EX-99.1 2 cnfr-ex99_1.htm EX-99.1 EX-99.1

 

img218339982_0.jpg 

News Release

 

For Further Information:

Jessica Gulis, 248.559.0840

ir@cnfrh.com

 

Conifer Holdings Reports 2024 First Quarter Financial Results

Company to Host Conference Call at 8:30 AM ET on Wednesday, May 15, 2024

 

Troy, MI, May 14, 2024 – Conifer Holdings, Inc. (Nasdaq: CNFR) (“Conifer” or the “Company”) today announced results for the first quarter ended March 31, 2024.

 

First Quarter 2024 Financial Highlights (compared to the prior year period)

•
Combined ratio was 96.7%, an improvement of 2.8 percentage points from Q1 2023
•
Expense ratio improved 2.6 percentage points to 34.7%
•
Net investment income increased 18.7% over the prior year period to $1.6 million
•
Net income allocable to common shareholders of $74,000, or $0.01 per share, based on 12.2 million weighted average shares outstanding

 

Management Comments

Nick Petcoff, CEO of Conifer, commented, "We are pleased to see the early signs of progress resulting from our strategic shift away from a risk-bearing carrier revenue model, toward wholesale agency,

production-based revenue. Results to date have been encouraging, and we are proud to report a profitable first quarter for Conifer. ”

 

 

 

 

Conifer Holdings, Inc. Page 2

May 14, 2024

 

Strategic Shift to Non-Risk Bearing Revenue

As previously announced, Conifer made the strategic decision to shift its revenue model to focus on a wholesale agency, production-based approach beginning in 2024. Progress to date has been steady, and the Company’s return to profitability in the first quarter of 2024 underscores the effectiveness of this strategic initiative.

 

Based on initial indications, Conifer ultimately plans to redirect all commercial gross written premium through its wholly owned managing general agency (“MGA”), Conifer Insurance Services (“CIS”). Accordingly, the Company anticipates that substantially all commercial lines business will be directly written by third-party insurers with A.M. Best ratings of A- or better by the end of the second quarter of 2024.

 

Conifer made considerable progress during the first quarter of 2024 in directing premium to capacity providers for coverage across multiple lines of business. Furthermore, the Company has ramped up transfer of cannabis premium to capacity providers and expects to ultimately shift all premium for this line of business to its capacity partners as well. The Company anticipates that this and other capacity initiatives will lead to substantially increased premiums placed for its agency segment and generate greater commission revenue over time.

 

The Company does plan to continue retaining and underwriting low-value homeowners business in Texas and the Midwest. As detailed in the Personal Lines results overview below, premium for the first quarter of 2024 increased 59.6% from the prior year period. Moreover, this line of business has demonstrated strong performance, leading to a combined ratio of 83.0% for the quarter.

 

 

 

 

Conifer Holdings, Inc. Page 3

May 14, 2024

 

2024 First Quarter Financial Results Overview

 

 

At and for the
Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

%
Change

 

 

 

(dollars in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

24,313

 

 

$

36,214

 

 

 

-32.9

%

Net written premiums

 

 

15,931

 

 

 

18,342

 

 

 

-13.1

%

Net earned premiums

 

 

16,887

 

 

 

21,952

 

 

 

-23.1

%

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

1,552

 

 

 

1,307

 

 

 

18.7

%

Change in fair value of equity securities

 

 

43

 

 

 

694

 

 

 

-93.8

%

 

 

 

 

 

 

 

 

 

 

Net income (loss) allocable to common shareholders

 

 

74

 

 

 

1,001

 

 

**

 

Net income (loss)
per share, diluted

 

$

0.01

 

 

$

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating income
(loss)*

 

 

188

 

 

 

307

 

 

**

 

Adjusted operating income (loss) per share,
diluted*

 

$

0.02

 

 

$

0.03

 

 

**

 

 

 

 

 

 

 

 

 

 

 

Book value per common
share outstanding

 

$

0.21

 

 

$

1.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic and
diluted

 

 

12,222,881

 

 

 

12,215,849

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

 

 

 

 

Loss ratio (1)

 

 

62.0

%

 

 

62.2

%

 

 

 

Expense ratio (2)

 

 

34.7

%

 

 

37.3

%

 

 

 

Combined ratio (3)

 

 

96.7

%

 

 

99.5

%

 

 

 

 

2024 First Quarter Gross Written Premium

Gross written premiums decreased 32.9% in the first quarter of 2024 to $24.3 million, compared to

$36.2 million in the prior year period. This decrease reflects the Company’s planned decision to reduce premium leverage on our operating subsidiaries and focus on non-risk bearing revenue.

 

 

 

 

Conifer Holdings, Inc. Page 4

May 14, 2024

 

Commercial Lines Financial and Operational Review

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

12,762

 

 

$

28,975

 

 

 

-56.0

%

Net written premiums

 

 

8,287

 

 

 

12,241

 

 

 

-32.3

%

Net earned premiums

 

 

8,797

 

 

 

17,123

 

 

 

-48.6

%

 

 

 

 

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

 

 

 

 

Loss ratio

 

 

76.5

%

 

 

61.4

%

 

 

 

Expense ratio

 

 

32.7

%

 

 

36.2

%

 

 

 

Combined ratio

 

 

109.2

%

 

 

97.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution to combined
   ratio from net (favorable)
   adverse prior year
   development

 

 

0.5

%

 

 

(4.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident year combined
   ratio (1)

 

 

108.7

%

 

 

102.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company’s commercial lines of business represented 52.5% of total gross written premium in the first quarter of 2024. As noted above, premium decreased considerably year over year as Conifer executed its planned shift over to its commission-based revenue model with our managing general agency, CIS. For example, as part of the planned reduction in premiums written, substantially all of the Security Guard program is now no longer being written on Conifer paper.

 

 

 

 

Conifer Holdings, Inc. Page 5

May 14, 2024

 

Personal Lines Financial and Operational Review

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

11,551

 

 

$

7,239

 

 

 

59.6

%

Net written premiums

 

 

7,104

 

 

 

6,101

 

 

 

16.4

%

Net earned premiums

 

 

8,090

 

 

 

4,829

 

 

 

67.5

%

 

 

 

 

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

 

 

 

 

Loss ratio

 

 

46.2

%

 

 

65.3

%

 

 

 

Expense ratio

 

 

36.8

%

 

 

40.8

%

 

 

 

Combined ratio

 

 

83.0

%

 

 

106.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution to combined
   ratio from net (favorable)
   adverse prior year
   development

 

 

(6.3

)%

 

 

(8.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident year combined
   ratio

 

 

89.3

%

 

 

114.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal lines, representing 47.5% of total gross written premium for the quarter, consists primarily of low-value dwelling homeowner’s insurance in Texas and the Midwest.

Personal lines gross written premium increased 59.6% from the prior year period to $11.6 million for the first quarter of 2024, led by growth in the Company’s low-value dwelling line of business in Texas.

Conifer was pleased to report strong performance in the premium it chose to retain: Personal Lines business posted a combined ratio of 83.0% for the first quarter of 2024. This represents an improvement of more than 23 percentage points compared to the prior year period.

 

 

 

 

Conifer Holdings, Inc. Page 6

May 14, 2024

 

Combined Ratio Analysis

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

 

Loss ratio

 

 

62.0

%

 

 

62.2

%

Expense ratio

 

 

34.7

%

 

 

37.3

%

Combined ratio

 

 

96.7

%

 

 

99.5

%

 

 

 

 

 

 

 

Contribution to combined ratio from net (favorable)

 

 

 

 

 

 

adverse prior year development

 

 

(2.7

)%

 

 

(5.6

)%

 

 

 

 

 

 

 

Accident year combined ratio

 

 

99.4

%

 

 

105.1

%

 

 

 

 

 

 

 

Combined Ratio:

The Company's combined ratio was 96.7% for the three months ended March 31, 2024, an improvement of 2.8 percentage points compared to the prior year period. This strong performance serves as a testament to the effectiveness of the company's risk mitigation strategies and its commitment to sustained profitability.

Loss Ratio:

The Company’s losses and loss adjustment expenses were $10.5 million for the first quarter ended March 31, 2024, down from $13.7 million in the prior year period. This resulted in a loss ratio of

62.0% for the first quarter of 2024, down slightly from the same period in 2023.

Expense Ratio:

The expense ratio demonstrated continued improvement in the first quarter, reflecting the Company’s sustained emphasis on expense management: the expense ratio for the first quarter of

2024 was 34.7%, down from 37.3% in the prior year period and below the Company’s near-term target of 35%.

Net Investment Income

Net investment income was $1.6 million for the quarter ended March 31, 2024, compared to

$1.3 million in the prior year period.

Change in Fair Value of Equity Securities

During the quarter, the Company reported a small gain from the change in fair value of equity investments of $43,000, compared to a $694,000 gain in the prior year period.

Net Income (Loss) allocable to common shareholders

The Company reported net income allocable to common shareholders of $74,000, or $0.01 per share, for the first quarter of 2024.

 

 

 

 

Conifer Holdings, Inc. Page 7

May 14, 2024

 

Adjusted Operating Income (Loss)

Adjusted operating income was $188,000, or $0.02 per share, for the first quarter ended March 31, 2024. See Definitions of Non-GAAP Measures.

Earnings Conference Call with Accompanying Slide Presentation

The Company will hold a conference call/webcast on Wednesday, May 15, 2024, at 8:30 a.m. ET to discuss results for the first quarter ended March 31, 2024.

Investors, analysts, employees and the general public are invited to listen to the conference call via:

Webcast: On the Event Calendar at IR.CNFRH.com

Conference Call: 844-868-8843 (domestic) or 412-317-6589 (international)

The webcast will be archived on the Conifer Holdings website and available for replay for at least one year.

About Conifer Holdings

Conifer Holdings, Inc. is a Michigan-based property and casualty holding company. Through its subsidiaries, Conifer offers specialty insurance coverage for both commercial and personal lines, marketing through independent agents in all 50 states. The Company is traded on the Nasdaq Global Market under the symbol CNFR. Additional information is available on the Company's website at www.ir.cnfrh.com.

Definitions of Non-GAAP Measures

Conifer prepares its public financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Statutory data is prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners' (NAIC) Accounting Practices and Procedures Manual, and therefore is not reconciled to GAAP data.

We believe that investors’ understanding of Conifer’s performance is enhanced by our disclosure of adjusted operating income. Our method for calculating this measure may differ from that used by other companies and therefore comparability may be limited. We define adjusted operating income (loss), a non-GAAP measure, as net income (loss) excluding: 1) net realized investment gains and losses, 2) change in fair value of equity securities and 3) Other gains (losses). We use adjusted operating income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance.

 

 

 

 

Conifer Holdings, Inc. Page 8

May 14, 2024

 

Forward-Looking Statement

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance, and include Conifer’s expectations regarding premiums, earnings, its capital position, expansion, and growth strategies. The forward-looking statements contained in this press release are based on management’s good-faith belief and reasonable judgment based on current information. The forward-looking statements are qualified by important factors, risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in the forward-looking statements, including those described in our form 10-K (“Item 1A Risk Factors”) filed with the SEC on April 1, 2024 and subsequent reports filed with or furnished to the SEC. Any forward-looking statement made by us in this report speaks only as of the date hereof or as of the date specified herein. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable laws or regulations.

 

 

 

 

Conifer Holdings, Inc. Page 9

May 14, 2024

 

Reconciliations of adjusted operating income (loss) and adjusted operating income (loss) per share:

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

(dollar in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

Net income (loss)

 

$

231

 

 

$

1,001

 

Less:

 

 

 

 

 

 

Change in fair value of equity securities

 

 

43

 

 

 

694

 

Impact of fincome tax expense (benefit) from adjustments *

 

 

-

 

 

 

-

 

Adjusted operating income (loss)

 

$

188

 

 

$

307

 

 

 

 

 

 

 

 

Weighted average common shares, diluted

 

 

12,222,881

 

 

 

12,215,849

 

 

 

 

 

 

 

 

Diluted income (loss) per common share:

 

 

 

 

 

 

Net income (loss)

 

$

0.02

 

 

$

0.08

 

Less:

 

 

 

 

 

 

Change in fair value of equity securities

 

 

-

 

 

 

0.05

 

Impact of income tax expense (benefit) from adjustments *

 

 

-

 

 

 

-

 

Adjusted operating income (loss), per share

 

$

0.02

 

 

$

0.03

 

 

 

 

 

 

 

 

 

 

* The Company has recorded a full valuation allowance against its deferred tax assets as of March 31, 2024 and March 31, 2023, respectively. As a result, there were no taxable impacts to adjusted operating income from the adjustments to net income (loss) in the table above after taking into account the use of NOLs and the change in the valuation allowance.

 

 

 

 

Conifer Holdings, Inc. Page 10

May 14, 2024

 

 

 

March 31

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Investment securities:

 

 

 

 

 

 

Debt securities, at fair value (amortized cost of $134,219 and $135,370,
   respectively)

 

$

120,534

 

 

$

122,113

 

 

 

 

 

 

 

 

Equity securities, at fair value (cost of $2,374 and $2,385, respectively)

 

 

2,387

 

 

 

2,354

 

Short-term investments, at fair value

 

 

23,724

 

 

 

20,838

 

Total investments

 

 

146,645

 

 

 

145,305

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

17,316

 

 

 

11,125

 

Premiums and agents' balances receivable, net

 

 

24,056

 

 

 

29,369

 

Receivable from Affiliate

 

 

1,155

 

 

 

1,047

 

Reinsurance recoverables on unpaid losses

 

 

73,807

 

 

 

70,807

 

Reinsurance recoverables on paid losses

 

 

5,075

 

 

 

12,619

 

Prepaid reinsurance premiums

 

 

20,486

 

 

 

28,908

 

Deferred policy acquisition costs

 

 

5,663

 

 

 

6,285

 

Other assets

 

 

6,875

 

 

 

6,339

 

Total assets

 

$

301,078

 

 

$

311,804

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Unpaid losses and loss adjustment expenses

 

$

175,826

 

 

$

174,612

 

Unearned premiums

 

 

55,231

 

 

 

65,150

 

Reinsurance premiums payable

 

 

2,399

 

 

 

246

 

Debt

 

 

24,946

 

 

 

25,061

 

Funds held under reinsurance agreements

 

 

24,211

 

 

 

24,550

 

Premiums payable to other insureds

 

 

8840

 

 

 

13,986

 

Accounts payable and accrued expenses

 

 

7,066

 

 

 

5,310

 

Total liabilities

 

 

298,519

 

 

 

308,915

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

Preferred stock, no par value (10,000,000 shares authorized; 1,000 issued and outstanding, respectively)

 

 

6,000

 

 

 

6,000

 

Common stock, no par value (100,000,000 shares authorized;
   12,222,881 issued and outstanding, respectively)

 

 

98,132

 

 

 

98,100

 

Accumulated deficit

 

 

(86,609

)

 

 

(86,683

)

Accumulated other comprehensive income (loss)

 

 

(14,964

)

 

 

(14,528

)

Total shareholders' equity

 

 

2,559

 

 

 

2,889

 

Total liabilities and shareholders' equity

 

$

301,078

 

 

$

311,804

 

 

 

 

 

Conifer Holdings, Inc. Page 11

May 14, 2024

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Revenue and Other Income

 

 

 

 

 

 

Premiums

 

 

 

 

 

 

Gross earned premiums

 

$

34,232

 

 

$

34,294

 

Ceded earned premiums

 

 

(17,345

)

 

 

(12,342

)

Net earned premiums

 

 

16,887

 

 

 

21,952

 

Net investment income

 

 

1,552

 

 

 

1,307

 

Change in fair value of equity securities

 

 

43

 

 

 

694

 

Agency commission income

 

 

4,336

 

 

 

430

 

Other income

 

 

260

 

 

 

196

 

Total revenue and other income

 

 

23,078

 

 

 

24,579

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

Losses and loss adjustment expenses, net

 

 

10,520

 

 

 

13,713

 

Policy acquisition costs

 

 

7,013

 

 

 

4,721

 

Operating expenses

 

 

4,495

 

 

 

4,279

 

Interest expense

 

 

877

 

 

 

686

 

Total expenses

 

 

22,905

 

 

 

23,399

 

 

 

 

 

 

 

 

Income (loss) before equity earnings in Affiliate and
   income taxes

 

 

173

 

 

 

1,180

 

Equity earnings in Affiliate, net of tax

 

 

58

 

 

 

(179

)

Income tax expense (benefit)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

Net income (loss)

 

 

231

 

 

 

1,001

 

Preferred stock dividends

 

 

157

 

 

 

-

 

Net income (loss) allocable to common shareholders

 

 

74

 

 

 

1,001

 

 

 

 

 

 

 

 

Earnings (loss) per common share,
   basic and diluted

 

$

0.01

 

 

$

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares
   outstanding, basic and diluted

 

 

12,222,881

 

 

 

12,215,849