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| 8-K - 8-K - Conifer Holdings, Inc. | a8-k2017annualmeetingslide.htm |
CNFR ANNUAL SHAREHOLDER MEETING
MAY 17, 2017
1
SAFE HARBOR STATEMENT
This presentation contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our management’s beliefs
and assumptions and on information currently available to management. These forward-looking statements include, without
limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position,
product expansion, future operations, margins, profitability, future efficiencies, and other financial and operating information.
When used in this discussion, the words “may,” “believes,” “intends,” “seeks,” “anticipates,” “plans,” “estimates,” “expects,”
“should,” “assumes,” “continues,” “potential,” “could,” “will,” “future” and the negative of these or similar terms and
phrases are intended to identify forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties, inherent risks and other factors that may cause
our actual results, performance or achievements to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our
management’s beliefs and assumptions only as of the date of this presentation. Our actual future results may be materially
different from what we expect due to factors largely outside our control, including the occurrence of severe weather
conditions and other catastrophes, the cyclical nature of the insurance industry, future actions by regulators, our ability to
obtain reinsurance coverage at reasonable rates and the effects of competition. These and other risks and uncertainties
associated with our business are described under the heading “Risk Factors” in our Annual Report on Form 10-K, filed on
March 15, 2017, which should be read in conjunction with this presentation. The company and subsidiaries operate in a
dynamic business environment, and therefore the risks identified are not meant to be exhaustive. Risk factors change and new
risks emerge frequently. Except as required by law, we assume no obligation to update these forward-looking statements
publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking
statements, even if new information becomes available in the future.
CONIFER: AT A GLANCE
2
Exchange / Ticker Nasdaq: CNFR
Share Price (at 5/1/2017): $7.95
Shares Outstanding*: 7.6M
Market Capitalization: $60M
GAAP Equity*: $68M
Book Value per Share*: $8.88
Conifer Holdings, Inc.
Conifer
Insurance Company
MI Domicile
A.M. Best: B++
Demotech: A
White Pine
Insurance Company
MI Domicile
A.M. Best: B+
Demotech: A
Sycamore
Insurance Agency
MI Domicile
A.M. Best: NR
Demotech: NR
* as of 12/31/2016
COMPANY HISTORY
2008
North Pointe
(founded by
Conifer founder
Jim Petcoff)
sold to QBE for
$146 million, or
approximately
1.7X book value
2012
Non-compete
agreements expire
and Conifer is
founded, bringing
together successful
executives with
new, state-of-the-
art processing
systems
August 2015
Conifer completes
IPO on Nasdaq,
further expands
as a specialty
niche writer of
P&C products
2015
Company makes
strategic decision to
slow growth in
homeowners
product in Florida;
Commences new
specialty products
in security guards
and low-value
dwelling with
historically strong
loss ratios
2016
Conifer continues to
lessen exposure to
Florida market;
Ramps up new lines;
reports favorable
underwriting trends
in new lines; grows
GWP by 22.6%
2017
Lower expense ratio
as GWP continues
to grow; focus on
enhancing
underwriting profit
in core specialty
commercial lines
3
CNFR 2016: YEAR IN REVIEW
Maintained Focus on Writing Core Lines of Business
Shifted Business Mix to Improve Profitability
Achieved Additional Expense Efficiencies across Organization
Balance Sheet Remains Well-Positioned to Support Companies
2017: Drive Positive Bottom Line
4
BUSINESS MIX – GROSS WRITTEN PREMIUM 2015 & 2016
2015 2016
5
CHI CONSOLIDATED: GROSS WRITTEN PREMIUM
• CHI has consistently grown and retained over 93% of its core lines of business, demonstrating success in
finding and keeping profitable business within its main competencies
• Retained renewal business provides opportunities to improve risk profile
• Management has moved quickly and effectively to reduce exposure in the few lines that underperformed
-
20,000
40,000
60,000
80,000
100,000
120,000
2011 2012 2013 2014 2015 2016
Total Commercial
Other Personal
FL HO
FL PA
ALIA
GROSS WRITTEN PREMIUMS
YEARS
Retained
Commercial Lines
Re-worked lines6.9% of GWP
Retained
Personal Lines
$27.3
$55.1
$68.2
$88.2
$21.6
$16.8
$28.8
$25.6
$26.7
$4.8
$0
$20
$40
$60
$80
$100
$120
2013 2014 2015 2016 Q1 2017
M
I
L
L
I
O
N
S
Commercial Lines Personal Lines
GROSS WRITTEN PREMIUM
• Gross written premium increased
23% for the twelve months ended
December 31, 2016
• Total gross written premium was
$115 million as of December 31, 2016
• Net Written Premium – up 25% for 2016
• Net earned premium up 34% for
same period
• Factors driving premium growth include:
Strong commercial lines experience in
hospitality & small business accounts
Particularly in commercial multi-peril
and other liability lines
Achieved growth despite planned reduction
in Personal Lines, shifting away from
wind-exposed premium (particularly
reducing Florida homeowners exposure)
6
$19.1
$21.6
$6.2
$4.8
$0
$5
$10
$15
$20
$25
$30
Q1 2016 Q1 2017
M
I
L
L
I
O
N
S
Commercial Lines Personal Lines
Q1 2017 RESULTS OVERVIEW
Significant Net Earned Premium growth:
• Total gross written premium was $26.5 million
for Q1 2017
Up 4% over the same period in 2016
Net earned premium was up 20%
for the same period
• Factors driving premium growth include:
Strong commercial lines experience in
hospitality & small business accounts,
particularly in commercial multi-peril
and other liability lines
Personal lines focus on low-value dwelling
business while reducing wind-exposed
homeowners
• Continuing Expense ratio improvement
Almost 500 basis point reduction quarter over
quarter from 49.8% in Q1 2016 to 44.9% in Q1
2017
Expect continued downward trend as earned
premiums ramp up
7
GROSS WRITTEN PREMIUM
COMMERCIAL LINES OVERVIEW
• Up 13% for Q1 2017 in gross written premium, compared to Q1 2016
• Seek leading position in specialized niche markets
Example - largest writer of liquor liability business in Michigan
• Writing commercial lines in all 50 states
8
GROSS WRITTEN PREMIUM
YEAR END 2016
TOP FIVE STATES
GROSS WRITTEN PREMIUM
$ in thousands
Michigan $ 19,746 22.4%
Florida 18,404 20.8%
Pennsylvania 10,837 12.3%
Texas 4,596 5.2%
Ohio 4,120 4.7%
All Other 30,539 34.6%
Total $ 88,242 100.0%
$68.2
$88.2
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
YE 2015 YE 2016
M
I
L
L
I
O
N
S
$25.6 $26.7
$0
$5
$10
$15
$20
$25
$30
YE 2015 YE 2016
M
I
L
L
I
O
N
S
• While gross written premium for Personal Lines increased 4% year over year, it was down 23%
in Q1 2017, compared to Q1 2016
• Decrease in wind-exposed homeowners - specifically Florida homeowners
• Low-value dwelling ramp-up in Texas and northern Louisiana
PERSONAL LINES: LOW-VALUE DWELLING & WIND-EXPOSED HOMEOWNERS
GROSS WRITTEN PREMIUM
$ in thousands
YTD 2016
Top Five States
Texas $ 10,425 39.1%
Florida 7,944 29.8%
Hawaii 3,885 14.6%
Indiana 3,383 12.7%
Illinois 712 2.7%
All Other 330 1.1%
Total $ 26,681 100.0%
9
GROSS WRITTEN PREMIUM
10
CHI CONSOLIDATED: LOSS RATIO IMPROVEMENT
SHIFTING BUSINESS MIX TO DRIVE STABILITY
• With planned reduction in FL HO, expect loss ratio to continue improved trend.
Shifting away from wind exposed business and focusing on low value dwelling premium
(which runs at significantly improved loss ratios).
• Each renewal period has provided additional opportunities to re-underwrite, modify pricing
and adapt claims strategies.
• Even with prior year reserve development, the accident year Loss Ratios have consistently decreased
over 4 years – with 2016 AY Loss Ratio: 54%
NET EARNED PREMIUMS ACCIDENT YEAR NET LOSS RATIOS
Commercial Lines Personal Lines Consolidated
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
2013 2014 2015 2016
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2013 2014 2015 2016
11
CHI CONSOLIDATED: EXPENSE RATIO TRENDING DOWNWARD
• Total expense ratio of 44.9% in Q1 2017
• Sequential expense ratio improvement quarter to quarter
Versus 49.8% in Q1 2016
Versus 48.0% in Q2 2016
Versus 46.3% in Q3 2016
Versus 45.3% in Q4 2016
• 920 basis point improvement overall since Q4 2015
• Expect continuing downward trend in 2017
Near-term
Expense Ratio
Target: 37%
54.1%
49.8%
48.0%
46.3%
45.3%
44.9%
Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
12
CONSERVATIVE INVESTMENT STRATEGY
• Investment philosophy is to maintain a
highly liquid portfolio of investment-grade
fixed income securities
• Total cash & investment securities of
$144.0M at March 31, 2017:
Average duration to worst: 3.0 years
Average tax-equivalent yield: ~2.2%
Average credit quality: AA
FIXED INCOME PORTFOLIO
CREDIT RATING
$ in thousands March 31, 2017
Fair Value % of Total
AAA $ 22,785 20.0%
AA 50,314 44.1%
A 26,509 23.2%
BBB 13,357 11.7%
BB 1,121 1.0%
TOTAL FIXED INCOME
INVESTMENTS
$ 114,086 100%
PORTFOLIO ALLOCATION
U.S.
Government
Obligations
6.0%
State & Local
Governments
11.0%
Corporate
Debt
32.0%
Commercial
Mortgage &
Asset-Backed
Securities
47.0%
Equity
Securities
4.0%
13
CONIFER: FOCUSED ON BOTTOM LINE RESULTS
13
Business Mix in 2016:
Commercial Lines
Represented 77% of overall
Business Mix
93% of Premiums Written
were in continuing
Core Lines
Expense Reduction:
Expense Ratio fell by
920 basis points
from Q4 2015 to Q1 2017
Expect continued
improvement over time
Strong Balance Sheet:
Total Assets Topped $200M
in 2016 with Conservative
Investment Portfolio
FOCUS: DRIVE BOTTOM LINE RESULTS IN 2017 AND BEYOND
