Conifer Holdings Inc. is moving to managing general agency business model for its commercial lines business, as it moves its catastrophe-hit Oklahoma homeowners business into runoff, said its chief executive officer.
For commercial lines, Conifer has moved to a production-based revenue model through its wholly owned MGA Conifer Insurance Services to move away from the limitations of a carrier-based model and embrace an MGA approach, CEO Nicholas J. Petcoff said in a conference call.
The group in the past used a risk retention model, using its operating companies to write and retain underwriting risk for commercial lines premiums, he said.
In 2023, personal lines was about 26% of Conifer’s total book, with commercial lines representing 74%, Petcoff said.
The shift is a fundamental change in how Conifer does business and one Petcoff said should position the group for long-term sustainability. Beginning in the second quarter, all of Conifer’s commercial lines business will be directly written by third-party insurers with AM Best Financial Strength Ratings of A- or better, Petcoff said.
Using third-party capacity providers for its MGA-produced business will provide a broader reach for existing profitable programs, he said. The model going forward will provide more of a focus on commission revenue and less on risk retention subsidiary carriers.
Fourth-quarter net loss was $19.5 million, compared with net income of $2.1 million a year earlier. For the full year, the net loss widened to $25.9 million from $10.7 million. Gross written premiums fell 29.4% to $24.4 million in the fourth quarter. Net investment income rose 27.2% to $1.4 million. The combined ratio worsened to 231.7 from 142.4.
Petcoff said in addition to reserve strengthening, the rest of Conifer’s fourth-quarter loss was related to convective storms in the Oklahoma homeowners business.
The top five writers of multiperil homeowners insurance by 2023 direct premiums written were State Farm Group, with a market share of 32.44%; Farmers Insurance Group with 14.46%; Allstate Insurance Group with 11.79%: USAA Group with 10.45%; and American Family Insurance Group with 3.48%, according to BestLink.
The Texas personal lines book also saw storm losses but generally did better, he said. To limit storm loss exposure, Conifer decided to nonrenew the Oklahoma book, which is now in runoff, he said.
Conifer decided to continue to underwrite profitable business in Texas and Midwest, regions Petcoff said continue to be profitable sources of income and good areas for Conifer to maintain a presence.
The “absolute majority” of Conifer’s net loss was reported in the fourth quarter alone, Petcoff said. In the quarter, the group decided to further strengthen its overall reserves by fully booking claims estimates to outside actuaries, he said.
“Given the magnitude of the financial impact, this decision was not taken lightly,” he said, adding the group believes the move was prudent for the long-term stability of the company and to protect against further future development.
Petcoff said Conifer made recent announcements concerning partnerships with underwriters Palomar and Accelerant as third parties, as part of its new MGA model.
Conifer on March 4 announced a capacity relationship with Accelerant, a data-driven risk exchange, connecting underwriters of specialty insurance risk with risk capital providers. By leveraging Accelerant’s Risk Exchange, including its analytics platform, Conifer said it seeks to improve risk assessment, thereby enhancing its underwriting process to deliver tailored specialty insurance products to its niche commercial clients.
Conifer also partnered with Palomar Holdings Inc. to offer coverage for the cannabis industry. Under the partnership, Conifer said coverage will be written on Palomar Specialty Insurance Co. and Palomar Excess and Surplus Insurance Co. paper.
AM Best earlier downgraded and withdrew credit ratings of Conifer Holdings Inc. and subsidiaries Conifer Insurance Co. and White Pine Insurance Co.