Conifer Holdings, Inc. (Nasdaq: CNFR) (“Conifer” or the “Company”) today announced results for the second quarter ended June 30, 2024.

Second Quarter 2024 Financial Highlights (compared to the prior year period)

  • Expense ratio improved 5.8 percentage points to 32.1%
  • Net investment income increased 11.2% over the prior year period to $1.5 million
  • Significant progress in planned gross written premium shift toward MGA model

Management Comments

Nick Petcoff, CEO of Conifer, commented, "We are pleased to report significant advances in our strategic transformation. Our main focus is shifting premium away from the traditional risk-bearing carrier revenue model to a more sustainable and scalable production-based revenue approach. This change reflects our commitment to aligning our business model with market demands by creating long-term value.”

Strategic Turn toward Non-Risk Bearing Revenue

Conifer saw significant progress in the second quarter of 2024 in its initiative to run commercial gross written premium through its wholly owned managing general agency (“MGA”), Conifer Insurance Services (CIS). This strategic shift away from a traditional risk-bearing revenue model to focus instead on a wholesale agency, production-based approach began in late 2023, and the Company expects 100% of future commercial gross written premium to flow through its MGA.

This approach is intended to optimize Conifer’s resources and will complement the Company’s shift to primarily focus on commission revenues within its MGA. Accordingly, Conifer anticipates that substantially all commercial lines business will be directly written by third-party insurers with A.M. Best ratings of A- or better by the end of the third quarter in 2024.

During the second quarter of 2024, Conifer continued advancing its plan to direct premium to capacity providers for coverage across multiple commercial lines of business. Furthermore, the transfer of cannabis premium to capacity providers has progressed at a steady pace, and the Company expects to ultimately shift all premium for this line of business to its capacity partners as well. The Company expects that this and other capacity initiatives will significantly boost the premiums placed by its agency segment, ultimately driving higher commission revenue over time.

The Company has continued to underwrite low-value homeowners business in Texas and the Midwest. As detailed in the Personal Lines results overview below, premium for the second quarter of 2024 increased 23.0% from the prior year period.

2024 Second Quarter Financial Results Overview

  At and for the Three Months Ended June 30,   At and for the Six Months Ended June 30,
  2024   2023   % Change   2024   2023   % Change
  (dollars in thousands, except share and per share amounts)
                       
Gross written premiums $ 18,971     $ 44,674     -57.5%   $ 43,284     $ 80,888     -46.5%
Net written premiums   13,247       29,328     -54.8%     28,638       47,670     -39.9%
Net earned premiums   16,666       23,183     -28.1%     33,553       45,135     -25.7%
                       
Net investment income   1,505       1,354     11.2%     3,057       2,661     14.9%
Net realized investment gains (losses)   (118 )     -     **     (118 )     -     **
Change in fair value of equity investments   (196 )     (12 )   **     (153 )     682     **
                       
Net income (loss) allocable to common shareholders   (3,950 )     (4,739 )         (3,876 )     (3,738 )    
Earnings (loss) per share, diluted $ (0.32 )   $ (0.39 )       $ (0.32 )   $ (0.31 )    
                       
Adjusted operating income (loss)*   (3,636 )     (4,727 )         (3,605 )     (4,420 )    
Adjusted operating income (loss) per share* $ (0.30 )   $ (0.39 )       $ (0.30 )   $ (0.36 )    
                       
Book value per common share outstanding $ (0.10 )   $ 1.38         $ (0.10 )   $ 1.38      
                       
Weighted average shares outstanding, basic and diluted   12,222,881       12,220,331           12,222,881       12,218,102      
                       
Underwriting ratios:                      
Loss ratio (1)   91.5 %     83.0 %         76.6 %     72.9 %    
Expense ratio (2)   32.1 %     37.9 %         33.4 %     37.6 %    
Combined ratio (3)   123.6 %     120.9 %         110.0 %     110.5 %    
                       
* The "Definitions of Non-GAAP Measures" section of this release defines and reconciles data that are not based on generally accepted accounting principles.
** Percentage is not meaningful
(1) The loss ratio is the ratio, expressed as a percentage, of net losses and loss adjustment expenses to net earned premiums and other income from underwriting operations.
(2) The expense ratio is the ratio, expressed as a percentage, of policy acquisition costs and other underwriting expenses to net earned premiums and other income from underwriting operations.
(3) The combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss.
                       

2024 Second Quarter Gross Written Premium

Gross written premiums decreased 57.5% in the second quarter of 2024 to $19.0 million, compared to $44.7 million in the prior year period. This decrease reflects the Company’s continued progress toward its goal to reduce premium leverage on operating subsidiaries and focus on non-risk bearing revenue. Commercial Lines Financial and Operational Review

Commercial Lines Financial Review
 
  Three Months Ended June 30,   Six Months Ended June 30,
  2024   2023   % Change   2024   2023   % Change
  (dollars in thousands)
                       
Gross written premiums $ 6,782     $ 34,761     -80.5 %   $ 19,544     $ 63,736     -69.3 %
Net written premiums   4,285       20,485     -79.1 %     12,572       32,726     -61.6 %
Net earned premiums   8,681       17,487     -50.4 %     17,478       34,610     -49.5 %
                       
Underwriting ratios:                      
Loss ratio   79.4 %     77.5 %         77.9 %     69.5 %    
Expense ratio   25.3 %     37.4 %         29.1 %     36.8 %    
Combined ratio   104.7 %     114.9 %         107.0 %     106.3 %    
                       
Contribution to combined ratio from net                      
(favorable) adverse prior year development   23.6 %     5.0 %         12.0 %     0.2 %    
                       
Accident year combined ratio (1)   81.1 %     109.9 %         95.0 %     106.1 %    
                       
(1) The accident year combined ratio is the sum of the loss ratio and the expense ratio, less changes in net ultimate loss estimates from prior accident year loss reserves. The accident year combined ratio provides management with an assessment of the specific policy year's profitability and assists management in their evaluation of product pricing levels and quality of business written.
                       

The Company’s commercial lines of business represented 35.7% of total gross written premium in the second quarter of 2024. As noted above, premium decreased considerably year over year in keeping with the strategic shift to a commission-based revenue model through Conifer’s managing general agency, CIS.

Personal Lines Financial and Operational Review

Personal Lines Financial Review
 
  Three Months Ended June 30,   Six Months Ended June 30,
    2024       2023     % Change     2024       2023     % Change
  (dollars in thousands)
                       
Gross written premiums $ 12,189     $ 9,913     23.0 %   $ 23,740     $ 17,152     38.4 %
Net written premiums   8,962       8,843     1.3 %     16,066       14,944     7.5 %
Net earned premiums   7,985       5,696     40.2 %     16,075       10,525     52.7 %
                       
Underwriting ratios:                      
Loss ratio   104.6 %     100.1 %         75.2 %     84.1 %    
Expense ratio   39.5 %     39.2 %         38.1 %     40.0 %    
Combined ratio   144.1 %     139.3 %         113.3 %     124.1 %    
                       
Contribution to combined ratio from net                      
(favorable) adverse prior year development   9.3 %     -6.4 %         1.4 %     -7.2 %    
                       
Accident year combined ratio   134.8 %     145.7 %         111.9 %     131.3 %    
                       

Personal lines, representing 64.3% of total gross written premium for the quarter. Personal lines gross written premium increased 23.0% from the prior year period to $12.2 million for the second quarter of 2024, led by growth in the Company’s low-value dwelling line of business in Texas and the Midwest. Seasonal spring storms significantly impacted our personal lines results for the quarter, mainly from the Oklahoma based business, which is in run-off. The run-off for that book is expected to be largely complete by the end of this year.

Combined Ratio Analysis

  Three Months Ended June 30,   Six Months Ended June 30,
  2024   2023   2024   2023
   
Underwriting ratios:              
Loss ratio 91.5 %   83.0 %   76.6 %   72.9 %
Expense ratio 32.1 %   37.9 %   33.4 %   37.6 %
Combined ratio 123.6 %   120.9 %   110.0 %   110.5 %
               
Contribution to combined ratio from net (favorable)              
adverse prior year development 16.8 %   2.2 %   6.9 %   -1.5 %
               
Accident year combined ratio 106.8 %   118.7 %   103.1 %   112.0 %
               

Net Investment IncomeNet investment income was $1.5 million for the quarter ended June 30, 2024, compared to $1.4 million in the prior year period.

Change in Fair Value of Equity SecuritiesDuring the quarter, the Company reported a loss from the change in fair value of equity investments of $196,000, compared to a $12,000 loss in the prior year period.

Net Income (Loss) allocable to common shareholdersThe Company reported net loss allocable to common shareholders of $4.0 million, or $0.32 per share, for the second quarter of 2024.

Adjusted Operating Income (Loss)In the second quarter of 2024, the Company reported an adjusted operating loss of $3.6 million, or $0.30 per share. See Definitions of Non-GAAP Measures.

Earnings Conference Call with Accompanying Slide PresentationThe Company will hold a conference call/webcast on Wednesday, August 14, 2024, at 8:30 a.m. ET to discuss results for the second quarter ended June 30, 2024.

Investors, analysts, employees and the general public are invited to listen to the conference call via:

  Webcast: On the Event Calendar at IR.CNFRH.com
  Conference Call: 844-868-8843 (domestic) or 412-317-6589 (international)
     

The webcast will be archived on the Conifer Holdings website and available for replay for at least one year.

About Conifer HoldingsConifer Holdings, Inc. is a Michigan-based property and casualty holding company. Through its subsidiaries, Conifer offers specialty insurance coverage for both commercial and personal lines, marketing through independent agents in all 50 states. The Company is traded on the Nasdaq Global Market under the symbol CNFR. Additional information is available on the Company's website at www.ir.cnfrh.com.

Forward-Looking Statement

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance, and include Conifer’s expectations regarding premiums, earnings, its capital position, expansion, and growth strategies. The forward-looking statements contained in this press release are based on management’s good-faith belief and reasonable judgment based on current information. The forward-looking statements are qualified by important factors, risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in the forward-looking statements, including those described in our form 10-K (“Item 1A Risk Factors”) filed with the SEC on April 1, 2024 and subsequent reports filed with or furnished to the SEC. Any forward-looking statement made by us in this report speaks only as of the date hereof or as of the date specified herein. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable laws or regulations.

Definitions of Non-GAAP MeasuresConifer prepares its public financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Statutory data is prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners' (NAIC) Accounting Practices and Procedures Manual, and therefore is not reconciled to GAAP data.

We believe that investors’ understanding of Conifer’s performance is enhanced by our disclosure of adjusted operating income. Our method for calculating this measure may differ from that used by other companies and therefore comparability may be limited. We define adjusted operating income (loss), a non-GAAP measure, as net income (loss) excluding: 1) net realized investment gains and losses and 2) change in fair value of equity securities. We use adjusted operating income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance.

Reconciliations of adjusted operating income (loss) and adjusted operating income (loss) per share: 

  Three Months Ended June 30,   Six Months Ended June 30,
  2024   2023   2024   2023
  (dollar in thousands, except share and per share amounts)
               
Net income (loss) allocable to common shareholders $ (3,950 )   $ (4,739 )   $ (3,876 )   $ (3,738 )
Less:              
Net realized investment gains (losses)   (118 )     -       (118 )     -  
Change in fair value of equity securities, net of tax   (196 )     (12 )     (153 )     682  
Impact of income tax expense (benefit) from adjustments *   -       -       -       -  
Adjusted operating income (loss) $ (3,636 )   $ (4,727 )   $ (3,605 )   $ (4,420 )
               
Weighted average common shares, diluted   12,222,881       12,220,331       12,222,881       12,218,102  
               
Diluted income (loss) per common share:              
Net income (loss) allocable to common shareholders $ (0.32 )   $ (0.39 )   $ (0.32 )   $ (0.31 )
Less:              
Net realized investment gains (losses)   (0.01 )     -       (0.01 )     -  
Change in fair value of equity securities   (0.01 )     -       (0.01 )     0.05  
Impact of income tax expense (benefit) from adjustments *   -       -       -       -  
Adjusted operating income (loss), per share $ (0.30 )   $ (0.39 )   $ (0.30 )   $ (0.36 )
               
         
Conifer Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
         
    June 30,   December 31,
    2024   2023
Assets   (Unaudited)    
Investment securities:        
Debt securities, at fair value (amortized cost of $132,889 and $135,370, respectively)   $ 119,371     $ 122,113  
Equity securities, at fair value (cost of $1,844 and $2,385, respectively)     1,660       2,354  
Short-term investments, at fair value     23,339       20,838  
Total investments     144,370       145,305  
         
Cash and cash equivalents     9,697       11,125  
Premiums and agents' balances receivable, net     30,583       29,369  
Receivable from Affiliate     1,174       1,047  
Reinsurance recoverables on unpaid losses     74,358       70,807  
Reinsurance recoverables on paid losses     8,614       12,619  
Prepaid reinsurance premiums     13,494       28,908  
Deferred policy acquisition costs     4,606       6,285  
Other assets     6,038       6,339  
Total assets   $ 292,934     $ 311,804  
         
Liabilities and Shareholders' Equity        
Liabilities:        
Unpaid losses and loss adjustment expenses   $ 174,786     $ 174,612  
Unearned premiums     44,820       65,150  
Reinsurance premiums payable     1,408       246  
Debt     24,832       25,061  
Funds held under reinsurance agreements     23,602       24,550  
Premiums payable to other insureds     19,299       13,986  
Accounts payable and accrued expenses     5,352       5,310  
Total liabilities     294,099       308,915  
         
Commitments and contingencies     -       -  
         
Shareholders' equity:        
Preferred stock, no par value (10,000,000 shares authorized; 1,000 issued and outstanding, respectively)     6,000       6,000  
Common stock, no par value (100,000,000 shares authorized; 12,222,881 issued and outstanding, respectively)      98,170       98,100  
Accumulated deficit     (90,559 )     (86,683 )
Accumulated other comprehensive income (loss)     (14,776 )     (14,528 )
Total shareholders' equity     (1,165 )     2,889  
Total liabilities and shareholders' equity   $ 292,934     $ 311,804  
         
Conifer Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except share and per share data)
                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2024   2023   2024   2023
                 
Revenue and Other Income                
Premiums                
Gross earned premiums   $ 29,381     $ 36,013     $ 63,613     $ 70,307  
Ceded earned premiums     (12,715 )     (12,830 )     (30,060 )     (25,172 )
Net earned premiums     16,666       23,183       33,553       45,135  
Net investment income     1,505       1,354       3,057       2,661  
Net realized investment gains (losses)     (118 )     -       (118 )     -  
Change in fair value of equity securities     (196 )     (12 )     (153 )     682  
Agency commission income     8,831       211       13,167       641  
Other income     160       187       420       383  
Total revenue and other income     26,848       24,923       49,926       49,502  
                 
Expenses                
Losses and loss adjustment expenses, net     15,281       19,319       25,801       33,032  
Policy acquisition costs     10,480       4,413       17,493       9,134  
Operating expenses     4,256       5,114       8,751       9,393  
Interest expense     869       820       1,746       1,506  
Total expenses     30,886       29,666       53,791       53,065  
                 
Income (loss) before equity earnings in Affiliate and income taxes     (4,038 )     (4,743 )     (3,865 )     (3,563 )
Equity earnings (loss) in Affiliate, net of tax     228       4       286       (175 )
Income tax expense (benefit)     (18 )     -       (18 )     -  
                 
Net income (loss)     (3,792 )     (4,739 )     (3,561 )     (3,738 )
Preferred stock dividends     158       -       315       -  
Net income (loss) allocable to common shareholders     (3,950 )     (4,739 )     (3,876 )     (3,738 )
                 
Earnings (loss) per common share,                
 basic and diluted   $ (0.32 )   $ (0.39 )   $ (0.32 )   $ (0.31 )
                 
Weighted average common shares outstanding,                
 basic and diluted     12,222,881       12,220,331       12,222,881       12,218,102  
                 

For Further Information:Jessica Gulis, 248.559.0840ir@cnfrh.com

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