U.S. stock futures slip lower; Cook’s firing increases Fed independence worries
Investing.com -- RBC Capital Markets has downgraded Conduit Holdings (LON:CRE) to a "sector perform" rating from "outperform," citing concerns over the company’s return on equity outlook and exposure to natural catastrophe risks.
Shares of the insurance company were down 1.9% at 08:10 ET (13:10 GMT).
Alongside the rating change, RBC also lowered its price target for Conduit to 425p from the previous 575p, reflecting a weaker-than-expected financial performance and limited near-term potential for a valuation re-rating.
Analysts at RBC flagged Conduit’s declining ROE, noting that while the company reported a 12.7% ROE for 2024, this figure was significantly bolstered by discounting effects.
The underlying ROE, excluding these effects, stood at just 7.4%, marking a sharp drop from the 15% recorded in 2023.
The brokerage’s 2025 ROE is projected to remain in the low-to-mid teens, which lags behind sector peers who are expected to deliver mid-to-high teens returns.
A key factor in Conduit’s weaker performance is its exposure to natural catastrophe losses, which weighed heavily on its results.
Unlike many competitors that have shifted their portfolios toward excess of loss treaties, Conduit’s reliance on quota share reinsurance has made it more vulnerable to frequent smaller-scale events.
The company’s exposure was further highlighted by a significant wildfire-related loss, which RBC analysts see as evidence of an over-concentration in property risks.
Despite Conduit’s strong solvency position, with a BSCR ratio of 269% and a well-covered dividend yield of around 7%, RBC sees limited potential for the stock to command a higher valuation multiple in the near term.
The brokerage’s P/B multiple has been revised downward to 0.8x from 1.1x, aligning with the revised price target.