• Conifer Holdings Reports 2021 Third Quarter Financial Results

    المصدر: Nasdaq GlobeNewswire / 10 نوفمبر 2021 16:01:01   America/New_York

    BIRMINGHAM, Mich., Nov. 10, 2021 (GLOBE NEWSWIRE) -- Conifer Holdings, Inc. (Nasdaq: CNFR) (“Conifer” or the “Company”) today announced results for the third quarter ended September 30, 2021.

    Third Quarter 2021 Financial Highlights (compared to the prior year period)

    • Gross written premium increased 12.9% to $33.7 million
    • Commercial Lines gross written premium increased 9.3% to $29.8 million
    • Personal Lines gross written premium increased 51.5% to $3.9 million
    • Net loss of $1.2 million, or $0.12 per share, based on 9.7 million average shares outstanding
    • Book value per share of $4.34 as of September 30, 2021

    James Petcoff, Chairman and CEO, commented, “We were pleased to report top line growth in the quarter with premiums increasing roughly 13% for the period. Our gross written premiums have improved by double-digit percentages for several quarters, which will help drive greater economies of scale going forward. And, while we reported additional development from prior years, our change in business mix has gained traction, as we implement steady rate increases across our book. For the remainder of 2021, our focus will continue to be on generating profitable premium growth while continuing to refine our business mix in our core specialty markets.”


    2021 Third Quarter Financial Results Overview

      At and for the
    Three Months Ended September 30,
      At and for the
    Nine Months Ended September 30,
     
       2021   2020  % Change
      2021  2020  % Change
       
      (dollars in thousands, except share and per share amounts)
                 
    Gross written premiums$33,704  $29,841  12.9% $99,058  $82,470  20.1%
    Net written premiums 26,069   25,043  4.1%  79,084   69,159  14.4%
    Net earned premiums 24,941   22,227  12.2%  72,614   66,002  10.0%
                 
    Net investment income 514   776  -33.8%  1,549   2,593  -40.3%
    Net realized investment gains (101)  3,316  **  3,883   4,489  **
    Change in fair value of equity investments (2,169)  (356) **  (3,234)  (1,866)  
    Other gains 2,778   -  **  11,688   260  **
                 
    Net income (loss) (1,209)  541  **  (293)  (2,679) **
     Net income (loss) per share, diluted$(0.12) $0.06    $(0.03) $(0.28)  
                 
    Adjusted operating income (loss)* (1,717)  (2,419) **  (12,630)  (5,562) **
     Adjusted operating income (loss) per share, diluted*$(0.18) $(0.24) ** $(1.30) $(0.58) **
                 
    Book value per common share outstanding$4.34  $4.40    $4.34  $4.40   
                 
    Weighted average shares outstanding, basic and diluted 9,692,150   9,630,600     9,686,874   9,606,436   
                 
    Underwriting ratios:           
     Loss ratio (1) 64.6%   65.2%     73.3%   61.5%   
     Expense ratio (2) 42.3%   45.5%     42.7%   46.2%   
     Combined ratio (3) 106.9%   110.7%     116.0%   107.7%   
                 
    * 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.
                 

    2021 Third Quarter Premiums

    Gross Written Premiums

    Gross written premiums increased 12.9% in the third quarter of 2021 to $33.7 million, compared to $29.8 million in the prior year period. The increase was the result of growth in both Commercial and Personal Lines business as general economic and business conditions began to improve following pandemic-related softness.

    Net Earned Premiums
    Net earned premiums increased 12.2% to $24.9 million for the third quarter of 2021, compared to $22.2 million for the prior year period. The Company expects net earned premiums to increase throughout 2021 as gross written premium growth over the past several quarters continues to be earned ratably through the year.


    Commercial Lines Financial and Operational Review

    Commercial Lines Financial Review
      Three Months Ended September 30,  Nine Months Ended September 30,
       2021   2020  % Change  2021   2020  % Change
      (dollars in thousands)
                 
    Gross written premiums$29,849  $27,297  9.3% $88,017  $76,341  15.3%
    Net written premiums 22,456   22,763  -1.3%  68,685   63,827  7.6%
    Net earned premiums 21,975   20,586  6.7%  64,869   61,122  6.1%
                 
    Underwriting ratios:           
     Loss ratio 66.7%   68.8%     74.7%   63.5%   
     Expense ratio 42.7%   45.4%     42.9%   46.1%   
     Combined ratio 109.4%   114.2%     117.6%   109.6%   
                 
    Contribution to combined ratio from net           
     (favorable) adverse prior year development 15.2%   22.4%     22.6%   18.5%   
                 
    Accident year combined ratio (1) 94.2%   91.8%     95.0%   91.1%   
                 
    (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, representing 88.6% of total gross written premium in the third quarter of 2021, primarily consists of property and liability coverage offered to owner-operated small- to mid-sized businesses.

    Commercial lines gross written premium increased 9.3% in the third quarter of 2021 to $29.8 million, as the Company continues to emphasize growth of its specialty lines business.

    The Commercial lines combined ratio was 109.4% for the three months ended September 30, 2021, compared to 114.2% in the prior year period.   The loss ratio was 66.7% for the three months ended September 30, 2021, compared with 68.8% in the prior year period while the expense ratio was 42.7% in the current year period, compared with 45.4% during the prior year period.

    Commercial lines accident year combined ratio was 94.2% for the quarter.


    Personal Lines Financial and Operational Review

                 
    Personal Lines Financial Review
      Three Months Ended September 30, Nine Months Ended September 30,
       2021   2020  % Change
      2021   2020  % Change
      (dollars in thousands)
                 
    Gross written premiums$3,855  $2,544  51.5% $11,041  $6,129  80.1%
    Net written premiums 3,613   2,280  58.5%  10,399   5,332  95.0%
    Net earned premiums 2,966   1,641  80.7%  7,745   4,880  58.7%
                 
    Underwriting ratios:           
     Loss ratio 48.8%   21.3%     61.8%   36.7%   
     Expense ratio 39.2%   46.8%     41.4%   46.7%   
     Combined ratio 88.0%   68.1%     103.2%   83.4%   
                 
    Contribution to combined ratio from net           
     (favorable) adverse prior year development 9.7%   3.8%     11.8%   2.2%   
                 
    Accident year combined ratio 78.3%   64.3%     91.4%   81.2%   
                 

    Personal lines, representing 11.4% of total gross written premium for the third quarter of 2021, consists largely of low-value dwelling homeowner’s insurance.

    Personal lines gross written premium increased 51.5% to $3.9 million in the third quarter of 2021 compared to the prior year period, led by growth in the Company’s low-value dwelling line of business in Texas.

    Personal lines combined ratio was 88.0% for the three months ended September 30, 2021, compared to 68.1% in the prior year period. Personal lines loss ratio was 48.8%, compared to 21.3% in the prior year period.

    The personal lines accident year combined ratio was 78.3% for the quarter.


    Combined Ratio Analysis

      Three Months Ended
    September 30,
     Nine Months Ended
    September 30,

      2021  2020   2021  2020 
      (dollars in thousands)
              
    Underwriting ratios:        
     Loss ratio64.6% 65.2%  73.3% 61.5%
     Expense ratio42.3% 45.5%  42.7% 46.2%
     Combined ratio106.9% 110.7%  116.0% 107.7%
              
    Contribution to combined ratio from net (favorable)        
     adverse prior year development14.6% 21.0%  21.4% 17.3%
              
    Accident year combined ratio92.3% 89.7%  94.6% 90.4%
              

    Combined Ratio
    The Company's combined ratio was 106.9% for the quarter ended September 30, 2021, compared to 110.7% for the same period in 2020. The Company’s accident year combined ratio for the quarter ended September 30, 2021 was 92.3%, compared to 89.7% in the prior year period.

    Loss Ratio:
    The Company’s losses and loss adjustment expenses were $16.2 million for the three months ended September 30, 2021, compared to $14.6 million in the prior year period. This resulted in a loss ratio of 64.6%, compared to 65.2% in the prior year period.

    Expense Ratio:
    The expense ratio was 42.3% for the third quarter of 2021, compared to 45.5% in the prior year period.

    Net Investment Income
    Net investment income was $514,000 during the quarter ended September 30, 2021, compared to $776,000 in the prior year period.

    Net Realized Investment (Losses) Gains
    Net realized investment losses during the third quarter were $101,000, compared to net realized investment gains of $3.3 million in the prior year period.

    Change in Fair Value of Equity Securities
    During the quarter, the Company reported a loss from the change in fair value of equity investments of $2.2 million, compared to a loss of $356,000 in the prior year period.

    Net Income (Loss)
    In the third quarter of 2021, the Company reported a net loss of $1.2 million, or $0.12 per share, compared to net income of $0.5 million, or $0.06 per share, in the prior year period.

    Adjusted Operating Income (Loss)
    In the third quarter of 2021, the Company reported an adjusted operating loss of $1.7 million, or $0.18 per share, compared to an adjusted operating loss of $2.4 million, or $0.24 per share, for the same period in 2020. The Company excluded $2.8 million in other gains from the adjusted operating loss in the third quarter of 2021, related to the forgiveness of the Paycheck Protection Program (PPP) loan. The Company also excluded a $2.2 million loss from the change in fair value of equity investments from the adjusted operating loss in the third quarter of 2021. See Definitions of Non-GAAP Measures.

    Earnings Conference Call with Accompanying Slide Presentation
    The Company will hold a conference call/webcast on Thursday, November 11, 2021 at 8:30 a.m. ET to discuss results for the third quarter ended September 30, 2021.

    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 the Company
    Conifer Holdings, Inc. is an insurance holding company, offering customized coverage solutions tailored to the needs of our specialty insureds. Nationwide, Conifer markets largely through independent agents, and 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 after-tax net realized investment gains and losses, excluding the tax effect of changes in unrealized gains and losses, excluding the after-tax 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 Ended
    September 30,
     Nine Months Ended
    September 30,
       2021   2020   2021   2020 
       
      (dollar in thousands, except share and per share amounts)
            
    Net income (loss)$(1,209) $541  $(293) $(2,679)
    Less:       
    Net realized investment gains and other gains, net of tax 2,677   3,316   15,571   4,749 
    Change in fair value of equity securities, net of tax (2,169)  (356)  (3,234)  (1,866)
    Adjusted operating income (loss)$(1,717) $(2,419) $(12,630) $(5,562)
             
    Weighted average common shares, diluted 9,692,150   9,630,600   9,686,874   9,606,436 
             
    Diluted income (loss) per common share:       
     Net income (loss)$(0.12) $0.06  $(0.03) $(0.28)
     Less:       
     Net realized investment gains and other gains, net of tax 0.28   0.34   1.61   0.49 
     Change in fair value of equity securities, net of tax (0.22)  (0.04)  (0.33)  (0.19)
     Adjusted operating income (loss), per share$(0.18) $(0.24) $(1.30) $(0.58)
             

    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 11, 2021 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)
            
         September 30,December 31,
          2021   2020 
    Assets (Unaudited)  
    Investment securities:    
     Debt securities, at fair value (amortized cost of $146,831 and $149,954, respectively) $146,710  $151,999 
     Equity securities, at fair value (cost of $21,942 and $16,912, respectively) 19,687   17,891 
     Short-term investments, at fair value  10,142   13,317 
      Total investments  176,539   183,207 
            
    Cash and cash equivalents  7,507   8,193 
    Premiums and agents' balances receivable, net  22,252   20,162 
    Receivable from Affiliate  8,940   8 
    Reinsurance recoverables on unpaid losses  23,056   24,218 
    Reinsurance recoverables on paid losses  4,340   2,138 
    Prepaid reinsurance premiums  4,225   1,316 
    Deferred policy acquisition costs  13,611   12,243 
    Other assets  8,465   10,112 
       Total assets $268,935  $261,597 
            
    Liabilities and Shareholders' Equity    
    Liabilities:    
     Unpaid losses and loss adjustment expenses $119,854  $111,270 
     Unearned premiums  65,036   56,224 
     Reinsurance premiums payable  750   - 
     Debt   34,486   40,997 
     Accounts payable and accrued expenses  6,701   8,693 
       Total liabilities  226,827   217,184 
            
    Commitments and contingencies  -   - 
            
    Shareholders' equity:    
     Common stock, no par value (100,000,000 shares authorized; 9,706,156 and 9,681,728 issued and outstanding, respectively)  92,659   92,486 
     Accumulated deficit  (49,278)  (48,985)
     Accumulated other comprehensive income (loss)  (1,273)  912 
      Total shareholders' equity   42,108   44,413 
       Total liabilities and shareholders' equity $268,935  $261,597 
            



    Conifer Holdings, Inc. and Subsidiaries
    Consolidated Statements of Operations (Unaudited)
    (dollars in thousands, except share and per share data)
                
         Three Months Ended Nine Months Ended
         September 30, September 30,
          2021   2020   2021   2020 
                
    Revenue and Other Income        
     Premiums        
      Gross earned premiums $31,770  $26,872  $90,245  $78,884 
      Ceded earned premiums  (6,829)  (4,645)  (17,631)  (12,882)
       Net earned premiums  24,941   22,227   72,614   66,002 
     Net investment income  514   776   1,549   2,593 
     Net realized investment gains (losses)  (101)  3,316   3,883   4,489 
     Change in fair value of equity securities  (2,169)  (356)  (3,234)  (1,866)
     Other gains  2,778   -   11,688   260 
     Other income  752   642   1,974   2,013 
       Total revenue and other income  26,715   26,605   88,474   73,491 
                
    Expenses        
     Losses and loss adjustment expenses, net  16,159   14,553   53,447   40,767 
     Policy acquisition costs  7,173   6,483   20,819   19,181 
     Operating expenses  4,077   4,537   12,768   14,441 
     Interest expense  701   723   2,154   2,185 
       Total expenses  28,110   26,296   89,188   76,574 
                
    Income (loss) before equity earnings in Affiliate and income taxes  (1,395)  309   (714)  (3,083)
     Equity earnings in Affiliate, net of tax  184   188   612   417 
     Income tax expense (benefit)  (2)  (44)  191   13 
    Net income (loss)  (1,209)  541   (293)  (2,679)
                
    Earnings (loss) per common share,        
      basic and diluted $(0.12) $0.06  $(0.03) $(0.28)
                
    Weighted average common shares outstanding,        
      basic and diluted  9,692,150   9,630,600   9,686,874   9,606,436 

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


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