risk-sharing our industry
provides has never been greater. As a treaty
reinsurer, Conduit Re is one step removed
from some of the insurance product
innovation we see. Where we innovate and
differentiate ourselves is on the management
of our underwriting portfolio and exposure
aggregations.
Aggregations very much in proportion
While exposure and aggregation management
is relevant to all our business lines, the one
that supports comparative analysis versus
peers is in relation to natural catastrophe
exposures. In this regard, we have
outperformed the plan set out at the time of
the IPO in that we have written more business
but with a lower level of modelled risk.
As we look ahead to 2024, based on our
approach of setting tolerances (in this instance
how much modelled catastrophe exposure
management can write without needing to
revert to the Board) as a percentage of
tangible capital, our tolerances increase to
$251 million gross ($95 million net) on a 1 in
100 basis and $391 million gross ($133 million
net) on a 1 in 250 basis. I note that this is
calibrated to a 1 July 2024 viewpoint, for a first
occurrence, and may change.
However, our business plan anticipates writing
less exposure than this, with the mean plan
anticipating net exposure on a 1 in 100 and 1 in
250 basis of $83.1 million and $93.3 million
respectively. In comparison to the 2023 plan
this represents an increase of $18.1 million on
the 1 in 100 and a decrease of $5.4 million on
a 1 in 250 basis. These measures are also
slightly lower than the revised 2023 targets
communicated to the financial markets in July
during the 2023 interim results presentation
and represent 8.4% and 9.4% of opening
tangible capital at the 1 in 100 and 1 in 250
return periods respectively.
Overall, our portfolio management techniques
are intended to manage volatility, while our
outwards reinsurance purchases are intended
to reduce the risk of balance sheet shocks. Our
decreased exposure at the more remote return
periods reflects the benefit of the catastrophe
bond which we sponsored during 2023 and
provides committed capacity for a three-year
period. This supplements our traditional
reinsurance protections, which address
natural perils, casualty clash and specialty
accumulations. Outwards counterparties
remain high quality and are individually
approved by our Counterparty Security
Committee.
Capital
While modelled catastrophe exposure is
a factor in our capital requirements1, it has
a relatively low impact in comparison to
premium risk and reserve risk. Our estimated
BSCR coverage ratio at 31 December 2023 is
381%, down from 404% at 31 December 2022
as we continue to deploy our capital. The
decrease is mainly driven by increased
premium and reserve risk which are offset in
part by retained earnings.
Capital requirements are a complex topic with
many variables and alternate views. The
current business plan anticipates that retained
earnings will start to outpace increasing
capital requirements within a three-to-five-
year planning horizon, settling to a BSCR
coverage ratio of between 200% and 300%,
which is our target operating range.
At this level, our available capital would
exceed required BSCR capital by more than
twice our modelled target 1 in 250 net PML
across the planning horizon. Our BSCR
coverage ratio would, as intended, position us
very much in the pack in comparison to other
Class 4 Bermuda (re)insurers. It is important to
note that the BSCR coverage ratio is one of
many views of capital adequacy, with other
1.
All references to capital requirements, both regulatory and rating agency, refer to CRL only as CHL is a pure
holding company.
Conduit Holdings Limited | Annual Report and Accounts 2023
24
Enterprise risk management report continued
regulatory ratios, rating agency models and
our developing internal capital model also
being relevant.
Risk profile
Despite the wider turmoil in the World, our
analysis of our own material risks generally
shows improvement as reflected in the table
on the next page, which articulates our
appetite and our current view on the
associated risks.
As ever, underwriting risk remains the risk that
we seek and is our primary risk. Our toolset in
this regard remains strong, with our freedom
from legacy constraints and Conduit Re's
relative organisational simplicity being our
key differentiators.
Operationally, we are stronger. Staffing
increased from 54 to 59 during 2023, and we
see this in a further reduction in the number
of risk events (of which none had a significant
impact) featured in my quarterly reports to
the Board. We have also taken the opportunity
to upgrade our underwriting policy
administration system, which has gone
smoothly as did our IFRS 17 implementation,
the other major project of the year.
Our investment risk philosophy remains
unchanged and delivers lower volatility than
we see reported by some peers.
Regulatory, rating agency and tax
considerations, while generally a topic of
interest for our industry have a largely muted
potential impact on Conduit.
Risk governance
The Board is required under The UK Code to
establish procedures to manage risk, oversee
the internal control framework, and determine
the nature and extent of the principal risks the
Company is willing to accept in the context of
achieving its long-term strategic objectives.
To this end, the Board is supported by the
CHL Audit Committee and the CRL Board and
committees, most notably the CRL Risk,
Capital and Compliance Committee.
The Board prescribes risk preferences that
guide the CRL Board and committees as they
establish risk appetite and tolerance
statements. The Board also monitors the
effectiveness of the overall enterprise risk
management framework, leveraging the work
undertaken by the CRL Board
and committees.
CHL Directors are invited to attend CRL
Board and committee meetings and are
provided with the associated materials and
minutes. In addition, four CHL Independent
Non-Executive Directors also serve as
Directors on the CRL Board.
CRL operates under a ‘three lines of defence’
risk management model, with the CRO
reporting directly to the CRL Board’s Risk,
Capital and Compliance Committee. This
reporting includes regular reporting of
compliance with risk appetite and tolerance
statements, emerging risks, risk event reports,
key risk indicators and the solvency self-
assessment. Membership of this committee
includes Directors who also serve on the
boards of both CHL and CRL.
The risk function provides independent
challenge and oversight of the identification,
measurement, management and monitoring of
risk by the first line of defence, supporting the
CRL Risk, Capital and Compliance Committee
and the CHL Board.
Day-to-day oversight of the management of
risk by the first line of defence and the
independent challenge provided by the
second line is supported by the CEO and the
Executive Committee.
Outputs from other second line of defence
functions (Compliance and Actuarial) and from
the third line (Internal Audit, External Audit
and the Independent Loss Reserve Specialist)
are fed back into the overall risk assessment.
Regular meetings between the second-line
functions and Internal Audit commenced
during 2022. Outputs from all such functions
may be used, where appropriate, to support
independent validation, alongside the risk
function’s own reports and those of other
independent third parties.
Looking ahead, I am anticipating an increased
overlap between my role as CRO and that of
Chief Sustainability Officer as we work to expand
our consideration of climate risk to also focus
on nature and biodiversity explicitly, and as
regulatory expectations in relation to disclosures
on these specific aspects of risk increase.
Conclusion
Overall, I remain confident that the management
of risk is progressing in line with the initial vision
set out with first-line ownership of risks: a small,
focused risk team working closely with actuarial,
modelling and data resources.
Our risk culture remains strong and based on
open dialogue and transparency and aligned
to our corporate values. The benefits of a
single underwriting location should not be
underestimated and supports us bringing
together groups to brainstorm on diverse
topics and ensuring that risk management
is very much part of everyday thinking.
Andrew Smith
CRO
27 February 2024
Conduit Holdings Limited | Annual Report and Accounts 2023
25
Enterprise risk management report continued
Risk category
Relative appetite/preference
Commentary
Overall –
capital adequacy
Low
We maintain capital to support a minimum rating of A– by AM Best and
to provide a surplus over the regulatory enhanced capital requirement
of twice that prescribed as an early warning buffer by the BMA.
High
This is the risk we seek in order to generate return. The risk is managed
by seeking a target portfolio based on our view of rate adequacy and
target diversification, supported by event and/or aggregate
retrocessional protections.
AM Best affirmed our A– financial strength rating and we continue to have
substantial capital to deploy.
In addition to regulatory and rating agency perspectives, we have now built
an internal capital model. While it continues to undergo validation activities
it has already been used to provide an additional perspective.
After consecutive market-loss heavy years, we are expecting favourable
underwriting conditions to prevail into 2024. This, together with an
expanded underwriting team and increased familiarity with cedants,
reduces the execution risk.
Medium
We underwrite catastrophe-exposed reinsurance through our property and
specialty classes, and business exposed to other aggregations, notably
across casualty lines. We seek to understand and manage our exposures
generally to a lower level than our Bermuda peer group.
As our portfolio has grown in scale, we have benefited from greater
diversification and lower than initially anticipated exposure to natural perils per
dollar of total premium. More broadly, increased scale includes an element of
assuming greater accumulations and a period of continued macroeconomic
uncertainty increases certain risks and potential for aggregation.
Medium
We underwrite a mix of classes including those where reserves take time
to develop. We seek to minimise reserve risk through rigorous data
analytics using market data, and benefit from an external loss reserve
specialist review.
Portfolio growth reduces reserve risk, while continued uncertain
macroeconomic factors offset this.
Investment – market
and liquidity
Low
Our primary aim is to protect capital and, consequently, we have a low
appetite to expose our capital base to investment losses and a low
appetite for volatility.
Our limited risk portfolio continues to remain highly liquid while current
investment yields provide lower downside asset risk.
Conduit Holdings Limited | Annual Report and Accounts 2023
Underwriting –
premium
Underwriting
– exposure
and aggregations
Underwriting –
reserve
26
Enterprise risk management report continued
Risk category
Relative appetite/preference
Trend
Commentary
Credit
Low
We use reinsurance to provide protection and therefore select reinsurers
who provide limited credit risk.
All retrocessionaires continue to be high quality and approved by the
Counterparty Security Committee. Our collateralised reinsurers continue to
be required to provide high-quality collateral, held in trust.
Operational and
systems
Low
We seek to minimise our operational risk within the context of operating
as a reinsurer. We seek to attract and retain high-quality staff and gain
competitive advantage by use of high-quality and integrated systems.
Strategic
Reputational
Low
We seek to manage risk by keeping a clear and focused strategy as
a single balance sheet reinsurer based in one location.
Low
A focus on maintaining and enhancing brand and franchise value with
support from the ESG Committee, established by the Holding
Company Board.
We have expanded our team, reducing key person dependencies, and
continue to invest in our processes and technology.
We have executed on strategy to date and favourable market conditions
further reduce strategic risk.
Public coverage is favourable to date and the quality and maturity of our
external disclosures continue to improve. Conversely, as recognition of
Conduit increases, this provides greater visibility.
Legal, regulatory and
litigation
Very low
We seek to minimise our legal, litigation and regulatory risk by investing
in our systems and people. We have no appetite for censure by regulators
and tax authorities.
While legal, regulatory and litigation risks are generally low, we include tax
risk in this grouping and, the rate of change on the global tax agenda
presents increased uncertainty and risk - albeit recognising that Conduit
underwrites on a single balance sheet from a single location.
Conduit Holdings Limited | Annual Report and Accounts 2023
27
Enterprise risk management report continued
Conduit Holdings Limited | Annual Report and Accounts 2023
28
Case study
2023 was the inaugural
year for the Conduit
Foundation ABIC
education award
In partnership with the Association of Bermuda
International Companies (ABIC), the Conduit
Foundation selected the first-ever recipient of
its education award. The award provides three
years of university funding for a student
embarking on their higher education journey.
In 2023 the Conduit Foundation was pleased
to announce Daniel MacPhee as the recipient
of the award. Daniel is a Bermudian student
who began his actuarial studies at university
in Canada in September 2023. As part of the
award, Conduit has also assigned its Chief
Actuary, Andrew Couper, to be a mentor to
Daniel to help guide him through his studies
and provide advice on attaining his future
career goals. In selecting its award recipient,
the Conduit Foundation sought a candidate
who not only met the Foundation's educational
criteria but who was also engaged with the
local community and understood the
importance of ESG.
In addition to offering the Conduit
Foundation education award, Conduit also
employs multiple interns each summer.
Conduit's internship programme is
distinguished by the breadth of exposure
and flexibility offered to the interns. All
interns are taken on with the aim of ensuring
that they each get experience of truly
substantial work, with flexibility in terms of
the departments, assignment length and
timing of their time at Conduit. All of this
means that the interns have an increased
opportunity to gain real insight into the
different strands of work done at Conduit
and how those strands are woven together.
"Conduit places great importance
on engaging with the local
community. Supporting
education and exposing
Bermuda's young adults
to the opportunities in our
industry is vital to the long-term
sustainability of our business
and our Islands."
Heather Mello
Head of Human Resources
Conduit Holdings Limited | Annual Report and Accounts 2023
29
ESG summary
"Beyond establishing a
successful reinsurance
company, Trevor and the
team have also established
a strong reputation for
community engagement.”
The Rt Hon. Lord Soames of Fletching
Chair, ESG Committee
In just three years the Company has achieved
a great deal, and it has been a privilege to
watch the Company’s ESG strategy come
to life. Beyond establishing a successful
reinsurance company, Trevor and the team
have also established a strong reputation for
community engagement, as was heard during
the ESG materiality assessment interviews.
The foundational work I commented on last
year has provided the platform from which
the achievements of Conduit’s employees
multiplied inside and out of the office as the
Company strove to support its community,
both financially and from direct, proactive
engagement.
Conduit's commitment to the industry's role
on environmental topics continued, with
ongoing engagement as a founder member
of the Insurance Task Force of the Sustainable
Market's Initiative, sponsorship of a successful
Bermuda Climate Summit and continued
improvements in the Company's ClimateWise
reporting score.
Good governance remains a focus and I was
delighted that Rebecca Shelley joined the ESG
Committee following her Board appointment
as an independent director, further advancing
gender balance.
Some of the outstanding achievements were
in the social sphere and in community
engagement. In 2023, all staff were awarded
a volunteering allowance for the first time
and the Company took on a permanent
volunteering position with Meals on Wheels:
each week two members of staff deliver hot
food to those less mobile. Staff have also
taken on the role of mentors with Big Brothers
and Big Sisters of Bermuda, to provide quality
mentoring relationships to young people in
need, helping them to reach their full potential.
Looking to the next generation of Bermuda’s
leaders, Conduit sponsored its first
scholarship, a three-year award to a
Bermudian university student. Conduit also
welcomed a record number of paid interns
to its office to help develop their skills and
experience through the summer.
I congratulate the entire Conduit team on all
their achievements during 2023 and look
forward to seeing further accomplishments
in the year ahead.
Lord Soames
ESG Committee Chair
21 February 2024
The talent and passions of Conduit’s staff
extend beyond reinsurance, and Conduit was
pleased to support two staff members as they
represented Bermuda in international sports
competitions. It is evident that staff
engagement is a key part of Conduit's
ESG strategy.
Another passion and ambition that Conduit
was able to support was the idea to organise
a Gala of Giving. The leadership shown by
Stuart Quinlan, Deputy CEO of Conduit in this
endeavour was admirable, as was the goodwill
shown by many peer companies who
supported the event alongside Conduit Re to
generate proceeds of over $340,000 for local
charities. This is over and above donations
made by the Conduit Foundation during 2023.
Conduit Holdings Limited | Annual Report and Accounts 2023
30
ESG summary continued
Our approach to ESG
Conduit Re seeks to be a responsible
company. Our approach to ESG is focused on
maximising the positive impact we can have,
while minimising the negative impact. We do
this recognising that we are a relatively small,
treaty-focused reinsurer; hence, steps
removed from the underlying business.
Last year we released our inaugural standalone
2022 ESG Report which set out our ESG
strategy; it included what we seek to achieve,
how and why. Details on our ambitions and
commitments, our impact, and updates on
our key ESG metrics can be found in our
standalone 2023 ESG Report, which is
available on our website.
In this Annual Report, we draw attention to
specific matters of note and signpost our
reporting in line with the Task Force on
Climate-related Financial Disclosures (TCFD).
Our ESG ambitions remain:
— positively impacting our stakeholders;
— supporting the transition to a sustainable
world; and
— minimising our negative impact on the
environment.
As a relatively small company, we enjoy the
benefits of being legacy-free in all its forms.
This means we can take deliberate, purposeful
and impactful steps as we seek to deliver on
those ambitions.
2023 highlights
Our key ESG achievements for 2023 include:
— the rollout of interest-free green loans to
employees, to support the purchase of
electric vehicles or solar panels;
— launching several employee engagement
initiatives, including a Plastic Free July
competition and organising a litter pick-up;
— providing staff with Company-organised
volunteering opportunities and one day's
volunteering allowance a year;
— expanding our ESG materiality assessment
conducted by H/Advisors to include
representation from our local and business
sector community; and
— progressing our ESG reporting by engaging
KPMG to provide limited assurance over
certain greenhouse gas emissions we
disclose.
Carbon emissions
In this Annual Report and Accounts we include
disclosures associated with the carbon
emissions we are responsible for.
Consistent with our approach in 2022 we seek
to be, and are, carbon neutral in relation to our
Scope 1 and Scope 2 emissions, and in relation
to business travel, hotel nights and staff
commuting. In 2023, KPMG, our external
auditors, provided limited assurance over
certain greenhouse gas emissions we disclose.
We achieve neutrality in relation to these
emissions by a mix of restraining our own
emissions and through the use of carefully
selected offsets.
We are also capturing data on the emissions
avoided because of our green-loans policy.
Our initial ambition is that the avoided
emissions through 2024 will be greater than
the increase in our Scope 2 emissions
expected from increased office space
necessitated by our increasing headcount.
Our longer-term ambition is that solar and
electric vehicle initiatives provide emissions
avoidance greater than our Scope 2 emissions.
We also report, but do not offset, our share of
our suppliers’ emissions.
TCFD reporting
We use the ClimateWise framework to support
our TCFD reporting and publish a standalone
ClimateWise report, also available on our
website. ClimateWise also score the quality of
reporting against their framework and we have
seen year-on-year improvement in our score
since we first produced a report for year-end
2020 and subsequently published our reports
for the 2021 and 2022 year-end.
Recognising developments in ESG reporting,
ClimateWise is undertaking a major review
of their framework to address requirements
including direct consideration of nature and
biodiversity. We are using the current
framework to report on year-end 2023 and
expect to transition to the new framework
for year-end 2024.
A summary of our TCFD reporting follows
on the next page.
Conduit Holdings Limited | Annual Report and Accounts 2023
31
ESG summary continued
Below is a summary of our TCFD disclosures, which are intended to provide context alongside a reference to where each topic is explored in more depth. ClimateWise provides an industry-specific
framework for TCFD reporting and is most meaningfully read as a standalone document, so has not been reproduced in full in the Annual Report and Accounts. Our ESG Report is a free-form
disclosure in which we add additional context and commentary, notably in relation to our ESG metrics and the relevance of climate to each member of executive management. Both documents can
be found on our website. Our 2023 ESG and ClimateWise reports are available to download on our website.
TCFD pillars
TCFD recommended disclosures
Governance
Disclose the organisation's governance around climate-related
risks and opportunities.
A
Describe the Board’s oversight of climate-related risks and
opportunities.
B
Describe management’s role in assessing and managing climate-
related risks and opportunities.
Disclosure status and reference to where disclosures
have been made
See section 1.1 of our ClimateWise Report.
The Board has held strategy sessions that have considered
climate-related risks and opportunities and have established
parameters within which management can operate. It receives
regular reports and is also supported by the ESG Committee.
See section 1.2 of our ClimateWise Report and the governance
section of our ESG Report.
Climate-related risk is integrated into various management
policies. Each Executive Committee member has specific climate
responsibilities as set out in our ESG Report which is available
on our website.
Conduit Holdings Limited | Annual Report and Accounts 2023
32
ESG summary continued
TCFD pillars
TCFD recommended disclosures
Strategy
Disclose the actual and potential impacts of climate-related
risks and opportunities on the organisation’s businesses,
strategy and financial planning where such information
is material.
A
Describe the climate-related risks and opportunities the
organisation has identified over the short, medium and long
term.
B
Describe the impact of climate-related risks and opportunities
on the organisation’s businesses, strategy and financial planning.
C
Describe the resilience of the organisation’s strategy, taking
into consideration different climate-related scenarios, including
a 2°C or lower scenario.
Disclosure status and reference to where disclosures
have been made
See sections 2.1 and 2.2 of our ClimateWise Report.
Climate-related risks and opportunities exist across our
underwriting, investments and operations.
See section 2 of our ClimateWise Report.
Climate-related risks and opportunities exist across our
underwriting, investments and operations that are relevant
for our business, strategy and financial planning.
See section 2.3 of our ClimateWise Report and the
environment section of our ESG Report.
Strategic discussion on climate scenarios are described in our
standalone reports. Our current processes do not yet fully
comply with the guidance for insurance companies and asset
owners, given scale and availability of information relating to
a 2°C or lower scenario.
Conduit Holdings Limited | Annual Report and Accounts 2023
33
ESG summary continued
TCFD pillars
TCFD recommended disclosures
Risk management
Disclose how the organisation identifies, assesses and manages
climate-related risks.
A
Describe the organisation’s processes for identifying and
assessing climate-related risks.
B
Describe the organisation’s processes for managing climate-
related risks.
C
Describe how processes for identifying, assessing and managing
climate-related risks are integrated into the organisation’s
overall risk management.
Metrics and targets
Disclose the metrics and targets used to assess and manage
relevant climate-related risks and opportunities where such
information is material.
A
Disclose the metrics used by the organisation to assess climate-
related risks and opportunities in line with its strategy and risk
management process.
Disclosure status and reference to where disclosures
have been made
See section 3.1 of our ClimateWise Report.
Our processes are integrated with our wider risk management
framework described in the enterprise risk management report,
as well as in in our Financial Condition Report which is available
on our website.
See section 3.1 of our ClimateWise Report.
Our processes are integrated with our wider risk management
framework described in the enterprise risk management report,
as well as in our Financial Condition Report which is available on
our website.
See section 3.1 of our ClimateWise Report.
Our processes are ntegrated with our wider risk management
framework described in the enterprise risk management report,
as well as in our Financial Condition Report which is available on
our website.
See the environment section of our ESG Report.
Our metrics relate primarily to carbon neutrality and to our
business partners’ commitments to climate matters.
B
Disclose Scope 1, Scope 2 and, if appropriate, Scope 3
greenhouse gas (GHG) emissions and the related risks.
Disclosed in this section of the Annual Report and Accounts.
Further detail can also be found in our ESG Report which is
available on our website.
C
Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance
against targets.
See the environment section of our ESG Report.
Our metrics relate primarily to carbon neutrality and to our
business partners’ commitments to climate matters.
Conduit Holdings Limited | Annual Report and Accounts 2023
34
ESG summary continued
Carbon emissions
We have included in the table below our Scope 1 to 3 emissions for 2023 and 2022. As we are a new company, we look to grow as sustainably as possible, with a focus on the average emissions per
employee. For details on our methodology, to see our five-year emissions plan and details on our carbon offsets, please refer to section 4 of our ClimateWise Report which is available on our website.
Emission type
Scope 1
Direct
Scope 2
Indirect energy
Scope 3
Indirect other
Activity
None
Electricity1
– location based
– market based
Business travel2
Hotels3
Staff commuting4
Total gross emissions from our operations
Gross emissions (location based)
Gross emissions (market based)
Carbon offset applied
Net carbon impact from operations
Gross emissions per average employee
Average number of employees
Location based
Market based
Gross emissions including our share of suppliers' emissions
Total gross emissions as per above market-based approach
Share of suppliers' emissions
Grand total
Basis of measurement
Quantity
tCO2e
Quantity
tCO2e
2023
2022
-
-△
-
-
kWh
175,186.9
179,785.5
Kilometres
Nights
Kilometres
1,951,215.0
329.0
187,749.9
1,545,335.0
256.0
163,866.7
129.2△
122.9△
227.5△
27.9△
17.7△
402.3△
396.0△
(396.0)
-
57.6
47.0
7.0△
6.9△
396.0△
1,042.6
1,438.6
132.6
126.0
188.4
16.8
17.8
355.6
348.9
(348.9)
-
7.5
7.4
348.9
746.8
1,095.8
1.
2.
3.
4.
The 2022 electricity consumption has been restated to correct a prior period error. Previously reported consumption was 95,712 KWh with the associated tCO2e being 69.3 and 66.7 on a location and market basis respectively.
Business travel for 2023 includes flights and long distance travel by train. Business travel for 2022 includes flights only.
In 2023 we updated our hotel methodology to use emission factors based on location and class from the Cornell Hotel Sustainability Benchmarking Index 2023. Cornell's prior Index did not include data on locations our staff travelled to.
Our estimated emissions from hotel stays in 2022 were calculated using Carbon Management for Tour Operators report. The result of applying our 2022 emission factors to hotel stays in 2023 would be 16tCO2e.
The commuting emission factor sources used in 2023 are consistent with those used in 2022: The UK Government's Greenhouse Gas Conversion Factors for Company Reporting and The UK Office for Rail and Road. The emission factors
have reduced from 2022 to 2023.
△ KPMG performed limited assurance procedures over these greenhouse gas disclosures. Their report is included in our 2023 ESG Report, available on our website.
Conduit Holdings Limited | Annual Report and Accounts 2023
35
Case study
Conduit helping employees
choose solar power and
electric cars
10%
of staff had a green
loan approved in
2023
By introducing the scheme, Conduit
has lowered those barriers for our
employees, while supporting the
reduction of heavy oil use and
vehicle emissions.
While environmental considerations
are an important driver, reducing the
cost of living is another important
consideration with the return on such
investments in Bermuda being greater
than elsewhere. The hope is that more
employees take advantage of the
opportunity in the future.
Conduit seeks to be carbon neutral in
its operations by limiting emissions
and the use of carefully selected
offsets, while also providing education
and awareness for staff around the
choices they make. These two
initiatives came together with an
employee suggestion that the
Company support the adoption of
solar power and electric cars by
providing interest-free green loans.
Introduced during 2023, the scheme
has seen a good level of interest, with
more than 10% of staff having a loan
approved already. Too often, the
cost of transition and available
infrastructure gets in the way of
real progress towards reducing
carbon emissions.
Conduit Holdings Limited | Annual Report and Accounts 2023
We selected representatives from our investor
community, local organisations in Bermuda,
Board members, Executives, and staff, to be
interviewed by H/Advisors. Together, they
assessed our most material topics under
the banners of Environment, Social and
Governance, guided by the GRI framework and
ISSB. The outputs of the materiality assessment
will be used to inform our strategy in 2024 and
onwards and reviewed on a regular basis.
36
Section 172 statement and stakeholder engagement
Provision 5 of The UK Code notes that the
Board should understand the views of the
Company's key stakeholders and describe in
the Annual Report and Accounts how their
interests and the matters set out in Section 172
of the UK Companies Act 2006 have been
considered in Board discussions and decision-
making. The Company is a Bermuda-
incorporated issuer and the Board is obliged
to follow director duties under Bermuda
company law. Although the Company is not
required by law to prepare a Section 172
statement it has chosen to do so as a matter
of best corporate governance.
The Board confirms that during the year
ended 31 December 2023 they have
discharged their duties to act in a way that
they believe promotes the long-term success
of the Company for the benefit of its members
as a whole, while having regard to the matters
set out in Section 172 of the UK Companies
Act 2006. Further information on how these
duties have been discharged is provided in
this statement.
Section 172 requires a director to have regard,
among other practical matters, to the:
— likely consequences of any decision in the
long-term;
— interests of the company’s employees;
— need to foster the company’s business
relationships with suppliers, customers
and others;
— impact of the company’s operations on the
community and environment;
— desirability of the company maintaining
a reputation for high standards of
business conduct; and
— need to act fairly between members
of the company.
Stakeholder engagement
In 2023, Conduit continued to focus on key
stakeholder engagement, to understand their
perspectives and the potential long-term
consequences of decisions and matters of
strategic importance to Conduit.
As key stakeholders, the Board discussed
broker and client relationships, shareholder
and employee engagement, government and
regulator engagement, rating agency
interaction, environmental matters and
Conduit’s impact on, and relationship with,
the local community, and considered these
matters in its decision-making.
In 2023 a more in-depth materiality
assessment was undertaken to include
a wider group of stakeholders to better
understand what is/was important to them
and what they believe has the greatest
impact on the Company.
Our materiality assessment was conducted
independently by the H/Advisors Sustain
team, who are ESG and sustainability strategy
development and communications specialists.
Conduit Holdings Limited | Annual Report and Account 2023
37
Section 172 statement and stakeholder engagement continued
Brokers and clients
— Relationships with the reinsurance broking
community and cedants are key to
Conduit’s success. In considering Conduit
Re’s strategy and business planning, the
Board received reports on, and noted the
extent of, the broker and cedant support
received by Conduit Re.
— The Board strives to be proactive,
transparent and interactive with
shareholders, who are always welcome
to ask questions. For further information,
and contact details, visit the Investor
Relations and Regulatory News Service
section on the Conduit Re website
(conduitreinsurance.com).
Shareholders
— In 2023, representatives of Conduit held
approximately 200 meetings one-on-one
with investors and via group calls. The
Executive Chairman, the CEO, the CFO and
Conduit's Head of Investor Relations
regularly met with shareholders throughout
the year, both quarterly to review trading
results and on an ad-hoc basis to discuss
various matters. Shareholders were
consulted regarding a proposed change
to the Directors' Remuneration Policy.
Feedback from these meetings was
presented to the Board on a regular basis
and informed Board debate and decision-
making on strategy and business planning.
Some of our larger shareholders were
also consulted as part of the materiality
assessment carried out as part of our
ESG reporting.
— Our Directors and management recognise
the benefits that come from dialogue with
shareholders and we have embraced an
active engagement strategy to discuss with
our shareholders the issues that are
important to them, hear their expectations
of us and share our views.
Employees
— Malcolm Furbert continued as the
Company's Non-Executive Director
responsible for engagement with
Conduit’s workforce.
— Malcolm met with our COO and our Head
of Human Resources regularly to discuss
employee engagement at Conduit. The
Board received reports of Malcolm's and
HR's activities, ensuring workforce views
were obtained and considered in Board and
management decision-making. Mr. Furbert
met with employees of Conduit at various
levels of the organisation, excluding
executives. It was recognised that
Conduit's growth and related increase
in employee numbers would bring new
challenges in ensuring that the culture
and successes to date were not lost as
growth continues.
— During 2023, the Head of Human
Resources conducted a detailed review of
Conduit's HR policies and procedures to
ensure that they remain robust, current and
competitive within the market.
— Having a supportive and inclusive culture is
important to us and we regularly track how
employees feel about working at Conduit.
In 2023, we conducted our second annual
employee engagement survey. The results
were shared with Malcolm, who provided
his own observations on employee
engagement to the Board.
— The Board was kept apprised of Conduit's
recruitment activities throughout 2023.
Headcount grew from 54 to 59 as at
31 December 2023.
— In 2023 all staff participated in compliance
training which covered key compliance
topics including sanctions, information
security and cyber risk, anti-money
laundering, anti-terrorist financing, anti-
bribery and corruption, conflicts of interest,
and compliance with tax and regulatory
operating guidelines. Training was also
provided which covered Conduit’s code of
conduct and whistleblowing procedures.
Government and regulators
— The Board recognises the need to monitor
changes in law and regulation, and to work
closely and openly with all relevant
regulatory and supervisory bodies.
Conduit's main operating subsidiary, CRL, is
licensed and supervised by the BMA.
Representatives of management met with
the BMA every quarter through the year.
The Board received regular reports
covering governmental, legal, regulatory
and supervisory matters and was kept
apprised of communications with and from
relevant bodies, in particular the quarterly
meetings with the BMA, and this
information was factored into strategy and
business planning.
— In 2023, we obtained and expanded our
reciprocal jurisdiction reinsurer (RJR)
status in various states within the US which
reduces the need for CRL to post collateral
to support cedants in those states.
— In 2023, the Bermuda Government
announced the introduction in Bermuda of
a corporate income tax (CIT). Legislation
implementing the Bermuda CIT regime,
which will largely follow the OECD’s global
minimum tax framework, was enacted in
December 2023. The Board was kept
apprised of developments and their
potential impact on Conduit.
Rating agencies
— CRL having and maintaining an AM Best
Financial Strength Rating of A– (Excellent),
and a Long-Term Issuer Credit Rating of
“a-” (Excellent) is critical to Conduit’s
success. Maintaining this rating is factored
into Board decisions with respect to capital
adequacy and risk management.
— Management regularly kept AM Best
apprised of developments within CRL and
fed back to the Board the results of
meetings and interactions with AM Best.
— In December 2023, AM Best reaffirmed
CRL's AM Best Financial Strength Rating of
A– (Excellent) and Long-Term Issuer Credit
Rating of “a-” (Excellent).
Conduit Holdings Limited | Annual Report and Account 2023
38
Section 172 statement and stakeholder engagement continued
changes in the market or Conduit's
operating environment.
In 2023, the Board, having taken advice from
Conduit’s independent remuneration advisers,
decided to pursue an amendment of the
Directors' Remuneration Policy previously
approved by the shareholders at the 2022
Annual General Meeting. The details of the
revised Remuneration Policy, which is intended
to apply for the years 2024 through 2026, are
set out on pages 62 to 67. As noted above,
shareholders were consulted about the
proposed change, which will be put to a
shareholders' vote at the 2024 Annual
General Meeting.
Trevor Carvey
CEO
27 February 2024
Elaine Whelan
CFO
27 February 2024
Our community and the environment
— As set out in the ESG summary on pages
29 to 34, environmental matters and the
community are a key focus for Conduit.
— Board decision-making is influenced by a
recognition that some economic activity
has negative outcomes. As detailed in the
ESG summary, we factor applicable criteria
into our decisions. Resulting examples
include Conduit’s commitment to achieving
and maintaining net-zero-carbon emissions
and to giving back to the community via
initiatives such as the Conduit Foundation,
whose mission includes supporting
organisations and outreach projects
focused on the environment, diversity and
inclusion initiatives, education and
Bermuda’s vulnerable populations.
Principal decisions
The principal decision made by the Board in
2023 was to affirm the current strategy,
covering a three-to-five-year horizon. The
Board determined that this approach
continues to refine and build on the original
strategy as set out in the IPO prospectus.
The Board participated in a two-day strategy
session before making its decision to continue
with the current strategy. Our strategic aim is
to deliver sustainable long-term returns
through the market cycle, based on the
foundations built over the last three years.
This aim would be reconsidered in the face
of significant or unexpected losses or
Conduit Holdings Limited | Annual Report and Account 2023
39
CORPORATE
GOVERNANCE
Our 2023 Governance Report sets out the composition
of our Board and explains how our Board governance
framework operates, alongside the key areas of focus
of Conduit's Board and Board Committees in 2023.
In keeping with our commitment
to diversity and inclusion, our
Board is comprised of 44%
female professionals with a
wide breadth of experience
and expertise.
Our Board Governance report
summarises our compliance with
the requirements of the UK
Corporate Governance Code
2018 (The UK Code).
Board of Directors
page 40
To view how we comply with The
UK Code, please see page 48
“The Board has put in place an effective governance
framework to facilitate its oversight role, and to ensure
that it retains decision-making power over material
matters to support Conduit's strategic aim, which is to
deliver sustainable long-term returns through the
market cycle...”
Neil Eckert
Executive Chairman
Board meeting attendance
Board independence
97%
2022: 96%
67%
2022: 67%
Read more:
page 45
Read more:
page 52
Read more:
page 54
Read more:
page 59
Conduit Holdings Limited | Annual Report and Account 2023
40
Board of Directors
-
Neil Eckert
Executive Chairman
Appointed to the Board: 7 October 2020
Skills and experience:
Neil Eckert is Executive Chairman and an
Executive Director of CHL.
Neil Eckert is an entrepreneur with four decades
of (re)insurance industry experience and has a
proven track record in the industry having held
various roles since 1980, many of which involved
starting new enterprises.
Beginning as a reinsurance broker, he rose
through the ranks to board member at Benfield,
Lovick & Rees & Co. Neil then founded Brit
Insurance in 1995 and remained its CEO until
2005, following which he served as a non-
executive director of the company until 2008.
He was co-founder and CEO of Climate
Exchange PLC, and founded Aggregated
Micropower.
External directorships:
Incubex Ltd, Ebix Inc., Boutique Modern Limited,
Chalvington Management Limited, NCX Family
Office, Chalvington Batteries Limited, Bellaroma
Investments Limited, Bishopsgate Solar 1
Limited, Seago Yachting Limited, Ripe Village
Stores, Ripe Foods Limited, Natural Capital
Exchange Limited, Wingrove House Limited,
Whetstone Properties Limited, Titan (South
West) Limited, Cricket Management Limited.
CHL Board Committee memberships:
n/a
Trevor Carvey
Executive Director and Chief Executive Off͏
Appointed to the Board: 18 November 2020
͏icer
Skills and experience:
Trevor Carvey is Chief Executive Officer and
an Executive Director of CHL.
Trevor has a track record of profitable build-
outs in the reinsurance industry. Having led the
consolidation and subsequent profitable
turnaround of the GE Frankona Marine & Energy
Global portfolio in the 1990s, he then became a
founding underwriter and leader at Arch Re
Bermuda in 2002.
In 2007, Trevor joined Harbor Point Re in the
UK to lead the build-out of its reinsurance
operations. He became CUO Europe of the
Alterra Re business after Harbor Point’s
merger with Max Re in 2012. Trevor was then
responsible for the successful integration of
Alterra Re’s Global Re unit into Markel.
In 2015, Trevor joined Hamilton Re to assist in
building out a new treaty reinsurance strategy
in the UK and subsequently served as active
underwriter for three years from 2016 to 2018.
Trevor has led Conduit since its launch in 2020.
As well as serving on the Board of Conduit
Holdings Limited, he is a Director of CRL and
chairs the Executive Committee.
External directorships:
Triple R Industries Limited, Beneficial House
(Birmingham) Regeneration LLP, Stanley Dock
(All Suite) Regeneration LLP.
CHL Board Committee memberships:
n/a
Conduit Holdings Limited | Annual Report and Accounts 2023
41
Board of Directors continued
Elaine Whelan
Executive Director and Chief Financial Off͏
Appointed to the Board: 14 January 2021
͏icer
Sir Brian Williamson CBE
Senior Independent Director
Appointed to the Board: 18 November 2020
Skills and experience:
Elaine Whelan is the Chief Financial Officer and
an Executive Director of CHL.
Elaine is an accomplished and experienced
public company CFO who has worked in the
(re)insurance industry for over 25 years. She
is a member of the Institute of Chartered
Accountants of Scotland, a member of the
Chartered Professional Accountants of
Bermuda and a member of the Institute
of Directors.
After qualifying as a chartered accountant,
Elaine joined Coopers & Lybrand in Bermuda
in 1997. From 2001 to 2006, she held a number
of positions at Zurich Insurance Company,
Bermuda Branch, ultimately as chief accounting
officer. In 2006, she joined the Lancashire
Group as financial controller.
She subsequently performed various financial
and management roles for the Lancashire
Group, including as CEO, Lancashire Insurance
Company Limited. From January 2011 to
February 2020, Elaine was Group CFO,
Lancashire Holdings Limited, and she was also
a main board director from January 2013 to
February 2020.
Elaine is responsible for all aspects of Conduit
Re’s financial management and reporting, is also
a Director of CRL and is a member of the
Executive Committee.
External directorships:
Cameron Holdings Inc., Salthouse Property Inc.,
Lomond Property Holdings Limited.
CHL Board Committee memberships:
n/a
Skills and experience:
Sir Brian Williamson has held a number of
chairmanships and directorships in banking,
exchanges, funds, investment trusts and private
equity. Sir Brian was chairman and chief
executive of Gerrard Group PLC, a member
of the Court of the Bank of Ireland, a director
of HSBC Holdings PLC, where he was also
chairman of the nomination committee, and
a director of the NYSE Euronext and chairman
of the remuneration committee.
Sir Brian was one of the four founders of the
London International Futures Exchange and
twice chairman. In the US, Sir Brian has been
a board member of both Nasdaq (additionally
serving as chairman of its international advisory
board) and the New York Stock Exchange. In
the UK, he was a director of The Climate
Exchange PLC.
Sir Brian is currently a director of Incubex,
which is in partnership with the European
Energy Exchange, part of the Deutsche Borse
Group and Nodal Exchange in the US.
Sir Brian has served on regulatory bodies
in both the US and the UK, the National
Association of Securities Dealers and The
Financial Services Authority.
External directorships:
Edenberg Trust Corporation Limited, R.J. Fleming
& Co Limited, vice chairman of Bergos Fleming
Zurich, Director Politeia, and Incubex Inc.
CHL Board Committee memberships:
Remuneration Committee (Chair) and
Nomination Committee.
Conduit Holdings Limited | Annual Report and Accounts 2023
42
Board of Directors continued
Malcolm Furbert
Independent Non-Executive Director
Appointed to the Board: 18 November 2020
Skills and experience:
Malcolm Furbert is a corporate and regulatory
lawyer with over 30 years’ experience, including
as a corporate lawyer with one of Bermuda’s
leading law firms, and over 15 years’ diverse in-
house legal counsel and management
experience with Bermuda-based insurance and
reinsurance companies (including American
International Company Limited, Catlin Insurance
Company Limited and XL Catlin), most recently
as general counsel and head of compliance &
regulatory affairs for the Bermuda operations
of XL Catlin, a Bermuda-based global
(re)insurance company (following the
acquisition of the Catlin Group by XL Capital).
In these roles, he provided general and
transactional legal and regulatory advice
and support to all business areas and had
oversight over the Bermuda compliance
function. He also acted as company
secretary to both regulated and non-
regulated group companies.
He is a member of the Bar of England and
Wales and the Bermuda Bar.
External directorships:
Somers Corporate Services Limited.
CHL Board Committee memberships:
Remuneration Committee and Nomination
Committee.
Elizabeth Murphy
Independent Non-Executive Director
Appointed to the Board: 18 November 2020
Skills and experience:
Elizabeth Murphy has worked in the insurance
and (re)insurance industry for more than 30
years. Elizabeth qualified as a chartered
accountant with Coopers & Lybrand in London
and moved to work for them in Bermuda. She
continued her career with ACE Tempest
Reinsurance Ltd as chief financial officer from
1993 to 2000 and as Treasurer of ACE Limited
for the next two years.
From 2002 to 2006, Elizabeth worked for
Scottish Re Group Limited, as chief financial
officer and executive vice president. From 2006
to 2008 she was an executive director of Kiln
Limited, chair of the compensation committee
and non-executive member of the audit
committee and she also served on the board
of SCPIE Holdings Inc. where she was a member
of the audit committee and stock option
committee. From 2009 to 2015 Elizabeth was
an executive director and chief financial officer
of Amlin Bermuda Ltd., Amlin AG and a member
of the risk committee.
External directorships:
Bernina Re Holding Ltd., Bernina Re Ltd.
CHL Board Committee memberships:
Audit Committee (Chair) and Nomination
Committee.
Conduit Holdings Limited | Annual Report and Accounts 2023
43
Board of Directors continued
Ken Randall
Independent Non-Executive Director
Appointed to the Board: 18 November 2020
Michelle Seymour Smith
Independent Non-Executive Director
Appointed to the Board: 15 September 2021
Skills and experience:
Ken Randall is a certified accountant and has
worked in the insurance industry for more than
46 years. During the 1980s, Ken was head of
regulation at Lloyd’s. From 1985 until 1991 Ken
served as chief executive of the Merrett Group,
which managed a number of prominent
syndicates at Lloyd’s.
of non-life legacy run-off portfolios and again
developed an insurance-servicing business in
London and the US; initially, the Randall &
Quilter Group’s service offering focused on
legacy portfolios and in recent years has also
developed a fast-growing programme
management business in Europe and the US.
Ken retired from Randall & Quilter in 2021.
Skills and experience:
Michelle Seymour Smith has over 20 years of
experience in the insurance and reinsurance
industry. During her career, Michelle has built
a reputation of making strategic initiatives a
reality and building effective teams and
operations to support sustained growth in
global organisations.
officer of Arch Capital Group Ltd until 2019,
leading a global programme to grow business
and improve operational efficiency. Michelle
has been named as one of 100 Influential
Women in Insurance and Reinsurance by
Intelligent Insurer. She is a member of the
Chartered Professional Accountants of
Bermuda and the Institute of Directors.
In 1991, Ken left Merrett and, with Alan Quilter,
set up the Randall & Quilter Group, whose
principal subsidiary, the Eastgate Group, grew
into the UK’s largest third-party provider of
insurance services with 1,300 employees and
a turnover of over £80 million per annum.
Eastgate was sold to Capita PLC in
November 2000.
Following the sale of Eastgate, Ken and Alan
refocused Randall & Quilter onto the acquisition
External directorships:
Roosevelt Road Ltd, Roosevelt Road Re Ltd,
Renaissance Capital Partners Limited, Financial
Guaranty Insurance Company Ltd,, Leamington
Insurance Advisors Ltd (Bermuda), W.T. Butler
& Co Ltd.
CHL Board Committee memberships:
Audit Committee, Nomination Committee
(Chair) and Remuneration Committee.
Michelle began her career with Arthur Andersen
in 1995. She went on to hold positions at Zurich
Insurance Global Energy and XL Capital Ltd. In
2004, she joined Arch Reinsurance Ltd as vice
president, controller. She performed several
roles at Arch Re, including chief financial officer
and chief operating officer, building and
overseeing the financial operations of the
insurance, reinsurance and mortgage divisions
and their international subsidiary reinsurance
division. She served as the chief transformation
External directorships:
Transport Intermediaries Mutual Association
Ltd., Bermuda Public Accountability Board,
Muuvment, Association of Bermuda
International Companies, Centennial
Foundation, Prismic Life Reinsurance, Ltd,
Prismic Life Holdings GP LLC, Prismic Life
Holding LP.
CHL Board Committee memberships:
Audit Committee and Nomination Committee.
Conduit Holdings Limited | Annual Report and Accounts 2023
44
Board of Directors continued
Rebecca Shelley
Independent Non-Executive Director
Appointed to the Board: 25 July 2023
Skills and experience:
Rebecca Shelley brings extensive commercial
and financial services experience to the Board,
as well as her background of market-facing
roles at listed companies. Having been investor
relations and corporate communications
director at Norwich Union plc from 1998-2000,
Rebecca moved to Prudential plc in 2000,
starting as investor relations director, and then
became group communications director with
a seat on their group executive committee.
From 2012 to 2016, Rebecca was the group
communications director of Tesco plc and a
member of their executive committee. During
this time she held positions on the board of the
British Retail Consortium and was a trustee of
the Institute of Grocery Distribution. In her final
executive role Rebecca spent three years at
broker TP ICAP plc as group corporate affairs
director, and was a member of the global
executive committee.
External directorships:
Sabre Insurance, Liontrust Asset Management,
Hilton Food Group.
CHL Board Committee memberships::
Remuneration Committee and Nomination
Committee.
Greg Lunn
General Counsel and Company Secretary
Appointed: 3 November 2020
Skills and experience:
Greg Lunn is General Counsel and Company
Secretary and leads the compliance function.
Greg has held various industry roles in Bermuda
and London over the past 25 years, initially with
the ACE Group and later with Lancashire
Holdings Limited, where he was group general
counsel and company secretary. At Lancashire,
in addition to his legal and corporate
governance work, he also had responsibility
for the internal audit function.
Greg is responsible for all legal, compliance and
corporate secretarial aspects of Conduit’s
business. Greg serves on the board of CRL and
is a member of the Executive Committee.
Conduit Holdings Limited | Annual Report and Accounts 2023
45
Introduction to
corporate governance
“The Board has put in place
an effective and efficient
governance framework to
facilitate its oversight role,
and to ensure that it retains
decision-making power over
material matters to support
Conduit's strategic aims.”
Neil Eckert
Executive Chairman
Introduction
The Board has put in place an effective and
efficient governance framework to facilitate its
oversight role, and to ensure that it retains
decision-making power over material matters
to support Conduit's strategic aim, which is to
deliver sustainable long-term returns through
the market cycle. We measure corporate
governance compliance against the
requirements of The UK Code. We also
monitor our compliance with applicable
governance requirements under Bermuda law
and regulations and, to ensure it retains
decision-making power over material matters
at an appropriate level, a schedule of matters
reserved for Board decision is maintained and
reviewed by the Board on a regular basis.
In 2023, in addition to face-to-face quarterly
Board and committee meetings, information
and education sessions on important topics
were held, for example on the implementation
and implications of IFRS 17. Feedback from the
externally facilitated 2023 Board performance
evaluation is that, while there are opportunities
to bring about improvements in Board
functioning, overall the atmosphere in the
boardroom allows for open contribution,
constructive debate, candid discussion and
critical thinking, supported by good-quality
written presentations.
In May, the Board met over two days to review
Conduit’s business strategy and related topics
of relevance to the business. Subjects
covered included:
— inflation outlook;
— investments;
— the brokers’ view of the market;
— a review of the experience of other
Bermuda market start-ups at the three-
year point;
— maximising value;
— capital requirements and cycle
management;
— investor perspectives and premium listing
implications; and
— emerging risks.
The Company expects to generate significant
returns over time for its shareholders and to
provide an ongoing and progressive dividend,
recognising that some earnings fluctuations
are to be expected. 1The Company is targeting
a dividend of $0.36 which is approximately 5%
to 6% of equity capital raised at the IPO,
allocated between an interim and final
distribution. On 20 February 2024, Conduit’s
Board of Directors declared a final dividend for
2023 of $0.18 (approximately £0.14) per
common share, which will result in an
aggregate payment of $29.7 million. This final
dividend followed an interim dividend of $0.18
(approximately £0.14) per common share
declared on 25 July 2023.
Conduit's current strategy, which was
originally promulgated in the IPO in December
2020 and has been updated annually
thereafter in light of actual market conditions
and updated forecasting, covering a three-to-
five-year horizon, was affirmed in 2023 by
the Board.
Dividend policy and dividend payments
The Company may pay dividends at such
times and in such amounts as the Board
determines appropriate and subject to the
Board being satisfied that to do so will not
prejudice CRL’s ability to maintain at least
an AM Best A– (Excellent) Financial
Strength Rating and subject to applicable
law and regulations.1
Depending on Conduit’s results and general
market conditions, CHL may also from time to
time consider the payment of special
dividends and returns of capital to
shareholders by way of share buybacks.
Special dividends (if any) are likely to vary
significantly in amount and timing.
All dividends and returns of capital will be
subject to the future financial performance of
Conduit, including results of operations and
cash flows, Conduit’s financial position and
capital requirements, rating agency
considerations, general business conditions,
legal, tax, regulatory and any contractual
restrictions on the payment of dividends and
1.
CHL relies on income from CRL, Conduit's main operating subsidiary, to fund dividend payments
Conduit Holdings Limited | Annual Report and Accounts 2023
46
Introduction to
corporate governance continued
any other factors the Board deems relevant in
its discretion, which will be taken into account
at the time.
Share purchases by Conduit's EBT
During 2023, Conduit's EBT continued with
on-market purchases of the Company’s shares.
Shares purchased are held in the EBT to meet
future obligations under CHL’s variable
incentive schemes. Unless specifically directed
by CHL, the Conduit EBT Trustee shall abstain
from exercising its voting rights over the
Shares held by the Conduit EBT at any general
meeting of CHL. If CHL directs that the
Conduit EBT Trustee may vote, CHL cannot
direct the manner in which the Conduit EBT
Trustee exercises its votes.
Further details of the share purchases are set
out in the Directors’ report on page 86 and in
note 17 to the consolidated financial
statements on page 147.
Opportunities and risks
Conduit was launched in the favourable
market conditions of late 2020, with the vision
to establish Conduit Re as a leading
reinsurance underwriting business over the
next five years. Industry developments since
2020 have presented a 2023 landscape that
was well beyond the original expectations
when Conduit was formed and our simple
structure, with a legacy-free balance sheet and
one team working together from one location,
has put Conduit in a strong position to
respond to the favourable market conditions.
The broad reinsurance market correction in
our favour, and what we witnessed in 2023
was a fundamental shift in risk versus return
metrics, presented opportunities for us to
accelerate our growth plans.
However, there are a number of uncertainties
underpinning the improvements in market
conditions including, but not limited to:
— the future impact of climate change;
— heightened geopolitical uncertainties; and
— economic and social inflation.
We believe that we are in a strong position to
incorporate the potential impact of these risks
into our underwriting and reserving.
We also need to be mindful that, although we
go to great efforts to manage the volatility in
our underlying exposures, we are in the
business of protecting our clients against
uncertainty and, consequently, our
underwriting results are always subject to the
vagaries of major loss events, both natural and
man-made.
A set of risk factors is set out in section 3 of
the notes to the consolidated financial
statements on page 110.
Stakeholder engagement
We place great importance on obtaining
feedback from stakeholders to factor into
our governance considerations.
Malcolm Furbert, charged with employee
engagement, continued his role with diligence
and enthusiasm by meeting regularly with
Heather Mello, our Head of Human Resources,
and with Stuart Quinlan, Deputy CEO and
COO. Malcolm also met one-on-one with a
number of staff members representing various
departments and levels of seniority.
Executives have continued to hold regular,
routine quarterly update meetings with CRL's
regulator, the BMA, to keep the regulator
apprised of business progress and other
developments at CRL.
I, together with the Head of Investor Relations,
and often the CEO and the CFO, have held
numerous meetings with shareholders, in
addition to hosting quarterly investor and
analyst calls.
More information on our stakeholder
engagement is contained in the Section 172
report on page 36.
Purpose, values, strategy and culture
Our core values shape everything we do and
play a key role in helping us to set strategy
and achieve our objective of building a
reinsurance business that will stand the test of
time. We expect all Directors and employees
of Conduit to consider and apply these core
values when making decisions, when carrying
out duties and when representing Conduit.
Our culture can be characterised as follows:
— An open and transparent approach where
all ideas are welcome, and mistakes are a
part of developing and learning.
— Information sharing is a daily occurrence.
— Communications are strong, constant and
not just top down.
— Everyone is welcome and can be
themselves – we embrace individuality
and recognise that inclusivity will not only
create a positive environment but will
enhance our overall achievements.
— We are a lean group where everyone
works hard.
— Formality and hierarchy is kept to a
minimum and flexibility and responding
to individual needs is key.
— A trust-based culture, rather than one of
rules, where decisions are taken quickly .
— Significant opportunities for developing
skills and careers. Potential will be
identified, and colleagues will be appointed
into new roles wherever possible and will
be supported in realising their potential
through training and coaching.
— A vibrant, fun environment where working
as a team is a given and a pleasure. Our
people like and want to work together.
— We celebrate success.
— We embrace technology.
Conduit Holdings Limited | Annual Report and Accounts 2023
47
Introduction to
corporate governance continued
In-camera sessions
In addition to the activities of the each of
the committees described in the respective
reports below, regular in-camera sessions of
the Independent Directors, led by the Senior
Independent Director, were held at each
regularly scheduled Board meeting without
management present.
Induction
All of the CHL Non-Executive Directors went
through an induction process, covering their
duties and responsibilities as Directors of a
company whose shares are admitted to
trading on the main market of the LSE.
The year ahead
In 2024 our governance will be focused on:
— Continuing to support the execution of
the strategy.
— Completing the establishment of a long-
term succession plan for executive
management and their direct reports.
— Continuing execution of the Board's
succession plan by the recruitment of
an additional independent Non-
Executive Director.
— Enhancements to Board reports,
management of meetings and director
education.
— Align or implement processes and controls in
response to the revisions to The UK Code.
Rebecca Shelley, the most recent Board
appointee, was taken through a
comprehensive induction process as part
of her appointment to the Board in 2023.
Neil Eckert
Executive Chairman
27 February 2024
Feedback from the strategy days held in May
was that the sessions were highly informative
and educational, assisting the Board in gaining
further valuable insights into the business of
Conduit which will help strengthen the Board’s
oversight of the business.
Conduit Holdings Limited | Annual Report and Accounts 2023
48
Corporate governance and compliance with the UK
Corporate Governance Code
The UK Code
As a Bermuda company with a standard listing
on the LSE, the Company is not required to
comply, or otherwise explain non-compliance,
with the requirements of The UK Code
published by the FRC in July 2018. However,
the Company has chosen to comply (or
explain non-compliance) with The UK Code,
because the Board is committed to the highest
standards of corporate governance.
Compliance statement
The Board considers that for the financial year
ended 31 December 2023, the Company has
complied with the provisions of The UK Code,
save that:
— The Company did not comply with
Provision 10 of The UK Code as Neil Eckert
is Executive Chairman and was not
independent at appointment as he was a
founder of the Company. However, 75% of
the Board (excluding the Chair) are Non-
Executive Directors whom the Board
considers to be independent, and the roles
of Chair and CEO are not exercised by the
same individual. Further, the Board believes
that effective business leadership is
provided by Neil Eckert as Executive
Chairman and Trevor Carvey as CEO, while
at the same time appropriate checks and
balances and scrutiny will be maintained
through the balance of the Board as a
whole, the strong and relevant experience
of the independent Non-Executive
Directors and the clear separation of duties
between the Senior Independent Director,
the Executive Chairman and the CEO,
as set out on the Company’s website.
— In one respect, the Company does not
comply with Provision 37 of The UK Code
which provides that remuneration schemes
and policies should enable the use of
discretion to override formulaic outcomes.
At the time of the Company's
establishment, it was determined that an
absolute calibration to the Management
Incentive Plan (MIP) programme with no
discretionary assessment was appropriate
in the circumstances. The MIP was put in
place prior to the IPO, with no further MIP
awards to be made under the
Remuneration Policy approved by the
shareholders in May 2022. Malus and
clawback provisions apply to the MIP
programme with further details set out
in more detail on page 60.
Governance framework
Conduit maintains a relatively simple
corporate structure and corporate governance
framework. The Board maintains overall
responsibility for Conduit and has established
an Audit Committee, a Nomination Committee
and a Remuneration Committee – whose terms
of reference are available on the Company’s
website and updated as necessary. It has also
established a non-board advisory committee
focused on Conduit’s approach to ESG, which
is chaired by Lord Nicholas Soames, a senior
and independent industry figure who is not
otherwise involved with Conduit as a Director
or Officer.
The Audit Committee oversees the effectiveness
of management’s processes for monitoring and
reviewing the effectiveness of risk management
and internal control systems in relation to the
Company’s financial reporting processes, further
details of which are set out on pages 54 to 58.
In relation to the day-to-day operations in
Conduit’s reinsurance business, the Board
relies on a strong Board at the CRL operating
company level, which includes four
Independent Non-Executive Board Members
(Ken Randall (Chair), Malcolm Furbert,
Elizabeth Murphy and Michelle Seymour
Smith) who serve at both the CHL Board and
CRL operating company Board level, each of
whom has extensive board and operational
level experience of regulated reinsurance
companies in Bermuda.
The CRL Board has, in turn, established four
sub-committees: Risk, Capital and Compliance;
Audit; Strategy; and Underwriting. It has also
established an Executive Management
Committee comprising of the Chief Executive
Officer and other Senior Executives.
CRL operates a strict 'three lines of defence'
model with all second-line functions (for
example risk and compliance) reporting to the
CRL Risk, Capital and Compliance Committee;
and the third line (Internal and External Audit,
Independent Loss Reserve Specialist)
reporting to the CRL Audit Committee.
While four Independent Non-Executive
Directors serve on the Board of CRL, all
Independent Non-Executive Directors are
encouraged to attend as observers at any
Board or Board Committee meetings across
Conduit, subject to any conflict management
limitations. Conduit is committed to open and
transparent governance.
Conduit has a comprehensive set of policies and
procedures aimed at bolstering governance and
compliance. Conduit's code of conduct,
whistleblowing policy and procedures, and other
compliance policies and procedures, including
policies covering anti-bribery and corruption,
anti-money laundering and anti-terrorism
financing, conflicts of interest and gifts and
hospitality are made available to staff via the
Conduit intranet. Regular compliance training is
provided. Conduit has contracted an external
independent specialist whistleblowing service
provider to enable staff to report whistleblowing
incidents, anonymously or otherwise, over the
phone or in writing via online submission.
The Board
Conduit has a Board with a strong blend
of experience and expertise in diverse
professional backgrounds including insurance
and other financial services, accounting,
regulatory, governance and other areas. The
Board has overseen and will continue to
oversee the Company’s trading and operation
as a public company.
Conduit Holdings Limited | Annual Report and Accounts 2023
49
Corporate governance and compliance with the UK
Corporate Governance Code continued
Biographical information for each of the
current Directors of the Company, including
each Director's experience, qualifications,
attributes and skills is on pages 40 to 44.
Succession planning was discussed at both
Nomination Committee and Board level in
2023 and will continue to be a key topic for
2024. More information is contained in the
Nomination Committee report on page 52.
Non-Executive Director independence
The UK Code recommends that at least half
the Board of Directors of a UK-listed company,
excluding the Chair, should comprise Non-
Executive Directors determined by the Board
to be independent in character and judgement
and free from relationships or circumstances
that may affect, or could appear to affect,
this judgement.
As part of the Board's normal rotation and
succession plan execution, Dr. Richard Sandor
stood down from the Board on 7 November
2023 at the end of his initial three-year
appointment term. For the purposes of this
report he was also determined to be an
Independent Non-Executive Director within
the meaning of The UK Code during the tenure
of his appointment.
Board meetings and attendance
The Board schedules meetings quarterly and
receives additional updates as required on
topics of importance arising in the months
where no formal meetings are scheduled.
Additional meetings have been and will be
arranged as necessary, including in relation to
the business of the committees. All Directors
receive an agenda and meeting packs in
advance of the meetings.
The Board has determined that all of the
Non-Executive Directors (being Sir Brian
Williamson, Malcolm Furbert, Elizabeth
Murphy, Ken Randall, Rebecca Shelley, and
Michelle Seymour Smith) are free from any
business or other relationship that could
materially interfere with the exercise of their
independent judgement and are therefore
'independent Non-Executive Directors' within
the meaning of The UK Code.
The Company has three Executive Directors
(including the Executive Chairman) and six
Independent Non-Executive Directors.
As part of the Company’s risk management
framework, Conduit follows regulatory and tax
operating advice and guidelines, common for
groups established in Bermuda, that require
the situs of the Company’s Board and
Committee meetings and decision-making
to be Bermuda.
The number of Board and committee meetings
attended by each Director for the purposes of
Provision 14 of The UK Code in the year ended
31 December 2023, relative to the number of
meetings held during their time in office, was
as follows:
Neil Eckert
Trevor Carvey
Elaine Whelan
Sir Brian Williamson
Malcolm Furbert
Elizabeth Murphy
Ken Randall
Dr. Richard Sandor
Rebecca Shelley1
Michelle Seymour Smith
Board
Nomination
Committee
Remuneration
Committee
Audit
Committee
4/4
4/4
4/4
4/4
4/4
4/4
4/4
3/4
2/2
4/4
n/a
n/a
n/a
4/4
4/4
4/4
4/4
3/4
2/2
4/4
n/a
n/a
n/a
4/4
4/4
n/a
4/4
3/4
2/2
n/a
n/a
n/a
n/a
n/a
n/a
4/4
4/4
n/a
n/a
4/4
1.
Rebecca Shelley was appointed on 25 July 2023 to serve on the Board, and she was also appointed to serve
as a member of the Nomination Committee and a member of the Remuneration Committee
Conduit Holdings Limited | Annual Report and Accounts 2023
50
Corporate governance and compliance with the UK
Corporate Governance Code continued
Board responsibilities
The Board is responsible for leading and
controlling the Company, and has overall
authority for the management and conduct
of its business, strategy and development.
The Board is also responsible for ensuring the
maintenance of a sound system of internal
controls and risk management (including
financial, operational and compliance controls)
and for reviewing the overall effectiveness of
systems in place as well as for the approval of
any changes to the capital, corporate and/or
management structure of the Company. To
ensure transparency and accountability of the
business to the Independent Non-Executive
Directors, the CHL Board was invited to attend
(and did attend) CRL Board-level and
Underwriting Committee meetings, and are
provided with all minutes and records of such
subsidiary Board and committee meetings.
The Board has established procedures for
Directors to take independent professional
advice at the expense of the Company in the
furtherance of their duties. Each Director also
has access to the General Counsel and
Company Secretary to ensure that good
governance and compliance is implemented
throughout Conduit. The division of
responsibilities between the Executive
Chairman, CEO and Senior Independent
Director is summarised below and is available
in full on the Company’s website.
Executive Chairman
CEO
Senior Independent Director
Ensures the effective running of the Board and supports the
CEO in an advisory role in the execution of the CEO's
responsibilities (including with respect to ESG matters), makes
sure that the views of the Board and shareholders are taken into
account, and acts as the primary ambassador for Conduit
in respect of Investor Relations and ESG matters.
Ensures that the Board as a whole plays a full and constructive
part in the development and determination of Conduit's strategy
and overall commercial objectives, with due consideration to
Conduit's responsibilities to its shareholders, its suppliers, clients,
customers, employees and other stakeholders.
Shapes the culture in the boardroom, encouraging all Directors
to engage in Board and Committee meetings by drawing on
their skills, experience and knowledge; and fostering
relationships based on trust, mutual respect and open
communication – both in and outside the boardroom – between
Non-Executive Directors and the executive team.
Promotes the highest standards of integrity, probity and
corporate governance throughout Conduit and particularly
at Board level.
Leads the executive management team in the day-to-day
management of the Group to pursue Conduit’s commercial
objectives and execute and deliver Conduit's strategy, as
approved by the Board.
Ensures that there is a culture of openness and debate, in
particular by facilitating the effective contribution of Non-
Executive Directors and ensuring constructive relations between
Executive and Non-Executive Directors.
Ensures, with the executive management team, that Board
decisions are implemented effectively and that significant
decisions made by the executive management team are
communicated to the Board in line with granted authority.
Is available to shareholders if they have concerns that contact
through the normal channels of the Executive Chairman or other
Executive Directors has failed to resolve or for which such
contact is inappropriate.
Provides clear leadership, inspires and supports Conduit's
employees in all areas of Conduit's business, including the
development of ideas, products and operations. Ensures that
there is effective communication by Conduit with its workforce,
including with respect to governance matters.
Manages Conduit’s risk profile, with the CRO and other members
of the executive, in line with the extent of risk identified as
acceptable by the Board, and ensures that appropriate internal
controls are in place.
Assists in the maintenance of the stability of the Board and
Company, particularly during periods of stress.
Acts as a sounding board for the Executive Chairman, providing
support in the delivery of the Executive Chairman’s objectives.
Conduit Holdings Limited | Annual Report and Accounts 2023
51
Corporate governance and compliance with the UK
Corporate Governance Code continued
Board activities
In addition to monitoring closely Conduit’s
core underwriting business, Board activities
in 2023 were focused on overseeing the
transition from the start-up phase (which
necessarily concentrated on establishing the
initial business and processes, hiring staff and
building technology) to process improvement,
refinement of technology, business growth
and enhancing the application of ESG matters.
The Board received regular written and oral
reports from executive management on
progress in each of these areas. The Board
also participated in a session straddling two
days to review strategy considering the wider
market and risk environment. It was
determined that there would be no changes
to the strategy, the objective of which is to
promote the long-term success of the
Company. Board meetings were held in
Bermuda to approve all key actions,
documentation and agreements.
Workforce engagement mechanism
Malcolm Furbert acts as the Company’s Non-
Executive Director responsible for workforce
engagement. See details on page 37 of the
Section 172 statement.
Board effectiveness
Since its inception in 2020, Conduit has been
committed to ensuring that the Board is
performing effectively. In 2021 and 2022,
annual board performance reviews were
internally facilitated. In 2023, Conduit's third
year, Conduit's first externally facilitated board
evaluation was conducted by Board Analytics,
a division of Intersect International. Board
Analytics was selected after a tendering
process involving a number of service
providers and has no previous business
relationship with Conduit or any of the
Directors, nor do they provide services of any
other type to Conduit. The process to select
an external independent reviewer was led by
the Company Secretary and approved by the
Board. The Company Secretary acted as the
internal contact for Marylee O’Neill of Board
Analytics to ensure that she had all necessary
access and support in order to carry out a full
and comprehensive review. Additionally, all
Independent Directors were available to Ms.
O’Neill throughout the process. The evaluation
consisted of: (i) an online survey completed
anonymously by each Director and selected
members of management (ii) individual
interviews with each Director, the Company
Secretary and selected members of
management (iii) attendance at Board and
Committee meetings as an observer, and (iv)
a review of the Board and committee agendas
and meeting materials.
Board Analytics focused on all aspects of
the Board’s effectiveness, as well as on the
effectiveness of each individual Director.
The Board was provided with a fulsome review
document which set out key findings and
recommendations. The evaluation confirmed
that, while the Board is working effectively
across all areas, including board leadership,
people and composition, process and
structure, board work, and board culture, there
are several opportunities and areas for action.
As part of its commitment to excellence, the
Board continually seeks to improve its
effectiveness and strive for constant
improvement and, based on the
recommendations in the report, will focus
on the following in 2024:
— Completing the establishment of a long-
term succession plan for executive
management and their direct reports.
— Continuing execution of the Board's
succession plan by the recruitment of an
additional Independent Non-Executive
Director, the search for whom is under way.
— Enhancements to Board reports,
management of meetings and director
education.
Further information on these initiatives can be
found throughout this report.
Conduit Holdings Limited | Annual Report and Accounts 2023
52
Nomination Committee report
“2023 was a year of
transition for the Board as
we moved on from the
establishment phase into
refreshing the Board to
meet identified needs and
to reflect the specialisms
of the business.”
Ken Randall, Chair
Nomination Committee
Introduction
I am pleased to present my report on the
activities of the Nomination Committee
(the Committee) for the year ended
31 December 2023,
In 2023 the Nomination Committee's focus
was on Independent Non-Executive Director
succession planning, bearing in mind the
somewhat unique situation where almost all of
Conduit's Non-Executive Directors had served
Conduit from the same appointment date in
2020. An independent specialist search
agency, Heidrick & Struggles, with no other
connection to Conduit, was appointed to
identify and assess Independent Non-
Executive Director candidates, and in July
we welcomed Rebecca Shelley to the Board.
Richard Sandor left the Board in November
and I thank him warmly for his contribution
to Conduit's establishment and transition from
a start-up to a business that has generated
$2.1 billion of ultimate premiums written in its
first three years in operation.
Execution of the Board succession plan
continues. Utilising the services of Heidrick &
Struggles, we have carried on the search for
additional Non-Executive Director candidates
to refresh the Board and to meet the identified
needs and specialisms of the business, to
enable an orderly, staggered succession.
Nomination Committee membership
In 2023, the Committee members were
Ken Randall (Chair), Sir Brian Williamson,
Malcolm Furbert, Elizabeth Murphy,
Dr. Richard Sandor and Michelle Seymour
Smith, and Rebecca Shelley joined the
Committee in July 2023.
Dr. Richard Sandor left the Committee when
he stepped down from the Board on 7
November 2023.
Independence and experience
All Committee members are Independent Non-
Executive Directors, each with many years of
relevant experience serving as directors and/
or working in the reinsurance industry.
Detailed biographies are available on pages
40 to 44.
As Chair, I am responsible for an annual review
of the Committee membership, and I am
satisfied that the current members are each
independent and capable of carrying out the
Committee roles and responsibilities.
Role and responsibilities
The Nomination Committee’s duties are set
out in its terms of reference, which are
available on Conduit’s website, The duties
include, but are not limited to:
— Director induction, training and development.
— Identifying and nominating candidates to
fill Board vacancies.
Details on how we performed these key
responsibilities in 2023 are set out in the
remainder of this report.
2023 meetings
The Nomination Committee is required to
meet at least twice annually, or more
frequently if required, to discharge its duties.
In 2023, there were four Committee meetings.
In addition to the members, other individuals
such as the Executive Chairman and the Head
of HR attended all or part of the meetings.
Name
Ken Randall
Elizabeth Murphy
Appointed
18 November 2020
18 November 2020
Sir Brian Williamson
18 November 2020
Malcolm Furbert
Richard Sandor
Michelle Seymour Smith
Rebecca Shelley1
18 November 2020
30 November 2020
22 February 2022
25 July 2023
Maximum possible
meetings Meetings attended
4
4
4
4
4
4
2
4
4
4
4
3
4
2
1.
Rebecca Shelley was appointed to the Nomination Committee on 25 July 2023 and was only eligible to attend two
of the four meetings held in 2023.
Conduit Holdings Limited | Annual Report and Accounts 2023
53
Nomination Committee report continued
Performance evaluation
The Committee reviewed the results of the
Board performance evaluation for the period
ending 31 December 2023 as described on
page 51.
Recognising that the agreed Board
succession plan was being executed, the
2023 evaluation raised no concerns regarding
the Board’s composition or diversity, or how
effectively members worked together to
achieve objectives.
The evaluation did identify individual areas
for improvement as set out on page 51 but,
overall, no concerns were identified in respect
of Non-Executive Director independence or
external time commitments.
Board and Committee composition and
succession planning
As noted in my introductory remarks,
implementation of the Board succession plan
was a priority in 2023.
In addition, work has commenced on a
succession plan for other key leadership
positions within Conduit.
In the meantime, Conduit maintains a robust
emergency succession plan for the Board and
senior management. The plan was reviewed by
the Committee in 2023.
Board gender split
l Male 56%
l Female 44%
Executive Committee direct reports gender split
l Male 58%
l Female 42%
Director induction and training
The Committee ensured that an appropriate
and comprehensive plan is in place for
inducting new Directors and Conduit’s
leadership team. Induction is tailored to the
needs of each individual but includes meetings
with the executive leadership team,
department heads and advisors, technical
briefings and office visits. Rebecca Shelley
participated in the induction programme as
part of the process for her appointment to
the Board.
As an equal opportunities employer, Conduit
does not tolerate discrimination or harassment
of any kind in any aspect of employment.
Conduit fully supports and celebrates
differences, which could include but are not
limited to race, age, gender, gender identity,
sexual orientation, disability, beliefs,
background (except as may be pertinent to
the requirements of a role, such as educational
qualifications or prior employment
experience), socio-economic group, family
or marital status, or nationality.
As at 31 December 2023 44% of the Board
was female.
Priorities for 2024
In 2024 the Committee will continue to focus
on implementation of Board succession and on
completing the establishment of a long-term
succession plan for executive management
and their direct reports, all with a view to
satisfying Conduit’s medium- to longer-term
succession needs at Board and senior
management levels.
Ken Randall, Chair
Nomination Committee
27 February 2024
The strategy and planning sessions held over
two days in May 2023 also contained a training
aspect for Directors. Diverse topics were
presented and discussed, including a
comprehensive review of the reinsurance
market covering reinsurer results, capital,
financial strength ratings, valuations and the
market outlook, the impact of inflation, a
review of investment markets and strategy, a
review of cycle management lessons learned
from prior Bermuda reinsurance businesses,
and stock market perspectives from the
Company’s financial advisors.
The Board also attended specific training
sessions in 2023 on the implementation of
IFRS 17.
Diversity and inclusion
Diversity and inclusion has been a priority
since Conduit’s inception. Management and
the Board believe that valuing diversity and
inclusiveness is a competitive differentiator,
enabling us to achieve our vision to create
unmatched value for our customers,
colleagues, business partners and
shareholders.
Conduit's Diversity and Inclusion Policy
reflects our principles for recruitment and
advancement at all levels of Conduit and
underlines the fact that Conduit is committed
to recruiting, retaining and developing people
with diverse backgrounds and experiences at
all levels of Conduit’s business, in a truly
inclusive environment.
Conduit Holdings Limited | Annual Report and Accounts 2023
54
54
Audit Committee report
Audit Committee report continued
"One of the Committee’s
most significant activities
in 2023, was overseeing
the implementation of
reporting in accordance
with IFRS 17.”
Elizabeth Murphy, Chair
Audit Committee
Introduction
As Chair of the Audit Committee, I am pleased
to present my report on the activities of the
Audit Committee (the Committee) for the
financial year ended 31 December 2023,
detailing the Committee’s activities during the
year, how it has discharged its responsibilities
and the key topics it has considered.
With Conduit having applied TCFD within the
2022 year-end reporting, the Committee,
along with the ESG Committee, received
updates on developments in TNFD and the
release of IFRS S1 and IFRS S2 by the ISSB,
applicable to periods beginning on or after
1 January 2024. Associated disclosures remain
an area of focus for the Committee.
Audit Committee membership
The Audit Committee membership is
comprised of Independent Non-Executive
Directors. For the full year 2023, the members
were Elizabeth Murphy, Ken Randall and
Michelle Seymour Smith.
The Audit Committee membership is the same
for CRL, which strengthens governance and
oversight of Conduit’s main operating subsidiary.
One of the main areas of focus, and one of
the Committee’s most significant activities in
2023, was overseeing the implementation of
reporting in accordance with IFRS 17 and, to
a lesser degree, IFRS 9. During the year, the
Committee oversaw preparations for the
implementation of IFRS 17 and was therefore
well placed to monitor the impact of the new
standard and to ensure that this was clearly
communicated to stakeholders. In this regard,
the UK Financial Reporting Council (FRC)
carried out a limited scope review1 of Conduit’s
IFRS 17 disclosures in its half year report to
30 June 2023. There were no questions or
queries raised with Conduit as a result of the
FRC’s review, although they may raise queries
with Conduit in the future. The Committee also
continued to monitor the integrity of external
financial reporting, systems, processes and the
control environment.
2023 meetings
The Audit Committee held four meetings
during the year. Members of senior
management and external and internal
auditors were invited to present at each
meeting. The Audit Committee also met
privately with the external auditors and in
an executive session with the CFO present.
The Chair of the Audit Committee held regular
meetings with the CFO and the external and
internal auditors outside of the formal
Committee meetings.
There were no points of concern arising out of
the Board’s performance evaluation regarding
the Audit Committee’s performance during 2023.
Name
Elizabeth Murphy
Ken Randall
Appointed
18 November 2020
18 November 2020
Michelle Seymour Smith
15 September 2021
Maximum possible
meetings
Meetings attended
4
4
4
4
4
4
1.
The FRC’s review is based solely on the Company's report and accounts and does not benefit from detailed knowledge of Conduit’s business or an understanding of the
underlying transactions entered into. It is, however, conducted by staff of the FRC who have an understanding of the relevant legal and accounting framework. Their review
provides no assurance that the Annual Report and Accounts are correct in all material respects. The FRC's role is not to verify the information provided to it but to consider
compliance with reporting requirements. Their review is written on the basis that the FRC (which includes its officers, employees, and agents) accepts no liability for reliance
on it by the Company or any third party, including but not limited to investors and shareholders.
Conduit Holdings Limited | Annual Report and Accounts 2023
55
Audit Committee report continued
Independence and experience
All Audit Committee members are
Independent Non-Executive Directors with
recent and relevant financial experience
and competence in accounting and/or audit,
and all have competence relevant to the
reinsurance sector in which Conduit operates.
Detailed information on the Audit Committee
members’ experience and qualifications is set
out in the Directors’ biographies on pages
40 to 44.
Role and responsibilities
The Audit Committee is required to carry out
duties in the areas listed below for CHL and
Conduit as a whole, as appropriate:
— Assessing the integrity of Conduit's
financial reporting and satisfying itself that
any significant financial judgements and
estimates made by management are sound.
— Keeping under review internal controls and
risk management systems.
— Reviewing compliance and fraud
procedures and controls.
— Monitoring and reviewing the effectiveness
of the internal audit function.
— Advising on the appointment of the
external auditor and overseeing the
relationship with the external auditor,
including their independence and
effectiveness.
More details around how these key
responsibilities were performed are set out
below. The Audit Committee’s terms of
reference are available on Conduit’s website.
Assessing the integrity of financial reporting
The Audit Committee reviewed the Company’s
quarterly trading updates, interim unaudited
condensed consolidated financial statements
and the annual audited consolidated financial
statements for the purposes of recommending
their approval by the Board. Particular
attention was paid to the implementation of
IFRS 17 and, to a lesser degree, IFRS 9 and the
related disclosures. The Committee also
reviewed and considered a paper from
management detailing areas of significant
judgement and estimation in the preparation
of the consolidated financial statements.
The Audit Committee received reports from
the external auditors on the consolidated
financial statements, including an interim
review report and a year-end audit results
report. The external auditors performed
procedures on Conduit’s implementation
of IFRS 17, including a review of the policy
decisions, judgements and estimates made
by management and financial reporting
disclosures. These reports were discussed with
the external auditors at the Audit Committee
meetings, both with management present and
with the Audit Committee in private session.
No significant issues were identified.
Throughout the year the CFO and the Audit
Committee Chair communicated and met
regularly to discuss matters related to the
preparation and presentation of Conduit's
financial statements, including the progress
of the external audit.
The Committee also received regular updates
on the status of the IFRS 17 implementation
project, the impact of the transition to IFRS 17
on historical reported financial information and
industry developments in relation to IFRS 17.
Members of the Audit Committee also
attended a number of training sessions
delivered by management. These sessions
covered the key technical requirements and
accounting policy decisions and principles plus
changes to the presentation and disclosure of
the financial statements.
The Audit Committee also received regular
and ad-hoc reports on the following:
— Accounting treatment and policies in
respect of business and investment
activities. Particular attention was paid
to the accounting policies adopted on the
implementation of IFRS 17 (see pages
102 to 110).
— Loss reserving developments and the
reserving process, including changes as
a result of IFRS 17 (see page 138).
— The implementation and/or development
of financial reporting systems including
changes as a result of IFRS 17.
— Finance reports from CRL including with
respect to BMA filings (via the overlap
with the CRL Audit Committee).
— Significant judgements and estimates and
going concern assessments.
— Management’s assessment of fraud risk.
Keeping under review internal controls and
risk management systems
The Board has ultimate responsibility for
ensuring the maintenance by Conduit of a
robust framework of internal control and risk
management systems. Monitoring and review
of these systems has been delegated to the
Audit Committee. The system of internal
controls is designed to manage rather than
eliminate the risk of failure to achieve business
objectives, and can only provide reasonable,
not absolute, assurance against material
misstatement or loss.
During 2023, the Audit Committee received
quarterly reports from Conduit's CRO covering:
— risks events, including control failures, and
commentary on the Company’s risk profile;
— risk appetite and tolerance statement
compliance;
— capital adequacy;
— an update on any changes to previous
— Recruitment and development within the
assessments of risk;
finance team.
— Accounting and financial reporting
developments other than IFRS 17.
Conduit Holdings Limited | Annual Report and Accounts 2023
56
Audit Committee report continued
The Committee reviewed management's
assessment of the effectiveness of the risk
management and control environment and
continued to review and approve applicable
policies and arrangements.
All members of the Committee also
participated in discussions on emerging
risks and were briefed on Conduit's response.
The Committee also received updates on
the ongoing development and enhancement
of systems.
The Committee received reports and
updates from Internal Audit on aspects of
internal control as determined in the Internal
Audit Plan.
Further detail of the emerging and principal
risks affecting Conduit, including those
matters that have informed the Board’s
assessment of Conduit’s ability to continue as
a going concern, as well as the risk mitigation
procedures in place to identify and manage
them, can be found in the risk disclosures on
page 110 of the Annual Report and Accounts.
Reviewing compliance and fraud procedures
and controls
The Audit Committee received regular
compliance reports from the General
Counsel, covering:
— regulatory interactions with the BMA,
regulatory reporting and updates on the
regulatory environment;
— corporate governance updates;
— the status of the compliance plan execution;
— compliance and regulatory training; and
— review of compliance policies, including
anti-money laundering, anti-bribery and
financial crime, conflicts of interest,
whistleblowing, sanctions and Conduit’s
code of conduct.
The Committee continued to review and
discuss proposed amendments to The UK
Code. Management will continue to monitor
developing control reporting requirements and
ensure adequate plans are in place to
implement changes as required.
The Audit Committee receives reports on
the number of whistleblowing cases reported
to Conduit’s whistleblowing service. The Audit
Committee reviewed and approved updates to
Conduit's whistleblowing policy and procedure
in 2023 and as Audit Committee Chair, I
received training from Conduit’s third-party
whistleblowing service provider on how
whistleblowing reports raised to them will
be handled.
The Audit Committee also receives an annual
fraud risk assessment from the CRO that includes
details of management's assessment of fraud
risks and the most material associated controls.
Climate and ESG reporting
As part of the Audit Committee's obligations
pursuant to TCFD, in 2023, as part of year-end
2022 reporting, Conduit published its first
standalone ESG Report and its ClimateWise
reports for 2021 and 2022 on Conduit's
website. The Committee also discussed and
agreed that KPMG be commissioned to
provide limited assurance over the carbon-
emission calculations for 2023.
Monitoring and reviewing the effectiveness
of the internal audit function
EY Bermuda Limited (EY) is the Company’s
outsourced internal auditor. EY has extensive
and current relevant experience, providing
outsourced and co-sourced internal audit
services to reinsurance businesses in Bermuda
and internationally and they are considered to
have the necessary skills and resources to
deliver the internal audit function effectively.
The internal auditor reports directly to the
Audit Committee.
During the year, the Committee considered
and approved the Internal Audit Charter and
monitored its execution. The internal audit
plan was based on an updated risk
assessment. Internal Audit provided quarterly
written and oral reports to the Audit
Committee. The findings of each internal audit
are reported at the Committee’s quarterly
meetings. The Committee reviews actions
recommended to management for the
improvement of internal controls and the
status of implementation of the actions.
The Committee also met privately with the
internal auditors.
The Audit Committee also evaluated the
independence of the internal auditors, and
no concerns were identified. The effectiveness
of the internal audit function is kept under
review annually and will also be formally
reviewed in 2024.
Overseeing the relationship with the
external auditor
KPMG Audit Limited (KPMG) was originally
appointed as the Company’s external auditor
in December 2020. At the Company’s 2023
AGM, KPMG was reappointed as external
auditors of the Company until the conclusion
of the 2024 AGM. The lead external audit
partner is James Berry who was appointed at
the same time as KPMG was appointed as the
Company’s first auditor in December 2020. In
2023 the Audit Committee assessed the fee
arrangements with KPMG which are discussed
in Note 8 of the financial statements.
The Audit Committee met with KPMG
regularly during 2023 (both in private session
and with management present) and reviewed
and approved the external audit work plan for
the year ending 31 December 2023. The Audit
Committee receives reports from KPMG, which
include the progress of the audit, key matters
identified and the views of KPMG on the
significant judgements and estimates outlined
below. KPMG also reports on matters such as
their observations on the Company’s financial
control environment, developments in the
Conduit Holdings Limited | Annual Report and Accounts 2023
57
Audit Committee report continued
audit profession, key upcoming accounting
and regulatory changes and certain other
mandatory communications.
Implementation of the policy is reviewed
annually by the Audit Committee.
The Audit Committee continues to monitor
developments, recommendations and
legislative proposals related to the quality and
effectiveness of the external audit and it will
formally review the effectiveness of the
external audit function in 2024.
Auditor independence and objectivity
The Audit Committee assesses the external
auditor’s independence annually and has
assessed that they are independent. To assist
in maintaining the external auditor’s
independence and objectivity, Conduit has
adopted a formal policy governing the
engagement of the external auditor to provide
non-audit services, taking into account the
relevant ethical guidance on the matter. The
policy describes the circumstances in which
the auditor may be engaged to undertake
non-audit work for Conduit. The Audit
Committee oversees compliance with the
policy and will consider and approve requests
to use the auditor for non-audit work when
they arise, if appropriate. Except for
procedures conducted by KPMG with respect
to the Company’s unaudited condensed
interim consolidated financial statements for
the six months ended 30 June 2023, and an
engagement to undertake a carbon emissions
disclosure review of the 2023 year end
reporting. The Non-Audit Services Policy
is available on the Company’s website.
Auditor reappointment
The Company is required to appoint auditors
at every general meeting of the Company at
which financial statements are presented to
shareholders. KPMG, acting as external auditor
to the Company in the Company’s third year,
has advised of its willingness to stand for
reappointment in 2024.
The Audit Committee and the Board consider
KPMG to have extensive experience auditing
publicly traded reinsurance businesses. The
Committee has concluded that KPMG’s
appointment as auditors for the forthcoming
year continues to be in the best interests of
the Company and its shareholders. The
resolution to reappoint KPMG will propose that
KPMG holds office until the conclusion of the
next Annual General Meeting at which
accounts are laid before the Company, at
a level of remuneration to be determined
by the Board.
Significant areas of judgement and estimation
Annually, management provides the Audit
Committee with an analysis of significant areas
of judgement and estimation in the
preparation of the consolidated financial
statements plus an analysis of the
appropriateness of preparing the statements
on a going concern basis. As discussed in our
accounting policies on page 102, the most
significant estimates made by management
are in relation to the undiscounted valuation of
the liability for incurred claims and associated
ceded reinsurance recoveries. Less significant
estimates are made in determining the
estimated fair value of certain financial
instruments and the estimated premium
cash flows used to determine reinsurance
revenue recognised.
The Audit Committee receives a quarterly
report on the liability for incurred claims, prior
year development on the liability for incurred
claims, and inflation considerations from the
Company’s Reserving Actuary. The Committee
reviews the adequacy of Conduit’s loss
reserves and challenges the methodology and
judgements applied.
Valuation of liability for incurred claims and
associated ceded reinsurance recoveries
The valuation of the liability for incurred claims,
including IBNR, involves a significant amount of
judgement. As stated in our accounting policies,
it is a complex process and it is reasonably
possible that uncertainties in the reserving
process and delays in cedants reporting losses
to Conduit, together with the potential for
unforeseen adverse developments, could lead
to a material change in the estimated liability
for incurred claims and associated ceded
reinsurance recoveries. Judgement is exercised
in estimating the future cash flows in relation to
ultimate claims settlement and selecting the
methodology to calculate a point estimate for
the ultimate loss. The risk adjustment is
estimated using a margin-based approach,
calibrated to a targeted confidence interval
range.
The Committee also receives reports from the
independent loss reserve specialist semi-
annually. The Committee was able to compare
their evaluation of the liability for incurred
claims with Conduit's and understand the
differences which naturally arise between them.
The Committee also received semi-annual
reports from the external auditors on the
adequacy of the liability for incurred claims.
The Committee focused in particular on:
— the implications of the adoption of IFRS 17;
— the reserving for natural-catastrophe and
large-loss events;
— the use of selected attritional reserving
ratios, given the lack of historical data
for Conduit;
— the difference in management’s estimates
versus the independent loss reserve
specialist, noting that the differences are
within a reasonable range;
— the process for estimating cash flow patterns
and establishing the risk adjustment;
— the process for determination of the
confidence interval;
Conduit Holdings Limited | Annual Report and Accounts 2023
58
Audit Committee report continued
— the assessment and quantification of the
impact of inflation on the liability for
incurred claims; and
— the adequacy of disclosure on the
uncertainties of the loss reserve estimates.
The Audit Committee was satisfied that all its
queries were appropriately addressed and
noted that there were no material differences
between the liability for incurred claims
calculated by the Company’s Reserving Actuary
and the independent loss reserve specialist.
The Committee was therefore satisfied that
the valuation of the liability for incurred claims
and associated ceded reinsurance recoveries
was appropriate.
Fair value of certain financial instruments
The asset types Conduit is invested in are not
complex with lower estimation uncertainty in
determining fair value. The assets are highly
liquid and are of high-credit quality. As
disclosed in note 12, all of Conduit’s assets are
Level (I) or Level (II) securities. There are no
equities, hedge funds or derivative instruments.
Conduit’s investments are fair valued through
the income statement (FVTPL). Conduit does
not therefore have any judgement around
impairment charges.
Expected premium cash flows used to
determine reinsurance revenue recognised
Our quota share policies in particular are
subject to estimates. Some management
judgement is exercised in determining the
initial ultimate premium cash flow estimates
from which to establish the recognition of
reinsurance revenue. While Conduit has a
relatively short operating history, the policies
underwritten are largely mature and known
to the underwriting team and therefore
establishing an appropriate estimate is not
deemed to be a significant risk. Management
carries out regular reviews on these estimates
to validate their reasonability.
Going concern assessment and longer-term
viability statements
The Audit Committee reviewed and advised
the Board on Conduit’s going concern and
longer-term viability statements included in
the Annual Report and Accounts and the
assessment reports prepared by management
in support of such statements. As part of this
review, the Audit Committee assessed the
methods, assumptions, judgements, business
planning and stress testing underpinning the
going concern assessment. The Audit
Committee was satisfied with the level of
analysis presented during the year, the related
approach taken and statements made in
Conduit’s key external reporting. More
information on the going concern and viability
statements can be found on page 102.
Annual Report and Accounts
The Audit Committee reviewed and approved
Conduit’s audited results and drafts of the
Annual Report and Accounts together with the
external auditor’s report. The Audit Committee
advised the Board that, in its view, the 2023
Report and Accounts, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders to
assess Conduit’s position and performance,
business model and strategy.
Priorities for 2024
— Continued monitoring of the control
environment and financial reporting
processes, including further embedding
of IFRS 17 into business as usual.
— Continue to monitor and implement
developments in climate and ESG reporting.
— To monitor the implementation of risk
management and internal control
framework changes to corporate
governance requirements of 2024 UK
Corporate Governance Code.
— To review the effectiveness of the
external auditors.
— To review the effectiveness of the
internal auditors.
Elizabeth Murphy, Chair
Audit Committee
27 February 2024
Conduit Holdings Limited | Annual Report and Accounts 2023
59
REMUNERATION
AT A GLANCE
The Conduit Remuneration Policy is designed to drive a culture
of high performance and create sustainable long-term value
for shareholders.
A summary of the 2023 remuneration outcomes for Executive
Directors is provided opposite.
Our performance1
Gross premiums written
RoE
Net tangible asset value
per share
$931.4m
22.0%
$6.25
2022: $622.5m
2022: (4.4)%
2022: $5.41
Total net investment return
Combined ratio
Total shareholder return
5.8%
2022: (5.0)%
72.1%
16.4%
2022: 103.0%
2022: 5.5%
1.
2022 numbers have been restated where necessary.
Key components
Outcome
Remuneration ($m)
The charts below set out the financial outcomes of the remuneration
package of the Executive Directors for 2023 against the 2022
reported outcomes.
l Fixed pay
l Annual bonus
Executive Chairman
CEO
CFO
Conduit Holdings Limited | Annual Report and Accounts 2023
5775611,2841,2359309061,5923072,5644641,875395202320222023202220232022050010001500200025003000 60
Directors' remuneration report
Introduction
I present the Directors’ remuneration report
for 2023 which consists of three sections:
1. This introduction, which explains our
approach to remuneration and summarises
the key decisions made by the Committee
during the year (pages 60 to 61).
2. Future Directors’ Remuneration Policy –
this sets out the proposed Remuneration
Policy, which will be put to a binding
shareholder vote at the 2024 AGM (pages
62 to 71).
3. Annual Report on Remuneration – this sets
out in detail how we’ve applied the
Remuneration Policy in 2023; the
remuneration received by Directors for the
year; and how we will apply the new
revised Policy in 2024. This report, along
with this Chair statement, will be put to
an advisory shareholder vote at the 2024
AGM (pages 72 to 84).
Performance for the year under review
2023 was a good year for Conduit. The overall
result was comprehensive income of $190.8
million or $1.19 per share. RoE for the year
was 22.0%.
Annual bonuses for 2023 were based 75%
on financial (RoE) targets and 25% on the
personal and strategic objectives of each
Executive Director.
As set out on pages 73 to 76, the Committee
set the threshold, target and stretch levels of
RoE required to be achieved for the financial
part of the 2023 annual bonus.
awards made to the Executive Directors
during the year.
It is the opinion of the Remuneration
Committee and the Board that the Company’s
management has done an outstanding job to
build a successful business in line with the
IPO prospectus. Management has recruited
an excellent team, now at 59 employees,
writing a strong book of diversified, quality
business utilising a technologically modern
operating platform.
Remuneration for 2023 reflects these
achievements. The RoE achieved for 2023 has
resulted in maximum pay-out of the financial
element of the annual bonus. The Committee
determined that the personal element pay-out
for the Executive Directors was appropriate
and in line with the performance achieved by
each Director. Details of the bonuses can be
found on pages 73 to 76.
The Remuneration Policy requires up to half of
any bonus to be deferred into shares, with
malus and clawback provisions in place.
The Executive Directors participate in the
Management Incentive Plan (the "MIP"), which
was agreed and put into place ahead of the
IPO. Details of the MIP were disclosed in the
IPO prospectus and the subsequent 2020
Annual Report and Accounts (and are
summarised in the Annual Report on
Remuneration section which follows below).
There were no additional long-term incentive
During 2023, the first tranche of bonus
deferral awards vested for Executive Directors
and staff. Additional tranches of the bonus
deferral awards made to Executive Directors
and staff from their 2021 and 2022 annual
bonus awards will vest in March 2024. Details
of the Executive Directors deferred share
bonus awards can be found on page 78.
Remuneration Policy review
As a non-UK incorporated company, Conduit is
not required to comply with the requirements
of the relevant provisions of the UK Companies
Act. However, as part of Conduit's commitment
to high standards of corporate governance,
the Committee agreed in 2020 that the
Remuneration Policy would in due course
be put to a binding shareholder vote.
As explained in my statement to shareholders
in our 2020 Annual Report & Accounts, there
was substantial engagement with prospective
investors and eventual shareholders of the
Company in the run-up to the IPO in late 2020
which included discussions of remuneration,
including the MIP arrangements. The initial
Remuneration Policy and the proposed
remuneration of Directors were fully disclosed
in our IPO Prospectus and the Board decided
that it would not serve a useful purpose to put
the initial Remuneration Policy to a binding
vote of shareholders at the AGM in May 2021.
Instead, the Company would continue to
develop its Remuneration Policy, with a full
disclosure in the 2021 Annual Report and
Accounts and a shareholder vote at the
2022 AGM.
Thus, while the current Remuneration Policy
was formally approved at the 2022 AGM
(having received 97.6% votes in favour) it has
effectively been in place for three years. The
Committee believes that, although the Policy
that was adopted then has served the
Company and its shareholders well, it is
relatively unusual in that there is no provision
within it to make any form of LTIP awards to
Executive Directors.
In the 2022 report the Company stated that
it had commenced a review of long-term
incentive plan (LTIP) structures. A new LTIP
was approved by the Committee and
implemented during 2023 although, in line
with the current shareholder-approved
Remuneration Policy, Executive Directors are
not eligible for awards under this LTIP.
During the third year of business, the
Committee felt that the Remuneration Policy
needed review and amendment to ensure
continued market peer alignment, specifically
to permit Executive Directors eligibility for
LTIP awards. A summary of the key features of
the LTIP was discussed with a number of
shareholders during a consultation process
which took place in early 2024. Following this
consultation, the Committee believes that
it is in the Company's interest to come back to
Conduit Holdings Limited | Annual Report and Accounts 2023
61
Directors' remuneration report continued
shareholders at the 2024 AGM (rather than
waiting as we could until the 2025 AGM) to
seek shareholder approval to amend the
Remuneration Policy to permit the making of
LTIP awards to Executive Directors and to
strengthen retention in the business in the
event that the Company needs to recruit or
appoint new Executive Directors in the future.
and will also be included in the Notice of AGM.
If approved, the 2024 Remuneration Policy
will be in place for the three-year period from
2024 to 2026 inclusive.
The revised Remuneration Policy is designed
to meet market best practice and the
provisions of The UK Code.
If the revised Remuneration Policy and LTIP
are approved at the 2024 AGM, the
Committee intends to incentivise Elaine
Whelan, CFO, with an LTIP award of 250% of
salary. Elaine was not part of the initial founder
allocation in 2020 in contrast to Neil Eckert,
Executive Chairman, and Trevor Carvey, CEO,
who received significant allocations at that
time in the MIP founder pool. Elaine did receive
a relatively modest allocation under the MIP, as
shown in prior disclosures. Neither Neil nor
Trevor will participate in the LTIP awards in
2024, however the proposed amendment to
the Policy allows all Executive Directors to be
eligible to participate in future LTIP awards
should the Committee determine that it is
appropriate to do so.
2024 Remuneration for Executive Directors
The remuneration report on the following
pages contains detailed disclosures on the
2023 remuneration outcomes for the Directors
as well as disclosure of details of the
implementation of the proposed Remuneration
Policy for the Executive Directors during 2024.
Remuneration Committee membership
I was appointed as Chairman of the
Remuneration Committee at the time of the
IPO in 2020. The other members of the
Remuneration Committee are Ken Randall,
Malcolm Furbert and Rebecca Shelley, who are
Independent Non-Executive Directors. Richard
Sandor retired as a Non-Executive Director in
November 2023. Rebecca Shelley was
appointed to the Board, and the Remuneration
Committee, in July 2023.
2023 meetings
The Remuneration Committee held four
meetings during the year, and Committee
attendance at meetings is shown in the
accompanying table.
Role and responsibilities
The responsibilities of the Remuneration
Committee include the following:
— Reviewing the appropriateness and
relevance of the Remuneration Policy.
— Determining the policy for Directors'
remuneration and setting remuneration
for the Executive Chair of the Board,
Executive Directors and senior
management including the Company
Secretary (the Executive Group).
— Reviewing the continuing appropriateness of
workforce remuneration and related policies.
— Determining all elements of the
— Reviewed the remuneration for Executive
Directors in line with the current
approved Policy.
remuneration of the Executive Group.
— Reviewed the business plan and
The Remuneration Committee’s terms of
reference, which also set out the Committee’s
reporting obligations and authority to carry
out its responsibilities, are available on the
Company’s website.
There were no points of concern arising out of
the Board’s performance review regarding
the Remuneration Committee’s performance
during 2023.
Key activities in the year
— Established a revised Remuneration Policy
for Executive Directors, for which approval
by the Company's shareholders will be
sought at the May 2024 AGM.
— Approved an LTIP for Conduit employees,
and initial Awards under the Plan to senior
executives below the Board.
appropriate RoE targets.
— Reviewed total compensation for the
Executive Group.
— Reviewed overall bonus and reward
arrangements for staff.
Conclusion
The Committee is committed to an open
dialogue with investors and welcomes views
on any part of our remuneration arrangements.
Having served a three year term, I shall not be
standing for re-election at the May 2024 AGM.
The Board will appoint a new Chair of the
Remuneration Committee to replace me at
that time.
Sir Brian Williamson, Chair
Remuneration Committee
27 February 2024
Name
Appointed
Sir Brian Williamson, Chair
17 November 2020
Malcolm Furbert
Ken Randall
Richard Sandor
Rebecca Shelley
17 November 2020
17 November 2020
24 November 2020
24 July 2023
Maximum possible
meetings
Meetings attended
4
4
4
4
2
4
4
4
3
2
Conduit Holdings Limited | Annual Report and Accounts 2023
62
Directors' Remuneration Policy
This section sets out the Directors’
Remuneration Policy (the "Remuneration
Policy"), which we will seek approval for at the
2024 AGM and which will come into effect on
the date following approval.
As a non-UK incorporated company, Conduit
does not need to comply with the
requirements of the provisions of the
Companies Act 2006 and Schedule 8 of the
Large and Medium–sized Companies and
Groups (Accounts and Reports) (Amendment)
Regulations 2008; however, it has chosen to
do so voluntarily. The Remuneration Policy has
been developed considering market best
practice and The UK Code, noting that as a
standard listed company it complies with The
UK Code on a voluntary basis, reflecting the
Board’s commitment to high standards of
corporate governance.
The main change to the previous
Remuneration Policy is to allow Executive
Directors to participate in the LTIP for which
shareholder approval is also being sought at
the 2024 AGM.
The Remuneration Committee may make
minor changes to the Remuneration Policy to
support its operation or implementation (for
example, for regulatory or administrative
purposes), provided that any such change
does not materially advantage any Directors,
without obtaining shareholder approval for
such changes.
— Predictability – the Remuneration Policy
contains appropriate caps for the different
pay elements. The potential reward
outcomes are set out in the illustrations
provided, which clearly show the potential
scenarios of performance.
— Proportionality – there is a clear link
between individual awards, delivery of
strategy and long-term performance. In
addition, the significant role played by
incentive/‘at-risk’ pay is designed to ensure
that poor performance is not rewarded.
— Alignment to culture – the Remuneration
Policy encourages performance that is
aligned to the culture of Conduit and in
accordance with accepted behaviours
and values.
Conduit’s approach to Senior Executive
reward is shaped by the following key
principles, where it is intended to deliver:
— Balancing short- and long-term goals –
provide a package with an appropriate
balance between short- and longer-term
performance targets linked to the delivery
of the Company’s business plan and the
generation of sustainable long-term returns
for shareholders.
— Shareholder alignment – ensure alignment
of the interests of the Executive Directors,
senior management and employees to the
long-term interests of shareholders.
— Competitive remuneration – maintain a
competitive package in order to attract,
retain and motivate high-calibre talent to
help ensure the Company performs
successfully.
— Fairness – take an active interest in the
development of good practices to deliver
fair remuneration at all levels of the
organisation.
— Performance-focused compensation –
encourage and support a sustainable, high-
performance culture in line with the build
plan and within the agreed risk profile of
the business.
In addition, the approach to senior reward is
tested against the six factors listed in The
UK Code:
— Clarity – the Remuneration Policy is
designed to be simple and to support long-
term sustainable performance so should be
well understood by participants
and shareholders.
— Simplicity – the Remuneration Committee
is mindful of the need to avoid overly
complex remuneration structures – the
executive remuneration policies and
practices are relevant to the continued
development of the business and simple to
communicate and operate.
— Risk – the Remuneration Policy is designed
to ensure that inappropriate risk taking is
not encouraged and will not be rewarded.
Appropriate limits are set out in the
Remuneration Policy. A balance of financial
and non-financial targets is used, which is
designed to be stretching but achievable to
ensure the arrangements do not encourage
excessive risk taking. The Committee
retains discretion to override formulaic
outcomes. There is a significant role played
by equity in the incentive plans, with up to
half of any annual bonus deferred into
shares, the LTIP (if approved by
shareholders for Executive Directors), the
MIP, and shareholding (including post-
cessation) requirements. Malus and
clawback provisions are in operation.
Conduit Holdings Limited | Annual Report and Accounts 2023
Base salary is a key element to recruiting, retaining and
incentivising executives of the right calibre to successfully
execute Conduit’s business strategy.
Benefits (including pension benefits)
Purpose and link
to strategy
Benefits support recruitment and retention and facilitate
a healthy workforce.
63
Directors' Remuneration Policy continued
Executive Director Remuneration Policy table
Base salary
Purpose and link
to strategy
Operation
Base salaries are reviewed annually, with any changes effective
from 1 January. Exceptionally, an out-of-cycle review may be
conducted if the Committee determines it is appropriate.
Operation
When setting base salary levels, the Committee will take into
account several factors including (but not limited to):
— The Director’s role, skills and experience.
— The economic environment.
— Overall business performance.
— Salary levels and pay conditions across the wider group.
— Individual performance.
— Market data for similar roles in comparable companies
(including reinsurance company peers).
— Changes to the size and complexity of the business.
Maximum opportunity There is no maximum base salary level.
The process for salary review is consistent for all employees
and increases for the Executive Directors are normally
considered in relation to the wider salary increases
across Conduit.
Higher increases may be permitted where appropriate, for
example development in role or a change in position or
responsibilities.
There are no formal metrics, although individual and group
performance is taken into consideration as part of the
annual review.
Performance metrics
Pension benefits
Conduit’s pension schemes are based on defined
contributions or equivalent cash in lieu or salary sacrifice,
subject to applicable law and local market standards. For
all staff, including Executive Directors, a cash allowance of
up to 10% of salary is paid in lieu of the standard employer
pension contribution, or a combination of pension
contributions and cash allowance, totalling 10% of salary.
Any changes in the workforce pension arrangements may
be reflected in executive director remuneration.
Other benefits
Other benefits reflect normal market practice, are
determined on a basis consistent with all employees, and
are set within agreed principles. Benefits include, but are
not limited to:
— Bermuda payroll tax and social insurance.
— Medical, dental and vision insurance.
— Life assurance.
— Long-term disability scheme.
— Gym and club membership.
— Travel allowance.
— Housing allowance for Bermuda-based
Executive Directors.
Additional benefits may be provided as the Remuneration
Committee considers appropriate and reasonable based on
market practice. Executive Directors are included in the
Directors’ and Officers’ Indemnity Insurance Policy.
Conduit Holdings Limited | Annual Report and Accounts 2023
64
Directors' Remuneration Policy continued
Benefits (including pension benefits)
Maximum opportunity
There is no maximum value of benefits; the value is set
according to recruitment and retention needs bearing
in mind local market standards and requirements.
Annual bonus
Purpose and link
to strategy
Pension contributions for Executive Directors will normally
be in line with the wider workforce, currently 10% of salary.
Performance metrics
None.
Operation
To reward the achievement of financial results and key
objectives over the financial year, which are linked to
Conduit’s strategic priorities.
To facilitate and encourage share ownership to align senior
employees with CHL shareholders through the use of
deferral into shares.
Annual bonus awards for the Executive Directors are
based on the financial performance of Conduit and the
performance against personal and/or strategic objectives
of each Executive Director during the financial year, with
performance measures and objectives set by the
Committee at the beginning of the financial year.
At the end of the performance period, the Remuneration
Committee will determine the actual bonus awards for
each Executive Director. The Remuneration Committee
aims to ensure that awards for Executive Directors are
based on performance viewed holistically rather than on
a formulaic outcome and has the discretion to adjust the
formulaic outcome.
Up to 50% of any bonus earned will be deferred into
shares, which normally vest over three years with one-
third of the award vesting in each of the following three
years. Participants may also be entitled to receive
dividend equivalents which have accrued on unvested
shares during the vesting period, such dividend equivalents
to be paid at vesting.
Bonus awards are subject to malus and clawback provisions.
Conduit Holdings Limited | Annual Report and Accounts 2023
65
Directors' Remuneration Policy continued
Annual bonus
Maximum opportunity
Performance metrics
Long-term incentive plan
Purpose and link
to strategy
Operation
The maximum bonus achievable for the Executive
Directors is 300% of base salary.
The majority of the performance measures will be based
on financial performance (for example, RoE). The financial
component will normally comprise at least two-thirds of
the overall opportunity. For 2024, the Committee has set
the financial component at 75% of the overall opportunity.
A financial performance hurdle applies before any bonus is
payable in relation to the financial component, which is
reviewed annually. Where performance is deemed to be
below a pre-determined hurdle, payouts for the financial
component will be nil. 25% is payable for meeting the
threshold performance required as set by the Committee
in the financial metrics targets.
The Committee has the discretion to make an award under
the personal performance component if the financial
performance hurdle has not been met.
Aligned to main strategic objective of delivering superior
returns to shareholders over the medium to long term.
Creates alignment with shareholders and provides focus
on performance and increasing the Company’s value over
the medium term.
Annual grant of performance shares which may be
structured as conditional awards or nil cost options.
Dividend equivalents which accrue during the vesting
period and, where applicable, during the post-vesting
holding period, may be paid. The Committee considers
each year who should participate and at what level to
ensure that total compensation remains competitive in
light of peer practice.
Subject to performance conditions measured over three
years and an additional two-year post-vesting holding
period. Clawback and malus provisions apply.
The number of shares awarded will normally be
determined by reference to the five-day average share
price prior to the date of the grant. The Committee can in
its discretion in exceptional circumstances scale back the
vesting outcomes, or impose additional vesting conditions,
to awards. The Committee will look to use discretion on
vesting only in exceptional circumstances.
Conduit Holdings Limited | Annual Report and Accounts 2023
66
Directors' Remuneration Policy continued
Long-term incentive plan
Maximum opportunity
Performance metrics
Executive Directors will have a maximum individual
opportunity of up to 300% of salary in respect of any
financial year.
The Committee may make awards at a level below
this limit.
Vesting of awards will be subject to the achievement of
performance conditions, measured over a three-year
performance period.
Any performance measures which have been selected will
reflect the long-term strategy of the company.
Performance measures may include TSR, NAV growth,
ROE, financial KPIs or any other performance measures
that the Committee may deem appropriate at the time.
The Committee will also determine the weightings of
performance conditions of each award.
A sliding scale of targets will be applied for financial
metrics. No more than 25% vesting will be achieved for
threshold performance.
Shareholding requirement
Purpose and link
to strategy
Operation
To ensure Executive Directors are aligned with
shareholder interests.
Each of the Executive Directors is required to build and
maintain a shareholding in the Company of 300% of salary
while in post.
At least 50% of any vested shares (net of tax) should be
retained from the portion of any future bonuses which are
paid in shares (post-tax and vested), long-term incentive
awards and other share awards. There is a seven-year
period from the date of IPO (or if later, the date of
appointment as an Executive Director) in which to achieve
compliance.
Post-cessation shareholding requirements apply which will
require Executive Directors to retain for two years
following cessation of their employment by Conduit the
lower in value of:
— such number of shares on cessation that have a market
value equal to the shareholding guideline in place at
that time; and
— the number of shares they hold at that time.
Shares that are personally acquired by the Executive
Director will be excluded from this post-cessation
holding requirement.
Maximum opportunity
Performance metrics
None.
None.
Conduit Holdings Limited | Annual Report and Accounts 2023
67
Directors' Remuneration Policy continued
Non-Executive Director remuneration
Fees
Purpose and link
to strategy
Operation
Maximum opportunity
To provide an appropriate fee level to attract and retain
Non-Executive Directors who have a broad range of skills
and experience to oversee Conduit’s strategy.
Non-Executive Directors receive an annual fee in respect
of their Board appointments together with additional
compensation for further duties (for example, Board
committee membership and chairperson roles).
The fees paid are determined by reference to market
data and the skills and experience required by the
Company, as well as the time commitment associated
with the role. Fees are normally reviewed at least every
two years, but not necessarily increased. Non-Executive
Directors are not eligible for participation
in the Company’s incentive plans.
Travel and other reasonable expenses incurred by Non-
Executive Directors while performing their duties for the
Company are reimbursed (including any tax where these
are deemed to be taxable benefits). Non-Executive
Directors are included in the Directors’ and Officers’
Indemnity Insurance Policy.
The amount of any remuneration payable to Non-
Executive Directors shall be determined by the Board
(excluding the Non-Executive Directors).
An aggregate remuneration limit applies under the
Company Bye-laws and shall not exceed $1.3 million per
annum (unless otherwise approved by the shareholders).
Performance metrics
None.
Conduit Holdings Limited | Annual Report and Accounts 2023
68
Notes to the Directors' Remuneration Policy
Performance targets
The Committee aims to ensure that
performance targets for the annual bonus and
long-term incentive awards to Executive
Directors are closely aligned to Conduit’s
short-term and long-term objectives. The
Committee has determined the most
appropriate performance measures and
targets, considering the key priorities of
Conduit over both the short and long-term.
Details are included in Conduit’s Report and
Accounts each year, subject to limitations with
regards to commercial sensitivity for the
annual bonus (where general terms will be
provided), and the full details disclosed
following the end of the financial year in
Conduit’s next Annual Report and Accounts,
again, subject to limitations with regards to
commercial sensitivity for the annual bonus
(if appropriate).
Malus and clawback
The Committee will have the discretion to
reduce a bonus or long-term incentive award
(malus) or require repayment of a bonus
award, or return of shares received under the
long-term incentive (clawback) where it
considers that there are exceptional
circumstances. Such exceptional
circumstances are limited to:
— material misstatement of results, financial
or otherwise;
— error in the calculation of the bonus
payable or the number of shares over
which an award is granted or vests;
— corporate failure resulting in the
appointment of a liquidator or
administrator to the Company;
— the Company entering into a compromise
or similar arrangement with its creditors;
— material failure of risk management and/or
regulatory non-compliance resulting in
serious reputational damage for the
Company; or
— unreasonable failure to protect the
interests of employees and/or customers.
Clawback will apply for a period of three years
following vesting/payment of an award.
In addition to the above noted circumstances
for initiating malus and clawback provisions,
there are two additional exceptional
circumstances which are applicable under the
terms of the MIP:
— material breach of any post-termination
employment covenants; or
— fraud or a financial criminal act, which
affects Conduit and carries a custodial
sentence during the course of employment.
Committee discretions
The Committee operates under the powers
delegate to it by the Board. The Committee
operates the benefit and incentive plans in
accordance with the relevant plan rules and
any applicable legislation. The Committee
retains a number of discretions to ensure
effective operation of the benefit and incentive
plans. These discretions are standard market
practice and include (but are not limited to)
the following:
— Selecting the participants in the plans.
— Determining the timing of payments/grants
— Undertaking the annual review of weighting
of performance measures and setting
targets for the annual bonus plan from year
to year.
of awards.
— Determining the quantum of awards and/or
payments (within the limits set out in the
Remuneration Policy).
— Determining the choice of (and adjustment
of) performance measures and targets for
each incentive plan in accordance with the
Remuneration Policy and rules of each plan.
— Determining the extent of pay-out based
on the assessment of performance.
— Overriding formulaic annual bonus or long-
term incentive award vesting outcomes,
taking account of overall or underlying
Company performance.
— Determining whether and to what extent
dividend equivalents should apply to awards.
— Determining whether malus and/or
clawback shall be applied to any award in
the relevant circumstances and, if so, the
extent to which they shall be applied.
— Making appropriate adjustments required
in certain circumstances, for instance for
changes in capital structure (or any similar
corporate event).
— Application of the holding period.
— Determining good leaver status for
incentive plan purposes and applying the
appropriate treatment.
— Agreeing to early payment of deferred
bonuses to Executive Directors on an
exceptional basis.
The Committee can relax the share ownership
requirement in exceptional circumstances and
may alter the operation of the guidelines to
reflect changing market practice, the
expectations of institutional shareholders and/
or such other matters as the Committee
considers appropriate.
If an event occurs that results in the annual
bonus plan or long-term incentive plan
performance conditions and/or the targets
being deemed no longer appropriate (e.g.
material acquisition or divestment), the
Committee will have the ability to adjust
appropriately the measures and/or targets and
alter weightings, provided that the revised
conditions are not materially less challenging
than the original conditions. In addition, the
Committee may exercise its discretion to make
other non-material decisions affecting the
Executive Directors’ awards in order to
facilitate the plans.
Any use of the above discretion would, where
relevant, be explained in the Company’s
Annual Report on Remuneration of Directors.
Conduit Holdings Limited | Annual Report and Accounts 2023
69
Notes to the policy table continued
Legacy arrangements
For the avoidance of doubt, any commitments
entered into by Conduit prior to the approval
and implementation of the Remuneration
Policy outlined in the policy table may be
honoured, even if they are not consistent with
the policy prevailing at the time the
commitment is fulfilled.
This includes the MIP, which was in place prior
to the IPO and this Remuneration Policy.
Details of the MIP can be found on page 37 of
the 2020 Annual Report and Accounts.
This may also include commitments to future
Executive Directors where the terms were
agreed prior to (and not in contemplation of)
promotion to Executive Director, which
includes satisfying awards of variable
remuneration based on the terms agreed at
the time the award was granted.
Service agreements – Executive Directors
The Company’s policy is for Executive
Directors to have service agreements which
may be terminated by the Company for
breach by the Executive or with no more than
six months’ notice from the Company to the
Executive Director and six months’ notice from
the Executive Director to the Company.
Illustration of the Remuneration Policy
The chart below sets out the potential values of the remuneration package of the Executive
Directors in line with the Remuneration Policy for 2024 under various performance scenarios.
Remuneration ($000's)
67%
67%
40%
50%
73%
73%
50%
58%
100%
50%
33%
33%
100%
42%
27%
27%
33%
40%
33%
33%
100%
33%
20%
16%
Executive Chair
CEO
CFO
l Fixed pay
l Annual bonus
l Performance share plan
Notes
— Minimum: Fixed pay (salary, benefits and pension).
— Target: Fixed pay and annual bonus at 50% of the maximum opportunity and LTIP at 50%
of maximum.
— Maximum: Fixed pay and maximum achievable annual bonus and LTIP.
— Maximum with 50% share price growth: Fixed pay and maximum achievable annual bonus and
LTIP at 1.5x maximum.
— Salary represents annual for 2024.
— Benefits have been included based on the actual 2023 value of benefits (including
housing allowances).
58%
— Pension represents the value of the annual pension of 10% of salary contributed by
the Company.
— LTIP represents intended award for CFO in 2024. No LTIP is included for the Executive Chair
or CEO as they will not receive an award in 2024.
On 18 November 2020, Neil Eckert and Trevor
Carvey each entered into service agreements
with CHL, which have since been transitioned
to agreements with CSL. Neil Eckert has also
entered into service agreement with CRSL in
respect of those aspects of his duties that are
performed in the UK. On 13 January 2021,
Elaine Whelan entered into a service
agreement and was appointed as an Executive
Director and the CFO.
If notice is served by either party, the
Executive Director can continue to receive
base salary, benefits and pension, per the
terms of their service agreement, for the
duration of their notice period during which
time the Company may require the individual
to continue to fulfil their current duties or may
assign a period of garden leave. Service
agreements do not contain liquidated
damages clauses.
The Company may elect to make a payment in
lieu of notice equivalent in value to a maximum
of six months’ base salary and benefits,
including pension contribution but excluding
bonus (which would be considered separately
in the appropriate circumstances), payable in
monthly instalments, which would be subject
to mitigation if alternative employment is
taken up during this time. Alternatively, the
Remuneration Committee retains discretion to
provide this payment as a lump sum.
In some cases, an Executive Director may be
determined a good leaver. Good leavers may
Conduit Holdings Limited | Annual Report and Accounts 2023
MinimumTargetMaximumMaximum + 50% share price growthMinimumTargetMaximumMaximum + 50% share price growthMinimumTargetMaximumMaximum + 50% share price growth05001000150020002500300035004000 70
Notes to the policy table continued
receive an annual bonus payment, which will
normally be subject to the satisfaction of the
relevant performance criteria tested at the
normal date and, ordinarily, the outcome will
be calculated on a time pro-rata basis to date
of departure. The Committee retains discretion
on whether the whole bonus payable is paid in
cash, or whether part of it is deferred either in
cash or shares.
In the event of termination for cause (e.g.
gross misconduct) neither notice nor payment
in lieu of notice will be given and the Executive
Director will cease to perform their services
immediately. In addition, and consistent with
market practice, the Company may pay a
contribution towards the Executive Director’s
legal fees for entering into a statutory
agreement, may pay a contribution towards
fees for outplacement services as part of
a negotiated settlement, or may make a
payment to settle claims the Executive
Director may have. There is no provision for
additional compensation on termination
following a change of control. Payment may
also be made in respect of accrued benefits,
including holiday not taken.
In the event of a change of control or similar
event, awards may vest early subject to
performance and, normally, any bonus
entitlement would be subject to prorating
on a time apportioned basis.
The Committee may at its discretion
determine that awards shall not be subject
to time pro-rating or be subject to pro-rating
to a lesser extent if it considers it appropriate
in the circumstances. Alternatively, following
an internal reorganisation which results in a
change of control, awards may be rolled over
into awards in the acquiring company.
Service agreements – Non-Executive
Directors
Non-Executive Directors are typically
expected to serve two three-year terms but
may be invited by the Board to serve for an
additional period.
Any term renewal is subject to Board review
and AGM re-election. Notwithstanding any
mutual expectation, there is no right to re-
nomination by the Board, either annually or
after any three-year period.
Recruitment of Directors – approach
to remuneration
Consistent with best practice, remuneration
packages for any new appointments to the
Board and senior employees (including those
promoted internally) will be set in line with the
Remuneration Policy which is proposed for the
period of 2024 through 2026 inclusive.
In setting base salaries for new Executive
Directors, the Committee will consider the
individual’s level of skills and experience. Where
it is appropriate to offer a below market-salary
on initial appointment, the Committee will have
the discretion to allow phased salary increases
over a period of time for a newly-appointed
Executive Director up to an appropriate salary
for the appointment, even though this may
involve increases in excess of those awarded to
the wider workforce.
Participation in the LTIP would be in
accordance with the information set out
in the policy table.
Benefits will be offered in line with the policy
table. For both external and internal
appointments, the Committee may consider it
appropriate to pay reasonable relocation or
incidental expenses, including payment of
reasonable legal expenses. This will ordinarily
be for a reasonable but fixed period of time and
will be disclosed on appointment. Pension will
normally be in line with the wider workforce.
Annual bonus will be in line with the policy
table and will be prorated in the year of
joining to reflect the period of service. In
setting the annual bonus, the Committee may
set different performance metrics (to those
of other Executive Directors) in the first year
of appointment.
Awards may be made on or shortly after an
appointment, subject to prohibited periods.
Different performance conditions may be set
as appropriate.
For external appointments, the Committee
recognises that it may need to provide
compensation for forfeited awards from the
individual’s previous employer. To the extent
possible, the design of any buyout will be
made on a broadly like-for-like basis and shall
be no more generous than the terms of the
incentives they are replacing, taking into
account the performance conditions attached
to the vesting of the forfeited incentives, the
timing of vesting and the likelihood of vesting.
Director
Elizabeth Murphy
Ken Randall
Malcolm Furbert
Sir Brian Williamson
Richard Sandor
Date of Appointment
18 November 2020
18 November 2020
18 November 2020
18 November 2020
26 November 2020
Michelle Seymour Smith
15 September 2021
Expiry of first three-
year term1
18 November 2023
18 November 2023
18 November 2023
18 November 2023
26 November 20232
15 September 2024
Rebecca Shelley
24 July 2023
24 July 2026
1.
2.
Succession planning for Board positions is discussed on page 48.
Richard Sandor left the Board on 8 November 2023.
Conduit Holdings Limited | Annual Report and Accounts 2023
71
Notes to the policy table continued
The Committee may also use the flexibility
provided (being best practice rather than a
requirement) under the Listing Rules to make
awards as provided for under Rule 9.4.2 (2)
without prior shareholder approval.
For an internal appointment, any variable pay
element or benefit awarded in respect of their
prior role may be allowed to continue on its
original terms.
The terms of appointment for a new Non-
Executive Director will be in accordance with
the Remuneration Policy for Non-Executive
Directors as set out in the policy table.
Executive Directors’ external appointments
Executive Directors may accept external
appointments as Non-Executive Directors of
other companies, as long as the companies
concerned are not competitors of Conduit,
and the appointment will not adversely affect
the performance of the Executive Director for
the Company, and with the specific prior
approval of the Board in each case. Any fees
receivable may be retained by the Executive
Director concerned.
How shareholders’ views are taken
into account
The Committee considers the views of
shareholders when reviewing the remuneration
of Executive Directors and other senior
executives, and takes into account published
remuneration guidelines and the specific views
of shareholders and proxy agencies. The
Committee consults with the Company’s key
shareholders when considering any significant
changes to the implementation of the
Remuneration Policy and when the
Remuneration Policy is being reviewed
(typically ahead of an AGM binding vote on
the Remuneration Policy). The Committee will
consider shareholder feedback received
before and after an AGM. The Committee
values feedback from its shareholders and
seeks to maintain a continued, open dialogue.
In January 2024, the Chair of the Committee
wrote to various shareholders, and met with
any who requested a call or meeting, in a
consultation exercise regarding a change to
the Remuneration Policy for which shareholder
approval is being sought at the 2024 AGM.
Feedback from the consultation process, along
with advice and guidance from the
Committee's advisor were considered in
drafting the Remuneration Policy as stated on
pages 62 to 71.
Broader employee context – consideration of
employment conditions elsewhere in Conduit
In accordance with the Remuneration
Committee’s terms of reference, when setting
remuneration for Executive Directors and the
Executive Chairman, the Committee reviews
the pay and conditions across Conduit.
Conduit aims to provide a market competitive
package to all employees and the Committee
considers executive remuneration in
the context of the wider employee population.
The Remuneration Policy for Executive
Directors is weighted more towards variable
pay than for other employees, with a greater
part of their pay therefore at risk to them and
conditional on the successful delivery of
Conduit’s business strategy. The operation of
the bonus scheme for the Executive Directors
is consistent with Conduit’s other senior
employees. Bonus pools are determined based
on financial performance against a target
which is reviewed annually. Bonuses for more
junior employees are calculated using a more
formulaic approach. The operation of the LTIP
for any Executive Director that participates
(for 2024 limited to the CFO) is consistent
with Conduit's other senior employees except
that awards to Executive Directors must be
subject to performance conditions.
While employees are not directly consulted on
matters of remuneration policy for Executive
Directors, the Committee liaises with the Head
of Human Resources to ensure that there is an
appropriate level of consultation between HR
and Conduit's employees on remuneration
matters. The results of any employee
feedback, whether direct feedback or as part
of the annual employee engagement survey
process, is reported to the Committee.
Conduit Holdings Limited | Annual Report and Accounts 2023
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Annual report on remuneration
2023 Remuneration Report
This section summarises the Directors’ remuneration for the year ended 31 December 2023 and how the Remuneration Policy will be implemented for the year ahead. This report on remuneration
together with the Chairman’s Statement, as detailed on pages 60 to 61, will be put to an advisory vote at the 2024 AGM.
The following sections in respect of Directors’ remuneration have been audited by KPMG Audit Limited:
— Single figure of remuneration.
— Non-Executive Director fees.
— 2024 annual bonus payments in respect of 2023 performance.
— Deferred bonus awards.
— Directors’ shareholdings and share interests.
Executive Directors’ single figure of remuneration
The table below sets out the total remuneration (in $000) for Executive Directors for the year ended 31 December 2023.
Executive Director
Neil Eckert
Trevor Carvey
Elaine Whelan
Year
2023
2022
2023
2022
2023
2022
Salary
Benefits1
Pension or
payment in
lieu2
562
546
849
824
621
603
1
1
350
329
247
243
14
14
85
82
62
60
Annual
bonus3
1,581
307
2,546
464
1,862
395
LTIP4
Other5
Total fixed
remuneration
Total variable
remuneration
Total
remuneration
-
-
-
-
-
-
11
-
18
-
13
-
577
561
1,284
1,235
930
906
1,592
307
2,564
464
1,875
395
2,169
868
3,848
1,699
2,805
1,301
Notes to single figure table
1.
2.
Benefits for Bermuda-based Executive Directors are comprised of the employee obligations which are paid by the Company with respect to: Bermuda payroll taxes, Bermuda social insurance, medical, dental and vision coverage, life
insurance, housing and other allowances paid or to be paid by Conduit in line with standard market practice. Benefits for Neil Eckert, who is UK-based, are a reflection of the annual well-being/gym allowance paid; there are no additional
benefits under his terms and conditions.
The Executive Directors’ pension provision is aligned to that of the rest of the workforce at 10% of pensionable earnings. Executive Directors may elect to take cash in lieu of pension, subject to compliance with applicable law. Neil Eckert is
on a split employment contract to delineate his duties, therefore, pension benefit for Neil is a reflection of his UK contractual benefit requirement; there are no Bermuda-based benefits for which he is eligible under his terms of employment.
Executive Director bonus awards are stated as the full value of the bonus award; up to 50% of bonuses awarded are payable as a deferred share award of an equivalent value.
3.
4. There were no LTIP awards to vest in 2022 or 2023 for Executive Directors. Additionally, no awards vested under the MIP during the year.
5. Dividend equivalents on the deferred bonus awards which vested during the year are included here at the value at the date of vesting (using a share price of £3.6360 and an FX rate of 1.222861).
Conduit Holdings Limited | Annual Report and Accounts 2023
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Annual report on remuneration continued
The following chart summarises the above disclosed remuneration of each Executive Director for 2022 and 2023:
Executive Director remuneration ($000s)
Neil Eckert
Trevor Carvey
Elaine Whelan
Annual bonus
In line with the Remuneration Policy, annual bonus awards for the Executive Directors were based on the financial performance of Conduit and the personal contributions of each Executive Director,
with the financial component making up 75% of the overall opportunity and 25% based on personal contribution and/or meeting strategic objectives. The financial measure for 2023 was RoE. The
following table shows the targets and the resulting level of payout for each Executive Director.
Financial Performance (75%)
RoE
Threshold
9.0 %
Target
12.0 %
Maximum
17.0 %
Actual1
22.0 %
Financial
element
pay-out
200 %
1. While financial targets for the year ended 31 December 2023 were set with reference to the 2023 business plan prepared under the prior accounting standard, IFRS 4, the RoE as assessed and presented under IFRS 17 is not materially
different. The outcome for the financial element would be the same under either an IFRS 4 or IFRS 17 basis.
Conduit Holdings Limited | Annual Report and Accounts 2023
8682,1691,6993,8481,3012,80520222023202220232022202305001,0001,5002,0002,5003,0003,5004,0004,500 74
Annual report on remuneration continued
Executive Directors’ performance objectives (25%)
Each of the Executive Directors was evaluated against their performance objectives for the year.
Neil Eckert
— Effective leadership and management of the Board
of Directors.
— Development of the investor relations and general
business strategy.
— Advocate for Conduit’s ESG strategy.
Detailed objectives
Effectively perform the duties of the Chairman’s role, primarily
achieved through overseeing the business and investor relations
strategy as well as managing the Board of Directors.
Assessment
Neil’s primary focus in an executive capacity is oversight and
direct engagement in Conduit’s investor relations strategy and
relationships, holding meetings with current and potential
investors, and with analysts.
Perform a leading role in promoting ESG principles across
the business.
Support the CEO to ensure the efficient operation of Conduit.
Trevor Carvey
— Effective leadership and management of the senior executive
team and group.
— Development of the general business strategy.
— Incorporate ESG principles into the business.
Effectively perform the duties of the CEO role: managing the
business in line with the strategy and business plan, participation
in relevant Committee meetings including leading the executive
team, making recommendations to improve business operations,
and actively participate in the development and execution of the
investor relations strategy.
Neil also continues to contribute effectively regarding our
approach to ESG, representing Conduit in various public
spheres. More broadly, Neil provides advice and guidance to
Trevor and to the Board, particularly navigating topics such as
corporate strategy and Board succession planning.
Trevor's leadership of the business and executive team in his
role as CEO has ensured that the business has achieved
significant results in the third year of business for Conduit.
Trevor has continued to focus time managing key investor and
stakeholder relationship engagement while also giving oversight
and direction to the business to ensure delivery of a quality
book of business.
Lead the executive team, ensuring they are all contributing to
business strategy growth and development, including fostering
strong relationships with our investors.
Perform a leading role in promoting ESG principles across
the business.
As this year's results show, Trevor has led Conduit through
another successful growth year, in line with Conduit's risk
management protocols. This has ensured that Conduit is well
positioned for the current market cycle and business
opportunities.
Conduit Holdings Limited | Annual Report and Accounts 2023
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Annual report on remuneration continued
Elaine Whelan
— Effective leadership and management of the finance and
investments and treasury functions for Conduit.
— Contribution to the general finance and investment strategies.
— Incorporation of ESG principles into the investment portfolio.
Detailed objectives
Effectively perform the duties of the CFO role: managing
production of financial reports which are required as a public
company, participation in relevant Committee meetings
including making recommendations to improve capital efficiency
and risk-adjusted returns, and actively participating in the
development and execution of the investor relations strategy.
Demonstrate leadership and management of the finance team.
Manage Conduit’s investment portfolio while working in
conjunction with the Investment Committee and CEO.
Perform a leading role in promoting ESG principles within the
investment portfolio. Manage our rating agency relationships,
update the CEO on matters which will get rating agency
attention and recommend action/communication.
Contribute, as a member of the executive team, to the efficient
operation of Conduit.
Assessment
In the third year of Conduit’s operation, Elaine sponsored and
led the project to implement IFRS 17 and, to a lesser degree,
IFRS 9. Initial finance systems were designed with IFRS 17 in
mind, so an efficient solution was able to be produced in a very
short timeframe and with significant data transparency. All
financial reporting deadlines were met and within budget, and
Elaine fostered strong engagement both internally and
externally with relevant stakeholders. Elaine continued to
oversee the Company’s investment portfolio, making
recommendations for new products, managers and ESG goals.
Elaine's forward-planning skills have ensured that there is
appropriate resource allocation to ensure that financial reporting
and systems projects are delivered.
Elaine is a strong contributor to management discussions and
general direction of the broader business and interacts well
while delivering her viewpoint to colleagues and team members.
Elaine has an efficient manner with which she conducts herself
within the business, and on investor calls. Elaine continues to
ensure that all finance systems continue to be robust and
integrated with the business to support the business strategy
and to ensure timely and accurate financial reporting.
Conduit Holdings Limited | Annual Report and Accounts 2023
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Annual report on remuneration continued
As a result of the performance assessment outcomes, the Committee determined bonuses for the Executive Directors as follows:
Neil Eckert
Trevor Carvey
Elaine Whelan
Financial
element pay-out
(% of weighted
element)
Personal
element pay-out
(% of weighted
element)
Actual bonus
pay-out (% of
maximum)
200
200
200
150
200
200
94
100
100
Bonuses are subject to a maximum of 300% of base salary. Up to 50% of bonuses awarded are payable as a deferred share award of an equivalent value (with the number of shares calculated using
the average of the share price at the close of the market over the five days prior to the day that the award is granted). These awards vest under the terms defined in the scheme rules, over three
years with one-third of the award vesting (including dividend equivalents) in each of the following three years. The Committee considers this to be an appropriate structure with the deferral serving
as a retention mechanism over the three-year period. Deferral over three years is also in line with the expected duration of Conduit’s reserves.
Neil Eckert
Trevor Carvey
Elaine Whelan
Actual bonus
pay-out
(% of maximum)
Maximum
opportunity
(% of salary)
Actual bonus
pay-out
(% of salary)
94
100
100
300
300
300
281
300
300
Outcome
($'000)
1,580
2,546
1,862
Cash bonus
paid,
$'000
(50%)
Bonus deferred
into shares,
$'000 (50%)
790
1,273
931
790
1,273
931
Long-term incentive plan
As previously disclosed, the Executive Directors participate in the MIP scheme, which was in place prior to the IPO and was detailed in the IPO prospectus and subsequent Annual Report and
Accounts. The MIP was Conduit’s only share based incentive plan; however a new LTIP is being proposed for Executive Director participation in the revised Policy being put to a shareholder vote at
the 2024 AGM. Details of the MIP can be found on pages 80 to 81 while the proposed LTIP details can be found in the Policy on pages 62 to 71 and in the Notice of AGM.
No awards under the MIP were eligible for vesting in the year under review.
Payments for loss of office
No Executive Director left the employment of Conduit during the year under review.
Conduit Holdings Limited | Annual Report and Accounts 2023
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Annual report on remuneration continued
Payments to past Directors
No payments were made to former Directors during the year.
Non-Executive Directors
The Non-Executive Director fees have been determined in accordance with the Remuneration Policy set out on page 67.
The Non-Executive Directors’ basic fee is $75,000 per annum, with additional annual fees payable in respect of membership of Board Committees of $15,000 per committee and $25,000 for
appointment as Chair of a committee (and $15,000 for appointment as Senior Independent Director). The Non-Executive Directors do not participate in incentive schemes. A fee of $25,000 per
annum is also payable in respect of Non-Executive Director appointment to the CRL board.
For the year ended 31 December 2023 under the terms of their appointments the Non-Executive Directors of CHL were paid the following fees:
Aggregate fees paid (including in respect of CRL) $000
Non-Executive Director
Sir Brian Williamson
Malcolm Furbert
Elizabeth Murphy
Ken Randall
Dr. Richard Sandor1
Michelle Seymour Smith
Rebecca Shelley2
Total
2023
2022
130
130
140
155
89
130
46
820
130
130
140
155
105
128
—
788
For 2023, fees include pro-rated fees which reflects his stepping down from the Board and Board Committees with effect from 7 November 2023.
1.
2. Rebecca Shelley was appointed to the Board on 24 July 2023. Fees for 2023 have been pro-rated from the date of appointment.
The aggregate remuneration paid for the year ended 31 December 2023 by way of fee for all the Non-Executive Directors was $820,493 made up of $720,493 in respect of CHL and $100,000
in respect of CRL.
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Directors’ shareholdings
Details of the Directors’ interests in shares are shown in the following table. Executive Directors are required to build and retain a holding of the Company’s shares equivalent to at least 300% of their
base salary.
Details of awards under the DSBP
Up to 50% of an Executive Director's annual bonus is deferred into shares under the DSBP. Details of the awards for Executive Directors under the DSBP are below, including awards made during
the year.
Neil Eckert
Trevor Carvey
Elaine Whelan
Awards held at
1 Jan 2023
Awards
granted during
the year
Awards vested
during the
year2
31,905
-
Awards held at
31 Dec 2023
Grant date
25-Mar-221
24-Mar-23
25-Mar-221
24-Mar-23
25-Mar-221
24-Mar-23
95,726
-
95,726
150,253
-
150,253
111,371
-
111,371
26,333
26,333
-
31,905
-
50,079
39,747
39,747
-
50,079
-
37,119
33,905
33,905
-
37,119
63,821
26,333
90,154
100,174
39,747
139,921
74,252
33,905
108,157
1.
The vesting dates for the DSBP awards are subject to the company being out of a closed period and are as follows:
2022 award (for 2021 performance bonus) – vests 33.33% per year over a three-year period, being 25 March 2023, 25 March 2024 and 25 March 2025.
2023 award (for 2022 performance bonus) – vests 33.33% per year over a three-year period, being 24 March 2024, 24 March 2025 and 24 March 2026.
2. Vested awards are included in the Executive Directors' shareholdings disclosed on the following page.
Conduit Holdings Limited | Annual Report and Accounts 2023
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Annual report on remuneration continued
Shareholding
Director
Neil Eckert3
Trevor Carvey
Elaine Whelan
Beneficially
owned as at
1 Jan 2023
Beneficially
owned as at
31 Dec 2023
669,657
295,630
153,053
707,387
442,709
233,266
Share awards
held – deferred
bonus
(unvested1)
90,154
139,921
108,157
Guideline % of
base salary Guideline met2
300%
300%
300%
Yes
Yes
No4
1.
Share awards under the DSBP are calculated as up to 50% of the annual bonus award, with the number of shares calculated using the average of the share price at the close of the market over the five days prior to the day that the award
is granted. See page 78 for details.
2. As at 31 December 2023, Neil Eckert and Trevor Carvey met the shareholding requirement set for Executive Directors.
3. Neil Eckert's beneficially owned shares includes 43,104 shares owned by his spouse, Nicola Eckert.
4. Elaine Whelan has seven years from appointment to build her shareholdings in order to meet the requirement. Once the unvested deferred share bonus awards disclosed in the table vest, Elaine Whelan will meet the required guideline.
Non-Executive Director1
Sir Brian Williamson
Malcolm Furbert
Elizabeth Murphy
Ken Randall
Dr Richard Sandor2
Michelle Seymour Smith
Rebecca Shelley3
1.
2.
3.
Non-Executive Directors do not receive an annual bonus and therefore do not participate in the DSBP.
Richard Sandor retired from the Board with effect from 7 November 2023; any shares purchased by him after this date are not reflected above.
Rebecca Shelley was appointed to the Board 24 July 2023.
Beneficially
owned as at
1 Jan 2023
Beneficially
owned as at
31 Dec 2023
20,000
8,000
15,000
55,000
15,000
20,000
-
30,000
8,000
15,000
55,000
15,000
20,000
4,088
Conduit Holdings Limited | Annual Report and Accounts 2023
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Annual report on remuneration continued
A share incentive plan, the MIP, was put in place prior to Admission for Neil Eckert and Trevor Carvey (the founders of Conduit) and other senior managers who are expected to make key
contributions to the success of Conduit from Admission. Upon appointment, Elaine Whelan was issued with MIP share options.
The table below sets out the respective MIP Share allocations for each of the Executive Directors at 31 December 2023:
Name
Neil Eckert
Trevor Carvey
Elaine Whelan1
Total
1.
Elaine Whelan’s MIP award is in the form of a nil-cost option.
USD MIP Shares GBP MIP Shares
45,000
30,000
5,000
80,000
45,000
30,000
5,000
80,000
Percentage
of MIP
45.0%
30.0%
5.0%
80.0%
Success in the MIP will be measured by share price performance and investor returns, and the MIP arrangements reflect these key metrics. The MIP was facilitated by the subscription for shares in
CML (a direct subsidiary of CHL, which is an intermediate holding company of CRL). Under the MIP, Executive Directors and other senior managers invited to participate subscribed for shares or were
issued nil-cost options in CML (MIP Shares). Half of the MIP Shares are denominated in sterling (GBP MIP Shares) and half in US dollars (USD MIP Shares).
Subject to vesting in the hands of the relevant holder of MIP Shares, if the performance condition is satisfied at the time, the MIP Shares will be automatically exchanged for common shares of CHL for
an aggregate value equivalent to up to 15% of the excess of the Market Value of CHL over and above the Invested Equity (the "Growth") (7.5% of the Growth based on calculations in sterling for the
GBP MIP Shares and 7.5% of the Growth based on calculations in US dollars for the USD MIP Shares).
If (1) the performance condition is satisfied for either or both of the GBP MIP Shares or the USD MIP Shares on each of the fourth, fifth, sixth and seventh anniversaries of Admission and (2) no
takeover of CHL or sale or liquidation of CML has taken place before any of those dates, one-quarter of the relevant MIP Shares (delivering 1.875%. of the Growth to the relevant shares) (each a
Tranche) will be automatically exchanged for such number of common shares of CHL as have an aggregate value (at the closing share price for the trading day immediately prior to the date of the
exchange) equal to 1.875% of the Growth at the date of the exchange. Whenever the performance condition has not been satisfied on the relevant anniversary date in respect of a Tranche, those MIP
Shares which might otherwise have been exchanged will not be exchanged and will automatically exchange at the next anniversary date on which the performance condition is satisfied. If the
performance condition is satisfied, any MIP Shares that have not automatically been exchanged for common shares of CHL before that date will on the effective date of any takeover of CHL or sale
or liquidation of CML be exchanged (delivering the remainder of the 7.5% of Growth for each of the USD MIP Shares and the GBP MIP Shares).
If on the seventh anniversary of Admission, the performance condition is not satisfied, all MIP Shares to be exchanged for commons shares of CHL on that date will be redeemed for 1 pence (sterling)
in aggregate. Similarly, on a takeover of CHL or sale or liquidation of CML, if the performance condition is not satisfied, all of the MIP Shares will be redeemed for 1 pence (sterling) in aggregate. MIP
Shares are subject to customary leaver provisions and malus/clawback principles.
The performance condition for the MIP is the compound annual growth rate achieved by CHL’s shareholders on the date of the relevant exchange of MIP Shares for common shares of CHL is equal
to or greater than 10% per annum. The performance condition is measured by reference to (1) any growth in CHL’s market capitalisation, (2) any dividends paid to common shareholders and (3) any
other returns of value to common shareholders. The performance condition is calculated from admission of its common shares to trading on the London Stock Exchange on 7 December 2020 on the
Conduit Holdings Limited | Annual Report and Accounts 2023
81
Annual report on remuneration continued
initial capital raised then (and from the date of any future equity investment in the Company on that equity) to the date of the relevant exchange. It also takes into account the timing of any prior
returns to common shareholders. The performance condition will be calculated separately in US dollars for the USD MIP Shares and sterling for the GBP MIP Shares.
Performance graph and table
This graph shows the value of £100 invested in Conduit Holdings Limited compared with the value of FTSE 250 (excluding Investment Trusts) since Admission.
CHL relative to FTSE 250 (7 December 2020 – 31 December 2023)
l Conduit Holdings
l FTSE 250
Conduit Holdings Limited | Annual Report and Accounts 2023
£99.20£85.22£84.33£92.417 Dec 202031 Dec 202031 Dec 202130 Dec 202229 Dec 20238090100110120 82
Annual report on remuneration continued
CEO single figure of remuneration
The table below shows the pay information of our CEO (in ,000).
Relative importance of the spend on pay
The table below shows the Company’s expenditure on employee pay compared with
distributions to shareholders for the period under review.
CEO total remuneration
Actual bonus as a % of maximum
Actual share award vesting as % of the maximum
2023
2022
2021
$3,848
$1,699
$2,649
100
n/a
19
n/a
59
n/a
2020
$606
n/a
n/a
Percentage change in remuneration
Given Conduit was only incorporated on 7 December 2020 and was listed for less than a month
in 2020 following the IPO, a year-on-year comparison in remuneration for 2020 versus 2021 is of
limited use. Market-loss events and mark-to-market unrealised losses on investments had a
negative impact on CEO remuneration in 2022 as disclosed in the CEO single figure of
remuneration (in ,000) disclosure above and the year-on-year percentage changes disclosed
below.
Executive Chair total remuneration
Executive Chair year-on-year remuneration
change (%)
2023
$2,169
150
2022
$868
-41
2021
$1,465
n/a
2020
$401
n/a
Distributions to shareholders
Total employee pay
2023
$m
59.3
31.8
2022
$m
59.3
22.3
Percentage
change
%
— %
43.0 %
CEO pay ratio
The majority of our employees are based in Bermuda, with fewer than 250 employees globally.
As a result, we are not required to publish a CEO pay ratio.
However, the decision was made that we should report the CEO pay ratio in line with the
Company's commitment to high standards of corporate governance. The 2022 and 2023
CEO pay ratios have been calculated using our total employee base (both Bermuda and UK
employees) as at 31 December in each respective year.
CEO total remuneration
$3,848
$1,699
$2,649
$606
25th percentile Total Pay Ratio
CEO year-on-year remuneration change (%)
CFO total remuneration1
CFO year-on-year remuneration change (%)
126
-36
n/a
$2,805
$1,301
$1,893
116
-31
N/A
n/a
n/a
n/a
Median Total Pay Ratio
75th percentile Total Pay Ratio
1.
The CFO was appointed 14 January 2021, her predecessor's 2020 pay and pro-rated 2021 pay are not included
in the above disclosure.
The table above sets out the single figure of remuneration for the CEO as compared with the
single figure of remuneration of employees at the 25th percentile, median and 75th percentile.
Conduit uses methodology A and defines the population as all Conduit employees, excluding
contractors, to calculate the total annual remuneration. Total annual remuneration is defined and
calculated on the same basis used for the Executive Directors in the single figure of remuneration.
This methodology was selected as it is considered the most accurate calculation method for the
ratio calculations.
Conduit Holdings Limited | Annual Report and Accounts 2023
Calculation
method
A
A
A
2023
27:1
17:1
10:1
2022
14:1
9:1
4:1
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Annual report on remuneration continued
External advisors
In 2022, the Committee appointed specialist remuneration advisors at Alvarez & Marsal Tax LLP
(A&M), a firm with no other connection to the Company or individual Directors. A&M is a member
of the Remuneration Consultants’ Group and is a signatory to its Code of Conduct, requiring the
advice provided to be objective and impartial. Based on the above, the Committee is comfortable
that the advice provided was independent. During 2023, $56,637 was paid to A&M (2022:
$65,411), on a time and materials basis.
Statement of shareholder voting
At the 2022 shareholder AGM, the first Remuneration Policy and Directors’ remuneration report
was submitted to shareholders. Disclosure of the voting results at the AGM is presented below.
Vote to approve 2022 Annual
report on remuneration
(at the 2023 AGM)
Vote to approve
Remuneration Policy
(at the 2022 AGM)
Total number
Total number
of votes % of votes cast
of votes % of votes cast
144,204,130
1,468,364
145,672,494
-
98.99
131,008,002
1.01
3,222,914
100.0
134,230,916
-
97.60
2.40
100.0
For
Against
Total
Abstentions
Remuneration for 2024
We disclose here the remuneration approach we have implemented for Executive Director and
senior management remuneration in 2024.
Impact of inflationary environment on employees
In 2022, management modelled various scenarios on how the impact of inflation on our
employees could be minimised. Management approved a fixed-term cost-of-living allowance
(COLA) for our staff, excluding Executive Directors, which ran from March 2023 through to the
end of February 2024.
Management have once again reviewed the current inflationary exposures for our staff and have
approved for the COLA to be extended for a further 12-month period commencing from March 2024.
The 2023-24 COLA, was structured to ensure that those with the greatest need (i.e. those at the
lower end of the salary scale) received the greatest assistance. Management have approved the
2024-25 COLA to be the same value to all staff as they received under the 2023-24 COLA.
Any new staff who have joined during 2023, and therefore did not receive the 2023-24 COLA
have had their 2024-25 COLA calculated under the same parameters as were set for the
2023-24 COLA.
While the COLA is not intended to be permanent, it will be subject to review in 12 months' time,
ahead of the determined end-date, to evaluate if the circumstances within the market have changed,
resulting in an extension or termination of the COLA, or its replacement by another mechanism.
Salary increases across Conduit
A standard salary increase of 5.0% was applied to Executive Directors when setting the 2024
salaries. Across the wider workforce for Conduit, the average increase is 6.3%, including
adjustments for promotions or market alignment. Additionally, the wider workforce are eligible
to participate in the cost-of-living allowance which is noted in more detail above, and Executive
Directors are not eligible for this additional allowance. When accounting for annual salary and the
cost-of-living allowance, the average increase in fixed pay across the wider workforce is 13.1%.
Conduit Holdings Limited | Annual Report and Accounts 2023
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All salary increases are with effect from 1 January 2024 and for Executive Directors are as follows:
Executive Director
Neil Eckert
Trevor Carvey
Elaine Whelan
2024 salary
2023 salary
$590,391
$562,277
$891,156
$848,720
$651,658
$620,627
payments calculated subject to a range of RoE levels. A minimum RoE financial performance
hurdle applies before any bonus is payable. The Remuneration Committee believes that these
targets are suitably challenging for Conduit’s operations. Details of the targets will be disclosed
retrospectively in next year’s report.
Up to half of any bonus award will be deferred into shares. Consistent with best practice, malus
and clawback provisions will be operated at the discretion of the Remuneration Committee.
Housing allowances
Housing allowances for the Bermuda-based Executive Directors remain unchanged from the prior
year and are as follows:
Other benefits
Other market-typical benefits for Executive Directors working in Bermuda have been provided,
including normal health and welfare benefits, housing allowances and travel allowances, and the
Company’s payment of the employee’s obligations for Bermuda payroll taxes and social insurance.
Executive Director
Trevor Carvey
Elaine Whelan
2024
2023
Monthly
housing
allowance
Annual
housing
allowance
Monthly
housing
allowance
Annual
housing
allowance
$17,500
$210,000
$17,500
$210,000
$10,000
$120,000
$10,000
$120,000
Bonus target and maximum parameters
Current bonus target and maximum opportunities for the Senior Executives also remain
unchanged from the prior year. They are as follows:
2024
2023
Executive Director
Bonus target
Maximum
bonus
Bonus target
Maximum
bonus
Neil Eckert
Trevor Carvey
Elaine Whelan
150%
150%
150%
300%
300%
300%
150%
150%
150%
300%
300%
300%
For the 2024 bonus scheme for Executive Directors, 75% will relate to financial performance
based on RoE and 25% will relate to personal performance aligned to key strategic objectives.
The target RoE generated by the annual business plan process is considered when setting
the appropriate targets for calculating the financial element of target bonuses, with actual bonus
Pension
The Executive Directors’ pension provision for 2024 continues to be aligned with that of the rest
of the workforce at 10% of pensionable earnings. Executive Directors may elect to take cash in
lieu of pension, subject to compliance with applicable law.
Long-term incentives
Executive Directors participate in the MIP, which was put in place pre-IPO, with no new long-term
incentive awards granted in 2023 in line with the approved Remuneration Policy. As noted in the
Chairman's opening statement in pages 60 to 61, the Committee determined that the Policy
needed review and amendment to ensure continued market peer alignment for Executive
Director packages. In light of this, a shareholder consultation and feedback exercise was
conducted, with particular focus on the proposed revised Remuneration Policy, which is
presented in this report in pages 62 to 71.
The 2024 Remuneration Policy will be put to a binding shareholder vote at the May 2024 AGM
and is expected to be in place for the three-year period from 2024 to 2026 inclusive.
Assuming the revised Remuneration Policy and LTIP are approved at the 2024 AGM, the
Committee intends to make an award to Elaine Whelan at 250% of salary. Neil Eckert and Trevor
Carvey will not participate the LTIP in 2024. The Committee will review the position again in
2025.
Conduit Holdings Limited | Annual Report and Accounts 2023
85
Annual report on remuneration continued
The Committee have determined that currently the most appropriate structure for the LTIP for
Executive Directors will be to have two financial performance conditions:
Growth in Net Asset Value (NAV) per share – 75% weighting
Growth in NAV per share as the primary performance metric will ensure a strong link is created
for ensuring long-term growth and value creation for shareholders is the main vesting
determinant of awards. Year-end shareholders’ equity includes the comprehensive income (loss)
for the financial year adjusted for dividends declared. Intangible assets are excluded from
shareholders’ equity to calculate the net tangible asset value per share.
The annual growth in NAV per share target range for awards is:
— threshold 5%; and
— maximum 13%.
Meeting the threshold target will result in 25% vesting of the relevant annual tranche (75%) of the
award. If the threshold target is not met, the relevant annual tranche of the award will not vest.
Performance between threshold and maximum will be determined on a straight-line basis.
This performance condition will be measured on an annual basis, with the award effectively split
into three with each year’s results being assessed against the target. In each year, performance
will be measured against the target range to determine the level of vesting in respect of one-third
of the total award. Vesting will only occur after completion of the full three-year performance
period, and continued employment of the Executive Director at the time of vesting.
Absolute Total Shareholder Return (TSR) – 25% weighting
Using absolute TSR enables Conduit to provide an objective reward for delivering value to
shareholders. Total shareholder return is calculated as the percentage change in Common Share
price over a period, after adjustment for Common Share dividends.
The TSR target range for awards is:
— threshold 5%; and
— maximum 13%.
Absolute TSR will be measured over the full three-year period of the award, rather than each
individual year within the period. Meeting the threshold target will result in 25% vesting of the
relevant element (25%) of the award. If the threshold target is not met, the relevant element
(25%) of the award will not vest. Performance between threshold and maximum is determined
on a straight-line basis.
Committee discretion with regards to LTIP vesting
If any year within the award vesting assessment produces a return that the Committee believes is
significantly worse than competitors and reflects poor management decisions, the Remuneration
Committee will use its discretion to determine the extent to which any relevant element of the
LTIP award shall vest fully (or to a lesser extent) based on the performance over the full three-
year period.
Non-Executive Director Fees
Non-Executive Director fees were set at the time of the IPO and have not subsequently been
amended. A review of Non-Executive Director fees will be undertaken during 2024.
Conduit Holdings Limited | Annual Report and Accounts 2023
86
Directors' report
The Directors of Conduit Holdings Limited present their report for the year ended 31 December
2023. This report includes the additional information required to be disclosed under the
Disclosure and Transparency Rules of the Financial Conduct Authority. Certain information
included in the Strategic Report, the Corporate Governance Report, the Audit Committee report,
the Nomination Committee report and the Directors’ remuneration report are incorporated by
reference into the Directors’ report in addition to the following topics.
Dividends
On 25 July 2023, the Board declared an interim dividend of $0.18 (approximately £0.14 pence)
per Common Share declared resulting in an aggregate payment of $29.7 million.
On 20 February 2024, Conduit’s Board of Directors declared a final dividend for 2023 of
$0.18 (approximately £0.14) per Common Share, which will result in an aggregate payment of
$29.7 million.
Overview
Conduit Holdings Limited was incorporated in Bermuda on 6 October 2020 under registration
number 55936 and has three subsidiaries incorporated in Bermuda: Conduit MIP Limited,
an incentive-related entity (registration number 56057), Conduit Reinsurance Limited, the main
operating company of Conduit (registration number 55937), and Conduit Services Limited, a
services company (registration number 56189). Conduit Reinsurance Services Limited is a wholly
owned services company registered in England (registration number 12947450).
On 7 December 2020, all of CHL’s common shares were admitted to the standard listing segment
of the Official List of the UK Financial Conduit Authority and admitted to trading on the LSE’s
main market for listed securities.
Insurance and indemnification
Conduit purchases insurance to cover Directors and officers against their costs in defending
themselves in civil proceedings taken against them in that capacity and in respect of damages
resulting from the unsuccessful defence of any proceedings.
The bye-laws of the Company also provide that the Company shall, to the extent permitted by
law, indemnify the Directors in respect of their acts and omissions and that the Company shall
advance funds to Directors for their defence costs. The indemnity provisions set out in the bye-
laws were in force during the financial year. Insurance and indemnity arrangements will not
provide cover where the Director has acted fraudulently or dishonestly.
Principal activity
Conduit’s principal activity, conducted through its main operating subsidiary CRL, is to provide
reinsurance products and services to its clients worldwide.
Principal risks and financial internal controls and risk management
Conduit’s principal risks and a description of the risk management framework and governance
are set out in the Enterprise Risk Management Report on pages 23 to 27; information regarding
financial internal controls and risk management is set out on page 55.
Recent developments
Recent developments are discussed on page 153.
Stakeholder engagement
A review of the Company’s engagement with stakeholders is set out in the Section 172 statement
on pages 36 and 38.
Diversity and inclusion
A discussion of Diversity and Inclusion is set out in the Nomination Committee report on page 53.
Board of Directors
The Directors of the Company who served during the financial year and through to the date
of this report are listed on page 48.
Compliance with the Code
A review of the Company’s compliance with the Code is set out on pages 48 to 51.
Biographies are set out on pages 40 to 44.
ESG
The ESG summary on pages 29 to 34 provides an overview of the Company’s approach to ESG,
including charity and climate.
Conduit Holdings Limited | Annual Report and Accounts 2023
87
Directors' report continued
Carbon emissions
Details of Conduit's carbon emissions for 2023 can be found in the ESG summary on page 34 of
this report.
Purchase of shares by the Employee Benefit Trust
CHL established an Employee Benefit Trust ("EBT") during the second quarter of 2022 with the
sole purpose of managing the equity incentives granted to executives and employees of Conduit.
Political donations
No political donations were made by Conduit in the year ended 31 December 2023, nor in 2022.
Further details of the EBT are set out in note 21 to the consolidated financial statements on
page 150.
Share capital
Details of the structure of the Company’s share capital and changes in the share capital during
the year are disclosed in note 17 to the consolidated financial statements. The Common Shares of
$0.01 par value each is the only class of shares of the Company presently in issue carrying voting
rights. There are no nil or partly paid shares in issue. All Common Shares rank pari passu in all
respects, there being no conversion or exchange rights attaching thereto and all Common Shares
have equal rights to participate in capital, dividend and profit distributions by the Company. The
Common Shares are freely transferable and there are no restrictions on transfer, except as set out
in the bye-laws or as may from time to time be imposed by law and regulations.
Bye-law amendments
A copy of the Company’s bye-laws is available for inspection on the Company’s website and at
the Company’s registered office. Changes to the Company’s bye-laws are governed by Bye-law
84, the text of which is repeated here in full:
“84.1 Subject to Bye-law 84.2, no bye-law shall be rescinded, altered or amended and no new
bye-law shall be made until the same has been approved by a resolution of the Board and by a
resolution of the Members.
84.2 Bye-laws 43, 44, 45, 47, 84 and 86 shall not be rescinded, altered or amended and no new
bye-law shall be made which would have the effect of rescinding, altering or amending the
provisions of such bye-laws, until the same has been approved by a resolution of the Board
including the affirmative vote of not less than 66% of the Directors then in office and by a
resolution of the members including the affirmative vote of not less than 66% of the votes
attaching to all shares in issue.”
In 2023. the EBT continued to make on-market purchases of CHL's shares. The Shares held in
the Conduit EBT are intended to be used for the benefit of employees under CHL's variable
incentive schemes.
Further details of the shares held by, and the purchases made by, the Conduit EBT are set out in
note 21 to the consolidated financial statements on page 150.
Directors’ interests
Directors’ beneficial interests in the Company’s Common Shares as of 31 December 2023,
including interests notified to the Company in respect of Directors’ closely associated persons
within the meaning of the Market Abuse Regulation (MAR) were as follows:
Directors
Neil Eckert, Executive Chairman
Trevor Carvey, Chief Executive Officer
Elaine Whelan, Chief Financial Officer
Sir Brian Williamson, Senior Independent Non-Executive Director
Malcolm Furbert, Independent Non-Executive Director
Elizabeth Murphy, Independent Non-Executive Director
Ken Randall, Independent Non-Executive Director
Michelle Seymour Smith, Independent Non-Executive Director
Rebecca Shelley, Independent Non-Executive Director
1.
2.
Includes 43,104 shares owned by his spouse, Nicola Eckert.
Includes 35,873 shares owned by his spouse, Nicola Eckert.
Common
Shares held
as of
31 December
2023
707,3871
442,709
Common
Shares held
as of
31 December
2022
669,6572
295,630
233,266
30,000
8,000
15,000
55,000
20,000
4,088
153,053
20,000
8,000
15,000
55,000
20,000
-
Conduit Holdings Limited | Annual Report and Accounts 2023
88
Directors' report continued
Shareholding guidelines require Executive Directors to build and maintain a shareholding in the
Company of 300% of salary while in post. Where not met at admission, any portion of future
bonuses that are paid in shares and other share awards or purchases will accumulate until this
requirement is met. Further details are set out in the remuneration report on pages 78 to 80. As
at 31 December 2023, As at 31 December 2023, Neil Eckert and Trevor Carvey met the
shareholding requirement set for executive directors. Elaine Whelan continues to build out her
share ownership and has almost four years remaining to achieve compliance under the policy.
Major shareholdings
As at 23 February 2024 Conduit Holdings Limited has been notified (via forms TR-1: Standard
form for notification of major holdings in accordance with DTR 5.3.1R(1)) of the following interests
of 5% or more in the voting rights in its common shares.
Shareholder
FIL Limited
Aviva PLC and affiliates
Janus Henderson Group Plc
1. Percentage as at date of notification
Number of shares
February 2024 (m)
% of shares notified
per Form TR1
16,433,270
16,446,637
8,345,539
9.99
9.95
5.05
Going concern and viability statement
A review of the financial performance of Conduit is set out on pages 18 to 21. The financial
position of Conduit, including its cash flows and its borrowing facilities, are included in the
financial statements starting on page 91. Conduit is well capitalised and has a well-balanced book
of business.
The Board will consider Conduit’s strategic plan for the business annually on a rolling basis using
a three-to-five-year time horizon. This period aligns to Conduit’s liabilities and business model,
allowing Conduit to adapt capital and solvency quickly in response to market cycles, events and
opportunities.
This is consistent with the outlook period set out in Conduit’s IPO prospectus.
Building on the strategy and plan presented in the IPO prospectus, the Board conducted its
annual review of strategy in 2023 and updated Conduit’s planning over a three-to-five-year time
horizon, taking into account perspectives on the external business environment and the principal
risks and material uncertainties affecting Conduit and examining how Conduit’s capital and
operational capacity can best be aligned to support Conduit’s objectives over the next three
years. Further information on Conduit’s principal risks can be found on pages 25 to 26. The risk
disclosures section of the consolidated financial statements on pages 110 to 128 sets out the
principal risks to which Conduit is exposed, including reinsurance risk, market risk, liquidity risk,
credit risk, operational risk and strategic risk, together with Conduit’s policies for monitoring,
managing and mitigating its exposures to these risks. As part of the consideration of the
appropriateness of adopting the going concern basis, Conduit uses stress and scenario analysis,
and testing, to assess the robustness of Conduit’s solvency and liquidity positions. To make the
assessment, Conduit analysed and tested a number of scenarios individually and in combination,
including applying reverse stress tests. The Board considers an aggregated occurrence of all
these scenarios to be remote and that under the assessed scenarios Conduit remained
adequately capitalised.
The Audit Committee also considered a formal going concern analysis from management at its
November 2023 meetings (for further details, see page 58 in the Audit Committee report).
After reviewing Conduit’s strategy, budgets and medium-term plans, and subject to the principal
risks faced by the business, the Board has a reasonable expectation that Conduit has adequate
resources to continue in operational existence through the period to 31 December 2024. For this
reason, the Board continues to adopt the going concern basis in preparing the accounts.
Disclosure of information to the auditors
Each of the persons who is a Director at the date of approval of this Annual Report and Accounts
confirms that:
— so far as the Director is aware, there is no relevant audit information of which the Company’s
auditors are unaware; and
— the Director has taken all the steps that he or she ought to have taken as a Director in
order to make himself or herself aware of any relevant audit information and to establish
that the Company’s auditors are aware of that information.
Conduit Holdings Limited | Annual Report and Accounts 2023
89
Directors' report continued
Auditors
KPMG Audit Limited has expressed its willingness to remain in office and the Audit Committee
has recommended its reappointment to the Board.
A resolution to reappoint the auditors and to authorise the Directors to determine their
remuneration will be proposed at the AGM of the Company.
Powers of Directors
The powers given to the Directors are contained in the Company’s bye-laws and are subject to
relevant legislation and, in certain circumstances (including in relation to the issuing and buying
back by the Company of its shares), approval by shareholders in a general meeting. At the AGM
in 2023, the Directors were granted authorities to allot and issue shares and to make market
purchases of shares and intend to seek renewal of these authorities in 2024.
Appointment and replacement of Directors
The appointment and replacement of Directors is governed by the Company’s bye-laws and the
Bermuda Companies Act 1981 and related legislation. In accordance with The UK Code,
all Directors will stand for annual re-election.
Annual General Meeting
The 2024 AGM will be held at 10:00 a.m. Atlantic time on 15 May 2024 at the Company’s
headquarters at Ideation House, 94 Pitts Bay Road, Pembroke, Bermuda. The Notice of the AGM
will be sent to shareholders in a separate circular. The deadline for submission of proxies will be
20 hours before the meeting.
Approved by the Board of Directors and signed on behalf of the Board
Greg Lunn
Company Secretary
27 February 2024
Conduit Holdings Limited | Annual Report and Accounts 2023
90
Directors' responsibilities statement
The Board is responsible for preparing the Annual Report and Conduit’s consolidated financial
statements in accordance with applicable law and regulations. Our responsibilities include
ensuring that the Company maintains proper accounting records which disclose with reasonable
accuracy the financial position of Conduit and that the financial statements present a fair view for
each financial period.
Legislation in Bermuda governing the preparation and dissemination of the consolidated financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
We confirm that we consider the Annual Report and Accounts, taken as a whole, is fair, balanced
and understandable, and provides the information necessary for shareholders to assess the
Company’s and Conduit’s position, performance, business model and strategy.
Further, we confirm that to the best of our knowledge:
— the consolidated annual financial statements are prepared on a going concern basis in
accordance with IFRS as issued by the IASB. Conduit’s management determine appropriate
measurement bases, to provide the most useful information to users of the consolidated
financial statements, providing a true and fair view of the assets, liabilities, financial position
and profit or loss of Conduit; and
— the Strategic Report on pages 5 to 38 which serves as the management report, includes a fair
review of the development and performance of the business and position and the
undertakings included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties they face.
The audited consolidated financial statements were approved for issue on 27 February 2024 and
the Directors responsible for authorising the responsibility statement on behalf of the Board are:
Trevor Carvey
Executive Director
and CEO
27 February 2024
Elaine Whelan
Executive Director
and CFO
27 February 2024
Conduit Holdings Limited | Annual Report and Accounts 2023
91
FINANCIAL
STATEMENTS
For the year ended 31 December 2023
Financial statements
Independent Auditor's report
Consolidated statement of comprehensive income (loss)
Consolidated balance sheet
Consolidated statement of changes in shareholders' equity
Statement of consolidated cash flows
Notes to the consolidated financial statements
Additional performance measures
Glossary
Advisers and contact information
91-159
92
98
99
100
101
102
154
157
161
Conduit Holdings Limited | Annual Report 2023
92
Independent Auditor's report
KPMG Audit Limited
Crown House
4 Par-la-Ville Road
Hamilton
HM 08
Bermuda
Telephone
Fax
Internet
+1 441 295 5063
+1 441 295 9132
www.kpmg.bm
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors of
Conduit Holdings Limited
Report on the audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Conduit Holdings Limited (the
“Company”) and its subsidiaries (the “Group”), which comprise the consolidated balance sheet as
at 31 December 2023, the consolidated statements of comprehensive income, changes in
shareholders' equity and cash flows for the year then ended, and notes, comprising material
accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at 31 December 2023, and its
consolidated financial performance and its consolidated cash flows for the year then ended in
accordance with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with International Ethics Standards Board for Accountants International
Code of Ethics for Professional Accountants (including International Independence Standards)
(IESBA Code) together with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Bermuda and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Conduit Holdings Limited | Annual Report and Accounts 2023
93
Independent Auditor's report
continued
The risk
Valuation of liability for incurred claims ('LIC')
(2023: Reinsurance contract liabilities include a liability for incurred claims of $592.2 million, $549.6 million net of ceded asset for incurred claims.
2022: Liability for incurred claims of $391.1 million, $332.6 million net of ceded asset for incurred claims)
Our response
Refer to the Audit committee report on pages 54 – 58 and the following in the notes to the consolidated financial statements: note 2 ‘Material accounting policies’, note 3 ‘Risk disclosures’ and note
14 ‘Reinsurance contracts’.
Conduit Holdings Limited | Annual Report and Accounts 2023
94
Independent Auditor's report
continued
The risk
A significant estimate made by management is the estimation of the LIC. The LIC is derived
from the estimated fulfilment cash flows relating to outstanding claims and claim expenses
already incurred but not yet paid and incurred but not reported losses (IBNR). In addition, an
explicit risk adjustment for non financial risk is applied. Estimates of future cash flows for
incurred claims are discounted on initial recognition and then re-measured to current rates as at
the reporting date.
Our response
Our procedures included:
Control design and implementation:
— We evaluated the design and implementation of the Group’s key controls regarding review
and approval of the LIC. We performed the tests below rather than seeking to rely on any
of the Group’s controls because the nature of the balance is such that we would expect to
obtain audit evidence primarily through the detailed procedures described.
Subjective valuation
The valuation of the LIC is a complex process which incorporates a significant amount of
judgement with high estimation uncertainty in setting assumptions such as initial expected
loss ratios, claim development patterns, estimates for large loss events and catastrophe (CAT)
events and a risk adjustment.
Assessing valuer’s credentials:
— We evaluated the competence, capabilities and objectivity of the Group’s internal and
independent experts;
— We (together with our own valuation specialists) performed enquiries of these experts
to understand their processes and models.
Amounts recoverable from reinsurers are estimated using the same methodology and
judgements as for the underlying liabilities.
Our valuation expertise:
— We used our own valuation specialists in assessing and challenging the reasonableness of
Estimated cash flows for IBNR reserves are estimated initially using expected loss ratios which
are selected based on information derived by the Group’s underwriters and actuaries during the
initial pricing of the business. The estimates used may be revised as additional experience or
other data becomes available. In addition, an allowance is made for specific risks. The
determination of this allowance is a subjective judgement based on the perceived uncertainty
and potential for volatility in the underlying claims.
the methods and assumptions utilised by the Group’s experts (on a gross and net of ceded
reinsurance basis) – including the assessment of selected loss ratios, claim development
patterns, reserves held for specific large loss and catastrophe (CAT) events and the risk
adjustment applied.
Assessing observable inputs:
— On a sample basis, we agreed the underlying data utilised in the actuarial analyses to
accounting records.
As such, we determined that the LIC has a higher degree of estimation uncertainty.
— We agreed a sample of cedant CAT loss estimates to supporting documentation as these
formed the basis of reserving for certain CAT events.
Assessing transparency:
— We evaluated the adequacy of the Group’s disclosures on the LIC in accordance with the
requirements of relevant accounting standards.
Conduit Holdings Limited | Annual Report and Accounts 2023
95
Independent Auditor's report
continued
The risk
Accuracy of proportional business reinsurance revenue
(Included within reinsurance revenue for the year ended 31 December 2023 of: $633.0 million 2022: $392.4 million).
Our response
Refer to the Audit committee report on pages 54 – 58 and the following in the notes to the consolidated financial statements: note 2 ‘Material accounting policies’.
Proportional business constitutes a significant portion of business written during the year;
pricing for which is based on estimates of total premium cash flows provided by ceding
companies supplemented by management estimates.
Subjective estimation
Management exercises judgement in determining the estimated total premium cash flows
expected to be received from reinsurance contracts that are used to determine the amount of
reinsurance revenue recognised in the period. These judgements are based on experience with
ceding companies, familiarity with each market, timing of the reported information and its
understanding of the characteristics of each class of business.
As such, we determined that the accuracy of inward reinsurance revenue estimates on
proportional business has a higher degree of estimation uncertainty.
Our procedures included:
Control design and implementation:
— We evaluated the design and implementation of the Group’s key controls regarding review
of the reinsurance revenue estimates recorded. We performed the tests below rather than
seeking to rely on any of the Group’s controls because the nature of the balance is such that
we would expect to obtain audit evidence primarily through the detailed procedures
described.
Assessing assumptions and methodology:
— We challenged assumptions applied by the Group including judgements applied to total
premium cash flows by management’s underwriters.
— We evaluated the reasonableness of these total premium cash flows by comparing the
actual reported reinsurance revenue with the initial estimated reinsurance revenue for prior
years.
— For a sample of policies, we agreed the total premium cashflows to third party supporting
documentation.
Assessing transparency:
— We evaluated the adequacy of the Group’s disclosures on reinsurance revenue estimates in
accordance with the requirements of relevant accounting standards.
Conduit Holdings Limited | Annual Report and Accounts 2023
96
Independent Auditor's report
continued
Other information
Management is responsible for the other information. The other information comprises the
Annual Report, but does not include the consolidated financial statements and our auditor’s
report thereon.
Except as described in the Report on Other Legal and Regulatory Requirements section of our
report, our opinion on the consolidated financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit,
or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report in
this regard.
Responsibilities of management and those charged with governance for the consolidated
financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial
reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain
professional skepticism throughout the audit. We also:
— Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
— Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
— Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
— Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
— Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
Conduit Holdings Limited | Annual Report and Accounts 2023
97
Independent Auditor's report
continued
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the consolidated financial statements of
the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
Directors’ remuneration report
The Group voluntarily prepares an annual report on remuneration in accordance with the
provisions of the United Kingdom (UK) Companies Act 2006. The Directors have engaged us
to audit the part of the annual report on remuneration specified by the UK Companies Act 2006
to be audited as if the Company were a UK registered company.
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the UK Companies Act 2006, as if those requirements applied to
the Company.
Corporate governance statement
We have been engaged to review the part of the corporate governance statement on pages 48
to 51 relating to the Group’s compliance with the provisions of the UK Corporate Governance
Code that would be specified by the Listing Rules of the UK’s Financial Conduct Authority for our
review if the Group had a premium listing on the London Stock Exchange. We have nothing to
report in this respect.
In addition, the Directors have engaged us to review their statements on going concern and the
longer-term viability on page 88 as if the Company was a United Kingdom registered company
with a premium listing on the London Stock Exchange. Our review was substantially less in scope
than an audit and only consisted of making inquiries and considering the Directors’ process
supporting their statements.
Based on the knowledge we acquired during our audit of the consolidated financial statements,
we have nothing material to add or draw attention to in relation to:
— the directors’ confirmation within the longer-term viability statement on page 88 that
they have carried out a robust assessment of the emerging and principal risks facing the
Group, including those that would threaten its business model, future performance, solvency
or liquidity;
— the directors’ explanation in the longer-term viability statement page 88 as to how they have
assessed the prospects of the Group, over what period they have done so and why they
consider that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
— the related going concern statement made in conformity with the Listing Rules set out on
page 88.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s shareholders and Board of Directors, as a body.
Our audit work has been undertaken so that we might state to the Company’s shareholders and
Board of Directors those matters we are required to state to them in an auditor’s report and the
further matters we are required to state to them in accordance with the terms agreed with the
Company and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company’s shareholders and Board of Directors,
as a body, for our audit work, for this report, or for the opinion we have formed.
The Engagement Partner on the audit resulting in this independent auditor’s report is
James Berry.
Chartered Professional Accountants
Hamilton, Bermuda
27 February 2024
Conduit Holdings Limited | Annual Report and Accounts 2023
98
Consolidated statement of comprehensive income (loss)
For the year ended 31 December 2023
Reinsurance revenue
Reinsurance service expenses
Ceded reinsurance expenses
Ceded reinsurance recoveries
Reinsurance service result
Net investment income
Net realised losses on investments
Net unrealised gains (losses) on investments
Net investment result
Net reinsurance finance (expense) income
Net foreign exchange gains
Net reinsurance and financial result
Equity-based incentive expense
Other operating expenses
Results of operating activities
Financing costs
Total comprehensive income (loss) for the year
Earnings (loss) per share
Basic
Diluted
Notes
4, 14
4, 14
4, 14
4, 14
4, 14
5
5
5, 12
5
4, 6, 14
7, 18
4, 7, 8, 15, 21
9, 16
2023
$m
633.0
(377.0)
(76.7)
4.3
183.6
41.3
(1.3)
30.6
70.6
(32.8)
1.4
222.8
(2.5)
(28.3)
192.0
(1.2)
190.8
2022
$m
(re-stated)
392.4
(362.1)
(48.6)
28.7
10.4
17.8
(2.8)
(67.8)
(52.8)
20.8
1.3
(20.3)
(2.1)
(20.7)
(43.1)
(0.8)
(43.9)
20
20
$1.19
$1.19
$(0.27)
$(0.27)
Conduit Holdings Limited | Annual Report and Accounts 2023
99
Consolidated balance sheet
As at 31 December 2023
2023
$m
2022
$m
(re-stated)
1 January
2022
$m
(re-stated)
Notes
Assets
Shareholders' equity
Cash and cash equivalents
11, 16
199.8
Accrued interest receivable
8.5
112.9
5.5
67.5
Share capital
3.7
Own shares
Investments
12, 13, 16
1,238.4
1,021.7
1,008.4
Other reserves
Ceded reinsurance contract assets
14
42.7
67.3
41.0
Retained loss
Other assets
Right-of-use lease assets
15
Intangible assets
Total assets
Liabilities
4.7
2.1
-
3.6
2.2
1.4
1.6
2.9
1.1
1,496.2
1,214.6
1,126.2
Total shareholders' equity
Total liabilities and
shareholders' equity
Reinsurance contract liabilities
14
494.5
336.3
15
12.0
2.3
8.7
2.4
Other payables
Lease liabilities
Total liabilities
Notes
17
17
18
2023
$m
2022
$m
(re-stated)
1 January
2022
$m
(re-stated)
1.7
1.7
(32.9)
(20.1)
1.7
(0.2)
1,059.6
1,058.1
1,056.0
(41.0)
(172.5)
(69.3)
987.4
867.2
988.2
1,496.2
1,214.6
1,126.2
The consolidated financial statements were approved by the Board of Directors on 27 February
2024 and signed on its behalf by:
116.1
19.0
2.9
Trevor Carvey
CEO
Elaine Whelan
CFO
508.8
347.4
138.0
Conduit Holdings Limited | Annual Report and Accounts 2023
100
Consolidated statement of changes in shareholders’ equity
For the year ended 31 December 2023
Notes
Share capital
$m
Own shares
$m
Other reserves
$m
Retained loss
$m
Balance as at 31 December 2021, as previously reported
Impact of initial application of IFRS 17
Balance as at 1 January 2022, re-stated
Total comprehensive loss for the year, re-stated
Purchase of own shares
Dividends on common shares
Equity-based incentives
Balance as at 31 December 2022, re-stated
Total comprehensive income for the year
Distributions by EBT
Purchase of own shares
Dividends on common shares
Equity-based incentives
Balance as at 31 December 2023
22
22
22
17
17
7, 18
17, 18
17
17
7, 18
Total
shareholders'
equity
$m
981.2
7.0
988.2
(43.9)
(19.9)
(59.3)
2.1
1.7
-
1.7
-
-
-
-
(0.2)
-
(0.2)
-
(19.9)
-
-
1,056.0
-
1,056.0
-
-
-
2.1
(76.3)
7.0
(69.3)
(43.9)
-
(59.3)
-
1.7
(20.1)
1,058.1
(172.5)
867.2
-
-
-
-
-
-
0.9
(13.7)
-
-
-
(1.0)
-
-
2.5
190.8
-
-
(59.3)
-
1.7
(32.9)
1,059.6
(41.0)
190.8
(0.1)
(13.7)
(59.3)
2.5
987.4
Conduit Holdings Limited | Annual Report and Accounts 2023
101
Statement of consolidated cash flows
For the year ended 31 December 2023
2023
$m
2022
$m
(re-stated)
Notes
Cash flows from operating activities
Comprehensive income (loss)
Depreciation
Write-off of intangible asset
Interest expense on lease liabilities
Net investment income
Net realised losses on investments
15
9, 15
5
5
190.8
(43.9)
Cash flows used in financing activities
0.7
1.4
0.1
0.9
-
0.1
Lease liabilities paid
Dividends paid
Purchase of own shares
(42.4)
(18.7)
Distributions by EBT
1.3
2.8
Net cash flows used in financing activities
(73.8)
(79.8)
2023
$m
2022
$m
(re-stated)
Notes
15
17
17
17
(0.7)
(59.3)
(13.7)
(0.1)
(0.6)
(59.3)
(19.9)
-
86.9
45.5
11
112.9
67.5
-
(0.1)
112.9
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning
of the year
Effect of exchange rate fluctuations on cash and
cash equivalents
Cash and cash equivalents at end of year
11
199.8
Net unrealised (gains) losses on investments
5, 12
(30.6)
Net unrealised foreign exchange gains
Equity-based incentive expense
7, 18
Change in operational assets and liabilities
– Reinsurance assets and liabilities
– Other assets and liabilities
(1.2)
2.5
184.0
2.8
67.8
(1.0)
2.1
195.1
(2.0)
Net cash flows from operating activities
309.4
203.2
Cash flows used in investing activities
Purchase of investments
Proceeds on sale and maturity of investments
Interest received
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash flows used in investing activities
(541.5)
(304.9)
356.5
206.2
37.0
(0.7)
21.1
-
-
(0.3)
(148.7)
(77.9)
Conduit Holdings Limited | Annual Report and Accounts 2023
102
Notes to the consolidated financial statements
For the year ended 31 December 2023
1. General information
CHL was incorporated under the laws of Bermuda on 6 October 2020 and, on 7 December 2020,
all of its common shares of par value $0.01 per share were admitted to the standard listing
segment of the Official List of the UK Financial Conduct Authority and admitted to trading on the
LSE’s main market for listed securities. CHL’s registered office is Clarendon House, 2 Church
Street, Hamilton HM 11, Bermuda. CHL's consolidated financial statements as at, and for the year
ended 31 December 2023 include the Company's subsidiaries. The principal activity of Conduit
is to provide reinsurance products and services to its clients worldwide.
funding retention, stress testing and scenario analysis. Conduit’s capital ratios and its capital
resources are comfortably in excess of regulatory solvency requirements, and internal stress
testing indicates Conduit can withstand severe economic and competitive stresses.
As a result of the assessment, the Board have a reasonable expectation that CHL and CRL have
adequate resources to continue in operational existence for the foreseeable future and therefore
believe that Conduit is well placed to manage its business risks successfully. Accordingly, they
continue to adopt the going concern basis in preparing the consolidated financial statements.
A full listing of Conduit's related parties can be found in note 21.
2. Summary of material accounting policies
The basis of preparation, use of judgements and estimates, consolidation principles and material
accounting policies adopted in the preparation of these consolidated financial statements are set
out below. Excluding percentages, share and per share data or where otherwise stated, all
amounts in tables and narrative disclosures are in millions of US dollars.
Basis of preparation
These consolidated financial statements are prepared on a going concern basis in accordance
with IFRS as issued by the IASB, and the DTR issued by the Financial Conduct Authority, and are
prepared on a historical cost basis, except for items measured at fair value as disclosed in the
relevant accounting policies. In accordance with the requirements of IAS 1, the financial
statements’ assets and liabilities have been presented in order of liquidity, which provides
information that is more reliable and relevant for a financial institution.
In the course of preparing these consolidated financial statements, no judgements have been
made in the process of applying Conduit’s accounting policies, other than those involving
estimations as noted in the ‘Use of judgements and estimates’ section, that have had a significant
effect on amounts recognised in these consolidated financial statements.
Going concern
The consolidated financial statements of Conduit have been prepared on a going concern basis.
In assessing Conduit's going concern position as at 31 December 2023, the Board have
considered a number of factors, including the current balance sheet position and Conduit’s
strategic and financial plan, taking account of possible changes in trading performance and
Changes in accounting policies and new standards
As previously disclosed, Conduit has initially applied IFRS 17 and IFRS 9, including any
consequential amendments to other standards, from 1 January 2023. There are no other new
or amended IFRS reporting standards, that have a material effect, that have become effective
during the year. IFRS 17 has had a significant impact on accounting for reinsurance contracts.
As a result, Conduit has restated certain comparative amounts and presented an additional
consolidated balance sheet as at 1 January 2022. Conduit’s updated accounting policies for
reinsurance contracts and financial instruments are set out below. Disclosures relating to the
transition to IFRS 17 and IFRS 9 have been set out in note 22.
Future accounting changes
Of the upcoming accounting standard changes, we do not anticipate that any will have a material
impact on the financial statements’ results, or presentation and disclosures.
Use of judgements and estimates
The preparation of financial statements in conformity with IFRS requires Conduit to make
judgements and estimates that affect the reported and disclosed amounts at the balance sheet
date, revenues and expenses during the reporting period and the associated financial statement
disclosures. All estimates are based on management’s knowledge of current facts and
circumstances, assumptions based on that knowledge and their prediction of future events.
Actual results may differ significantly from the estimates made.
The most significant estimates made by management are in relation to the liability for incurred
claims and associated ceded reinsurance recoveries, as discussed in note 3 and note 14.
Conduit Holdings Limited | Annual Report and Accounts 2023
103
Notes to the consolidated financial statements
continued
Less significant estimates are made in determining the estimated fair value of certain financial
instruments, as discussed in note 3 and note 12.
assets and liabilities carried at estimated fair value and denominated in a foreign currency are
translated at the exchange rate at the date the fair value was determined.
In addition, some management judgement is exercised in determining the total premium
cashflows expected to be received from reinsurance contracts that are used to determine the
amount of reinsurance revenue recognised in the period.
While not significant, estimates are also used in the estimated fair value of the MIP as discussed
in note 7.
Consolidation principles
These consolidated financial statements comprise the financial statements of CHL and its
subsidiaries as at and for the year ended 31 December 2023. Subsidiaries are those entities that
are controlled by Conduit and are fully consolidated from the date on which Conduit obtains
control and continue to be consolidated until the date when such control ceases. Control is
achieved when Conduit is exposed, or has rights, to variable returns from its involvement with
the subsidiary and has the ability to affect those returns through its power over the subsidiary.
Intragroup balances and transactions are eliminated in preparing the consolidated financial
statements. Subsidiaries’ accounting policies are generally consistent with Conduit’s
accounting policies.
Foreign currency
The functional currency, which is the currency of the primary economic environment in which
Conduit operates, is US dollars. Items included in the financial statements of each entity are
measured using the functional currency. These consolidated financial statements are presented
in US dollars.
Foreign currency transactions are recorded in the functional currency for each entity using the
exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies are revalued at period end exchange rates. The resulting
foreign exchange differences on revaluation are recorded in the consolidated statement of
comprehensive income (loss) within net foreign exchange gains (losses). Non-monetary assets
and liabilities denominated in a foreign currency are carried at historic rates. Non-monetary
Reinsurance contracts
Prior to IFRS 17 coming into effect, IFRS was silent in respect of certain aspects relating to the
measurement of reinsurance contracts. In such instances, the IFRS framework allows reference
to another comprehensive body of accounting principles. Conduit’s management therefore
determined appropriate measurement bases, to provide the most useful information to users
of the financial statements, using their judgement and considering US GAAP.
IFRS 17 sets out the classification, measurement and presentation and disclosure requirements for
reinsurance contracts. It requires reinsurance contracts to be measured using current estimates
and assumptions that reflect the timing of cash flows and recognition of profits as insurance
services are delivered. The standard provides two main measurement models which are the
General Measurement Model (GMM) and the Premium Allocation Approach (PAA).
The PAA simplifies the measurement of reinsurance contracts for remaining coverage, or pre-
claims, in comparison to the GMM. The PAA is similar to Conduit’s previous accounting policies
under IFRS 4 for calculating revenue, however there are some key presentation changes with
respect to certain commissions. The GMM is used for the measurement of the liability for
incurred claims.
PAA eligibility
Under IFRS 17, Conduit’s reinsurance contracts issued and ceded reinsurance contracts held
are all eligible to be measured by applying the PAA, due to meeting the following criteria:
— Loss-occurring reinsurance contracts with coverage period of one year or less are
automatically eligible; and
— Modelling of risk-attaching contracts or contracts with a coverage period greater than one
year produces a measurement for the group of reinsurance contracts that does not differ
materially from that which would be produced applying the GMM.
Conduit Holdings Limited | Annual Report and Accounts 2023
104
Notes to the consolidated financial statements
continued
Classification
Contracts that transfer significant reinsurance risk at the inception of the contract are accounted
for as reinsurance contracts. Contracts purchased and held by Conduit under which it transfers
significant reinsurance risk to a counterparty are accounted for as ceded reinsurance contracts.
Contracts that do not transfer significant reinsurance risk are accounted for as investment
contracts. Reinsurance risk is transferred when a reinsurer agrees to compensate a policyholder
if a specified uncertain future event adversely affects the policyholder.
Conduit’s accounting policies apply to both reinsurance contracts issued and ceded reinsurance
contracts held unless explicitly referenced as applying to contracts issued or ceded only. Conduit
writes both excess of loss and proportional (also known as quota share or pro-rata) reinsurance
contracts. The type of contract impacts the recognition of reinsurance revenue. Contract types
are discussed on page 106.
Separating components from reinsurance contracts
IFRS 17 distinguishes three components that, if embedded in a reinsurance contract, should be
bifurcated, and accounted for separately. These are:
— Cash flows relating to embedded derivatives that are required to be separated;
— Cash flows relating to distinct investment components; and
— Promises to transfer distinct goods or distinct non-insurance services.
IFRS 17 then applies to all remaining components of the contract. Conduit does not have any
contracts containing non-insurance components that require separation. Where contracts contain
multiple reinsurance components that meet the requirements for separation, these are separated
and accounted for as standalone contracts.
Some reinsurance contracts issued contain profit sharing arrangements, such as profit
commissions and no claims bonuses. Under these arrangements, there is a minimum guaranteed
amount that the policyholder will always receive either in the form of profit commission, or as
reimbursement for claims, or another contractual payment, irrespective of the insured event
happening. These are typically considered non-distinct investment components. Non-distinct
investment components are not separated from the reinsurance contract as they are closely
interrelated to the measurement of the reinsurance contract. However, the impact of the non-
distinct investment components are excluded from the consolidated statement of comprehensive
income (loss) by adjusting reinsurance revenue and reinsurance service expenses by the
minimum amount due. There is no impact to the reinsurance service result as there is an equal
reduction to both revenue and expenses.
Level of aggregation
Conduit manages reinsurance contracts issued by class of business within an operating segment.
Classes of business are aggregated into portfolios of contracts that are subject to similar risks.
Contracts within each portfolio are grouped into groups of contracts that are issued within a
calendar year, the annual cohort, and are (i) contracts that are onerous at initial recognition; (ii)
contracts that at initial recognition have no significant possibility of subsequently becoming
onerous; or (iii) a group of remaining contracts. These groups represent the level of aggregation
at which reinsurance contracts are initially recognised and measured. Such groups are not
subsequently reconsidered.
Onerous contracts
Under the PAA, it is assumed there are no contracts in the portfolio that are onerous at initial
recognition, unless there are facts and circumstances that may indicate otherwise. Management
primarily considers the following to determine whether there are facts and circumstances that
mean a group of contracts are onerous:
— Pricing information;
— Results of similar contracts it has recognised; and
— External factors, such as a change in market experience or regulations.
If a group of contracts becomes onerous, Conduit increases the carrying amount of the liability
for remaining coverage to the amount of the fulfilment cash flows with the amount of such an
increase recognised immediately in reinsurance service expenses. Subsequently, Conduit
amortises the amount of the loss component by decreasing reinsurance service expenses. The
loss component amortisation is based on the passage of time over the remaining coverage
period of contracts within an onerous group. If facts and circumstances indicate that the
expected profitability of the onerous group during the remaining coverage has changed, then
Conduit remeasures the loss component by reassessing the fulfilment cash flows as required until
the loss component is reduced to zero.
Where a loss component is expected to be partially or fully recovered by ceded reinsurance
contracts, the amount of recovery is recognised in ceded reinsurance recoveries.
Conduit Holdings Limited | Annual Report and Accounts 2023
105
Notes to the consolidated financial statements
continued
Recognition
Conduit recognises groups of reinsurance contracts it issues from the earliest of:
— The beginning of the coverage period of the group of contracts;
— The date when the first payment from the cedant is due or when the first payment is received
and, as a result, can set a price of level of benefits that fully reflects those risks. Where Conduit
issues multi-year contracts and does not have the ability to re-price on each policy anniversary
the contract is considered one contract and therefore future cash flows from each of the annual
periods are considered on initial recognition.
if there is no due date; or
— For a group of onerous contracts, the date when facts and circumstances indicate that the
group is onerous.
For ceded reinsurance contracts Conduit recognises the group of contracts:
— If the reinsurance contracts provide proportionate coverage, at the later of the beginning of
the coverage period of the group, or the initial recognition of the underlying covered
reinsurance contracts issued; or
— For non-proportionate coverage, the beginning of the coverage period of the group of
contracts, unless an onerous group of underlying reinsurance contracts have been recognised
and the ceded reinsurance contract has been signed before that date.
Modification and derecognition
Conduit derecognises reinsurance contracts when:
— The rights and obligations relating to the contract are extinguished (meaning discharged,
cancelled or expired); or
— The contract is modified such that the modification results in a change in the measurement
model or the applicable standard for measuring a component of the contract, substantially
changes the contract boundary, or requires the modified contract to be included in a different
group. In such cases, Conduit derecognises the initial contract and recognises the modified
contract as a new contract. When a modification is not treated as a derecognition, Conduit
recognises amounts paid or received for the modification with the contract as an adjustment
to the relevant liability for remaining coverage.
Contract boundaries
The measurement of a group of reinsurance contracts includes all future cash flows expected to
arise within the boundary of each contract in the group. Cash flows are within the boundary of a
reinsurance contract if they arise from substantive rights and obligations that exist during the
reporting period in which Conduit can compel the cedant to pay the premiums, or in which
Conduit has a substantive obligation to provide the cedant with services. A substantive obligation
to provide services ends when Conduit has the practical ability to reassess the risks of the cedant
For ceded reinsurance contracts the cash flows are within the boundary of the contract if
Conduit has a substantive right to receive services or if Conduit is compelled to pay premiums
to the reinsurer. The substantive right to receive services from the reinsurer ends when:
— The reinsurer has the practical ability to reassess the risks transferred to it and can set a price
of level of benefits that fully reflects those risks; or
— The reinsurer has a substantive right to terminate the coverage.
Conduit assesses the contract boundary at initial recognition and at each subsequent reporting
date to include the effects of changes in circumstances on Conduit’s substantive rights and
obligations. The assessment of the contract boundary, which defines the future cash flows that
are included in the measurement of the contract, requires judgement and consideration of
Conduit's substantive rights and obligations. Conduit issues risk-attaching reinsurance contracts
which provide reinsurance coverage to underlying contracts issued within the terms of the
contract. While the contracts can have an annual term the contract boundary is assessed with
consideration of the coverage period of the underlying contracts. Contracts that cover claims
from underlying contracts within the contract period, loss-occurring contracts, are typically
annual term. Where contracts contain multi-year terms, Conduit exercises judgement on whether
provisions within the contract allow cancellation or re-pricing at each anniversary of the contract.
Measurement – Liability for remaining coverage
On initial recognition of each group of contracts, the carrying amount of the liability for remaining
coverage is measured as the premiums received on initial recognition, if any, minus any
reinsurance acquisition expense cash flows allocated to the group of contracts and any amounts
arising from the derecognition of the prepaid reinsurance acquisition expense cash flows asset.
Conduit has chosen not to expense reinsurance acquisition expense cash flows on contracts with
coverage of one year or less when they are incurred in order to apply a consistent treatment of
reinsurance acquisition expense cash flows for all contracts, regardless of the length of coverage.
Conduit Holdings Limited | Annual Report and Accounts 2023
106
Notes to the consolidated financial statements
continued
Subsequently, at the end of each reporting period, the liability for remaining coverage is:
— Increased by any premiums received in the period;
— Decreased for reinsurance acquisition expense cash flows paid in the period;
— Decreased for the amounts of expected premium cash flows recognised as reinsurance
revenue for the services provided in the period;
— Increased for the amortisation of reinsurance acquisition expense cash flows in the period
recognised as reinsurance service expenses; and
— Decreased for any non-distinct investment component paid or transferred to the liability
for incurred claims.
Conduit has elected not to adjust the liability for remaining coverage for the time value of money
as its reinsurance contracts do not contain a significant financing component.
Conduit measures the reinsurance asset for remaining coverage for its ceded reinsurance
contracts that it holds on the same basis as reinsurance contracts issued, adapted to reflect the
features that differ between contracts issued versus contracts held.
Reinsurance revenue recognised in the period is based on the total premium cash flows expected
to be received over the lifetime of the contract, net of any deductions that are paid to the cedant.
The amount of total expected revenue from a contract recognised in the period is dependent on
the type of reinsurance contract, as discussed below.
Excess of loss contracts
For the majority of excess of loss contracts, expected premium cash flows are assessed based on
the minimum and deposit or flat premium, as defined in the contract. Subsequent adjustments to
the minimum and deposit premium are assessed in the period in which they are determined. For
excess of loss contracts where no deposit is specified in the contract, premium cash flows are
assessed based on estimates of premiums provided by the ceding company. Subsequent
adjustments, based on reports of actual premium by ceding companies, or revisions in estimates,
are assessed in the period in which they are determined. For multi-year policies that are payable
in annual instalments, where the reinsured has the sole ability to cancel, the total expected
premium cash flows for all annual periods are assessed at the inception of the contract. Where
unilateral cancellation by the reinsurer exists at each anniversary of the contract the annual
periods are assessed as separate contracts.
Reinsurance revenue for excess of loss contracts is generally recognised evenly over the term
of the underlying risk period of the reinsurance contract, except where the period of risk differs
significantly from the contract period. In these circumstances, reinsurance revenue is recognised
over the period of risk in proportion to the amount of reinsurance protection provided. Where
contract terms require the reinstatement of coverage after a ceding company’s loss, as the
reinstatement is contingent on the loss, the estimated mandatory reinstatement premiums are
recorded within reinsurance service expenses.
Proportional contracts
Premium cash flows for proportional contracts are assessed based on estimates of ultimate
premiums provided by the ceding company, supplemented by management's estimates of
premiums based on its experience with the ceding company, familiarity with each market, the timing
of the reported information and its understanding of the characteristics of each class of business.
Initial estimates of premium cash flows are assessed in the period in which the contract incepts, or
the period in which the contract is bound, if later. Contracts written on a ‘risks-attaching’ basis cover
claims which attach to the underlying reinsurance policy written during the term of the respective
policy. Reinsurance revenue on such policies generally extend beyond the original term of the
contract. Subsequent adjustments, based on reports of actual premium by the ceding company,
or revisions in estimates, are assessed in the period in which they are determined.
Reinsurance acquisition expense cash flows
Reinsurance acquisition expense cash flows represent the cash flows that arise from the cost
of selling and underwriting a group of reinsurance contracts and include:
— Contract specific costs, such as brokerage;
— Operating expenses that are incurred in relation to the fulfilment of reinsurance contracts; and
— An allocation of fixed and variable overheads.
Reinsurance acquisition expenses are deferred over the period in which the related premiums are
earned to the extent they are recoverable out of expected future revenue margins and
recognised within reinsurance service expenses.
Commissions that are paid to cedants, such as ceding commissions, are not treated as
reinsurance acquisition expense cash flows as they do not relate to a service. Such commissions
are treated as a reduction in the expected premium recognised as reinsurance revenue.
Conduit Holdings Limited | Annual Report and Accounts 2023
107
Notes to the consolidated financial statements
continued
Ceded reinsurance expenses
Ceded reinsurance is purchased in the normal course of business to increase capital capacity or
to limit the impact of individual risk losses and loss events impacting multiple cedants, such as
natural-catastrophes, or both. Conduit may purchase ceded reinsurance on both an excess of loss
and a proportional basis, and may supplement this with the use of ceded reinsurance cover linked
to the issuance of catastrophe bonds or other capital market products. Ceded reinsurance
premiums are recognised as ceded reinsurance expenses in the same manner as reinsurance
contracts issued, depending on the terms of the contract. Ceding commissions received are
deducted from the premium paid that is recognised in ceded reinsurance expenses. Other
expenses incurred in the placing of ceded reinsurance contracts that are in relation to a service
by a third party, such as brokerage, are recognised in ceded reinsurance expenses.
Measurement – Liability for incurred claims
The liability for incurred claims represents the estimated ultimate cost of settling all reinsurance
claims arising from events that have occurred up to the end of the reporting period, including the
operating costs that are expected to be incurred in the course of settling such claims,
reinstatement premiums on specific loss events, profit commissions and similar expenses that are
contingent on claims plus a provision for IBNR. The liability for incurred claims is derived from the
estimated fulfilment cash flows relating to expected claims. The fulfilment cash flows incorporate,
in an unbiased way, all reasonable and supportable information available, without undue cost or
effort, about the amount, timing and uncertainty of those future cash flows. They also include an
explicit adjustment for non-financial risk, the risk adjustment. Estimates of future cash flows for
incurred claims are discounted on initial recognition and then re-measured to current rates as at
the reporting date.
Cash flows for outstanding losses are estimated initially on the basis of reported losses received
from cedants. Cash flows for ACRs are determined where management’s expectation of the
ultimate cost of the reported loss is greater than that reported. Estimated cash flows for IBNR
may also consist of a provision for additional development in excess of losses reported by
cedants, as well as a provision for losses which have occurred but have not yet been reported
by cedants.
Cash flows for IBNR are estimated initially using expected loss and loss adjustment expense
ratios which are selected based on information derived by underwriters and actuaries during the
initial pricing of the business. These estimates are reviewed regularly and, as experience develops
and new information is received, the cash flows are adjusted as necessary. As actual loss
information is reported, and Conduit develops its own loss experience, management will use
various actuarial methods as well as a combination of management’s judgement and experience,
historical reinsurance industry loss experience and estimates of pricing adequacy trends to
estimate cash flows for IBNR.
The estimation of the liability for incurred claims is a complex process which incorporates a
significant amount of judgement. It is reasonably possible that uncertainties in the reserving
process, delays in cedants reporting losses to Conduit, together with the potential for unforeseen
adverse developments, could lead to a material change in the liability for incurred claims.
Any amounts recoverable from reinsurers are estimated using the same methodology as for the
underlying losses except for the requirement under IFRS 17 to assess the ceded reinsurance
recovery cash flows for the effect of any risk of non-performance, including expected credit
losses. Management monitors the creditworthiness of its reinsurers on an ongoing basis and
assesses any reinsurance assets for the risk of non-performance, with a provision for non-
performance risk being recognised as an expense in the period in which it is determined.
Presentation of reinsurance contracts
Reinsurance assets and liabilities
The asset or liability for a portfolio of reinsurance contracts is the net position of both the liability
for remaining coverage and the liability for incurred claims. Whether a portfolio is in a liability or
asset position is typically impacted by the timing of cash flows received versus cash flows paid.
Conduit presents separately in the consolidated balance sheet portfolios of reinsurance contracts
issued and held that are in an asset position and those that are in a liability position.
All reinsurance contract assets and liabilities are deemed monetary assets and liabilities and are
revalued at period end exchange rates.
Reinsurance revenue
Reinsurance revenue in the consolidated statement of comprehensive income (loss) is the
amount of expected premium cash flows, net of any deductions paid to the cedant and excluding
any non-distinct investment component. Conduit allocates the expected premium receipts to
each period of coverage on the basis of passage of time or the expected risk pattern if it differs
significantly from the passage of time.
Conduit Holdings Limited | Annual Report and Accounts 2023
108
Notes to the consolidated financial statements
continued
Reinsurance service expenses
Reinsurance service expenses in the consolidated statement of comprehensive income (loss)
includes changes in the liability for incurred claims that do not arise from the application of
discount rates, being recognition and amortisation of any loss components, amortisation of
reinsurance acquisition expense cash flows and other attributable operating expenses.
Ceded reinsurance income and expenses
Conduit has elected to present the income and expenses from ceded reinsurance contracts
separately in the consolidated statement of comprehensive income (loss). Ceded reinsurance
expenses represent the total expected ceded premiums and other amounts, that are not
contingent on recoveries, payable to the reinsurer. Conduit recognises ceded reinsurance
expenses based on the passage of time over the coverage period of a group of contracts or
expected risk pattern. Income from ceded reinsurance contracts includes expected recoveries
on incurred claims, changes in expected recoveries related to past service, the provision for the
effects of changes in risk of reinsurer non-performance plus other amounts that are contingent
on recoveries, such as ceded profit commissions payable to the reinsured.
Net reinsurance finance income (expense)
Reinsurance finance income (expense) includes the changes in the carrying amounts of
reinsurance and ceded reinsurance assets and liabilities arising from the unwind of discount
recognised in prior periods and the effects of remeasuring to current discount rates plus other
financial assumptions. Conduit has elected to disaggregate the changes in the risk adjustment
for the time value of money and present in net reinsurance finance income (expense).
Conduit has chosen not to disaggregate finance income (expense) between other comprehensive
income (OCI) and comprehensive income.
Financial instruments
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks, money market
funds, and other short-term highly liquid investments with a maturity of three months or less at
the date of purchase. Carrying amounts approximate fair value due to the short-term nature and
high liquidity of the instruments.
Investments
Conduit’s fixed maturity securities portfolio meets the requirements for mandatory classification
as FVTPL and is carried at estimated fair value in the consolidated balance sheet. The
classification of financial assets is determined at the time of initial purchase. A financial asset is
classified at FVTPL if it is held within a business model that is managed and evaluated on a fair
value basis or if acquired principally for the purpose of selling in the short term, or if it forms part
of a portfolio of financial assets in which there is evidence of short-term profit taking.
Presentation of these securities in the FVTPL category is consistent with how management
monitors and evaluates the performance of these securities on a fair value basis.
Regular way purchases and sales of investments are recognised at estimated fair value on the
trade date, and are subsequently carried at estimated fair value. Balances pending settlement are
reflected in the consolidated balance sheet in other assets or other payables. The estimated fair
value of Conduit’s fixed maturity securities portfolio is determined based on bid prices from
recognised exchanges, broker-dealers, recognised indices or pricing vendors. Changes in
estimated fair value of investments classified as FVTPL are recognised in the consolidated
statement of comprehensive income (loss) within net unrealised gains (losses) on investments.
Investments are derecognised when Conduit has transferred substantially all the risks and
rewards of ownership. On derecognition of an investment held at FVTPL, previously recorded
unrealised gains and losses are recycled from net unrealised gains (losses) on investments to net
realised gains (losses) on investments.
Interest income, amortisation and accretion of premiums and discounts on fixed maturity
securities are calculated using the effective interest rate method and recognised in net
investment income. The carrying value of accrued interest income approximates estimated fair
value due to its short-term nature and high liquidity.
Leases
Conduit recognises a right-of-use asset and a lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost, which comprises the initial measurement of
the corresponding lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of any costs to be
incurred at the expiration of the lease agreement.
Conduit Holdings Limited | Annual Report and Accounts 2023
109
Notes to the consolidated financial statements
continued
Right-of-use assets are subsequently measured at cost less accumulated depreciation and any
impairment losses. Straight-line depreciation is calculated from the commencement date of the
lease to the earlier of either the end date of the lease term or the useful life of the underlying asset.
The lease liability is initially measured at the present value of the future lease payments at the
lease commencement date. Lease payments are discounted using the interest rate implicit in the
lease or, if that rate cannot be readily determined, Conduit's incremental borrowing rate. Lease
payments included in the measurement of the lease liability include fixed payments (including in-
substance fixed payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
The lease liability is subsequently measured by increasing the lease carrying amount to reflect the
interest due on the lease liability using the effective interest rate method and reducing the
carrying amount to reflect the lease payments made. Conduit re-measures the lease liability and
the related right-of-use asset whenever there is a change in future lease payments arising from
a change in index or rate, if Conduit changes its assessment of whether it will exercise a purchase,
extension or termination option or if there is a revised in-substance fixed lease payment.
Right-of-use assets and lease liabilities are presented as separate financial statement line items in
the consolidated balance sheet.
Employee benefits
Equity-based incentives
Conduit currently operates a MIP under which shares are subscribed for or nil cost options are
granted. The fair value of the instruments granted is estimated on the date of grant. The
estimated fair value is recognised as an expense pro-rata over the vesting period of the
instrument, adjusted for the impact of any non-market vesting conditions. No adjustment to
vesting assumptions is made in respect of market vesting conditions.
Conduit also previously established a DSBP. A percentage of each employee's bonus is
automatically deferred into shares as nil cost options. These nil cost awards vest annually in
separate equal tranches over a three-year period from the date of grant and do not have
associated performance criteria attached to the awards. These awards accrue dividend
equivalents for all dividends declared where the record date falls between the grant date and
date of exercise, and are paid at the time of exercise.
During 2023 Conduit established an LTIP. These nil cost awards granted to staff vest over a
three-year period from the date of grant and do not have associated performance criteria
attached to the awards. These awards accrue dividend equivalents for all dividends declared
where the record date falls between the grant date and date of exercise, and are paid at the time
of exercise.
At each balance sheet date, Conduit revises its estimate of the number of instruments that are
expected to become exercisable. It recognises the impact of the revision of original estimates, if
any, as equity-based incentive expense in the consolidated statement of comprehensive income
(loss), and a corresponding adjustment is made to other reserves in shareholders’ equity over the
remaining vesting period.
On exercise, the differences between the expense charged to the consolidated statement of
comprehensive income (loss) and the actual cost to Conduit, if any, is transferred to other
reserves in shareholders’ equity.
Pensions
Conduit’s pension plans are based on defined contributions or equivalent cash in lieu, subject to
applicable law and local market standards. On payment of contributions to the plans or cash in
lieu there is no further obligation to Conduit. Contributions or payments of cash in lieu are
recognised as employee benefits in the consolidated statement of comprehensive income (loss)
in the period when the services are rendered.
Conduit Holdings Limited | Annual Report and Accounts 2023
110
Notes to the consolidated financial statements
continued
Tax
Income tax on the profit or loss for the period comprises current and deferred tax. Current tax
is the expected tax payable on the taxable income for the year using tax rates enacted or
substantively enacted at the year-end reporting date and any adjustments to tax payable in
respect of prior periods.
Deferred tax is provided, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. The
amount of deferred tax provided is based on the expected manner of realisation or settlement of
the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted
at the reporting date. Deferred tax assets are recognised in the consolidated balance sheet to the
extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Own shares
Own shares include shares repurchased under share repurchase authorisations and held in
treasury, plus shares purchased and held in trust, for the purposes of employee equity-based
incentive schemes. Own shares are deducted from shareholders’ equity. No gain or loss is
recognised on the purchase, sale, cancellation or issue of own shares and any consideration paid
or received is recognised directly in equity.
Share capital and issuance costs
Shares are classified as shareholders' equity if there is no obligation to transfer cash or other
financial assets. Transaction costs that are attributable to the issuance of new shares are treated
as a deduction from equity.
3. Risk disclosures
Introduction
Conduit is exposed to risks from several sources, classified into six primary risk categories. The
primary risk categories are: (a) reinsurance risk; (b) market risk; (c) liquidity risk; (d) credit risk;
(e) operational risk; and (f) strategic risk. These are discussed in detail on the following pages.
The primary risk to Conduit is reinsurance risk.
The Board is responsible for determining the nature and extent of the principal risks Conduit is
willing to take in achieving its strategic objectives and should maintain sound risk management
and internal control systems. To this end, the Board has established various committees to
support the execution of its responsibilities and has reviewed the committee structures at CRL.
The Board, and committees thereof, define the risk preferences and appetites within which
management is authorised to operate.
The risk function is responsible for supporting the Board, and the CRL Board, with the day-to-day
oversight of the risks that Conduit seeks or is exposed to in pursuit of its strategic objectives, and
the satisfaction of certain regulatory risk management expectations relevant to CRL. The
framework under which risks are managed contemplates risk appetite and tolerance constraints.
Risk appetite is prescribed by the Board and is reviewed at least annually, with consideration of
the financial and operational capacity of Conduit. The use of financial capacity in this context
relates to calculated or modelled capital requirements, based on residual unmitigated risk
exposures. Current capital requirements are determined by reference to rating agency and
regulatory capital requirements.
Day-to-day management of risk is the responsibility of management, operating within the defined
appetite and tolerances. The risk framework prescribes a standardised approach to the
management of risk, oversight and challenge by the risk function and independent assurance
provided by the internal audit function. The risk framework also addresses the reporting of risks,
emerging risks, risk events and compliance with risk appetite and tolerance statements to
executive management and the Board, and relevant board committees, of CHL and CRL. To
ensure transparency and accountability of the business for all independent Non-Executive
Directors, four Independent Non-Executive Directors from the Board have been appointed to the
Board of CRL. Furthermore, the Board is invited to attend operating entity board level meetings
and see all minutes and records of such operating entity board and committee meetings.
Conduit Holdings Limited | Annual Report and Accounts 2023
111
Notes to the consolidated financial statements
continued
Climate change
Conduit is exposed to risks associated with climate change but also potential opportunities
arising from that risk. Risks from climate change can include physical risk and transition risk.
Physical risks are those relating to the physical impacts of climate change, which can be from
increased frequency and/or severity of climate-related events, or structural, due to longer-term
shifts in climate patterns. Transition risks are those relating to the transition to a lower carbon
economy and include risks such as policy and legal risk, technology risk, market risk and
reputational risk. The potential financial impact from these risks is mitigated by Conduit’s
strategic and risk management policies.
Global tax reform
Conduit continues to monitor developments in local and international taxation. On 27 December
2023 the Bermuda government enacted legislation, the Bermuda Corporate Income Tax Act of
2023 (Bermuda CIT), into law. CHL, CSL, CML and CRL are currently not in scope for this new
legislation. While certain implications of the new Bermuda CIT remain uncertain, Conduit's current
assessment is that it does not meet the criteria to pay any taxes under the Bermuda CIT. If
Conduit were to meet the Bermuda CIT criteria in the future, it is likely that an exemption will be
available for the first five years in which the tax would otherwise apply.
The international tax agenda continues to provide uncertainty to companies. Conduit has a
limited international footprint and underwrites from a single balance sheet and a single
jurisdiction, which limits complexity. As CHL, CSL, CML and CRL do not meet the qualifying
criteria under Bermuda CIT, they continue to benefit from an existing undertaking from the
Bermuda government which exempts them from all Bermuda local income, withholding and
capital gains taxes until 31 March 2035.
a. Reinsurance risk
Conduit underwrites both short-tail and long-tail reinsurance contracts on a worldwide basis.
These reinsurance contracts transfer insurance risk, including risks exposed to both natural and
man-made catastrophes, and risk and liability losses. The risk in connection with underwriting
reinsurance contracts is, in the event of a covered loss, whether the premiums will be sufficient to
meet the associated loss payments and expenses. The underwriters evaluate and estimate the
level of premiums sufficient to cover expected losses, expenses and profitability through a
combination of sophisticated risk modelling tools, past experience and knowledge of loss events,
current industry trends and broader economic indicators. In order to ensure appropriate
reinsurance risk selection and limits on the concentration and diversification of the aggregate
portfolio, Conduit has established risk management and internal control systems to evaluate and
assess the expected losses of each individual contract, class of business, geographic region and
the aggregate portfolio.
These controls, include, but are not limited to:
— A five-year strategic plan is produced that defines the over-riding business goals that
management and the Board aim to achieve;
— A detailed business plan is produced annually and considers current market conditions and
the risk-adjusted profitability of the underwriting portfolio;
— Conduit's internal capital requirements consider the probability and magnitude of reinsurance
losses varying adversely from the expected losses considered during the underwriting and
subsequent reserving processes;
— Forecasts are produced periodically to assess the progress toward the business plan and the
strategic plan;
— Each underwriter has a clearly defined limit of underwriting authority;
— Each contract underwritten is subject to a pre-bind peer review;
— An underwriting roundtable meeting, typically held daily, where deal flow, pricing and
opportunities are discussed;
— Pricing models are used in all areas of the underwriting process and are stored centrally in our
pricing platform;
— Risk appetite and tolerance statements have been established and the CRO reports quarterly
on adherence;
— A number of modelling tools are used to model catastrophes and calculate the associated
expected losses; and
— Outwards reinsurance is purchased to mitigate both frequency and severity of losses, and to
protect Conduit’s capital base.
Conduit Holdings Limited | Annual Report and Accounts 2023
112
Notes to the consolidated financial statements
continued
Catastrophe management
Certain of Conduit’s classes of business provide coverage for natural-catastrophes (e.g.,
earthquakes, floods, hurricanes and wildfires) and are subject to seasonal variation and the
impacts of climate change. Conduit’s business has exposure to large catastrophe losses in North
America, Europe and Japan as a result of windstorms. The level of windstorm activity, and landfall
thereof, during the North American, European and Japanese wind seasons may materially impact
loss experience. The North American and Japanese wind seasons are typically June to November
and the European wind season November to March. Conduit also has exposure to other natural-
catastrophes, such as earthquakes, tsunamis, droughts, floods, hail and tornadoes, which can
occur throughout the year. In addition, Conduit is exposed to risk losses throughout the year
from perils such as fire, explosion, war, terrorism, political risk and other events, including loss
arising from legal liabilities rather than physical damage.
Conduit has defined its appetite and tolerances for risk accumulations and uses models to
determine the expected frequency and severity of aggregating exposures. As with all such
models, there is a risk that modelled expectations may not reflect actual outcomes and the scope
of the models are such that not all exposures are captured.
Conduit has set tolerances around various scenarios. Of these, at the commonly reported 100-
year and 250-year return periods, Conduit’s most significant exposures to any single peril and
region combination are to Florida windstorm and California earthquake. The table below shows
the estimated net exposures to these peak zone perils on a first occurrence basis. Net positions
are calculated by applying relevant reinstatement premiums and outwards reinsurance to the
respective modelled gross exposures.
As at 31 December
Return Period Peril
100-year
250-year
100-year
250-year
Florida windstorm
Florida windstorm
California earthquake
California earthquake
2023
2022
Net
$m
92.7
90.0
72.0
72.7
% of
tangible
capital
9.4%
9.1%
7.3%
7.4%
Net
$m
18.5
61.1
20.8
74.8
% of
tangible
capital
2.1%
7.1%
2.4%
8.6%
The table shows modelled estimated exposure at a point in time. At the 100-year return period
the primary driver for the year-on-year increase is that in 2023 there were no individual loss
events that were significant enough to Conduit to reduce the magnitude of loss event needed to
trigger aggregate outward reinsurance recoveries. The 2022 comparative, by contrast, reflected
that events, including Hurricane Ian, had moved Conduit closer to recoveries from aggregate
protections. The increases also reflect growing risk appetite as Conduit Re scales.
The modelled estimated exposure for Florida windstorm on a net 250-year basis is lower than a
100 year basis due to the characteristics of the Stabilitas Re catastrophe bond. Refer to note 21
for additional details.
There can be no guarantee that the modelled assumptions and techniques deployed in
calculating these figures are accurate. There could also be an unmodelled loss which exceeds
these figures. The models also contain loss scenarios which could cause a larger loss to capital
than the modelled expectation from the above return periods.
Conduit Holdings Limited | Annual Report and Accounts 2023
113
Notes to the consolidated financial statements
continued
Operating segments
The underwriting business is comprised of three principal divisions: Property, Casualty and Specialty. These divisions are also considered to be Conduit's operating segments. Details of each operating
segment and reinsurance revenue by geographic region and operating segment are as follows:
Year ended 31 December
US
Worldwide
Europe
Other
Reinsurance revenue
Property
$m
Casualty
$m
Specialty
$m
2023
198.0
101.2
21.7
24.3
345.2
118.3
23.4
28.2
1.9
171.8
20.6
74.7
19.7
1.0
2022
Total
$m
336.9
199.3
69.6
27.2
Total
%
Property
$m
Casualty
$m
Specialty
$m
53.2
31.5
11.0
4.3
109.8
104.0
56.5
15.7
10.8
14.9
16.2
1.6
3.9
51.4
7.0
0.6
Total
$m
217.7
122.8
38.9
13.0
Total
%
55.5
31.3
9.9
3.3
116.0
633.0
100.0
192.8
136.7
62.9
392.4
100.0
Property reinsurance
Conduit is exposed to large natural-catastrophe losses, such as windstorm and earthquake losses,
primarily from assuming risks associated with property treaties. Exposure to natural-catastrophe
events is controlled and measured by managing to predefined limits within stochastic modelling
and deterministic accumulations across classes per geographic zone and peril. The accuracy of
these analyses is limited by the quality of data and the effectiveness of the modelling. It is
possible that a catastrophic event significantly exceeds the expected modelled event loss.
Natural-catastrophe risk is written across both the US and internationally on an excess of loss
and capped quota share basis. Reinsurance structures are offered typically in respect of peril,
geography and probability of activation or exhaustion.
industry loss warranties, catastrophe bonds issuances, or proportional treaty arrangements may
also be utilised.
Casualty reinsurance
Conduit underwrites a balanced portfolio of casualty classes of business, comprised of both
excess of loss and proportional contracts, on a worldwide basis.
Casualty claims tend to take longer to be reported and ultimately settled than physical damage
risks. Conduit typically maintains a liability for incurred claims for casualty classes of business
over a longer period of time than for the property and specialty classes of business where the
costs of claims are generally known and settled within a shorter time frame.
Property per risk treaties are offered with the strategy to minimise natural-catastrophe exposure,
focusing on fire risk. This is considered by both natural-catastrophe specific metrics, treaty
conditions and excess of loss structure.
Conduit will purchase ceded reinsurance to protect against any ‘clash’ between losses arising
in its casualty portfolio.
Ceded reinsurance may be purchased to mitigate exposures to large natural-catastrophe losses.
Ceded reinsurance is typically purchased on an ultimate net loss excess of loss basis, however
The sub-classes of casualty business include directors and officers liability, financial institutions
liability, general liability for multiple sub-classes and, on an excess and umbrella basis, medical
Conduit Holdings Limited | Annual Report and Accounts 2023
114
Notes to the consolidated financial statements
continued
malpractice, professional liability and transactional liability. Conduit has limited appetite for, and
generally avoids, workers compensation, standalone auto and cyber treaties.
Directors and officers liability
Directors and officers liability policies offer protection for company managers and directors and
officers against claims that may arise in the normal course of operations. Coverage includes legal
expenses and liability to shareholders, bondholders, creditors or others owing to actions or
omissions by a director or officer of a private or public corporation, or not-for-profit organisation.
Financial institutions liability
Financial institutions coverage may cover risks such as computer and commercial crime,
professional indemnity and civil liability.
General liability
General liability commonly provides cover for losses arising from the legal liability of an original
insured and statutory liability in the case of employers’ liability which result in bodily injury or
disease to third parties or physical damage to third-party property. Conduit offers a wide range
of general liability reinsurance products including contractors general liability, excess general
liability, umbrella, energy and environmental.
Medical malpractice
Medical malpractice reinsurance generally covers professional liability and errors and omissions
specifically in the healthcare industry, protecting physicians and other healthcare professionals
against claims of negligent acts or injury of patients under their care. Medical malpractice
reinsurance does not cover intentional or criminal acts.
Professional liability
Professional liability generally provides coverage for third-party losses resulting from legal
liability or civil liability or negligence, errors or omissions or wrongful acts arising from the
provision of, or failure to provide, professional services by an original insured. Sub-classes of this
business would include lawyers, accountants, architects and engineers, errors and omissions, plus
miscellaneous professional liability.
Transactional liability
Transactional liability reinsurance is used by parties to various business transactions, such as
mergers, acquisitions and divestitures, to transfer certain transaction-related risks to the
reinsurance market. There can be a broad range of risks covered, including warranty, litigation,
pension and tax uncertainties and employment matters.
Specialty reinsurance
Conduit's specialty classes of business are written on both an excess of loss and proportional
basis and can provide reinsurance coverage against physical damage (short-tail) or against legal
liability (long-tail) losses. Although specialty classes of business are exposed to natural-
catastrophe risk, it is generally to a lesser extent than property classes of business. They are more
likely to be affected by specific large loss events such as accidents, collisions, fires and similar
man-made catastrophe events. Specialty classes of business are highly diverse in nature and
require specific market expertise and experience. The specialty classes of business include, but
are not limited to, aviation, energy, engineering and construction, environmental, marine,
renewables, political violence and terrorism and are offered on both a specific and a whole
account basis.
Conduit purchases ceded reinsurance protection to reduce exposure to both large risk losses and
an accumulation of smaller claims arising from any one event. Ceded reinsurance is typically
purchased on an excess of loss basis, but, from time to time, proportional arrangements may be
entered into.
Aviation
The aviation class of business provides cover to the insurers of airlines, aircraft, airports, aircraft
manufacturers and aviation related products, and includes cover for the aircraft themselves as
well as losses arising from passenger and third-party liability claims against airlines and/or
operators and/or manufacturers.
Conduit Holdings Limited | Annual Report and Accounts 2023
115
Notes to the consolidated financial statements
continued
Energy
The energy class of business provides reinsurance cover for a global spread of accounts that
includes risks such as downstream energy, midstream energy, upstream energy, energy liability,
construction and natural perils related coverages such as Gulf of Mexico wind and hurricane
programmes. Policies typically cover legal liability of an insured and property for physical
damage (including natural-catastrophe), machinery breakdown perils and consequential business
interruption exposure. Loss limits are set at a level commensurate with the modelled estimated
maximum loss scenario.
Engineering and construction
The class covers a wide range of products falling under related property and business income
protection on a worldwide basis. These products include, but are not limited to, contractors’ all
risks, erection all risks, plant and equipment, machinery breakdown and loss of profits. Projects
range from small bespoke to large civil engineering constructions. The main hazards are fire and
explosion, theft, collapse and natural perils such as earthquake, windstorm and flood.
Environmental
Environmental products generally provide cover relating to the environmental and energy
casualty classes with regard to pollution. The related sectors typically include energy,
construction, and industrial which includes both commercial and residential risks.
Marine
Marine cargo is an international account and covers the reinsurance of commodities or goods in
transit. Typically, transit cover is provided on an all-risks basis for marine perils for the full value
of the goods concerned. Static cover is also provided for losses to cargo, from both elemental
and non-elemental causes. In addition, the cargo account can include for example, fine art, vault
risks, artwork on exhibition and marine war and terrorism business relating to cargo in the
ordinary course of transit.
Marine liability commonly provides cover for legal liability for losses arising from the operation
of marine and offshore related assets including but not limited to the reinsurance of the
International Group of Protection and Indemnity Clubs, the operation and management of ships
and vessels, cargo, and marine builders' risks covering the building of ocean-going vessels and
offshore assets.
The marine hull class generally consists of worldwide coverage spanning physical damage, hull
and machinery breakdown, loss of hire and mortgagees’ interests for a range of maritime vessels
from cargo and passenger ships to private pleasure craft. Products typically cover both risk and
catastrophe exposures.
Renewables
The class covers a wide range of tailored solutions globally. The class includes offshore and
onshore wind power, ground and rooftop solar power plus bioenergy fuels and associated
operations. The risks exposed are quite unique, from difficult construction operations to installing
complex equipment that is routinely exposed to natural hazards. Policies typically include cover
for physical damage, legal liability, machinery breakdown and business interruption for both
construction and operational phases.
Political violence and terrorism
Political violence and terrorism coverage is provided for US and worldwide property risks, but
typically excluding nuclear, chemical, biological and cyber coverage in most territories.
Whole account
Coverage is generally provided on a worldwide basis and covers a broad spectrum of the
cedants risks under a single policy. The classes of business covered under a whole account
reinsurance policy can include property, specialty and casualty classes of business including
commercial and personal automobile, general liability, workers’ compensation, employers’ liability,
excess casualty and umbrella, as well as selected professional liability coverage.
Ceded reinsurance
Ceded reinsurance is purchased in the normal course of business to increase capital capacity,
limit the impact of individual risk losses and loss events impacting multiple cedants (such as
natural-catastrophes), or both. Ceded reinsurance may also be purchased from time to time to
optimise the risk-adjusted return of Conduit's aggregate underwriting portfolio. Conduit may
purchase ceded reinsurance on both an excess of loss and proportional basis, and may also use
reinsurance linked to catastrophe bonds or other capital market products. The mix of ceded
reinsurance coverage is dependent on specific loss mitigation requirements, market conditions
and available capacity. In certain market conditions, Conduit may deem it more economic to hold
capital than purchase ceded reinsurance. Ceded reinsurance does not relieve Conduit of its
obligations to policyholders. Conduit is exposed to reinsurance risk where ceded reinsurance
Conduit Holdings Limited | Annual Report and Accounts 2023
116
Notes to the consolidated financial statements
continued
contracts put in place to reduce gross reinsurance risk do not perform as anticipated, result in
coverage disputes or prove inadequate in terms of the limits purchased. Failure of a ceded
reinsurer to pay a valid claim is considered a credit risk which is detailed in the credit risk section
below. Ceded reinsurance coverage is not intended to be available to meet all potential loss
circumstances. Conduit will retain certain losses, as the cover purchased is unlikely to transfer the
totality of Conduit’s exposure. Any loss amount which exceeds the ceded reinsurance coverage
purchased would be retained by Conduit. Some ceded reinsurance policies have limited
reinstatements, therefore the number of claims which may be recovered on second, and
subsequent loss circumstances is limited.
Under Conduit’s ceded reinsurance security policy, ceded reinsurers are assessed and approved
based on their financial strength ratings, among other factors. These decisions are regularly
reviewed as an integral part of the business planning and performance monitoring process.
The management Counterparty Security Committee examines and approves all Conduit’s ceded
reinsurers to ensure that they possess suitable security.
Fulfilment cash flows
Fulfilment cash flows consist of:
— The estimates of future cash flows required in the ultimate settlement of claims;
— An adjustment for the time value of money; and
— A risk adjustment for non-financial risk
Estimates of future cash flows
A significant and critical judgement and estimate made by management is the estimation of
future cash flows in relation to ultimate claims settlements. Management estimates, in an
unbiased way, future cash flows to cover its estimated liability for both reported and unreported
claims on events that have occurred up to the latest valuation date, incorporating all reasonable
and supportable information that is available without undue cost or effort. Management uses
methodologies that calculate a point estimate for the ultimate losses, representing management’s
best estimate of ultimate future cash flows. Conduit estimates the future cash flows by taking
outstanding losses, adding an estimate for IBNR and, if deemed necessary, ACRs which represent
Conduit's estimate for losses related to specific contracts that management believes may not be
adequately estimated by the cedant as at that date.
Liabilities for incurred claims are not permitted until the occurrence of an event which may give
rise to a claim. As a result, only provisions applicable to losses that have occurred up to the
reporting date are established, with no allowance for the provision of a contingency liability to
account for expected future losses or for the emergence of new types of latent claims. Claims
arising from future events can be expected to require the establishment of substantial liabilities
from time to time. The estimated timing of the future cash flows is determined by applying cash
flow payment assumptions to the best estimate of ultimate future cash flows.
The reserving process is dependent on management's judgement and is subject to meaningful
uncertainty due to both qualitative and quantitative factors, including, but not limited to: the
nature of the business written, whether it is short-tail or long-tail, whether it is excess of loss or
proportional, the magnitude and timing of loss events, the geographic areas impacted by loss
events, time lags in the reporting process from the original claimant, limited claims data, policy
coverage interpretations, case law, regulatory directives, demand surge and inflation, potential
uncertainties related to reinsurance and ceding company reserving practices, and other factors
inherent in the estimation process for the net ultimate liability for incurred claims.
The judgements and estimates used in establishing future cash flow calculations may be revised
as additional experience or other data becomes available. Future cash flows are also reviewed as
new or improved methodologies are developed and as laws or regulations change. Furthermore,
as a business operating within a broker market, management must rely on loss information
reported to brokers by other insurers and their loss adjusters, who must estimate their own losses
at the policy level, often based on incomplete and changing information. The information
management receives varies by cedant and may include paid losses, estimated case reserves and
an estimated provision for IBNR reserves. Additionally, reserving practices and the quality of data
reporting may vary among ceding companies, which adds further uncertainty to management’s
estimates of the ultimate losses.
Conduit’s internal actuaries review the assumptions and methodologies on a quarterly basis and
develop an actuarial best estimate of Conduit’s future cash flows using the processes outlined
above. The management Reserving Committee reviews the estimate for the liability for incurred
claims on a quarterly basis. The reserves are subject to a semi-annual independent review by
Conduit’s external actuaries. The results of the internal and independent reserve reviews are
presented to the Audit Committee.
Conduit Holdings Limited | Annual Report and Accounts 2023
117
Notes to the consolidated financial statements
continued
Risk adjustment
The risk adjustment for non-financial risk is the compensation that Conduit requires for bearing
the uncertainty about the amount and timing of the cash flows arising from reinsurance
contracts. Conduit determines the risk adjustment at the entity level and allocates to the groups
of reinsurance contracts.
Reinsurance risk
Conduit is exposed to reinsurance market risk from several sources, including the following:
— The advent or continuation of a soft market, which may result in a stabilisation or decline
in premium rates and/or terms and conditions for certain classes, or across all classes;
— The actions and reactions of key competitors, which may directly result in volatility in
Conduit has estimated the risk adjustment using a margin-based approach. The margins are
calibrated to a targeted confidence interval range using the BMA BSCR risk framework. Conduit
expects that the risk adjustment recognised within the fulfilment cash flow will fall within the
range of the 75th and the 85th percentile, gross and net of ceded reinsurance. Conduit estimates
that the risk adjustment net of ceded reinsurance corresponds to the 82nd percentile as at
31 December 2023 and to the 81st percentile as at 31 December 2022.
Short-tail versus long-tail
Claims relating to short-tail risks are generally reported more promptly than those relating to
long-tail risks. The timeliness of reporting can be affected by such factors as the nature of the
event causing the loss, the location of the loss and whether the losses are from policies in force
with primary insurers or reinsurers.
Excess of loss versus proportional
For excess of loss contracts, management is aided by the fact that each policy has a defined limit
of liability arising from one event. Once that limit has been reached, there is no further exposure
to additional losses from that policy for the same event. For proportional business, an initial
estimated loss and loss expense ratio is generally used. This is based upon information provided
by the ceding company and/or their broker and management’s historical experience of that
treaty, if any, and the estimate is adjusted as actual experience becomes known.
b. Market risk
Conduit is at risk of loss due to movements in market factors. The main market risks Conduit was
exposed to include:
— Reinsurance risk;
— Investment risk; and
— Currency risk.
premium volumes and rates, fee levels and other input costs;
— Market events, including unusual inflation in rates, may result in a limit in the availability of
cover, causing political intervention or national remedies;
— Failure to maintain broker and cedant relationships, leading to a limited or substandard choice
of risks inconsistent with Conduit’s risk appetite;
— Changes in laws and regulation, including capital, governance or licensing requirements: and
— Changes in the geopolitical environment.
The most important method to mitigate reinsurance market risk is to maintain strict underwriting
standards. Conduit manages reinsurance market risk in numerous ways, including the following:
— Reviews and amends underwriting plans and outlook as necessary;
— Reduces exposure to, or withdraws from, market sectors where conditions have reached
unattractive levels;
— Purchases appropriate, cost-effective reinsurance cover to mitigate exposures:
— Closely monitors changes in rates, terms and conditions and inflation;
— Ensures through rigorous underwriting criteria that surplus capital does not drive short-term
risk appetite;
— An underwriting roundtable meeting, typically held daily, where deal flow, pricing and
opportunities are discussed;
— Holds quarterly management Underwriting Oversight Committee meetings that consider
matters that include underwriting performance for CRL;
— Holds an annual strategy review meeting;
— Holds a quarterly Underwriting Committee board meeting that considers matters including
underwriting performance for CRL;
— Holds a quarterly Risk, Capital and Compliance Committee meeting to review relevant risk and
capital considerations for CRL; and
— Holds regular meetings with regulators and rating agencies.
Conduit Holdings Limited | Annual Report and Accounts 2023
118
Notes to the consolidated financial statements
continued
Reinsurance finance risk
Estimates of future cash flows for incurred claims are discounted on initial recognition and then
re-measured to current rates as at each reporting date. Reinsurance liabilities and ceded assets
for incurred claims are therefore sensitive to the level of market interest rates. Interest rate risk
on reinsurance contracts is the risk that the value of the future cash flows will fluctuate due to
changes in market interest rates. Movements in interest rates may lead to an adverse impact on
the value of Conduit’s reinsurance contract assets and liabilities. Conduit manages this risk by
monitoring the duration of reinsurance contract cash flows and adopting policies regarding asset
and liability matching to reduce the volatility arising from interest rate movements on assets and
liabilities in the consolidated statement of comprehensive income (loss).
The total reinsurance contract assets and liabilities exposed to interest rate risk are detailed
below:
As at 31 December
Ceded asset for incurred claims
Liability for incurred claims
Total
Note
14
14
2023
$m
42.6
2022
$m
58.5
(592.2)
(391.1)
(549.6)
(332.6)
Discount rates
All future cash flows are discounted using yield curves that are adjusted to reflect the characteristics of the cash flows and the liquidity of the reinsurance contracts. Conduit determines its discount
rates using a bottom-up method of using a risk-free rate, plus an illiquidity premium where applicable. Risk-free rates are determined by reference to the yields published by EIOPA for the relevant,
material currencies. The illiquidity premium is estimated by reference to observable market corporate bond yields.
The annual spot rates, including illiquidity premium, used for the re-measurement of the net liability for incurred claims as at the balance sheet date are shown below for all portfolios:
As at 31 December
USD
EUR
GBP
2023
2022
1 year
5.26%
3.86%
5.24%
3 years
5 years
10 years
4.22%
2.94%
4.17%
4.00%
2.82%
3.86%
3.95%
2.89%
3.78%
1 year
5.57%
3.68%
4.96%
3 years
5 years
10 years
4.76%
3.70%
4.83%
4.45%
3.63%
4.56%
4.25%
3.59%
4.21%
Conduit Holdings Limited | Annual Report and Accounts 2023
119
Notes to the consolidated financial statements
continued
The sensitivity of Conduit's net reinsurance liability for incurred claims to interest rate movements
is detailed below, assuming linear movements in interest rates:
As at 31 December
Immediate shift in yield (basis points)
100
75
50
25
0
-25
-50
-75
-100
2023
$m
17.4
13.1
8.7
4.4
-
(4.4)
(8.8)
(13.3)
(17.8)
%
3.2
2.4
1.6
0.8
-
(0.8)
(1.6)
(2.4)
(3.2)
2022
$m
10.7
8.1
5.4
2.7
-
(2.7)
(5.5)
(8.2)
(11.0)
%
3.2
2.4
1.6
0.8
-
(0.8)
(1.7)
(2.5)
(3.3)
Investment risk
Movements in investments resulting from changes in interest and inflation rates, credit spreads,
and currency exchange rates, among other factors, may lead to an adverse impact on the value
of Conduit’s investment portfolio. Conduit seeks to invest in issuers with stronger ESG practices
on balance, as it believes that this will also help reduce risk in the portfolio.
The Investment Committee of the CRL Board is responsible for all investment-related decisions
and investment guidelines. The investment guidelines set the parameters within which Conduit’s
external managers must operate. Important parameters of these guidelines include permissible
asset classes, duration ranges, credit quality, permitted currency, maturity, industry sectors,
geographical, sovereign and issuer exposures. Guideline compliance is monitored on a monthly
basis. The portfolio of fixed maturity securities is currently managed by four external managers.
Their performance is monitored on an ongoing basis. Conduit projects the level of funds required
to meet near-term obligations and cash flow needs following extreme events in order to ensure
adequate liquidity is maintained. Conduit also prioritises liquid asset classes with higher credit
quality and shorter duration so that Conduit can meet reinsurance and other near-term
obligations. Conduit has split the portfolio into a short-tail mandate, to better match the property
and specialty classes of business, and a long-tail mandate, to better match the casualty classes of
business and some aspects of the specialty classes of business. The short-tail mandate will be
slightly shorter duration than the long-tail mandate.
Conduit reviews the composition, duration and asset allocation of its investment portfolio on a
regular basis to respond to changes in interest rates and other market conditions. If certain asset
classes are anticipated to produce a higher return within management’s risk tolerance, an
adjustment in asset allocation may be made. Conversely, if the risk profile is expected to move
outside of tolerance levels, adjustments may be made to reduce the risks in the portfolio.
Conduit models various periods of significant stress in order to better understand the investment
portfolio’s risks and exposures. The scenarios represent what could, and most likely will, occur –
albeit not in the exact form of the scenarios, which are based on historic periods of volatility.
Conduit also monitors the portfolio impact of more severe scenarios consisting of extreme shocks.
Conduit focuses on the most significant risks in its investment portfolio which are interest rate
risk, credit risk and liquidity risk, and has built stress testing and risk analytics around these risks
to ensure they are within tolerances and preferences.
Strategic asset allocation reviews will be undertaken periodically to assess Conduit’s overall
investment strategy and to consider alternative asset allocations to achieve the best risk-adjusted
return within Conduit's risk appetite. Any resulting recommendations would be approved by the
appropriate management committee(s) and reported to the Board. The Investment Committee
meets quarterly to ensure that the strategic and tactical investment actions were consistent with
investment risk preferences, appetite, risk and return objectives and tolerances. The investment
risk tolerances have been incorporated into the risk framework.
Conduit Holdings Limited | Annual Report and Accounts 2023
120
Notes to the consolidated financial statements
continued
The investment mix by mandate and sector of Conduit's portfolio of fixed maturity securities
is as follows:
As at 31 December 2023
Short-term investments
US treasuries
US agency debt
US municipals
Non-US government and agency
Asset-backed
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Corporate
Total
Estimated
fair value
short-tail
$m
Estimated
fair value
long-tail
$m
Estimated
fair value
total
$m
As at 31 December 2022
42.0
230.0
2.0
11.8
2.0
125.4
62.3
11.7
7.8
25.6
286.1
4.7
46.7
Short-term investments
113.9
343.9
US treasuries
1.8
7.3
-
48.9
59.8
6.6
-
31.2
3.8
19.1
2.0
174.3
122.1
18.3
7.8
56.8
US agency debt
US municipals
Non-US government and agency
Asset-backed
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
157.5
443.6
Corporate
Estimated
fair value
short-tail
$m
Estimated
fair value
long-tail
$m
Estimated
fair value
total
$m
33.2
4.7
103.6
106.6
-
10.0
2.0
102.6
52.7
9.8
3.2
21.9
263.6
1.8
5.2
-
61.2
47.9
3.0
-
30.8
157.9
37.9
210.2
1.8
15.2
2.0
163.8
100.6
12.8
3.2
52.7
421.5
806.7
431.7
1,238.4
Total
602.6
419.1
1,021.7
Conduit Holdings Limited | Annual Report and Accounts 2023
121
Notes to the consolidated financial statements
continued
Corporate and non-US government and agency bonds by country are as follows:
The sector allocation of corporate bonds is as follows:
As at 31 December
Financials
Industrials
Utilities
Total
2023
$m
260.9
161.4
21.3
%
58.8
36.4
4.8
2022
$m
220.9
180.3
20.3
%
52.4
42.8
4.8
443.6
100.0
421.5
100.0
As at 31 December 2023
US
UK
Canada
Other countries
Total
As at 31 December 2022
US
UK
Canada
Other countries
Total
Other
industries
$m
Non-US
government
and agency
$m
Financials
$m
179.0
178.5
22.9
16.1
42.9
1.6
0.9
1.7
260.9
182.7
-
-
-
2.0
2.0
Other
industries
$m
Non-US
government
and agency
$m
Financials
$m
140.6
187.7
21.7
23.2
35.4
5.5
0.5
6.9
220.9
200.6
-
-
-
2.0
2.0
Total
$m
357.5
24.5
17.0
46.6
445.6
Total
$m
328.3
27.2
23.7
44.3
423.5
Conduit Holdings Limited | Annual Report and Accounts 2023
122
Notes to the consolidated financial statements
continued
Conduit’s investment portfolio is comprised of fixed maturity securities and cash and cash
equivalents. Fair values can be impacted by movements in interest rates, credit ratings, exchange
rates, the current economic environment and outlook. The estimated fair value of the portfolio of
fixed maturity securities is generally inversely correlated to movements in market interest rates.
If market interest rates fall, the estimated fair value of Conduit’s portfolio of fixed maturity
securities would tend to rise and vice versa. The sensitivity of the price of fixed maturity
securities to movements in interest rates is indicated by their duration. The greater a security’s
duration, the greater its price volatility to movements in interest rates. The sensitivity of Conduit’s
portfolio of fixed maturity securities to interest rate movements is detailed below, assuming linear
movements in interest rates.
As at 31 December
Immediate shift in yield (basis points)
100
75
50
25
0
-25
-50
-75
-100
2023
$m
(32.1)
(24.1)
(16.0)
(8.0)
-
9.1
18.3
27.4
36.5
%
(2.6)
(1.9)
(1.3)
(0.6)
-
0.7
1.5
2.2
2.9
2022
$m
(23.0)
(17.2)
(11.5)
(5.7)
-
6.6
13.2
19.7
26.3
%
(2.2)
(1.7)
(1.1)
(0.6)
-
0.6
1.3
1.9
2.6
Conduit mitigates interest rate risk on the investment portfolio by establishing and monitoring
duration ranges in its investment guidelines. The duration of the portfolio is matched to the
modelled expected duration of the reinsurance reserves, within a permitted range. The permitted
duration range for the portfolio is between 1.5 and 5 years. The overall duration for the fixed
maturity securities, managed cash and cash equivalents is 2.4 years as at 31 December 2023
(as at 31 December 2022: 2.2 years).
In addition to duration management, Conduit monitors VaR to measure potential losses in the
estimated fair values of its cash and invested assets and to understand and monitor risk. The VaR
calculation is performed using variance/covariance risk modelling. Securities are valued
individually using standard market pricing models. These security valuations serve as the input
to many risk analytics. The principal VaR measure that is produced is an annual VaR at the 99th
percentile confidence level. Under normal conditions, the portfolio is not expected to lose more
than the VaR metric listed below, 99% of the time over a one-year time horizon. The
appropriateness of this measure is considered by the Investment Committee periodically.
Conduit’s annual VaR calculation is as follows:
As at 31 December
99th percentile confidence level
2023
2022
% of
shareholders'
equity
9.3 %
$m
91.9
% of
shareholders'
equity
7.1 %
$m
62.0
Conduit Holdings Limited | Annual Report and Accounts 2023
123
Notes to the consolidated financial statements
continued
Currency risk
Conduit is susceptible to fluctuations in rates of foreign exchange, principally between the US dollar and pound sterling and the US dollar and the euro. Even though risks are assumed on a worldwide
basis, they are predominantly denominated in US dollars. Conduit is exposed to currency risk to the extent its assets are denominated in different currencies to its liabilities. Conduit is also exposed to
translation risk on non-monetary assets and liabilities. Foreign currency gains and losses are recorded in the period they occur in the consolidated statement of comprehensive income (loss).
Conduit hedges monetary non-US dollar liabilities primarily with non-US dollar assets but may also use derivatives, such as currency forwards, to mitigate foreign currency exposures. The main
foreign currency exposure relates to its reinsurance and ceded reinsurance assets and liabilities, cash holdings and dividend payable, if applicable.
With the adoption of IFRS 17 all reinsurance and ceded reinsurance assets and liabilities are monetary items and are revalued at period end exchange rates.
The following table summarises the carrying value of all monetary and non-monetary assets and liabilities categorised by Conduit’s main currencies. Prior periods have been restated for the adoption
of IFRS 17:
As at 31 December 2023
Total assets
Total liabilities
Net assets (liabilities)
As at 31 December 2022 (re-stated)
Total assets
Total liabilities
Net assets (liabilities)
USD
$m
1,427.9
(438.7)
989.2
USD
$m
1,192.9
(303.3)
889.6
GBP
$m
26.3
(20.4)
5.9
GBP
$m
10.5
(8.9)
1.6
EUR
$m
16.5
(29.3)
(12.8)
EUR
$m
4.2
(22.4)
(18.2)
Other
$m
25.5
(20.4)
5.1
Other
$m
7.0
(12.8)
(5.8)
Total
$m
1,496.2
(508.8)
987.4
Total
$m
1,214.6
(347.4)
867.2
The impact on profit from a proportional foreign exchange movement of 10.0% against the US dollar at year end spot rates would be an increase or decrease of $0.4 million (31 December 2022:
decrease or increase $1.3 million).
Conduit Holdings Limited | Annual Report and Accounts 2023
124
Notes to the consolidated financial statements
continued
c. Liquidity risk
Liquidity risk is the risk that cash may not be available to pay obligations when they are due
without incurring unreasonable costs. Conduit's main exposure to liquidity risk is with respect to
its reinsurance and investment activities. Conduit is exposed if proceeds from the sale of financial
assets are not sufficient to fund obligations arising from reinsurance contacts and/or other
liabilities. Conduit can be exposed to fund daily calls on its available investment assets, principally
to settle reinsurance claims and/or to fund trust accounts following a large catastrophe loss, or
other collateral requirements.
Liquidity risk exposures related to reinsurance activities are as follows:
— Large catastrophic events, or multiple medium-sized events in quick succession, requiring the
payment of high value claims within a short time frame or to fund trust accounts established
to collateralise claims payment liabilities;
— Failure of cedants to meet their contractual obligations with respect to the timely payment
The maturity dates of Conduit's portfolio of fixed maturity securities are as follows:
As at 31 December 2023
Fixed maturity securities at FVTPL
Less than one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Over five years
Short-tail
$m
Long-tail
$m
Total
$m
174.6
135.3
122.3
29.3
41.1
71.3
29.9
204.5
13.1
47.7
21.5
79.8
93.2
148.4
170.0
50.8
120.9
164.5
379.3
of premiums; and
Asset-backed and mortgage-backed
232.8
146.5
— Failure of Conduit’s ceded reinsurers to meet their contractual obligations to pay claims
within a timely manner.
Total
806.7
431.7
1,238.4
Liquidity risk exposures related to investment activities are as follows:
— Adverse market movements and/or a duration mismatch to obligations, resulting
in investments needing to be disposed of at a significant realised loss; and
— An inability to liquidate investments due to market conditions.
Conduit's investment strategy is to hold high quality, liquid securities sufficient to meet
reinsurance liabilities and other near-term liquidity requirements. Portfolios are specifically
designed to ensure funds are readily available in an extreme event.
As at 31 December 2022
Fixed maturity securities at FVTPL
Less than one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Over five years
Asset-backed and mortgage-backed
Short-tail
$m
Long-tail
$m
167.9
149.5
54.2
15.8
4.9
20.1
190.2
46.0
37.0
12.5
48.8
21.0
110.9
142.9
Total
$m
213.9
186.5
66.7
64.6
25.9
131.0
333.1
Total
602.6
419.1
1,021.7
Conduit Holdings Limited | Annual Report and Accounts 2023
125
Notes to the consolidated financial statements
continued
The estimated maturity profile of the reinsurance liability for incurred claims and financial liabilities of Conduit is as follows:
As at 31 December
Carrying
value
$m
Less than
one
$m
One to
three
$m
Three to
five
$m
Over five
$m
Total
$m
Carrying
value
$m
Less than
one
$m
One to
three
$m
Three to
five
$m
Over five
$m
Reinsurance liability for incurred claims
592.2
158.0
231.4
117.3
85.5
592.2
391.1
109.9
160.0
66.1
55.1
Years until liability becomes due – discounted
2023
2022
Other reinsurance payables
Other payables
Lease liabilities
Total
12.0
12.0
2.3
12.0
12.0
0.7
-
-
1.6
-
-
-
-
-
-
12.0
12.0
2.3
16.2
8.7
2.4
16.2
8.7
0.6
-
-
-
-
1.2
0.6
-
-
-
618.5
182.7
233.0
117.3
85.5
618.5
418.4
135.4
161.2
66.7
55.1
418.4
Total
$m
391.1
16.2
8.7
2.4
Actual maturities of the above may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.
The estimation of the ultimate liability for incurred claims is complex and incorporates a significant amount of judgement. The timing of payments is also uncertain and cannot be predicted as simply
as for other financial liabilities. Actuarial and statistical techniques, past experience and management’s judgement have been used to determine a likely settlement pattern.
As at 31 December 2023, cash and cash equivalents were $199.8 million (31 December 2022: $112.9 million). Conduit manages its liquidity risks via its investment strategy to hold high quality, liquid
securities, sufficient to meet its reinsurance liabilities and other near-term liquidity requirements. In addition, Conduit has established asset allocation and maturity parameters within the investment
guidelines such that the majority of the investments are in high quality assets which could be converted into cash promptly and at minimal expense. Conduit monitors market changes and outlook
and reallocates assets as it deems necessary.
As at 31 December 2023, Conduit considers it has more than adequate liquidity to pay its obligations as they fall due even if difficult investment market conditions were to prevail for a period of time.
Conduit Holdings Limited | Annual Report and Accounts 2023
126
Notes to the consolidated financial statements
continued
d. Credit risk
Credit risk is the risk that a counterparty may fail to pay, or repay, a debt or obligation. Conduit is
exposed to credit risk on its fixed maturity investment portfolio, its expected premium cash flows
due from cedants and on ceded reinsurance recoverables.
Credit risk on Conduit’s portfolio of fixed maturity securities is mitigated through the investment
policy to invest in instruments of high credit quality issuers and to limit the amounts of credit
exposure with respect to particular ratings categories and any one issuer. Securities rated below
an S&P or equivalent rating of BBB+ may comprise no more than 10.0% of the portfolio. Conduit
also limits exposure to individual issuers, with declining limits for less highly rated issuers. Conduit
therefore does not expect any significant credit concentration risk on its investment portfolio,
except for fixed maturity securities issued by the US government and its agencies.
Conduit is potentially exposed to counterparty credit risk in relation to the total expected
premium cash flows due from reinsurance brokers and cedants and on ceded reinsurance
recoverables due from Conduit’s reinsurers. Credit risk on total expected premium cash flows
due from cedants is managed by conducting business with reputable broking organisations,
with whom Conduit has established relationships, and by rigorous cash collection procedures.
Conduit also has a broker approval process in place. Credit risk from ceded reinsurance
recoverables is primarily managed by the review and approval of reinsurer security, with
ongoing monitoring in place.
Ceded reinsurance recoverables are recorded within ceded reinsurance contract assets as the
ceded asset for incurred claims which is shown in note 14.
As at 31 December 2023
AAA
AA+, AA, AA-
A+, A, A-
BBB+, BBB, BBB-
Other
Total
As at 31 December 2022
AAA
AA+, AA, AA-
A+, A, A-
BBB+, BBB, BBB-
The table opposite presents an analysis of Conduit’s major exposures to counterparty credit risk,
based on their rating. Expected premium cash flows are not rated, however there is limited
default risk associated with these amounts.
Other
Total
Cash and cash
equivalents and fixed
maturity securities
$m
Ceded asset for
incurred claims
$m
434.2
562.0
332.6
109.4
-
1,438.2
-
-
23.1
-
19.5
42.6
Cash and cash
equivalents and fixed
maturity securities
$m
Ceded asset for
incurred claims
651.4
74.5
279.7
129.0
-
1,134.6
-
-
31.0
-
27.5
58.5
The ceded reinsurance assets classified as other are fully collateralised.
As at 31 December 2023 the average credit quality of Conduit's cash and cash equivalents and
portfolio of fixed maturity securities was AA (31 December 2022: AA).
Conduit Holdings Limited | Annual Report and Accounts 2023
127
Notes to the consolidated financial statements
continued
Total expected premium cash flows represents the premium, net of deductions, expected to be
received for past and future reinsurance coverage. The following table shows total expected
premium cash flows that are not yet due and those that are past due but not impaired, which
represents the exposure to credit risk on reinsurance contracts issued at the balance sheet date:
As at 31 December
Not yet due
Less than 90 days past due
Over 90 days past due
Total
2023
$m
2022
$m
(re-stated)
318.2
215.0
42.7
7.0
29.8
3.4
367.9
248.2
For the years ended 31 December 2023 and 2022 no provisions have been made for impaired
or irrecoverable balances and no amount was charged to the consolidated statement of
comprehensive income (loss) in respect of bad debts.
e. Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes,
personnel, systems or external events. During the reporting period, various operational risks were
identified, and steps were taken to manage or mitigate these risks.
The risk framework addresses the identification, assessment and management of operational
risks. This process involves the use of risk registers to identify inherent risk and residual risk after
the application of controls. The management of individual risks is the responsibility of
management, with independent challenge and oversight provided by the risk function. The results
of compliance reviews and independent internal audits provide an additional level of review and
verification. The Audit Committee has selected a reputable provider to serve as outsourced
internal auditors.
f. Strategic risk
Conduit has identified several strategic risks, including:
— The risks that either the poor execution of the business plan or an inappropriate business plan
in itself results in a strategy that fails to reflect adequately the trading environment, resulting
in an inability to optimise performance, including reputational risk;
— The risks of the failure to maintain adequate capital, accessing capital at an inflated cost or the
inability to access capital and unanticipated changes in vendor, regulatory and/or rating
agency models that could result in an increase in capital requirements or a change in the type
of capital required; and
— The risks of succession planning, staff retention and key personnel risks.
Business plan risk
Conduit's business plan forms the basis of operations and provides strategic direction to
management. Actual versus planned results are monitored regularly.
Capital management risk
The total tangible capital is as follows:
As at 31 December
Shareholders' equity
Intangible assets
Total tangible capital
2023
$m
2022
$m
(re-stated)
987.4
867.2
-
1.4
987.4
865.8
Risks associated with the effectiveness of Conduit’s capital management are mitigated as follows:
— Regular monitoring of current and prospective regulatory and rating agency capital requirements;
— Oversight of capital requirements by the Board;
— Ability to purchase sufficient, cost-effective reinsurance;
— Maintaining contact with vendors, regulators and rating agencies in order to stay abreast
of upcoming developments; and
— Participation in industry groups such as the Association of Bermuda Insurers and Reinsurers,
Reinsurance Association of America and the International Underwriting Association.
Conduit Holdings Limited | Annual Report and Accounts 2023
128
Notes to the consolidated financial statements
continued
Conduit reviews the level and composition of capital on an ongoing basis with a view of:
— Maintaining sufficient capital for underwriting opportunities and to meet obligations
to policyholders;
— Maximising the risk-adjusted return to shareholders within the context of the defined
risk appetite;
— Maintaining an adequate financial strength rating; and
— Meeting all relevant capital requirements.
Capital is increased or returned as appropriate. The retention of earnings generated leads to an
increase in capital. Capital raising can include debt or equity and returns of capital may be made
through dividends, share repurchases, a redemption of debt or any combination thereof. Other
capital management tools and products available to Conduit may also be utilised. All capital
actions require approval by the Board.
The primary source of capital used by Conduit is equity shareholders’ funds. As a holding
company, CHL relies on dividends from its operating entity to provide the cash flow required
for dividends to shareholders. The ability of the operating entity to pay dividends and make
capital distributions is subject to the legal and regulatory restrictions of the jurisdiction in which it
operates.
CRL is regulated as a Class 4 (re)insurer by the BMA and is required to hold sufficient capital in
that under applicable regulations. BMA’s regulatory framework, has been assessed as equivalent
to the EU’s Solvency II regime. CRL had sufficient capital at all times throughout the year to meet
the BMA’s requirements, inclusive of the BSCR standard formula and minimum margin of
solvency.
Retention risk
Risks associated with succession planning, staff retention and key man risks are mitigated
through a combination of resource planning processes and controls, including:
— The identification of key personnel with appropriate succession plans at CHL;
— The identification of key team profit generators at CRL and function heads with targeted
retention packages;
— Documented recruitment procedures, position descriptions and employment contracts;
— Resource monitoring and the provision of appropriate compensation, including equity-based
incentives which vests over a defined time horizon, subject to achieving certain performance
criteria; and
— Training schemes.
Conduit Holdings Limited | Annual Report and Accounts 2023
129
Notes to the consolidated financial statements
continued
4. Segmental reporting
Management and the Board review Conduit’s business and evaluates its performance primarily
by three segments: Property, Casualty and Specialty. These are considered to be the reportable
segments for the purposes of segmental reporting. Further classes of business are underwritten
within each reportable segment. The nature of these individual classes is discussed further in the
Risk disclosures section in note 3.
Reportable
segments
Property
Casualty
Specialty
Operations and classes of business
US and international property catastrophe and non-catastrophe risks on an
excess of loss and proportional contract basis.
US and international casualty risks principally including directors and officers
liability, financial institutions liability, general liability, medical malpractice,
professional liability and transactional liability.
Diverse portfolio of business, including aviation, energy, engineering and
construction, environmental, marine, renewables, political violence and terrorism
and whole account.
Reportable segment performance is measured by the reinsurance service and finance result and
the combined ratio. The chief operating decision maker does not manage Conduit's assets by
reportable segment, and, accordingly, investment income and other non-underwriting related
items are not allocated to each reportable segment. Refer to the risk disclosures for more
information. All amounts reported are transactions with external parties and associates.
Year ended 31 December 2023
Reinsurance revenue by geographic region
Property
$m
Casualty
$m
Specialty
$m
US
Worldwide
Europe
Other
198.0
101.2
21.7
24.3
118.3
23.4
28.2
1.9
20.6
74.7
19.7
1.0
Total
$m
336.9
199.3
69.6
27.2
Reinsurance revenue
345.2
171.8
116.0
633.0
Year ended 31 December 2022
Reinsurance revenue by geographic region
US
Worldwide
Europe
Other
Property
$m
Casualty
$m
Specialty
$m
109.8
104.0
56.5
15.7
10.8
14.9
16.2
1.6
3.9
51.4
7.0
0.6
Total
$m
217.7
122.8
38.9
13.0
Reinsurance revenue
192.8
136.7
62.9
392.4
There are no significant inter-segmental transactions.
Included within the worldwide geographic region, are premiums written with external parties
in Bermuda for $4.0 million (31 December 2022: $0.6 million).
Conduit Holdings Limited | Annual Report and Accounts 2023
130
Notes to the consolidated financial statements
continued
Year ended 31 December
Reinsurance revenue
Ceded reinsurance expenses
Net reinsurance revenue
Reinsurance losses and loss related amounts, discounted
Reinsurance operating expenses
Reinsurance service expenses
Ceded reinsurance recoveries
Reinsurance service result
Net reinsurance finance expense
Reinsurance service and finance result
Other operating expenses
Net unallocated revenue (expenses)
Total comprehensive income
Net loss ratio (discounted)
Reinsurance operating expense ratio
Other operating expense ratio
Combined ratio (discounted)
Net loss ratio (undiscounted)
Combined ratio (undiscounted)
2023
Property
$m
Casualty
$m
Specialty
$m
345.2
(66.9)
278.3
(136.5)
(30.4)
(166.9)
4.6
116.0
(9.5)
106.5
171.8
(1.3)
170.5
(120.7)
(11.9)
(132.6)
0.2
38.1
(15.0)
23.1
116.0
(8.5)
107.5
(70.8)
(6.7)
(77.5)
(0.5)
29.5
(8.3)
21.2
47.4%
10.9%
70.7%
7.0%
66.3%
6.2%
58.3%
77.7%
72.5%
51.5%
62.4%
89.4%
96.4%
77.1%
83.3%
Total
$m
633.0
(76.7)
556.3
(328.0)
(49.0)
(377.0)
4.3
183.6
(32.8)
150.8
(28.3)
68.3
190.8
58.2%
8.8%
5.1%
72.1%
68.0%
81.9%
Property
$m
192.8
(40.5)
152.3
(142.9)
(16.7)
(159.6)
21.4
14.1
2.5
16.6
2022
Casualty
$m
136.7
(1.2)
135.5
(116.1)
(8.5)
(124.6)
0.2
11.1
13.8
24.9
Specialty
$m
62.9
(6.9)
56.0
(73.5)
(4.4)
(77.9)
7.1
(14.8)
4.5
(10.3)
79.8%
11.0%
85.5%
6.3%
118.6%
7.9%
Total
$m
392.4
(48.6)
343.8
(332.5)
(29.6)
(362.1)
28.7
10.4
20.8
31.2
(20.7)
(54.4)
(43.9)
88.4%
8.6%
6.0%
90.8%
91.8%
126.5%
103.0%
83.0%
94.0%
93.8%
100.1%
128.8%
136.7%
94.7%
109.3%
Conduit Holdings Limited | Annual Report and Accounts 2023
131
Notes to the consolidated financial statements
continued
5.
Investment return
6. Reinsurance finance return
Year ended 31 December
Interest accretion from reinsurance contracts
Interest accretion from ceded reinsurance contracts held
Net interest accretion
Change in discount rates from reinsurance contracts
Change in discount rates from ceded reinsurance contracts held
Net change in discount rates
Net reinsurance finance income (expense)
2023
$m
(28.9)
2.9
(26.0)
(7.2)
0.4
(6.8)
(32.8)
2022
$m
(7.3)
1.2
(6.1)
29.3
(2.4)
26.9
20.8
As at 31 December 2023
Fixed maturity securities
Cash and cash equivalents
Total
As at 31 December 2022
Fixed maturity securities
Cash and cash equivalents
Total
Net
investment
income
$m
Net
realised
gains
(losses)
$m
Net
unrealised
gains
(losses)
$m
Total
investment
return
$m
35.7
5.6
41.3
(1.3)
-
(1.3)
30.6
-
30.6
65.0
5.6
70.6
Net
investment
income
$m
Net
realised
gains
(losses)
$m
Net
unrealised
gains
(losses)
$m
Total
investment
return
$m
16.5
1.3
17.8
(2.8)
(67.8)
(54.1)
-
-
1.3
(2.8)
(67.8)
(52.8)
Included in net investment income is $1.3 million of investment management and custody fees for the
year ended 31 December 2023 (31 December 2022: $1.1 million). Net foreign exchange gains (losses) on
cash and cash equivalents and fixed maturity securities for the year ended 31 December 2023 was nil
(31 December 2022: $0.1 million loss). Foreign exchange impacts are not included in the investment
returns in the table above.
Conduit Holdings Limited | Annual Report and Accounts 2023
132
Notes to the consolidated financial statements
continued
7. Employee benefits and other incentives
Aggregate remuneration and other incentives of Conduit’s employees is as follows:
The following table lists the assumptions used in the stochastic model for the MIP awards:
Year ended 31 December
Wages and salaries
Pension benefit
Bonus and other benefits
Total cash compensation
Equity-based incentives
Total employee benefits and other incentives
2023
$m
13.0
1.3
15.0
29.3
2.5
31.8
2022
$m
11.4
1.1
7.7
20.2
2.1
22.3
Equity-based incentives – MIP
Prior to the IPO, a MIP was created. The purpose of the MIP was to provide an incentive scheme
for the founders and initial employees for their services in establishing the foundations of
Conduit. The incentive is based around shares in CML, which will be automatically exchanged for
ordinary shares of CHL for an aggregate value equivalent to up to 15% of the excess of the
market value of CHL over and above the Invested Equity, subject to the satisfaction of the
vesting conditions. All outstanding and future grants have an exercise period of four to seven
years from the grant date. The fair value is estimated using a stochastic Monte Carlo model.
CML issued 100,000 A1 shares and 100,000 A2 shares during the period ended 31 December 2020
at a subscription price of £1.72 and $2.26, respectively. Refer to note 17 for additional details.
Assumptions
Dividend yield
Expected volatility1
Risk-free interest rate2
Expected life of instruments
0%
range from
17.2% – 19.0%
range from
0.3% – 0.6%
range from
4 to 7 years
1.
2.
The expected volatility was calculated based on a comparator group of companies.
The risk-free interest rate is based on the yield of a US government bond on the date of grant.
The shares were granted prior to the IPO and therefore discounts for business viability and lack
of marketability were also applied. There are significant risks associated with an IPO and the
instruments are also illiquid until the tranche vesting dates. Management therefore selected their
best estimates at the time for these discounts. These assumptions were highly judgemental and
input from advisers was sought. Management also considered alternative assumptions and
concluded there was not a material impact on the estimated valuation selected. The calculation
of the equity-based incentive expense assumes no forfeitures due to employee turnover, with
subsequent adjustments to reflect actual experience. The assumptions and estimated valuation
selected resulted in 20% being expensed upfront for certain employees as this portion was not
tied to service conditions and was fully expensed in the period ended 31 December 2020.
Conditions of the MIP include:
— The incentives are to be equity-settled and have therefore been accounted for in accordance
with IFRS 2;
— The value of the services received in exchange for the share-based incentives is measured by
reference to the estimated fair value of the incentives at their grant date, with the estimated
fair value recognised in the consolidated statement of comprehensive income (loss), together
with a corresponding increase in other reserves within shareholders’ equity, on a straight-line
basis over the vesting period, based on an estimate of the number of shares that will
ultimately vest;
Conduit Holdings Limited | Annual Report and Accounts 2023
133
Notes to the consolidated financial statements
continued
— Vesting conditions, other than market conditions linked to the share price of CHL, are not
taken into account when estimating the fair value; and
— At the end of each reporting period Conduit revises its estimates of the number of shares that
are expected to vest due to non-market conditions and recognises the impact of the revision
to original estimates, if any, in the consolidated statement of comprehensive income (loss),
with a corresponding adjustment to shareholders’ equity.
Equity-based incentives – LTIP
The LTIP is a retention scheme with awards granted to staff members as nil cost options. The nil
cost options vest over a three year period from the date of grant and do not have associated
performance criteria attached to the awards. These awards accrue dividend equivalents for all
dividends declared where the record date falls between the grant date and date of exercise, and
are paid at the time of exercise.
Equity-based incentives – DSBP
A percentage of each employee's bonus is automatically deferred into shares as nil cost options.
The nil cost options vest annually in separate equal tranches over a three year period from the
date of grant and do not have associated performance criteria attached to the awards. These
awards accrue dividend equivalents for all dividends declared where the record date falls
between the grant date and date of exercise, and are paid at the time of exercise.
LTIP
Outstanding as at 31 December 2022
Granted
Exercised
Forfeited
Outstanding as at 31 December 2023
Number of
awards
-
-
(11,559)
753,016
315,875
(250,963)
(35,236)
782,692
764,575
8. Other operating expenses
Year ended 31 December
Other operating expenses include:
Audit fees
Other auditor services
Total
Number of
awards
-
365,984
-
-
365,984
2023
$m
2022
$m
1.3
0.1
1.4
0.9
0.1
1.0
During the year ended 31 December 2023, KPMG Audit Limited provided non-audit services in
relation to Conduit's 2023 interim review and carbon emission disclosures. Fees for non-audit
services in the year ended 31 December 2023 totalled $0.1 million (31 December 2022:
$0.1 million).
Conduit Holdings Limited | Annual Report and Accounts 2023
DSBP
Outstanding as at 31 December 2021
Granted
Exercised
Forfeited
Outstanding as at 31 December 2022
Granted
Exercised
Forfeited
Outstanding as at 31 December 2023
134
Notes to the consolidated financial statements
continued
9. Financing costs
11. Cash and cash equivalents
Year ended 31 December
LOC and trust fees
Interest expense on lease liabilities
Total
2023
$m
1.1
0.1
1.2
2022
$m
0.7
0.1
0.8
As at 31 December
Cash at bank and in hand
Cash equivalents
Total
2023
$m
39.4
160.4
199.8
2022
$m
21.5
91.4
112.9
Refer to note 16 for details of Conduit’s financing arrangements.
10. Tax
Bermuda
CHL, CSL, CML and CRL have received an undertaking from the Bermuda government which
exempts them from all Bermuda local income, withholding and capital gains taxes until 31 March
2035. On 27 December 2023 the Bermuda government enacted legislation, the Bermuda
Corporate Income Tax Act of 2023, into law which may supersede such exemptions. CHL, CSL,
CML and CRL are currently not in scope for this new legislation and as such, the exemptions
provided by the Bermuda government undertaking still apply.
United Kingdom
CRSL is subject to normal UK corporation tax on all of its taxable profits. For the years ended 31
December 2023 and 2022 an immaterial tax profit arose and Conduit has therefore not
recognised a deferred tax asset.
Cash equivalents include money market funds and other short-term highly liquid investments
with three months or less remaining until maturity at the time of purchase. The carrying amount
of these assets approximates their fair value. Refer to note 16 for cash and cash equivalents
provided as collateral under Conduit’s financing arrangements.
Conduit Holdings Limited | Annual Report and Accounts 2023
Cost or
amortised
cost
$m
Unrealised
gains
$m
Unrealised
losses
$m
Estimated
fair value
$m
135
Notes to the consolidated financial statements
continued
12. Investments
As at 31 December 2023
Fixed maturity securities, at FVTPL
Short-term investments
US treasuries
US agency debt
US municipals
Non-US government and agency
Asset-backed
US government agency mortgage-
backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-
backed
Corporate
Total
46.7
351.0
4.0
19.5
2.0
177.3
135.9
20.0
8.1
62.7
456.0
1,283.2
-
2.1
-
0.3
-
0.3
0.7
0.1
0.1
0.2
2.5
6.3
-
(9.2)
(0.2)
(0.7)
-
46.7
343.9
3.8
19.1
2.0
As at 31 December 2022
Fixed maturity securities, at FVTPL
Short-term investments
US treasuries
US agency debt
US municipals
Non-US government and agency
(3.3)
174.3
Asset-backed
(14.5)
122.1
(1.8)
(0.4)
18.3
7.8
(6.1)
56.8
US government agency mortgage-
backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-
backed
Cost or
amortised
cost
$m
Unrealised
gains
$m
Unrealised
losses
$m
Estimated
fair value
$m
37.9
221.6
2.0
16.4
2.1
171.6
116.3
15.1
3.7
59.7
-
0.2
-
-
-
-
-
(11.6)
(0.2)
(1.2)
(0.1)
(7.8)
37.9
210.2
1.8
15.2
2.0
163.8
0.1
(15.8)
100.6
-
-
-
(2.3)
(0.5)
(7.0)
12.8
3.2
52.7
(14.9)
443.6
Corporate
(51.1)
1,238.4
Total
450.7
1,097.1
0.1
0.4
(29.3)
421.5
(75.8)
1,021.7
As at 31 December 2023 other assets and other payables included $0.1 million and nil for investments
sold and purchased, respectively (31 December 2022: $1.2 million and $1.2 million, respectively).
Conduit determines the estimated fair value of each individual security utilising the highest-level
inputs available. Prices for the investment portfolio are provided via a third-party investment
accounting firm whose pricing processes and the controls thereon are subject to an annual audit
on both the operation and the effectiveness of those controls. Various recognised reputable
Conduit Holdings Limited | Annual Report and Accounts 2023
136
Notes to the consolidated financial statements
continued
pricing sources are used including pricing vendors. The pricing sources use bid prices where
available, otherwise indicative prices are quoted based on observable market trade data. The
prices provided are compared to the investment managers’ pricing.
Conduit has not made any adjustments to any pricing provided by independent pricing services
or its third-party investment managers for the years ended 31 December 2023 and 2022. The fair
value of securities in the investment portfolio is estimated using the following techniques:
LEVEL (I) – Level (I) investments are securities with quoted prices in active markets. A financial
instrument is regarded as quoted in an active market if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service or regulatory agency
and those prices represent actual and regularly occurring market transactions on an arm’s
length basis.
LEVEL (II) – Level (II) investments are securities with quoted prices in active markets for similar
assets or liabilities or securities valued using other valuation techniques for which all significant
inputs are based on observable market data. Instruments included in Level (II) are valued via
independent external sources using directly observable inputs to models or other valuation
methods. The valuation methods used are typically industry accepted standards and include
broker-dealer quotes and pricing models including present values and future cash flows with
inputs such as yield curves, credit spreads, interest rates, prepayment speeds and default rates.
LEVEL (III) – Level (III) investments are securities for which valuation techniques are not based
on observable market data and require significant management judgement.
Conduit determines whether transfers have occurred between levels of the fair value hierarchy by
re-assessing the categorisation at the end of each reporting period. Transfers from Level (I) to (II)
securities amounted to $9.4 million and transfers from Level (II) to (I) securities amounted to
$63.4 million during the year ended 31 December 2023 using end of current period positions and
estimated fair values. Transfers from Level (I) to (II) securities amounted to $76.2 million and
transfers from Level (II) to (I) securities amounted to $37.8 million during the year ended 31
December 2022 using end of current period positions and estimated fair values. There were
no investments included in Level (III) for either year end.
The fair value hierarchy of Conduit's investment portfolio is as follows:
As at 31 December 2023
Fixed maturity securities, at FVTPL
Short-term investments
US treasuries
US agency debt
US municipals
Non-US government and agency
Asset-backed
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Corporate
Total
Level I
$m
Level II
$m
46.1
343.9
-
-
-
-
-
-
-
-
0.6
-
3.8
19.1
2.0
174.3
122.1
18.3
7.8
56.8
Total
$m
46.7
343.9
3.8
19.1
2.0
174.3
122.1
18.3
7.8
56.8
93.6
350.0
443.6
483.6
754.8
1,238.4
Conduit Holdings Limited | Annual Report and Accounts 2023
137
Notes to the consolidated financial statements
continued
As at 31 December 2022
Fixed maturity securities, at FVTPL
Short-term investments
US treasuries
US agency debt
US municipals
Non-US government and agency
Asset-backed
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Corporate
Total
Level I
$m
Level II
$m
37.9
210.2
-
-
-
-
-
-
-
-
-
-
1.8
15.2
2.0
163.8
100.6
12.8
3.2
52.7
Total
$m
37.9
210.2
1.8
15.2
2.0
163.8
100.6
12.8
3.2
52.7
51.3
370.2
421.5
299.4
722.3
1,021.7
Refer to note 16 for investments provided as collateral under Conduit’s financing arrangements.
13. Interests in structured entities
Unconsolidated structured entities in which Conduit has an interest
As part of Conduit’s investment activities, it invests in unconsolidated structured entities. Conduit
does not sponsor any of the unconsolidated structured entities. The business relations of Conduit
with the structured entities set out below do not give rise to consolidation because the criteria
for control pursuant to IFRS 10, as contained in our consolidation principles, are not met.
A summary of interests in unconsolidated structured entities is as follows:
As at 31 December
Fixed maturity securities, at FVTPL
Asset-backed
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
2023
$m
174.3
122.1
18.3
7.8
56.8
2022
$m
163.8
100.6
12.8
3.2
52.7
Total
379.3
333.1
The fixed maturity structured entities are used to meet specific investment needs of borrowers
and investors which cannot be met from standardised financial instruments available in the
capital markets, providing liquidity and diversification. While individual securities may differ in
structure, the principles of the instruments are similar and it is appropriate to aggregate the
investments into the categories detailed above.
The risk that Conduit faces in respect of the investments in structured entities is similar to the risk it
faces in respect of other financial investments held on the consolidated balance sheet. Fair value is
determined by market supply and demand, which is driven by investor evaluation of the credit risk
of the structure and changes in the term structure of interest rates which can change the
expectation of cash flows associated with the instrument and, therefore, its value in the market.
The maximum exposure to loss in respect of these structured entities would be the carrying value
of the instruments that Conduit holds. Generally, default rates would have to increase
substantially before Conduit would suffer a loss. This assessment is made prior to investing and
regularly through the holding period for the security.
Refer to note 16 for investments provided as collateral under Conduit’s financing arrangements.
Conduit Holdings Limited | Annual Report and Accounts 2023
138
Notes to the consolidated financial statements
continued
14. Reinsurance contracts
The breakdown of portfolios of reinsurance contracts issued and reinsurance contracts held, that
are in an asset position and those in a liability position and by type of reinsurance asset or
liability, is set out below.
The reconciliation from the opening to the closing balances of the liability for remaining coverage
and the liability for incurred claims for reinsurance contracts issued and ceded reinsurance
contracts held is shown below. The reconciliation shows the movement in the liability by the
reinsurance service result, total comprehensive income (loss) and cash flows separately for
reinsurance contracts issued and ceded reinsurance contracts held.
As at
31 December
2023
$m
31 December
2022
$m
(re-stated)
1 January
2022
$m
(re-stated)
Reinsurance contract liabilities
(494.5)
(336.3)
(116.1)
Liability for remaining coverage
Liability for incurred claims
Other reinsurance receivables (payables)
109.7
(592.2)
(12.0)
71.0
(391.1)
(16.2)
Reinsurance net asset (liability)
(494.5)
(336.3)
49.1
(162.8)
(2.4)
(116.1)
Ceded reinsurance contract assets
42.7
67.3
41.0
Ceded asset (liability) for remaining coverage
Ceded asset for incurred claims
Ceded other receivables (payables)
Ceded reinsurance net asset (liability)
(1.2)
42.6
1.3
42.7
(3.7)
58.5
12.5
67.3
(2.5)
43.5
-
41.0
Conduit Holdings Limited | Annual Report and Accounts 2023
139
Notes to the consolidated financial statements
continued
Year ended 31 December ($m)
Opening reinsurance asset (liability)
Reinsurance revenue
Reinsurance service expenses
Remaining
coverage
2023
Incurred claims
Remaining
coverage
2022
Incurred claims
Excluding loss
component
Present value
of future cash
flows
Risk
adjustment
Total
Excluding loss
component
Present value
of future cash
flows
Risk
adjustment
Total
71.0
633.0
(365.8)
(25.3)
(320.1)
-
-
633.0
49.1
392.4
(154.4)
(8.4)
(113.7)
-
-
392.4
Incurred claims and other expenses
-
(311.9)
(27.1)
(339.0)
-
(324.4)
(21.0)
(345.4)
Amortisation of reinsurance acquisition expense cash flows
Changes to liabilities for incurred claims for past service
Reinsurance service expenses
Reinsurance service result
Reinsurance finance income (expense)
Effect of exchange rates
Total changes in comprehensive income (loss)
Investment components
Cash flows
Premiums received
Claims and other attributable expenses paid
Reinsurance acquisition expense cash flows
Total cash flows
Closing reinsurance asset (liability)
(37.6)
-
(37.6)
595.4
-
0.1
595.5
20.1
(595.5)
-
18.6
(576.9)
109.7
-
(5.9)
(317.8)
(317.8)
(33.2)
(1.3)
(352.3)
(20.1)
-
195.9
-
195.9
(542.3)
-
(37.6)
5.5
(0.4)
(21.6)
(377.0)
(21.6)
256.0
(2.9)
(0.1)
(36.1)
(1.3)
(24.6)
218.6
-
-
-
-
-
-
195.9
18.6
(381.0)
(49.9)
(482.5)
(595.5)
(376.5)
(22.9)
-
(22.9)
369.5
-
0.3
369.8
13.7
-
14.9
(361.6)
71.0
-
4.2
(320.2)
(320.2)
19.9
1.0
(299.3)
(13.7)
-
101.6
-
101.6
(365.8)
-
(22.9)
2.0
6.2
(19.0)
(362.1)
(19.0)
2.1
-
30.3
22.0
1.3
(16.9)
53.6
-
-
-
-
-
-
(376.5)
101.6
14.9
(260.0)
(25.3)
(320.1)
Conduit Holdings Limited | Annual Report and Accounts 2023
140
Notes to the consolidated financial statements
continued
Year ended 31 December ($m)
Opening ceded reinsurance asset (liability)
Ceded reinsurance expenses
Ceded reinsurance recoveries
Amounts recoverable on incurred claims
Changes to amounts recoverable for incurred claims
Ceded reinsurance recoveries
Reinsurance service result
Ceded reinsurance finance income (expense)
Effect of exchange rates
Total changes in comprehensive income (loss)
Investment components
Cash flows
Premiums paid
Recoveries received
Total cash flows
Closing ceded reinsurance asset (liability)
Remaining
coverage
2023
Incurred claims
Excluding loss
component
recovery
Present value
of future cash
flows
Risk
adjustment
(3.7)
(76.7)
-
-
-
(76.7)
-
-
(76.7)
-
79.2
-
79.2
(1.2)
58.5
-
-
4.3
4.3
4.3
3.3
-
7.6
-
-
(23.5)
(23.5)
42.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Remaining
coverage
Excluding loss
component
recovery
2022
Incurred claims
Present value of
future cash
flows Risk adjustment
Total
54.8
(76.7)
-
4.3
4.3
(2.5)
(48.6)
-
-
-
(72.4)
(48.6)
3.3
-
-
-
(69.1)
(48.6)
-
-
79.2
(23.5)
55.7
41.4
47.4
-
47.4
(3.7)
43.5
-
28.0
0.7
28.7
28.7
(1.2)
-
27.5
-
-
(12.5)
(12.5)
58.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
41.0
(48.6)
28.0
0.7
28.7
(19.9)
(1.2)
-
(21.1)
-
47.4
(12.5)
34.9
54.8
Conduit Holdings Limited | Annual Report and Accounts 2023
141
Notes to the consolidated financial statements
continued
Remaining
coverage
2023
Incurred claims
Remaining
coverage
2022
Incurred claims
Year ended 31 December ($m)
Opening net reinsurance asset (liability)
Net reinsurance revenue
Net reinsurance service expenses
Excluding loss
component
Present value
of future cash
flows
Risk
adjustment
Total
Excluding loss
component
Present value of
future cash
67.3
556.3
(307.3)
(25.3)
(265.3)
-
-
556.3
46.6
343.8
-
flows Risk adjustment
Total
(110.9)
(8.4)
(72.7)
-
-
343.8
-
Net incurred claims and other expenses
-
(311.9)
(27.1)
(339.0)
-
(296.4)
(21.0)
(317.4)
Amortisation of reinsurance acquisition expense cash flows
Changes to net liabilities for incurred claims for past service
Net reinsurance service expenses
Reinsurance service result
Net reinsurance finance income (expense)
Effect of exchange rates
Total changes in comprehensive income (loss)
Investment components
Cash flows
Net premiums received
Net claims and other attributable expenses paid
Reinsurance acquisition expense cash flows
Total cash flows
Closing net reinsurance asset (liability)
(37.6)
-
(37.6)
518.7
-
0.1
518.8
20.1
(516.3)
-
18.6
(497.7)
108.5
-
(1.6)
(313.5)
(313.5)
(29.9)
(1.3)
(344.7)
(20.1)
-
172.4
-
172.4
(499.7)
-
(37.6)
5.5
3.9
(21.6)
(372.7)
(21.6)
183.6
(2.9)
(0.1)
(32.8)
(1.3)
(24.6)
149.5
-
-
-
-
-
-
(516.3)
172.4
18.6
(325.3)
(49.9)
(441.1)
(22.9)
-
(22.9)
320.9
-
0.3
321.2
13.7
(329.1)
-
14.9
(314.2)
67.3
-
4.9
(291.5)
(291.5)
18.7
1.0
(271.8)
(13.7)
-
89.1
-
89.1
-
(22.9)
2.0
6.9
(19.0)
(333.4)
(19.0)
2.1
-
(16.9)
-
-
-
-
-
10.4
20.8
1.3
32.5
-
(329.1)
89.1
14.9
(225.1)
(307.3)
(25.3)
(265.3)
Conduit Holdings Limited | Annual Report and Accounts 2023
142
Notes to the consolidated financial statements
continued
Conduit did not book any additional case reserves for the years ended 31 December 2023 and
2022. The net liability for incurred claims as at 31 December 2023 had an estimated duration of
3.1 years (31 December 2022: 3.1 years).
The liability established by Conduit is viewed as adequate, however a 20% increase in estimated
undiscounted losses would have a $133.9 million adverse impact on comprehensive income (loss)
(31 December 2022: $91.9 million).
Despite an active period for natural catastrophe losses for the industry, there were no major
event losses individually or in aggregate which had a material impact on Conduit during 2023.
During 2022 the most significant loss events impacting Conduit were the Ukraine war and
Hurricane Ian. The estimated undiscounted ultimate net impact, after ceded reinsurance and
reinstatement premiums, is $24.6 million and $39.7 million respectively. Our undiscounted
ultimate loss estimates, net of ceded reinsurance and reinstatement premiums, for previously
reported loss events remain stable. During the year ended 31 December 2023 the changes in the
discounted net liability for incurred claims for prior accident years was a reduction of $3.9 million
(31 December 2022: $6.9 million).
Claims development table
The following tables show the estimates of cumulative undiscounted incurred claims, including the risk adjustment, for each successive accident year at each reporting date, together with the
cumulative payments to date:
Gross undiscounted claims, including risk adjustment
Accident year
At end of accident year
One year later
Two years later
Current estimate of undiscounted incurred claims
Cumulative payments to date
Current estimate of undiscounted liability for incurred claims
Effect of discounting
Current estimate of discounted liability for incurred claims
$m
2021
190.7
184.7
187.5
187.5
(112.8)
74.7
$m
2022
391.2
387.2
387.2
(135.7)
251.5
$m
2023
401.3
401.3
(58.0)
343.3
$m
Total
976.0
(306.5)
669.5
(74.3)
595.2
Conduit Holdings Limited | Annual Report and Accounts 2023
143
Notes to the consolidated financial statements
continued
Ceded undiscounted recoveries, including risk adjustment
Accident year
At end of accident year
One year later
Two years later
Current estimate of ceded undiscounted incurred recoveries
Cumulative recoveries received to date
Current estimate of ceded undiscounted asset for incurred claims
Effect of discounting
Current estimate of ceded asset for incurred claims
Net undiscounted claims, including risk adjustment
Accident year
At end of accident year
One year later
Two years later
Current estimate of net undiscounted incurred claims
Cumulative payments to date
Current estimate of net undiscounted liability for incurred claims
Effect of discounting
Current estimate of net liability for incurred claims
$m
2021
(48.9)
(50.1)
(57.3)
(57.3)
38.0
(19.3)
$m
2021
141.8
134.6
130.2
130.2
(74.8)
55.4
$m
2022
(39.0)
(36.9)
(36.9)
-
(36.9)
$m
2022
352.2
350.3
350.3
(135.7)
214.6
$m
2023
-
-
-
-
$m
2023
401.3
401.3
(58.0)
343.3
$m
Total
(94.2)
38.0
(56.2)
4.7
(51.5)
$m
Total
881.8
(268.5)
613.3
(69.6)
543.7
Conduit Holdings Limited | Annual Report and Accounts 2023
144
Notes to the consolidated financial statements
continued
A reconciliation of the net liability for incurred claims per the claims development tables to the carrying amounts included in the balance sheet has been provided below. Loss related amounts
represent amounts due that are contingent on claims, such as reinstatement premiums and profit commissions.
Reconciliation to carrying amounts:
As at 31 December
Undiscounted liability for incurred claims per claims development tables
Discount
Liability for incurred claims per claims development tables
Other loss related amounts
Liability (asset) for incurred claims
Gross
$m
669.5
(74.3)
595.2
(3.0)
592.2
2023
Ceded
$m
(56.2)
4.7
(51.5)
8.9
Net
$m
613.3
(69.6)
543.7
5.9
(42.6)
549.6
Gross
$m
459.3
(54.9)
404.4
(13.3)
391.1
2022
Ceded
$m
(76.6)
7.4
(69.2)
10.7
(58.5)
Net
$m
382.7
(47.5)
335.2
(2.6)
332.6
The estimation of the ultimate fulfilment cash flows for claims is a complex process which incorporates a significant amount of judgement. It is reasonably possible that uncertainties inherent in the
reserving process, delays in insureds or ceding companies reporting losses to Conduit, together with the potential for unforeseen adverse developments, could lead to a material change in estimated
liability for incurred claims. Further information on the calculation of the liability for incurred claims and associated risks are provided in the risk disclosures in note 3.
Conduit Holdings Limited | Annual Report and Accounts 2023
145
Notes to the consolidated financial statements
continued
15. Right-of-use lease assets
Right-of-use lease assets primarily relate to leased properties for Conduit's offices in Bermuda
and office equipment.
Right-of-use assets
Balance and net book value as at 31 December 2021
Depreciation
Balance and net book value as at 31 December 2022
Additions
Depreciation
Balance and net book value as at 31 December 2023
Lease liabilities
As at 31 December
Less than one year
Between one and five years
Total undiscounted lease liabilities
Amounts recognised in the consolidated financial statements
Year ended 31 December
Consolidated statement of comprehensive income (loss)
Interest expense on lease liabilities
Depreciation of right-of-use assets
Total
Consolidated statement of cash flows
2023
$m
2022
$m
0.1
0.6
0.7
0.1
0.7
0.8
$m
2.9
(0.7)
2.2
0.5
(0.6)
Lease payments
0.7
0.6
2.1
2022
$m
0.6
2.0
2.6
2023
$m
0.8
1.6
2.4
The discounted lease liability as at 31 December 2023 was $2.3 million (31 December 2022:
$2.4 million). Conduit does not face significant liquidity risk with respect to its lease liabilities.
Conduit Holdings Limited | Annual Report and Accounts 2023
146
Notes to the consolidated financial statements
continued
16. Financing arrangements
Letters of credit and trust accounts
CRL is a non-admitted reinsurer in the US and Canada although during the year received
reciprocal jurisdiction reinsurer status in certain states of the US (RJR). Subject to certain
exceptions, RJR status reduces the need for CRL to post collateral to support cedants in states
where CRL has RJR status. However, terms and conditions of certain reinsurance contracts with
US and Canadian cedants require CRL to provide collateral for outstanding insurance contract
liabilities, including the liability for remaining coverage and liability for incurred claims. The
collateral can be provided by LOCs or by assets in trust accounts. Refer to note 9 for details of
interest expense associated with these LOCs included in financing costs. Additional information
about Conduit's exposure to interest rate and liquidity risk is included in the risk disclosures
section in note 3.
Standby letter of credit facility
During July 2021, CRL, as the borrower, entered into a $125.0 million standby letter of credit
facility led by Lloyds Bank Corporate Markets PLC. CHL will guarantee the obligations of CRL
with respect to the standby letter of credit facility. Terms of the standby letter of credit facility
contain standard qualitative representations and require certain standard financial covenants be
adhered to, including: a maximum consolidated debt to capital ratio of CHL of 35.0%; a minimum
consolidated tangible net worth of CHL; and a minimum A.M. Best rating of B++ for CRL. CRL
increased the aggregate amount of the commitment under the facility up to $150.0 million during
2022, with an additional $25.0 million increase concluded during 2023 increasing the facility to
$175.0 million. As at 31 December 2023, $125.3 million (31 December 2022: $92.0 million) was
outstanding under the standby letter of credit facility and is secured by cash and cash
equivalents and investments of $153.2 million (31 December 2022: $110.7 million).
Uncommitted letter of credit facility
During September 2021, CRL entered into a $75.0 million uncommitted letter of credit facility
with Citibank Europe PLC which was increased to $125.0 million during 2023. Terms of the
uncommitted letter of credit facility include standard qualitative representations. As at 31
December 2023, $72.9 million (31 December 2022: $37.0 million) was outstanding under the
uncommitted letter of credit facility and is secured by cash and cash equivalents and investments
of $89.1 million (31 December 2022: $49.7 million).
Trust accounts
Several trust account arrangements have been established in favour of policyholders and ceding
companies to provide collateral or comply with the security requirements of certain contracts.
As at 31 December 2023, $170.8 million (31 December 2022: $127.4 million) of cash and cash
equivalents and investments were restricted in favour of third parties.
Additional letter of credit and trust funding requirements
For the year ended 31 December 2023, $18.2 million (31 December 2022: $87.8 million) of
collateral requests and collateral amendments in respect of that financial year were received
subsequent to the year end date. These collateral requests will be completed in the normal
course of business and will be funded during the subsequent year using cash and cash
equivalents and/or investments.
Conduit Holdings Limited | Annual Report and Accounts 2023
147
Notes to the consolidated financial statements
continued
17. Share capital
Authorised share capital
Authorised common shares of $0.01 each
Authorised A1 shares of £0.01 each
Authorised A2 shares of $0.01 each
As at 31 December 2023 and 2022
Allotted, called-up and fully paid
Issued
As at 31 December 2023 and 2022
Number
10,000,000,000
100,000
100,000
$m
100.0
-
-
10,000,200,000
100.0
Common
shares
number
165,239,997
165,239,997
A1 shares
number
100,000
100,000
A2 shares
number
Total
number
100,000
165,439,997
100,000
165,439,997
Total
$m
1.7
1.7
The number of common shares in issue less own shares held as at 31 December 2023 was 158,056,137 (31 December 2022: 160,141,174).
CHL holds 18,000 A1 and A2 shares at 31 December 2023 and 2022. The A1 and A2 shares issued by CML have no voting rights attached. Subject to vesting conditions, discussed in note 7, the A1 and
A2 shares will be automatically exchanged for ordinary shares of CHL.
Conduit Holdings Limited | Annual Report and Accounts 2023
148
Notes to the consolidated financial statements
continued
Own shares
Own shares
As at 31 December 2021
Repurchased
Purchased by EBT
As at 31 December 2022
Purchased by EBT
Transferred to EBT
Distributed by EBT
As at 31 December 2023
Number held
in treasury
(32,823)
$m
(0.2)
(725,000)
(3.4)
Number held
in trust
-
-
Total number
of own shares
$m
-
-
(32,823)
(725,000)
-
-
(4,341,000)
(16.5)
(4,341,000)
(757,823)
(3.6)
(4,341,000)
(16.5)
(5,098,823)
-
-
(2,336,000)
(13.7)
(2,336,000)
757,823
3.6
(757,823)
-
-
-
-
250,963
(3.6)
0.9
-
250,963
(7,183,860)
(32.9)
(7,183,860)
(32.9)
Total
$m
(0.2)
(3.4)
(16.5)
(20.1)
(13.7)
-
0.9
Shares repurchased by CHL and the EBT will be held as own shares to meet future obligations under CHL’s variable incentive schemes. See note 21 for information on shares held by the EBT.
Dividends
Final 2021
Interim 2022
Final 2022
Interim 2023
See note 23 for information with respect to dividends declared subsequent to 31 December 2023.
Record date
25 March 2022
Payment date
22 April 2022
19 August 2022
9 September 2022
24 March 2023
21 April 2023
18 August 2023
8 September 2023
Per share $
0.18
0.18
0.18
0.18
$m
29.7
29.6
29.6
29.7
Conduit Holdings Limited | Annual Report and Accounts 2023
149
Notes to the consolidated financial statements
continued
18. Other reserves
Other reserves consist of the following:
20. Earnings (loss) per share
The following reflects the earnings (loss) and share data used in the basic and diluted loss per
share computations:
Other
reserves
$m
Share
premium
$m
Total other
reserves
$m
Year ended 31 December
0.6
1,055.4
1,056.0
Total comprehensive income (loss)
2.1
-
2.1
-
1,058.1
Basic weighted average number of shares
Dilutive effect of equity-based incentives
2023
$m
2022
$m
190.8
(43.9)
Number
Number
160,103,836
163,441,264
461,091
167,093
As at 31 December 2021
Equity-based incentive expense
Transfer from share premium to contributed surplus
1,055.4
(1,055.4)
As at 31 December 2022
Equity-based incentive expense
Distributions by EBT
As at 31 December 2023
1,058.1
2.5
(1.0)
1,059.6
-
-
-
-
2.5
(1.0)
1,059.6
Other reserves include Conduit’s equity-based incentive expense.
Share premium includes any premiums received on issue of share capital. The transaction costs
that were attributable to the issuance of new shares incurred in forming Conduit were treated as
a deduction from share premium. The share premium was transferred to contributed surplus
during May 2022 after approval by Conduit's shareholders at the AGM.
19. Contingencies and commitments
Legal proceedings and regulations
Conduit operates in the reinsurance industry and is subject to legal proceedings in the normal
course of business. While it is not practicable to estimate or determine the final results of all
pending or threatened legal proceedings, management does not believe that any such
proceedings (including litigation) will have a material effect on its results and financial position.
Diluted weighted average number of shares
160,564,927 163,608,357
Earnings (loss) per share
Basic
Diluted
Per share $
Per share $
1.19
1.19
(0.27)
(0.27)
Equity-based incentive awards are only treated as dilutive when their conversion to common
shares would decrease earnings per share or increase loss per share from continuing operations.
Incremental shares from ordinary restricted share options where relevant performance criteria
have not been met are not included in the calculation of dilutive shares.
Conduit Holdings Limited | Annual Report and Accounts 2023
150
Notes to the consolidated financial statements
continued
21. Related party disclosures
These consolidated financial statements include CHL and the entities listed below:
On 18 May 2023, CHL completed the transfer of 757,823 common shares held in treasury with
a value of $3.6 million to the EBT.
Subsidiary undertakings
CHL
CRL
CRSL
CML1
CSL
EBT
Domicile
Bermuda
Bermuda
Principal Business
Holding company, Ultimate parent
General insurance business
England and Wales
Support services
Bermuda
Bermuda
Jersey
Support services
Support services
Employee benefit trust
During the year ended 31 December 2023 the EBT distributed 250,963 shares with a value of
$0.9 million to employees. There were no distributions for the year ended 31 December 2022.
Stabilitas Re
Stabilitas Re Limited a special purpose vehicle (Stabilitas Re), was launched in June 2023.
Conduit sponsored the launch of a catastrophe bond issued by Stabilitas Re and CRL entered
into a collateralised reinsurance agreement with Stabilitas Re as part of the transaction. The
catastrophe bond was issued to third-party investors by Stabilitas Re. Conduit has no ownership
interest in nor any control over Stabilitas Re and therefore does not consolidate that entity.
1.
CML is part-owned by members of management. Management’s share ownership in CML exists solely for the
purposes of the Group’s management share incentive scheme for attracting and retaining talent. Management’s
shares in CML have no voting power or control in respect of CHL's ownership of CRL via CML's ownership of CRL.
Key management compensation
Remuneration for key management of Conduit’s Executive Group, and Non-Executive Directors, was
as follows:
Unless otherwise stated, Conduit owns 100% of the share capital and voting rights in the
subsidiaries listed.
Employee benefit trust
The EBT was established with the sole purpose of administering Conduit's equity-based incentive
schemes. The trustee operates the trust for the benefit of Conduit's employees, all in accordance
with an established trust deed. While Conduit does not have legal ownership of the EBT, the trust
is consolidated in Conduit's accounts due to the ability that Conduit has to influence the actions
of the trust.
Year ended 31 December
Cash compensation
Equity-based incentive expense
Directors fees and expenses
Total
2023
$m
9.1
1.8
0.8
11.7
2022
$m
4.7
1.4
0.8
6.9
Note: An additional member of the executive group was included in key management compensation for the current
year. Prior year comparatives have not been re-stated as they were not deemed to be key management for that year.
Funding for the trust is provided by CHL through a non-interest bearing loan facility. The facility
may only be used by the trustee for the purpose of achieving the objectives of the EBT. During
the year ended 31 December 2023, advances of $13.7 million (31 December 2022: $16.5 million)
were made to the trust.
Loans to employees, including key management, to assist with environmental and other projects,
have been made by CSL. These loans are short term and interest free. Any financial benefit to the
employee is generally not material.
CHL common shares purchased by the EBT will be held for the benefit of employees under CHL's
variable incentive schemes. During the year ended 31 December 2023 the trust purchased
common shares of 2,336,000 (31 December 2022: 4,341,000).
Non-Executive Directors do not receive any benefits in addition to their agreed fees and
expenses and do not participate in any of Conduit’s incentive, performance or pension plans.
Conduit Holdings Limited | Annual Report and Accounts 2023
151
Notes to the consolidated financial statements
continued
IncubEx, Inc.
Effective 9 April 2021, CHL executed a stock purchase agreement with IncubEx, a product and
business development firm with a focus on designing and developing new financial products in
global environmental, reinsurance and related commodity markets. CHL purchased 624 shares
of IncubEx’s Series A-3 preferred stock, with a par value of $0.0001 per share, for an aggregate
purchase price of $50,000, or $80.08 per share.
Previously, only contract specific acquisition cash flows were deferred and amortised. Under IFRS
17, the recognition of reinsurance acquisition expense cash flows includes an allocation of
acquisition-related operating expenses incurred in the period.
Conduit recognises its reinsurance acquisition expense cash flows as part of the liability or asset
for remaining coverage and amortises over the coverage period in line with the service provided.
The current Executive Chairman of CHL is also a founder and current Chairman of IncubEx.
The terms and conditions of the stock purchase agreement are equivalent to those that would
prevail in an arm’s length transaction. The investment in IncubEx is included in other assets in the
consolidated balance sheet and is recorded at cost, which approximates fair value.
Measurement of the liability for incurred claims (previously losses and loss adjustment expenses)
is determined on a discounted probability-weighted expected value basis and includes an explicit
risk adjustment for non-financial risk. Previously, under IFRS 4, losses and loss adjustment
expenses were undiscounted without an explicit adjustment for non-financial risk.
22. Transition to IFRS 17 and IFRS 9
IFRS 17, Insurance Contracts
IFRS 17 replaces IFRS 4 Insurance Contracts for annual periods on or after 1 January 2023. In
addition to the updated accounting policies and disclosure in notes 2, 3, 4, 6 and 14, some of the
key differences between IFRS 17 and the accounting policies previously adopted by Conduit
under IFRS 4 are outlined below.
IFRS 17 identifies cash flows that are contingent on claims as being presented within the
reinsurance service expenses, such as reinstatement premiums and profit commissions.
Previously under IFRS 4 these were recorded in gross premiums written and net acquisition
expenses, respectively. Similar presentation impacts are noted on ceded reinsurance contracts,
with cash flows that are contingent on recoveries, such as reinstatement premiums paid and
profit commissions received, presented within ceded reinsurance recoveries.
Changes to classification and measurement
The adoption of IFRS 17 did not change the classification of Conduit’s reinsurance contracts
issued or ceded reinsurance contracts held. Under IFRS 17, Conduit's reinsurance contracts issued
and reinsurance contracts held are all eligible to be measured by applying the PAA.
The measurement principles of the PAA are similar to accounting policies previously applied
under IFRS 4 but are different in the following key areas:
Under IFRS 4 gross premiums written were recognised at the top of the consolidated statement
of comprehensive income (loss) with an adjustment for the change in the unearned premium
liability. IFRS 17 defines reinsurance revenue as the expected premium cash flows net of any
deductions that are paid to the cedant, excluding any investment components.
If contracts are assessed as being onerous, a loss component is recognised. Previously these may
have formed an unexpired risk reserve provision determined through the liability adequacy test.
Changes to presentation and disclosure
Under IFRS 4 separate assets and liabilities were recognised for premium receivables, deferred
acquisition costs, unearned premiums, and loss and loss adjustment reserves. These assets and
liabilities were shown aggregated for all reinsurance contracts, separately for ceded. IFRS 17
groups the reinsurance assets and liabilities by portfolio, as defined by Conduit’s level of
aggregation accounting policy in note 2, separately for reinsurance contracts issued and ceded
reinsurance contracts held and presents a net asset or liability for the portfolio as a whole. This
means that different portfolios could be in an asset or liability position depending on the timing
of cash flows.
The consolidated statement of comprehensive income (loss) has changed significantly in its
presentation. Previously Conduit reported items such as gross premiums written, net premiums
earned and loss and loss adjustment expenses. Under IFRS 17, the standard defines and requires
separate presentation of reinsurance revenue and reinsurance service expenses. Conduit has
chosen to present income and expenses from ceded reinsurance contracts as separate line items.
Conduit Holdings Limited | Annual Report and Accounts 2023
152
Notes to the consolidated financial statements
continued
The standard requires separate presentation of reinsurance finance income or expense which
represents the unwind of discounting and changes in reinsurance liabilities due to updating to
current discount rates.
Transition to IFRS 17
Changes in accounting policies resulting from the adoption of IFRS 17 have been applied using a
full retrospective approach. Under the full retrospective approach, as at 1 January 2022 Conduit:
— Identified, recognised and measured each group of reinsurance contracts as if IFRS 17 had
always applied;
— Derecognised any existing balances that would not exist had IFRS 17 always applied. These
include deferred acquisition expenses, reinsurance receivables and payables, net loss and loss
adjustment expense reserves and unearned premium reserves. Under IFRS 17 they are
included in the measurement of reinsurance contract assets or liabilities; and
— Recognised any resulting net difference in equity.
The increase to shareholders’ equity from the application of IFRS 17 is predominantly driven by
the discounting of net loss reserves which were previously undiscounted, the deferral of certain
acquisition-related operating expenses and the revaluation of reinsurance balances that are
now considered monetary items under IFRS 17. The impacts of discounting and the deferral
of acquisition-related operating expenses are timing differences as both will be unwound over
the settlement of claims liabilities and insurance contract coverage periods respectively. The
effects of adopting IFRS 17 on the consolidated financial statements as at 1 January 2022 are
shown below. Similar impacts were noted on the consolidated financial statements as at
31 December 2022.
As at
Assets
Cash and cash equivalents
Accrued interest receivable
Investments
Inwards premiums receivable
Ceded reinsurance
contract assets
Other assets
Right-of-use lease assets
Deferred acquisition expenses
Intangible assets
Total assets
Liabilities
Reinsurance contract liabilities
Amounts payable to reinsurers
Other payables
Lease liabilities
Total liabilities
31 December 2021
(as reported)
$m
1 January 2022
(re-stated)
$m
Impact of
adopting IFRS 17
67.5
3.7
1,008.4
-
-
-
-
(155.0)
67.5
3.7
1,008.4
155.0
50.0
1.6
2.9
44.6
1.1
41.0
1.6
2.9
-
1.1
1,334.8
1,126.2
324.4
7.3
19.0
2.9
116.1
-
19.0
2.9
(9.0)
-
-
(44.6)
-
(208.6)
(208.3)
(7.3)
-
-
353.6
138.0
(215.6)
Conduit Holdings Limited | Annual Report and Accounts 2023
153
Notes to the consolidated financial statements
continued
As at
Shareholders' equity
Share capital
Own shares
Other reserves
Retained loss
Total shareholders' equity
Total liabilities and
shareholders' equity
31 December 2021
(as reported)
$m
1 January 2022
(re-stated)
$m
Impact of
adopting IFRS 17
— Equity instruments at fair value through other comprehensive income, with no recycling of
gains or losses to profit or loss on derecognition and
— Debt instruments at amortised cost.
1.7
(0.2)
1.7
(0.2)
1,056.0
1,056.0
(76.3)
981.2
(69.3)
988.2
-
-
-
7.0
7.0
1,334.8
1,126.2
(208.6)
Conduit’s classification of its financial assets is explained in the accounting policies beginning on
page 102 in note 2. Conduit's financial investment portfolio of fixed maturity securities meets the
requirements for mandatory FVTPL which is consistent with the measurement of Conduit’s
previous accounting policies under IAS 39.
The classification and measurement of financial liabilities under IFRS 9 remains the same as IAS
39, except where a financial liability is designated as FVTPL.
Changes to presentation and disclosure
To reflect the differences between IAS 39 and IFRS 9, IFRS 7 Financial Instruments: Disclosures
was also amended. There was no impact to Conduit from these amendments with the
implementation of IFRS 9.
IFRS 9, Financial Instruments
IFRS 9 replaced IAS 39, Financial Instruments: Recognition and Measurement for annual periods
beginning on or after 1 January 2018. However, Conduit elected, under the amendments to IFRS
4, to apply the temporary exemption from IFRS 9, thereby deferring the initial application date
of IFRS 9 to align with the initial application of IFRS 17.
Transition to IFRS 9
As Conduit's accounting policies under IFRS 9 are consistent with those applied under IAS 39,
there is no financial impact on transition. There is therefore no restatement of comparatives nor
any impact from adoption on shareholders' equity.
Changes to classification and measurement
To determine their classification and measurement category, IFRS 9 requires all financial assets to
be assessed based on a combination of Conduit’s business model for managing the assets and
the instruments’ contractual cash flow characteristics. The IAS 39 measurement categories for
financial assets (fair value through profit or loss (FVTPL), available for sale (AFS), held-to-
maturity (HTM) and loans and receivables (L&R) at amortised cost) have been replaced by:
— Financial assets at fair value through profit or loss, including debt instruments, equity
instruments and derivatives;
— Debt instruments at fair value through other comprehensive income, with gains or losses
recycled to profit or loss on derecognition;
23. Subsequent events
Dividends
On 20 February 2024, Conduit’s Board of Directors declared a final dividend for 2023 of
$0.18 (approximately £0.14) per common share, which will result in an aggregate payment of
$29.7 million. The dividend will be paid in pounds sterling on 24 April 2024 to shareholders of
record on 22 March 2024 (the Record Date) using the pound sterling / US dollar spot exchange
rate at 12 noon on the Record Date.
Conduit Holdings Limited | Annual Report and Accounts 2023
154
Additional information
Additional performance measures (the “APMs”)
Conduit presents certain APMs to evaluate, monitor and manage the business and to aid readers’ understanding of Conduit's financial statements and methodologies used. These are common
measures used across the (re)insurance industry and allow the reader of Conduit's financial reports to compare those with other companies in the (re)insurance industry. The APMs should be viewed
as complementary to, rather than a substitute for, the figures prepared in accordance with IFRS. Conduit’s Audit Committee has evaluated the use of these APMs and reviewed their overall
presentation to ensure that they were not given undue prominence. This information has not been audited.
Management believes the APMs included in the consolidated financial statements are important for understanding Conduit’s overall results of operations and may be helpful to investors and other
interested parties who may benefit from having a consistent basis for comparison with other companies within the (re)insurance industry. However, these measures may not be comparable to
similarly labelled measures used by companies inside or outside the (re)insurance industry. In addition, the information contained herein should not be viewed as superior to, or a substitute for,
the measures determined in accordance with the accounting principles used by Conduit for its audited consolidated financial statements or in accordance with IFRS.
Below are explanations, and associated calculations, of the APMs presented by Conduit:
APM
Gross premiums written (KPI)
Explanation
For the majority of excess of loss contracts, premiums written are recorded
based on the minimum and deposit or flat premium, as defined in the contract.
Premiums written for proportional contracts on a risks attaching basis are
written over the term of the contract in line with the underlying exposures.
Subsequent adjustments, based on reports of actual premium by the ceding
company, or revisions in estimates, are recorded in the period in which they are
determined. Reinstatement premiums are excluded.
Net loss ratio (discounted and
undiscounted)
Ratio of net losses and loss related amounts expressed as a percentage of net
reinsurance revenue in a period. This can be calculated using discounted or
undiscounted net losses and loss related amounts.
Reinsurance operating expense
ratio
Ratio of reinsurance operating expenses, which includes acquisition expenses
charged by insurance brokers and other insurance intermediaries to Conduit,
and operating expenses paid that are attributable to the fulfilment of
reinsurance contracts, expressed as a percentage of net reinsurance revenue
in a period.
Calculation
Amounts payable by the cedant before any deductions, which may include
taxes, brokerage and commission.
Net losses and loss related amounts / Net reinsurance revenue
Undiscounted net losses and loss related amounts / Net reinsurance revenue
(note 4)
Reinsurance operating expenses / Net reinsurance revenue
(note 4)
Conduit Holdings Limited | Annual Report and Accounts 2023
155
Additional information continued
Additional performance measures (the “APMs”)
continued
APM
Other operating expense ratio
Explanation
Ratio of other operating expenses expressed as a percentage of net
reinsurance revenue in a period.
Calculation
Other operating expenses / Net reinsurance revenue
(note 4)
Combined ratio (KPI)
The sum of the net loss ratio, reinsurance operating expense ratio and other
operating expense ratio. Other operating expenses are not allocated to the
segment combined ratio.
Net loss ratio + Net reinsurance operating expense ratio + Other operating
expense ratio
(note 4)
Combined ratio (undiscounted)
The sum of the net loss ratio (undiscounted), reinsurance operating expense
ratio and other operating expense ratio. Other operating expenses are not
allocated to the segment combined ratio.
Net loss ratio (undiscounted) + Net reinsurance operating expense ratio +
Other operating expense ratio
(note 4)
Accident year loss ratio
Ratio of the net losses and loss related amounts of an accident year (or
calendar year) revalued at the current balance sheet date expressed as
a percentage of net reinsurance revenue in a period.
Accident year net losses and loss related amounts / Net reinsurance revenue
Total net investment return (KPI) Conduit's principal investment objective is to preserve capital and provide
adequate liquidity to support the payment of losses and other liabilities. In light
of this, Conduit looks to generate an appropriate total net investment return.
Conduit bases its total net investment return on the sum of non-operating cash
and cash equivalents and fixed maturity securities. Total net investment return
is calculated daily and expressed as a percentage.
Net investment income + Net unrealised gains (losses) on investments + Net
realised gains (losses) on investments / Non-operating cash and cash
equivalents + Fixed maturity securities, at beginning of period
Return on equity (KPI)
RoE enables Conduit to compare itself against other peer companies in the
immediate industry. It is also a key measure internally and is integral in the
performance-related pay determinations. RoE is calculated as the profit for
the period divided by the opening total shareholders' equity.
Profit (loss) after tax for the period / Total shareholders' equity, at beginning
of period
Conduit Holdings Limited | Annual Report and Accounts 2023
156
Additional information continued
Additional performance measures (the “APMs”)
continued
APM
Total shareholder return (KPI)
Explanation
Total shareholder return allows Conduit to compare itself against other public
peer companies. Total shareholder return is calculated as the percentage
change in Common Share price over a period, after adjustment for Common
Share dividends.
Calculation
Closing Common Share price, at end of period - Opening Common Share price,
at beginning of period + Common Share dividends during the period / Opening
Common Share price, at beginning of period
Dividend yield
Calculated by dividing the annual dividends per Common Share by the
Common Share price on the last day of the given year and expressed as
a percentage.
Annual dividends per Common Share / Closing Common Share price
Net tangible assets per share
(KPI)
This provides a measure of book value per share for all shares in issue less own
shares held in treasury or the EBT trust.
Total shareholders' equity less intangible assets, at the end of the period / Total
common shares in issue less own shares held
The GBP equivalent of NTAVS is calculated using the end of period exchange
rate between USD and GBP.
Conduit Holdings Limited | Annual Report and Accounts 2023
157
Appendix
Glossary
The following definitions apply throughout the Annual Report and Accounts unless the context
otherwise requires. All references to legislation in this document are to the legislation of England
and Wales unless the contrary is indicated. Any reference to any provision of any legislation shall
include any amendment, modification, re-enactment or extension thereof. Words importing the
singular shall include the plural and vice versa, and words importing the masculine gender shall
include the feminine or neutral gender.
ABIR The Association of Bermuda Insurers and Reinsurers (ABIR) represents the public policy
interests of its members.
Book value per share Calculated by dividing the value of the total shareholders’ equity by the
sum of all common voting shares outstanding.
Broker An intermediary who negotiates contacts of insurance or reinsurance, receiving
a commission for placement and other services rendered.
Brokerage The commission that is payable to a Broker for placing an insurance or reinsurance
contract with an insurer or a reinsurer.
Additional case reserves (ACRs) ACRs represent Conduit's estimate for losses related to specific
contracts which Conduit believes may not be adequately reported, or adequately covered in the
application of IBNR.
BI Business Interruption Insurance coverage that replaces income lost in the event that business
is halted due to direct physical loss or damage.
BSCR Bermuda Solvency Capital Requirement.
Admission The admission of all of CHL’s Common Shares (1) to the standard listing segment of
the Official List of the UK Financial Conduct Authority, and (2) to trading on the London Stock
Exchange’s main market for listed securities which occurred on 7 December 2020.
Cedant A ceding insurer or a reinsurer that writes and issues a policy to an (re)insured and
contractually transfers (cedes) a portion of the risk to a reinsurer or retrocessionaire.
Aggregate excess of loss (XOL) reinsurance A form of excess of loss reinsurance in which the
excess and the limit of liability are expressed as annual aggregate amounts.
AGM Annual General Meeting of the CHL shareholders.
CEO Chief Executive Officer
CFO Chief Financial Officer
CHL Conduit Holdings Limited.
AM Best a global credit agency, news publisher and data analytics provider, focusing on the
insurance sector.
Claim A request by an insured or reinsured for indemnification by an insurance or reinsurance
company for loss incurred from an insured peril or event.
AM Best rating (i) in respect of financial strength: A M Best's independent opinion of an insurer's
financial strength and ability to meet its ongoing insurance policy and contract obligations, and
(ii) in respect of long term issuer credit: A M Best's independent opinion of an entity's ability to
meet its ongoing financial obligations.
CML Conduit MIP Limited.
Combined ratio The sum of the net loss ratio, reinsurance operating expense ratio and other
operating expense ratio.
BMA Bermuda Monetary Authority.
Common shares common shares of CHL of $0.01 par value per share.
Board of Directors or Board unless otherwise stated refers to the CHL Board of Directors.
Company Conduit Holdings Limited.
Conduit Holdings Limited | Annual Report and Accounts 2023
158
Appendix continued
Coverholder A coverholder is a company or partnership authorised by a managing agent to
enter into a contract or contracts of insurance to be underwritten by the members of a syndicate
managed by it in accordance with the terms of a binding authority.
Earnings (loss) per share (EPS) Calculated by dividing comprehensive income (loss) for the year
attributable to shareholders by the weighted average number of common shares outstanding
during the year, excluding treasury shares.
Conduit The brand for Conduit Holdings Limited and all associated group companies.
EBT The Conduit Group EBT is a trust established for the sole purpose of administering Conduit's
equity-based incentive schemes.
Conduit Re The brand for all Conduit's reinsurance business.
CRL Conduit Reinsurance Limited.
CRO Chief Risk Officer.
CRSL Conduit Reinsurance Services Limited (previously named Conduit Marketing Limited).
CSL Conduit Services Limited.
CUO Chief Underwriting Officer.
Diluted earnings (loss) per share Calculated by dividing comprehensive income (loss) for the
year attributable to shareholders by the weighted average number of common shares
outstanding during the year, excluding treasury shares, plus the weighted average number of
common shares that would be issued on the conversion of all potentially dilutive equity-based
compensation awards.
ECR Enhanced capital requirement. Under the BSCR Model, the reinsurer’s minimum required
statutory capital and surplus is referred to as the enhanced capital requirement (ECR). The ECR is
the greater of the calculated BSCR and the minimum solvency margin (MSM).
Estimated ultimate premiums written Premium reported by ceding companies, excluding
reinstatement premiums, supplemented by management’s judgement on the estimate provided.
Excess of loss (XOL, XL) or non-proportional Reinsurance that indemnifies against all or a
specified portion of loss and loss expenses in excess of a specified monetary amount or other
threshold, known as the cedant's retention or reinsurers attachment point, generally subject to a
negotiated reinsurance contract limit.
Executive Group is comprised of the Executive Chairman, CEO ,CFO, CRO, CUO, Chief Operating
Officer, General Counsel and Chief Actuary
FVTPL Fair value through profit or loss.
Dividend yield Calculated by dividing the annual dividends per Common Share by the Common
Share price on the last day of the given year and expressed as a percentage.
Gross premiums written (GPW) Amounts payable by the cedant before any deductions, which
may include taxes, brokerage and commission.
DSBP The deferred share bonus plan is an equity-based incentive plan where a certain
percentage of employee bonuses is deferred into nil-cost options.
IAS International Accounting Standard(s) are created by the IASB for the preparation and
presentation of financial statements.
DTR The Disclosure Rules and Transparency Rules sourcebook as issued by the Financial
Conduct Authority.
IASB International Accounting Standards Board.
IFRS International Financial Reporting Standard(s).
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Incurred But Not Reported (IBNR) Reserve for anticipated or likely losses that may result from
insured events which have taken place, but which have not yet been reported and/or possible
adverse development of previously reported losses.
LTIP The long term incentive plan is an equity-based award plan granted to employees as
nil-cost options.
IPO Initial public offering.
Invested equity Means the aggregate of initial equity invested in CHL on Admission and equity
invested pursuant to any future equity raises by the Company, with the US dollar value of
Invested Equity for the USD MIP Shares being calculated at the spot rate at the time the relevant
proceeds of the equity raise were received by the Company.
ISSB IFRS International Sustainability Standards Board
Liability for incurred claims (LIC) Liabilities established by reinsurers to reflect the estimated
cost of claims payments and the related expenses that the reinsurer will ultimately be required to
pay in respect of reinsurance contracts it has written. The LIC includes the risk adjustment and
contractual payments made that are contingent on loss events, such as profit commissions and
reinstatement premiums. The LIC is discounted.
Liability for remaining coverage (LRC) The liability for remaining coverage represents the
balance of premium received, net of acquisition expenses, less the premium income and
acquisition expenses amortised in the period.
LOC Letter of credit.
Losses occurring business Business where the wording stipulates that claims against liability
policies can be notified to the Company at any time following the issue of the policy.
Loss reserve development The difference between the amount of the liability for incurred claims
initially estimated by an insurer or reinsurer and the amount re-estimated in an evaluation at a
later date.
LSE London Stock Exchange.
Market value Refers to (1) the market capitalisation of CHL calculated by reference to the six-
month average closing share price prior to the date of the relevant exchange of MIP Shares for
common shares of CHL (adjusted to take into account any capital events or distributions during
that period); or, (2) in the case of a takeover of CHL, the value of the consideration for the
takeover, or (3) in the case of a sale of CHL, the net sale consideration, or (4) in the case of the
liquidation of CHL, the amount available for distribution in the liquidation, in each case taking into
account any prior dividends, returns of capital or other distributions. The market value for the
USD MIP Shares will be calculated in US dollars based on the prevailing spot rate on the date of
the relevant share price and in the case of a takeover of CHL, or sale or liquidation of CML, the
latest reasonably practicable spot rate prior to the date of the exchange of MIP Shares for
common shares of CHL as determined by the Remuneration Committee of CHL.
Net loss ratio Ratio of net losses and loss related amounts expressed as a percentage of net
reinsurance revenue in a period.
Non-admitted business Business written by a reinsurer not licensed by a particular state or
jurisdiction, but nevertheless able to sell and service reinsurance policies to cedants located
within that state or jurisdiction.
OECD Organisation for Economic Co-operation and Development.
Other operating expense ratio Ratio of other operating expenses expressed as a percentage
of net reinsurance revenue in a period.
Overriding commission (OVR) A commission that is paid by a reinsurer over and above the
cedant's original acquisition costs.
Quota share reinsurance A form of proportional reinsurance in which the reinsurer assumes
an agreed percentage of each insurance contract being reinsured.
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Retention The amount of the loss which is retained by the cedant prior to the attachment of
a reinsurance programme.
Return on Equity (RoE) RoE is calculated as the profit for the period divided by the opening total
shareholders' equity.
Risk-adjusted rate change Reflects management's assessment of net rate changes of our
renewal business net of the impact of claims inflation, exposure changes, and changes in any
other terms and conditions.
Senior Executive(s) refers to the Executive Chairman, CEO and CFO and Chief Operating Officer.
State(s) refers to one or or more of the fifty states making up the United States of America.
TCFD The Task Force on Climate-Related Financial Disclosures (TCFD) was created by the G20
established Financial Stability Board in December 2015 to improve the quality, quantity and
consistency of climate-related disclosures. To achieve this, it developed a reporting framework
which consists of a number of recommendations structured into four pillars: governance,
strategy, risk, and metrics and targets.
The UK Code The UK Corporate Governance Code, monitored by the UK Financial Reporting
Council.
Total shareholder return (TSR) TSR is calculated as the percentage change in common share
price over a period, after adjustment for common share dividends.
Treaty reinsurance A form of reinsurance in which the ceding company makes an agreement to
cede certain business and the reinsurer, in turn, agrees to accept all business qualifying under the
agreement, known as the “treaty”.
Ultimate loss ratio The ratio of ultimate losses and loss related amounts to total reinsurance
revenue received for all policies written in a given period.
US refers to the United States of America
VaR Value at Risk.
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Appendix
Advisers and contact information
Conduit Holdings Limited
Bermuda Company Registration Number 55936
Office address
Ideation House
94 Pitts Bay Road
Pembroke HM08 Bermuda
T: +1 441 276 1000
Registered address
Clarendon House
2 Church Street
Hamilton HM11 Bermuda
Shareholder contacts
Company Secretary
Greg Lunn
E: legal@conduitre.bm
Investor relations
E: info@conduitre.bm
Registrar
Computershare Investor
Services (Bermuda) Limited
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
United Kingdom
T: +44 370 702 0000
Advisers
Financial advisers
Kinmont Limited
5 Clifford Street
London, W1S 2LG
United Kingdom
Brokers
Peel Hunt
100 Liverpool Street
London EC2M 2AT
United Kingdom
Berenberg
60 Threadneedle Street
London EC2R 8HP
United Kingdom
Panmure Gordon & Co
One New Change
London EC4M 9AF
United Kingdom
Auditors
KPMG Audit Limited
Crown House
4 Par-la-Ville Road
Hamilton HM 08 Bermuda
Bankers
HSBC Bank Bermuda Limited
37 Front Street
Hamilton HM 11 Bermuda
Conduit Holdings Limited | Annual Report and Accounts 2023