Conduit Re shares fall 9% following Carvey exit and reinsurance update

By Ryan Hewlett

March 31 - (The Insurer) - Shares in Conduit Holdings fell more than 9% in early trading on Monday after the reinsurer announced the exit of CEO Trevor Carvey and disclosed plans to bolster its reinsurance protection following the California wildfires.

The London-listed stock fell by 9.19% to 321.00 pence apiece shortly after the opening bell.

Shares in Conduit Holdings, the parent of “class of 2020” reinsurer Conduit Re, are now trading around 31% lower year to date and are at a near 37% discount to its December 2020 IPO.

Monday’s losses followed a pre-markets announcement to the London Stock Exchange in which Conduit Re said executive chairman and founder Neil Eckert will immediately assume the role of interim CEO, with Carvey’s retirement coming because of a “change in personal circumstances requiring his return to the UK”.

Jefferies analyst Philip Kett in a circular on Monday pointed to Eckert’s experience both as executive chairman of Conduit Re and as the founder and former CEO of Brit, but described Carvey’s departure as “disappointing”.

“Given that the hardest work of establishing the platform and growing the business has already been completed, this departure is disappointing, as Conduit is (to our eyes) entering a lower-risk "business as usual" phase,” said Kett in a note.

Panmure Liberum’s Abid Hussain noted separately that Conduit Re continues to benefit from a “strong team” despite Carvey’s exit.

“The business remains well positioned to navigate the underwriting cycle with a strong leadership in place supporting the interim CEO, this includes the chief underwriting officer and CFO,” said Hussain.

Conduit Re also announced plans to purchase additional reinsurance cover to protect the business from further earnings volatility through the remainder of the year. The cost of the additional cover has led management to reduce its return on equity guidance for 2025 to between high single digits and low double digits.

“Given the low valuation of the shares (<1x P/B), the market appears to demand a lower risk profile, even if it reduces the ROE from mid-teens to nearer to 10%,” said Jefferies’ Kett. “Crucially, this reinsurance is not being purchased to correct any further underwriting concerns, and Conduit have reiterated that the wildfire loss is unchanged.”