CNFR - Earnings call transcript Q4 2020

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Operator

Good morning and welcome to Conifer Holdings Q4 2020 Investors Conference Call. [Operator Instructions]. I would now like to turn the conference over to Adam Prior from The Equity Group. Please go ahead.

Adam Prior

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

the accompanies On website. find available from earnings as the copies company's to of presentation the website, via portion the release, ir.cnfrh.com, view or Investor as webcast which Relations discussion today, management's you download can slide is that or well Conifer's of

filings underlying uncertainties economy and statements, risks from various forward-looking including conference in relating statements our time information, of results except of business, the to the may this our operations Before specifically asked that the anticipated statements and statements any including a as impact to and to with XX-K in or has statements and risks started, those forward-looking differ federal results latest its well our whether results update the statements, any future new call note disclaims developments revise forward-looking products or its result obligation time reports. to and company may trends, as Actual of these with and subsequent we made subsidiaries. forward-looking and historical within risks information, get of result business as I described the as COVID-XX that respect including financial with and SEC, on Conifer Form the uncertainties in company Conifer's laws, from associated constitute meaning a otherwise. the the company's the from and Conifer the securities materially

section link of of will on Relations Investor through replay provided call a this a addition, In our website. the be

to earnings the prepared GAAP. as statutory measures reconciled and also SEC therefore our SEC is discuss and by of G. accounting Statutory GAAP in included, measures filings. not in historical During this are to financial accordance these our Regulation data rules possible, defined when is non-GAAP we'll accounting financial release reconciliations non-GAAP measures financial comparable call, with

to Petcoff, We will go with prepared and Jim Mr. Chief I'll remarks conduct session Jim. ahead, call Executive Please turn morning. after management's this Chairman a Q&A And over that, the Officer.

James Petcoff

Thank Good you, Adam, morning. and

me are Brian. I'll brief then detail, the will underwriting and On discuss results provide Harold Nick, today Harold, greater in financials. our call Nick and will and the with overview, cover a Andy

a smaller year. first grew at due top portfolio. the place second throughout current result. to Looking close though, of hard hard rate the back are our year. the sequential gross restrictions it's our truly at global fine-tuning with that's thanks pandemic. dominated challenges rate really imposed collective to all of experienced resilience, pleased we and XXXX work our several In After the is the see Conifer adapted, We the transpired conceive quarters, solid to to to a notable, and very very ahead. XXXX, Considering approaching mix, commitment all business normalcy to of growth are X% our for in premium you a written -- in the in such with by who to we in for return the spirit truly faced, successfully the course days line of Hopefully, full pleased Many to thanks was I'm a embody years XXXX, shelter in the necessary and that up response employees. of the More the pandemic. but the over adversity. tackle drive year

a fourth quarters. the this written the back premiums states the We On written quarter also quarter our running the and profitable fourth to a GAAP XXXX As We to in QX. in in sets the by company. gross in up think fourth with basis, million began XXXX. ground was third $XX premiums us up, hit increasing year accelerated year under ended just for almost growth with the versus open XXXX, in XX%

quarter our and post with reported higher profitable from year. of investments, leading realized profitable earnings company the largely gains on most operations GAAP We overall top during the increased the fourth was due per our $X.XX line, to a volumes during basis to the quarter. share premium As of the quarter,

increase We also generated year book at the an share. in value our per ending $X.XX

some be Conifer also new Looking trend top at and of ahead both expect policy focus severity core continue businesses year both activity, and claims targeted spent on of We additions through reduced markets. were our significantly will as XXXX, home. in time rate XXXX. in select XXXX to that our was line, increases in to and a frequency generally more reversal do closed our growing specialty people

in shutdowns still country, of However, last across of half the expect to levels with follow of we year in the the terms this place some states various claims in activity. first

in our In and line beyond, expenses diligently addition operating our reducing top to well. XXXX growing focused remain as on we

our driving expect of XX% we underwriting of goal or yield consistent below, which near-term a over will time. profit a rate have expense We

markets. We across specialty closely performance our to niche our continue book all in monitor our

quite hospitality. Our well in XXXX, core including performed markets

pandemic, and their will expect restaurants to been operations hope have heavily While return bars normal soon. we impacted throughout the and

We of turn momentum in enjoying me markets, growth Nick that, for dwelling profitable We to XXXX. over some to low-value color also our all it look With intend for let specifically other maintain and small underwriting. the Nick? our we commercial forward in are in to operations. business

Nicholas Petcoff

new continue a profitability. execute global largely grow a premium opportunity current optimism intend and the agents during all you, successfully trying Thank together, finish strategic we fourth truly have growth gross in while to servicing key ample storm, we terms ample in weather pursuing our those the out, At and beyond. by in goals Admittedly, to niche were provides Last the was groups would proud adapt be markets on group XXXX come. our and business profitably adapting of COVID-XX. quarter runway, ability and our able were and This note our ways to feel just specialty like be as focusing creative, pandemic. our for results rally how continue environment insureds to to to solid years first, react changing not during our of night, from effort year, and high not ultimately insurance in the and of quarter. write plan, affected fourth for we a doing I'm most, but core to working and sure operating were part and on a where That Jim. we home, for the coupled We of pleased in markets with of our reported written our extremely Yet pandemic. to to favorable rate early we the areas adjust employees' reality planning of bear several

operations. new in established and have top it's insureds. same compared As under Jim quarter quarter to throughout fourth XXXX. with improved year line speaks or to previous we our XXXX, experienced by maintained largely premium an with with our noted, each in above and their level well, our they pandemic, the This running. XX% the XX% stay employees This in teams, our and ways as to ending agents quarter the of due finding consistency to gross thanks customers. our and for seamlessly also have relationships with the Throughout maintained of evidenced investments account our retention also underwriters communicate to full growth remote transition by to operational high as extremely is over which But technology just improving touch support XX% at written our our overall agents and allowed

while Looking also ahead, we flexible our expect model, customer technology operating us to agent enabling reduce to prioritizes which forward. expenses going and underpin a engagement, operating service

in Our personal new lines. trend in top a mix higher geographies. Submission through commercial the of many of key growing market our and our and quarterly in came line premium we growth gross continued increase rate both throughout course of and are XXXX, business written to share

our of home we is Michigan still state our state, have fact, grow and largest to premium here. room In

growth also Our other lines contributing with commercial during specialty led our business small positively. XXXX segment

among the be the most that which and XX% has pandemic, in the segment, hospitality on year. terms only was by to impacted it bars premium Our continued market has down includes a of been restaurants,

And just to corner. positive. and cautiously their turn the normalcy are see return bars operations We restaurants, the a will is optimistic to that that, with around

As that follow that business will suit. we in market expect occurs, our

In GL app overall fact, notable almost phone This reduced terms segments significantly insureds accounts quick-service for of as claims exposure in activity our claims hospitality in all other resulted drive-up, across activity, of in in restaurants takeout general. in the resulted the pandemic have many many a other focusing improvement on and and, impacts delivery of are options. or

Moving to personal lines.

decision focused strategic the transitioning business the bulk to has quarter the This premium business dwelling our from last correlated wind-exposed the is instead. from personal fourth performance directly to our represented we for on That these improved of markets have the firmly cat low-value lines overall away business result away a Our business to during low-value full year. reduce dwelling over exposed by years. few and of as

positive with for difficult Thankfully, are many events cat returns lines was which to happening. personal the various XXXX, industry, cat exposure many for large we our contribute combined positive for a and year combined For by On point, our year. lines so personal in that helped year. pleased for fourth with overall leading the previous our cat reduced points, XX% lines ratio quarters. quarter, to healthy very trends you was XX full noted the very the by quarter personal in Overall, consistent improving overall a in the

that with expect premiums profits to continue top Our line grow, underwriting line consistent in where is we over time. growth and

the And is to I'll believe discussion sustainable well over to Harold Our are to Meloche to today's for team we to hand ensure a we markets, operating provide as profits company of financials. management positioned come. to that years overarching so. the goal do now is a positioned well call in the generate

Harold Meloche

was detail. $XX.X Conifer's XX% and commercial quick review and XX% to XX% compared I'll The lines personal same gross compared of in underwriting results, prior review I loss the of a down website company's also In presentation period to the million, year combined of last improved Jim results. the XX%. in breakout the to Thank the and in on year. in with on you, to comparable loss from XX% quarter XXX% to focus greater year having increased was was Nick our ratio fourth XX% ratio the XX%, modestly fourth while ratio the quarter, Nick. our investors will XXX% provide written quarter for of lines considerably filings to prior loss detailed premiums, The encourage premiums the ratio of I the period.

our to expense Moving ratio.

the had favorable expense planned ratio. expense on Our reductions impact a

to partially XX.X% $XXX,XXX basis. the commercial property per made by leverage measures net was as However, our earned lowered Accordingly, quarter investments we to same period expense we time, rates slightly risk XX.X% implement this higher ratio expect retention our expense year. as to and do a offset the this ceded from improved premiums, Over in the premium our for we continue further have net ratio last scale cost-cutting reduce on technology. we to

have ratio quarter expense under continue a an year at to prior we the as goal investment feel of for period. was And confident will premiums $XXX,XXX this Net reporting or improve. grow, for We compared ratio to the short-term XX%. income $XXX,XXX that

net to $X.X $XX,XXX. compared While gains to increased substantially realized million

Our with an X.X%. AA yield years of X.X fixed duration majority securities quality the an plus, investments with tax-equivalent credit remain average of conservatively a income of and managed in average

$X.XX income net net or period. result $X the to Conifer reporting a share million profitable, the As $X.XX in of per $X.X of share or a million of year prior above, loss per remained compared

fairly $X.X earned compared XXXX. This to losses or per improvement an share for share and per or quarter, million adjusted was of operating due Conifer primarily million period net reduced the on $X.XX operating a premium. expenses loss same of in reported to loss adjusted operating reduced $X.X $X.XX an The consistent

$XXX million balance to XX, assets year-end the investments of of Moving to were the XXXX. at sheet. were at $XXX $XXX December XXXX, XXXX. at million compared Total at Cash million $XXX end to end million total compared the and

against back $X.XX We that share. it had of Jim And per a assets the Finally, valuation closing with I'd of that, in book tax value. remarks. share allowance turn not book we for a reflected value per company's to over reported was like deferred $X.XX to

James Petcoff

global excellence, here how pandemic. In able has short, premium at base, proud a extremely the year XXXX our challenges. exceptional operating Conifer I'm our to maintained We everyone was of we're grow responded. and of despite

We have as for to to are emerges your Operator? take even mix solid successfully profits. shifted we look now our ready questions. support this world from And business Conifer. the And forward pandemic, better we underwriting to days

Operator

Instructions]. [Operator

Sandler. Piper from Newsome Paul from is question first Our

Paul Newsome

I the prospectively. ask expense going on your as that you the about prices how your does business up industry-wide. both change for and well impact how ratio that's wanted into Obviously, loss to business the And are and integrating about of reinsurance targets ratio? think the the

James Petcoff

general, general, our come. to hopefully going we a as years our reinsurance to I'll and the where Because talk let Andy accident are we relatively our the In able retentions of of Yes. the handle And in so development about -- level, at costs taken -- from reinsurance it have Nick it it. they our were But Nick on year experience sheet. keep look in rates our de-levering improving balance basis, is amount were just way we an on further. won't down a But up. same the really that higher we've same.

Nicholas Petcoff

Yes.

X:X. So, at our treaties are core reinsurance

those. renewed just we So

on Our property are treaties X:X basis. cat a

the the which results X:X renewal, we actually So we're obviously, of positive. know very

lower were some to from million casualty our $XXX Jim on we our increase also with all. treaties. minimal rate all ceded limit add As We're clash that $XXX million. property to was able done retention at to our mentioned, additional able to And

that property lower where with renewal. least moving hopefully and continuing a Obviously, with some the at XXXX, where in sense to in X:X the be very was makes were happy retentions goes. experience So interesting to forward. the it will volatility cat industry-wide point, And to the it we X:X our positive. But Jim's to of look and remove that at see

James Petcoff

cat the to little talk as up prior bit at that for Andy, renewal X:X what and about a look us want set exposure? you we do

Andrew Petcoff

Yes.

costs you probably helped downward. years. last getting few over has a our As substantially of to trend few of Paul, remember, of a cat the continued wind-exposed We've down lines out business more our drop see

past on a buying period of exposure as the to than higher much the in were limit we're total a in base. terms So, compared we return

this So year. it think year, to last be will we about stable

for going price cat it up that mentioned, we've basis we're stable will pricing a marketplace. us. seen Nick on -- hopeful As in be about But cost those

Paul Newsome

companies, of to you my what current sort And talk about a ratio. be, ratio your that mix of that the second long-term others. your expected return XX%? is than is high aspiration as most book to XX% And XX% business an different of given obviously, little mentioned of rate -- question, a expense relative kind of adequate Could if expense would manage achieving achieve you business a return, insurance goal your is but your you a

James Petcoff

different. of our in carrier. Yes. investor also A-minus -- That's ratio impacted true. business our The XX% we'll business mix use is for still a an we We're our A ratio. fronting we where an expense A-minus company rating that little the to a part reduction by is and goal. expense requires not rating, a is achieve it Once long-term have significant And the have

acquisition without But would because going get the are. long-term are to costs the it's difficult XX%. that A very to be they be to goal Our minus, what

You market costs. acquisition pay have to

continue and go a fixed down on We a been to expenses, our able basis. to just not those real control actually basis, percentage have

come We're on way going we basis. to as we the continue through grow, we So expenses world expense to to fixed reductions. has the changed our COVID, expect the down. opportunities a from And still I cost-cutting reduce further see -- go-forward see ratio

goal, long-term XX% is is to a answer not question, your XX% goal. So short-term

the expect current ratios mix to of our loss to improve We continue with business.

And expected want we returns. know, so, don't I exceptional returns,

is goal So -- be Paul. would that's returns. But goal our exceptional XX%, long-term

Operator

Scattergood. from Farnam, Our from Bob next Boenning question is and

Bob Farnam

not there just dwelling recently. there confirm weather I have low-value much you're the to to terms had exposure winter the product or going they've of in want in With Texas, whether

James Petcoff

But to exposure. question. have let answer I'm Andy that We going

Andrew Petcoff

a We But dwelling and do majority dwelling of are Texas. freeze we exposure of fire cover the and policies policies have have Yes, absolutely there. do HOX fire mix does not that in policies claims. policies, our

do or for buyback $XX,XXX. water we However, offer damage $X,XXX up to a

get out see come book as of cat. $X have of into group. retention possibly that to cat, a are will number a we lines but do a our million, see other will is that believe loss we $X million on we $X The net number. our this. us So, rolled alone We buy We do lines not the claims million business have do of a personal we could

all states, $X lines would business million business book with Texas not So, we to get other Texas do it and along million commercial number. a in personal business, of time -- the we not would the first the hit lines alone with that is with But possible at this $X believe of it retention.

Bob Farnam

purchased policies of that ballpark, for extra these damage? think the Okay. Approximately, how do you many just coverage water

Andrew Petcoff

Yes.

we top could policy. And some sort of of purchased have of worth coverage. between that their vary $X,XXX on believe XX% coverage $XX,XXX about water So damage or underlying

Bob Farnam

bit a the little the to Reserve maybe you underlying development the details commercial developments gears us loss give to on reserve continues side. continues shifting commercial some -- what to And line away just -- side? more the in be driving give me was profitably. Can line wear

James Petcoff

Nick?

Nicholas Petcoff

majority our 'XX, the talked was which side the in quick restaurant service the driven prior that came a be of in exposure commercial calls. line book about from development in Florida, business. was obviously standpoint. inflation our reduced quick-service a Yes, really over continues litigation by We've from And on restaurant That 'XX. state by Florida our challenge XX% to since and social

pandemic that. for out XXXX, to was from the XXXX, in less closing some those quarter. So driver the that and we prior of obviously see the years. issue, an development with has extent, But claims the And being that we are helped

Bob Farnam

wrote that heard you I 'XX. that saying you business was 'XX Is of you from the say? are that what in most -- that So developments and

Nicholas Petcoff

Yes.

the driver and the quarter. during that was So largest 'XX, quick-service of the in development 'XX restaurant

James Petcoff

geographies in to had of years, areas QSR challenges we've mainly. XXXX. Florida, out exposure just like and the where reduced have was we've XXXX been from But out geographically where our Nick specific was -- of it before. those that to been was profitable Florida Florida. And getting XX% accounts last very over there, probably past. get the XX% we since in in that And in said, the QSR by the few Really

for should expect negligible don't and as and years, better to 'XX be should be that as far 'XX continue really we 'XX development. So, accident the

Brian Roney

that And it short. business reporting tail on pretty right, has a period, also is relatively the short or

Nicholas Petcoff

quick-service point, at know reporting. the What shorter count end as Brian's casualty for To be. it's Typically, lines. Yes. to the the of quick year restaurant very line liability is we to is is opposed going other

that So an been It's of the social the of we a of declining We more just XXXX have tail that exposure claims. of Jim inflation part by litigation. XXXX see has of front number book a getting idea not in caused shouldn't years. And should state. and mentioned, as in for But our major a reporting. be

James Petcoff

Very little.

Bob Farnam

of And when term. near-term saying is you're XX%, expense near ratio considered what

James Petcoff

XXXX.

Bob Farnam

want have notes company principal intend me, of had the and from how when the the for how holding couple pay at questions senior to much know last a they of cash I've you due? down And bondholders you to that come

James Petcoff

I'm going that. to Brian let answer

Brian Roney

all, line we of a obviously Well, first cash, of of have in terms credit.

the looking cash for the blessed that there's And you're co. hold have have been Michigan. kind state I are or in long-standing we operating at making mean, of of at the have that ways Michigan. either based payments, service getting us, typically subsidiaries contracts by bondholders contract our biggest two of for a here And of We it, in place. dividends out service are both you have thing But

XX.X% to off we carve So up the premium top. can

last we million premium in wrote $XXX So year.

that cover ample see of interest. plenty the us and relative can to you So gives runway

right about is of So the years years. that. this September X go. we still after non-call feel year, We comfortable actually as stands in have up X it Actually, the to now very

to well exist, still our to we're So markets stated are, years going they before we'll September. looking clearly which the think from is X maturity, in terms but able of be possible at where we to come events refi be we out back if

Bob Farnam

right. All

likely like more it refinancing as option? your So most now, right sounds you're towards looking

Brian Roney

be time. would the thought at this That

James Petcoff

are love more much We'd to now. us as to rates favorable -- interest

Operator

[Operator Instructions].

from from is question Alex next Our Bolton James. Raymond

Alex Bolton

in maybe down you maybe help to the year break going opening rate And higher economy. from you share into growth Maybe within see of then some growth me of could from due that having what's commercial expansion? market the expect what's coming XXXX, continuing the if how lines and And first you coming half the forward?

James Petcoff

Nick, why take share? rate you don't the versus

Nicholas Petcoff

quarter. Yes. I we a mentioned, it fourth mean, combination, as was in the

strong in seeing property rate are line particular. of We the on business

we're So there in the single rate mid-to-high seeing digits. increases

So taverns that business the and that bars, was restaurants, on business write. quite property on other of we line lift a small the commercial

also On a is the in seeing overall commercial of our auto, book, mid-to-high increases that in single rate market portion which we're smaller the digits.

a of muted rate driven the of in -- is really by by geography driven little it's that's and liability increases, terms Our really terms bit lockdown. the more in

during that seen are lower reducing much obviously, as their by look So also lower and to costs restaurants -- reducing sales, if have you basis, they're premiums. insurance have We've well. have coverages limits rating our lockdowns to restaurants going and which is these lower bars

puts were that security the pressure and downward on pandemic, some strong our actually a But by small economic like we impacted which beyond seen programs. of the rate given in guards, businesses environment. pretty have the rate expansion dealers, really used car as did private commercial -- the And not see these rebound things that there. So some increases, investigators,

the before saw that pandemic of hospitality that in the kind some decline of in the we which happened really during we that, the a to We're pandemic premiums. we some the the made see in of the investments more of is that growth. the and So starting where to second that year, half and last growth either had couple programs we started year even in initiated offset

the a starting this activity see see they we class hopefully, XXXX, we in the further as normalized start rebound terms tick -- our to even of basis of early second vaccination I half hospitality are, of the rollouts to we'll as more think see forward. up the to end quarter, and third Certainly, open submission quarter hopefully, moving In are states the some beginning hospitality up. with into

Adam Prior

operator? more, Any

Operator

No, no over -- there's it turn back more remarks. you questions. Jim any for Petcoff to I'll final Would

James Petcoff

you. appreciate of hospitality on year. as see, today. this And were come being look forward start to in still have pandemic. sectors, everybody just for as us. profitability last XXXX Nick our I to as with being biggest We our core can And outlined, Thank business, grow we to call out the you long-term we other which able

very excited Thanks we're prospects again. XXXX. for about So the Goodbye.

Operator

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

You may disconnect. now

Conifer (CNFR) 28 Feb 212020 Q4 Earnings call transcript