Presurance Holdings, Inc. Q4 FY2022 earnings call

Key Points

• Conifer saw top line growth of roughly 5% in 2022 while staying in its underwriting lane and expanding key underwriting verticals.
• Significant underwriting enhancements over the past several years include tightened terms/conditions, lower reinsurance retentions, improved geographic spread, increased rate, and strengthened reserves.
• For the full year, an expense ratio of 38% was posted, with the fourth quarter seeing a 37% expense ratio, moving towards the goal of 35% or lower.
• Strategic transactions in the fourth quarter: A Loss Portfolio Transfer (LPT) agreement provided $20 million of adverse loss development cover for accident years 2019 and prior, and an asset purchase agreement to monetize assets of Venture Holdings Agency funded the LPT and bolstered reserves.
• Underwriting focus on key specialty verticals, refining geographic spread (e.g., reducing Florida exposure while increasing market share in Michigan), personal lines growth (up almost 50% quarter-over-quarter in the fourth quarter), and quick service restaurant business in runoff.

In the fourth quarter, gross written premiums increased 5% to just under $35 million. Commercial lines accounted for 83% of total gross written premium in the fourth quarter. Personal lines represented 17% of total gross written premium. Conifer's combined ratio was 142% in the fourth quarter compared to 104% in the same period last year. The expense ratio was 37% for the fourth quarter, down 420 basis points from the prior year period. Net income for the fourth quarter was $2.1 million or $0.17 per share.

Forward-Looking Statements

• Expect to continue successful expense savings initiatives with the goal of an expense ratio of 35% or lower.
• Confident in moving towards consistent operating profit with top line growth, ongoing underwriting enhancements, and reserve strengthening efforts.

Risks

• Uncertainties associated with COVID-19 and its impact on the economy and business.
• Risks described in Conifer's SEC filings, including those related to forward-looking statements.
• Lingering effect of legacy reserve drag as an impediment to consistent operating profit.

Q: There are some 6.75% notes coming due in September and I see you filed an S1 for a new offering last year. And I was wondering what the plan was for the maturing notes towards the end of September of this year?

A: Well, we're either going to renew them or pay them off. And we have plans underway to do one or the other, so you'll be seeing more S1 come through and hopefully in the next quarter or two, we'll get those taken care of.