Business Context and Reporting Period
This is Conifer Holdings, Inc.’s unaudited Form 10-Q for the three months ended March 31, 2017. The request metadata names Presurance Holdings, Inc., but the filing identifies Conifer Holdings, Inc. as the registrant. Conifer is a property-and-casualty insurance holding company focused on specialty commercial and personal lines, selling through independent agents and managing general agents.
Financial Results
Amounts are in U.S. dollars; financial statement amounts below are in millions unless noted.
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Total revenue | $25.063 | $20.883 |
| Net earned premiums | $24.140 | $20.109 |
| Net income (loss) | ($1.798) | ($2.028) |
| Loss per share | ($0.24) | ($0.27) |
| Net cash from operations | $3.926 | $2.976 |
| Cash and short-term investments | $25.163 | — |
| Senior debt | $17.125 | $17.750 at Dec. 31, 2016 |
| Total assets | $207.966 | $203.701 at Dec. 31, 2016 |
| Total shareholders’ equity | $66.573 | $67.794 at Dec. 31, 2016 |
Net earned premiums rose 20.0%; gross written premiums increased 4.3% to $26.474 million, while net written premiums grew 1.2% to $22.324 million. The consolidated combined ratio improved to 109.1% from 112.2%, but remained above 100%, indicating an underwriting loss. The loss ratio increased to 64.2% from 62.4%; the expense ratio declined to 44.9% from 49.8%.
Cash used in investing activities was $5.598 million, mainly reflecting investment purchases and sales; financing activities used $0.625 million, principally debt repayments. The company reported $7.0 million of undrawn revolver availability and stated that it was in compliance with credit-facility covenants. Insurance subsidiaries’ statutory capital and surplus was $60.7 million, down from $62.2 million at year-end.
Material Changes Versus the Prior Comparable Period
- Commercial gross written premiums grew 13.1% to $21.644 million, primarily from hospitality programs. Personal gross written premiums fell 22.7% to $4.830 million as the company reduced Florida homeowners exposure and stopped writing certain Texas wind-exposed business.
- Commercial underwriting shifted to a $0.109 million loss from a $0.620 million gain; personal underwriting loss narrowed to $0.682 million from $1.386 million.
- Net losses and loss adjustment expenses rose 23.9% to $15.733 million, including $3.079 million of adverse prior-period reserve development, compared with $1.588 million in Q1 2016.
- Net loss improved by $0.230 million. Investment income increased to $0.577 million from $0.537 million; interest expense rose to $0.224 million from $0.157 million.
- Unpaid losses and loss adjustment expense reserves increased to $62.135 million from $54.651 million at year-end 2016; reinsurance recoverables on unpaid losses increased to $9.125 million from $6.658 million.
Outlook, Risks, and Unusual Items
- No specific earnings or premium guidance is provided. Management said it expects the expense ratio to trend lower as earned premium grows and stated that available cash, investments, and revolver capacity should meet liquidity needs.
- Management is de-emphasizing Florida homeowners business and reducing Texas wind-exposed exposure; low-value dwelling business grew 26.7% year over year in the quarter.
- Reserve estimates are inherently uncertain; management recorded $3.1 million of adverse prior-year development, principally in commercial property and liability. Ultimate claim costs may differ materially from recorded reserves.
- Reinsurance does not release the insurer from its obligations to policyholders. The company reported $14.0 million net due from reinsurers, including ceded unearned premiums, and considers it recoverable; a reinsurer default could cause losses.
- The investment portfolio is exposed primarily to interest-rate risk; its effective duration was approximately 3.0 years. The company also identifies claims inflation, judicial awards, and geographic concentration as relevant exposures; 58% of gross written premiums came from Florida, Michigan, Pennsylvania, and Texas.
- Ordinary-course legal proceedings include insurance placement, claims administration, and other business claims. Management did not believe a material loss beyond amounts accrued was reasonably possible. No material changes to previously disclosed risk factors were reported.
Important Facts for Investors to Verify
- Confirm the registrant identity: the supplied metadata says Presurance Holdings, Inc., while this filing is for Conifer Holdings, Inc.
- Review the adequacy and development of loss reserves, especially the $3.079 million adverse prior-period development and higher unpaid-loss balance.
- Assess whether commercial premium growth can produce underwriting profitability, given the 109.1% combined ratio and commercial segment’s move to a loss.
- Monitor Florida and Texas exposure reductions, catastrophe reinsurance costs, and the company’s concentrated state premium mix.
- Verify liquidity, debt service, covenant compliance, and recoverability of reinsurance balances; the filing states liquidity is adequate but does not provide a specific forward earnings forecast.