Convex profits expected to continue to improve
Bermuda-based Convex Group's profitability is expected to continue to improve as its book of business gains scale and diversifies, ratings agency AM Best said.
The agency made the prediction as it affirmed the specialty re/insurer's financial strength rating of A and gave it a stable outlook.
Convex was founded by re/insurance legends Stephen Catlin and Paul Brand in 2019.
"Convex has demonstrated consistently improving underwriting results since its inception in 2019, with 2023 representing the group’s most profitable year to date, evidenced by an 89% combined ratio (as calculated by AM Best)," AM Best said. "Results in 2023 benefited from a relatively benign catastrophe year, as well as the gradual unwind of mark-to-market losses on the group’s fixed-income portfolio. Prospectively, profitability is expected to continue to improve as Convex’s book of business gains more scale and further diversification, supported by a favourable rate environment.
"Convex has quickly established a strong franchise as an internationally recognised re/insurance group, with operations spanning across the UK, Bermuda, Luxembourg, and Guernsey, as well as a managing general underwriter in the United States. The group’s gross written premium exceeded $4 billion in 2023 and is expected to continue to expand rapidly over the medium term."
The agency said the ratings reflected Convex’s consolidated balance sheet strength, which AM Best assessed as very strong, as well as the group’s adequate operating performance, neutral business profile and appropriate enterprise risk management.
It said Convex’s consolidated risk-adjusted capitalisation was "comfortably at the strongest level" at year-end 2023, as measured by Best’s Capital Adequacy Ratio (BCAR).
"The group’s balance sheet strength is supported by good financial flexibility, notably demonstrated in the fourth quarter of 2020 by an equity capital raise of $1 billion and the issuance of perpetual preference shares of $500 million, which were fully drawn down in 2023.
"An offsetting rating factor is Convex’s material exposure to catastrophe risk and its dependence on reinsurance to manage this risk; however, this is mitigated partially by a reinsurance panel of excellent credit quality."
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