Q4 2023 Conifer Holdings Inc Earnings Call
Good day and welcome to the Conifer Holdings fourth quarter 2023 earnings Conference call.
Operator: Good day, and welcome to the Conifer Holdings 4th Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Brian Roney. Please go ahead.
All participants will be in a listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Brian Roney. Please go ahead.
Brian Joseph Roney: Thank you and good morning, everyone Conifer issued a press release relating to its 2023 fourth quarter financial results after the close of market yesterday.
Brian Joseph Roney: Thank you and good morning everyone. Conifer issued a press release relating to its 2023 fourth quarter financial results after the close of market yesterday. You can find copies of the earnings release on the company's website, ir.cnfrh.com. The slide presentation accompanying management's remarks this morning is available to view or download via webcast or from the investor relations section of Conifer's website. Before we get started, please note that, except with regard to historical information, statements made in this conference call may constitute forward-looking statements within the meaning of the Federal Securities Laws, including Actual results may differ materially from the results anticipated in these forward-looking statements due to various risks and uncertainties underlying our forward-looking statements, as described from time to time in Conifer's filings with the SEC, including our latest Form 10-K and subsequent reports. Conifer specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise.
Can find copies of the earnings release on the company's website IR Dot C. N F R H dot com.
None: Slide presentation accompanying managements remarks. This morning is available to view or download via webcast or from the Investor Relations section of kind of first website.
None: Before we get started please note that except with regard to historical information statements made in this conference call may constitute forward looking statements within the meaning of the federal securities laws, including statements relating to trends the company's operations and financial results and the business and the products of the company and its.
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None: Actual results may differ materially from the results anticipated in these forward looking statements due to various risks and uncertainties underlying our forward looking statements as described from time to time in conifer's filings with the SEC, including our latest Form 10-K and subsequent reports.
<unk>, specifically disclaims any obligation to update or revise any forward looking statements whether as a result of new information future developments or otherwise. In addition, a replay of this call will be provided through a link on the Investor Relations section of our website.
Brian Joseph Roney: In addition, a replay of this call will be provided through a link on the Investor Relations section of our website. During this call, we'll also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included when possible in our earnings release and our historical SEC filing. Statutory accounting data is prepared in accordance with statutory accounting rules and is therefore not reconciled to GAAP.
None: During this call. We'll also discuss non-GAAP financial measures as defined by SEC regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included when possible in our earnings release, and our historical SEC filings.
None: Tori accounting data is prepared in accordance with statutory accounting rules and is therefore not reconciled to GAAP, we will conduct a Q&A session. After management's prepared remarks. This morning with that I'll turn the call over to Nick Pickoff, Our Chief Executive Officer Nick.
Nicholas James Petcoff: We will conduct a Q&A session after management's prepared remarks this morning. With that, I'll turn the call over to Nick Petcoff, our Chief Executive Officer. Nick?
Nicholas James Petcoff: Thanks, Brian, and good morning, everyone. Also on the call with us today is our CFO, Harold Meloche. As we close the chapter on 2023, I want to take a moment to provide some insight into the numbers we've reported for the full year. The absolute majority of our total reported loss was actually realized in the fourth quarter alone and was the result of a strategic decision on our part.
Nick Pickoff: Thanks, Brian and good morning, everyone also on the call with US today is our CFO Harold Marsh.
As we close the chapter on 2023, I wanted to take a moment to provide some insight into the numbers we've reported for the full year.
Nick Pickoff: The absolute majority of our total reported loss was actually realized in the fourth quarter alone and was the result of a strategic decision on our part.
Nick Pickoff: In the fourth quarter, we made the conscious decision to further strengthen our overall reserves by fully booking to our outside actuaries point estimate.
Nicholas James Petcoff: In the fourth quarter, we made the conscious decision to further strengthen our overall reserves by fully booking to our outside actuaries' point estimates. Given the magnitude of the financial impact, this decision was not taken lightly. But we do believe it was prudent to ensure the long-term stability of our company and to protect against further development in the future. Another factor affecting financial performance during the year was the impact of convective storms on our personal lines book of business in Oklahoma, in particular. Our Texas Personal Lines book also saw storms in the air, but it generally performed much better overall.
Nick Pickoff: Given the magnitude of the financial impact this decision was not taken lightly but.
Nick Pickoff: But we do believe it was prudent to ensure the long term stability of our company and to protect against further development in the future.
Nick Pickoff: Another factor affecting financial performance during the year was the impact of convective storms on our personal lines book of business in Oklahoma in particular.
Our Texas personal lines book also saw storms in the air but generally performed much better overall.
Nicholas James Petcoff: As a result, even after several solidly performing years prior, we made the decision to reduce the overall storm risk and non-renew our Oklahoma book, which is now in runoff. As for personal lines going forward, we do expect to continue underwriting the low-valued homeowners business written in Texas and in the Midwest. These regions have proven to be reliable sources of revenue for our company, and we recognize the importance of maintaining our presence in these markets. We remain committed to serving the needs of homeowners in these regions by providing them with reliable and affordable insurance coverage. We believe that by continuing to underwrite profitable business in Texas and the Midwest, we can remain well-positioned for long-term success. For the full year 2023, our personal lines production was roughly 26% of total premiums written, with the remaining 74% of premium coming from commercial lines.
Nick Pickoff: As a result, even after several solidly performing years. Prior we made the decision to reduce the overall storm risk and non renew our Oklahoma book, which is now in runoff.
Nick Pickoff: As for personal lines going forward, we do expect to continue underwriting the low valued homeowners business written in Texas and in the Midwest.
Nick Pickoff: These regions have proven to be reliable sources of revenue for our company and we recognize the importance of maintaining our presence in these markets.
We remain committed to serving the needs of homeowners in these regions by providing them with reliable and affordable insurance coverage.
Nick Pickoff: We believe that by continuing to underwrite profitable business in Texas and the Midwest, We can remain well positioned for long term success.
Nick Pickoff: For the full year 2023, our personal lines production was roughly 26% of total premiums written but the remaining 74% of premium coming from commercial lives.
Nicholas James Petcoff: As for commercial lines, we have made a significant strategic shift in revenue recognition models in 2023 and beyond. Whereas, in years past, we had employed a risk retention model utilizing our operating insurance companies to write and retain underwriting risk for commercialized premium, we have moved to a production-based revenue model through our wholly owned Managing General Agency, Conifer Insurance Services, or CIS. With that in mind, for commercialized production, we have decided to transition away from the limitations of a carrier-based revenue model and instead embrace a managing general agency production-based revenue approach. This shift represents a fundamental change in how we do business, and it is one that we believe will position us for long-term success and sustainability. Under this new model, starting in the second quarter of 2024, substantially all of our commercial lines business will be directly written by third-party insurers with AMS ratings of A- or better.
As for commercial lines, we have made a significant strategic shift in revenue recognition models in 2023 and beyond.
Nick Pickoff: Whereby in years past, we had employed a risk retention model utilizing our operating insurance companies to write entertain underwriting risks for our commercial lines premium we have just moved to a production based revenue model through our wholly owned managing General agency Conifer insurance services or C. I S.
Nick Pickoff: With that in mind for our commercial lines production, we have decided to transition away from the limitations of a carrier based revenue model and instead embraced a managing general agency production based revenue approach.
Nick Pickoff: This shift represents a fundamental change in how we do business and it is one that we believe will position us for long term success and sustainability.
Nick Pickoff: Under this new model starting in the second quarter of 2020 for substantially all of our commercial lines business will be directly written by third party insurers with a M best ratings of AA minus or better.
Nick Pickoff: Utilizing third party a rated capacity providers for our MGA produced business, who will provide a much broader reach for our existing profitable programs.
Nicholas James Petcoff: Utilizing third-party A-rated capacity providers for our MGA-produced business will provide a much broader reach for existing profitable programs. Further, it will empower us to ensure a sustainable business model going forward, one that is more focused on commission revenue and less on risk retention through our subsidiary carriers. When looking to the future and across the insurance landscape, it has become increasingly clear that we need to adapt to a production-based world in order to thrive in a rapidly changing market. With that in mind, as outlined in several press releases earlier this week, we are pleased to partner with both Palomar and Accelerant to provide A-rated paper to our commercial lines insureds going forward. Both of these partners will allow us to better meet our customers' overall needs and extend our reach in the profitable markets that we serve best.
Nick Pickoff: Further it will empower us to ensure a sustainable business model going forward. One that is more focused on commission revenue and less on risk retention through our subsidiary carriers.
Nick Pickoff: When looking to the future and across the insurance landscape. It has become increasingly clear that we need to adapt to a production based world in order to thrive in a rapidly changing market.
Nick Pickoff: With that in mind as outlined in several press releases earlier. This week, we are pleased to partner with both Palomar and accelerant to provide a rated paper to our commercial lines insurance going forward.
Nick Pickoff: Both of these those partners will allow us to better meet our customers' overall needs and extend our reach in the profitable markets that we serve best.
Nicholas James Petcoff: I want to assure our shareholders, policyholders, and partners that this transition has been managed thoughtfully and responsibly. We are working closely with all stakeholders to ensure a smooth and seamless transition, minimizing any disruptions to our operations, and maintaining the high standards of service and integrity that remain our company's hallmark. Thank you for your continued support as we embark on this exciting new chapter in Conifer's journey. Our commitment to excellence, integrity, and transparency continues to drive every decision we make. And with that, I'll pass the call over to Harold to discuss the numbers. Harold? Thank you.
Nick Pickoff: Wanted to assure our shareholders policyholders and partners that this transition has been managed thoughtfully and responsibly.
Nick Pickoff: We are working closely with all stakeholders to ensure a smooth and seamless transition.
Nick Pickoff: Minimizing any disruptions to our operations and maintaining the highest standards of service and integrity that remain our company's hallmark. Thank.
Nick Pickoff: Thank you for your continued support as we embark on this exciting new chapter in Conifer's journey.
Nick Pickoff: Our commitment to excellence integrity and transparency continues to drive every decision, we make and with that I'll pass the call over to Harold to discuss the numbers.
Harold James Meloche: Thank you, Nick. I'll provide a brief overview of the financial results, and I encourage investors to review our filings and presentation on the company's website for greater detail.
Harold James Meloche: Thank you Nick I will provide a brief overcast of the financial results and I encourage investors to review our filings and presentation on the company's website for greater detail.
Harold James Meloche: With Nick having detailed the premium breakout, I will focus on the underwriting results. For the year 2023, our overall combined ratio is 135% compared to 122% during the same period last year. The accident-year combined ratio for the fourth quarter was 132% and 114% for the full year 2023. The expense ratio for the full year of 2023 was 37%, down from 38% for the full year of 2022 and nearly reaching our target expense ratio of 35%. Net investment income was $1.4 million during the fourth quarter, up 27% from $1.1 million in the prior year period. Our investments remain conservatively managed, with the vast majority of our investable assets in fixed income securities, with an average credit quality of AA+, an average duration of 2.9 years, and a growing tax equivalent yield of 3.3%.
Harold James Meloche: But <expletive> having detailed the premium breakout.
Harold James Meloche: I will focus on the underwriting results.
Harold James Meloche: For the year 2023, our overall combined ratio was 135% compared to 122% during the same period last year.
Harold James Meloche: The accident year combined ratio for the fourth quarter was 132% and 114% for the full year 2023.
Harold James Meloche: The expense ratio for the full year of 2023 was 37% down from 38% for the full year of 2022, and nearly reaching our target expense ratio of 33 excuse me 35%.
Harold James Meloche: Net investment income was $1 $4 million during the fourth quarter up 27% from $1 1 million in the prior year period.
Harold James Meloche: Our investments remain conservatively managed with the vast majority of our investable assets in fixed income securities with an average credit quality of double a plus an average duration of two nine years and a growing tax equivalent yield of three 3%.
Overall, the company reported a net loss of $19 $5 million or $1 59 per share for the fourth quarter and compared to a net income of $2 1 million or <unk> 17 per share in the prior year period.
Harold James Meloche: Overall, the company reported a net loss of $19.5 million, or $1.59 per share, for the fourth quarter, and compared to a net income of $2.1 million, or $0.17 per share, in the prior year period. The company also reported an adjusted operating loss of $19.5 million, or $1.59 per share, compared to an adjusted operating loss of $1.3 million, or $0.10 per share, in the prior year period. Moving to the balance sheet, total assets were $312 million at quarter end, with cash and total investments of $156 million.
Harold James Meloche: The company reported an adjusted operating loss of $19 5 million or $1 59 per share compared to an adjusted operating loss of $1 3 million or.
Harold James Meloche: Or <unk> 10 per share in the prior year period.
Harold James Meloche: Moving to the balance sheet total assets were $312 million at quarter end.
With cash and total investments of $156 million.
Nicholas James Petcoff: And with that, I'll turn it back over to Nick for his closing remarks. Thanks, Harold.
Harold James Meloche: And with that I'll turn it back over to Nick for closing remarks.
Nick Pickoff: Thanks Harold.
Nicholas James Petcoff: In closing, I want to emphasize that as we move forward, I remain confident in Conifer's ability to deliver long-term value to our shareholders. And with that, I'd like to invite any questions you may have. Operator?
Nick Pickoff: In closing I want to emphasize that as we move forward I remain confident in <unk> ability to deliver long term value to our shareholders.
Nick Pickoff: And with that I'd like to invite any questions you may have operator.
We will now begin the question and answer session.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. There appear to be no questions at this time, so this concludes our question and answer session. I would like to turn the conference back over to Nick Petcoff for any closing remarks.
None: To ask a question you May Press Star then one on your Touchtone phone.
None: If you are using a speakerphone please pick up your handset before pressing the keys.
None: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
None: At this time, we will pause momentarily to assemble our roster.
None: There appear to be no questions at this time, which concludes our question and answer session.
None: I would like to turn the conference back over to Nick Petco for any closing remarks.
Yeah.
Nicholas James Petcoff: Thank you. We appreciate your time and interest in the company and invite anyone to reach out to us with any questions that you may have. We appreciate your time today.
Nicholas James Petcoff: Thank you. We appreciate your time and interest in the company and invite anyone to reach out to us with any questions that you may have I. Appreciate your time today. Thank you.
None: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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