CNFR - Earnings call transcript Q4 2017

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Operator

Good morning and welcome to the Conifer Holdings Fourth Quarter 2017 Investor Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Adam Prior of the Equity Group. Please go ahead.

Adam Prior

Thank you and good morning everyone. fourth results XXXX of the its yesterday. market issued quarter after financial close Conifer

website, can presentation ir.cnfrh.com, the company’s the On you as discussion today. as management’s earnings find well the accompanies slide that here release of copies

the presentation selected If webcast, find hand on to in the you easier view, slide of via the you right are at large slides webcast which may looking read are page. that the can side be

and forward-looking including information, except described subsidiaries. to as disclaims as to and statements a Conifer SEC. may or Actual that and respect has with conference the uncertainties, specifically result of trends, results federal those asked the meaning Before and in information, that whether made operations to of differ result we any the from including revise otherwise. of get Conifer’s any materially update relating the from was the Conifer statements financial note historical with obligation the data filings in reconciled the to non-GAAP news statements, business of future a provided accounting started, accounting call developments accordance risks is statements company those these forward-looking release. results I its may is measures within the results with in statements products new this anticipated Statutory with from of company’s in therefore not Also laws, constitute the securities prepared statutory or and reconciliation rules forward-looking GAAP. and company time-to-time the

the morning. Chairman like With session Mr. after Q&A now prepared Executive call that, turn Go and Officer. Jim. Chief over would I Petcoff, ahead, to conduct this remarks Jim to will a We management’s

Jim Petcoff

Thank you, everyone. and Adam morning good

is Joining from on Roney. and Meloche management Brian me call and the the Petcoff, Nick Andy Harold team today

say returned generally half they to overall performance XXXX. At solid quarter validate the we second points initiatives Conifer, ratio. Our XX reported on improved I improvement a of implemented significantly we and proud during of were combined the our an profitability to fourth and results that combined. am

the continued our We percentage quarter. our lines performance, also posted ratio strong mainly improvement by These XX alone hospitality the underwriting of were improvements and driven security from loss point for commercial business. guards a in

XXXX. Going forward, remain lines. better improving we focus like our to operating our We a capabilities profit and in to to remain believe With an continue growth that, conservative rate will we I feel profitable the we near-term. that would the call to hand will our Nick? to underwriting on in performing markets. confident breakdown our With underwriting over individual generating We of expect business overall. be we committed mix, our for Nick

Nick Petcoff

we continued measures have we Jim. to discussing our to to I long-term for begin the In lines shift by like you, the mix specialty proactive business groundwork Thank taken on focusing commercial our while more fourth Conifer’s continued quarter, to profitable our success. niche lay market. financial would the

XXXX. earned selection add allows With increased can same partially growth period. in personal X% we premium of decline offsetting premium the returns cycles. market million shareholder lines impact generates earned lines experience XX% to more returns We over the quarter of selectively was underwriting premium premiums Years an we more $XX coupled fourth better years over lines and of these more strong consistent as net management. risk of emphasize tailored profitable increased in the commercial large. the to with can our where non-commoditized writing claims share, business, of This our earned achieve fourth at planned that business market XX% earned certain importantly, through couple time written gross lines quarter. is net positively value just to represented our in and can premiums but personal mind, the continue experience net increasing us XX% where Commercial total collective with to lines our XX% deemphasizing bring in more quarter and attractive business is prudent we drive almost for to while help versus competition lines over last commercial in unprofitable net our and industry commercial more bear Overall, in mix of the that select We shift net underwriting, by across believe lines.

pleased and our taverns. for are with commercial and profitable the most remain in premium lines Our quarter, performance of underwriting we the especially hospitality business bars restaurants,

security business to continued quick-service us. perform well book restaurant our for and guard Our have also

these underwriting for we excess with that been believe flexibility, line a and and value from surplus have our proposition We distinct markets create can years, our is we peers.

but and continued markets existing XXXX, we all penetration in expect by our entering expansion book As from our necessarily not we by states. our through geographic commercially markets, of in growth move of XX commercial greater new business, continuing specialty

Now but underperformance to through was losses, homeowners corporate the development a Florida we quarter not XXXX the The XXXX, will protect on experienced secured industry personal of without years which from an we all contract adverse executed Florida the of a assignment horizon. XXXX. by of benefits mainly claims of against business. due the as line adverse third development political inflated business accident includes trend lines, unfavorable for in homeowners, due of loss to The only lines whole cover, the solution primarily continued to the executed

in Florida actively to non-renewing addition assumption homeowners cover, we In the adverse XXXX. began book February of development our

personal are result improve for At XXXX, personal this near expect lines overall wind written we premiums time, a as wind going will we for reduce reducing going wind a from of fourth book Conifer to in generally gross as At the expect profitability This and from lines our overall overall production efficient expect in more gross lines majority in premium and believe more benefit should in personal lines, earn coming cash forward. of them significantly same risk creates roughly continued X% in $X quarter By to Reduction we growth Conifer of the reduction non-renewal long-term recap as production total of our we of the help exposure the the our written personal premiums in well. offset can buy But to way book. for spend our lines year planned decline as XX% so a are commercial help lines reduce to The our reduce exposed to as significant our providing commercial of spend. decrease prior allow we decreased terms personal just top planned us premiums the that reducing the process, opportunity line reinsurance the of catastrophe we Florida, footprint added personal forward. our should whole. reinsurance a Conifer’s wind-exposed profitable a over reinsurance of whole write in while million compared lines We create retain to the de-risking premium this with term. period. exposure

the Harold over the brief hand Meloche of discussion call a will financials. for to I Now,

Harold Meloche

Thank you, Nick.

but I release, few sheet during the questions results fully highlights, welcome Q&A. our As briefly any detailed information balance is over will go specific press and in financial a

an gross prior to mentioned, million $XX.X premiums ceded increased in year million same Nick premiums for saw the the and both We the net compared As premiums the in to period. increase at earned time our for fourth X% lower earned $XX.X quarter quarter.

The XXXX has of XXX.X% loss Jim of in The leaving XXXX. on reduced the coverage. company’s adjustment the compared event the in ratio due XX.X% of the highlighted, of Conifer’s combined same to losses million adverse the fourth significantly to for for fourth compared million been period In the As accident in prior XXXX. to ratio $XX and expenses impact company’s million the benefits $X.X were company quarter the losses year the cover development. reserves of $XX.X ceded quarter quarter was in million fourth of development $XX loss XXXX, under ADC, the future of

the reported to Conifer result, prior a considerably XX% compared period. of year ratio As loss XX% improved in a

expense The fourth containment was due XXXX and costs higher the acquisition to XX% to in lower period, efforts, cost improvement continued a the in compared solid quarter the decrease earned premiums. Our prior year policy largely of points. basis was ratio of XX% XXX

the net loss quarter, a a compared net $X.X of or fourth XXXX. of company the reported of For income per to share per share $XXX,XXX $X.XX $X.XX fourth million quarter or the in

of year million. We Regarding our average X.X%. X portfolio quality with securities, fixed of conservative and currently duration balance cash of investment the yield investments vast an years, maintained sheet, approximately $XXX average equivalent assets $XXX majority total of a credit a an with AA, strategy million were and with tax our income total of at in end,

market managed per would December reflected million company’s that, valuation book We deferred the the have place throughout with our was did tax that objective or turn remarks. the back allowance deferred cycle. not with like tax in asset our in for protecting already, a XX, took valuation it conservatively against them full tax had end. capital represents impact to that At that closing assets value net year to XXXX XXXX, income. a was And share there investments Because changes allowance $X.X of book value materially and I $X.XX not over our against Jim the at

Jim Petcoff

Thank you, Harold.

is profitability to a fourth going quarter, of pleased room and were are for know with we in forward. we lot meet While prepared we there return improvement the those challenges to the

peers on we where discussed, outperformed our we our business niche within have to our towards focus the industry. historically Nick markets As continue mix

our and where continuing our focus generated upon growth we have specialty will in results. commercial underwriting acceptable largely Our markets, remain both personal,

generate ready the in to long-term. over income now, coming the And profitability we your take periods this expect are We underwriting Operator? and to questions. improved

Operator

Please comes The of first question James. Raymond from Instructions] ahead. go Doirin Carl [Operator

Carl Doirin

morning Thank the good taking Hi, for everybody. questions. you

order space. the of guess to reduction about I pretty And Just that give talk expect last to the slowed homeowner hurricanes wanted personal from over I given an you start with? mentioned possibly guess I be update when believe down quarter in the much off, us if on regulators can Florida to I sort and you and lines. the we could your planned that Florida that the

Jim Petcoff

question? going that our in reduction Andy, exposure. but I changed the handle the to take think am don’t let But order want you I Sure. to Andy it,

Andy Petcoff

did It possibility Yes, could. not. a it you that are There correct. was

for until as non-renewal has started X business February all was And continue and process throughout the on that projected, so will we homeowners and gone. the Florida it the assumption year

Carl Doirin

second beyond purposes? past carry for just would – for question more what Okay. And guess as modeling a I be my guess no look we rate – would normalized tax assuming loss I be XXXX and

Jim Petcoff

Andy?

Andy Petcoff

can I rate? find... Tax

Jim Petcoff

tax forward? the Was rate a question, was going there normalized

Carl Doirin

XXXX? beyond guess, I Well, Yes.

Andy Petcoff

Yes.

do have operating we a net quite So, few carry-forwards. loss

bottom our actually So few going DTAs years, to we we recognize the that are for to to no until basically real we have. see line are effect a tax able

we into say will I those So, after and tax would through rate that pre-tax well and probably tax we up. once effect XXXX, XXXX will as have a no carry be it then that to XX% will income use any basically

Carl Doirin

very That you good. Thank all was much. me. sounds it Okay, for

Operator

Bob The next Please question from ahead. go Boenning comes & Farnam of Scattergood.

Bob Farnam

Good more in question a hi, had you Yes, a lines. morning. of the maybe market for there. commercial I –

looking penetration loss versus Just the in get the the are wanted you security and of you trends to pricing are that the maybe hospitality know into and states what guards? kind some of in segments, to

Jim Petcoff

that. should handle Nick? Nick

Nick Petcoff

long the other where this the each states. history marketplace. would much operate in state expect penetrations than higher share will I think being we our home Yes, market distinctly vary in state, the have we markets Michigan, pretty and we Sure. in

are here to us for point high historical trajectory in I Michigan. share for We a that’s think a to and get achievable on market

like and We have been on expansions geographic Texas Colorado. focused certain

there that – have lot Michigan unique is market run-rate. a get will states, we we I Texas, particular, in market some but that to geography the that, those share still here that have also Michigan. think know in here is in a like don’t don’t to aspects much we larger we have things I there of ever and in are and

last growth. in could expect So, and and say yes, maybe we the high in penetration bar, RBT, Midwestern security high not seen And certain as performed our book, marketplace targeted XX in in and months high, to space retention or very but maybe those certain And while to us terms the for historical the to restaurant, others. on able well have is hospitality, other country. quite Florida are There in the risk and bar, tavern unique really the there particular, the pretty guess are performed with ability loss as areas and create rates in some we on for we of the loss on the have very states, some wind within large have Texas, of ripe the acceptable I more disruption in those ratios. But book the restaurant, Michigan we XX seeing both rates, end, tavern well renewals. guard been I’d the trends lines some as haven’t states maintaining of within achieve in historical states, that aspects states

good in hospitality business. classes markets class, And overall relative states about very the for underperformed take in ability to book. both of feel we in So, seeing the loss the to we has and particular are the rate that maybe ratios

Bob Farnam

likewise, trend would of you how in you do is that think pace the and is the loss excess that? So keeping pricing characterize trend or it

Nick Petcoff

of other in seeing that are that. have and kind that more In states the inflations muted and around much I’d expectation, higher excess than more you increase performed Yes. well. it’s say that trend the loss within as states slightly our performed are maybe pricing hasn’t in of

Bob Farnam

are last to okay. you as maybe that And expense from – scale you me you achieve? ratio trying an Right, guys question you up have is want, the scale get to

Jim Petcoff

from Well, be think we like away would but this in mid-XXs, that. is we a little are the Yes, we still to Jim. ways

Our the core on continues. expenses, expense acquisition costs initiatives both and on our

the resources get sub growth We of be our year. we expect in lines has still exposure our the and by the or the we XX to the But we in with growth growth. personal And the as and initiatives, our around end near-term XX Our expect mid-XXs. reallocate long-term, to slowed still to want increasing commercial. reducing

Bob Farnam

Right, great.

Okay, thanks.

Operator

the to questions Jim back session. are remarks. concludes no at for turn other conference our I This Petcoff There Instructions] [Operator time. this like over closing question-and-answer would to

Jim Petcoff

the just to the take for everybody and I us listen time want to to today taking thank call.

think and in think strategic I direction made change direction we that are we a have great I in headed a our forward. going

near-term, that to we growth somewhat we business, in entering in improve. experienced the expect As of next we expect to the lower our on profitability quarters, profitability couple of continue we markets I focus the our but have years, said than the will be recent are with and

you and the next for you thank to we time So, forward quarter. taking look to talking

Operator

now you today’s conference has presentation. attending The concluded. Thank for

may You disconnect. now

Conifer (CNFR) 3 Mar 182017 Q4 Earnings call transcript