• Gross Written Premium: Decreased 33% to $24 million

• Commercial Lines: Represented 52% of total gross written premiums

• Personal Lines: Comprised 48% of total gross written premiums

• Combined Ratio: 97%, down 280 basis points from previous year

• Loss Ratio: Steady at 62%

• Accident Year Loss Ratio in Personal Lines: 53%, down 20 percentage points from last year

• Expense Ratio: 35%, improved by 260 basis points from previous year

• Net Investment Income: $1.6 million, up 19% from previous year

• Net Income: $74,000 or $0.01 per share

• Adjusted Operating Income: $188,000 or $0.02 per share

• Total Assets: $301 million at quarter end

• Cash and Total Investments: $164 million

• Book Value: $0.21 per share

• Warning! GuruFocus has detected 2 Warning Signs with CNFR.

Release Date: May 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Conifer Holdings Inc (NASDAQ:CNFR) has successfully executed a strategic shift to a wholesale agency production-based revenue model, enhancing distribution channels and market reach.

• The company has expanded its reach in new markets, particularly in cannabis-related coverage, by transferring cannabis premium to capacity partners.

• Conifer Holdings Inc (NASDAQ:CNFR) reported a strong combined ratio of 83% for its Personal Lines, indicating efficient underwriting and profitability in that segment.

• Net investment income increased by 19% compared to the previous year, reflecting a well-managed and conservative investment portfolio.

• The company's expense ratio improved, decreasing by 260 basis points from the previous year, meeting the near-term target of 35%.

Negative Points

• Gross written premium decreased by 33% to $24 million, reflecting the strategic decision to reduce premium leverage on operating subsidiaries.

• The shift to a commission-based revenue model has resulted in a significant reduction in premium leverage, impacting overall production levels.

• Despite the strategic shift, the overall commercial lines production represented only 53% of total production for the quarter, indicating a decrease.

• The company reported a modest net income allocable to common shareholders of $74,000 or $0.01 per share for the first quarter of 2024.

• Total assets and book value per share figures suggest potential challenges in asset growth and valuation enhancement.

Q & A Highlights

Q: Can you provide an overview of the strategic changes made in Conifer Holdings' business model in the first quarter? A: Nicholas Petcoff - CEO, Director: In the first quarter, we shifted our focus from an underwriting revenue model to a wholesale agency production-based approach for our commercial lines. This strategic pivot allows us to leverage agency partnerships and mitigate market risks by focusing on non-risk bearing revenue, which we believe will ensure more stable financial outcomes.

Q: What were the financial results for Conifer Holdings in the first quarter of 2024? A: Harold Meloche - Chief Financial Officer, Treasurer: The company reported a decrease in gross written premium by 33% to $24 million due to our strategic shift. The combined ratio improved to 97%, and net income allocable to common shareholders was $74,000 or $0.01 per share. Adjusted operating income was $188,000 or $0.02 per share.

Q: How has the shift to a wholesale agency model impacted the production in commercial lines? A: Nicholas Petcoff - CEO, Director: With the new model, commercial lines now represent about 53% of our total production. We've successfully directed premium to capacity providers, particularly in expanding our cannabis coverage, which aligns with our strategy to focus on commission-based revenue.

Q: What is the current status of the Personal Lines business following these strategic changes? A: Nicholas Petcoff - CEO, Director: Our Personal Lines business, particularly low valued homeowners' insurance in Texas and the Midwest, has shown strong performance with a combined ratio of 83%. We plan to continue retaining this business on our books as it complements our strategic direction well.

Q: Can you discuss the company's investment performance and portfolio management in the first quarter? A: Harold Meloche - Chief Financial Officer, Treasurer: Net investment income increased by 19% to $1.6 million. Our investment portfolio is conservatively managed, primarily in fixed income securities, maintaining an average credit quality of double-A plus and a tax equivalent yield of 3.4%.

Q: What are Conifer Holdings' future outlook and strategic priorities following the first quarter results? A: Nicholas Petcoff - CEO, Director: We are committed to our new strategic direction and will continue to focus on delivering value to our customers and shareholders. The positive first quarter results validate our strategic decisions, and we are optimistic about the future growth and stability of the company.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.