S&P Global Ratings has raised the financial strength ratings on re/insurer Convex group’s operating companies to ‘A’ from ‘A-‘, and assigned a stable outlook.
The companies include: Convex Re Ltd., Convex Insurance UK Ltd., Convex Guernsey Ltd., and Convex Europe S.A.
Convex has shown significant growth since launching in late 2019, achieving its underwriting profitability goals in the past two years.
It reached its third year of underwriting profit with more than $5.2 billion of gross premiums in 2024, along with a positive net income. The group is also diversifying into new lines and markets, notably through a Lloyd’s syndicate.
S&P expects Convex’s portfolio to remain balanced between property, casualty, and specialty business, and estimated the company’s market share of its chosen fields to be around 3%.
Convex has expanded its market share, now leading approximately a third of its direct book. Its reinsurance utilisation, which stood at roughly 32% at the close of 2024, is projected to steadily decrease to about 30% over the coming years.
The group has demonstrated strong technical profitability alongside its growth, which has led S&P to upgrade its competitive position assessment to strong from satisfactory.
Convex achieved its third straight year of underwriting profit and second net profit by 2024. It posted a strong 87.6% combined ratio, with an underwriting profit of $381 million and net income of $5.6 million.
This was significantly boosted by a $272 million net investment return which resulted in a 17% return on equity.
Like other reinsurers in the US property and specialists lines, Convex also faced losses from the California Wildfires in January 2025. Underwriting volatility from natural catastrophe events and similar losses are an expected part of the group’s business and are captured in S&P’s high risk exposure score.
“Under our base case, we assume Convex will report a net combined ratio of 94%-97% in 2025 which reflects a cat load (the additional premium charged to cover the potential for large, unexpected losses from catastrophic events like hurricanes, earthquakes, or floods) of 6%-8% in addition to the first-quarter wildfire losses,” S&P analysts stated.
Adding: “For 2026 and 2027, we assume a combined ratio of 90%-92% if major losses remain within the annual budget. We expect $300 million-$400 million net income for 2025, $500 million-$700 million for 2026 and 2027, with a return on equity of 11%-16%.
“Considering the balance sheet, capital according to S&P Global Ratings’ model has remained well in excess of the 99.99% level. Reserving is prudent and reserve development stable.”
The rating agency expects Onex, currently the major owner of Convex, will be supportive of the group’s growth strategy as it is viewed as a financial sponsor.
“The stable outlook reflects our expectation that Convex will maintain its strong competitive position with sound underwriting and bottom-line profitability in line with our base case. We also anticipate capitalization with a material buffer over our highest confidence interval according to our capital model,” S&P concluded.
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