ifer (US:CNFR)2020-03-01 03:10Financial Data and Key Metrics Changes - Gross written premiums were $25 million in Q4 2019 and $102 million for the year, reflecting a slight decrease due to the shift towards more profitable lines [18] - The combined ratio improved to 112.9% in Q4 2019 from 123% in the same period of 2018, with a loss ratio of 69% compared to 77% a year ago [18] - The expense ratio decreased to 44.3% in Q4 2019 from 45.6% in the prior year period, and for the full year, it was 44% versus 46% a year ago, showing an improvement of almost 200 basis points [18] Business Line Data and Key Metrics Changes - The company has repositioned its business largely into commercial lines, achieving favorable results and considerable rate increases in select lines [6][8] - Personal lines production has seen a turnaround, particularly in low-value dwelling business, which performed well without the catastrophe exposures of previous wind-exposed business [9] - The commercial lines accident year combined ratio was 98% versus 105% a year ago, while personal lines improved to 99% from 113% [18] Market Data and Key Metrics Changes - The company is focusing on specialty niche markets, particularly in commercial lines, where greater rate adequacy is observed [8] - The market is hardening in key areas such as hospitality and small business, providing opportunities for growth [8] Company Strategy and Development Direction - The company aims for sustainable underwriting profit and is dedicated to consistent underwriting guidelines, willing to let non-renew business if pricing is inadequate [7] - The management believes that 2020 presents an opportunity for double-digit top line growth, supported by a solid balance sheet and operational infrastructure [10][21] - The company is growing its fee-based agency operations, which are expected to contribute to non-risk revenue in 2020 and beyond [13] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about returning to profitability in 2020, with expectations that premium growth will significantly reduce the expense ratio [23] - The company has exited troubled geographic areas and is comfortable with its current loss picks for 2019 and 2020 [24][32] - Management acknowledges ongoing challenges in certain areas but believes they are on the downhill side of previous issues, with a focus on profitable growth moving forward [46] Other Important Information - The investment portfolio is conservatively managed, with high-quality fixed income securities and an average credit quality of AA [19] - Total assets were $247 million at year-end, with cash and total investments at $177 million [20] Q&A Session Summary Question: Will the company return to profitability in 2020? - Management expects that growth in premium will significantly reduce the expense ratio, leading to profitability [23] Question: What are the company's thoughts on accident year loss picks for 2019? - Management is comfortable with the loss picks for 2019 and 2020, having made significant underwriting changes in troubled areas [24] Question: Can the company discuss the rate environment for its focus areas? - The rate environment varies by geography, with significant rate increases observed in commercial auto and general liability in certain areas [26] Question: How does the company view its capital position? - The company has strong RBC ratios and is comfortable with its capital position to fuel growth for the upcoming year [28] Question: What is the company's strategy regarding claims inflation versus rate adequacy? - The company is focusing on repositioning its book of business away from high litigation cost areas to achieve rate adequacy [32] Question: How much of the reserve development is related to troubled geographic areas? - Approximately 95% of the reserve development issues are related to troubled areas like Southeast Florida and Pennsylvania liquor [38]