Schedule II - Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2023

Condensed Financial Information Disclosure [Abstract]

Schedule II - Condensed Financial Information of Registrant

Schedule II

Conifer Holdings, Inc.

Condensed Financial Information of Registrant

Balance Sheets – Parent Company Only

(dollars in thousands)

	December 31,
	2023			2022
Assets
Investment in subsidiaries	$	31,157		$	56,670
Cash		3,174			9,022
Due from Affiliate		33			113
Other assets		1,457			2,434
Total assets	$	35,821		$	68,239
Liabilities and Shareholders' Equity
Liabilities:
Debt	$	29,061		$	33,876
Due to subsidiaries		3,436			9,754
Other liabilities		1,798			5,659
Total liabilities		34,295			49,289
Shareholders' equity:
Preferred stock, no par value (10,000,000 shares authorized; 1,000 and 0 issued and outstanding, respectively)		6,000			—
Common stock, no par value (100,000,000 shares authorized; 12,222,881   and 12,215,849 issued and outstanding, respectively)		98,100			97,913
Accumulated deficit		(86,683	)		(60,760	)
Accumulated other comprehensive income (loss)		(15,891	)		(18,203	)
Total shareholders' equity		1,526			18,950
Total liabilities and shareholders' equity	$	35,821		$	68,239

The accompanying notes are an integral part of the Condensed Financial Information of Registrant.

Schedule II

Conifer Holdings, Inc.

Condensed Financial Information of Registrant

Statements of Comprehensive Income (Loss) – Parent Company Only

(dollars in thousands)

	Year Ended December 31,
	2023			2022
Revenue
Management fees from subsidiaries	$	17,367		$	4,980
Other income		819			190
Total revenue		18,186			5,170
Expenses
Operating expenses		14,133			14,365
Interest expense		3,079			2,816
Total expenses		17,212			17,181
Income (loss) before equity in earnings (losses) of subsidiaries and income tax expense (benefit)		974			(12,011	)
Income tax expense (benefit)		73			(4,078	)
Income (loss) before equity earnings (losses) of subsidiaries		901			(7,933	)
Equity earnings (losses) in subsidiaries		(26,805	)		(2,748	)
Net income (loss)		(25,904	)		(10,681	)
Other Comprehensive Income
Equity in other comprehensive income (loss) of subsidiaries		2,312			(16,093	)
Total Comprehensive income (loss)	$	(23,592	)	$	(26,774	)

The accompanying notes are an integral part of the Condensed Financial Information of Registrant.

Schedule II

Conifer Holdings, Inc.

Condensed Financial Information of Registrant

Statement of Cash Flows – Parent Company Only

(dollars in thousands)

	Year Ended December 31,
	2023			2022
Cash Flows from Operating Activities
Net income (loss)	$	(25,904	)	$	(10,681	)
Adjustments to reconcile net income (loss) to net cash used in   operating activities:
Depreciation and amortization		545			436
Equity in undistributed (income) loss of subsidiaries		26,805			2,748
Stock-based compensation expense		190			211
Deferred income tax expense		(3,806	)		3,884
Other (gain) loss		—			—
Changes in operating assets and liabilities:
Due from subsidiaries		(6,318	)		2,699
Due from Affiliate		80			107
Current income tax recoverable		—			—
Other assets		860			62
Other liabilities		(73	)		(203	)
Net cash provided by (used in) operating activities		(7,621	)		(737	)
Cash Flows From Investing Activities
Contributions to subsidiaries		1,019			4,000
Dividends received from subsidiaries		—			—
Purchases of investments		—			—
Purchases of property and equipment		—			—
Net cash provided by (used in) investing activities		1,019			4,000
Cash Flows From Financing Activities
Proceeds received from issuance of shares of preferred stock		6,000			—
Proceeds received from issuance of shares of common stock		—			5,000
Proceeds from issuance of long-term debt		10,727			—
Repurchase of common stock		(3	)		10
Borrowings under debt arrangements		—			5,000
Repayment of borrowings under debt arrangements		—			(5,000	)
Paydown of long-term debt		(13,971	)		—
Debt issuance costs		(1,999	)		—
Net cash provided by financing activities		754			5,010
Net increase (decrease) in cash		(5,848	)		8,273
Cash at beginning of period		9,022			749
Cash at end of period	$	3,174		$	9,022
Supplemental Disclosure of Cash Flow Information:
Interest paid		2,949			2,979
Preferred stock dividends declared but not paid at end of period		19			—

The accompanying notes are an integral part of the Condensed Financial Information of Registrant.

1. Accounting Policies

Organization

Conifer Holdings, Inc. (the “Parent”) is a Michigan‑domiciled holding company organized for the purpose of managing its insurance entities. The Parent conducts its principal operations through these entities.

Basis of Presentation

The accompanying condensed financial information should be read in conjunction with the Consolidated Financial Statements and related Notes of Conifer Holdings, Inc. and Subsidiaries. Investments in subsidiaries are accounted for using the equity method. Under the equity method, the investment in subsidiaries is stated at cost plus contributions and equity in undistributed income (loss) of consolidated subsidiaries less dividends received since the date of acquisition.

The Parent’s operations consist of income earned from management and administrative services performed for the insurance entities pursuant to intercompany services agreements. These management and administrative services include providing management, marketing, offices and equipment, and premium collection, for which the insurance companies pay fees based on a percentage of gross premiums written. Also, the Parent receives commission income for performing agency services. The primary operating costs of the Parent are salaries and related costs of personnel, information technology, administrative expenses, and professional fees. The income received from the management and administrative services is used to cover operating costs, meet debt service requirements and cover other holding company obligations.

Estimates and Assumptions

Preparation of the condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying disclosures. Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates.

Dividends

The Parent received $1.4 million in cash dividends from RCIC in 2023. The Parent received a $10.8 million dividend from CIS during the fourth quarter of 2022.

2. Guarantees

The Parent has guaranteed the principal and interest obligations of a $10.0 million surplus note issued by Conifer Insurance Company to White Pine Insurance Company (both wholly owned subsidiaries). The note pays interest annually at a per annum rate of 4% and has no maturity.

As of December 31, 2023, the surplus note was adjusted to a fair value of $6.8 million as a result of KBRA downgrading CIC's surplus note rating from BBB- to BB+. This change in CIC's rating required a change in the statutory statement presentation from a cost basis to a fair value basis of accounting.