Good day everyone, welcome to Conduit's Q1 2026 trading update. Thank you for joining us today. Joining me on the call are Neil Eckert, Chief Executive Officer, Elaine Whelan, Chief Financial Officer, and Stephen Postlewhite, Chief Underwriting Officer. Please note our disclaimer language on slide two. I will now turn the call over to our CEO, Neil Eckert.
Thanks, Brett, and welcome everyone. As mentioned on our 2025 results call, Stephen joined in January, and I'm delighted to have him with us today. As usual, today's update focuses on our top-line underwriting experience during the quarter and our view of the market, with Steve providing more details of each of our segments. Elaine Whelan will then cover the financial and investment highlights, including a review of our capital management strategy. In the first quarter of 2026, we continued to identify select areas for growth and increased gross premiums written by 4.9% over the prior year. Growth was again led by our casualty segment, where risk-adjusted pricing has remained stable. The quarter saw heightened volatility in investment markets following the outbreak of the conflict in the Middle East.
Against this backdrop, we were pleased with the performance of our investment portfolio, which generated a 0.3% return during the first quarter, despite the volatility and higher fixed income yields and spreads. Importantly, our managed investments continued to grow by over $100 million since year-end and over $400 million during the last 12 months, reaching $2.3 billion. This added scale will continue to support our earnings going forward. Capital management remains a focus for us as market conditions soften. During the first quarter, we repurchased $22.9 million worth of shares. This month we substantially completed our previous $50 million buyback authorization. We remain confident in the strength of our balance sheet. The board has authorized a new buyback program, demonstrating our focus on shareholder returns.
Turning to our top-line underwriting performance for the first quarter, our portfolio continues to grow into areas of the market where we have found attractive underwriting opportunities. We achieved 4.9% growth in gross written premiums, reaching $430 million in the first quarter. Our overall growth rate continues to moderate given increasing competition in the market. We have identified select opportunities that align with our appetite, primarily in the casualty segment. As we discussed on our last call, our reception in the market was strong at 1/1, this performance is a direct result of the hard work of the team leading up to the renewal period. Market capacity continues to increase, driven by the strong retained earnings of the industry over the last several years. Prices are softening, we observed a risk-adjusted rate decline of 5% for the first quarter.
Property and specialty markets are experiencing more intense competition and rate softening, but pricing overall remains adequate in our view. Casualty rates are more stable, broadly keeping up with loss trend, and we have seen strong opportunities to grow that portfolio with existing and new cedents. From a loss perspective, the first quarter of 2026 was more benign than the prior year, which included the California wildfires, but was in line with longer-term averages for insured catastrophe losses for the industry. The market is also dealing with the rise in geopolitical uncertainty and the conflict in the Middle East. The event is ongoing and could impact several areas of the market, depending on the extent and duration of the conflict.
We do have exposure to the conflict in some of our specialty classes and have recorded an initial loss estimate based on the latest information, which is not material to Conduit. With that, I will hand over to Steve for a deeper dive into our market experience across our segments.
Thanks, Neil. Good morning everyone. It's great to be with you today. As Neil mentioned, I joined the team in January this year and have been working in the industry for nearly three decades. I'm very happy to bring this experience to the CEO role at Conduit. Over my career, I have served in senior positions within underwriting, risk management, and actuarial functions. I've spent the first few months getting to know the team and the portfolio and have been pleased with the strength of the people and the opportunities for Conduit going forward. In Q1, the team selectively renewed or secured deals that align well with our strategic objectives, primarily seeking to protect our margins and improve earnings stability. Turning to the property segment, gross premiums written increased 1% over the prior year period to $248.8 million.
This modest growth reflects our success of securing new business and increasing shares on well-priced accounts while reducing exposure or exiting treaties with poorer performance or terms that did not match our technical pricing standards. We continue to see a strong flow of business opportunities and submissions, and we are carefully picking our participations. As we expected, rates continued to soften in the quarter and risk-adjusted rates were down 9% across our property portfolio. The rate softening comes on the back of several years of strong rate increases and profitable results for the industry. Despite the recent rate softening, we believe the pricing generally remains adequate, and we continue to find select opportunities. Softening was most notable within property catastrophe reinsurance lines driven by robust returns over recent years, increased capacity and a relatively benign loss activity for the market.
We expect these softening trends to continue through the mid-year renewals, and we will remain nimble and proactive in the competitive environment to target well-priced business. Turning to casualty, in Q1, the team continued to focus on expanding in classes where rate dynamics remain robust and with cedents that have demonstrated track records of prudent cycle management behaviors. Our casualty team has found select new business opportunities on top of strong renewals. The increase in this segment complements our shorter tail property and specialty business and enhances overall portfolio diversification. For the fourth's first quarter, we reported $109.7 million of gross premiums written, representing a 23% increase over the prior year quarter. Expiring business was generally renewed at similar shares, while we made deliberate decisions to exit underperforming treaties where returns or terms were less attractive, supporting ongoing portfolio optimization.
Growth for the quarter was largely attributable to U.S. general third party liability, complemented by incremental gains in smaller subclasses that contributed to portfolio diversification. The rating environment remains attractive in our view, although some classes continue to demonstrate firmer prices than others. We continue to focus on areas of the casualty market with sustained pricing momentum. During the first quarter, risk-adjusted rates were down 1% after adjusting for inflation expectations. Looking ahead, we remain mindful of industry loss trends, including some signs of increased loss frequency and past legacy concerns in certain areas. Against this backdrop, our focus is on carefully selecting our partners, improving diversification and expansion with our preferred partners across complementary classes.
Turning to specialty, competition has increased, and we have scaled back the portfolio slightly to begin the year, with premiums reducing 4% or $3 million compared to prior year to $71.8 million. Consistent with our plans, we have been able to leverage our strong trading relationships and quota share participations to successfully write some new higher margin excess of loss business. This gradual repositioning will take time, but we expect it will help support our margins as the market softens. Risk-adjusted rates were down 7% in the quarter. The specialty market has become competitive and the team stepped back from a number of deals which did not meet our expectations or requirements. Instead, the team has prioritized protecting margins and ensuring written deals are adequately priced with the required terms and conditions.
Loss impacted contracts and selected classes where there has been loss activity have experienced firmer pricing, such as marine and aviation, and we have written a few new treaties in these areas. The first quarter has been quite active from a risk loss perspective in addition to the ongoing conflict in the Middle East. We don't expect the direction of the market to change, but there is potential for enhanced geopolitical risk awareness and the ongoing conflict to create further opportunities. We will stand ready to respond should the opportunities align with our appetite. I will now hand over to Elaine to go through our financial and investment highlights.
As you've heard, our growth continues into our sixth year of operations, albeit now at a much slower pace, as you would expect, given the rapid growth we experienced in our earlier years and also market conditions at the 1/1 renewals. We wrote $430.3 million of gross premiums written in the first quarter of the year, compared with $410.2 million in the first quarter of 2025, a 4.9% increase year-on-year. We typically write the majority of our book in the first half of the year, certainly by 1/7. We have tried to front load our book a little given our market outlook. We would expect that first quarter growth rate to moderate a bit by the half year, although we still expect to see growth for the year.
Note that our gross premiums written exclude reinstatement premiums as they're not deemed to be revenue under IFRS 17 but are included within reinsurance service expenses as a loss related amount. Our reinsurance revenue was $240.3 million compared with $213 million in the prior year, a 12.8% increase year-on-year. There hasn't been any significant loss activity in the quarter that has impacted the company. We do expect to pick up some losses related to the U.S. military campaign in Iran, we don't expect these to be material to results based on the current information available. Given that latest information, I would describe the loss level from the ongoing conflict as manageable and within our earnings expectations. Otherwise, not much to report on the loss front and prior year specific loss events are broadly stable.
On the investment side, the portfolio yield offset the negative impact of the increase in yields in the quarter, and we generated a return of 0.3%. Book yield is 4.2% in line with year-end and March 31 last year. We remain relatively short duration and maintain our focus on a high quality, highly liquid portfolio, particularly given the recent volatility in the markets. Duration is currently 2.8 years on both our investments and our net reserves. Average credit quality is double-A, and you can see the usual pie chart here with our asset allocation. The only change to note is a small bank loan portfolio that we have started this year to help to diversify the portfolio and maintain yield. Otherwise, no real changes from prior quarters in that or our strategy.
We started to include this slide on capital last year to explain how we think about capital. Our focus, first and foremost, is on maintaining sufficient capital to maintain our ratings and to support our underwriting portfolio. We then carry a buffer for opportunities and any other eventualities. Anything over and above that is where we consider capital returns or where else to deploy the excess. The option or blend of options depends on a number of factors, including market outlook and/or share multiple. This month, we substantially completed the $50 million share repurchase authorization that our board approved last year. This year, our board have approved another program, and we intend to execute that as and when appropriate before our 2027 AGM. I'll now hand back to Neil for closing comments.
Thanks, Elaine. In closing, we remain focused on delivering shareholder returns and will continue to execute our strategy to support that objective. We continue to make meaningful progress to stabilize the business. The key driver has been the renewal of our outward retrocession program at 1/1, with broader coverage for peak and secondary perils, reducing our net exposure to tail events. Board and leadership strength is an ongoing focus, and we are pleased that Steve Postlewhite is now settled in the CUO role and working well with his team. We have continued to make progress with our regular board succession during the first quarter. Elizabeth Murphy has retired from the board, and I would like to thank her for her dedicated service. Elizabeth was a founder director and has provided valuable guidance and insight as Audit Committee Chair during her tenure.
Sadly, Stephen Redmond, a tremendous asset to the board, passed away in March. His significant contributions and kindness will be missed by all those who had the privilege of working with Stephen. During the quarter, Nicholas Shott was appointed board chair and was joined by three new independent non-executive directors, Richard Lightowler, Peter Mullen, and Penny Shaw, each bringing strong insurance industry experience. The market is softening, but we view most areas as remaining rate adequate. We found select growth opportunities in the first quarter, primarily within our casualty segment and will continue to adjust in response to changing conditions. Our underwriting business is supported by a relatively conservative and growing investment portfolio that is now $2.3 billion. This increased scale will support investment income and returns going forward. Capital management remains a priority.
We substantially completed the initial $50 million share buyback program and have continued to pay a consistent, attractive dividend. The board has authorized another share buyback program, reinforcing our focus on capital efficiency and shareholder value. Looking ahead, while we expect competitive market conditions to persist, we remain confident in our strategy, balance sheet, and underwriting approach to generate value for shareholders. Thank you for your time and continued interest in Conduit. We would now be happy to take your questions.
If you are dialed into the call and would like to ask a question, please press star followed by the number one on your telephone keypad. We will pause for a moment to assemble the queue. We'll take our first question from Michael Christodoulou from Berenberg. Please go ahead.
Yeah. Hi. Thanks for taking my questions. I have a couple. First one, I guess it's on volume. Most reinsurers have reported so far highlighted the reduction in volume, but Conduit actually managed to grow premiums 5%, led by casualty up 23% year on year. If you can give us a bit more color around that, behind the drivers, specifically maybe for casualty, and perhaps talk a bit about the risk profile, that would be great. The second one, it's on retro. Neil, you mentioned the renewal of the retro program. That also should mean that there's gonna be a benefit from lower pricing.
If you can elaborate maybe about where that benefit will show up and also, I guess, for the new structure of the retro, where it stands and I guess how it helps going forward, that also would be great. Thank you.
Steve, if you'd take the first question on the inwards, and then I'll deal with the retro.
Sure. Okay. Thanks, Michael. Thanks for the questions. You know, on casualty, clearly the main driver of the growth comes from casualty. Really there, you know, we're kind of benefiting a little from our scale and nimbleness, so we're able to be really selective in what we target for growth there. What I would say is there's kind of three levels to that selectivity. The first is we're able to look underneath casualty, which is a very broad church, and we identify there are a number of lines of business which, you know, are continuing to be really quite price adequate and are the hardest. In particular, I would highlight USGL, where that line of business, you know, is kind of in a later stage in the cycle than many.
It's, you know, still in a harder state, and we've been able to focus and really be very selective in terms of that line in particular. The second area of selectivity, I guess, is our preferred partner approach where we look at, you know, our business and our trading partners. We classify some of them as preferred. We do that because we believe they are the very strongest in the areas that we target. The very strongest in terms of how they do their underwriting, and in particular, I guess, at this stage of the cycle, how they think about cycle management so we can see and they can demonstrate that they are being, you know, good actors in terms of managing their portfolio and therefore give us confidence that we can support them.
There are two areas and the third area of selectivity is really diversification. We're able to target classes that generate the highest level of diversification and therefore use the lowest capital and so get the best returns for us and kind of that nimbleness has enabled us to grow. The other thing I would say is it takes time to get on some of these placements and we have been very consistent with how we've traded with a number of these partners and built up a very strong relationship, very focused relationship with them and that's really standing us in good stead enabling us to grow in casualty.
Okay. Thanks, Steve.
Yeah.
On the retro program, we have benefited from more competitive conditions, but the principal thing we did was set out to eradicate basis risk, which you will be aware was the cause of the California issue in 2025. We buy a tower, a full whole account, both for peak and secondary perils, which we don't publish the limits that we place or the actual retention because that's commercially sensitive. What we do give is information on our PMLs and risk tolerances. The overall we get better value, a more comprehensive and complete program. We are managing our exposures now both from a capital and from an earnings volatility perspective. The cost will not be less than last year because the account has grown.
Although we, in my view, bought significantly more, better value, we will have paid more than last year. As I say, I stress, I would emphasize the word value. That those premiums will come through when we financially report both at the interims and the year end.
Our next question.
Okay.
comes from the line of Abid Hussain with Panmure Gordon. Please go ahead.
Hello. Hi, everyone. I've got three questions if I can. The first one is on management changes. Just wondering with the new Chief Underwriting Officer and a new chairperson, have there been any changes to the risk appetite or indeed the underwriting processes? The second question is on the pricing trends at the 1st of April or after the end of the quarter. Just wondering if you observed any meaningful loosening to the T's and C's, the terms and conditions within the contracts renewing after the quarter end. Just finally on your capital ratio and the target range, thank you for sharing that. That's very helpful. The BSCR ratio is bang in the middle of your target range.
Are you comfortable at that sort of level in the current market conditions, or would you let it drift lower from here? Thank you.
Thanks, Abid. I'm going to let Steve do the one for rate. I'm going to let Elaine comment on capital. I will start with management changes. I mean, the whole period since I took over has been one of change and in every regard, and by one instance I'll come onto, it's been about positive change and strength and improvement. You know, it's been a fascinating 12 months from my perspective and we have strengthened from the top down, the main board. We've strengthened, in my view, the underwriting processes. There is one thing I will comment on. As regards to Elaine, that is a genuine retirement. She is a friend of this company, will be fully engaged and working here until September.
That is different from a lot of the other change that we have put into place, but we are strengthening this company across the board. As it relates to risk appetite, the new arrivals. We have published our risk appetite in terms of PMLs and catastrophe, that is continues to be conservatively managed. Really my takeaway theme is it's gradual change with a view to positive and strengthening, that's where we are. Steve, over to you for 1/4.
Yeah. I think the question related to changes in Ts&Cs as opposed to pure rate change. I mean, if there is one kind of slight silver lining to a market which is softening relatively rapidly, I would say there is discipline.
In Ts&Cs , we haven't really seen structures materially changing. We haven't seen yet, I guess, the advent of, you know, additions such as terrorism and NBCR and other things coming into property policies any more than we had historically. That's not to say that that couldn't change as we go forward. It's something that we're very alive to, and will be very much on top of as we go through the underwriting process.
Hey, Abid. Just on the capital side of things, we are very comfortable where we're sitting just now. I think wouldn't expect to see that change too much from that position. If anything, hopefully that would come up a little bit as we build retained earnings and manage our risk through risk selection and managing our PMLs and the extra reinsurers we've got there as well. Would just point out though that that is only one area of focus for us. It's the one that gets published because that's the one that everyone else puts out there. We also pay attention to the rating agency models and our own internal capital model as well, so that there's quite a lot that goes into how we think about capital and our capital requirements.
Thank you.
Our next question comes from the line of Andreas van Embden from Peel Hunt. Please go ahead.
Yes, thank you, and good morning. I just had a question around the investment portfolio. If I look at the investment leverage, the investments against equity, it's around two times. I just wondered whether, if you take a three-year view, whether this is gonna be sort of a constant ratio of investments to equity, or as you build out your casualty portfolio, as you've shown that in Q1, whether that should increase over time.
Elaine, do you want to comment or do you want me to?
Just one question, Andreas? That's most unlike you.
Yeah.
Or is it one question for now? I think in terms of where our leverage goes, a lot of it depends on what we're doing on the capital side of things as well. If we are making capital returns, then that's obviously going to impact how much that portfolio can grow. We are cash generative and the reserves have been building. As the business mix changes, at some point that might kind of cap out. We haven't really kind of given any guidance on that. It does depend on where the market goes, what business we're underwriting, the business mix, and how much we're returning in capital to shareholders as well.
Andreas, I'll just add to that. I think the clue is in the size of the account in the early years. Once the account, as Elaine has observed, once the account and the early years are fully developed, then the growth in gross assets will plateau. So long as we're growing the casualty account and the current years are bigger than the prior, than the old years, then you will see a growth in the amount of reserves that we carry because the book has a tail of up to seven years in terms of reaching maturity. I would expect to see our gross assets continue to grow.
Okay. Okay, thank you very much. Thanks.
Our next question comes from the line of Ben Cohen with RBC Capital Markets. Please go ahead.
Hi there. Good morning, good afternoon, everyone. I wanted to ask two things. Firstly, just interested in terms of the margin that you think you're writing new business at. Maybe you could put that into the context of, I guess, I'm not sure if it's now a historic target to hit a sort of mid-teens ROE over the course of the cycle, just sort of where you are against that sort of target. The second thing is if you could give any outlook as to how you see the market developing into the June, July renewals. Any particular aspects that you're looking out for there or areas you're choosing to focus on. Thank you.
Right. Steve, if I pass over to you to comment on the mid-year renewals and market outlook.
Sure. Yeah. On the market outlook, obviously we're right in the throes of that right now, June and July. We don't really see a material difference to what we've seen in the first quarter of the year. Property is probably gonna be off slightly more, and we kind of predicted that, to some extent, front loading our property exposure to 1st of January. You know, that we expected. Casualty and specialty I think is really more of the same. I think we'll be, you know, very similar to what you see within this pack.
Okay. We obviously, when we are writing new business, we have an internal target margin, which we don't really comment on in public, sort of given the commercial sensitivity in terms of our new customers reading about what margin we expect out of their business. What I will comment on the mid-teen ROE, that figure was something that emerged around the time that the company was launched. What we have seen is people getting in hard markets into the 20+ ROEs, and we hit 20+ in 2023.
A lot of people had been achieving returns in excess of 15, and what the assumption being that that's a cross cycle return, not a forecast for any one year in isolation. I'm obviously aware of where analyst forecasts sit for our company this year, and I'm not gonna comment on that. I think a decently run reinsurance business can post cross-cycle ROEs of 15, and this hard cycle has reinforced my views on that. What we've got to do as a company is execute.
Okay. Thank you.
Our next question comes from the line of Joseph Theuns with Autonomous. Please go ahead.
Hi there. Thanks for taking my questions. The first is in the property book. I just want to get a sort of a flavor of how much of the growth, you know, kind of was split between the excess of loss versus quota share. You know, kind of a broader update on, you know, how the recalibration towards a 50/50 mix in that book is going. Then the second question, I was hoping to kind of square off the chart that you have on slide 11 on capital with your target range of 200%-300%. I believe in the past you've said that the required capital range, required capital is 170.
If the target solvency range is 200-300, can we sort of take away that the targeted headroom is 30%? You know, based off that, you know, anything in excess of 200% can be considered excess capital. Thank you again for taking the questions.
I'll start on the property QS versus XL, then I'll pass over to Elaine to comment on the capital. I don't think I'm really familiar with where the 170 figure ever came from. I'll let Elaine deal with that. We always said that the transition to excess of loss would be a medium-term project and could take two to three renewal seasons. That process is underway, and we have written a significant amount of new excess of loss business. I'm very pleased with the showing that we've had. What we will do is it is work in progress. I mean, effectively, what we've had is one significant part of the renewal book at 1/1 renewals has come up. We are, 1/4 was good.
We do not at this stage publish a split, but over time we will give granular information. What I said before was it would be a medium-term issue. We have come off quite a lot of the quota share because it relates to excess of loss, and we are growing the open market. I'd rather report on sort of facts and information once we have achieved that. I reiterate what we said before, it is a two to three renewable season project to get to the split that you referenced. That split would be a target for property and specialty. Casualty will always be predominantly quota share. Those, you know, that is the way that market operates. Elaine, I'll pass over to you to discuss the capital.
Cheers. Hi, Joe. Not too sure about the 170 either. Maybe we can chat about that offline and see where that's coming from. I think maybe just to put into context what we're trying to see on that slide is how we think about capital, and it is not an exact science. There are a few different models that we look at. The regulatory one is only one of the models that we look at, and we tend to focus more on the rating agency model and our own internal capital model.
When we've calibrated those models against each other and, you know, where we sit in our business model relative to peers, all that kind of stuff, the 200%-300% range is where we've come up from the regulatory perspective. You know, I wouldn't read too much into the fact that we're bang in the middle of that range this year, but it will move around there. That is driven by market opportunity. We can be at the lower end of that, we can be at the higher end of that, and that may or may not trigger a conversation around whether we're doing capital returns or not.
It's very much about working out what our required capital is for the book that we want to underwrite, and then putting that buffer on top of there, which I think is a fairly common approach in the market and carrying some headroom over that. And that gives us the flexibility to respond to anything that we need to respond to. Once we get out over those levels, that's when we're starting to have conversations around what we do with that extra capital that's there that we're not using for the business. Are we seeing a new line of business that we want to go into? Are we looking to deploy it into another area? Those kind of things or whether we want to return that. It's quite an involved process.
It's not just driven by, hit a certain percentage and then anything over that gets returned.
Okay. Okay. Makes sense. Thanks for your responses. Sorry if I may just have one very quick follow-on. In terms of the buyback impact on solvency last year, can you give us a sort of rough range of how many points of solvency that had an impact on?
I don't have that number to hand, Joe.
Okay.
I mean-
Sorry.
In terms— I mean, the one thing that I would say is that last year we did come in at a, in excess of an 11-point ROE at the end of the day. Whatever it looked like at the midyear, it was slightly better a year in, and that would obviously have helped the balance sheet and the ratios a little bit. Okay. Let's move on.
Maybe just one thing to add to that. I think in terms of our overall capital base, $50 million isn't really that big a number, so it's not a big percentage, it's not a big impact.
Yeah. Okay, Joe. Thank you.
There are no further questions on the conference line. I will now turn the call over back to Neil for closing remarks.
Thank you. We're now well into Q2, which has continued as Q1 left off. We have effected a lot of change, and we're now getting through to the phase of strengthening the business in key areas, particularly operations and underwriting. I'm personally pleased with Q1. I look forward to presenting our interim results in late July. Thank you all for your interest. Cheers.