MIDAS SHARE TIPS: Invest in insurer Conduit Re to help cover your bills

Protected: Conduit Re handles reinsurance for shipping cargoes

Insurance companies are an unpopular bunch. They increase premiums at the worst possible time, have scant regard for loyalty and show an unerring talent for wriggling out of claims. As investments, however, insurers are rather more attractive, particularly for income seekers.

CONDUIT RE typifies the breed. The company listed on the stock market in December 2020, paid a robust dividend in its full year of business and is expected to declare a payment of around 30p when it reveals 2022 results next week. With the shares at £4.50, the stock is yielding more than 6.5 per cent and dividends are forecast to rise still further this year and next.

But Conduit Re is not just about income. The group focuses exclusively on reinsurance so it provides cover for big insurers, keen to reduce their exposure to certain risks.

This is a highly specialised market so operators really need to know what they are doing. Here, Conduit comes into its own. The company was set up by industry veterans, Nick Eckert and Trevor Carvey, both of whom have worked in reinsurance since the 1980s, with a string of successful businesses behind them. In 2020, they decided the time was right to build something new – a business with all the latest technology and none of the issues that plagued older firms, weighed down with past claims.

Using their contacts, Eckert and Carvey gathered an experienced team around them and in December 2020 Conduit Re was launched on the stock market, raising more than £820 million from investors, drawn to the duo’s impressive pedigree.

Conduit shares were priced at £5 so they have fallen slightly since floating but should recover sharply over the next few months and beyond. The company specialises in property, casualty and speciality reinsurance, ranging from homes, ports and factories to wind farms and oil rigs to complex areas such as directors’ liabilities, injuries and shipping cargo.

Prices are going up across the board. Many firms have either pulled out of the reinsurance market or reduced their exposure to it, bruised by historic losses. But demand has begun to soar, particularly after natural disasters such as Hurricane Ian in Florida, flooding in Australia, wildfires across Europe and America, and the Putin-driven disaster that is the Ukraine war.

Limited supply and growing demand means that insurance firms have been struggling to find the reinsurance cover they need. Many are turning to Conduit Re. The group said last month that premiums are rising by as much as 60 per cent in some quarters and Eckert described the market as the most attractive he has ever known.

Analysts expect Conduit to announce a near 80 per cent increase in 2022 premiums to $680 million (£560 million), rising to $870 million this year and more than $950 million in 2024. As a start-up, the group has been loss-making to date but should deliver profits of around $120 million this year, increasing to $170 million in 2024. Insurance is a cyclical business but most observers believe conditions are set fair for at least another three to five years. And investors may well be rewarded, even when the market turns. At that time, Conduit is likely to pull in its horns, write less business and may distribute cash to investors via special dividends.

Midas verdict: Successful insurers tend to have well-placed contacts, teams of smart underwriters and plenty of experience. Conduit Re ticks all these boxes and, at £4.50, the shares are a buy. Investors can even use the income to pay their rapidly rising insurance bills.

Traded on: Main market Ticker: CRE Contact: conduitreinsurance.com or 001 441 276 1000