Conduit Capital is an investment holding company founded in South Africa in 2005, with the aim to specifically buy into the insurance industry. Conduit Capital shares are up for sale on the Johannesburg Stock Exchange (JSE). Conduit operates through two internal divisions: Insurance and Risk Services and Corporate and Investment Services.

The group’s insurance division is run through wholly-owned subsidiary Constantia Risk and Insurance Holdings. The subsidiary offers a comprehensive portfolio of short and long-term insurance products, dealing mainly with underwriting management agencies focused on niche products.

Corporate and Investment Services comprises Conduit’s finance and treasury function, as well as corporate and operational services. The division is responsible for supporting subsidiary companies where necessary and providing capital. Conduit’s main business goal is to grow the per share net asset value of the company over the long term, working on a decentralised basis whereby subsidiaries have independence to conduct business. The company is relatively low-key, with a market cap of R835 million, but Conduit Capital share price history shows that the company is a great option for mid-cap investors today.

The company’s insurance subsidiaries have showed excellent progress, entering into various new business opportunities and recording solid financial data. The company enjoyed a gain of 9.1% in its key performance metric: net asset value per share, in 2015. A successful rights offer took place in December 2015, which netted the company R150 million. The capital will be used to pursue a number of insurance opportunities. Profit before tax decreased by 41.3% compared to 2014, but was 5% more than the first half of 2015. Decline of was driven primarily by a decrease in investment income due to lower returns from investments, and was also negatively affected by normalisation of the group’s tax rate.

The group is focusing on increasing net premium instead of gross written premium, with the idea that increased retention will allow the group to grow its capital base. The company has succeeded in this regard, raising net premium income by 34.3% to R 228.5 million.

The combined ratio (a measure of an insurance company’s ability to make profits from underwriting services) for the period stood at 98.6%, a good overall sign for the group’s profitability. Conduit Capital share price leapt to new all-time highs at the end
of 2015, and the live online stocks chart shows that these high levels are being maintained.

Conduit’s board has said that instability and uncertainty in financial markets is creating attractive opportunities for the company to buy into opportunities. Stock market volatility is playing nicely into Conduit’s hands, with their insurance businesses launching new ventures and expanding existing relationships.

Following wholesale changes to Conduit’s board in 2015, the company is pursuing a more aggressive acquisition and investment strategy which has reaped dividends for shareholders. Conduit has been touted as a company to watch on the JSE, and Conduit Capital shares could be a surprisingly profitable buy.

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Insurance

P&C Insurance

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