Third Quarter 2023 Financial Highlights (compared to the prior year period)
- Gross written premium increased 16.5% to
$38.5 million - Net investment income increased 68.6% to
$1.5 million - Expense ratio improved to 33.9%, down 600 bps from the prior year
- Combined ratio of 120.8%; accident year combined ratio excluding the impact of storm-related losses was 95.3% (6)
Management Comments
2023 Third Quarter Financial Results Overview
At and for the Three Months Ended | At and for the Nine Months Ended | ||||||||||||||||||||
2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||||||
(dollars in thousands, except share and per share amounts) | |||||||||||||||||||||
Gross written premiums | $ | 38,548 | $ | 33,088 | 16.5 | % | $ | 119,436 | $ | 103,470 | 15.4 | % | |||||||||
Net written premiums | 5,689 | 23,693 | -76.0 | % | 53,359 | 68,980 | -22.6 | % | |||||||||||||
Net earned premiums | 23,979 | 24,958 | -3.9 | % | 69,114 | 73,489 | -6.0 | % | |||||||||||||
Net investment income | 1,450 | 860 | 68.6 | % | 4,111 | 1,931 | 112.9 | % | |||||||||||||
Net realized investment gains (losses) | - | - | ** | - | (1,505 | ) | ** | ||||||||||||||
Change in fair value of equity investments | (87 | ) | (151 | ) | 42.4 | % | 595 | 446 | 33.4 | % | |||||||||||
Gain from sale of renewal rights | 2,335 | - | 2,335 | - | |||||||||||||||||
Other gains (losses) | - | 66 | ** | - | 60 | ** | |||||||||||||||
Net income (loss) | (2,706 | ) | (1,523 | ) | ** | (6,444 | ) | (12,792 | ) | ** | |||||||||||
Net income (loss) per share, diluted | $ | (0.22 | ) | $ | (0.14 | ) | $ | (0.53 | ) | $ | (1.26 | ) | |||||||||
Adjusted operating income (loss)* | (4,954 | ) | (1,438 | ) | ** | (9,374 | ) | (11,793 | ) | ** | |||||||||||
Adjusted operating income (loss) per share, diluted* | $ | (0.41 | ) | $ | (0.13 | ) | ** | $ | (0.77 | ) | $ | (1.16 | ) | ** | |||||||
Book value per common share outstanding | $ | 0.96 | $ | 1.32 | $ | 0.96 | $ | 1.32 | |||||||||||||
Weighted average shares outstanding, basic and diluted | 12,222,881 | 11,101,194 | 12,219,713 | 10,178,975 | |||||||||||||||||
Underwriting ratios: | |||||||||||||||||||||
Loss ratio (1) | 86.9 | % | 66.6 | % | 77.8 | % | 77.2 | % | |||||||||||||
Expense ratio (2) | 33.9 | % | 39.9 | % | 36.3 | % | 38.8 | % | |||||||||||||
Combined ratio (3) | 120.8 | % | 106.5 | % | 114.1 | % | 116.0 | % | |||||||||||||
* 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 Third Quarter Premiums
Gross Written Premiums
Gross written premiums increased 16.5% in the third quarter of 2023 to
The Company’s small business program continues to lead the way in this regard, comprising 81.9% of commercial lines premium and 60.6% of overall GWP for the third quarter. Conifer’s low-value home/dwelling lines of business have shown strong historical performance, and were major contributors to the overall growth in personal lines premium.
Net Earned Premium
Net earned premium decreased 3.9% to
Commercial Lines Financial and Operational Review
Commercial Lines Financial Review | |||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Gross written premiums | $ | 28,492 | $ | 27,635 | 3.1 | % | $ | 92,228 | $ | 88,297 | 4.5 | % | |||||||||
Net written premiums | (3,155 | ) | 18,730 | -116.8 | % | 29,571 | 55,456 | -46.7 | % | ||||||||||||
Net earned premiums | 17,315 | 20,789 | -16.7 | % | 51,925 | 62,097 | -16.4 | % | |||||||||||||
Underwriting ratios: | |||||||||||||||||||||
Loss ratio | 88.8 | % | 64.0 | % | 76.0 | % | 80.0 | % | |||||||||||||
Expense ratio | 31.7 | % | 39.6 | % | 35.1 | % | 38.0 | % | |||||||||||||
Combined ratio | 120.5 | % | 103.6 | % | 111.1 | % | 118.0 | % | |||||||||||||
Contribution to combined ratio from net (favorable) adverse prior year development | 23.3 | % | 13.2 | % | 7.9 | % | 28.4 | % | |||||||||||||
Accident year combined ratio (non-GAAP) (4) | 97.2 | % | 90.4 | % | 103.2 | % | 89.6 | % | |||||||||||||
Impact from storms | - | - | 1.9 | % | - | ||||||||||||||||
Accident year combined ratio before impact of storms (non-GAAP) (4) | 97.2 | % | 90.4 | % | 101.3 | % | 89.6 | % | |||||||||||||
(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 presented the accident year combined ratio for the three and nine months ended | |||||||||||||||||||||
The Company’s commercial lines of business represented 73.9% of total gross written premium in the third quarter of 2023. Conifer redoubled its commitment to strategically maintaining and broadening its reach within select key verticals where the Company has deep underwriting knowledge and experience. This expertise-driven approach provides the foundation for current and future profitable growth.
Commercial lines gross written premium increased 3.1% in the third quarter of 2023 to
The Commercial lines accident year combined ratio was 97.2% for the three months ended
The expense ratio was 31.7% for the third quarter of 2023, marking significant improvement of 790 basis points from the prior year period, and beating the Company’s 35% target.
Personal Lines Financial and Operational Review
Personal Lines Financial Review | |||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
Gross written premiums | $ | 10,056 | $ | 5,453 | 84.4 | % | $ | 27,208 | $ | 15,173 | 79.3 | % | |||||||||
Net written premiums | 8,844 | 4,963 | 78.2 | % | 23,788 | 13,524 | 75.9 | % | |||||||||||||
Net earned premiums | 6,664 | 4,169 | 59.8 | % | 17,189 | 11,392 | 50.9 | % | |||||||||||||
Underwriting ratios: | |||||||||||||||||||||
Loss ratio | 82.0 | % | 79.2 | % | 83.3 | % | 61.8 | % | |||||||||||||
Expense ratio | 39.7 | % | 41.3 | % | 39.9 | % | 43.1 | % | |||||||||||||
Combined ratio | 121.7 | % | 120.5 | % | 123.2 | % | 104.9 | % | |||||||||||||
Contribution to combined ratio from net (favorable) adverse prior year development | -6.3 | % | 9.1 | % | -6.8 | % | 3.8 | % | |||||||||||||
Accident year combined ratio (non-GAAP) (5) | 128.0 | % | 111.4 | % | 130.0 | % | 101.1 | % | |||||||||||||
Impact from storms | 37.5 | % | - | 40.3 | % | - | |||||||||||||||
Accident year combined ratio before impact of storms (non-GAAP) (5) | 90.5 | % | 111.4 | % | 89.7 | % | 101.1 | % | |||||||||||||
(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 presented the accident year combined ratio for the three and nine months ended | |||||||||||||||||||||
Personal lines, representing 26.1% of total gross written premium for the third quarter of 2023, consists mainly of low-value home/dwelling insurance products. Gross written premium in personal lines was
Personal lines combined ratio was 121.7% for the three months ended
Before the impact of these storm-related losses, the personal lines accident year combined ratio was 90.5% for the third quarter, and 89.7% for the nine months ended
Combined Ratio Analysis
Three Months Ended | Nine Months Ended | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Underwriting ratios: | |||||||||||
Loss ratio | 86.9 | % | 66.6 | % | 77.8 | % | 77.2 | % | |||
Expense ratio | 33.9 | % | 39.9 | % | 36.3 | % | 38.8 | % | |||
Combined ratio | 120.8 | % | 106.5 | % | 114.1 | % | 116.0 | % | |||
Contribution to combined ratio from net (favorable) adverse prior year development | 15.0 | % | 12.6 | % | 4.2 | % | 24.6 | % | |||
Accident year combined ratio (non-GAAP) (6) | 105.8 | % | 93.9 | % | 109.9 | % | 91.4 | % | |||
Impact from storms | 10.5 | % | - | 11.5 | % | - | |||||
Accident year combined ratio before impact of storms (non-GAAP) (6) | 95.3 | % | 93.9 | % | 98.4 | % | 91.4 | % | |||
(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 presented the accident year combined ratio for the three and nine months ended | |||||||||||
Combined Ratio:
The Company's combined ratio was 120.8% for the three months ended
Loss Ratio:
The Company’s losses and loss adjustment expenses were
Expense Ratio:
The expense ratio exhibited significant improvement in the third quarter, due in large part to the Company’s sustained emphasis on expense management: the expense ratio for the third quarter of 2023 was 33.9%, down from 39.9% in the prior year period and below the Company’s near-term target of 35%.
Net Investment Income
Net investment income was
Net Realized Investment Gains (Losses)
The Company did not have any realized investment gains or losses during the third quarter or nine months ended
Change in Fair Value of
During the quarter, the Company reported a loss of
Net Income (Loss)
The Company reported net loss of
Adjusted Operating Income (Loss)
In the third quarter of 2023, the Company reported an adjusted operating loss of
Earnings Conference Call with Accompanying Slide Presentation
The Company will hold a conference call/webcast on
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
About
Definitions of Non-GAAP Measures
Conifer prepares its public financial statements in conformity with accounting principles generally accepted in
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) Change in fair value of equity securities, 3) Gain on sale of renewal rights and 4) Other gains (losses). 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 | Nine Months Ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
(dollar in thousands, except share and per share amounts) | |||||||||||||||
Net income (loss) | $ | (2,706 | ) | $ | (1,523 | ) | $ | (6,444 | ) | $ | (12,792 | ) | |||
Less: | |||||||||||||||
Net realized investment gains (losses), net of tax | - | - | - | (1,505 | ) | ||||||||||
Change in fair value of equity securities, net of tax | (87 | ) | (151 | ) | 595 | 446 | |||||||||
Gain from sale of renewal rights | 2,335 | - | 2,335 | - | |||||||||||
Other gains (losses), net of tax | - | 66 | - | 60 | |||||||||||
Adjusted operating income (loss) | $ | (4,954 | ) | $ | (1,438 | ) | $ | (9,374 | ) | $ | (11,793 | ) | |||
Weighted average common shares, diluted | 12,222,881 | 11,101,194 | 12,219,713 | 10,178,975 | |||||||||||
Diluted income (loss) per common share: | |||||||||||||||
Net income (loss) | $ | (0.22 | ) | $ | (0.14 | ) | $ | (0.53 | ) | $ | (1.26 | ) | |||
Less: | |||||||||||||||
Net realized investment gains (losses), net of tax | - | - | - | (0.15 | ) | ||||||||||
Change in fair value of equity securities, net of tax | - | (0.01 | ) | 0.05 | 0.04 | ||||||||||
Gain from sale of renewal rights | 0.19 | - | 0.19 | - | |||||||||||
Other gains (losses), net of tax | - | - | - | 0.01 | |||||||||||
Adjusted operating income (loss), per share | $ | (0.41 | ) | $ | (0.13 | ) | $ | (0.77 | ) | $ | (1.16 | ) | |||
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
Consolidated Balance Sheets | |||||||
(dollars in thousands) | |||||||
2023 | 2022 | ||||||
Assets | (Unaudited) | ||||||
Investment securities: | |||||||
Debt securities, at fair value (amortized cost of | $ | 101,745 | $ | 110,201 | |||
Equity securities, at fair value (cost of | 2,345 | 1,267 | |||||
Short-term investments, at fair value | 40,523 | 25,929 | |||||
Total investments | 144,613 | 137,397 | |||||
Cash and cash equivalents | 14,361 | 28,035 | |||||
Premiums and agents' balances receivable, net | 24,512 | 21,802 | |||||
Receivable from Affiliate | 889 | 1,261 | |||||
Reinsurance recoverables on unpaid losses | 46,766 | 82,651 | |||||
Reinsurance recoverables on paid losses | 6,959 | 6,653 | |||||
Prepaid reinsurance premiums | 43,132 | 16,399 | |||||
Deferred policy acquisition costs | 5,737 | 10,290 | |||||
Other assets | 6,474 | 7,862 | |||||
Total assets | $ | 293,443 | $ | 312,350 | |||
Liabilities and Shareholders' Equity | |||||||
Liabilities: | |||||||
Unpaid losses and loss adjustment expenses | $ | 139,214 | $ | 165,539 | |||
Unearned premiums | 78,865 | 67,887 | |||||
Reinsurance premiums payable | 4,727 | 6,144 | |||||
Debt | 25,264 | 33,876 | |||||
Funds held under reinsurance agreements | 26,541 | 11,084 | |||||
Accounts payable and accrued expenses | 7,041 | 8,870 | |||||
Total liabilities | 281,652 | 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) | 98,057 | 97,913 | |||||
Accumulated deficit | (67,204 | ) | (60,760 | ) | |||
Accumulated other comprehensive income (loss) | (19,062 | ) | (18,203 | ) | |||
Total shareholders' equity | 11,791 | 18,950 | |||||
Total liabilities and shareholders' equity | $ | 293,443 | $ | 312,350 |
Consolidated Statements of Operations (Unaudited) | |||||||||||||||
(dollars in thousands, except share and per share data) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenue and Other Income | |||||||||||||||
Premiums | |||||||||||||||
Gross earned premiums | $ | 38,150 | $ | 34,401 | $ | 108,457 | $ | 100,947 | |||||||
Ceded earned premiums | (14,171 | ) | (9,443 | ) | (39,343 | ) | (27,458 | ) | |||||||
Net earned premiums | 23,979 | 24,958 | 69,114 | 73,489 | |||||||||||
Net investment income | 1,450 | 860 | 4,111 | 1,931 | |||||||||||
Net realized investment gains (losses) | - | - | - | (1,505 | ) | ||||||||||
Change in fair value of equity securities | (87 | ) | (151 | ) | 595 | 446 | |||||||||
Gain from sale of renewal rights | 2,335 | - | 2,335 | - | |||||||||||
Other gains (losses) | - | 66 | - | 60 | |||||||||||
Other income | 439 | 603 | 1,463 | 1,964 | |||||||||||
Total revenue and other income | 28,116 | 26,336 | 77,618 | 76,385 | |||||||||||
Expenses | |||||||||||||||
Losses and loss adjustment expenses, net | 20,911 | 16,671 | 53,943 | 56,940 | |||||||||||
Policy acquisition costs | 4,725 | 6,230 | 13,859 | 17,419 | |||||||||||
Operating expenses | 4,403 | 4,380 | 13,796 | 13,010 | |||||||||||
Interest expense | 855 | 778 | 2,361 | 2,216 | |||||||||||
Total expenses | 30,894 | 28,059 | 83,959 | 89,585 | |||||||||||
Income (loss) before equity earnings in Affiliate and income taxes | (2,778 | ) | (1,723 | ) | (6,341 | ) | (13,200 | ) | |||||||
Equity earnings (loss) in Affiliate, net of tax | 72 | 199 | (103 | ) | 368 | ||||||||||
Income tax expense (benefit) | - | (1 | ) | - | (40 | ) | |||||||||
Net income (loss) | (2,706 | ) | (1,523 | ) | (6,444 | ) | (12,792 | ) | |||||||
Earnings (loss) per common share, basic and diluted | $ | (0.22 | ) | $ | (0.14 | ) | $ | (0.53 | ) | $ | (1.26 | ) | |||
Weighted average common shares outstanding, basic and diluted | 12,222,881 | 11,101,194 | 12,219,713 | 10,178,975 | |||||||||||
For Further Information:
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Source:
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