Conifer Holdings Reports 2024 Third Quarter Financial Results
TROY, Mich., Nov. 13, 2024 (GLOBE NEWSWIRE) -- Conifer Holdings, Inc. (Nasdaq: CNFR) (“Conifer” or the “Company”) today announced results for the third quarter ended September 30, 2024. This quarter, the Company reported a $61 million gain on the sale of its insurance agency operations, completed in August of this year, along with an adjusted operating loss of over $7 million in the period.
Third Quarter 2024 Financial Highlights
- $61 Million gain on sale of insurance agency operations
- Adjusted operating loss of $7.4 million or ($0.60) a share
- Net income of $53.3 million for the period
Management Comments
Brian Roney, CEO of Conifer, commented, "Third quarter results reflect the successful culmination of the sale of our insurance agency operations to Bishop Street Underwriters. With the sale, and the majority of our commercial lines production in runoff, we are focusing underwriting efforts on select personal lines, particularly in Texas and Midwest homeowners.”
Reduction of Commercial Lines Business
For the period, total Gross Written Premium was down almost 61% overall, and net earned premium was down 39%. As a result of the sale completed in August 2024, we no longer have any insurance agency operations, and we expect a significant decline in revenue. We expect commercial lines business to represent 10% or less of our written premiums going forward. As a result, we expect any future premiums will primarily consist of personal lines business, notably our homeowner’s insurance portfolio in Texas and the Midwest. As detailed in the personal lines results overview below, gross written premium for those lines of business for the third quarter of 2024 increased 10% from the prior year period.
2024 Third Quarter Financial Results Overview
| At and for the Three Months Ended September 30, | At and for the Nine Months Ended September 30, | |||||||||||||||||||||
| 2024 | 2023 | % Change | 2024 | 2023 | % Change | |||||||||||||||||
| (dollars in thousands, except share and per share amounts) | ||||||||||||||||||||||
| Gross written premiums | $ | 15,086 | $ | 38,548 | -60.9 | % | $ | 58,370 | $ | 119,436 | -51.1 | % | ||||||||||
| Net written premiums | 11,174 | 5,689 | 96.4 | % | 39,812 | 53,359 | -25.4 | % | ||||||||||||||
| Net earned premiums | 14,601 | 23,979 | -39.1 | % | 48,154 | 69,114 | -30.3 | % | ||||||||||||||
| Net investment income | 1,391 | 1,439 | -3.3 | % | 4,411 | 4,036 | 9.3 | % | ||||||||||||||
| Net realized investment gains (losses) | (7 | ) | - | ** | (125 | ) | - | ** | ||||||||||||||
| Change in fair value of equity investments | (29 | ) | (87 | ) | 66.7 | % | (182 | ) | 595 | -130.6 | % | |||||||||||
| Net income (loss) allocable to common shareholders | 52,788 | (2,706 | ) | ** | 48,912 | (6,444 | ) | ** | ||||||||||||||
| Net income (loss) allocable to common shareholders per share, diluted | $ | 4.32 | $ | (0.22 | ) | $ | 4.00 | $ | (0.53 | ) | ||||||||||||
| Adjusted operating income (loss)* | (7,352 | ) | (4,275 | ) | ** | (9,554 | ) | (8,456 | ) | ** | ||||||||||||
| Adjusted operating income (loss) per share, diluted* | $ | (0.60 | ) | $ | (0.35 | ) | ** | $ | (0.78 | ) | $ | (0.69 | ) | ** | ||||||||
| Book value per common share outstanding | $ | 4.01 | $ | 0.24 | $ | 4.01 | $ | 0.24 | ||||||||||||||
| Weighted average shares outstanding, basic and diluted | 12,222,881 | 12,222,881 | 12,222,881 | 12,219,713 | ||||||||||||||||||
| Underwriting ratios: | ||||||||||||||||||||||
| Loss ratio (1) | 103.8 | % | 86.9 | % | 84.8 | % | 77.8 | % | ||||||||||||||
| Expense ratio (2) | 39.3 | % | 33.9 | % | 35.2 | % | 36.3 | % | ||||||||||||||
| Combined ratio (3) | 143.1 | % | 120.8 | % | 120.0 | % | 114.1 | % | ||||||||||||||
| * 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 Third Quarter Gross Written Premium
Gross written premiums decreased significantly in the third quarter of 2024 to $15 million, compared to $38.5 million in the prior year period. This decrease reflects the Company’s fundamental shift away from commercial lines insurance business. We expect this to continue to decrease following the sale of our insurance agency operations, as the commercial lines business produced in the future by our former insurance agency operations will be written by other carriers.
Commercial Lines Financial and Operational Review
| Commercial Lines Financial Review | ||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2024 | 2023 | % Change | 2024 | 2023 | % Change | |||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||
| Gross written premiums | $ | 4,018 | $ | 28,492 | -85.9 | % | $ | 23,562 | $ | 92,228 | -74.5 | % | ||||||||||
| Net written premiums | 1,481 | (3,155 | ) | 146.9 | % | 14,053 | 29,571 | -52.5 | % | |||||||||||||
| Net earned premiums | 6,428 | 17,315 | -62.9 | % | 23,906 | 51,925 | -54.0 | % | ||||||||||||||
| Underwriting ratios: | ||||||||||||||||||||||
| Loss ratio | 168.0 | % | 88.8 | % | 102.1 | % | 76.0 | % | ||||||||||||||
| Expense ratio | 29.1 | % | 31.7 | % | 29.1 | % | 35.1 | % | ||||||||||||||
| Combined ratio | 197.1 | % | 120.5 | % | 131.2 | % | 111.1 | % | ||||||||||||||
| Contribution to combined ratio from net (favorable) adverse prior year development | 123.4 | % | 23.3 | % | 41.9 | % | 7.9 | % | ||||||||||||||
| Accident year combined ratio (1) | 73.7 | % | 97.2 | % | 89.3 | % | 103.2 | % | ||||||||||||||
| (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 production was down almost 86% in the quarter and represented roughly 27% of total gross written premium in the third quarter of 2024. Commercial lines net earned premium was down 63% for the same period. In the quarter, the commercial lines loss ratio was up significantly, as we further focused on strengthening reserves overall.
Personal Lines Financial and Operational Review
| Personal Lines Financial Review | ||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2024 | 2023 | % Change | 2024 | 2023 | % Change | |||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||
| Gross written premiums | $ | 11,068 | $ | 10,056 | 10.1 | % | $ | 34,808 | $ | 27,208 | 27.9 | % | ||||||||||
| Net written premiums | 9,693 | 8,844 | 9.6 | % | 25,759 | 23,788 | 8.3 | % | ||||||||||||||
| Net earned premiums | 8,173 | 6,664 | 22.6 | % | 24,248 | 17,189 | 41.1 | % | ||||||||||||||
| Underwriting ratios: | ||||||||||||||||||||||
| Loss ratio | 53.3 | % | 82.0 | % | 67.8 | % | 83.3 | % | ||||||||||||||
| Expense ratio | 47.4 | % | 39.7 | % | 41.2 | % | 39.9 | % | ||||||||||||||
| Combined ratio | 100.7 | % | 121.7 | % | 109.0 | % | 123.2 | % | ||||||||||||||
| Contribution to combined ratio from net (favorable) adverse prior year development | -0.7 | % | -6.3 | % | 0.6 | % | -6.8 | % | ||||||||||||||
| Accident year combined ratio | 101.4 | % | 128.0 | % | 108.4 | % | 130.0 | % | ||||||||||||||
Personal lines premium represented 73% of total gross written premium for the quarter. Personal lines gross written premium increased 10% from the prior year period to just over $11 million for the third quarter of 2024, led by growth in the Company’s low-value dwelling line of business in Texas and the Midwest. Despite significant storm activity in the period and for the year, the combined ratio for personal lines business improved compared to the same period in 2023.
Combined Ratio Analysis
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||
| Underwriting ratios: | |||||||||||||
| Loss ratio | 103.8 | % | 86.9 | % | 84.8 | % | 77.8 | % | |||||
| Expense ratio | 39.3 | % | 33.9 | % | 35.2 | % | 36.3 | % | |||||
| Combined ratio | 143.1 | % | 120.8 | % | 120.0 | % | 114.1 | % | |||||
| Contribution to combined ratio from net (favorable) adverse prior year development | 53.9 | % | 15.0 | % | 21.1 | % | 4.2 | % | |||||
| Accident year combined ratio | 89.2 | % | 105.8 | % | 98.9 | % | 109.9 | % | |||||
Net Investment Income
Net investment income was $1.4 million for both the quarter ended September 30, 2024 and the quarter ended September 30, 2023.
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 $29,000, compared to a $87,000 loss in the prior year period.
Net Income (Loss) allocable to common shareholders
The Company reported net income allocable to common shareholders of $52.8 million, or $4.32 per share, for the third quarter of 2024.
Adjusted Operating Income (Loss)
In the third quarter of 2024, the Company reported an adjusted operating loss of $7.4 million, or $0.60 per share. See Definitions of Non-GAAP Measures.
About Conifer Holdings
Conifer 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. The Company is traded on the Nasdaq Capital 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 future revenue, premiums, earnings, its capital position, expansion, and business 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, the Form 10-Q filed with the SEC on November 13, 2024 and subsequent reports filed with or furnished to the SEC. Any forward-looking statement made by us in this press release 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 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: 1) net realized investment gains and losses, 2) change in fair value of equity securities and 3) net income from discontinued operations. 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 September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| (dollar in thousands, except share and per share amounts) | |||||||||||||||
| Net income (loss) allocable to common shareholders | $ | 52,788 | $ | (2,706 | ) | $ | 48,912 | $ | (6,444 | ) | |||||
| Less: | |||||||||||||||
| Net realized investment gains (losses) | (7 | ) | - | (125 | ) | - | |||||||||
| Change in fair value of equity securities | (29 | ) | (87 | ) | (182 | ) | 595 | ||||||||
| Net income from discontinued operations | 60,176 | 1,656 | 58,773 | 1,417 | |||||||||||
| Impact of income tax expense (benefit) from adjustments * | - | - | - | - | |||||||||||
| Adjusted operating income (loss) | $ | (7,352 | ) | $ | (4,275 | ) | $ | (9,554 | ) | $ | (8,456 | ) | |||
| Weighted average common shares, diluted | 12,222,881 | 12,222,881 | 12,222,881 | 12,219,713 | |||||||||||
| Diluted income (loss) per common share: | |||||||||||||||
| Net income (loss) allocable to common shareholders | $ | 4.32 | $ | (0.22 | ) | $ | 4.00 | $ | (0.53 | ) | |||||
| Less: | |||||||||||||||
| Net realized investment gains (losses) | - | - | (0.01 | ) | - | ||||||||||
| Change in fair value of equity securities | - | (0.01 | ) | (0.02 | ) | 0.05 | |||||||||
| Net income from discontinued operations | 4.92 | 0.14 | 4.81 | 0.11 | |||||||||||
| Impact of income tax expense (benefit) from adjustments * | - | - | - | - | |||||||||||
| Adjusted operating income (loss), per share | $ | (0.60 | ) | $ | (0.35 | ) | $ | (0.78 | ) | $ | (0.69 | ) | |||
* The Company has recorded a full valuation allowance against its deferred tax assets as of September 30, 2024 and September 30, 2023, respectively. As a result, there were no taxable impacts to adjusted operating income from the adjustments to net income (loss) in the table above after taking into account the use of NOLs and the change in the valuation allowance.
| Conifer Holdings, Inc. and Subsidiaries | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| (dollars in thousands) | ||||||||||
| September 30, | December 31, | |||||||||
| 2024 | 2023 | |||||||||
| Assets | (Unaudited) | |||||||||
| Investment securities: | ||||||||||
| Debt securities, at fair value (amortized cost of $125,257 and $135,370, respectively) | $ | 115,161 | $ | 122,113 | ||||||
| Equity securities, at fair value (cost of $1,838 and $2,385, respectively) | 1,625 | 2,354 | ||||||||
| Short-term investments, at fair value | 21,255 | 20,838 | ||||||||
| Total investments | 138,041 | 145,305 | ||||||||
| Cash and cash equivalents | 32,389 | 10,663 | ||||||||
| Premiums and agents' balances receivable, net | 12,753 | 29,364 | ||||||||
| Receivable from Affiliate | - | 1,047 | ||||||||
| Reinsurance recoverables on unpaid losses | 65,860 | 70,807 | ||||||||
| Reinsurance recoverables on paid losses | 12,919 | 12,619 | ||||||||
| Prepaid reinsurance premiums | 9,545 | 28,908 | ||||||||
| Deferred policy acquisition costs | 6,590 | 6,405 | ||||||||
| Receivable from contingent considerations | 12,924 | - | ||||||||
| Other assets | 8,831 | 7,036 | ||||||||
| Assets from discontinued operations | - | 3,452 | ||||||||
| Total assets | $ | 299,852 | $ | 315,606 | ||||||
| Liabilities and Shareholders' Equity | ||||||||||
| Liabilities: | ||||||||||
| Unpaid losses and loss adjustment expenses | $ | 160,905 | $ | 174,612 | ||||||
| Unearned premiums | 36,628 | 65,150 | ||||||||
| Reinsurance premiums payable | - | 246 | ||||||||
| Debt | 16,473 | 25,061 | ||||||||
| Funds held under reinsurance agreements | 23,495 | 24,550 | ||||||||
| Premiums payable to other insureds | - | 13,986 | ||||||||
| Liabilities from discontinued operations | - | 4,083 | ||||||||
| Accounts payable and accrued expenses | 13,300 | 5,029 | ||||||||
| Total liabilities | 250,801 | 312,717 | ||||||||
| Commitments and contingencies | - | - | ||||||||
| Shareholders' equity: | ||||||||||
| Preferred stock, no par value (10,000,000 shares authorized; 0 and 1,000 issued and outstanding, respectively) | - | 6,000 | ||||||||
| Common stock, no par value (100,000,000 shares authorized; 12,222,881 issued and outstanding, respectively) | 98,162 | 98,100 | ||||||||
| Accumulated deficit | (37,771 | ) | (86,683 | ) | ||||||
| Accumulated other comprehensive income (loss) | (11,340 | ) | (14,528 | ) | ||||||
| Total shareholders' equity | 49,051 | 2,889 | ||||||||
| Total liabilities and shareholders' equity | $ | 299,852 | $ | 315,606 | ||||||
| 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, | ||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||
| Revenue and Other Income | |||||||||||||||||||
| Premiums | |||||||||||||||||||
| Gross earned premiums | $ | 23,278 | $ | 38,150 | $ | 86,891 | $ | 108,457 | |||||||||||
| Ceded earned premiums | (8,677 | ) | (14,171 | ) | (38,737 | ) | (39,343 | ) | |||||||||||
| Net earned premiums | 14,601 | 23,979 | 48,154 | 69,114 | |||||||||||||||
| Net investment income | 1,391 | 1,439 | 4,411 | 4,036 | |||||||||||||||
| Net realized investment gains (losses) | (7 | ) | - | (125 | ) | - | |||||||||||||
| Change in fair value of equity securities | (29 | ) | (87 | ) | (182 | ) | 595 | ||||||||||||
| Other income | 61 | 109 | 287 | 408 | |||||||||||||||
| Total revenue and other income | 16,017 | 25,440 | 52,545 | 74,153 | |||||||||||||||
| Expenses | |||||||||||||||||||
| Losses and loss adjustment expenses, net | 15,152 | 20,911 | 40,953 | 53,943 | |||||||||||||||
| Policy acquisition costs | 3,249 | 4,400 | 9,800 | 13,405 | |||||||||||||||
| Operating expenses | 3,594 | 4,093 | 8,666 | 12,769 | |||||||||||||||
| Interest expense | 2,275 | 855 | 4,021 | 2,361 | |||||||||||||||
| Total expenses | 24,270 | 30,259 | 63,440 | 82,478 | |||||||||||||||
| Income (loss) from continuing operations before income taxes | (8,253 | ) | (4,819 | ) | (10,895 | ) | (8,325 | ) | |||||||||||
| Income tax expense (benefit) | (1,367 | ) | (457 | ) | (1,851 | ) | (464 | ) | |||||||||||
| Net income (loss) from continuing operations | $ | (6,886 | ) | $ | (4,362 | ) | $ | (9,044 | ) | $ | (7,861 | ) | |||||||
| Net income (loss) from discontinued operations | 60,176 | 1,656 | 58,773 | 1,417 | |||||||||||||||
| Net income (loss) | 53,290 | (2,706 | ) | 49,729 | (6,444 | ) | |||||||||||||
| Preferred stock dividends | 502 | - | 817 | - | |||||||||||||||
| Net income (loss) allocable to common shareholders | 52,788 | (2,706 | ) | 48,912 | (6,444 | ) | |||||||||||||
| Earnings (loss) per common share, basic and diluted | |||||||||||||||||||
| Net income (loss) from continuing operations | $ | (0.60 | ) | $ | (0.36 | ) | $ | (0.81 | ) | $ | (0.64 | ) | |||||||
| Net income (loss) from discontinued operations | $ | 4.92 | $ | 0.14 | $ | 4.81 | $ | 0.12 | |||||||||||
| Net income (loss) allocable to common shareholders | $ | 4.32 | $ | (0.22 | ) | $ | 4.00 | $ | (0.53 | ) | |||||||||
| Weighted average common shares outstanding, basic and diluted | 12,222,881 | 12,222,881 | 12,222,881 | 12,219,713 | |||||||||||||||
For Further Information:
Jessica Gulis, 248.559.0840
ir@cnfrh.com
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