Conifer Holdings, Inc. (Nasdaq: CNFR) (“Conifer” or the “Company”) today announced results for the second quarter ended June 30, 2023.

Second Quarter 2023 Financial Highlights (compared to the prior year period)

  • Gross written premium increased 19.4% to $44.7 million
  • Expense ratio continues downward trend: 110 basis point improvement from Q2 2022
  • Combined ratio of 120.9%; accident year combined ratio excluding the impact of storm-related losses was 95.4% (6)

Management Comments James Petcoff, Executive Chairman and Co-CEO, commented, “While the second quarter results were affected by atypically severe storm losses, it is important to emphasize that excluding the impact of these storm-related losses, Conifer would have achieved continued profitability in the quarter.”

2023 Second Quarter Financial Results Overview

  At and for theThree Months Ended June 30,   At and for theSix Months Ended June 30,
    2023       2022     % Change     2023       2022     % Change
  (dollars in thousands, except share and per share amounts)
                       
Gross written premiums $ 44,674     $ 37,418       19.4 %   $ 80,888     $ 70,382       14.9 %
Net written premiums   29,328       27,266       7.6 %     47,670       45,287       5.3 %
Net earned premiums   23,183       24,576       -5.7 %     45,135       48,531       -7.0 %
                       
Net investment income   1,354       564       140.1 %     2,661       1,071       148.5 %
Net realized investment gains (losses)   -       (1,436 )     **       -       (1,505 )     **  
Change in fair value of equity investments   (12 )     317       -103.8 %     682       597       14.2 %
Other gains (losses)   -       (1 )     **       -       (6 )     **  
                               
Net income (loss)   (4,739 )     (8,399 )     **       (3,738 )     (11,269 )     **  
Net income (loss) per share, diluted $ (0.39 )   $ (0.86 )           $ (0.31 )   $ (1.16 )        
                               
Adjusted operating income (loss)*   (4,727 )     (7,279 )     **       (4,420 )     (10,355 )     **  
Adjusted operating income (loss) per share, diluted* $ (0.39 )   $ (0.75 )     **     $ (0.36 )   $ (1.07 )     **  
                       
Book value per common share outstanding $ 1.38     $ 1.75         $ 1.38     $ 1.75      
                       
Weighted average shares outstanding, basic and diluted   12,220,331       9,712,602           12,218,102       9,710,223      
                       
Underwriting ratios:                      
Loss ratio (1)   83.0 %     90.2 %         72.9 %     82.7 %    
Expense ratio (2)   37.9 %     39.0 %         37.6 %     38.3 %    
Combined ratio (3)   120.9 %     129.2 %         110.5 %     121.0 %    
                       
* 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.
 

2023 Second Quarter Premiums

Gross Written PremiumsGross written premiums increased 19.4% in the second quarter of 2023 to $44.7 million, compared to $37.4 million in the prior year period. This top line growth was orchestrated through a multi-faceted approach: Rate increases in select market segments were thoughtfully aligned with the Company's risk profile; while concurrently, continued expansion within select key verticals allowed the Company to capitalize on existing strengths and expertise, and highlight runway for future growth in these historically profitable lines of business.

This approach was most clearly demonstrated in the Company’s small business program, where GWP increased 17.0% in the second quarter of 2023 to $28.0 million. Conifer’s low-value dwelling line of business continued its strong growth trajectory as well, with premiums up 62.0% to $6.9 million in the quarter.

Net Earned PremiumsNet earned premiums decreased 5.7% to $23.2 million in the second quarter of 2023, compared to $24.6 million for the prior year period. The decrease was primarily due to higher specific loss property reinsurance rates, effective January 1, 2023.  

Commercial Lines Financial and Operational Review

Commercial Lines Financial Review
  Three Months Ended June 30,   Six Months Ended June 30,
    2023       2022     % Change     2023       2022     % Change
  (dollars in thousands)
                       
Gross written premiums $ 34,761     $ 32,076       8.4 %   $ 63,736     $ 60,662       5.1 %
Net written premiums   20,485       22,386       -8.5 %     32,726       36,726       -10.9 %
Net earned premiums   17,487       20,784       -15.9 %     34,610       41,308       -16.2 %
                       
Underwriting ratios:                      
Loss ratio   77.5 %     95.5 %         69.5 %     88.1 %    
Expense ratio   37.4 %     38.0 %         36.8 %     37.2 %    
Combined ratio   114.9 %     133.5 %         106.3 %     125.3 %    
                       
Contribution to combined ratio from net (favorable) adverse prior year development   5.0 %     44.4 %         0.2 %     36.1 %    
                       
Accident year combined ratio (non-GAAP) (4)   109.9 %     89.1 %         106.1 %     89.2 %    
                       
Impact from storms   5.5 %     -           2.7 %     -      
                       
Accident year combined ratio before impact of storms (non-GAAP) (4)   104.4 %     89.1 %         103.4 %     89.2 %    
                       
(4) 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 accident year combined ratio is a non-GAAP measure. We excluded $967,000 of severe storm losses from the accident year combined ratio during the quarter due to the significant variance relative to our historical and expected future losses. The accident year combined ratio before impact of storms is a non-GAAP measure.
                                               

The Company’s commercial lines of business represented 77.8% of total gross written premium in the second quarter of 2023. Conifer’s dedication to maintaining and enhancing its deep knowledge and experience within select key verticals remains a cornerstone of its strategy. This expertise-driven approach provides the foundation for the Company's future growth and profitability.

Commercial lines gross written premium increased 8.4% in the second quarter of 2023 to $34.8 million, diligently executing on the Company’s strategy of combining rate increases with organic growth in historically profitable lines of business.

The Commercial lines combined ratio was 114.9% for the three months ended June 30, 2023; this represents an improvement of 18.6 percentage points compared to the same period in 2022. The loss ratio was 77.5% for the quarter, down 18.0 percentage points from 95.5% in the prior year period.

The expense ratio was 37.4% for the second quarter of 2023, marking continued improvement from the prior year period.

Personal Lines Financial and Operational Review

Personal Lines Financial Review
  Three Months Ended June 30,   Six Months Ended June 30,
    2023       2022     % Change     2023       2022     % Change
  (dollars in thousands)
                       
Gross written premiums $ 9,913     $ 5,342       85.6 %   $ 17,152     $ 9,720       76.5 %
Net written premiums   8,843       4,880       81.2 %     14,944       8,561       74.6 %
Net earned premiums   5,696       3,792       50.2 %     10,525       7,223       45.7 %
                       
Underwriting ratios:                      
Loss ratio   100.1 %     61.4 %         84.1 %     51.7 %    
Expense ratio   39.2 %     44.7 %         40.0 %     44.1 %    
Combined ratio   139.3 %     106.1 %         124.1 %     95.8 %    
                       
Contribution to combined ratio from net (favorable) adverse prior year development   -6.4 %     7.0 %         -7.2 %     0.6 %    
                       
Accident year combined ratio (non-GAAP) (5)   145.7 %     99.1 %         131.3 %     95.2 %    
                       
Impact from storms   78.0 %     -           42.2 %     -      
                       
Accident year combined ratio before impact of storms (non-GAAP) (5)   67.7 %     99.1 %         89.1 %     95.2 %    
                       
(5) 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 accident year combined ratio is a non-GAAP measure. We excluded $4.4 million of severe storm losses from the accident year combined ratio during the quarter due to the significant variance relative to our historical and expected future losses. The accident year combined ratio before impact of storms is a non-GAAP measure.
                                               

Personal lines, representing 22.2% of total gross written premium for the second quarter of 2023, consists mainly of low-value dwelling homeowner’s insurance.

Personal lines gross written premium increased 85.6% to $9.9 million in the second quarter of 2023 compared to the prior year period, led by growth in the Company’s low-value dwelling line of business.

Personal lines combined ratio was 139.3% for the three months ended June 30, 2023. As noted in the Company’s July 28, 2023 press release, losses stemmed predominantly from the multiple convection storms that largely impacted Oklahoma and Texas in the second quarter. Before the impact of these storm-related losses, the personal lines accident year combined ratio was a profitable 67.3% for the second quarter of 2023, and 89.1% for the six months ended June 30, 2023.

Combined Ratio Analysis

  Three Months EndedJune 30,   Six Months Ended June 30,
    2023       2022       2023       2022  
   
               
Underwriting ratios:              
Loss ratio   83.0 %     90.2 %     72.9 %     82.7 %
Expense ratio   37.9 %     39.0 %     37.6 %     38.3 %
Combined ratio   120.9 %     129.2 %     110.5 %     121.0 %
               
Contribution to combined ratio from net (favorable) adverse prior year development   2.2 %     38.6 %     -1.5 %     30.9 %
               
Accident year combined ratio (non-GAAP) (6)   118.7 %     90.6 %     112.0 %     90.1 %
               
Impact from storms   23.3 %     -       11.9 %     -  
               
Accident year combined ratio before impact of storms (non-GAAP) (6)   95.4 %     90.6 %     100.1 %     90.1 %
               
(6) 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 accident year combined ratio is a non-GAAP measure. We excluded $5.4 million of severe storm losses from the accident year combined ratio during the quarter due to the significant variance relative to our historical and expected future losses. The accident year combined ratio before impact of storms is a non-GAAP measure.
                               

Combined Ratio:The Company's combined ratio was 120.9% for the quarter ended June 30, 2023, down 8.3 percentage points from the prior year period. Before the impact of storm losses as described above, the Company’s accident year combined ratio was 95.4% for the quarter.  

Loss Ratio: The Company’s losses and loss adjustment expenses were $19.3 million for the three months ended June 30, 2023, down from $22.3 million in the prior year period.

Expense Ratio: The expense ratio continues to improve, due in large part to the Company’s sustained emphasis on expense management: the expense ratio for the second quarter of 2023 was 37.9%, down from 39.0% in the prior year period as the Company approaches its near-term target expense ratio of 35%.

Net Investment IncomeNet investment income was $1.4 million during the quarter ended June 30, 2023, up 140.1% compared to $564,000 in the prior year period.

Net Realized Investment Gains (Losses)The Company did not have any realized investment gains or losses during the second quarter of 2023. Net realized investment losses were $1.4 million in the prior year period.

Change in Fair Value of Equity SecuritiesDuring the quarter, the Company reported a loss of $12,000 from the change in fair value of equity investments, compared to a gain of $317,000 in the prior year period.

Net Income (Loss) The Company reported net loss of $4.7 million, or $0.39 per share, for the second quarter of 2023, compared to a net loss of $8.4 million, or $0.86 per share, in the prior year period.

Adjusted Operating Income (Loss)In the second quarter of 2023, the Company reported an adjusted operating loss of $4.7 million, or $0.39 per share, compared to an adjusted operating loss of $7.3 million, or $0.75 per share, for the same period in 2022. See Definitions of Non-GAAP Measures.

Earnings Conference Call with Accompanying Slide PresentationThe Company will hold a conference call/webcast on Thursday, August 10, 2023 at 8:30 a.m. ET to discuss results for the second quarter ended June 30, 2023.

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

Webcast:Conference Call:        On the Event Calendar at IR.CNFRH.com844-868-8843 (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 specialty insurance holding company, offering customized coverage solutions tailored to the needs of our insureds nationwide. Conifer is traded on the NASDAQ exchange under the symbol “CNFR”. Additional information is available on the Company’s website at www.CNFRH.com.

Definitions of Non-GAAP Measures

Conifer 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 the after-tax amounts of: 1) net realized investment gains and losses, 2) Other gains (losses) and 3) 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 and adjusted operating income per share:

  Three Months EndedJune 30,   Six Months EndedJune 30,
    2023       2022       2023       2022  
  (dollar in thousands, except share and per share amounts)
               
Net income (loss) $ (4,739 )   $ (8,399 )   $ (3,738 )   $ (11,269 )
Less:              
Net realized investment gains (losses), net of tax   -       (1,436 )     -       (1,505 )
Other gains (losses), net of tax   -       (1 )     -       (6 )
Change in fair value of equity securities, net of tax   (12 )     317       682       597  
Adjusted operating income (loss) $ (4,727 )   $ (7,279 )   $ (4,420 )   $ (10,355 )
               
Weighted average common shares, diluted   12,220,331       9,712,602       12,218,102       9,710,223  
               
Diluted income (loss) per common share:              
Net income (loss) $ (0.39 )   $ (0.86 )   $ (0.31 )   $ (1.16 )
Less:              
Net realized investment gains (losses), net of tax   -       (0.14 )     -       (0.15 )
Other gains (losses), net of tax   -       -       -       -  
Change in fair value of equity securities, net of tax   -       0.03       0.05       0.06  
Adjusted operating income (loss), per share $ (0.39 )   $ (0.75 )   $ (0.36 )   $ (1.07 )
                               

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 March 27, 2023 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.

Conifer Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
       
  June 30,   December 31,
    2023       2022  
Assets (Unaudited)    
Investment securities:      
Debt securities, at fair value (amortized cost of $121,367 and $127,119, respectively) $ 105,996     $ 110,201  
Equity securities, at fair value (cost of $2,282 and $1,905, respectively)   2,326       1,267  
Short-term investments, at fair value   39,564       25,929  
Total investments   147,886       137,397  
       
Cash and cash equivalents   18,765       28,035  
Premiums and agents' balances receivable, net   25,895       21,802  
Receivable from Affiliate   933       1,261  
Reinsurance recoverables on unpaid losses   56,505       82,651  
Reinsurance recoverables on paid losses   5,828       6,653  
Prepaid reinsurance premiums   24,444       16,399  
Deferred policy acquisition costs   9,500       10,290  
Other assets   6,767       7,862  
Total assets $ 296,523     $ 312,350  
       
Liabilities and Shareholders' Equity      
Liabilities:      
Unpaid losses and loss adjustment expenses $ 145,004     $ 165,539  
Unearned premiums   78,468       67,887  
Reinsurance premiums payable   12,023       6,144  
Debt   34,031       33,876  
Accounts payable and accrued expenses   10,140       19,954  
Total liabilities   279,666       293,400  
       
Commitments and contingencies   -       -  
       
Shareholders' equity:      
       
Common stock, no par value (100,000,000 shares authorized; 12,222,881 and 12,215,849 issued and outstanding, respectively)   98,013       97,913  
Accumulated deficit   (64,498 )     (60,760 )
Accumulated other comprehensive income (loss)   (16,658 )     (18,203 )
Total shareholders' equity   16,857       18,950  
Total liabilities and shareholders' equity $ 296,523     $ 312,350  
               
Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except share and per share data)
                 
    Three Months Ended   Six Months Ended
    June 30   June 30
      2023       2022       2023       2022  
                 
Revenue and Other Income                
Premiums                
Gross earned premiums   $ 36,013     $ 33,782     $ 70,307     $ 66,546  
Ceded earned premiums     (12,830 )     (9,206 )     (25,172 )     (18,015 )
Net earned premiums     23,183       24,576       45,135       48,531  
Net investment income     1,354       564       2,661       1,071  
Net realized investment gains (losses)     -       (1,436 )     -       (1,505 )
Change in fair value of equity securities     (12 )     317       682       597  
Other gains (losses)     -       (1 )     -       (6 )
Other income     398       663       1,024       1,361  
Total revenue and other income     24,923       24,683       49,502       50,049  
                 
Expenses                
Losses and loss adjustment expenses, net     19,319       22,251       33,032       40,269  
Policy acquisition costs     4,413       5,725       9,134       11,189  
Operating expenses     5,114       4,470       9,393       8,630  
Interest expense     820       727       1,506       1,438  
Total expenses     29,666       33,173       53,065       61,526  
                 
Income (loss) before equity earnings in Affiliate and income taxes     (4,743 )     (8,490 )     (3,563 )     (11,477 )
Equity earnings (loss) in Affiliate, net of tax     4       93       (175 )     169  
Income tax expense (benefit)     -       2       -       (39 )
Net income (loss)     (4,739 )     (8,399 )     (3,738 )     (11,269 )
                 
Earnings (loss) per common share, basic and diluted   $ (0.39 )   $ (0.86 )   $ (0.31 )   $ (1.16 )
                 
Weighted average common shares outstanding, basic and diluted     12,220,331       9,712,602       12,218,102       9,710,223  
                                 

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

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