CNFR - Earnings call transcript Q2 2019

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Operator

Good morning, and welcome to the Conifer Holdings Inc., Second Quarter 2019 Investor Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Adam Prior. Please go ahead.

Adam Prior

Thank you, and good morning, everyone. second 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 as management's earnings find well the accompanies slide that today. release of copies

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

except with and Before may started, that note company and that made asked statements has operations products constitute within the call I to the we meaning federal that respect subsidiaries. in business relating statements the of of and the get the its to including statements conference company's information, results historical financial the the company with this laws, trends, securities forward-looking and

result Conifer in Actual differ obligation the risks from or in filings in the these result results revise to uncertainties, Conifer's statements statements, from accounting and time including anticipated was materially new of disclaims news as GAAP. forward-looking is, Statutory any the not provided a is non-GAAP otherwise. those of reconciliation statutory as Conifer whether or described with information, specifically future measures a data time and results forward-looking update from accounting to reconciled to SEC. may release. accordance Also, a with any prepared developments of therefore, rules with

remarks management's morning. after We session prepared this will a conduct Q&A

With to ahead, Jim. and that, Jim go I'll Please the Officer. Chief turn call over Executive Chairman Mr. Petcoff,

James Petcoff

and everyone. Thank you, Adam. Thanks, good morning,

Meloche; and will today be Roney. management Petcoff; Nick Petcoff; from us Harold Andy Joining Brian

our a goals, of in as operating the milestones number but execute to entire reaching significant we make some quarter second did strategy. have our progress in on we we profitability accomplish of still terms short-term of Overall,

premium achieve scale top Conifer to our growth in place much and writing specialty on more in in and changes greater is line position selectively commercial in mix deliver business, largely focusing planned a the With better XXXX.

where on underwrite that solely Conversely, select seen in venues are into results, markets commercial we focused we we've select including can our expanding business from the geographic conditions profitably. where away claims challenging markets We're favorable exhibited have Florida. moving

of growth the To placement on the this capital shares approximately announced the of company's X.X the $X.XX. during small, proceeds acquisitions. segments. for core a we our specifically, support quarter, growth agency and to of We long-term specialty strategy, grow commercial to use intend better plan closing we accretive prepare of directly a these at common More to business execute company premium private in million price stock

on these looking by table. Results as potential are we place acquisitions attractive increased be we're acquisitions, analyzed peers. that drive leaving -- We making small that to long-term focusing agency premiums on increased But agency for on carriers significant we are focusing we other at to revenue garner the Conifer increased have bottom non-risk we and versus we our with commissions. generation the line realized revenue non-risk and that ROE is may reason small the

production that premium can have own this may that Also, books we from otherwise away the benefit placed of on added has retain the us. increasing strategy our been

our with greater operating remain management achieve our over to Coupled base we expense by premium company plans, earned and the first costs, to growth allowing overall committed absolute our reducing and growing efficiency agency time. premium

has our positive the consistent production growing of we're a relatively sustainable over help returns. largely been and years, changing to result commercial the past only has drive line profits right top this we committed but been and mix lines can towards business the will several to our deliver While way short-term base premium strong build in We markets believe this so a for profitability. long-term, shareholder right future ultimately

talk about and they'll it turn me closing I'll Nick? Harold, for some return over Nick the With remarks. let details, that, to and and

Nicholas Petcoff

Thank to to the compared $XX.X million X% in down prior million in premiums second quarter you, were Jim. $XX.X the gross year Overall, written period.

of Our $XX.X commercial written compared lines the business million represented slightly quarter the XXXX second XXXX. premiums second when to year-over-year decreased and total of XX% to gross quarter in of

As a quarter, the months in The ratio XXXX. XXX.X% quarter XX.X% lower combined net combined lines was commercial the result lines the premium for XXX.X%. the XX, of June ended and earned X year was commercial accident the for ratio

we that competitive conscious effort in as to down well were pressures as Florida. stemming very work from comp second to selectively the quarter a Premiums lost business largely in account our due write

to our our exposure commercial even our and we certain to by of growth plan, refine As within Florida-based repositioning business lines mix overall commercial continue reducing part further business.

our In saw classes small within our that group particularly business we RBC to we pursue lines, specifically, more our the most. growth in want strong markets and, commercial

we example, including comp. premium work and liability targeting For GL, liquor are more Michigan actively overall, property,

the As state. year is becoming plays production our Michigan fast number out, one

of policy most lines on existing new geographic the solid markets. business. and in new single-digit most to rate growth, are we across rate Overall, range larger auto for for certain commercial the continued expansion of see our increases Average middle- or and runway increases classes

touch personal lines. briefly on I'll Now

business ratio premium XXX% $X.X in almost personal lines premiums X% written the represented our the of The Our at million lines for in gross of quarter. combined QX remaining XXXX. was total personal

further and dwelling away wind-exposed drive results low-value and line improve move we personal services. through those further as significantly time premium to expect from more our over product We

low-value cycles. dwelling developing for focus to Texas continue several us growth we this relationships and in on has across our agency in our market products, those states. Historically, to complement for prospects Midwest helped the As

mix As clear write core business expansion our more we bottom to coupled with selective and the lines. is in goal transition of our line, focus on our this commercial specialty personal with a business continue

we potential we of profitability we we writing best premium all the As specialty business time. that underwriting our of where are refine production, regardless strongly see for believe over market,

the hand over a financials. Now the discussion call I'll Harold for Meloche to of

Harold Meloche

Nick. you, Thank

quick results, and it our investors for open the I'll we'll review to encourage review I provide about the quarterly information up for additional always, of filings then any questions. As a company.

was Conifer's prior quarter, we this XXX% -- XX-point In of the a quarter XXX% ratio were compared period. the reported gross loss and year ratio a to X.X% $XX.X compared period in XX.X% million, of second written the XXXX, to same loss down premiums in combined XX.X% for year-over-year.

net million earned Our $X.X was personal premiums were $X.X to XX%. due by the or lines, down XX% largely down million which or

to This to quarter, ratio prior slightly in XX% compared expense decreased period. year the the XX.X%

this see to commercial number especially as we net grow earned We our decline expect to in premiums, our continue lines.

to cost In addition, implemented efforts reduction lower as over ratio we a of time number the well. have

the quarter $XXX,XXX to period. in $X.X compared to prior this year Net investment income increased XX.X% million

a with credit conservatively yield In fixed investments quality managed of AA, duration X with are an securities Our majority second the income years X.X%. the and an of of of tax-equivalent average or of loss the to million quarter of compared $X.X share in year a net per company the reported loss XXXX, $X.X a net period. prior per share $X.XX of or $X.XX million average

Moving were assets quarter and to cash $XXX the million with total total million. of $XXX sheet, balance investments end, at

that per deferred allowance value reflected book tax We in share. not $X.XX end of share. of share the book of $X.XX Our $X.XX value. the and valuation quarter ADC share result at per assets was as was That represents against a per gain a per had deferred company's $X.XX a

And closing for like remarks. over I'd turn with Jim that, to back to it

James Petcoff

Harold Nick. and Thanks,

company our on the We with long-term benefit focused profitably this of shareholders. are growing solely

have and Conifer plan invest place the corporately to have agency grow we in to initiatives, over we put distribution personally solid the path, select to us our and continue help infrastructure premium that time. forward. in and mix including implement We right We initiatives us achieve and going profitable allow acquisitions as existing growth our manage business our will believe on

to and for With questions. I any that, the like go would to ask operator back

Operator

Instructions] question from Scott first [Operator you. go ahead. comes Our Please Thank Preston.

Scott Preston

Can hear me you okay? guys

James Petcoff

Yes, Scott, can. we

Scott Preston

backing has at we're quarter, it's Irma, really can just scale the top But line, losses It in So at on a issue account XQ, progressed. third the at of bad. absolute how the particularly fourth out looking one wasn't quarter. point. and lost going seems this in I this about, you past at more forward you maybe -- focused more level know quarter talk

expenses quarter, third the happening about you And profitability of increasing? coming the we can breakeven where would where that talk if kind kind you with that line see down, of $XX how see costs with can fourth and top quarter, coming down at? progressed Where and million, be, reinsurance to million, and have you talk $XX might

James Petcoff

I'm love I'd to that. Nick about to a talk have it. great That's talk about question. going

Nicholas Petcoff

growth strong tavern Michigan, We last up second quarter seen in were XX% Yes. restaurant, bar, Michigan for in year. a over particular. in in business, We've the

well. We're growth XX% up over We strong also saw Colorado. last year as in

areas geographic grow. in So to where we we're and want growing the classes

by of extremely and Florida, it in premium -- We headwinds of design. Florida. we've saw exposure environment we us was most there lot rate to where been reducing losing not challenging, to down been in was our needs that the The and been has be by think of terms environment and litigation is -- a some so but we've it

premium. we where the saw that's downtick So some of the in

growing most several we've that But the over seen we in for are areas years. the profitable throughout past

improvement the mix lowering in premium well. we on cat And as forward and we a So reinsurance ratio with earned to moving that property about see are premium as mix good feel going very the exit forward, premium see you moving loss of an noted we the costs in business. wind-exposed as the question, increase the in our of net result based our

half where year top areas to loss additional Coast grow, We the the on auto dealers equally space Midwest, West the in business. the this in growth good with looking importantly on improvements our between we've Southeast. the outside We're we're at about the as where the very and in experience. of second had basis as very So line a non-franchise as ratio good feel well looking of expanding the we're on

James Petcoff

we're I'd add agency I is Thanks, Nick. be to not we talked Brown & Scott, like or Acrisure thing only a acquisitions. that to to or about The Brown whatever. want clear be that, an trying to

a for and exits. are, me, our are bit We lot -- little agents of a like only older getting looking

want type them to our a to best And majority They business. be to times, beneficial. of us. to We're a And way as in come help us it's control of distribution to come it player for They as a transition. we their lot there's see possible. us if able to

So And our agency at acquisitions we're value. in said, I selectively it's we is the like think only doing to, the distribution. control fair

insurance doing thing third-party have we supplementing we're of business. is, been other we contracts on business write, with companies that we've The lines our

out see an guards, growing Nevada us, with for there's As workers' use and we comp the that opportunities core wholesale average as our products, So we those companies distribution really, our exclusively a lot revenue so nationwide. more growing -- as we and almost example, our But for of offer businesses of explore the employers adding well. benefit security can the right? we're of

Scott Preston

as range Where think there can Is line? top do of you provide can you Okay. you us? year guys far the at kind as a exit

James Petcoff

Nick?

Nicholas Petcoff

Yes.

I we're a range that? $XXX is year, $XXX I think when end we're Brian, to add of at the look we comfortable you million, million want probably to do anything looking think, -- I mean, the that probably with. to

Brian Roney

if first think little the goals, it, look I you Yes, at I a half, internal our shy. obviously, think

Second about. stronger some growth initiatives talked to half, we expect that the see of given Nick

think as at touch, probably single-digit I of to should a line be the So thing it. kind up overall flat top look we up

that is I obviously, Michigan. Midwest nation. across to where comments I It our in the rollout mean echo we depends through how see the going we're would profitable continued business the and driving continue to on,

that's us, focus. I for really So probably the of more think

James Petcoff

want to I Scott. And add some,

we mean falls is our right this the ratio earned long-term talked net as continue reduced got expenses. to you changes, really in reduce things. expense reinsurance the play. premiums and overall get some to from minimum -- We fixed that and our done with haven't premium. headed earned You We cat we old get premium premium net things up million, earned $XX we've -- got We And up to $XX line we're to million. want that our I our the and hit a direction, just in about net

growing in that busy of growing And our minute. turn and we're now around a and been don't -- out businesses, and getting changing core kind fires that of the almost us the I'm way claims You putting mix our and we've down. development is saying over, the way, totally totally years in but prior headaches the for number not there. caused is past have that business

we're is in soon, we're $XX saying to comfortable our going it up So possible. as to grow. hoping And very earned as quickly in get million premium the range

Scott Preston

be should improvement zero even level, you profitable Is fairly that ratio, assuming loss that in at And the correct? at Okay. guys level. that

James Petcoff

should that, We believe significantly. the yes. believe ratio we improve loss And

but benefit, an So be that would yes. added

Scott Preston

Okay. And then...

Nicholas Petcoff

one thing I add... And would

James Petcoff

Scott. ahead, Go

Scott Preston

Yes.

the Irma, question feel reserved some like more well do you Just that you there little now? it's do development and had just there's was still we're you there's of my a last think development Irma? kind risk on done in Or

James Petcoff

not that new are not not we're just case getting not getting And that reopening. fact we're claims, well reserved the new cases. getting claims It's development. on claims. we only are we're -- We're It's

need. I we that's So another hurricane attorneys take to mean one. new what I is what need from to in we really Irma mean really Florida the the

I to it. put a Florida So know mess. how mean I don't is

Scott Preston

But the new correct? help that, legislation should

James Petcoff

changes over and I -- will conservative are has in currently they to continue governor be been they three long that in updated. Supreme who term, justices. fairness, expect the to rational And made But able have a hoping. made did appointed We're on were hang the being to Court Florida

there's down the And think toward getting people litigation reform push big think -- They're it's a is I coming. in costs for it. -- with on finally highest tax litigation there the the I the country. finally like is the and

Florida got expect in I here. on what write we to very to careful the be down meantime, So improve. we've But

Operator

Mike Our comes Instructions] Bergeron Strength [Operator from next Capital. question with

Michael Bergeron

Good morning guys.

Just clarifying a some to few start. -- questions

after loss million before the quarter, that or $X.X the in So was the ADC?

James Petcoff

After.

Michael Bergeron

So was pick after. the what size up million? that, from $X was the ADC that to And of

Harold Meloche

much this in You mean did how amortize particular quarter? we

Michael Bergeron

Yes.

Harold Meloche

amortized about We million. them $X

Michael Bergeron

Okay.

around for be million done quarter? loss the having without $X So to we'd that, close

Harold Meloche

basis. GAAP a on Yes,

Michael Bergeron

guys we've How you know much remains -- bit. know a at point? do -- of How remains? much because chewed How through how the it I quite ADC this Okay. much

Harold Meloche

under Just $X.X million.

Michael Bergeron

Okay.

problems going So solve really forward. not much to left

James Petcoff

that's I Correct. I know it's wouldn't say solved -- that's that, a yes, correct. problem. don't But

Michael Bergeron

mean problems? Jim, you not what do you solve do by -- Why that,

James Petcoff

development two of number these development those -- won't some we to really saying there cover went we have The we on first ADC about we did quarters Irma, was hopefully last -- in of quarters. as shrinking in to claims. by told of development development because old type and I last the the much been significant place all put also, I'm have you claims see are significantly, not be design expect just The the that really we The seen six the pretty but months But claims. that's not -- down. down through expect the future in in

getting guaranteeing through anything. -- hopefully just those a getting our years, those to not the But are I'm of -- volume months, so don't it. limitations six you're you're statute down first we So all in as numbers not see where dramatically getting not -- and that in focus running point old are we're we going the and coming the from because on claims much

So the we about feel better fact...

Michael Bergeron

might occurred be reaction that guys? on that an me at is. quarterly you But be past you past like, but just seems one your this business. since past, think to And think to first that of The in my hey, size part that lot a over year My development guys accident we've Does it's the is, loss that comments basis. it lost you sound the on interesting see thing wondered about years we'll to I a the -- have $XX this heard it we here, year the would money over right thing, why million, and quoting we're keep prior skeptically this see. looking thing, hey, be based which period have wait to because company we is single-biggest few -- adjusted of XXXX,

James Petcoff

we've numbers Whatever are, reported. the the argue with what going not to I'm are. numbers

Brian Roney

of where you've one here do biggest is, I talk are changes going -- I moving things the we see think we story. our to Mike, business Where our of about to? forward? lot the known mean, A

heard Florida kind issue was involved of You've that the systemic about It the with industry. specific. Conifer not

nitpicking... kind So it's I of think

Michael Bergeron

up... Wait

Brian Roney

hang on. just Mike, Mike. Hey, on, No. hang

out absolute in when everybody right we've we're we're is seen I think dollars shareholders. there it's I with here to obviously, mean just there what you've done period. a shareholders, protect else. largest to mischaracterization go and say And

Nicholas Petcoff

Yes.

Brian Roney

So things control, I as we doing we think from you as mix be our think can scoop to and things direct see are with that And we've today. look the I especially what the trying you is within everything done we're give standpoint, straight business at our our shift.

not what are I about think So to if we see need moving that's things into shareholders I as focused on, today, but you to quarters. us to think what lines, areas, for things forward, do commercial that is moving talked bring positive be we today in the Nick us shareholder can build how our for only can we future value are value that

Nicholas Petcoff

Yes.

Michael Bergeron

-- reasonable X are to be skeptical biggest I quarter at I I point, can of fair this losses that. was it's be for would supposed been the But is every for -- start think shares be projections look reasons that my argue every next is I think to and is at and shared quarter. just last these historical the it's to reaction just better. you years, loss you an the investor year, going that I guys assumption it better. lower the And going first there in And the some to over and your to who's because -- might do

thought going service whether But taking let to are that. -- you have mean to your do through beginning to ask are are are about guys concerns how because ability debt? we How you guys or this me continue to you not shareholder-friendly actions. you question we can I debate have

S million. you quarter, $X raised the $X You million this in but lost

like feels in, money of kind that So out. money

debt, company service you leverage, to leveraged $XX profit. Usually, or it's buyout million levered so a need guys. got of You

amount HoldCo. do us at can confidence money you kind that? So can the you keep have that the you through What us about just thought calm? of of to give to talk Maybe bank you can

Brian Roney

this Mike, know, can actually the already our of for of payments our have you had two different The service several ability as or dividends of we've years, is areas either use prefers Well, discussion service you actually you pool could make state a Michigan largely contracts. since to function contracts.

They place to It our go XX.X% as that written our up had to predecessor top that use us those service carve to then we up the allows in were of to gross off years. have debt. for well. companies premium HoldCo contracts We can in can

our and providers relationships are sub our So we our comfortable a we is position going as a bank very payments make basis with in on are comfortable forward. debt that our to

James Petcoff

In addition, million if look Florida makes $XX of amount up the gone. all the XXXX, the loss, and in homeowners, by business bulk you was of which, that's at what that 'XX way, the

for look future like to that very going is So the is say past based. to you very, poorly the

to think this... So -- I that solve don't going that don't we're know I

Michael Bergeron

what Jim, I that. which say, roll did still not in from was... call, think. the -- seeing you're Irma, earlier say you you claims I some will in you're asked I guys said

James Petcoff

you No, claims are And Irma it's reinsured. the true. know from

even net is there's themselves the seeing net premium premium lowering Irma by we're is reinsured. don't about what a I to claims earned earned So is That's hurting the of do on because I but reinstatement But development, the can that premiums. are nothing want it. side, see where us,

That's Florida.

that has work the in entire comp. three The line hasn't the look only is of If industry the every business development had for in last at the development industry, one you years.

having we're So other areas, in those problems okay? not

Michigan for of we're liquor, still look historical the of business there, business, we're say those looks ratios of That's why look confident we we are products very we book in Colorado good. at the it, and at company. So in our the today, out the the business. business loss Michigan, the pretty down what why where going. the we're sit investing in that's And We're we and books and composition

we where are. So that's

or one think results you're stop sorely not happy sell my either if fix That's If you today, stock. do -- I I'm it. with I'm the things. of place, sorry. are can And really I mistaken. in a them or different But you can two I'm --

Michael Bergeron

that Say again, Jim.

Brian Roney

at Mike, this on, move if there's any other We questions. see your we participation. maybe point, think I appreciate

Michael Bergeron

just me ask, raise to guys let you Well, envision do having capital? more

Brian Roney

Not at Not saying... this no. point in time,

James Petcoff

is and capital, reason would raise No we growth. opinion our for more

Michael Bergeron

the come think most you just consistent need thing me That's conversation money. quarterly to that say we let just that's consistent over need is got yet. And put guys most conversation And numbers one make because on night, some hasn't be I that to there's more it the the Hey, past. I loss been that And happened. the the we last thought, in might we with that realize think I we've here. know I And well, emotion what biggest we had board.

out. So -- the that run worried ADCs and I'm

we'll So see.

Operator

[Operator James. from Raymond Instructions] Our Holanda next Marcos question comes with

Marcos Holanda

did Came in claims in you was give Florida how late guys us so you have book? many I curious, open the still just

James Petcoff

have of never, quoted I think, number claims. We a

probably I'd take the now XXXX I at just or of yes, to about XXXX let's years in older XX% XXXX. the we're -- XX%. from well, think And the end of quoted XX% 'XX, -- on down we've was like And percentages XX% say sometimes. it until at from XXXX down end --

it's significantly So down.

Marcos Holanda

that? near And on valuation DTA, in taken do have to you your on allowances term? do so Or Okay. plan the you then any

James Petcoff

valuation allowance it. DTA? against There's XXX%

Harold Meloche

obviously, value, of June reflected $X.XX the in XX. $X.XX as not there's to book relates share that's per value So as it book

James Petcoff

going is emotion. but The looking thing get back any you only do is back, forward. doesn't We say can look there I'll good. emotional, We're you

much or we to past. try possible. can We forward. tell off necessary areas going ward the looking environment and done are to a I the everything in legal that not believe that and you certain come are little and the That's bit? we've industry us bite back very We Can

book forward. all are our and and in That's comfortable premium our and where we're say. to in non-risk growing I in productivity, are at and investing and where our where and going reducing are our increasing we feel of our we business we unearned move look and and with it, expenses going, we what's can we But revenue we're

to bring in thank questions So you points were good Mike, make you out some able we call. your that because the for I

everyone, we thank So seeing listening, and you, forward you to thank you, and look for quarter. next

Operator

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

may now You disconnect.

Conifer (CNFR) 11 Aug 192019 Q2 Earnings call transcript