CNFR - Earnings call transcript Q3 2021

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Operator

Good morning and welcome to Conifer Holdings Third Quarter 2021 Investor Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Adam Prior of The Equity Group. ahead. go Please

Adam Prior

good quarter and yesterday Conifer it's issued the Thank results morning, after third financial website, market the XXXX company's you ir.cnfrh.com. everyone. close on of

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

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

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

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

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

Jim Petcoff

Thank you, Adam. Good everyone. morning,

of Harold Nick in with On I'd overview. cover the today the Brian. underwriting will brief Personal like is Conifer. the see On continued detail just leading and XX% call, pleased discuss in over provide premiums almost month premium for the for meaningful to written and and quarter Harold growth nine written up the and growth growth, up a third results call I to Lines gross gross today's XX% In double-digit period. greater financials. quarter, Both quarter-over-quarter will reported was another to me Nick, Commercial

in the deeper implementing like changes we'd several growing have business are it mix years solely specialty our largely lines. we focused we established for successfully on is to been where And our be. now, With

a major push bit our have the In we line rate component that to significant wherever will addition, growth continue later. the serve. more increases in a top select this general, we in of In Nick on from little quarter possible. rate came lines

roll After to growth fundamental promising signs reduce and trend see through a operating book, we economies -- cost our helping the increasing about ongoing efficiency of favorable well. economics overall scale, of going positive our growth for With the our optimizing mix, forward. impact line structure as years enhancements continue business for several very drive The definitely business are general top we will we the that excited future.

significant in performing core generating focus For the our and runway. continue premium sustainable remainder of -- remains our our growth In XXXX, profitable specialty will markets, lines. be best growth to has our on continued

going to I Nick. to consistent operating ability We forward. will that, profit greatly over With turn report Conifer's enhance it

Nick Petcoff

several business production last small group. to our consistent the the growth, Jim. of Commercial total pleased comments over growth. XX% Jim's of underwriting substantial represented line you, we are see the from in to the successful Lines for coming Echoing effort our years where top favorable period, fruition form on growth saw Thank made we

Lines of as gross of the Personal business, over overall. which low-value dwelling $XX quarter. Commercial million to growth were a for the premiums the premiums XX% continuing very represented nine for written consists over trend up Our almost X% month largely Lines and quarter positive up in written period XX% well,

benefiting still renewal quarter, levels existing third at the retention approximately continued and to we new our business grow During from submissions are XX%. high

our of we geographies, state including further are market key many our expand base, we premium As Michigan. of home our developing share in

Michigan continued addition a significant expected opportunities remains future of our driver many business for other presents In positive performance, to us and growth.

in book Looking combined the down COVID non-renewals. largely hospitality quarter, impacts closely, our ongoing to more selective were with premiums planned due at

the top achieved in premium line in $X Lines roughly million hand, an Commercial our helped XX% On other for small equates growth. our group. quarter the This growth which alone we of increase drive business to premium additional

we do positive contributions as well. time, over normalizes expect hospitality As premium there

We combined the profitable Personal for also as period. to increase roughly XX% ratio as a million Lines a reported well premium XX% in $X

where continue dedicated Our particularly our conservatively established dispersed wind to Indiana. wind relationships have the solid with is consists select We events. strong wind to monitoring Texas to underwriting of Personal Midwest remain largely we'll cover to in Lines and specialty in reduce across possible future purchase markets. actively this growth, well low-value our exposures dwelling products, exposure Geographically, teams and

largely in a we shift mix very where earlier, direction. changes Jim line positive discussed our by As This business class mix in includes geography, and business shifted have necessary.

know have lines greatest that profit. for growth today's and opportunity pleased the coming and are the We to we from that well serve see

in reported report that reported few off prior also impacted Much we and development our to current either did lines of quarter-over-quarter, run improvements additional we or expense from select years profitability. we development loss a ratios from While period stems our continue deemphasize. that that

several noted reduced classes of our the factors. to taken Florida we exposure example, performing to high as previously proactively we restaurant service the ongoing a exposure. noted have our to judicial premium have we business for been refining our mitigate expectations items QSR restaurant, have Over have development? book bar, have these In past lines. was select since not environment. impact the quarters, Florida certain well as we challenging change our future due mix achieved these that For steadily XXXX, in watermark exposures among several to What reserve and tavern quick our were overall QSR business key particular, we certain of reducing efforts in the as was Largest

best following the We've remaining best XX% be methods where total increased and to also claims Our refine is premium positive terms roughly down by our select focusing of efforts. our of versus XXXX demonstrates in continued on premium of written. applicable. the QSR results our update to XXXX, data expected year-end reserves the on The production ongoing underwriting average the

XX, reported same to months claim down count XXXX, same nine for September period more our is the in down ended QSR period the from XX% and XX% XXXX. the XXXX liability For than

we our we in in from to fact, lines, our nine XXXX. months made than our reported the all down claim possible. The In period across counts, of to reducing believe, one compared down the more XX, and achieve the were claim to I'm exposure XX% same is ended lines shift line geographies, efficiency see allowing just improvements same mix and and have our XX% XXXX, book to us personally counts XXXX to business period This focused the liability underperforming across many greater September reduced of overall. reflect for us and classes scale are pleased like we best very our example on organization. expect how proud or Overall, top to we growing helping the

effective now is expected Harold hand growth by shift Meloche the Our results. I'll provide discussion underwriting the business today's our strategy line financials. call evidenced over top planned premium to future a to favorably of and mix to

Harold Meloche

I Thank the quick you, filings encourage to presentation provide of greater website our company's review and the for a and review on investors also Nick. I'll detail. results

I'll thorough period the XXX% last combined including to more Conifer's improving ratio ratio. year. compared XXX% results, Specifically, in our through go underwriting expense discussion an same was the of quarter third in a

an shift to XX.X% ago, this future the our ratio period, compared XX% ratio to our ratio particularly combined impact loss an underwriting was down quarter Lines in In for third in for the of performance period wind-exposed The while possible year XX% in were loss this storm quarter, several reduce we prior results. of Lines, the our especially began loss business slightly considering ratio quarter. pleased XX.X% is overall quarter for otherwise XX% our peers. was Our last Personal several Commercial with to years away year. from XX% goal the was to and was Personal difficult compared cap the the When to Lines we

this of Personal example be sector. from The Lines third planned excellent proved quarter shift to -- away wind-exposed an shifted

in the year XX% accident Our quarter compared prior current XX% was to the combined year ratio period. in

to expense this from continue XXX and reductions to ratio resulting ratio; basis improved our XX.X% premium XX.X% from expense Accordingly, Moving the year, we down points. see for planned period to quarter our improvement last same growth. expense

achievable million implement up a expense scale is in investment in the in compared in earned that the a income measures the same loss we net $XXX,XXX while during near premiums, technology, As period and realized sub-XX our believe company third was -- very net cost-cutting in reported net to leverage investments the prior gain to we year ratio $XXX,XXX year we $XXX,XXX of prior realized the continue compared to made $X.X quarter, Investment future. the the further a have period. of

average equity a X.X majority and tax reduced per we years average or the program. this securities related of X.X%. of Our loss $X.X million per million the conservatively an yield change of $X.XX to period. million prior recognition investments of company investments protection or share share managed negative $X.X and an AA+, of other a reported remain loan in value with net quarter, of in the under year the $XXX,XXX the In in of payroll income duration resulted that gains with income a the the $X.X net fair in compared we recorded income to credit net of $X.XX by equivalent the reporting PPP quality of forgiveness Overall, fixed

$X.X gain value, $X.XX the per year. of Year-to-date, $XXX,XXX same this of million share XXXX. reported to or $X.X adjusted company same of adjusted period the a loss in reported $X.X loss or period operating other nonrecurring $X.XX fair share versus and loss net the million a Excluding million change for operating the an loss in an compared per of for last company

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

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

remarks. to value. And book assets in I'd not it We share a $X.XX to reflected full valuation in deferred closing back with per Jim have turn tax that, net over allowance, to that, for were due like

Jim Petcoff

I our impact exposure to that of Harold. and have we line XX% the our the generated lines month greatest nine grow pleased to am to see the plan Thanks, while top for execution in reserves period, as our overall. quarter business reducing XX% all

We continue grow our effectively our refine business mix and top line. to

going Our profitability achieving to I'd scale Operator? and primary remains any forward. operating efficient if line With driving there's questions. that, focus bottom and ask like

Operator

[Operator Scattergood. Instructions] Boenning Please Bob go ahead. question & of first The comes from Farnam

Bob Farnam

Hey, there. Yes.

Just a couple of questions here.

that kind premium $X.X hoping In at and of the of rightsize policyholders' it's you -- looking your growth your million surplus to to you're written terms net infrastructure kind on premium based leverage have. of I'm for now. the

your -- So balancing put more how to on much leverage intact? you that still have figure but keeping your to I'm keep growth to with out -- rating trying

Jim Petcoff

Yes. That's question. great Thanks, Bob. a

and we used XX%. capital a company of as But in reinsurance-wise, haven't capital pretty only hopefully not you help of and we'll or have raise along that straightforward. either to et it's to But our any reinsurance But like the XX% of our to lines development deleverage needed think We plenty that rate subsides, growth posting been Brian, or is be earnings or... availability do grow. if the And additional those growth. there's to comments cetera, we XX% will quarter, it's anything any

Brian Roney

more us, anticipated top Jim's of give actually base bit a to are, from at the right looking we'll supplement of we think of look now. that other where But we be our line I ways line are is a where that. percentage obviously, I off obviously echo obviously, we growth see little growth, we for room if top and our comments kind as smaller and

Bob Farnam

lowering have to of have of maybe to cost you just question possibility still that of the address was reduce in to my to question ratio order almost infrastructure? Yes, is a line you to expense there going be kind -- the get kind where the expense ratio infrastructure further want if the top with is whole it you're -- to of that under pressure, kind the

Jim Petcoff

if at of values our the their go infrastructure. even We've going been they operating you And continuing as lower dollar expenses, in the are cost up. to real down look ratings

So we have focused bit ratio. a we've don't hurting think The because front-end our which expense I on -- I are rating hampered our somewhat we're quite -- that. by costs

In the our 'XX, that business 'XX costs. of problem reinsurance through us 'XX, addition, lines in reverberating caused still 'XX, have some are

that as We expect to mitigate well.

kind expense lowered be It by but as So with We minimum wasn't to in premium, points on, to earned decline. we premium as of a earned that. a of quarter would earned even as the results, the upward, the on I catch-up It's ratio expense offset current And is that basis some anticipate but in is had our a premiums getting And little the guess premium. we're goes it's to than cryptic going that's significant expect up. on ratio. right goes little time on hit ratio expense earned that. minimum year growth continues, premium certain really otherwise, growth, better extent our a feel a little And catching bit the continue which operating direction. premium our reinsurance few this growth better we more bit we

get couple the and of few see way. We sub-XX that to expect quarters continuing it in we quarters -- next

Bob Farnam

The from mature before in And right. senior know noteholders. under second years asked questions All have question I I Okay. notes two the I little now. the have, I've but

So $XX have you outstanding. million

to when they be what to plans your mature? able that Just are pay down

Harold Meloche

actually, years. there's Well, obviously, two point as you out, more

with now, do is about We probably the I will, feel if actually growing, think right into coverage confident We're about the we that back subdebt premium to refi out you our underlying people how your the more refi payments. But as line top to coverage, dividends? thing the the most where market. the interest refi we important are comfortable gives But obviously for for ability they feel with now. feel right that.

going an far as a see interest we interest favorable as rates So we're costs forward. lower to our with opportunity hopefully trend concerned, and

Bob Farnam

Okay, thanks guys.

Operator

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

Alex Bolton

a you can bar Good -- the how restaurant are impact? Peters. don't business, Maybe Alex COVID looking headwind morning, touch and turns the tailwind? understanding calling Greg when other on to in touching Bolton Florida, you maybe in What's from restaurant that everyone. in this being U.S. the elsewhere COVID the This is get I a Maybe headwind to bars for doing like the from outlook? I a in mean, best of a mean, on and tailwind states and impact

Jim Petcoff

Nick?

Nick Petcoff

Sure.

hospitality see bar, on down the big So was portion efforts terms that it actually some own in growth the to comments book, of though restaurant, there varies bar, did particular. a our in our was of a Even tavern QSR bit reunderwriting of quite market your sort in initial out on the for book. decline restaurant, business. geography independent We tavern overall,

starting tavern by So -- labor you see, independent so We things and stabilize especially created we to an that. less in the the world. issue so bar, on franchise I'd in -- of the say, issues side the still shortages side have but on more are restaurant,

hours to tied capacity, especially as COVID side. -- sales, much tavern are liquor-driven operation and of but So impacting maybe that directly bar, it's and businesses shortages those businesses the obviously not and in reducing in lower labor hours

more see moving as think the well. there. where, of think vibrant. think like stabilize mixed close chains some Michigan states, and I pretty like are little that In a particularly into other to states do to but be Florida we starting labor been in XXXX, especially starting normal, So to mentioned, normal Midwestern to it's a things back the as stabilize you if supply And sort of outside spring, bit I shortages are it's we'll the and other of we're some of bag places I see

Alex Bolton

I net Okay, it investment you great. forward? going that increase down. Maybe think guess investment some would going coming guess And and maybe thoughts -- I rise about forward, subsequent would net income. I then, subsequential can on be there's guess, in think I talk income, I

Jim Petcoff

keeping at, the and is if we're mean, duration book look low, and book us, equivalent Harold XX% I tax being about as the portfolio, book annualized talked you in I obviously, cash his Yes. mean, while short. the for income floaters yield short term section. of yield with roughly

from rates exposure think I we so we're is take opportunities principal but income. So, trying going less perspective, interest as forward it, see less there a at look perhaps we with to rising

I So down conservative horns of going and for pulled it that more in on way, as at opportunities book forward. look been years annualized the rates with respect we've forward that But half pretty see said, a going our investment we in little been I rise. you as like has But an of three as the think interest income yield book bit. income less, kind we

Alex Bolton

Okay, great. the Thanks for answers.

Operator

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

Jim Petcoff

really you. say. to Thank have I much don't

in We're we We're here. areas we I want. think covered growing everything growing. the

standpoint. year's accident we're we've probably And going. to still little work of pretty book through ratios we feel excellent. a bit delevered current about and loss from development We have our good are a Our where care-risk

interest forward and thank for look to continued So you quarter. to talking you we your next

Operator

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

disconnect. You may now

Conifer (CNFR) 11 Nov 212021 Q3 Earnings call transcript