Core Viewpoint - Conifer Holdings, Inc. experienced a significant transition in 2024, marked by the sale of its insurance agency operations, a substantial reduction in commercial lines business, and a strategic focus on personal lines insurance moving forward [2][3][4]. Financial Highlights - For the full year 2024, total Gross Written Premium decreased by nearly 50% compared to the previous year, while Net Earned Premium fell by 27.5% [2][10]. - The fourth quarter of 2024 saw Gross Written Premium at $13.7 million, down 43.9% from $24.4 million in the same period of 2023 [10]. - Net income allocable to common shareholders for the fourth quarter was a loss of $25.4 million, or $2.08 per share, while for the full year, the company reported a net income of $23.5 million, or $1.93 per share [20][31]. Commercial Lines Business - The commercial lines business experienced a drastic decline, with Gross Written Premium down 79% in Q4 2024 and 75.1% for the full year [13][14]. - The loss ratio for commercial lines surged to 650.8% in Q4 2024, reflecting the company's focus on strengthening reserves [13][17]. Personal Lines Business - Personal lines gross written premiums increased by 10.6% in Q4 2024 and 23.4% for the full year, driven by growth in the homeowner's insurance portfolio in Texas and the Midwest [3][14]. - Personal lines accounted for 77% of total gross written premium in Q4 2024, indicating a strategic shift towards this segment [15]. Investment Performance - Net investment income rose by 5.8% to $5.8 million for the year ending December 31, 2024, compared to $5.4 million in the prior year [18]. - The company reported a loss of $21,000 from changes in the fair value of equity investments during the quarter, contrasting with a gain of $13,000 in the prior year [19]. Underwriting Ratios - The combined ratio for the company was 292.9% in Q4 2024, significantly higher than 231.7% in Q4 2023, indicating underwriting challenges [17]. - The loss ratio for the overall business was 254.6% in Q4 2024, compared to 191.1% in the same quarter of the previous year [17].

Investment Portfolio - As of December 31, 2024, the fair value of the investment portfolio, excluding cash and cash equivalents, was $128.4 million, down from $145.3 million in 2023, indicating a decrease of approximately 11.9%[314] - As of December 31, 2024, a 200 basis point increase in interest rates would decrease the fair value of investments by $6,328,000, representing a 5.0% decline in shareholders' equity[316] - The estimated fair value of investments remains at $126,816,000 with no change in interest rates[316] - A 200 basis point decrease in interest rates would increase the fair value of investments by $7,305,000, leading to a 5.8% increase in shareholders' equity[316] Interest Rate Risk Management - The option adjusted duration of the debt securities portfolio was 2.7 years as of December 31, 2024, compared to 2.9 years in 2023, reflecting a slight reduction in interest rate risk exposure[314] - The primary market risk exposure to the debt portfolio is interest rate risk, with the fair market value of fixed-income securities inversely related to changes in market interest rates[314] - The company manages interest rate risks by investing in securities with varied maturity dates and maintaining the duration of the investment portfolio within a defined range of three to four years[314] Regulatory Environment - The company's insurance subsidiaries are subject to various state regulations designed to protect policyholders, which may impact profitability and operational flexibility[66] - Regulatory requirements include the approval of premium rates and policy forms, as well as maintaining minimum capital and surplus levels[68] - The company is required to participate in insolvency funds or associations, which protect policyholders against insurer insolvency, with minimal assessments reported for 2023 and 2024[75][76] - The National Association of Insurance Commissioners (NAIC) Insurance Regulatory Information System (IRIS) identifies thirteen industry ratios to assist in monitoring the financial condition of insurance companies[78] Employee and Operational Information - As of December 31, 2024, the company had nine full-time employees, with no collective bargaining agreements in place[79] - The company maintains an internet website where it provides access to its financial reports and filings with the SEC[80] Reinsurance and Credit Risk - The net amount due from reinsurers decreased from $112.3 million in 2023 to $97.5 million in 2024[319] - The company primarily invests in investment-grade securities to manage credit risk[317] - The company selects reinsurers with an A.M. Best rating of "A-" or better to mitigate credit risk[318] - The company remains obligated to pay claims regardless of reinsurer performance under reinsurance agreements[318] - The company evaluates the financial condition of reinsurers throughout the duration of agreements to manage credit risk[318] Inflation Impact - Inflation is not believed to have a material effect on operations, except for its impact on interest rates and claims costs[320] - The company considers inflation effects in pricing and estimating reserves for unpaid losses and loss adjustment expenses (LAE)[320]

Financial Performance - Conifer Holdings reported a net income of $53.3 million for Q3 2024, translating to $4.32 per share[2][11]. - Adjusted operating loss for the quarter was $7.4 million, or $0.60 per share[2][12]. - The company anticipates a significant decline in revenue following the sale of its insurance agency operations[3][5]. - Adjusted operating loss for the three months ended September 30, 2024, was $(7,352) thousand compared to $(4,275) thousand for the same period in 2023, indicating a worsening of approximately 72.8%[17]. - The company reported a net income allocable to common shareholders of $52,788 thousand for the three months ended September 30, 2024, compared to a net loss of $(2,706) thousand for the same period in 2023[19]. - Diluted income per common share for the three months ended September 30, 2024, was $4.32, a significant increase from $(0.22) in the prior year[17]. Revenue and Premiums - Gross written premiums decreased by 60.9% year-over-year to $15 million, primarily due to the exit from commercial lines[4][5]. - Net earned premiums fell by 39.1% to $14.6 million compared to the previous year[4]. - Personal lines gross written premiums increased by 10.1% to $11.1 million, representing 73% of total gross written premiums[9]. - Net earned premiums for the three months ended September 30, 2024, were $14,601 thousand, a decrease from $23,979 thousand for the same period in 2023, representing a decline of approximately 39.5%[19]. - Total revenue and other income for the three months ended September 30, 2024, was $16,017 thousand, down from $25,440 thousand in the prior year, reflecting a decrease of about 37.0%[19]. Assets and Liabilities - Total assets as of September 30, 2024, were $299,852 thousand, a decrease from $315,606 thousand as of December 31, 2023, representing a decline of about 5.0%[18]. - Total liabilities decreased to $250,801 thousand as of September 30, 2024, from $312,717 thousand at the end of 2023, reflecting a reduction of approximately 19.8%[18]. - Cash and cash equivalents increased to $32,389 thousand as of September 30, 2024, compared to $10,663 thousand at the end of 2023, indicating a growth of approximately 203.5%[18]. Other Financial Metrics - The loss ratio for the combined business was 143.1%, up from 120.8% in the prior year[10]. - Interest expense for the three months ended September 30, 2024, was $2,275 thousand, up from $855 thousand in the same period last year, representing an increase of about 166.5%[19]. - The company expects commercial lines to represent 10% or less of written premiums going forward[3].

Core Viewpoint - Conifer Holdings, Inc. reported a significant financial shift following the sale of its insurance agency operations, resulting in a net income of $53.3 million for Q3 2024, despite an adjusted operating loss of $7.4 million [2][12]. Financial Highlights - The company achieved a $61 million gain from the sale of its insurance agency operations [2]. - Adjusted operating loss was reported at $7.4 million, equating to a loss of $0.60 per share [2][13]. - Net income for the period was $53.3 million, or $4.32 per share [12][25]. Premiums and Revenue - Gross written premiums decreased by 60.9% to $15.1 million compared to $38.5 million in Q3 2023 [4][6]. - Net earned premiums fell by 39.1% to $14.6 million from $24 million in the prior year [4][24]. - The company anticipates that commercial lines will represent 10% or less of written premiums going forward, focusing instead on personal lines, particularly homeowners insurance in Texas and the Midwest [3][6]. Commercial Lines Business - The commercial lines business saw a drastic decline, with gross written premiums down 85.9% to $4 million in Q3 2024 [7][8]. - The loss ratio for commercial lines increased significantly to 168% compared to 88.8% in the previous year [7][11]. - The company expects continued revenue decline in commercial lines following the sale of its agency operations [6][8]. Personal Lines Business - Personal lines gross written premiums increased by 10.1% to over $11 million, representing 73% of total gross written premiums for the quarter [10][11]. - The combined ratio for personal lines improved to 100.7%, indicating a more favorable underwriting environment compared to 121.7% in Q3 2023 [10][11]. Investment Income - Net investment income remained stable at $1.4 million for both Q3 2024 and Q3 2023 [11][24]. - The company reported a loss of $29,000 from changes in the fair value of equity investments, an improvement from a loss of $87,000 in the prior year [12][24]. Management Commentary - CEO Brian Roney highlighted the successful sale of the insurance agency operations and the strategic focus on personal lines insurance moving forward [2].

Financial Performance - Net earned premiums for the three months ended September 30, 2024, were $14,601,000, down 38.8% from $23,979,000 in the same period of 2023[10] - Total revenue and other income decreased to $16,017,000 for the three months ended September 30, 2024, compared to $25,440,000 for the same period in 2023, a decline of 37.0%[10] - The company reported a net loss from continuing operations of $6,886,000 for the three months ended September 30, 2024, compared to a loss of $4,362,000 in the same period of 2023[10] - The net income (loss) for the nine months ended September 30, 2024, was $(9,044,000), compared to $(7,861,000) for the same period in 2023, indicating a worsening financial performance[20] - The company reported a net loss from continuing operations of $10,895 million for the nine months ended September 30, 2024, compared to a loss of $8,325 million for the same period in 2023[78] - The company reported a segment loss of $(6,294) for the three months ended September 30, 2024, compared to a loss of $(5,020) for the same period in 2023[75] - The total segment loss increased to $7.3 million in Q3 2024 from $5.3 million in Q3 2023[105] Discontinued Operations - Net income from discontinued operations was $60,176,000 for the three months ended September 30, 2024, compared to $1,656,000 in the same period of 2023, indicating a significant increase[10] - The net income from discontinued operations for the nine months ended September 30, 2024, was $58,773 million, compared to $1,417 million in 2023[35] - The company recognized a gain of $54,767 million on the sale of CIS and $6,459 million on the sale of SSU during the three months ended September 30, 2024[34] - The company completed the sale of Conifer Insurance Services on August 30, 2024, for a total consideration of $59.5 million, which includes an initial cash consideration of $46.6 million and contingent payments[30] Assets and Liabilities - Total assets decreased from $315,606,000 on December 31, 2023, to $299,852,000 as of September 30, 2024, representing a decline of approximately 5.0%[7] - Total liabilities decreased from $312,717,000 on December 31, 2023, to $250,801,000 as of September 30, 2024, a reduction of approximately 19.8%[7] - The company’s accumulated deficit improved from $(86,683,000) on December 31, 2023, to $(37,771,000) as of September 30, 2024[7] - Total liabilities as of August 30, 2024, were $39,421 million, compared to $401 million on December 31, 2023[32] - The company’s total liabilities increased to $98,162 million as of September 30, 2024, compared to $97,913 million at December 31, 2022[19] Cash Flow and Investments - The company experienced a significant increase in cash provided by investing activities, totaling $50,528,000 for the nine months ended September 30, 2024, compared to a cash outflow of $(4,040,000) in the same period of 2023[20] - The company reported a significant increase in cash flows from operating activities, with a net cash provided of $6,722 million for the nine months ended September 30, 2024, compared to a net cash used of $5,550 million in the same period of the previous year[20] - The company reported total cash at the end of the period of $32,389 million, a substantial increase from $14,361 million at the beginning of the period[20] - The company reported gross unrealized losses from available-for-sale securities were $10.2 million as of September 30, 2024, due to market conditions and interest rate changes[38] - The company held 282 issues of debt securities with unrealized losses as of September 30, 2024[40] Premiums and Underwriting - Gross written premiums for the three months ended September 30, 2024, totaled $15,086, a decrease from $38,548 in the same period of 2023[75] - The Company exited the Oklahoma business in mid-2024 and significantly reduced writings in commercial lines[75] - For the nine months ended September 30, 2024, gross written premiums totaled $58,370 million, a decrease from $119,436 million for the same period in 2023[78] - The underwriting combined ratio was 143.1% for Q3 2024, up from 120.8% in Q3 2023, indicating an underwriting loss[93] - The company has significantly reduced its writings in commercial lines, with gross written premiums from Texas, Michigan, Oklahoma, and Indiana accounting for 84.2% of total gross written premiums for the nine months ended September 30, 2024[75] Stock and Equity - The company redeemed all of its $6.0 million Series A Preferred Stock on August 30, 2024, incurring a redemption premium of $397,000[69] - The company’s stock-based compensation expense for the nine months ended September 30, 2024, was $62 million, down from $147 million in the same period of 2023[20] - The book value per common share outstanding increased to $4.01 for the nine months ended September 30, 2024, compared to $0.24 for the same period in 2023[108] Risk and Compliance - The company does not believe there is a reasonable possibility of any material loss exceeding amounts already accrued from ongoing legal claims[74] - The company has no contracts referencing LIBOR and does not expect new accounting guidance to have a material impact on its financial statements[27] - The company is currently evaluating the impact of new accounting standards related to income taxes and segment reporting, effective after December 15, 2024[27] Miscellaneous - The company reported that actual results may differ from estimates made in the financial statements, highlighting the inherent uncertainty in financial reporting[24] - The management's discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in the quarterly report[80] - The company filed its annual report on Form 10-K with the U.S. Securities and Exchange Commission on April 1, 2024[80]

Core Insights - Bishop Street Underwriters has acquired Conifer Insurance Services, marking its entry into commercial lines and expanding its multi-line MGA platform [1][3] - Conifer operates in specialty lines, including small and medium-sized enterprises, hospitality, and auto dealers, presenting growth opportunities for Bishop Street [2] - The acquisition is part of Bishop Street's strategic expansion, aiming to leverage Conifer's infrastructure for geographic expansion and new product development [3][4] Company Overview - Bishop Street Underwriters, a portfolio company of RedBird Capital, focuses on partnering with MGAs and niche underwriting teams to build a differentiated platform [5] - RedBird Capital Partners manages $10 billion in assets and integrates private equity investing with a business-building mandate across financial services, sports, and media [6]

Financial Data and Key Metrics Changes - Overall gross written premium decreased 58% to $19 million, reflecting a strategic shift towards a commission-based revenue model [10] - Conifer's combined ratio was 124% in the second quarter, impacted by weather-related losses [10] - The expense ratio improved to 32%, down 580 basis points from the same period last year [10] - Net loss allocable to common shareholders was $4 million or $0.32 per share, with an adjusted operating loss of $3.6 million or $0.30 per share [11] Business Line Data and Key Metrics Changes - Commercial lines represented approximately 36% of total production for the quarter, with a combined ratio of 105% [7] - Personal lines production was primarily affected by spring storms, particularly in Oklahoma, which is in run-off [8] - Agency commission increased significantly to nearly $9 million compared to $211,000 in the same quarter of 2023, indicating progress in the commission-based revenue initiative [10] Market Data and Key Metrics Changes - The company is focusing on expanding its reach in key markets, particularly in cannabis-related coverage, through partnerships with A-rated capacity providers [6] - The transition to a commission-based model is expected to yield market benefits over time, improving margins and service flexibility [9] Company Strategy and Development Direction - The company is shifting towards a commission-based revenue model through its managing general agency, Conifer Insurance Services, to achieve more stable and predictable revenue streams [5] - This strategic shift aims to enhance overall profitability and create a scalable business model [5] - The focus is on optimizing commercial lines and leveraging agency partners to expand distribution channels [5] Management's Comments on Operating Environment and Future Outlook - Management believes the transition to the MGA model will allow for quicker profitability compared to the previous carrier-based model [12] - The company is optimistic about the personal lines book moving forward, despite challenges faced in the second quarter [12] - Management is focused on achieving operational profitability and favorable returns for shareholders in the long term [9] Other Important Information - The company recorded a net investment income of $1.5 million, up 11% from the prior year [11] - Total assets were reported at $293 million, with cash and total investments of $154 million [11] Q&A Session Summary Question: When does the company expect to become profitable and what are the sources of liquidity? - Management indicated that the shift to the MGA model and improved weather results in personal lines should facilitate quicker profitability [12] - Additional liquidity may be considered through asset sales if necessary [13]

Conifer Holdings Inc. Q2 2024 INVESTOR CONFERENCE CALL August 14, 2024 Nasdaq: CNFR Fulfilling the Unique Needs of Specialty Insurance Markets as a Long-Term Partner 2 SAFE HARBOR STATEMENT | --- | --- | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Financial Performance - Gross written premiums decreased 57.5% year-over-year to $19.0 million in Q2 2024, down from $44.7 million in Q2 2023[3] - The company reported a net loss allocable to common shareholders of $4.0 million, or $0.32 per share, for Q2 2024[9] - The combined ratio for Q2 2024 was 123.6%, compared to 120.9% in Q2 2023[8] - The loss ratio for Q2 2024 was 91.5%, up from 83.0% in the prior year[8] - Conifer Holdings reported a net loss allocable to common shareholders of $3.95 million for the three months ended June 30, 2024, compared to a net loss of $4.74 million for the same period in 2023, representing a 16.5% improvement[14] - Adjusted operating income for the three months ended June 30, 2024, was a loss of $3.64 million, compared to a loss of $4.73 million in the prior year, indicating a 23.1% reduction in losses[14] - The diluted loss per common share for the three months ended June 30, 2024, was $0.32, an improvement from a loss of $0.39 per share in the same quarter of 2023[14] - Net income (loss) for Q2 2024 was $(3,792) million, compared to $(4,739) million in Q2 2023, showing an improvement of 20.0%[16] - Earnings (loss) per common share improved to $(0.32) in Q2 2024 from $(0.39) in Q2 2023[16] Revenue and Premiums - Gross earned premiums for Q2 2024 were $29,381 million, down from $36,013 million in Q2 2023, representing a decrease of 18.1%[16] - Net earned premiums decreased to $16,666 million in Q2 2024 from $23,183 million in Q2 2023, a decline of 28.3%[16] - Total revenue and other income increased to $26,848 million in Q2 2024, compared to $24,923 million in Q2 2023, reflecting a growth of 7.7%[16] - Agency commission income significantly increased to $8,831 million in Q2 2024 from $211 million in Q2 2023, a remarkable growth of 4011.4%[16] Investment and Assets - Net investment income increased by 11.2% to $1.5 million compared to $1.4 million in the prior year period[3] - The company reported total investments of $144.37 million as of June 30, 2024, slightly down from $145.31 million at the end of 2023, a decrease of 0.6%[15] - Total assets decreased to $292.93 million as of June 30, 2024, down from $311.80 million at the end of 2023, reflecting a 6.0% decline[15] - Cash and cash equivalents decreased to $9.70 million as of June 30, 2024, down from $11.13 million at the end of 2023, a decline of 12.8%[15] Liabilities and Recoverables - Total liabilities were reported at $294.10 million as of June 30, 2024, compared to $308.92 million at the end of 2023, showing a decrease of 4.8%[15] - Premiums and agents' balances receivable increased to $30.58 million as of June 30, 2024, up from $29.37 million at the end of 2023, marking a 4.1% increase[15] - Reinsurance recoverables on unpaid losses rose to $74.36 million as of June 30, 2024, compared to $70.81 million at the end of 2023, representing a 5.5% increase[15] Operational Efficiency - The expense ratio improved by 5.8 percentage points to 32.1% from 37.9% in the prior year[3] - Conifer Holdings continues to focus on growth strategies and capital position improvements, with expectations for future premium increases and operational performance enhancements[11] - The company expects 100% of future commercial gross written premium to flow through its managing general agency (MGA) model[1] - 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 Q3 2024[2]

Financial Performance - Net earned premiums for the three months ended June 30, 2024, were $16,666 thousand, down 28.2% from $23,183 thousand in the same period of 2023[8] - Total revenue and other income increased to $26,848 thousand for the three months ended June 30, 2024, compared to $24,923 thousand for the same period in 2023, marking an increase of 7.7%[8] - Losses and loss adjustment expenses decreased to $15,281 thousand for the three months ended June 30, 2024, down 21.1% from $19,319 thousand in the same period of 2023[8] - The company reported a net loss of $3,792 thousand for the three months ended June 30, 2024, compared to a net loss of $4,739 thousand for the same period in 2023, indicating an improvement of 20.0%[9] - The company reported a total comprehensive loss for the three months ended June 30, 2024, was $(3,604) thousand, compared to $(5,480) thousand for the same period in 2023, reflecting a decrease in losses of 34.2%[9] - Net income for the six months ended June 30, 2024, was $(3,561) thousand, compared to $(3,738) thousand for the same period in 2023, indicating a slight improvement[18] - The company reported a segment loss of $4,360,000 for the three months ended June 30, 2024, compared to a loss of $5,265,000 in the same period of 2023, indicating an improvement[62] - The company reported a segment loss of $4,905 million for the six months ended June 30, 2024, compared to a loss of $5,400 million in the same period of 2023[63] Assets and Liabilities - Total assets decreased from $311,804 thousand as of December 31, 2023, to $292,934 thousand as of June 30, 2024, representing a decline of approximately 6.0%[5] - Total liabilities decreased from $308,915 thousand as of December 31, 2023, to $294,099 thousand as of June 30, 2024, a reduction of approximately 4.8%[5] - The company’s accumulated deficit increased to $(90,559) thousand as of June 30, 2024, compared to $(86,683) thousand as of December 31, 2023[5] - Total equity as of June 30, 2024, was $2,559 thousand, down from $2,889 thousand at the end of the previous year[15] - Cash at the end of the period was $9,697 thousand, down from $18,765 thousand at the beginning of the period[18] - The company reported net cash used in operating activities of $(1,952) thousand for the six months ended June 30, 2024, compared to $(1,447) thousand for the same period in 2023[18] - The company reported a total deficit of $90,559,000 as of June 30, 2024, compared to $86,683,000 at December 31, 2023, indicating a worsening financial situation[16] Investment and Income - Net investment income for the three months ended June 30, 2024, was $1,505 thousand, an increase of 11.1% from $1,354 thousand in the same period of 2023[8] - The company reported total investment income for the six months ended June 30, 2024, reached $3,169,000, up 14.0% from $2,781,000 in the prior year[32] - The company reported gross unrealized gains related to equity investments of $354,000 as of June 30, 2024, down from $505,000 at December 31, 2023[33] - The company holds only investment-grade securities, with gross unrealized losses of $13.6 million as of June 30, 2024, primarily due to market conditions[26] - The company executed multiple producer agreements to underwrite a majority of its commercial lines business moving forward[25] Business Strategy and Operations - The company has shifted its business model to focus on producing insurance products through its managing general agency (MGA), with two third-party insurers underwriting most of its commercial lines business by the end of Q2 2024[21] - The strategic shift from premium revenues to commission revenues began in 2024, with expectations that almost all commercial lines business will be underwritten by third-party insurers by Q3 2024[66] - The wholesale agency business segment has become more prominent, with substantially all commercial lines business produced by the MGA and underwritten by third-party insurers[70] - The company is actively considering the sale of assets and business operations to raise capital for debt repayment and improve its financial position[21] - The company expects existing cash and investments to be adequate to meet its capital and liquidity needs over the next twelve months[25] Premiums and Underwriting - For the three months ended June 30, 2024, the Company recorded gross written premiums of $18,971,000, a decrease from $44,674,000 in the same period of 2023[61] - The Company reported net written premiums of $13.2 million, a decrease of 54.9% from $29.3 million in 2023[45] - Commercial lines gross written premiums fell by $28.0 million, or 80.5%, to $6.8 million in Q2 2024, down from $34.8 million in Q2 2023[79] - Personal lines gross written premiums increased by $2.3 million, or 23.0%, to $12.2 million in Q2 2024, compared to $9.9 million in Q2 2023[74] - The accident year loss ratio for commercial lines was 55.8% and for personal lines was 95.3%, resulting in a total loss ratio of 74.7% for Q2 2024[81] - The underwriting combined ratio was 123.6% for Q2 2024, compared to 120.9% for Q2 2023, indicating an underwriting loss[74] Regulatory and Compliance - The company does not expect the new accounting guidance (ASU 2022-06) to have a material impact on its consolidated financial statements[24] - The company is evaluating the impact of new segment reporting guidance (ASU 2023-07) on its consolidated financial statements[24] - The company is assessing the implications of the new income tax disclosure requirements (ASU 2023-09) on its financial statements[24] - The company anticipates needing to contribute between $3.0 million to $5.0 million in additional capital to WPIC to maintain its licenses[100] - A.M. Best downgraded the financial strength ratings of CIC and WPIC to C, indicating a weak ability to meet ongoing financial obligations[68] - Kroll downgraded CIC to BB- and WPIC to B, both with a negative outlook, indicating low financial condition quality[68]