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Investing.com -- Shares in Conduit Holdings plummeted 21% on Wednesday after the company posted a disappointing set of first-half results and downgraded its return-on-equity (ROE) outlook for the year.
The miss was driven by higher-than-expected losses in the second quarter and further reserve strengthening related to Ukraine.
Net income for the first half came in at a loss of $14 million, well below consensus expectations of a $13 million profit. This translated to an annualised ROE of -2.6%.
The undiscounted combined ratio stood at 122.1%, a sharp deterioration from consensus estimates of 108.6%, primarily due to $118 million in California wildfire-related losses and reserve adjustments tied to a U.K. High Court ruling.
While the investment result of $64 million beat consensus by 47%, it was not enough to offset the underwriting pressures. Gross written premiums reached $803 million, growing 9% year-on-year, but still missed expectations by 2%. Book value per share declined to 643 cents, 2% below consensus.
The company lowered its full-year 2025 (FY25) ROE outlook to the mid-single digits, down from the previous high-single-digit to low-double-digit range. No specific guidance was given for the full-year combined ratio or premium growth.
"We see nothing new on operational outlook or strategic plans, key to which is to reduce earnings volatility going forward," RBC Capital Markets analyst Mandeep Jagpal said in a note.
"Shares trade at on 0.8x 2025E book for a 7.2% yield, above the recent lows, which we think presents downside risk," they added.
Conduit maintained the interim dividend at $0.18 per share, in line with consensus and flat year-on-year.