CNFR - Earnings call transcript Q4 2019

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Operator

Good day and welcome to the Conifer Holdings, Inc. Q4 2019 Investor Conference Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Mr. Adam Prior of The Equity Group. Please go ahead.

Adam Prior

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

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

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

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

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

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

Jim Petcoff

everyone. morning, Good Adam. you, Thank

and will the Andy Harold, us team management Brian. from be Joining Nick, today

year Conifer. XXXX of transition for was a continuing

select over largely into for We have we considerable results have where lines, commercial achieved long-term repositioned rate and we increases favorable seeing lines. more our are the where currently business

going we expected certainly into as timing the we see very solid a than forward. longer growth XXXX, of feel we in While taken we footing to lot move this are profitable and transition has sustained

line, On our our we lines the markets, exposure. on the to adjusting avoid business are coastal while to continue focused personal remain commercial top specialty we

achieve Our the result time. fundamental underwriting will must sustainable in only guiding is over that profit top growth line that philosophy

are premium premium’s We sake. not in interested for

we result, a our As the business willing needed to consistent is guidelines, now mind, we With dedicated the been in long-term we book first that a business. include the stable rate in are written base, underwriting core remain premium to if achieving market are place. non-renew price are of write to let underwriting not that which seeing we the felt getting business that maintaining we strengthening in have we What we adequacy. while

line how where and focusing our in top Going on build mainly forward, book when growth side, niche start to is we markets, does the adequacy. again for the rate growth positioned growth? certain observed the with that the it Conifer and commercial becomes question greater We are specialty

areas key the and For our small is as business. built such largely longstanding hardening on relationships, hospitality in company certainly but is driven the account market and

wind see is line share premium business. dwelling and same does performing personal old well we us of predominantly business have not turnaround exposures exposed to consists did. In low-value our catastrophe addition, which production, This our of begun for lines in the

appropriately exit to In certain was markets such cat-exposed as timed. Florida addition, we feel the decision

a emerging were companies in have our industry of what in and are seen still ahead recovery in the are we it from market the recent facing. that process Given appears we peers months, well

to our a rate get time. overall, adequacy would So front, that understood repositioning of on while we it the over time book premium level take

growth balance premium markets solid sheet. and to at foundation into for to we we XXXX. translate are see top Now notable line here worth strong operating in Two position opportunities of generate advantage and Conifer good are specialty take have increases highlights the we our in namely our examples profits, that double-digit mentioning a infrastructure fractable of to our

we ratio XXXX, each reported improvements in quarter. year-over-year In expense

in ratio While net as of business, years overall, coastal from expense pulled lower has recent infrastructure of put the remained built largely function wind the elevated were in have in when what infrastructure we today. premium The place a we premiums exposed we still systems we founded place back to have support and excess handle Conifer our growth. to in reported we earned

advantage we well-positioned select the Now, see specialty growth are take we of to our markets. opportunities in

balance a Finally, sheet remains have that we solid.

duration short quality, turbulent high today’s markets. for is portfolio investment and well situated Our

With going overview, underwriting. more to I color Nick? bit a for Nick am our over that to it turn on

Nick Petcoff

we comfortable XXXX. feel help for a you, main well XXXX, in top and line the overall Heading profitability. into to selective company equipped Three will return drive growth is that Thank Jim. our factors growth

niche, the including our share lastly business a niche solid our shift E&S and classes. our increases, lines increasing agency Our we selectively are business business by a over our core underserved small many Throughout concentrated business low-value which while to segments, mix, hospitality approach In recent year, is specialty growing focused a personal measured in starts strong rate commercial is supported and fee complemented we in market achieving with XX% a on majority commercial with commercial products. taken operation have developing driving dwelling base, lines, past income. in and the through of

we product have low-value offerings. On focused on line particularly remained side, dwelling the personal

and that have select orchestrated We profitability methodical that avenue is growing an lines the means of personal business taken in best our sustained approach sector. for

profit. and We business altogether from away our the historically while during written quarter. degree legislative conditions into moved confident having drove volatility an for fourth to niche, writings area largely and low-value exited wind-exposed is the higher competitive that operating performed have business. personal where heading in the in even XXXX growing conversely, challenging that growth dwelling is has which us made consistently the report Yet it well feel we value an premiums about result, lines wind-exposed dwelling and of there a markets low a As business

non-risk we in continue which of Finally, becoming grow contribute beyond. XXXX increasing agency and will revenues revenue to an anticipate fee-based overall portion to our operations, our we

We carriers value expertise with across agents have our and partnered a business. of with globally functionality to team deliver known the different our lines and and several relationships proposition successfully utilized of

fee-based For When for example, We we every profit best evaluating time. that business a retain with out and versus property we biased greatest agreement property and not liability our has larger any coverage place the a with comes large continue our in us collective to carrier the anywhere coverages to build to opportunity which them. write it personal commercial want value through the nationwide direction. the versus experience one business, judgment gives general

moving and favorable wind-exposed exist. early well. conditions Conversely, strategy review we as exit has Florida able and well of flexible financials, market Before between to underwriting I writing comment for successful our us been I the admitted to platform will for platform past factors departure, flexibility our participate where on a allows example Harold in it of in quickly paper. on to turn Since select from Conifer’s exit results. specialty E&S This we and to other business. are forward our believe it markets hallmark the prove or This our one being company has a worked brief want creation, pivot warrant non-performing over such a lines us

for Conifer our and we view double-digit over our shareholders. point can for generate a a take believe time While we year, our expense lower the we long-term premium always of that at a achieve markets, profit is increases full ratio where

that, With to it I will turn over Harold.

Harold Meloche

then and XX-K, on report I you, filings filed which provide the will Form will up encourage the Thank it XX. any a our annual review I be Nick. review results with for will to our we quarterly of open investors on SEC March quick questions. and

in the ratio to Gross written and shift slight $XX combined business Conifer’s the were is profitable the was the to $XXX mix The to compared to for the XXXX. due XXX.X% period million fourth in in ongoing fourth for the premium same more efforts million volume XXX% quarter quarter the of lines. year. premiums decrease in

XX% to year our ratio XX% quarter, the the in was loss For period. compared prior

spike decreased commercial personal approximately quarter closer in versus improvement the XX% property ago versus a year combined XXX% a was XX.X% year from ratio ratio comparison. commercial ratio period quarter the in year been year-over-year full this loss XX% XXX XX.X% points full was The year to have lines, a an to QX, it and for and the for basis ago. non-correlated accident year prior Before XXX% the losses of year for lines The ago, versus of XX%. almost in the expense for would XX% XX% a

Investment direction. are quarter $XXX,XXX numerous measures underway income for see the have prior continue during moving trends opportunity $XXX,XXX cost-cutting the we the more we compared to year in right While see pleased to period. was to in fourth improvement, and

million the $X.X share fourth share compared per of of ago. million managed, $X.XX investments the securities, are an average tax an reported $X over average net equivalent Our net years duration $X.XX In yields or quarter with a and X conservatively quality with income majority a loss XXXX, just fixed loss of the credit per of X.X%. of a to company of or year of AA,

prior compared year million total year Moving million to year $XXX the year million investments assets balance end $XXX at total to were compared end million at and end. sheet, were end. $XXX Cash $XXX prior at at to

per share. value book year Our $X.XX end was at

a book have of the $X.XX not against share value. per in valuation assets company’s allowance was tax We deferred reflected that

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

Jim Petcoff

Harold. Thanks,

to continue for opportunities questions, see note we I it management Before to as want turn for growth. a I team, over that

and any shareholder measured do premiums general, as And While serve to to stock see we line We opportunity know primary our our in double-digit value. an are support now, growth continue as we the a mandate capital. questions. ready company’s we always as Operator? active for top XXXX is increase to take take approach of operators as we managers to

Operator

Our Raymond Instructions] comes Peters Greg with James. first question go [Operator Please ahead. from

Greg Peters

for Good been it’s tough morning. guys. of couple a years Well, you

clearly in the is really XXXX, challenging you and just reported about there results. the that marketplace companies way, by it’s and have not think you As other

accident enough entire look think think they ‘XX? that a XXXX, about Do back be about you for conservatively enterprise? to get picks profitability think your the you of you able position across you loss year set will what do you you as As are and think do to

Jim Petcoff

there. Greg, asked good that you morning. things Two

As far the will year. yes, down move growth as during in we start the expect expense to significantly ratio profitability, premium any

have additional – to We premium. things capable lean, have that scalable cuts and we and machine like to necessary amount of not cutting effectively, but that good, is a we write that are operate tremendous are cuts operating made efficient that

under never down. any is that but the move were believe year type where fourth those even we we get XX% at by who going were reasonable we ratio, quarter amount you going to So Northpoint, that expense know of And that, are believe of below expense level of for to this before with we that ratio to growth. of we or

So would unfortunate profitability developments social have it’s having inflation from to say whatever started ‘XX that and yes, a judicial from a and respect due casualty to areas are exiting ‘XX loss been we picks, – whether people had have that want standpoint, significant development geographical use. and We I underwriting in on changes. those you standpoint. world is to or made in terms the with litigation

very ‘XX, over are our comfortable but loss picks ask are for XXXX, with our Some going bled picks loss about you probably we forward. of into comfortable with for And XXXX. very it we XXXX when

that rough and but as our now. thing possibly the of of we could disaster know that mitigated I results losses got Florida a Florida The right we companies happening a as you it’s couple was that before out been soon are the and seeing we that homeowners there have, years, on

jurisdictions. We in Louis things casualty underwriting high if in – change Northpoint talk had out business, Southeast Pennsylvania particular extremely when you area, we ‘XX, number those our for was I ‘XX clearly of at look Midwest. saw philosophy one certain going That’s or state. redistribution now book really Florida, – at same the state geographic not performed did well ‘XX, an the of ‘XX about liquor, Northpoint thing areas. we St. problem getting is days say the a a also in performing And Michigan always when in our that the that changing of liquor, been And Montana

feel comfortable are we are with current really comfortable accident year we now areas we the in the So yes, and losses. with

Greg Peters

environment? just the can question, rate going are focus, you talk of to the business about talk for about Final your be can you areas now lines of that

Jim Petcoff

to am that. about I Nick going let talk

Nick Petcoff

geographies, by to a bit single-digits. The seeing. commercial General side still sort have environment. the piece is on rate well. a our based mid the that to range decreases In property increases, had we especially up of single-digit in single closer due we work single-digits XX% that’s smaller the Midwest, to increases auto, today. is the rate somewhere on is at for bit significant but of overall on seeing Work physical and geography has the varies and or in terms book competitive It that it we accounts. are are as results by comp seeing on – to in mid the comp, is various high rate double-digit are been Sure. sometimes quite more seeing losses the account double-digits, are to our liability rate Jim’s of or litigation In on what benign geography GL liability, high to point are we lower troubled high geography book very history. varies which litigation, quite in tougher increases Accounts and a damage

Greg Peters

for your you Thank answers. Great.

Operator

question ahead. next Sandler. comes Please from Newsome Our with go Paul Piper

Paul Newsome

just basis RBC fueling about statutory call. about your for the bit thoughts a your you how I and capital position a in next of both should you filings we thanks feel and ratios, growth GAAP just morning respect could the hoping some be think would talk great? year Good with there it how on terms any more and was for little for comfortable

Harold Meloche

or Jim Yes, I in. that can else in. chime fielding anyone start can

of all, are RBC First very for ratios companies both strong. our

growth they both as written from on another rule look premiums are there with are we are and And of grow both where still thumb comfortable still of to have. the to well. plenty have lot – a at projected – we We our quite so and strong that companies a we at net capital surplus runway rate is

Paul Newsome

updated from just Do you we should perspective, that of... have at metrics look in of any sort terms capital a

Harold Meloche

have comes think that XX. the which I some we be will XX-K, in March out

Paul Newsome

to the versus what of off the every think is general sort about claims maybe about I question thoughts question, inflation. of your has quarter Great. move rate happening you for been Greg’s And company talk underlying can what of with

are whether getting recognizing underlying we how vary general are some claims what figure the by geography, sense big various not – if You all getting spread spread, but could just rate and it think more to or that are I out the that they are companies of a does trying actually positive positive than be? – inflation what

Jim Petcoff

just us, For think the about up. I actual rates going Nick talked

on you demand medicals $X throw million. functioning of the them For certain us, areas or any the they business geographies down desk, that what And the – and your I high. litigation the process book the where away the tell repositioning – road, the you it’s the from more they are give about are litigation mean, they in awards so of demands until or of don’t awards X years the costs won’t X and jury and areas – jury and

causing types wants been exiting So of what’s of to headaches, those couple years. those things for something. but are a Nick say we’ve

Nick Petcoff

Jim’s Yes, add I there. to would line last what

there lines One were feel that geographies, that of growth a with in commercial the significant we’ve line, you’ve certain done environment, that of adequacy can where in accounts top need. quarter. the you and seen was, get things we rate we fourth line Part that the the – competitive see didn’t in don’t you in the it you top

side. and given get renewing on you areas we adequacy rate feel where really the those can we and environment have So growth the non that out getting our casualty of been focusing

where certain the focused we’ve exited it in that So commercial as the feel is especially feel don’t auto, we relates there. the is and – hospitality, to adequacy areas because on rate do geographies just on areas, that rate there we the and

Jim Petcoff

to with commercial I made what the about of probably be. talking our used auto, In year-over-year, are now, the double don’t we they’re to in able know, and rates from that they probably some adequacy on to double. get that, ‘XX we’re area, underwriting changes rate

the half writing same we’re of we So essentially commercial premium, have exposure. the auto but amount

going you’re challenging. the more are where Other there’s to there’s get there. But geographic. so to lines point it’s like I And adequacy said, rate

enough. this in about adequacy and in now it’s Midwest lines We the picks the specialty for our now in continue. back in where type it’s areas have perspective are rate a unearned in the experienced look on we’re and ratio on loss – have those of this can We comfortable expect the those is and those – what business have, opinion, whether right to the we different X our of business, current writing loss geographic we years have in we say, our this hospitality, years based getting can the we of area, the results premium geographies. area, of feel And the we from we experience books is

So Does rate in to we your that adequacy want areas the to write. we’re answer get we feel able question?

Paul Newsome

that, it I probably what think a mix is I view rate you’re getting No, the mean, will so. change that business have like inflation, getting claims that I more. in dominate if the much versus far of what sounds summary you’re

Jim Petcoff

That’s correct.

Paul Newsome

Much more.

you thank much. Okay, very

Operator

comes Scattergood. & Please with Farnam next Boenning Our ahead. go Bob question from

Bob Farnam

the there and morning. a Yes had good for hi commercial question I the on lines. reserves

wind-exposed development. with always your you’re details I pretty significant Because is Now more lines, as had there, you’ve but on continuing probably the this some showing side. personal Florida the know on I issues book, the line core book, book, there commercial think even

of much of commercial Now liquor? on is areas geographic in the development it terms of or to problem is Montana how the board how related Pennsylvania like the that kind side? just your across line of development And much liquor

Jim Petcoff

of would XX% in problem that troubled area. Florida is a related I there areas. I’d throw say to those the as Southeast

Bob Farnam

Okay.

trying So areas. and you’ve have get – of of out gotten or areas those those to been out

So going forward, writing thinking that’s to the is be development going you’re not not new business there? why you’re much because as

Jim Petcoff

Right. meet out we of out law – I we We XXXX. let change timing, XXXX, and of about we get mean, we but started the change in Pennsylvania the the out to amending underwriting results our there, getting in in started – talk law we Nick started of liquor the in but of the liquor – get Pennsylvania, I’ll to XXXX, and saw

Nick Petcoff

the started of we exiting Yes, XXXX. end process liquor the Montana in of

the all off that process that’s So the ‘XX, started really much was by Pennsylvania middle book. by the books. ‘XX, was of the ‘XX basically end pretty off that in – that of

Southeast trend, line through think We to we liquor make as continue. way well significantly. bit Florida we’ve risks back certain pulled But the of of the significantly. in rate decreasing can development, area And do we’ve is had trend have another would on reduced be to some we’ve it is other And area It’s the the that we been going a we side the on development do on of seen book. We quarter. an thing we that smaller that think especially that business much quite as where I’d as we think book. auto limits. mentioned, definitely get we’ve needed commercial is book be that’s – overall the back while while pulling every has some see – we we’ve that would rate, portion a continued manage, that do – note that changes a well,

like from $XXX,XXX $XXX,XXX. haven’t may moved liquor on they to or limits rates we’ve while reduced million states, liability down in look certain $X.X much So

severe book the losses meet of rate. to addition manage So liquor been more that able to control in we’ve from through driven limits are the

Bob Farnam

Okay.

in business been year. a out but the – new like, you’ve and any gotten in haven’t sounds – Pennsylvania already – you So you’ve – this for written Montana, been of least you’ve policies it at over

and limits reserved some So of I’m much how open Montana, to these as be how more can How relative example? Pennsylvania the for maybe to more lingering. claims those? are much out possibly can on – still we to development figure getting trying out claims they give you us and are information

Harold Meloche

us bit. leave has can have a – which going different They they we’re Montana, statute. totals it less It is the can etcetera. file limitation. basically limitation. of forced to investigate back sue done. Pennsylvania can you means to much a the Pennsylvania of pretty statute continue a because and longer little statute writ, we on they a for etcetera, all a have writ, them the those it, went it of We goes,

getting So prior. the at same feel we see Pennsylvania fact longer limits are that a bit anywhere that has type not the last going to the We little pretty tail. than lower near we’ve good been seen But a about years. X of development we’ve for

many knew. know and of had don’t off how and – if But Florida, are. top what similar. tell you head claims numbers I how tell – many ‘XX don’t ‘XX opened my Southeast But I’d the it’s I we you, those very way I still I know from can it’s down... prior, is prior

Nick Petcoff

plans. XXX than Less

Jim Petcoff

anything issues well. than those or the to they’re that basis. damages Yes significant in reserved type and – And reserve of prior. on do feel that regular and less or ones And that the those ‘XX we we at have of a have statutes we things, look have – yes, have that most And and for sure run the plans then year. on XXX those –

However, now things do crop then. up and every

kind minute, the with is last the then make an trial. the then and That’s development. they them I’ll how injured unrealistic them, deal So is they an person drives you we may a this then a there’s to show to at And We bills all really as right? idea litigation example. Yesterday, looking in of have injured have of give hold – we medical claim, sent And year ripe think forward, or how throw this up know with but don’t don’t X getting demand, haven’t person either. years, they they you you them I was any at at stuff that. and they an Some don’t it of tomorrow the the that liability, is. us

specifically and – Florida Pennsylvania. that talking I’m – and Southeast Now

of there’s conservative So do and we those less a we’re we where do lot expect. injuries, having – ones that we claims the what significant know but have reserve

I I mean, the at I involved an getting ago, claims mean, – get downhill Florida, still just the gone. struggle. so of and started Florida, too you and side get this from We X we kind to that’s $XX,XXX going much years we it’s pretty But that knew want the we a down number are on are tail So know I got water of very The occasionally, it’s to $XX,XXX end we’re in like to every get fees. on because don’t focus quarter. development we’re out, have not look, problem. But this. true mean, this. of But they at ongoing and were legal you want we think the that’s in much when going we’re that.

property for unbelievably I important or commercial property I think quarter, points an were our terrible We the If just Harold, property our was on in property That X quarter. about commercial X we by it X quarter, was on the it the quarters. mentioned ratio. losses, note caused having had think loss it’s and a unexpected. was it year XXX% to fourth that, in great

in at some you expected look that we and that it at we’re So did development, happen. – if look but for you what line, then

we’re feel we we of – where we like well our are business of going. didn’t it and out book that, work we on we downhill So side But the – do quarter. for and lost so the

Harold Meloche

ahead the mean, Greg. But One kind that from look we in handled and kind it seeing I’d we side, the adequately adequacy big we that industry aren’t at feel think if other are That’s geographies us, out our like to items about, obviously, mix relative is of for claims to a inflation, in of we’re it. the business. comment of we’re think rate jump reserve where at in when I not two saying it what was Nick hearing I we think but question the look comments, seeing, we talking I’m also, of experiencing reserved with. you back XXXX Paul from I

business quarter-over-quarter-over-quarter, decline look counts where and then where we think look look we Jim from have we book, see most see if we that’s the at go-forward you think time, of shutting now But statutes as take we to do that to claim are I are I comfortable scale? on now is think say, a people our given to basis, I where the going this rate relative that where well, feel shift the ourselves XXXX writing that given mix, that see like when Michigan the line is development adequacy, excellent forward down, the our you as at the and geographies coming – in the we now. given had is, continue we’re prior, take overall business a as run, in can top that have reserve perspective. at experience, you

in do down we ratio. see or measured bit do more to it something a going to can to drive us it we’ll the expense in scale is the now opportunity undue that in is get an – pace. We’re fashion But that a little not for help

Bob Farnam

to out what’s under going obviously, the hood, issues creeping on when or you it. got have It’s to for it’s us large or when just so figure kind have scenes the behind still speak, – the for Yes. amount of the hard reserve property up. Alright, of – claims you

how Pennsylvania lines at going under me your I for trying there were the that the days, guess, really but like example, is era were profitable So profitable alright, to – like Northpoint? in are on Northpoint I’m that what’s question at or just don’t just really that not you were a relative Montana are there of to there Liquor, scenes. trying for, Northpoint, trying the get business – much Northpoint behind you now? or is you’re lines for feel Like, that there versus not difference we’re business era to really now? at sounds were – of writing Liquor last much whether I a figure lot it were replicate when to recall out

Jim Petcoff

at that just Conifer. in contributed Northpoint known and Florida two where difficulty that for our quite the profitability get done. areas well those has Florida successful in was great gone experienced the us Homeowners court the system two at certain The The Homeowners we Florida areas And things GL. and is it’s are a Yes. Florida bit just of were and GL difficult to geographies, very

– can’t getting is out no the thing anymore. such on You as motion there

a a something do make and clear summary on judges disposition won’t that’s can You motion very it. the for

longer. are So you litigations stocking these much

out and Conifer. that of saw we those But Florida profitable two moving been Florida at things, us Homeowners have GL and and not for profitable were us Northpoint So for we are at they those – very areas. that

Bob Farnam

makes Yes, that trying I some figure Okay, out what what was – of was stuff. driving sense. that to

Okay, it Thanks. me. that’s for

Operator

would This session. turn for our management closing any like question-and-answer conference over remarks. to to the concludes back I

Jim Petcoff

not significant growth, ratio just commission the expect come our expense the continue not expect, want that side, with costs the etcetera. to growth changes, I we to to into made reasonable reiterate line. on on we but huge but We’ve growth, fixed just

dollar and growth from – down to a from with, the Greg our expect Peters core do premium percentage, earned our are I increases. think, in areas, we we the we from great was a that terms also one. and go expect real comfortable So as And question

and are ‘XX. comfortable for ‘XX our with loss picks We

So thank time, your you for support. continued and the appreciate taking I

Operator

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

You disconnect. may now

Conifer (CNFR) 29 Feb 202019 Q4 Earnings call transcript