Q2 2020 Conifer Holdings Inc Earnings Call
Good day welcome to the called although.
Q2.
All participants should be up so a little bit should you need assistance, they say well call. It specialist, but also start to fall.
Today's presentation, there will be an opportunity well shows.
So let's start.
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So it's all your question. Please press Star then.
So selfish about it.
I would love to try to publish it without Empire.
Please go ahead.
Thank you and good morning.
Conifer issued its 2022nd quarter financial results coastal markets yesterday.
Its website <unk>.
[music] our age so you can find copies of the earnings release, both slide presentation.
Before we get started the company has no.
Historically information.
[music] security book.
Ratio <unk> financial results.
Products for the company subsidiary.
Actual results may differ materially from the results anticipated Gordon.
[music] various risks and uncertainties underlying forward looking statements.
On the economy.
Well.
Yes, Scott.
The company's filings.
So our form 10-K cups.
Hello.
And then obligation to update or revise any forward looking statement.
The new information.
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In addition, a replay of this call will be provided through bank.
Relationships.
During this call will also discuss non-GAAP financial measure.
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Reconciliations.
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When possible and <unk>.
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Got you toward the accounting days.
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Yes.
[music] his prepared remarks as.
With that I'll turn the call administered.
Chairman Chief Executive Officer.
Hey.
Good morning, everyone.
Calling me today, Yes, you know the Andean Brian.
I'd like to provide a brief overview.
Our underwriting in greater detail Arrow financial.
Last night copper issue the solid financial resource resolved in the second quarter.
Despite the disruption due to the grow pandemic I really shouldn't be too.
Sure.
Due to combination of improving the underwriting results coupled with the change in the value equity investments kind of proposed.
And then extra share 16.
Period.
Our results reflect our Android and then and the underwriting discipline in our tangible evidence about turning the corner profitability.
Our business remains largely commercial with over 90% in specialty commercial.
And last December.
Over the past several years mcquade, increasing occupancy, especially commercial business, especially in the near site.
Well the company can be profitable.
Mark here.
In addition, we aligned believed in Dallas Americas commercial lines versus for.
Long tail versus short and within our underwriting ability to evaluate in place rest between admitted business or assets.
That's really period between dozens and advantage we have over two years.
Allows us to increase that only.
Penetration in March, but also our geographic spread across the country.
[music], she got agents and ensure that specialize in that area.
Which meet our specialty underwriting criteria.
The strategy is starting to go yeah.
[music] <unk> or is there.
I'd like to step back then.
Yeah.
When you add the market in there.
It was a great deal of uncertainty as to the insurance net.
New business potential and topline premium as well.
[music] go there and.
Any individual impact so by family.
Our dropped all affected by code name so to get through there.
Oh, Yeah, we were proactive and shipping, but these remote operations leveraging our early investments in technology, thereby safely and securely Eric.
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The result was that our agencies and their insurance, so a little to no disruption.
In fact, we have occurred that overall answer as well as they're generally higher than our peers and we are providing exceptional service during an incredibly difficult.
That makes me extremely proud of our blade and our ongoing commitment meeting the needs of our children ages.
I've always feel good about had to do this plan and midstream business going forward.
We really are generally conservative in there and then the overall economy as we evaluate potential impact yeah.
Today, well created had been impacted by code in certain sectors of our business.
Factors that go to get such that overall, we had not seen material impact.
Nor profitability.
In fact over all claims volumes continue to be down to.
The versus earlier in the or Nick will talk about the more aware.
As we have shifted the majority of our premiums in our core commercial lines with favorable FX losses are continuing to.
This quarter, we saw those improvements reflect in our underwriting results Las actually.
Yes.
Those of you get about capital in the beginning I've heard a site historical norm for that or something like loss ratios at around this level consistently through so.
Those loss ratios, coupled with an improving expense ratio as we achieve operating scale she's driver combined ratio well area as well.
Coupled with reasonable investment returns as well they deliver consistently improved our own structure.
The next phase, where we continue to drive selected grow in achieving double digit operating scale, while continuing to streamline stats and we're past well without any disruption.
Well, we've seen today, so that he can achieve those but we continue to emphasize underwriting profitability at each decision.
Overall this is the salaries goal during a very uncertain.
With that let me turn it over the next it's in Colorado.
Thank you.
During the second quarter, several developments became clear the navigated the covert related like.
First we are seeing retention rates running that are higher than historical norms and back in the month of June retention rates were running at 91%.
We've got significant growth can be attributed wasn't driven competitive dynamic and increased market share.
Also keep in mind that we've been focusing for several quarters and our business they share, especially commercial where we have a distinct value proposition, while growing our low value beyond that.
The BOP instead of shipping or does it make has done a good bathree admittedly, we believe it or a Democrat arbitrary consistently profitable or.
Those markets got substantial runway selective growth and we expect them to generate value for our shareholders going forward.
Secondly law the top line has been solid overall and the Don animosity base it back down again.
In fact overall frequency is down and largely severity as well.
During the last time period of the monthly total from earlier in the year were down in terms of total claims that 40% or more on a per month satish.
Lastly, where appropriate we are getting rate increases in both.
So we're definitely seeing signs that certain market.
He's very about hardening, particularly any yesterday.
And our topline we reported quarterly increases in our overall growth in.
9.4%.
We're going to be approximately 9% personalize the teacher.
Worldwide with profitable on an accident year, David personal lines, but in 86% side.
Our commercial business represents approximately 93% growth in Korea, and large and small commercial business pollution, delivering admitted and not covered the artisan contractor small commercial I'm sure.
There's a lot of client among other classes.
In addition, we had a strong marketing to get them in Sally segment.
Policies mammy for restaurants bars, and taverns and quick service restaurant.
Overall, we are relatively little disruption stemming from the over 19 granted.
It's important to note that many of our restaurant customers, we're offering a guy and many are quick service restaurants, a dry food capability, that's held off that other establishment more reliant on casual dining.
Throughout the calendar you continued to work with aren't very good talking to understand and education longer term is back on the endemic.
As always our biggest priority is on customer service and strengthening our position across our niche understood but.
That's merkel business, we've got a strong growth in our small business segment.
This is driven by higher premiums and specialty Indiana.
While we continue to rise Murphy and then also.
We see strong potential for growth and the number of days, including our own it in Michigan, which is our largest screens that.
Overall, we see opportunities for new policy drugs and swap rate increases geographically the Americas used commercial accounts.
While we were pleased to see blocked and dropped during the period, where we believe is being driven by.
Our overall loss ratio grew by 12.5 percentage points for the period.
We reported an excellent underwriting is all about verisign fits well with represent approximately 7% or their gross written premiums overall.
For the quarter, our personal lines loss ratio improved to 40%.
This is largely due to fewer low value on that.
Sure Blackberry document it was pretty me I mean, they Florida, we had been discussing for several quarters now.
The reduction of when they say directly.
Perfect all right.
And the focus away from cat exposed business overall, Bermuda nobody does that.
Ill now hand, the column to hear a lot decided to dr. financial.
Thank you Nick.
I'll quickly knows the financial results, we certainly encourage investors to review our family and presentation on the company's website or greater detail.
And the second quarter, they didnt, they need to be between 4% 27.5 million.
But then they had in detail the breakout the adult.
[music].
Congrats combined ratio was 100.5 assigned in the second order a significant improvement compared to 113% to prior year period and bulk within the first quarter 2020.
We reported a loss they still 54.6% compared to 67.1% in the prior year period and improvement of 12 and a half dependent.
Moving to our expense base, we reported a flat expense ratio of 45.9% during the second quarter.
It doesn't really reinsured related reinstatement premium.
We do expect to achieve expense ratio reduction as we go closer to a big scale it had implemented initiatives to streamline.
Over the past several period that we believe that had a favorable is that over time.
We continue to foster expense reduction initiatives today well.
Our short term goal to get to expense ratio at around EUR, 80%.
Net investment income was $853000 they were down from 1.1 million in the prior year period.
The net realized gains for 254200 45000.
Good to 715000 inside.
During the quarter the company reported to gain from the change in fair value of equity investment.
A $1.6 million.
Appeared to a lot point 9 million in the prior year period.
A 3.1 million in the third quarter 20.
This increase was largely related to the recovery in the city market. Following a decline in the first quarter relating to the capability and then it.
We also saw rebound in their own realized gains within our bond portfolio.
After the 5 billion dollar.
Our investments are conservatively managed with the majority in fixed income securities.
In an average credit quality, a delay in energy duration of three and a half years.
And the tax equivalent yield at two point, though.
As a result of above the company reported return to profitability reporting net income.
$1.5 million.
Share.
Hey, good net loss of 2.9 years, both centsper share price.
Moving to the balance sheet total assets for $250 million at June Thirtyth 2020.
Compared to 247.
At year end.
Total invested 475 million at quarter end.
Compared to 177.
Yeah.
We were we reported a nice increase in book value this quarter, our book value at quarter end with $4 and 51 penny per share compared to $3.81 per share at March 30 true.
Up over 18%.
Equally footballer.
We had evaluation allowance against our company deferred tax assets of $1.42 cents per share.
At quarter end and this represents the dollar 32 per share.
Not reflected in book value.
Data they sit here does that over to Jim for closing remarks.
[music] this wasn't the order for the company and we feel it reflects the Commision we have.
We generated and sustainable operating profit as we see lack of we grew our coffee for the long term benefit our shareholders.
In closing I'd like to know that we have been incredibly wobble in crowd.
Our employees during the disruption.
Insurance carriers, often discussed strengthened their relationships, but they are but it's also equally important to discuss strength.
There.
Our people have held up better.
Banking relationships with our agents and ensuring that and when they argue the need it.
And now I'd like to take any questions operator.
We'll now begin your question answer session to ask your question anyway, plus Star then one touch Oh.
You know you still see good.
Pick up their heads up four plus so we'll keep withdraw your question. Please press Star then too.
At the side, we'll pause momentarily to assemble a roster.
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Oh.
Our first question will come from Paul Newsome Hypersound. Please go ahead.
Good morning doing was doing well.
Yeah, I'll tell you.
You just won.
Good.
Yes.
It's against level.
We still see issue Oh.
Well I see in.
Most intelligent constructively and then we will do better who.
Well I'm going to be all all of them all night.
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General and.
In premium net earned premium is down a little due to the increase in our reinsurance.
That was not yet.
Increase rate.
No it I'm not sure.
There are a little bit more.
Reinsurance, but we have less exposure.
Second we had.
We do still getting the benefit of hurricane Hermine and adding that claims.
I will do.
Yeah, David in premiums, which drove down our that has created a movie is well, India you had those headwinds going into it.
Hey.
<unk> expense standpoint on that.
<unk> expenses.
We will see were below last year and continuing to go down a quarterly basis.
Annualized than we have.
Again.
After it.
He had movement.
The commission rate they stayed the same so DCB they didn't go getting rid of the.
Having limited dissipate.
In a boring.
Net earned premium and they're not in premium increase we see positive side going forward. So here, we want to add anything.
I'd say they recovered area the biggest thing right now.
Sure.
That is really good at that point or more.
I'm, sorry, so we do expect to see that trending down.
The net orders.
No I think for up to get out of 48.
No no.
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You will give us a little bit more color on the.
Goldman two seasons and news and.
HM.
You should use swimsuits units.
We did you do.
Sure.
And one driver I.
One of the largest driver.
There was some commercial auto development out of our remote telling us they admit from prior years.
That make auto liability program has gone down significantly as we raised our rage really in that fit in and see that the current day, although we did decent commercial auto development in that program in the quarter that was one of the larger dry driver on and you did had can do.
Relevant on prior year.
Driven by the tort environment, Florida from Boston Allergy business, but we did see that diminish quarter over quarter that was a positive for a while on the overview of both the larger driver for us.
But they were primarily from 17 in prior and from an 18, but again do you see the declining.
We are 17 and prior claims had gone down significantly.
2016 Empire and you're down here I think 130 claimed a lot. So those are closing out pretty quickly and we hope and expect to you that I did make moving forward.
Oh he.
One other thing to add Nixes, you might want to talk about scale huge volumes.
Yeah, but they do early in Florida, which is sort of that one of the top record environment.
For your statue so 2016 in particular, where we're running up against the statute. So we don't necessarily anticipate you know and lots of additional claim on mortgage at closing out the existing.
And I told in somebody who's been helpful. As yeah, we see workload and things like that that put pressure on some plaintiffs attorneys and.
Yeah, we had.
Oh, absolutely older class.
Yeah, I'm really minimal impact from.
Improved seems much Warren.
Good top line really <unk> Hum session.
You do get.
Will hold up as you guys were in school season, we couldn't do the do it doesn't seem like you got a lot of customers.
The way you like we do I believe such despite the difficulties.
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No I our federal government.
Lot of things and probably will have its done, but I think that PDP thing.
Yeah, a lot of people in that.
And get them paying a premium.
And now that things are starting to open up and actually people, we deferred premiums on.
Hi, 90% of Ah.
Got it creates a we were surprised at the numbers do we think that the hot die stacking specifically in the last time buy davern inhabit.
At some point yeah, we were caught not optimistic that everybody is going to continue on the same way, we think it's going to be very challenging for that sector.
Well, we haven't seen yet.
And I don't know I see the PDP, the where you think <unk>, yeah, and one thing I'd add there certainly the bars and taverns CAD.
In the Brian the locked down while our the quick service restaurant franchise restaurants that we right.
Our better that often deal with the lock down they already had a ordering through on App like board actually breed things like that they were able to weather the storm a little bit better as they also had drive through so that I'm ready to go they they were more resilient through that certainly the Bart patterns have been impacted.
In Michigan.
Reliability mandatory so on those businesses risk, losing or liquor license if they don't maintain their their you know there liquor covered so that Ben.
Very sticky for us.
Yeah, I think again, pointing you know as you go into the fall and winter as outdoor heating become less of.
The option here and some of that order. They certainly you know we're cautiously optimistic but you know there's lot of the there.
Great. Thank you grew the answer is really appreciate the color.
Thanks, Paul.
Again, bypassing question that was started by the one started on board.
Yes.
Yes.
Our next question will come from Bob, Florida, but it's fairly but please go ahead.
Hi, there good morning, I, just I want to continue on that.
How the a question just.
So.
It sounds like you had a lot of patients that that either slowing down or state stayed open would drive through or whatever so what do you have any idea what percentage would be probably we actually had to shut down completely.
For the quarter.
This is going to be a gap.
But.
I'll give my yet.
I would say.
You know worried at 50%.
Yeah, Hey that has yet to be yet because I could drive there but.
[laughter] in terms of shot down you know all Mo promote we've heard them our agents in our cured with almost everyone has had the ability to add some sort of a doubt or I.
Delivery through an.
Like I mentioned before.
For moved out there eating so certainly I would say eight role was probably the you noted that the bottom of that you certainly some of those are average add that had a readjust operation are awfully commodity businesses due to three me, while they were dropping that down real Ben.
This point from what we've heard a debt the vast majority of that accurate are now back all of that I'm guessing you know other than the quick service restaurant there is probably.
Our hybrid vantage get features that are more I would add a weaker to where they were sort of reorganizing their their best operation, but that is pretty sure it whereas in and they were backing up and running certainly they went down their expected and and Sharon.
Thank you can get very top of the let the things that they they maintain and a lot of Katie data choice you. There. If you look the liabilities that or you know other financial on restriction to bad so yeah.
With that and levels that extremely high grade certainly do that submission that down were down a notch dowdy rocketing data for that year over year German units that but retention levels are higher than normal and this is anecdotal, but I think it is.
Indicative of what's going on in the more rural areas, Michigan, a friend who owns the restaurant in Northern Michigan and he has gone from seven then we decided to me.
Not because he doesn't want to be opened the other two days they can't hire anybody because they were getting $600 me, but no one they can't find workers. He also has less people inside but he has less workers.
And then the outside is going and he's doing more carrier. He said that in overall sales aircraft down, but if you couple in the D. the bottom line hedge.
Right I think one of the thing that you didn't keep in mind as a percentage of overall no. This is the benefit of obviously being balanced organization, especially across commercial so it's not that there's a one trick pony here from that perspective, and there might be worth bottom up on the nature of what we Ah you because.
Obviously is not necessarily a mile line prior said, yeah, and we've made accommodations you'd add on.
Did lower liability Lynette, while they were closed in order to save money that way.
The some ancillary aggregated removed on an order at the.
<unk> expense there on your on air ensuring that the Brian Delaney, adding all of those products the liquor liability that property and general liability altogether guys add.
Another I'd imagine brought his or her and higher out and not just drop like operate in and.
Okay. That's all.
Hi, good.
In insurance.
Retention sounds like it was it was pretty positive. So what have you been getting maybe provide more details and not a rate increases.
Yeah, so I'm on the rate side.
And we've seen that.
Sure, Dave and most market.
The happy and tightening and and you.
The anat aspect of the data has been strong when you look at it on a property basis.
Robert mid single digit.
Which isn't it dividing given that you're not heavily had those areas. So I think that that's pretty reasonable in the in line with the marketplace.
General liability is heavily.
Have they determined by geography overall about mid single digit, but that can vary pretty dramatically based on.
The state that and that judicial environment, where the ventured is located and then commercial auto is it more high single digit we're still seeing on tightening in that marketplace that really while that though.
I guess the the Navajo there's the increase is down a little bit over the past and three or four years, we are being so rate increases achieved in that light indebtedness.
Yeah, I'd say you know some of that better performing a judicial fly has done a g. outside closer to flat maybe slightly up.
Okay, great. Thanks for that.
Last question for me.
So you.
You're talking about getting your expense ratio down to hopefully 40 or below when you get through a scale what what do you guys considered to be it could be scale.
Mid Thirtys Oh.
Okay all right.
Yeah, Yeah pretty premium skill.
$20 million over.
Yeah, it's more freedom together.
Easily in the numbers.
And with rate increases.
And our growth outside of the rating.
We're hoping to get or no.
And then he.
Orders.
Great. Okay. Thanks mantras guys.
Right.
Oh, Yes question will come from good heaters Raymond James Please.
Yeah good morning.
I was just curious.
About your commercial business and you know your target.
Okay.
Because.
You know number the larger carriers have introduced more automated small middle sized commercial products. You know this chart tried to streamline the underwriting process to make it easier and you'd almost so almost a direct to consumer approach and I'm wondering if that you're seeing any of that.
So any of your markets are the 80 or they are all youre talking about that at all.
Yeah, we had.
We have seen that that trend in certain marketplaces, certainly can it no commercial bye bye bye.
Do you see that and Ah by agent.
And maybe some of that probably.
The.
No common area VR quick service restaurant their.
Asset liability.
So you're there pretty hard to bottom.
On the liquor liability side, you leave into the done anything.
But really geared more today than the three my that process Robbie bleed.
Ordered the E. the independent agency distribution.
But it's certainly something that we're seeing more of them and the commercial BOP side and something that you know, we're looking at very carefully monitoring and and you.
Looking at that often yeah moving forward you feel that they're actually want to go ahead.
You know the feedback you get premier agents are they suggesting that they're losing market share to these direct products or.
Do they give you said that you know, it's just another competitor marketplace, making held their own.
Yeah, I think it's more but I just another competitor.
From their perspective, it hasn't bad.
Overwhelming issue that's been brought up you know I can certainly think of anecdotal confident and while I to more of it Iraq model.
But for the most part it's not something that I think in.
My word that you know either by anything under <unk> GAAP occasionally I.
I think a lot of the agent there used to dealing with.
That dynamic on personal lines side, so maybe they are a little bit more experience that.
And there otherwise would be so.
Got it.
Got it maybe a little bit less impactful. They can do you add in Athens and were more probably had rented and then it hasn't really gotten there yet other than to take service restaurant.
Got it.
No you're commenting on.
Some of the types of your business in the second quarter of the first quarter.
And I just was hoping you could read digits.
The concept of.
Lower frequency accident frequency, whether it's your commercial book or Youre.
Personalized book just has resulted in reduced economic activity I guess, what ultimately I've tried to get at is you know the results improved nicely in the second quarter trying to parse out what's sustainable versus you know what is abnormal and will revert back to where it was before.
Well.
It's not going to regroup back where it was before because we haven't tired I made a different mix of business geography line business.
Our out of maybe judicial.
Oh type area and the Koby game.
And opportunity.
You have lower frequency.
A lot of knows how to use.
[music].
Huh.
Change.
Okay.
So we're not.
It's not going to go back to what it was before.
When you look at when you look at our new business and we go back over to historical losses.
Based on the geography in the mix of business, we have today, we're pretty confident that.
Well I places agnostic on an after year basis, but they're not going to tick anywhere near where they went before that historical losses on admit that you have today are good so we have confidence.
In that.
You know coated obviously when you said all the businesses.
And they have to maintain your opinions either because they need to the Goldman they own building it they happening in the legalized.
Thank you want me to clean.
Not sort of looking back at <unk>.
So you know that those will pick back up but I live here.
I have always been good other than me.
HM 2015.
So I.
I mean, that's tied into that number.
In the victory business, we had that you have.
You know added at Calhoun.
No I'm sure.
Yeah.
Stronger business so.
We can happen.
You lowered your reinsurance Retentions what would it just a follow up with that I, just curious about I read church reinsurance structure changed visible expenses this year the last.
That that's really why so.
We will retain a half million and now we're down to three or $400.
Right.
Got it.
I just gets the last question would just be the capital position the company.
One quarter does it make a trend that you did report profitability this quarter. So that's a good good.
Good side can you give us an update on.
How your capital position is positioned relative to the people underwriting.
Oh.
In addition was still up on that on the dashboard girls. So it's called so often people on board.
To that.
<unk>.
Concentrate anyway.
Yeah.
So oh and the capital going out.
So.
[music] determined that talking about 25% Andrea.
So that we just growing it.
So I single digit low double digit well.
Got it actually answers.
It's I'm showing no further questions. So.
This will conclude ARX <unk> session.
But until the conference back over to Jim <unk> closing remarks.
On a bank.
Three view.
Questions and and taking the time today.
Listen to our story, we do believe we're in a good vision you believe were actively trying to.
Close out the old claims so when I say, there won't be development no, but we're we're in pretty good timeframe that they see.
Especially when the accident year experience.
And exceptionally good.
But we see that business and they said in a good condition, we didn't talk about personal lines with the person now back to the performing book and that will that grew up 14% and we expect that.
So.
We are optimistic I didn't even say cautiously optimistic we're optimistic that.
Feature is right so.
Thank you.
We called since those now concluded. Thank you for attending today's presentation you may now disconnect.
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