ifer (CNFR) - 2024 Q4 - Annual Report

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]